pre14a
SCHEDULE 14-A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant þ
Filed by a Party Other than the Registrant o
Check the appropriate box:
þ Preliminary Proxy Statement
o Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)
o Definitive Proxy Statement
o Definitive Additional Materials
o Soliciting Material under Rule 14a-12
Panhandle Oil and Gas Inc.
Name of the 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):
þ No fee required
o 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 below how it was
determined):
4. Proposed maximum aggregate value of transaction:
5. Total fee paid:
o Fee paid previously with preliminary materials.
o 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:
Preliminary Proxy Statement
Dated January 11, 2010
Notice of Annual Shareholders Meeting
To be held March 11, 2010
To the Shareholders of Panhandle Oil and Gas Inc.:
Notice is hereby given that the annual meeting of the shareholders of Panhandle Oil and Gas
Inc. will be held at the Waterford Marriott, 6300 Waterford Boulevard (63rd and North
Pennsylvania), Oklahoma City, Oklahoma, on Thursday, March 11, 2010, at 9:00 a.m., local time, for
the following purposes:
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To elect three directors for terms of three years; |
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To approve and adopt the Panhandle Oil and Gas Inc. 2010 Restricted Stock Plan; |
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To ratify the appointment of Ernst & Young, LLP as our independent registered public
accounting firm for the fiscal year ending September 30, 2010; and |
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To consider and act upon any other matter as may properly come before the meeting or
any adjournment or postponement thereof. |
Only holders of record of the Common Stock at the close of business on January 29, 2010 will be
entitled to vote at the meeting and any adjournments.
By Order of the Board of Directors
Lonnie J. Lowry, Secretary
Oklahoma City, Oklahoma
February 5, 2010
YOUR VOTE IS IMPORTANT.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE MARK, SIGN AND DATE THE ENCLOSED PROXY AND
MAIL IT PROMPTLY IN THE POSTAGE-PAID ENVELOPE PROVIDED.
PLEASE VOTE!
TABLE OF CONTENTS
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(i)
Panhandle Oil and Gas Inc.
5400 N. Grand Boulevard, Suite 300
Oklahoma City, OK 73112-5688
Annual Shareholders Meeting
March 11, 2010
PROXY STATEMENT
The accompanying proxy is solicited by the Board of Directors of Panhandle Oil and Gas
Inc. (the Board), an Oklahoma corporation (the Company, Panhandle, we, us and our), for
use at the Companys annual shareholders meeting (the meeting) to be held at the Waterford
Marriott, 6300 Waterford Boulevard, Oklahoma City, Oklahoma, on Thursday, March 11, 2010, at 9:00
a.m. local time, and at any adjournment or postponement thereof, for the purposes set forth in the
accompanying Notice of Annual Shareholders Meeting.
When the proxy is properly executed and returned, the shares it represents will be voted at
the meeting in accordance with any directions noted thereon. If no direction is indicated, the
persons named on the enclosed proxy will vote the proxy for the nominees for director, for approval
of the Companys 2010 Restricted Stock Plan and for ratification of the appointment of our
independent registered public accounting firm. Should other matters properly come before the
meeting, the proxy will be voted as the Board may recommend.
If the enclosed form of proxy is executed and returned, it still may be revoked at any time
before it is exercised, by signing and sending to the Company a later dated proxy or a written
revocation, or by attending the meeting and voting in person.
If your shares are held in street name (that is, through a bank, broker or other nominee),
follow the voting instructions on the form you receive from such firm. If you hold shares in
street name and would like to attend the meeting and vote in person, you will need to bring a
proxy to the meeting signed by the nominee in whose name your shares are registered.
The mailing address of the Company is 5400 N. Grand Boulevard, Suite 300, Oklahoma City, OK
73112-5688. The Company anticipates that the proxies and proxy statements will be mailed to
shareholders beginning on or about February 5, 2010.
The cost of soliciting proxies for the meeting will be paid by the Company. In addition to
solicitation by mail, arrangements may be made with brokerage firms, banks and other custodians,
nominees and fiduciaries to send proxy material to their principals. The Company will reimburse
these institutions for their reasonable costs. No solicitation is to be made by specially engaged
employees or other paid solicitors.
Important Notice Regarding the Availability of Proxy Materials for the Shareholders Meeting to be
held on March 11, 2010.
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This proxy statement, form of proxy and the Companys 2009 Annual Report to Shareholders
are available at the following website: www.proxydocs.com/phx. |
(1)
Voting of Common Stock
All holders of Common Stock of record at the close of business on January 29, 2010 will be
entitled to vote at the meeting. As of January 29, 2010, there were 8,311,636 shares of Class A
Common Stock, par value $0.01666 (Common Stock), outstanding, entitled to vote, owned by
approximately 4,000 shareholders. A list of record shareholders entitled to vote at the meeting
will be available for examination at least 10 days prior to the meeting at the Companys offices
during ordinary business hours and at the meeting.
The Amended Certificate of Incorporation of the Company provides for one vote for each share
of Common Stock outstanding. At the meeting, each record holder of Common Stock will be entitled to
cast one vote per share of Common Stock held of record on the record date. Votes may be cast by
shareholders either present in person or by proxy.
The presence, in person or by proxy, of a majority of the outstanding shares of Common Stock
entitled to vote is necessary to constitute a quorum for the transaction of business at the
meeting. Abstentions and broker non-votes are counted as present and entitled to vote for the
purpose of determining a quorum. Broker non-votes are shares held by brokers or nominees over
which the broker or nominee lacks discretionary power to vote (such as for the election of
directors) and for which the broker or nominee has not received specific voting instructions from
the beneficial owner. For purposes of determining the outcome of any matter as to which the broker
or nominee has indicated on the proxy that it does not have discretionary authority to vote, those
shares will be treated as not present and not entitled to vote with respect to that matter, even
though those shares will be considered present and entitled to vote for purposes of determining a
quorum and may be entitled to vote on other matters.
Because of a change in rules of the New York Stock Exchange, brokers or nominees no longer
have the discretionary power to vote shares in uncontested director elections. They may only vote
shares for the election of directors if they receive specific voting instructions from the
beneficial owner.
The Board has adopted a majority vote standard for the election of directors in uncontested
elections. Accordingly, at the meeting, each director will be elected if the holders of a majority
of shares of Common Stock present at the meeting and entitled to vote for the election of directors
cast their votes FOR him. Abstentions will have the effect of a vote against the election of a
nominee. The three nominees for director at the meeting are currently directors of the Company. If
any incumbent nominee for director fails to receive the required affirmative vote of the holders of
a majority of the votes cast for that director, under Oklahoma law and the Companys Bylaws, the
incumbent will remain in office until his successor is elected and qualified or until his earlier
death, resignation, retirement or removal. If any incumbent for director receives a greater number
of votes WITHHELD from his election than votes FOR, he must promptly submit his offer of
resignation from the Board for consideration by the Corporate Governance and Nominating Committee
of the Board. The Corporate Governance and Nominating Committee will consider all relevant facts
and circumstances and recommend to the Board the action to be taken with respect to such offer of
resignation. The Board will act on the offered resignation, taking into account such
recommendation, and publicly disclose its decision regarding the offered resignation within 90 days
from the date of election. The director who offered his resignation shall not participate in any
proceedings with respect to his offered resignation. If the Board accepts a directors offered
resignation, the Corporate Governance and Nominating Committee will recommend to the Board whether
to fill such vacancy or reduce the size of the Board. The Companys Corporate Governance
(2)
Guidelines and Bylaws can be viewed at the Companys website: www.panhandleoilandgas.com.
Proposal No. 2 will be approved if the holders of a majority of shares of Common Stock present
at the meeting and entitled to vote on Proposal No. 2 vote FOR the proposal.
Proposal No. 3 will be approved if the holders of a majority of shares of Common Stock present
at the meeting and entitled to vote on Proposal No. 3 vote FOR the proposal.
The Company knows of no arrangements which would result in a change in control of the Company
at any future date.
The Company knows of no other matters to come before the meeting. If any other matters
properly come before the meeting, the proxies solicited hereby will be voted on such matters as the
Board may recommend, except proxies which are marked to deny discretionary authority.
A proxy is enclosed for your signature. Please return it immediately, marked, dated and
signed.
PROPOSAL NO. 1
ELECTION OF THREE DIRECTORS
The present directors of the Company and their current Board Committee memberships are as
follows:
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Positions and Offices |
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Served As |
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Present |
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Presently Held with |
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Director |
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Term |
Name |
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Age |
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the Company |
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Since |
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Ends |
Bruce M. Bell (1)(2)(3)
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68 |
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Director
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2004 |
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2010 |
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Michael C. Coffman
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Director, President and Chief
Executive Officer
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2006 |
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2011 |
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E. Chris Kauffman (2)(4)
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69 |
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Director
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1991 |
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2012 |
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Duke R. Ligon (1)(2)(3)
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68 |
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Director
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2007 |
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2011 |
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Robert O. Lorenz (1)(2)
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63 |
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Lead Independent Director (5)
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2003 |
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2010 |
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Robert A. Reece (1)(3)(4)
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65 |
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Director
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1986 |
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2011 |
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Robert E. Robotti (1)(2)(3)
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56 |
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Director
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2004 |
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2010 |
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H. Grant Swartzwelder (2)(3)(4)
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Director
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2002 |
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2012 |
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(1) |
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Member of the Audit Committee |
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(2) |
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Member of the Compensation Committee |
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(3) |
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Member of the Corporate Governance and Nominating Committee |
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Member of the Retirement Committee |
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Elected Lead Independent Director effective November 1, 2008. |
There are three vacancies for three-year terms beginning 2010. Nominees for the vacancies
are Bruce M. Bell, Robert O. Lorenz and Robert E. Robotti, all of whom are currently directors.
These nominees were recommended by the Corporate Governance and Nominating Committee and
approved by the Board. The Board has no reason to believe that any of the nominees will be
unable
(3)
to serve as director. However, if any nominee should be unable for any reason to accept
nomination or election, it is the intention of the persons named in the enclosed proxy to vote
those proxies for the election of such other person or persons as the Board may recommend.
Nominees for Election to the Board of Directors in 2010
Dr. Bruce M. Bell has been CEO of Post Oak Oil Company (oil and gas exploration and
production) since 1983 and president and CEO of Edrio Oil Co. Inc. (oil and gas exploration and
production) since 1982, both of Oklahoma City. He served as chairman of the Mid-Continent Oil & Gas
Association (oil and gas trade association) from 1997 to 2006. Dr. Bell holds a Ph.D. degree in
paleontology.
Robert O. Lorenz is a former audit partner of Arthur Andersen LLP. He served as the managing
partner of the Oklahoma City office beginning in 1994 and as the managing partner of the Oklahoma
practice beginning in 2000. He retired from Arthur Andersen in 2002. Since 2005, Mr. Lorenz has
been a director of OGE Energy Corp. (regulated electric utility and natural gas transportation),
and was a director of Infinity Inc. (oil and gas exploration and development) from 2004 to 2009. He
also served as a director of Kerr-McGee Corporation (oil and gas exploration and production) from
2005 to 2006 when it was acquired by Anadarko Petroleum Corp.
Robert E. Robotti, since 1983, has been the president of Robotti & Company, LLC ( a registered
broker-dealer), president of Robotti & Company Advisors, LLC (a registered investment advisor), or
their predecessors, and since 1980, as the managing member of Ravenswood Investment Company, LLC,
which serves as the general partner of two investment partnerships, all located in New York City.
Since 2007, Mr. Robotti has served as portfolio manager and managing member of Robotti Global Fund,
LLC, a global equity fund. Mr. Robotti is a certified public accountant and holds a MBA degree. He
is a member of the New York Society of Security Analysts.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS
VOTE FOR THE ELECTION OF
BRUCE M. BELL, ROBERT O. LORENZ AND ROBERT E. ROBOTTI
AS DIRECTORS
Directors Whose Terms Continue Beyond the 2010 Annual Meeting and Who Are Not Subject to Election this Year
Directors Whose Terms Expire in 2011
Michael C. Coffman has worked in public accounting and as a financial officer with companies
involved in the oil and gas industry since 1975. He joined the Company in 1990 as its treasurer.
