<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12.
</TABLE>
Panhandle Royalty Company
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE> 2
[PANHANDLE ROYALTY COMPANY LETTERHEAD]
April 5, 1999
Dear Fellow Shareholders,
Attached to this letter are Proxy materials describing five items to be
voted on at the "Special Shareholder Meeting" on May 7, 1999. The Board of
Directors solicits your approval of the five changes to Panhandle's Articles of
Incorporation. THE BOARD OF DIRECTORS BELIEVES APPROVAL OF THESE ITEMS IS
ESSENTIAL TO ENSURE YOUR COMPANY'S CONTINUED GROWTH INTO THE NEW MILLENNIUM.
THESE ARE THE MOST IMPORTANT CHANGES REQUIRING SHAREHOLDER APPROVAL SINCE THE
COMPANY CONVERTED FROM ITS COOPERATIVE STATUS IN 1978.
Your Board believes our shares are undervalued by the marketplace and
do not represent the true underlying value of the Company. There are numerous
reasons for this belief, but the major reason is that our stock trades only
infrequently and is not easily identified or locatable by shareholders or
brokers wishing to trade. Often there is little stock available for sale or
purchase. Our stock is not followed by stock analysts and has few market makers.
When a shareholder desires to sell company stock in many cases that person will
sell below the current "bid" and "ask" range due to lack of knowledge as to that
range. Frequently, the spread between the "bid" and "ask" price is greater than
$3.00, primarily due to the infrequency of trading (only 6,000-8,000
shares/month).
<PAGE> 3
Your Directors unanimously believe the best method to realize our
stock's true value is for you, the shareholder, to have more shares available
for trading. This will be accomplished by the three-for-one split. Those of you
who do trade the stock will then be placing more shares for sale and
availability to potential purchasers. This should increase the frequency of
trades as well as the number of shares traded and should reduce the "bid" and
"ask" spread. An increase in the authorized number of shares is necessary for
the three-for-one split to be approved. The additional unissued shares of stock
can be used at some future date for proper corporate purposes including
acquisition of fee minerals, and other oil and gas assets.
There is of course no guarantee that these proposals will improve the
trading price of our stock. Your Board does believe that approval of these
proposals will give our stock the potential to improve in price.
To accomplish potential acquisitions using our stock, we must convince
the seller of those assets that Panhandle stock is not only valuable but also is
easily tradeable in the market. A person who is offered tens of thousands of
shares of our stock, but will receive only one vote for all of those shares as
our Articles of Incorporation now specifies, would most likely decline the deal
or would want all cash. We are not aware of any public companies, except
cooperatives, that have the one vote per shareholder method we have. We believe
that use of our stock to make acquisitions necessitates the change to one vote
per share. To protect you the shareholder from an unfriendly takeover at an
unfair price, we are further asking for your vote in support of the super
majority vote of shareholders or Directors required to approve any unfriendly
offer.
<PAGE> 4
The Board of Directors unequivocally and most strongly recommends your
approval of all five Proxy proposals. PLEASE VOTE. A BALLET NOT CAST IS THE SAME
AS A "NO" VOTE TO CHANGE THE ARTICLES OF INCORPORATION. The Company has now been
in existence 73 years during the 20th Century. We hope your and our successors
may later during the 21st Century look back to this shareholders vote as the new
beginning for an even better, stronger and larger Company as a dominant mineral
holding exploration company in the USA.
Sincerely,
H W Peace II
President
<PAGE> 5
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 7, 1999
Notice is hereby given that a special meeting of shareholders (the
"Special Meeting") of Panhandle Royalty Company (the "Company") will be held at
the offices of the Company, Grand Centre, Suite 210, 5400 N. Grand Boulevard,
Oklahoma City, Oklahoma, on May 7, 1999, at 9:00 a.m., for the following
purposes:
1. To consider and vote upon a proposal to change the duration of
the Company to perpetual duration from fifty years.
2. To consider and vote upon a proposal to increase the number of
authorized shares of Class A Common Stock ("Common Stock")
from 1,000,000 shares to 6,000,000 shares.
3. To consider and vote upon a proposal to effect a three-for-one
stock split of the outstanding Common Stock (entitling each
shareholder to receive two additional shares of Common Stock
for each one share owned) and a corresponding reduction of the
par value per share of the Common Stock from $.10 to
3 1/3(cent).