From 1995 to 2006, he served as vice-president and chief financial officer. From 2006 to August
2007, he served as co-president and chief financial officer. Since August 2007, he has served as
president and chief executive officer.
Duke R. Ligon is an attorney and served as senior vice president and general counsel of Devon
Energy Corporation (oil and gas exploration and production) from 1997 until he retired in 2007.
Since 2007, he has served as strategic advisor to Loves Travel Shops and Country Stores
(4)
(convenience stores and midstream energy transportation). He has been a director of Pre-Paid Legal
Services, Inc. (insurance company) since 2007, Quest Midstream Partners, L.P. (natural gas
transportation) since 2006 and Blue Knight Energy Partners (formerly SemGroup Energy Partners,
L.P.) (crude oil terminaling, storage, gathering and transportation) since 2009. He was a director
of TransMontaigne Partners, L.P. (distribution and marketing of petroleum products) from 2008 to
2009 and Teppco Partners LP in 2009. Mr. Ligon was elected to the Board in August 2007.
Robert A. Reece is an attorney and since 1980 has been of counsel with the law firm of Crowe &
Dunlevy, Oklahoma City, and active in the management of his familys investments, including
significant oil and gas holdings. For over 15 years, he has been a director of NBC Bank (a national
banking association) of Oklahoma City. He holds a MBA degree.
Directors Whose Terms Expire in 2012
E. Chris Kauffman has been the vice president, secretary and treasurer of Campbell-Kauffman,
Inc. (an independent insurance agency) since 1983 and chief financial officer and secretary of The
Insurance Center Agency, Inc. (an independent insurance agency) since 1990, both of Oklahoma City.
He has been involved with both agencies since 1983. He served as Chairman of the Board of the
Company from 2005 to 2008. Mr. Kauffman has never been an employee of the Company.
H. Grant Swartzwelder is president of PetroGrowth Advisors, Irving, Texas (a merchant banking
and venture capital firm) which he founded in 1998. Since 1998, he has founded and manages several
private companies engaged in various aspects of the oil and gas service businesses. Prior to 1998,
he was vice president of Principal Financial Securities, Inc., Dallas, Texas (an investment-banking
firm). He holds a Bachelor of Science degree in Petroleum Engineering and a MBA degree.
None of the organizations described in the business experiences of the Companys directors and
officers are parents, subsidiaries or affiliates of the Company or, except for Mr. Kauffmans
insurance agency, do business with the Company.
None of the non-management directors have ever been employees of the Company.
Lead Independent Director
Effective November 1, 2008, the Board named Robert O. Lorenz as Lead Independent Director and
eliminated the position of Chairman of the Board. The Lead Independent Director presides at all
Board meetings and all executive sessions of outside directors. The Board adopted a Charter of
Lead Independent Director which can be viewed at the Companys website:
www.panhandleoilandgas.com.
Meetings and Committees of the Board of Directors
During the fiscal year ended September 30, 2009 (fiscal 2009), the Board held five meetings.
At each meeting, a quorum of directors was present. The outside directors hold executive sessions
at each Board meeting without management present. The Company expects all of its directors to
attend each annual shareholders meeting. All directors attended the 2009 annual shareholders
meeting.
(5)
During fiscal 2009, each director attended at least 75% of the meetings of the Board and each
of the Board committees on which he served.
The Board has determined that, under the rules of the New York Stock Exchange, all directors
are currently independent, except for Michael C. Coffman, Chief Executive Officer, who does not
serve on any Board committee.
The Board has four standing committees: Audit, Compensation, Corporate Governance and
Nominating, and Retirement.
Information regarding the functions performed by the Audit Committee, its membership and the
number of meetings held during fiscal 2009 is set forth below in the caption Report of the Audit
Committee included in this proxy statement. Each member of the Audit Committee meets all
applicable independence and financial literacy requirements of the Securities and Exchange
Commission and of the New York Stock Exchange. Robert O. Lorenz has been determined by the Board to
meet the audit committee financial expert requirements of the Securities and Exchange Commission
and the New York Stock Exchange. A copy of the Audit Committee Charter can be viewed at the
Companys website: www.panhandleoilandgas.com.
During fiscal 2009, the Compensation Committee was comprised of Bruce M. Bell, chair, E.
Chris Kauffman, Duke R. Ligon, Robert O. Lorenz, Robert E. Robotti and H. Grant Swartzwelder. The
Committee met two times during fiscal 2009. The Committee reviews officer performance and
recommends to the Board compensation amounts for officers and directors. See Compensation
Discussion and Analysis below. The Compensation Committee Charter can be viewed at the Companys
website: www.panhandleoilandgas.com.
During fiscal 2009, the Corporate Governance and Nominating Committee was comprised of Duke
R. Ligon, chair, Bruce M. Bell, Robert A. Reece, Robert E. Robotti and H. Grant Swartzwelder. This
Committee met twice during fiscal 2009. The Committees charter can be viewed at the Companys
website: www.panhandleoilandgas.com. The principal functions of the Corporate Governance and
Nominating Committee are to: search for, identify and screen individuals qualified to become
members of the Board; recommend to the Board when new members should be added to the Board;
recommend to the Board individuals to fill vacant Board positions; and recommend to the Board
nominees for election as directors at the annual shareholders meeting. If a vacancy on the Board
exists that will not be filled by an incumbent director, the Committee identifies prospective
nominees primarily through business and industry contacts. At a minimum, in its assessment of
potential Board candidates, the Governance and Nominating Committee will review each candidates
character, wisdom, acumen, business skills and experience, understanding and involvement in the oil
and gas industry, and ability to devote the time and effort necessary to fulfill his or her
responsibilities. The Corporate Governance and Nominating Committee will consider nominees proposed
by shareholders of the Company if the requirements set forth in the Companys Bylaws are satisfied.
For more information, see Shareholder Proposals below. Those nominations must include sufficient
biographical information so that the Committee can appropriately assess the proposed nominees
background and qualifications. To propose a prospective nominee for the Committees consideration,
shareholders should submit the proposal in writing to Panhandle Oil
and Gas Inc., Attention: Secretary, 5400 N. Grand Boulevard, Suite 300, Oklahoma City, OK
73112-5688. Any such submission must be accompanied by the written consent of the proposed nominee
to being named as a nominee and to serve as a director, if elected.
(6)
During fiscal 2009, the Retirement Committee was comprised of Robert A. Reece, chair, E. Chris
Kauffman and H. Grant Swartzwelder, and oversaw the administration of the Companys Employee Stock
Ownership and 401(k) Plan and Agreement. This Committee met twice during fiscal 2009.
Compensation of Directors
The following outlines the compensation plan for the Companys outside directors for their
services in all capacities.
The following table contains information with respect to fiscal 2009 compensation of directors
of the Company who served in such capacity during fiscal 2009, except for the fiscal 2009
compensation of Michael C. Coffman, Chief Executive Officer, whose compensation is disclosed below
in the caption Executive Compensation Summary Annual Compensation Table. Other than the
Directors Deferred Compensation Plan, the Company has no stock award, stock option or other equity
incentive plans for its directors.
Director Compensation
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Fees Paid |
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in Cash or |
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All Other |
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Name |
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Deferred(1) (2) |
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Compensation(3) |
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Total |
Bruce M. Bell
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$ |
36,000 |
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$ |
1,646 |
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$ |
38,146 |
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E. Chris Kauffman
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$ |
27,000 |
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$ |
5,552 |
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$ |
32,552 |
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Duke R. Ligon
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$ |
34,500 |
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$ |
678 |
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$ |
35,178 |
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Robert O. Lorenz
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$ |
51,000 |
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$ |
3,585 |
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$ |
54,585 |
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Robert A. Reece
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$ |
33,000 |
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$ |
9,322 |
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$ |
42,322 |
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Robert E. Robotti
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$ |
35,000 |
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$ |
2,189 |
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$ |
37,189 |
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H. Grant Swartzwelder
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$ |
33,000 |
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$ |
3,716 |
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$ |
36,716 |
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(1) |
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All but one director deferred 100% of their retainers and fees under the Directors
Deferred Compensation Plan. E. Chris Kauffman deferred 26% of his retainers and fees under the Plan and
received cash payments for the remainder. |
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(2) |
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At the end of fiscal 2009, the following future share amounts had been recorded to
each directors account under the Directors Deferred Compensation Plan: Bell 6,472; Kauffman 20,150;
Ligon 2,942; Lorenz 13,625; Reece 34,056; Robotti 8,435; and Swartzwelder 13,880. |
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(3) |
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Under the Companys Directors Deferred Compensation Plan For Non-Employee Directors,
dividends paid on the Companys Common Stock are recorded to each Directors account on the record date of the
dividend in the form of unissued shares. The amount recorded is based on the number of future unissued shares
in each Directors account and the closing market price of the Company Stock on each dividend record date. |
From January 1, 2008 to December 31, 2009, outside directors were paid an annual retainer
of $20,000 and a $1,000 fee (plus out-of-pocket travel expenses) for attending each Board and
committee meeting. Any director who traveled over 50 miles to attend a Board or committee meeting
received an additional $500 for each meeting. In addition to the above retainers and fees,
(7)
the
Chairman of the Board received an additional annual retainer of $15,000. The Company eliminated the
Chairman of the Board position effective October 31, 2008 and created the position of Lead
Independent Director effective November 1, 2008. The Lead Independent Director received an
additional annual retainer of $10,000 in 2009. The chairs of the Audit and Compensation Committees
received additional annual retainers of $10,000 and $2,500, respectively, in 2008 and 2009. The
chair of the Nominating Committee received an additional annual retainer of $1,000 in 2008. The
Company rescinded the charter of the Nominating Committee effective March 6, 2008 and established
the Corporate Governance and Nominating Committee on the same date. Its chair received an
additional annual retainer of $2,500 in 2009. The annual retainers are paid on January 15 of each
year.
Effective January 1, 2010, outside directors receive annual retainers of $25,000, a $1,500 fee
for attending each Board meeting, a $1,000 fee for attending each committee meeting and
out-of-pocket travel expenses for attending all meetings. Any director who travels over 50 miles to
attend a Board or committee meeting receives an additional $500 for each meeting. In addition to
the above fees, during calendar 2010, the Lead Director and the chairs of the Audit, Compensation
and Corporate Governance and Nominating Committees will receive additional annual retainers of
$10,000, $10,000, $4,000 and $2,500, respectively. The annual retainers are paid on January 15 of
each year.
Outside directors may elect to be included in the Panhandle Oil and Gas Inc. Deferred
Compensation Plan For Non-Employee Directors (the Directors Deferred Compensation Plan). The
Directors Deferred Compensation Plan provides that each outside director may individually elect to
be credited with Company stock rather than cash for all or a portion of the annual retainer, Board
and committee meeting fees, and also may elect to receive shares, if and when issued, over a period
of time up to ten years. These unissued shares are recorded to each directors deferred
compensation account at the closing market price of the shares (i) on the dates of the Board and
committee meetings, and (ii) on January 15 of each year for the annual retainers. Only upon a
directors retirement, termination or death, or upon a change-in-control of the Company, will the
shares recorded for such director under the Directors Deferred Compensation Plan be issued to the
director. The promise to issue such shares in the future is an unsecured obligation of the Company.
All directors participate in the Directors Deferred Compensation Plan.
Transactions with Directors
The Company has entered into indemnification agreements with each of its directors and
executive officers.
During fiscal 2009, the Company purchased directors and officers liability and other
miscellaneous insurance policies through the Campbell-Kauffman, Inc. insurance agency for premiums
aggregating $94,650. E. Chris Kauffman is an owner and officer of the Agency. The Company
believes that the premiums and the terms of the insurance policies were at market rates and on
market terms.
We review any transactions and relationships in which the Company and any of our directors,
nominees for director, executive officers or any of their immediate family members may be
participants, so as to determine whether any of these individuals have a direct or indirect
material interest in any such transaction. We have developed and implemented processes and controls
to obtain information from the directors and executive officers about related person transactions,
and
(8)
for then determining, based on the facts and circumstances, whether a related person has a
direct or indirect material interest in any such transaction. Transactions that are determined to
be directly or indirectly material to a related person are disclosed in our proxy statement, as
required by SEC rules.
Pursuant to these processes, all directors and executive officers annually complete, sign and
submit a directors and officers questionnaire that is designed to identify related person
transactions and both actual and potential conflicts of interest. We also make appropriate
inquiries as to the nature and extent of business that the Company may conduct with other companies
for whom any of our directors or executive officers also serve as directors or executive officers.
Under the Companys Code of Ethics and Business Practices, if an actual or potential conflict of
interest affects an executive officer, he or she is to immediately disclose all the relevant facts
and circumstances to the Companys President or the Corporate Governance and Nominating Committee,
as appropriate. If the Corporate Governance and Nominating Committee determines that there is a
conflict, it will refer the matter to the Board, which will review the matter to make a final
determination as to whether a conflict exists, and, if so, how the conflict should be resolved.
Under the Companys Corporate Governance Guidelines, if an actual or potential conflict of interest
affects a director, he or she must immediately disclose all the relevant facts and circumstances to
the Corporate Governance and Nominating Committee, which will review the matter to determine if a
conflict exists. If so, the Corporate Governance and Nominating Committee will refer the matter to
the Board for review and action. In addition, the Audit Committee reviews all reports and
disclosures of actual and potential related person transactions.
The Company has a written Code of Ethics and Business Practices applicable to all directors
and executive officers of the Company that prohibits directors and executive officers from entering
into transactions, or having relationships, that would result in a conflict of interest with the
interests of the Company. Waivers of the Code of Ethics and Business Practices for directors and
executive officers may only be granted by the Board. The Code of Ethics and Business Practices can
be found under For Investors Corporate Governance on the Companys website at:
www.panhandleoilandgas.com.
PROPOSAL NO. 2
APPROVAL OF THE PANHANDLE OIL AND GAS INC. 2010
RESTRICTED STOCK PLAN
The Board has adopted, subject to shareholder approval, the Panhandle Oil and Gas Inc.
2010 Restricted Stock Plan (the 2010 Stock Plan). The 2010 Stock Plan will make available 100,000
shares to provide an essential long-term component to the Companys total compensation package for
its officers reflecting the importance the Company places on aligning the interest of its officers
with those of its shareholders. Initially, the Company intends to use restricted stock awards to
replace one-half of the participating officers annual cash bonuses with restricted stock vesting
over
the number of years determined by the Compensation Committee which will be a minimum of two
years. The Compensation Committee believes that restricted stock awards which vest over several
years will add a desirable long-term component to the officers compensation packages and encourage
officers to remain with the Company.
(9)
The 2010 Stock Plan is designed to provide as much flexibility as possible for future grants
of restricted stock so that the Company can respond as necessary to provide competitive
compensation in order to retain, attract and motivate officers of the Company and to align their
interests with those of the Companys shareholders.
Historically, the Company has not provided any equity incentives other than contributions of
Common stock to the Companys ESOP Plan. See Executive Compensation.
The Company intends to repurchase on the open market or in private transactions shares of
Common Stock equal to the number of shares of restricted stock awarded on an annual basis under the
2010 Stock Plan in order to avoid dilution to existing shareholders.
The full text of the 2010 Stock Plan is included as Appendix A to this Proxy
Statement, and a brief description of its material terms is provided below.
Description of the 2010 Stock Plan
Nature of Awards. The 2010 Stock Plan permits the grant of shares of restricted stock to
Company officers. The Company intends to sell shares of restricted stock to officers at a
significant discount to the fair market value of the shares, generally at the par value of the
shares. The restricted shares will vest after the passage of time, typically over several years on
the anniversary dates of the issuance of the restricted stock. The Company will repurchase the
restricted stock at the original purchase price if vesting does not occur.
Each participant in the 2010 Stock Plan will enter into a stock restriction agreement with the
Company setting forth the terms, conditions and restrictions of the restricted stock purchase. The
restricted stock will be issued in the name of the participant and deposited with the Company, or
an escrow agent determined by the Compensation Committee, until the restrictions lapse or until
vesting is no longer possible under the stock restriction agreement.
Subject to the terms and conditions of the stock restriction agreement, a participant holding
restricted stock will have the right to receive dividends on the shares of restricted stock during
the restriction period, vote restricted stock and enjoy other shareholder rights related to the
restricted stock. Upon expiration of the restriction period, subject to the terms of the Plan and
the stock restriction agreement, the participant is entitled to receive shares of common stock not
subject to restriction.
Effective Date and Term. Subject to shareholder approval, the 2010 Stock Plan will be
effective on March 11, 2010, the date of the meeting. No restricted stock will be awarded after the
day before the tenth anniversary of the effective date, but the vesting periods for restricted
stock previously sold may extend beyond that date.
Eligibility. Any current officer of the Company, or any of the Companys present or future
subsidiary entities in which the Company has a controlling interest, as determined by the
Compensation Committee, is eligible to be granted an award of restricted stock.
Administration. The 2010 Stock Plan will be administered by the Compensation Committee, which
shall have authority to grant awards of restricted stock and determine recipients and the terms
(10)
of
awards. The Compensation Committee shall have full authority to construe and interpret the terms of
the 2010 Stock Plan and to determine all facts necessary to administer the Plan.
Stock Subject to the 2010 Stock Plan. Subject to adjustments allowed under the 2010 Stock
Plan, awards of restricted stock may be made under the Plan for up to 100,000 shares of common
stock. If any award of restricted stock expires or is terminated, surrendered or canceled without
being fully vested, the unused shares covered by such award shall again be available for grants
under the Plan.
Restricted Stock. Pursuant to the Plan, the Compensation Committee may grant awards of
restricted stock on the terms and conditions set forth by the Compensation Committee in the
applicable stock restriction agreement, including the conditions for vesting, the vesting periods
and the issue price. The vesting period for any restricted stock award will be a minimum of two
years.
Adjustments Due to Changes in Capitalization or Control. In the event of any stock split,
reverse stock split, stock dividend, recapitalization, combination of shares, reclassification of
shares, spin-off or other similar change in capitalization or event, or any dividend or
distribution to holders of shares of common stock other than an ordinary cash dividend, (i) the
number of shares of common stock available under the 2010 Stock Plan, (ii) the number of shares of
common stock subject to and the repurchase price per share subject to each outstanding restricted
stock award, and (iii) the terms of each other outstanding award shall be equitably adjusted by the
Company in the manner determined by the Compensation Committee.
Change in Control. Upon the occurrence of a change in control of the Company as defined in
the Plan, except to the extent provided to the contrary in the stock restriction agreement between
a participant and the Company, all restrictions and conditions on all restricted stock awards then
outstanding shall automatically lapse and be deemed terminated or satisfied, as applicable.
Transferability of Awards. Unless otherwise provided by the Compensation Committee,
restricted stock is nontransferable, either voluntarily or by operation of law, except by will or
the laws of descent and distribution or pursuant to a qualified domestic relations order.
Termination of Employment. The Compensation Committee shall determine the effect on restricted
stock due to the disability, death, retirement, termination or other cessation or change in the
employment, of a participant.
Tax Withholding. A participant in the 2010 Stock Plan must satisfy all applicable federal,
state and local or other income and employment tax withholding obligations of the Company before it
will authorize the restricted stock to be released by the Company or from escrow. The Compensation
Committee may allow a participant to satisfy all or part of these withholding obligations by
transferring shares of restricted stock to the Company.
Amendment of Awards. The Compensation Committee may amend, suspend or terminate the 2010
Stock Plan or any portion of the Plan at any time; provided that if at any time the approval of
the Companys shareholders is required as to any modification or amendment under applicable
laws and rules, the Compensation Committee may not effect such modification or amendment without
such approval. Unless otherwise specified in the amendment, any amendment to the 2010 Stock Plan
shall apply to, and be binding on, the holders of restricted stock under the Plan at the time the
(11)
amendment is adopted, provided, the Compensation Committee determines that such amendment does not
materially and adversely affect the rights of participants under the Plan.
Federal Income Tax Consequences
Under current federal tax law, the following is a summary of the United States federal income
tax consequences generally arising with respect to restricted stock granted under the 2010 Stock
Plan. The discussion is not a complete analysis of all federal income tax consequences and does not
cover all specific transactions which may occur.
In general, no income will be recognized by a participant for U. S. federal income tax
purposes upon the grant of restricted stock if the restrictions are of a nature that the shares are
both subject to a substantial risk of forfeiture and are not freely transferable. On the date that
the restrictions on the shares lapse, the participant will recognize ordinary income in an amount
equal to the fair market value of the shares on that date (minus any amount the participant paid
for the shares). Income recognized by the participant who is an officer is compensation subject to
withholding. As a result the Company must make the necessary arrangements with the participant to
ensure that the proper amount is withheld. The Company may satisfy the withholding obligations
through additional withholding on salary or bonuses. The Compensation Committee may allow a
participant to transfer restricted stock to the Company to satisfy all or part of the withholding
obligation. A participants adjusted basis in the stock received will be equal to the ordinary
income recognized by the participant (plus any amount the participant paid for the shares). If a
participant thereafter sells the stock, any amount realized over (or under) the adjusted basis of
the stock will constitute capital gain (or loss) to the participant for U. S. federal income tax
purposes. If a participant forfeits an award before the restrictions lapse, the participant will
not recognize gain or loss as a result of such forfeiture.
Upon the grant of restricted stock, a participant may file an election under Section 83(b) of
the Internal Revenue Code of 1986 to accelerate the recognition of ordinary income to the date of
the award of restricted stock. The ordinary income would be equal to the fair market value of the
shares of stock on the award date (minus any amount the participant pays for the shares) and is
compensation subject to withholding for employees. If a participant subsequently forfeits the stock
or the stock depreciates in value after a Section 83(b) election is filed, the participant will not
be eligible for capital loss treatment with respect to the stock.
Dividends paid to a participant holding restricted stock before the expiration of the
restriction period will be additional compensation taxable as ordinary income to the participant
subject to withholding, unless the participant made an election under Section 83(b). If the
participant has made a Section 83(b) election, the dividends will be dividend income, rather than
additional compensation, to the participant.
The Company generally will be entitled to a corresponding tax deduction equal to the ordinary
income and dividends includible in a participants compensation income.
(12)
Plan Benefits
If the shareholders approve the proposed 2010 Stock Plan, 100,000 shares of restricted Common
Stock will be issuable pursuant to its terms to all eligible participants of the Plan. The
Compensation Committee has not at this time considered or approved any future awards under the 2010
Stock Plan so the identity of future award recipients and the size and terms of future awards are
not known at this time.
Reasons for Shareholder Approval and Vote Required for Approval
NYSE Rule 303A.08 requires a company listed on the NYSE to seek stockholder approval when the
company establishes any plan or other arrangement that provides for the delivery of equity
securities of the company to any employee, director or other service provider as compensation for
services.
The proposed 2010 Stock Plan will be approved if the holders of a majority of shares of common
stock present at the meeting and entitled to vote on Proposal No. 2 vote FOR the proposal.
Abstentions will have the effect of a vote AGAINST Proposal No. 2.