4. To consider and vote upon a proposal to change the voting
rights of the Common Stock from one vote per shareholder to
one vote per share.
5. To consider and vote upon a proposal to require the approval
of holders of 66 2/3% of the Common Stock in connection with
certain takeover, merger or other extraordinary corporate
transactions.
6. To transact such other business as may properly come before
the Special Meeting and any adjournment thereof.
Shareholders at the close of business on March 19, 1999 shall be
entitled to notice of and to vote at the Special Meeting. The Special Meeting
may be adjourned from time to time and, at any reconvened meeting, action with
respect to the matters specified in this Notice may be taken without further
notice to the shareholders of the Company unless required by law or the Bylaws
of the Company
IF YOU DO NOT EXPECT TO ATTEND THE SPECIAL MEETING IN PERSON, PLEASE
MARK, DATE AND SIGN THE ENCLOSED PROXY CARD AND PROMPTLY RETURN IT IN THE
ENCLOSED PREPAID ENVELOPE FOR YOUR CONVENIENCE.
<PAGE> 6
YOUR VOTE IS IMPORTANT. ANY UNRETURNED PROXY WILL HAVE THE
SAME EFFECT AS A NEGATIVE VOTE. PLEASE VOTE.
By Order of the Board of Directors
Michael C. Coffman, Secretary
Oklahoma City, Oklahoma
April 5, 1999
2
<PAGE> 7
PANHANDLE ROYALTY COMPANY
GRAND CENTRE, SUITE 210
5400 N. GRAND BOULEVARD
OKLAHOMA CITY, OKLAHOMA 73112
APRIL 5, 1999
PROXY STATEMENT
The following information is furnished in connection with the special
meeting of shareholders (the "Special Meeting") of Panhandle Royalty Company
(the "Company") to be held at the offices of the Company, Grand Centre, Suite
210, 5400 N. Grand Boulevard, Oklahoma City, Oklahoma, on May 7, 1999, at 9:00
a.m.
The accompanying proxy is solicited by the Board of Directors (the
"Board") of the Company for use at the Special Meeting and any adjournments
thereof. The cost of solicitation of proxies will be borne by the Company.
Original solicitation of proxies by mail may be supplemented by telephone,
facsimile or personal solicitation by directors, officers or regular employees
of the Company. No additional compensation will be paid to directors, officers
or regular employees for such services. It is anticipated that this Proxy
Statement and the accompanying proxy will be mailed to shareholders on or about
April 5, 1999.
When the proxy is properly executed and returned, the shares it
represents will be voted at the Special Meeting in accordance with the
directions noted thereon. If no direction is indicated, the shares will be voted
for the approval of each of the proposals described herein. Should any other
matters come before the Special Meeting, valid proxies will be voted in
accordance with the recommendations of the Board, although the Company does not
presently know of any other such matters.
If the accompanying proxy is executed and returned, the shareholder may
nevertheless revoke the proxy 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 Special Meeting and voting in person. Any shareholder who desires
to vote in person at the Special Meeting and whose shares are held of record by
a broker, bank or other nominee must bring to the Special Meeting a letter from
the broker, bank or other nominee confirming such shareholder's beneficial
ownership of the shares and a proxy from the record holder issued in the name of
the attending shareholder. The mailing address of the Company is Grand Centre,
Suite 210, 5400 N. Grand Boulevard, Oklahoma City, Oklahoma 73112.
Shareholders are requested to return the accompanying proxy
immediately, dated and signed exactly as the stock appears in the shareholders
name. If stock is held in joint tenancy, both tenants should sign the proxy.
Proxies for stock held by a corporation should be signed in the full corporate
name by an authorized officer. In the event the holder of the stock is deceased,
the personal
<PAGE> 8
representative, executor or administrator should sign the proxy and attach a
certified copy of the letters of appointment to the proxy.
VOTING SECURITIES
The holders of Class A Common Stock ("Common Stock") at the close of
business on March 19, 1999 shall be eligible to vote at the Special Meeting. As
of March 19, 1999, there were 682,514 shares of Common Stock outstanding, held
by an estimated 2,600 shareholders. To the best knowledge of the Company, no
individual or group, as defined in Section 13(d)(3) of the Securities Exchange
Act of 1934, owns, beneficially or of record, more than 5% of the outstanding
Common Stock.