Consequences of Non-Approval
The Company considers shareholder approval of the 2010 Stock Plan to be critical to the
Companys ability to retain and attract officers whose services are necessary to successfully
execute the Companys business plan. If the shareholders do not approve the 2010 Stock Plan, the
Company believes its ability to retain and attract talented officers will be adversely affected due
to the ability of competitors of the Company to offer equity compensation to talented individuals.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS
VOTE FOR
THE PANHANDLE OIL AND GAS INC. 2010 RESTICTED STOCK PLAN
PROPOSAL NO. 3
RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
The Audit Committee has directed the Company to submit the selection of Ernst & Young LLP
as the Companys independent registered public accounting firm for the fiscal year ending September
30, 2010 for ratification by the shareholders at the meeting. Neither the Companys Bylaws nor
other governing documents or law require shareholder ratification of the selection of Ernst & Young
LLP as the Companys independent registered public accounting firm. However, the Audit Committee is
submitting the selection of Ernst & Young LLP to the shareholders for ratification as a matter of
good corporate practice. If the shareholders fail to ratify the selection, the Audit Committee will
reconsider whether or not to retain that firm. Even if the selection is ratified, the Audit
Committee may, in its discretion, direct the appointment of a different independent registered
public accounting firm at any time during the year if it determines that such a change would be in
the best interests of the Company and its shareholders.
(13)
A representative of Ernst & Young LLP is expected to attend the meeting and will have the
opportunity to make a statement if he or she so desires, and will be available to respond to
appropriate questions of shareholders.
For fiscal 2010, the Audit Committee has selected Ernst & Young LLP to conduct quarterly
reviews for the first three fiscal quarters.
Independent Accountants Fees and Services
The following sets forth fees billed for audit and other services provided by Ernst & Young LLP for
the fiscal years ended September 30, 2009 and September 30, 2008:
|
|
|
|
|
|
|
|
|
Fee Category |
|
Fiscal 2009 Fees |
|
|
Fiscal 2008 Fees |
|
Audit Fees (1) |
|
$ |
314,500 |
|
|
$ |
275,100 |
|
Audit-Related Fees |
|
$ |
|
|
|
$ |
|
|
Tax Fees |
|
$ |
|
|
|
$ |
6,575 |
|
All Other Fees |
|
$ |
|
|
|
$ |
|
|
|
|
|
(1) |
|
Includes fees for audit of annual financial statements,
reviews of the related quarterly financial statements and internal control
audits required by Section 404 of the Sarbanes-Oxley Act. |
All services rendered by Ernst & Young LLP were permissible under applicable laws and
regulations and were pre-approved by the Audit Committee. The Audit Committees pre-approval policy
is set forth in the Audit Committee Charter and which can be viewed at the Companys website:
www.panhandleoilandgas.com.
To ratify the selection of Ernst & Young LLP, a majority of the votes cast on Proposal No. 3
must vote FOR ratification. Abstentions will have the effect of a vote AGAINST ratification.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS
VOTE FOR
RATIFICATION OF SELECTION OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
Report of the Audit Committee
During fiscal 2009, the Audit Committee was composed of five independent directors:
Robert O. Lorenz, chair, Bruce M. Bell, Duke R. Ligon, Robert A. Reece and Robert E. Robotti. The
Board has determined that all committee members are independent and that Mr. Lorenz is an audit
committee financial expert, as defined by Securities and Exchange Commission guidelines and the
rules of the New York Stock Exchange. Four meetings of the Committee were held during fiscal 2009.
(14)
The Audit Committee Charter was adopted in December, 2004 and an immaterial change was
approved by the Board in December, 2008. A copy of the Charter can be viewed at the Companys
website: www.panhandleoilandgas.com.
The Audit Committees primary responsibility is to oversee the Companys financial reporting
process on behalf of the Board and report the results of its activities to the Board. Management
has the primary responsibility for the financial statements and the reporting process including the
systems of internal control over financial reporting.
Controls and Procedures. Management has established and maintains a system of disclosure
controls and procedures designed to provide reasonable assurance that information required to be
disclosed by the Company in the reports filed or submitted under the Securities Exchange Act of
1934, as amended, is recorded, processed, summarized and reported within the time periods specified
in the SECs rules and forms, and includes controls and procedures designed to provide reasonable
assurance that information required to be disclosed by the Company in those reports is accumulated
and communicated to management, including the Chief Executive Officer and the Chief Financial
Officer, as appropriate, to allow timely decisions regarding required disclosure. As of September
30, 2009, management conducted an evaluation of disclosure controls and procedures. Based on this
evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Companys
disclosure controls and procedures are effective to provide reasonable assurance that the
information required to be disclosed in the reports filed or submitted under the Securities and
Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods
specified in the SECs rules and forms. The Audit Committee discussed with management and Ernst &
Young LLP, the Companys independent registered public accounting firm (independent accountants),
the quality and adequacy of the Companys disclosure controls and procedures.
Management has also established and maintains a system of internal controls over financial
reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities and Exchange Act of
1934. These internal controls are designed to provide reasonable assurance that the reported
financial information is presented fairly, that disclosures are adequate and that the judgments
inherent in the preparation of financial statements are reasonable. Management conducted an
evaluation of the effectiveness of the Companys internal control over financial reporting based on
the framework set forth in Internal Control Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission. Based on managements evaluation under the
framework in Internal Control Integrated Framework, management concluded that the Companys
internal control over financial reporting was effective as of September 30, 2009 as discussed in
more detail in Managements Report on Internal Control Over Financial Reporting, which was included
in our Annual Report on Form 10-K for the year ended September 30, 2009, filed with the SEC on
December 9, 2009. The effectiveness of the Companys internal control over financial reporting as
of September 30, 2009 has been audited by Ernst & Young LLP, as stated in its attestation report,
which was included in our Annual Report on Form 10-K for the year ended September 30, 2009. The
Audit Committee reviewed and discussed with management and Ernst & Young LLP the Companys system
of internal control over financial reporting in compliance with Section 404 of the Sarbanes-Oxley
Act of 2002.
Discussions with Management and Independent Accountants. In fulfilling its responsibilities,
the Committee reviewed with management the audited financial statements included in the Companys
Annual Report on Form 10-K for fiscal 2009, including a discussion of the quality, not just the
(15)
acceptability, of the accounting principles, the reasonableness of significant judgments and
the clarity of disclosures in the financial statements. The Audit Committee reviewed with Ernst &
Young LLP, which is responsible for expressing an opinion on the conformity of those audited
financial statements with generally accepted accounting principles, their judgments as to the
quality, not just the acceptability, of the Companys accounting principles and such other matters
as are required to be discussed with the Audit Committee by Statement on Auditing Standards No. 61
(Communications with Audit Committees), as amended by Statement on Auditing Standards No. 90 (Audit
Committee Communications). In addition, the Audit Committee discussed with the independent
accountants its independence from management and the Company, including matters in the written
disclosures received from the independent accountants as required by the Independence Standards
Board Standard No. 1 (Independence Discussions with Audit Committees).
The Audit Committee met with the independent accountants, with and without management present,
to discuss the overall scope and plans for their audit, the results of their examinations, their
evaluations of the Companys internal control over financial reporting and the overall quality of
the Companys financial reporting.
The Audit Committee also met with the independent accountants and management after the end of
each of the first three fiscal quarters. At these meetings, the independent accountants review of
quarterly results was presented and discussed and discussions were also held with management
concerning these results.
In reliance on the reviews and discussions referred to above, the Audit Committee recommended
to the Board (and the Board approved) that the audited financial statements be included in the
Companys Annual Report on Form 10-K for fiscal 2009 for filing with the Securities and Exchange
Commission.
Audit Committee
Robert O. Lorenz Chair
Bruce M. Bell
Duke R. Ligon
Robert A. Reece
Robert E. Robotti
Beneficial Ownership of Common Stock
The following table sets forth information with respect to the outstanding shares of
Common Stock owned beneficially as of December 31, 2009 by all persons who own or are known by the
Company to own beneficially more than 5% of the outstanding Common Stock, by each director, nominee
for director and executive officer and by all directors and executive officers as a group.
(16)
|
|
|
|
|
|
|
|
|
|
|
Amount of Shares |
|
|
|
|
Beneficially |
|
|
Name of Beneficial Owner |
|
Owned(3)(4) |
|
Percent of Class |
Bruce M. Bell (1) |
|
|
1,100 |
|
|
|
* |
|
Paul F. Blanchard, Jr. (2) |
|
|
|
|
|
|
* |
|
Michael C. Coffman (1)(2) |
|
|
115,994 |
|
|
|
1.4 |
% |
E. Chris Kauffman (1) |
|
|
33,000 |
|
|
|
* |
|
Duke R. Ligon (1) |
|
|
181,182 |
|
|
|
2.2 |
% |
Robert O. Lorenz (1) |
|
|
4,200 |
|
|
|
* |
|
Lonnie J. Lowry (2) |
|
|
9,816 |
|
|
|
* |
|
Robert A. Reece (1) |
|
|
46,576 |
|
|
|
* |
|
Robert E. Robotti (1)
c/o Robotti & Company, LLC
110 E. 42nd St., 11th
Floor New York, NY 10017 |
|
|
774,776 |
|
|
|
9.3 |
% |
Ben Spriestersbach (2) |
|
|
7,733 |
|
|
|
* |
|
H. Grant Swartzwelder (1) |
|
|
8,272 |
|
|
|
* |
|
Robb P. Winfield (2) |
|
|
1,082 |
|
|
|
* |
|
All directors and executive officers as a group
(12 persons) |
|
|
1,141,691 |
|
|
|
13.8 |
% |
|
|
|
* |
|
Less than 1% owned |
|
(1) |
|
Director |
|
(2) |
|
Executive Officer |
|
(3) |
|
The number of shares shown includes shares that are individually or jointly
owned, as well as shares over which the individual has either sole or shared investment or voting
authority. |
|
(4) |
|
The number of shares shown does not include future share amounts recorded to each
outside directors account under the Panhandle Oil and Gas Inc. Deferred Compensation Plan for
Non-Employee Directors. See Proposal No. 1 Compensation Table of Directors, footnote(2). |
Executive Officers
The following is a list of the current executive officers of the Company. All officers
hold office at the discretion of the Board and may be removed from office, with or without cause,
at any time by the Board.
(17)
|
|
|
|
|
|
|
|
|
|
|
Positions and Offices Presently Held |
|
Officer |
Name |
|
Age |
|
With the Company |
|
Since |
Michael C. Coffman(1) |
|
56 |
|
President and Chief Executive Officer |
|
1990 |
Paul F. Blanchard, Jr. |
|
49 |
|
Senior Vice President and Chief Operating Officer |
|
2009 |
Lonnie J. Lowry |
|
57 |
|
Vice President, Chief Financial Officer and Secretary |
|
2006 |
Ben Spriestersbach |
|
58 |
|
Vice President of Land |
|
2005 |
Robb P. Winfield |
|
35 |
|
Controller and Chief Accounting Officer |
|
2009 |
|
|
|
(1) |
|
Biographical information for Mr. Coffman is set forth in Election of Directors Directors Whose
Term Expires in 2011. |
All officers named above also hold the same office in the Companys wholly-owned
subsidiary, Wood Oil Company.
Paul F. Blanchard, Jr. was sole proprietor of a consulting petroleum engineering firm from
2007 to 2008, and served from 1997 to 2007 as Vice President, Mid-Continent Business Unit of Range
Resources Corporation. He became the Companys Vice President and Chief Operating Officer in
January 2009. Mr. Blanchard holds a Bachelors of Science Degree in Petroleum Engineering.
Lonnie J. Lowry served as Vice President, Controller and Secretary from March, 2006 until
August, 2007 when he was elected Vice President, Chief Financial Officer and Secretary. From 2001
to 2006, he served as Controller of the Company. He had been Controller of Wood Oil Company for 15
years when acquired by Panhandle in 2001.
Ben Spriestersbach was elected Vice President of Land in 2005. From 2002 through 2004, he
served as Land Manager of the Company. From 1989 to 2001, he worked for Farmers Union Cooperative
Royalty Company (oil and gas royalty company), last serving as assistant secretary-treasurer. Mr.
Spriestersbach is a certified professional land man.
Robb P. Winfield served as Controller from February 2008 to March 2009 when he was elected
Controller and Chief Accounting Officer. Mr. Winfield was employed by Chesapeake Energy
Corporation from 2004 to 2008 as Revenue Coordinator and Supervisor and was employed as an auditor
from 1999 to 2004 with Ernst & Young LLP.
Executive Compensation
The table below sets forth information for the three most recently completed fiscal years
concerning compensation paid to executive officers in those fiscal years for services in all
capacities.
Summary Compensation Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal |
|
Base |
|
Cash |
|
All Other |
|
|
Name and Principal Position |
|
Year |
|
Salary(1) |
|
Bonus(1) |
|
Compensation(2) |
|
Total |
Michael C. Coffman, |
|
|
2009 |
|
|
$ |
236,250 |
|
|
$ |
250,504 |
(9) |
|
$ |
35,274 |
(3) |
|
$ |
522,028 |
|
President and Chief Executive |
|
|
2008 |
|
|
$ |
216,250 |
|
|
$ |
188,113 |
|
|
$ |
34,976 |
(3) |
|
$ |
439,339 |
|
Officer |
|
|
2007 |
|
|
$ |
186,250 |
|
|
$ |
79,500 |
|
|
$ |
33,675 |
(3) |
|
$ |
299,425 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paul F. Blanchard, Jr.,(7) |
|
|
2009 |
|
|
$ |
150,897 |
|
|
$ |
-0- |
|
|
$ |
-0- |
|
|
$ |
150,897 |
|
Senior Vice President and
Chief Operating Officer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(18)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal |
|
Base |
|
Cash |
|
All Other |
|
|
Name and Principal Position |
|
Year |
|
Salary(1) |
|
Bonus(1) |
|
Compensation(2) |
|
Total |
Lonnie J. Lowry, |
|
|
2009 |
|
|
$ |
156,250 |
|
|
$ |
42,075 |
|
|
$ |
30,033 |
(4) |
|
$ |
228,358 |
|
Vice President, Chief Financial |
|
|
2008 |
|
|
$ |
139,875 |
|
|
$ |
35,486 |
|
|
$ |
26,973 |
(4) |
|
$ |
202,334 |
|
Officer and Secretary |
|
|
2007 |
|
|
$ |
122,375 |
|
|
$ |
30,330 |
|
|
$ |
23,554 |
(4) |
|
$ |
176,259 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ben Spriestersbach, |
|
|
2009 |
|
|
$ |
125,750 |
|
|
$ |
34,422 |
|
|
$ |
24,398 |
(5) |
|
$ |
184,570 |
|
Vice President of Land |
|
|
2008 |
|
|
$ |
119,775 |
|
|
$ |
30,608 |
|
|
$ |
23,315 |
(5) |
|
$ |
173,698 |
|
|
|
|
2007 |
|
|
$ |
111,100 |
|
|
$ |
26,289 |
|
|
$ |
21,253 |
(5) |
|
$ |
158,642 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robb P. Winfield, (8) |
|
|
2009 |
|
|
$ |
121,667 |
|
|
$ |
32,490 |
|
|
$ |
23,196 |
(6) |
|
$ |
177,353 |
|
Controller and Chief
Accounting Officer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Salaries are set on a calendar year basis and are reported on a fiscal year basis ending on September 30 of each year. This means that the salary shown above for each fiscal
year reported represents three months salary of the previous calendar year and the first nine months of the current calendar year. Cash bonuses are paid in December of each year based on the
preceding fiscal years performance. Bonuses shown for fiscal 2009 were paid in December 2008 and were based on fiscal 2008 Company financial and operating performance. The same timing of payments
and Company performance holds true for fiscal 2008 and 2007. |
|
(2) |
|
Includes premiums of immaterial amounts for group life insurance for fiscal 2009, fiscal 2008 and fiscal 2007. |
|
(3) |
|
Represents the value of 1,615 shares for fiscal 2009, 1,128 shares for fiscal 2008 and 1,336 shares for fiscal 2007 of Company stock contributed to the ESOP on Mr.
Coffmans behalf based on the closing market price of the shares on the last day of each fiscal year. |
|
(4) |
|
Represents the value of 1,392 shares for fiscal 2009, 879 shares for fiscal 2008 and 927 shares for fiscal 2007 of Company stock contributed to the ESOP on Mr. Lowrys
behalf based on the closing market price of the shares on the last day of each fiscal year. |
|
(5) |
|
Represents the value of 1,124 shares for fiscal 2009, 753 shares for fiscal 2008 and 834 shares for fiscal 2007 of Company stock contributed to the ESOP on Mr.
Spriestersbachs behalf based on the closing market price of the shares on the last day of each fiscal year. |
|
(6) |
|
Represents the value of 1,082 shares for fiscal 2009 of Company stock contributed to the ESOP on Mr. Winfields behalf based on the closing market price of the shares on
the last day of the fiscal year. |
|
(7) |
|
Mr. Blanchard joined the Company January 26, 2009, thus he received no bonus in fiscal 2009 and was not eligible for an ESOP contribution. |
|
(8) |
|
Mr. Winfield was named an executive officer effective March 5, 2009. |
|
(9) |
|
Mr. Coffmans Cash Bonus paid in December 2008 (during fiscal 2009) includes a payment of $225,000 for his performance based on fiscal 2008 Company operating results and
$25,504 for a supplemental payment for a portion of his earned ESOP contribution which could not be made due to the deferral maximum regulations of the Internal Revenue Service. |
The Companys only equity incentive plan or other incentive compensation plan for its
executive officers is the Panhandle Oil and Gas
Inc. Employee Stock Ownership and 401(k) Plan
(the ESOP), and, if approved, the 2010 Panhandle Oil and Gas Inc. 2010 Restricted Stock Plan.
The ESOP is a tax-qualified defined contribution plan, and serves as the Companys only
retirement plan for its employees. Contributions are made at the discretion of the Board and, to
date, all contributions have been made in shares of Company Common Stock. Contributions are
allocated to all participants in proportion to their salaries for the plan year and 100% vesting
occurs after three years of service. Separation prior to three years of service results in
forfeiture of all contributions received. All employees, including the executive officers, may
participate in the 401(k) portion of the ESOP on a voluntary basis. Under the terms of the 401(k)
portion of the ESOP, eligible employees may elect to defer a portion of their earnings up to the maximum allowed by
(19)
regulations of the Internal Revenue Service. The Company makes no matching contributions to the
401(k) portion of the ESOP.
Compensation Discussion and Analysis
Compensation Committee and Role of the Board of Directors in Fiscal 2009
The Compensation Committee is composed entirely of independent directors and has the
responsibility for establishing, implementing and monitoring the compensation of the Companys
executive officers. In particular, the Committees role is to oversee and recommend to the Board
for final approval, the compensation, benefit plans and policies, and, in addition, review, approve
and recommend to the Board annually all compensation decisions relating to the Chief Executive
Officer and other executive officers of the Company. The Committee reviews executive compensation
programs, approves compensation levels and performance metrics, reviews management performance and
final executive bonus distributions. The Committee met two times during fiscal 2009. The Committee
operates in accordance with its charter, which sets forth its powers and responsibilities. A copy
of the charter of the Compensation Committee can be viewed at the Companys website:
www.panhandleoilandgas.com.
In December of each year, base salaries of the executive officers are set for the next
calendar year and bonuses are determined based on the preceding fiscal years operational and
financial performance. Under the Committees Charter, the Committee reviews and approves corporate
goals and objectives relevant to the Chief Executive Officers compensation, evaluates the Chief
Executive Officers performance in light of those goals and objectives and based on the Committees
evaluation, recommend to the Board compensation levels for the Chief Executive Officer and all
other executive officers with the final decision made by the Board.
Compensation Philosophy and Objectives
The objectives of the Companys compensation program are to:
|
§ |
|
attract and retain key executives which are necessary to continue execution of
our unique business strategies involving the ownership, management and use of mineral
acreage in an oil and gas exploration and production company; |
|
|
§ |
|
motivate and reward individual performance and contributions; and |
|
|
§ |
|
align the interests of the executives with those of the shareholders. |
The principal elements of the executive compensation program are salary, annual cash bonus and
contributions to the ESOP. The Company currently does not offer any stock award, stock option or
non-equity incentive plans to its executive officers and has no employment contracts. Awards of
restricted stock will become an integral part of the compensation program if the 2010 Stock Plan is
approved by shareholders at the meeting. Restricted stock, if approved, and the salary, cash bonus
and the ESOP will be used to meet the Companys compensation objectives as follows:
|
§ |
|
Attract and retain key executives and reward the officers who contribute to the
Companys success and to motivate the officers to develop and execute current and
long-term business strategies and goals. |
(20)
|
§ |
|
Motivate and reward individual performance and contributions. The Companys
evaluation of the individual performance of each executive officer affects most aspects
of the executives compensation. Individual performance and level of responsibility are
considered in determining an executives annual salary and are important factors in
deciding discretionary cash bonuses. |
|
|
§ |
|
The performance of the Company is also a key factor in determining
compensation. |
|
|
§ |
|
Align the interests of the executives with those of the Companys shareholders.
In fiscal 2009, the Company continued to use allocations of Company stock to the ESOP
to align the financial interests of the executives with those of the shareholders and
to provide a longer-term incentive form of compensation. In addition, restricted stock
will be used in the future if the 2010 Stock Plan is approved by shareholders. |
Role of Executive Officers
In fiscal 2009, the Compensation Committee and the Board made all compensation decisions for
the position of Chief Executive Officer and, after receiving input from the Chief Executive
Officer, all other executive officers. The Compensation Committee and the Board reviewed the
performance of the Chief Executive Officer, and afterwards, set his compensation. Mr. Coffman was
not present during these discussions. The Compensation Committee and the Board, together with the
Chief Executive Officer, reviewed the performance of the other executive officers. The Chief
Executive Officer made compensation recommendations to the Compensation Committee and the Board
with respect to the other executive officers. Messrs. Blanchard, Lowry, Spriestersbach and Winfield
were not present at the time of these discussions.
Base Salaries and Annual Cash Bonuses
Base salaries and annual cash bonuses for executive officers are based upon the individuals
responsibilities and experience, taking into account, among other factors, the individuals
initiative, contribution to the Companys overall performance, handling of special projects or
events during the year and yearly financial and operating results. Base salaries for executive
officers are reviewed and compared to similar positions in the Companys industry.
The Company has been participating in the Effective Compensation, Incorporated Oil and Gas
Compensation Survey (the Survey) whereby the Companys compensation amounts for all employees
(including executive officers) is compared to a selected group of peer companies. The 2008 Survey,
published in July 2008, was used for comparison purposes in setting calendar 2009 salaries in
December of 2008. The following peer companies were used for the comparisons:
|
|
|
Bill Barrett Corporation
|
|
Mustang Fuel Corporation |
Brigham Exploration Company
|
|
Penn Virginia Oil and Gas |
Crimson Exploration Inc.
|
|
Rosetta Resources, Inc. |
Delta Petroleum Corporation
|
|
Stone Energy Corporation |
Energy Partners, Ltd.
|
|
TXCO Resources, Inc. |
GMX Resources Inc.
|
|
Venoco, Inc. |
Harvest Natural Resources, Inc. |
|
|
(21)
As the Company does not have the same complexity of operations as several of the peer
companies, the Compensation Committee uses the Survey as a tool and has maintained compensation
levels below the peer group averages for the executive officers while trying to maintain
competitive salary levels for other employees.
Base Salaries. The base salaries of the executive officers are reviewed annually by the
Compensation Committee and future salary adjustments are recommended to the Board for final
approval. The Compensation Committee and the Board consider various factors, including:
|
|
|
the overall responsibilities of the executive officers; |
|
|
|
|
the time period over which the executive officer has performed his responsibilities for
the Company; |
|
|
|
|
the scope, level of experience and experience required to successfully execute the
executive officers position with the Company; |
|
|
|
|
the demonstrated individual performance of the executive officer; and |
|
|
|
|
the recommendation of the Chief Executive Officer with respect to other executive
officers. |
Based on these factors and considerations, in December 2008, the Board established the annual
base salary for the Chief Executive Officer at $240,000 for calendar 2009. Salaries for the
executive officers in fiscal 2009 are set forth in the Summary Compensation Table above and were
determined by the Board based on the considerations described above. In December, 2009, the annual
base salary of the Chief Executive Officer was adjusted to $260,000 for calendar 2010.
Annual Cash Bonuses. During an annual Company goal-setting process, the Chief Executive
Officer, the Compensation Committee and the full Board approve Company objective performance
metrics as well as more subjective performance goals that focus on the manner in which the
Companys oil and gas business is managed. For fiscal years 2007, 2008 and 2009, the objective
performance metrics addressed earnings per share (for 2008 and 2009 only), general and
administration (G&A) expense per Mcfe of production, reserve replacement percentage, Mcfe
production increase and finding cost per Mcfe.
The objective performance metrics for fiscal 2008 and 2009 are below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2008(1) |
|
Fiscal 2009(1) |
Metric Category |
|
Floor |
|
Target |
|
Weighting |
|
Floor |
|
Target |
|
Weighting |
Earnings per share |
|
$ |
0.75 |
|
|
$ |
1.45 |
|
|
|
100 |
% (2) |
|
$ |
1.00 |
|
|
$ |
1.70 |
|
|
|
100 |
% (2) |
Reserve replacement percentage |
|
|
100 |
% |
|
|
198 |
% |
|
|
35 |
% |
|
|
100 |
% |
|
|
181 |
% |
|
|
35 |
% |
Mcfe production increase |
|
|
1 |
% |
|
|
16 |
% |
|
|
29 |
% |
|
|
5 |
% |
|
|
12 |
% |
|
|
29 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maximum |
|
Target |
|
Weighting |
|
Maximum |
|
Target |
|
Weighting |
Finding cost per Mcfe |
|
$ |
4.00 |
|
|
$ |
2.75 |
|
|
|
29 |
% |
|
$ |
3.50 |
|
|
$ |
2.75 |
|
|
|
29 |
% |
G&A expense per Mcfe of production |
|
$ |
0.80 |
|
|
$ |
0.60 |
|
|
|
7 |
% |
|
$ |
0.77 |
|
|
$ |
0.55 |
|
|
|
7 |
% |
(22)
|
|
|
(1) |
|
Each metric has a graduated scale of achievement from -0- to 100 percent between the floor or maximum and target amounts which is then applied to
the weighting percentage. |
|
(2) |
|
The earnings per share weighting percentage that is achieved in a fiscal year was multiplied times all other performance metric weighting percentages
which are then accumulated to determine the total bonus percent. |
|
(3) |
|
The structure of these metrics rewards the reduction of finding cost per Mcfe and G&A expense per Mcfe. |
The Compensation Committee believes that combining the metric categories of growing
reserves, increasing Mcfe production, reducing the finding cost per Mcfe and reducing G&A expense
per Mcfe are the important measurements necessary for increasing shareholder value to grow an oil
and gas exploration and production company. The target metric of reducing finding cost per Mcfe is
intended to discourage drilling marginal or unprofitable wells only to achieve increased production
and reserves. These metrics have been adopted by the Compensation Committee to focus management on
drilling wells that are economically viable. The emphasis on the earnings per share metric has the
effect of discouraging excessive risk taking. The Compensation Committee does not believe that
these performance metrics reward executives for taking risks beyond those risks inherent in the oil
and gas exploration and production business.
The subjective performance goals are tailored to the job description of each executive officer
by weighting each major area of responsibility. Within each major area, a breakdown is made of more
detailed areas of responsibility with weighting applied to each. An evaluation is performed
annually by the outside directors and the Compensation Committee of the Chief Executive Officer,
and by the Chief Executive Officer of each of the other executive officers. In this evaluation,
performances are evaluated on each of the detailed areas of responsibility. The evaluations are
then accumulated to determine the grade for each major area and the area grading is summarized to
determine the executive officers subjective performance evaluation total score.
The Compensation Committee believes that the Chief Executive Officers cash bonus element of
compensation should principally reflect his success in achieving the above Company performance
metrics. His bonus calculation is based on a weighting of 70% for meeting the objective performance
metrics and 30% for meeting his subjective performance goals. Mr. Blanchard joined the Company on
January 26, 2009 (roughly one-third through fiscal 2009). Thus, his bonus was based solely on
meeting subjective performance criteria in fiscal 2009. In future years his bonus calculation will
be based on a weighting of 60% for meeting the Company objective performance metrics and 40% for
meeting his subjective performance goals. Since Mr. Blanchard joined the Company subsequent to the
fiscal 2009 bonus payments being made in December 2008, his first bonus payment date was in
December 2009. The other executive officers annual bonuses are based 80% for meeting subjective
performance goals and 20% on meeting Company objective performance metrics.
In making its decisions regarding cash bonuses paid for fiscal 2008 results, the Compensation
Committee determined that the Company had significantly exceeded the targeted levels for the
Companys objective metrics applicable in fiscal 2008. The Committee also reviewed the performance
of the Chief Executive Officer in meeting his subjective performance goals and each of the
executive officers performance with respect to their subjective performance goals for fiscal 2008.
(23)
The maximum targeted annual cash bonus paid during fiscal 2009 to the Chief Executive Officer
(based on fiscal 2008 results) was 100% of his base salary and 30% of the base salaries of the
other executive officers. The same process was used for the cash bonuses based on fiscal 2009
operating results. Since the Company did not achieve the earnings per share metric for fiscal 2009
(even though all other company performance metrics substantially exceeded target levels), the Chief
Executive Officers performance bonus paid based on fiscal 2009 results was limited to a maximum of
30% of his base salary resulting in a reduction of his performance bonus from $225,000 for fiscal
2008 to $72,000 for fiscal 2009.
Broad-Based Employee Benefits
§ |
|
The Company has an ESOP which is a tax-qualified, defined contribution plan that covers all employees,
including the executive officers. Under the ESOP, the Company contributes shares of Common Stock to the ESOP
based on the employees total compensation level. |
|
§ |
|
The executive officers are eligible to participate in all of the Companys other employee benefit plans which
include medical, dental, group life, long term disability, accidental death and dismemberment and eye care
insurance, in each case on the same basis as all other employees. |
|
§ |
|
The Company provides no perquisites or other personal benefits to its executive officers. |
Change-In-Control Executive Severance Agreements
The Board believes that the executives performance generally may be hampered by distraction,
uncertainty and other activities in the event of a change-in-control of the Company which might
adversely affect shareholder values. To reduce these potential adverse effects and to encourage
fair treatment of the executive officers in connection with any change-in-control event,
Change-In-Control Executive Severance Agreements were entered into with the executive officers to
provide for change-in-control protection. Under these Agreements, if, within two years following a
change-in-control event, the Company terminates the employment of any of the executives without
cause, or any executive resigns for good reason, that executive would be entitled to a severance
payment, payable in a lump sum, in cash, following his termination, in an amount equal to two times
the average of the compensation paid to the executive during the two calendar years preceding the
change-in-control (or the annual average of any shorter period). Compensation for this purpose
includes the sum of the executives base salary, cash bonuses and contributions made to the ESOP on
executives behalf. The bonus to be used in determining the executives compensation shall not be
less than two times his targeted bonus for the calendar year in which the change-in-control event
occurs (or if not yet determined for that year, two times executives targeted bonus for the
preceding calendar year). Further, if the executive qualifies, and the Company is required to
provide coverage under COBRA, the Company shall reimburse the executive the costs of purchasing
continuing coverage under COBRA for the executive and his dependents for as long as he qualifies for
COBRA coverage. The Company is not currently subject to COBRA because it has fewer than 20
employees.
A change-in-control event generally means: (i) the acquisition of beneficial ownership of 30%
or more of the Companys Common Stock; (ii) during any two consecutive years, individuals who
currently make up the Companys Board (or which subsequently become directors after being approved
for election by at least a majority of current directors) ceasing for any reason to make up at
(24)
least two-thirds of the Board; or (iii) approval by the Companys shareholders of (a) a
reorganization, merger or consolidation which results in the ownership of 20% or more of the
Companys Common Stock by persons or entities that were not previously shareholders, (b) a
liquidation or dissolution of the Company, or (c) the sale of substantially all of the Companys
assets.
There may arise situations where the potential to merge with or be acquired by another company
may be in the best interest of our shareholders. Based on such a potential, the Company believes
that the double trigger requiring both (i) a change-in-control event and (ii) the termination of
an executives employment without cause or his resignation for good reason is appropriate to
provide fair treatment of the executive officers, while allowing them to continue to concentrate on
enhancing shareholder value during a change-in-control event, as they may take actions to do so
that ultimately may lead to their termination after the event.
Pursuant to the Change-In-Control Executive Severance Agreements, assuming that a
change-in-control event took place on the last day of fiscal 2009, and an executives employment
was terminated without cause, or the executive terminated his employment for good reason, within
two years following this assumed change-in-control event, the executives below would receive the
following severance payments:
|
|
|
|
|
|
|
|
|
|
|
|
|
Name |
|
Salary(1) |
|
Bonus(2) |
|
Total(3) |
Michael C. Coffman |
|
$ |
533,250 |
|
|
$ |
480,000 |
|
|
$ |
1,013,250 |
|
Paul F. Blanchard, Jr. |
|
$ |
440,000 |
|
|
$ |
220,000 |
|
|
$ |
660,000 |
|
Lonnie J. Lowry |
|
$ |
361,053 |
|
|
$ |
96,000 |
|
|
$ |
457,053 |
|
Ben Spriestersbach |
|
$ |
295,583 |
|
|
$ |
76,200 |
|
|
$ |
371,783 |
|
Robb P. Winfield |
|
$ |
263,124 |
|
|
$ |
75,000 |
|
|
$ |
338,124 |
|
|
|
|
(1) |
|
Calculated based on (i) two times the average of the executive officers base
salary during calendar years 2008 and 2009 plus (ii) two times the average amount contributed to
the ESOP on behalf of each executive for fiscal years 2008 and 2009. |
|
(2) |
|
Calculated based on two times the maximum targeted bonus for each
executive for fiscal year 2009. |
|
(3) |
|
In addition, if the Company is required to provide continuing coverage
to its employees under COBRA (as defined in Section 4980B of the Internal Revenue Code of 1986)
at the time of a change-in-control, the Company will reimburse each executive for all costs
incurred by him in purchasing such continuing coverage for himself and his dependents as long as
he qualifies for COBRA coverage. |
Other than the Change-In-Control Executive Severance Agreements, the Company maintains no
employment agreements with its executive officers.
Other Compensation Matters
The Company currently does not have ownership requirements or a stock retention policy for our
executive officers. Further, the Company has no policy restricting an executive officer from
limiting his economic risk to the market value of Company stock owned by him.
Section 162(m) of the Internal Revenue Code limits the deductibility of compensation in excess
of $1,000,000 annually paid to any of our executive officers, unless the compensation qualifies as
(25)
performance-based compensation. As our compensation levels are well below this level, Section
162(m) is a non-factor for the Company.
The Company currently does not have a provision in place for recovery of previous bonus
payments if relevant performance metrics are restated or otherwise altered in a manner that would
reduce the size of a previous bonus payment. The Company has never had such an event, however, the
Compensation Committee will evaluate the adoption of such a provision in 2010.
As of the date of this Proxy Statement, the Company has weathered the ongoing economic
conditions in an excellent manner and to the best of its knowledge, has no upcoming issues. The
Company is mindful of the current state of the economy and will continue to evaluate its situation
and the potential effects on executive compensation.
Report of the Compensation Committee
The Compensation Committee has reviewed and discussed the Compensation Discussion and
Analysis with management and, based on such review and discussions, the Compensation Committee has
recommended to the Board that the Compensation Discussion and Analysis be included in this proxy
statement.
Compensation Committee
Bruce M. Bell Chair
E. Chris Kauffman
Duke R. Ligon
Robert O. Lorenz
Robert E. Robotti
H. Grant Swartzwelder
Code of Ethics
The Board has adopted a Code of Ethics for Senior Financial Officers. The Companys Chief
Executive Officer, Chief Financial Officer and Chief Accounting Officer were required to sign this
code and will be held to the standards outlined. In addition, the Board has adopted a Code of
Ethics and Business Practices applicable to all directors, officers and employees of the Company.
Copies of both codes are available at the Companys website: www.panhandleoilandgas.com.
Communications with the Board of Directors
The Company provides an informal process for shareholders and other interested parties to
send communications to its Board. Shareholders or other interested parties who wish to contact the
outside directors as a group, the Lead Independent Director, or any of its individual members may
do so by writing to: The Board of Directors, Panhandle Oil and Gas Inc., 5400 N. Grand Boulevard,
Suite 300, Oklahoma City, OK 73112-5688. Correspondence directed to any individual Board member is
referred, unopened, to that member. Correspondence not directed to a particular Board member is
referred, unopened, to the Lead Independent Director.
(26)
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities and Exchange Act of 1934 requires the Companys directors
and executive officers and persons who own more than ten percent of the Companys Common Stock
(collectively reporting persons) to file with the Securities and Exchange Commission initial
reports of ownership and reports of changes in ownership of the Common Stock, and to furnish the
Company with copies of such reports. Based upon a review of the filings with the Securities and
Exchange Commission and representations that no other reports were filed, the Company believes that
during fiscal 2009 all directors and executive officers complied with the reporting requirements of
Section 16(a) of the Securities and Exchange Act of 1934.
Shareholder Proposals
Proposals of shareholders intended to be presented at the next annual shareholders
meeting to be held in March 2011, and to be included in the proxy statement and form of proxy
pursuant to Rule 14a-8 under the Securities and Exchange Act of 1934, must be received by the
Company by October 4, 2010. Any such proposals should be in writing and be sent by certified mail;
return receipt requested, to the Companys principal office address shown above, Attention:
Secretary. Upon receipt of any such proposal, the Company will determine whether or not to include
such proposal in the proxy statement and any proxy in accordance with regulations governing the
solicitation of proxies.
In order for a shareholder to nominate a candidate for director, under the Companys Bylaws
timely notice of the nomination must be received by the Company in advance of the meeting.
Ordinarily, such notice must be received not less than 90 nor more than 120 days prior to the first
anniversary of the preceding years meeting. The shareholder filing the notice of nomination must
describe various matters regarding the nominee, including, but not limited to, such information as
name, address, occupation, business background and shares held, and the nominee must deliver a
written questionnaire and agreement to the Company covering certain matters as specified in the
Bylaws. In order for a shareholder to bring other business before a shareholders meeting, timely
notice must be received by the Company within the time limits described above in this paragraph for
notice of nomination of a candidate for director. Such notice must include a description of the
proposed business, the reasons therefor, and other specified matters. These requirements are
separate from the requirements a shareholder must meet to have a proposal included in the Companys
proxy statement under Rule 14a-8 described above.
In each case the notice must be given to the Secretary of the Company at the address shown
below under the caption Form 10-K. Any shareholder desiring a copy of the Companys Bylaws will
be furnished one without charge upon written request to the Secretary. A copy of the Bylaws is
available on the Companys website at www.panhandleoilandgas.com.
Annual Financial Report
Copies of the Annual Report to Shareholders for fiscal 2009 are being mailed with this
proxy statement and a copy of the Annual Report is available on the Companys website at:
www.panhandleoilandgas.com.
(27)
Form 10-K
A copy of the Companys Annual Report on Form 10-K for fiscal 2009 filed with the
Securities and Exchange Commission is included in the Annual Report to Shareholders mailed with
this proxy statement. A separate Form 10-K and copies of the Companys charters for the various
committees of the Board, the Corporate Governance Guidelines and the Companys codes of ethics are
available, free of charge, upon written or oral request made to the Company at the address or
telephone number set forth below, or can be viewed at the Companys website:
www.panhandleoilandgas.com.
Lonnie J. Lowry, Secretary
Panhandle Oil and Gas Inc.
5400 N. Grand Boulevard, Suite 300
Oklahoma City, OK 73112-5688
405.948.1560
Other Matters
Management knows of no other matters to be brought before the meeting. However, if any
other matters do properly come before the meeting, it is intended that the shares represented by
the proxies in the accompanying form will be voted as the Board may recommend. Whether shareholders
plan to attend the meeting or not, they are respectfully urged to sign, date and return the
enclosed proxy, which will be returned to them at the meeting if they are present and so request.
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By Order of the Board of Directors |
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Lonnie J. Lowry, Secretary
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February 5, 2010
YOUR VOTE IS IMPORTANT.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE MARK, SIGN AND DATE THE ENCLOSED PROXY
AND MAIL IT PROMPTLY IN THE POSTAGE-PAID ENVELOPE PROVIDED.
PLEASE VOTE!
(28)
APPENDIX A
PANHANDLE OIL AND GAS INC.
2010 RESTRICTED STOCK PLAN
Appendix A, Page 1 of 8
TABLE OF CONTENTS
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Section 1. Introduction |
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1.1. Purpose of the Plan |
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1.2. Nature of Sales of Restricted Stock |
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1.3. Effective Date and Term of Plan |
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Section 2. Definitions And Construction |
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2.1. Definitions |
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2.2. Construction |
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Section 3. Eligibility |
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3.1. In General |
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Section 4. Administration Of The Plan |
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4.1. In General |
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Section 5. Shares Subject To The Plan |
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5.1. Number of Shares |
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Section 6. Restricted Stock |
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6.1. Sale of Restricted Stock |
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6.2. The Restricted Period |
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6.3. Escrow |
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6.4. Dividends |
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6.5. Repurchase of Restricted Stock |
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6.6. Expiration of Restricted Period |
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6.7. Rights as a Shareholder |
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Section 7. Adjustments |
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7.1. Changes in Capitalization |
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Section 8. Change In Control |
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8.1. Consequences of a Change In Control on Restricted Stock |
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8.2. Change In Control Defined |
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Section 9. General Provisions |
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9.1. Transferability of Restricted Stock |
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9.2. Termination of Status |
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9.3. Withholding |
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9.4. Other Conditions on Delivery of Stock |
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Section 10. Miscellaneous |
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10.1. No Right to Continued Employment |
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10.2. Amendment |
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10.3. Compliance with Code Section 409A |
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10.4. Governing Law |
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(i)
Appendix A, Page 2 of 8
PANHANDLE OIL AND GAS INC.
2010 RESTRICTED STOCK PLAN
SECTION 1. INTRODUCTION
1.1. Purpose of the Plan. The Plan provides an essential long-term component to the Companys
total compensation package for its officers reflecting the importance the Company places on
aligning the interest of its officers with those of its shareholders and provides incentives for
officers to remain with the Company. The Plan will enhance the Companys ability to attract, retain
and motivate officers of the Company.
1.2. Nature of Sales of Restricted Stock. The Plan is intended to permit the Sale by the
Company of Shares of Restricted Stock to its officers subject to various vesting based on the
passage of time or other conditions to vesting and other restrictions on the transferability of the
Shares sold. The transfer restrictions on these Shares will be removed based on the vesting periods
contained in the Stock Restriction Agreement between the Company and the affected Participant.
Except as otherwise provided by the Plan, each Sale hereunder may be made alone or in addition or
in relation to any other Sale. The terms of each Sale need not be identical, and the Compensation
Committee need not treat Participants uniformly.
1.3. Effective Date and Term of Plan. If approved by shareholders at the Companys 2010
Annual Shareholders Meeting, the Plan will be effective as of March 11, 2010. No sales shall be
permitted under the Plan after March 10, 2020 but the vesting periods for Shares previously sold
may extend beyond that date.
SECTION 2. DEFINITIONS AND CONSTRUCTION
2.1. Definitions. When used in this 2010 Restricted Stock Plan, the following terms shall have the meanings set
forth below, unless the context clearly requires a different meaning:
(a) |
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Board means the Board of Directors of the Company. |
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(b) |
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Change in Control shall have the meaning set forth in Section 8.2. |
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(c) |
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Code means the Internal Revenue Code of 1986, as amended. |
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(d) |
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Common Stock means the Companys Class A Common Stock, par value $0.01666 per share. |
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Company means Panhandle Oil and Gas Inc. |
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(f) |
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Compensation Committee shall mean the Compensation Committee of the Board. |
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Disability shall mean incapacity due to physical or mental illness as determined by the
Compensation Committee. |
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(h) |
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Effective Date means the first date set
forth in Section 1.3. |
Appendix A, Page 3 of 8
(i) |
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Fair Market Value means the closing sales price (for the primary trading session) of a
Share on the date the Restricted Period ends. For any date that is not a trading day, the
Fair Market Value of a Share for such date will be determined by using the closing sales
price for the immediately preceding trading day. |
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(j) |
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Participant means any officer who purchases Restricted Stock. |
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(k) |
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Plan means this 2010 Restricted Stock Plan. |
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(l) |
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Repurchase shall have the meaning as set forth in Section 6.5. |
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(m) |
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Restricted Period means the period of time during which the transfer of the Shares of
Restricted Stock shall be restricted and after which the shares of Restricted Stock shall
be vested. |
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(n) |
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Restricted Stock means Shares sold under this Plan. |
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(o) |
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Sale means a sale of shares of Restricted Stock made under the Plan. |
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Share means a share of Class A Common Stock, par value $0.01666 per share, of the Company. |
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Stock Restriction Agreement means all agreements between the Company and a Participant
covering the Sale of Restricted Stock under this Plan. |
2.2. Construction. When used in the Plan, (a) the terms include and including shall
be deemed to include the phrase but not limited to and (b) masculine pronouns shall include the
feminine.
SECTION 3. ELIGIBILITY
3.1. In General. Any natural person is eligible to purchase Restricted Stock if such
individual is a current officer of the Company or any of the Companys present or future subsidiary
entities as determined by the Compensation Committee.
SECTION 4. ADMINISTRATION OF THE PLAN
4.1. In General.
(a) |
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The Plan will be administered by the Compensation Committee. The Compensation Committee
shall have authority to determine the Participants and terms and conditions of any Sale of
Restricted Stock, and to adopt, amend and repeal such administrative rules, guidelines and
practices relating to the Plan as it shall deem advisable. |
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The Compensation Committee shall have full discretionary authority to construe and
interpret the terms of the Plan and any Stock Restriction Agreement, and to determine all facts
necessary to administer the Plan and any Stock Restriction Agreement. The Compensation Committee
may correct any defect, supply any omission or reconcile any inconsistency in the Plan or any Stock
Restriction Agreement in the manner and to the extent it shall deem necessary or advisable. |
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All decisions by the Compensation Committee shall be made in its sole discretion and shall
be final and binding on all persons having or claiming any interest in the Plan or in any purchase
of Restricted Stock. No director or person acting pursuant to the authority delegated by the |
Appendix A, Page 4 of 8
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Compensation Committee shall be liable for any action or determination relating to or under
the Plan made in good faith. |
SECTION 5. SHARES SUBJECT TO THE PLAN
5.1. Number of Shares.
(a) |
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Subject to adjustment under Section 7.1, Sales of Restricted Stock may be made under the
Plan for up to 100,000 Shares. |
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If Shares sold hereunder are repurchased by the Company prior to the vesting of such
Shares the repurchased Shares shall again be available for sale by the Company to officers under
the Plan. Shares issued under the Plan may consist in whole or in part of authorized but unissued
shares or treasury shares. |
SECTION 6. RESTRICTED STOCK
6.1. Sale of Restricted Stock. The Compensation Committee may sell Shares of Restricted Stock
to such officers as it determines. The sale price of Shares shall be at a significant discount to
the Fair Market Value of the Shares, generally at a per Share price equal to the par value of the
Shares sold. Sales of Restricted Stock shall be subject to such restrictions on transfer and the
Repurchase of Restricted Stock by the Company and such other terms and conditions, subject to the
provisions of the Plan, as determined by the Compensation Committee.
6.2. Restricted Period. At the time a Sale of Restricted Stock is made to a Participant,
the Compensation Committee shall establish a period of time during which the transfer of the Shares
of Restricted Stock shall be restricted and after which the Shares of Restricted Stock shall be
vested (the Restricted Period). Each Sale of Restricted Stock may have a different Restricted
Period. The Restricted Period shall be a minimum of two years and the Compensation Committee shall
determine the Restricted Period for all Restricted Stock.
6.3. Escrow. Each Participant purchasing Restricted Stock shall enter into a Stock
Restriction Agreement with the Company setting forth the terms, conditions and restrictions of the
Sale. Any certificates representing Shares of Restricted Stock shall be registered in the name of
the Participant and deposited with the Company, or an escrow agent as determined by the
Compensation Committee, together with a stock power for each certificate endorsed in blank by the
Participant. Each such certificate shall bear a legend in substantially the following form:
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The transferability of this certificate and the shares of Common Stock represented by it are
subject to the terms and conditions contained in the Panhandle Oil and Gas Inc. 2010
Restricted Stock Plan (the Plan), and an agreement entered into between the registered
owner and Panhandle Oil and Gas Inc. Copies of the Plan and the agreement are on file at the
principal office of Panhandle Oil and Gas Inc. |
Alternatively, in the discretion of the Company, ownership of the Shares of Restricted Stock and
the appropriate restrictions shall be reflected in the records of the Companys transfer agent and
no physical stock certificates shall be issued prior to vesting.
Appendix A, Page 5 of 8
6.4. Dividends. Unless otherwise determined by the Compensation Committee or provided in
the Stock Restriction Agreement, Participants holding Restricted Stock will be eligible to receive
all dividends paid with respect to such Shares. If any dividends or distributions are paid in
Shares, or consist of a dividend or distribution to holders of Shares other than an ordinary cash
dividend, the Shares or other property will be subject to the same restrictions on transferability
as the Restricted Stock with respect to which they were paid and such Shares or other property
shall be deposited with the Company or in escrow as provided in Section 6.3.
6.5. Repurchase of Restricted Stock. In the event any Shares of Restricted Stock under
the terms of the Stock Restriction Agreement (including any additional shares of Restricted Stock
that may result from changes in capitalization of the Company as provided in Section 7.1) do not
vest, the Company shall repurchase (Repurchase) such Shares from the affected Participant for a
price equal to the original sale price. All repurchased Shares shall be surrendered to the Company
and the stock certificates representing such Shares shall be cancelled.
6.6. Expiration of Restricted Period. Upon the expiration of the Restricted Period and
the satisfaction of any other conditions prescribed by the Compensation Committee or set forth in
the Stock Restriction Agreement, the restrictions applicable to the Restricted Stock shall lapse
and, unless otherwise instructed by the Participant, a stock certificate for the number of Shares
of Restricted Stock with respect to which the restrictions have lapsed shall be released by the
Company or from escrow and delivered, free of all such restrictions and legends, except any that
may be imposed by law, to the Participant or the Participants estate, as the case may be.
6.7. Rights as a Shareholder. Subject to the terms and conditions of the Plan, each
Participant receiving Restricted Stock shall have all the rights of a shareholder with respect to
the Shares of Restricted Stock during the Restricted Period, including the right to vote any shares
of Restricted Stock and to receive payment of dividends subject to the provisions in Section 6.4.
SECTION 7. ADJUSTMENTS
7.1. Changes in Capitalization. In the event of any stock split, reverse stock split, stock
dividend, recapitalization, combination of shares, reclassification of shares, spin-off or other
similar change in capitalization or event, or any dividend or distribution to holders of Shares
other than an ordinary cash dividend, (a) the number and class of securities available under this
Plan, (b) the number of Shares sold under this Plan and (c) the price payable to a Participant upon
the Repurchase, shall be equitably adjusted in the manner determined by the Compensation Committee.
SECTION 8. CHANGE IN CONTROL
8.1. Consequences of a Change In Control on Restricted Stock. Upon the occurrence of a Change
In Control, except to the extent specifically provided to the contrary in the applicable Stock
Restriction Agreement, all restrictions and conditions on all Restricted Stock then outstanding
shall automatically lapse and be deemed terminated or satisfied, as applicable.
8.2. Change In Control Defined. For purposes of this Plan, Change In Control shall
Appendix A, Page 6 of 8
mean
the occurrence of any one or more of the following:
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(i) |
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any person (as such term is used in Section 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended (the Exchange Act)) (other than a trustee or other fiduciary
holding securities under an employee benefit plan of the Company) is or becomes the beneficial
owner (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of
the Company representing 30% or more of the total voting power represented by the Companys then
outstanding Voting Securities; or |
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(ii) |
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during any period of two consecutive years, individuals who at the beginning of such
period constitute the Board of Directors of the Company (the Incumbent Board), and any new
director, whose election by the Board or nomination by the Board for election by the Companys
shareholders was approved by a vote of at least two-thirds
(2/3) of the directors then still in
office who either were directors at the beginning of the period or whose election or nomination for
election was previously so approved, cease for any reason to constitute a majority of the Board, or |
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(iii) |
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the shareholders of the Company approve a merger or consolidation of the Company with
any other corporation, other than a merger or consolidation that would result in the Voting
Securities of the Company outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into Voting Securities of the surviving entity) at
least 80% of the total voting power represented by the Voting Securities of the Company or such
surviving entity outstanding immediately after such merger or consolidation; or |
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(iv) |
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the shareholders of the Company approve a plan of complete liquidation of the Company or
an agreement for the sale or disposition by the Company (in one transaction or a series of
transactions) of all or substantially all of the Companys assets. |
As used in this Section 8.2, the term Voting Securities means the Companys Class A Common Stock,
par value $0.01666 per share, and any other securities of the Company that vote generally in the
election of directors.
SECTION 9. GENERAL PROVISIONS
9.1. Transferability of Restricted Stock. Except as the Compensation Committee may otherwise
determine or provide in a Stock Restriction Agreement, Restricted Stock may not be sold, assigned,
transferred, pledged or otherwise encumbered by Participants holding Restricted Stock, either
voluntarily or by operation of law, except by will or the laws of descent and distribution or,
pursuant to a qualified domestic relations order. References herein to a Participant, to the extent
relevant in the context, shall include references to authorized transferees.
9.2. Termination of Status. The Compensation Committee shall determine the effect on
Restricted Stock of the Disability, death, early or normal retirement, termination or other
cessation of employment, authorized leave of absence or other change in the employment of a
Participant.
9.3. Withholding. The Participant must satisfy all applicable federal, state, and local
or other income and employment tax withholding obligations before the Company will authorize the
Shares to be released from escrow to the Participant. The Company may decide to satisfy the
withholding
Appendix A, Page 7 of 8
obligations through additional withholding on salary or wages. If the Company elects
not to or cannot withhold from other compensation, the Participant must pay the Company the full
amount, if any, required for withholding. Payment of withholding obligations is due before the
Company will authorize the release of the Shares. If approved by the Compensation Committee, a
Participant may
satisfy such tax obligations in whole or in part by delivery of a portion of the Restricted Stock
creating the tax obligation, valued at Fair Market Value; provided, however, except as otherwise
provided by the Compensation Committee, that the total tax withholding where Restricted Stock is
being used to satisfy such tax obligations cannot exceed the Companys minimum statutory
withholding obligations (based on minimum statutory withholding rates for federal and state tax
purposes, including payroll taxes, that are applicable to such supplemental taxable income). Shares
surrendered to satisfy tax withholding requirements cannot be subject to any repurchase,
forfeiture, unfulfilled vesting or other similar requirements.
9.4. Other Conditions on Delivery of Stock. The Company will not be obligated to remove
restrictions from Shares previously delivered under the Plan until (a) all conditions of the Sale
have been met or removed to the satisfaction of the Company, (b) in the opinion of the Companys
counsel, all other legal matters in connection with the delivery of such Shares have been
satisfied, including any applicable securities laws and any applicable stock exchange or stock
market rules and regulations, and (c) the Participant has executed and delivered to the Company
such representations or agreements as the Company may consider appropriate to satisfy the
requirements of any applicable laws, rules or regulations.
SECTION 10. MISCELLANEOUS
10.1. No Right to Continued Employment. No Participant under the Plan shall have any right,
because of his or her participation, to continue in the employment of the Company for any period of
time or to any right to continue his or her present or any other rate of compensation.
10.2. Amendment. The Compensation Committee may amend, suspend or terminate the Plan or
any portion of the Plan at any time; provided that if at any time the approval of the Companys
shareholders is required for any modification or amendment under applicable laws and rules, the
Compensation Committee may not effect such modification or amendment without such approval. Unless
otherwise specified in the amendment, any amendment to the Plan adopted in accordance with this
Section 10.2 shall apply to, and be binding on, the holders of all Shares of Restricted Stock
outstanding under the Plan at the time the amendment is adopted, provided the Compensation
Committee determines that such amendment, taking into account any related action, does not
materially and adversely affect the rights of existing Participants under the Plan.
10.3. Compliance with Code Section 409A. No Sale of Restricted Stock shall provide for a
deferral of compensation within the meaning of section 409A of the Code.
10.4. Governing Law. The provisions of the Plan and all Sales of Restricted Stock made
hereunder shall be governed by and interpreted in accordance with the laws of the State of
Oklahoma, excluding choice-of-law principles that would require the application of the laws of a
jurisdiction other than the State of Oklahoma.
Appendix A, Page 8 of 8
PROXY
Panhandle Oil and Gas Inc.
Grand Centre, Suite 300, 5400 North Grand Blvd.
Oklahoma City, OK 73112-5688
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints L. Kelly Harris and Linda K. Schwartz, or either of
them, as proxies each with full power of substitution, to represent and vote all of the
shares of Class A Common Stock of Panhandle Oil and Gas Inc. held of record by the
undersigned on January 29, 2010, at the annual meeting of shareholders to be held on
March 11, 2010, or any adjournment or postponement thereof. Should other matters
properly come before the meeting, the proxies are further authorized to vote thereon as
the Board of Directors may recommend.
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ELECTION OF DIRECTORS (three vacancies, each for a 3-year term) |
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Bruce M. Bell
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o FOR
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o WITHHOLD AUTHORITY TO VOTE FOR |
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Robert O. Lorenz
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o FOR
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o WITHHOLD AUTHORITY TO VOTE FOR |
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Robert E. Robotti
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o FOR
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o WITHHOLD AUTHORITY TO VOTE FOR |
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APPROVAL OF 2010 RESTRICTED STOCK PLAN |
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o FOR o AGAINST o ABSTAIN |
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RATIFICATION OF SELECTION OF ERNST & YOUNG LLP AS INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM |
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o FOR o AGAINST o ABSTAIN |
(Please Sign on Reverse Side)
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE
UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR ALL
PROPOSALS.
PLEASE SIGN EXACTLY AS NAME APPEARS BELOW
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DATED:
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2010 |
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SIGNATURE, IF HELD JOINTLY |
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WHEN SHARES ARE HELD BY JOINT TENANTS, BOTH SHOULD SIGN. WHEN SIGNING AS ATTORNEY,
EXECUTOR, ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH. IF A
CORPORATION, PLEASE SIGN IN FULL CORPORATE NAME BY PRESIDENT OR OTHER AUTHORIZED OFFICER.
IF A PARTNERSHIP, PLEASE SIGN IN PARTNERSHIP NAME BY AUTHORIZED PERSON.