The Articles of Incorporation of the Company provide for one vote for
each holder of Common Stock, irrespective of the number of shares of Common
Stock owned by the shareholder. In addition, the Oklahoma General Corporation
Act requires the affirmative vote of the holders of at least a majority of the
outstanding Common Stock (meaning at least a majority of the shares rather than
a majority in number of the holders) in order for the proposals described herein
to be approved. Accordingly, at the Special Meeting each holder of Common Stock
will be entitled to one vote with regard to the approval requirements of the
Company's Articles of Incorporation and one vote per share with regard to the
approval requirements of the Oklahoma General Corporation Act. The Company's
Class B Common Stock has no voting rights.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth, as of March 19, 1999, information
regarding beneficial ownership of the Company's Common Stock by each director of
the Company, each executive officer of the Company whose annual salary and bonus
exceeded $100,000 during the Company's most recent fiscal year, and all
directors and executive officers as a group:
<TABLE>
<CAPTION>
Amount and Nature Percent of
Director or Group of Beneficial Ownership Class
------------------ ----------------------- ----------
<S> <C> <C>
Michael A. Cawley, 100 shares, sole voting and *
Director investment powers
Sam J. Cerny, 1,200 shares, sole voting *
Director and investment powers
E. Chris Kauffman, 3,100 shares, shared voting *
Director and investment powers
</TABLE>
2
<PAGE> 9
<TABLE>
<CAPTION>
Amount and Nature Percent of
Director or Group of Beneficial Ownership Class
----------------- ----------------------- ----------
<S> <C> <C>
H. W. Peace, II, 8,371 shares, shared voting 1.2%
Director, President and investment powers
and CEO
Ray H. Potts, 160 shares, sole voting and *
Director investment powers
Robert A. Reece, 5,848 shares, sole voting *
Director and investment powers
Jerry L. Smith, 7,024 shares, sole voting 1.0%
Director and investment powers
All directors and 10,392 shares, shared 1.5%
executive officers voting and investment
as a group powers
(9 persons)
27,103 shares, sole voting 4.0%
and investment powers
37,495 shares, total 5.5%
</TABLE>
- -------------------
* Less than 1.0% owned.
3
<PAGE> 10
SUMMARY OF PROPOSALS BEING PRESENTED
FOR ACTION BY THE SHAREHOLDERS
The Board believes that the market price of the Company's Common Stock
does not adequately reflect the value inherent in the Company. During the past
year, the Board has considered a number of factors that it believes are
adversely affecting the market price and performance of the Common Stock. This
process included discussions with the financial community and significant
shareholders. The Board has identified several concerns that are independent of
the Company's operating performance or the stock market as a whole and that are
within the power of the Company and the shareholders to address. Principally
these are (i) investor wariness regarding the highly unusual voting rights of
the Common Stock (one vote per shareholder rather than one vote per share as
essentially all public companies have) and (ii) a lack of liquidity in the
market for the Common Stock resulting primarily from the small number of shares
of Common Stock currently outstanding.
The Board also believes that the value of the Company may be enhanced
and its long-term growth and success fostered by carefully selected strategic
transactions involving reserve acquisitions or business combinations in which
the Company issues its Common Stock for all or part of the purchase price. The
current environment of relatively low energy prices has created attractive
acquisition opportunities. The Company's ability to take advantage of these
acquisition opportunities would be improved by increasing the number of
authorized shares of Common Stock.
Although there can be no assurance that they will have a positive
impact on the market price of the Common Stock, the Board has developed a series
of proposals ("Proposals") to address the problems of investor wariness and
liquidity discussed above. The Board has unanimously approved and is
recommending that the shareholders approve the Proposals, which are intended to
increase investor interest in the Common Stock, to improve market liquidity for
the Common Stock and to enhance the ability of the Company to use Common Stock
to make acquisitions. The Board's Proposals are briefly summarized as follows:
PROPOSAL 1 CHANGE THE DURATION OF THE COMPANY TO PERPETUAL
DURATION FROM FIFTY YEARS.
This brings the Company in line with other public
companies.
PROPOSAL 2 INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON
STOCK FROM 1,000,000 SHARES TO 6,000,000 SHARES.
This will provide additional authorized shares for
issuance pursuant to the three-for-one stock split
described in Proposal 3 below and for other corporate
purposes including acquisitions.
4
<PAGE> 11
PROPOSAL 3 EFFECT A THREE-FOR-ONE STOCK SPLIT OF THE
OUTSTANDING COMMON STOCK (ENTITLING EACH SHAREHOLDER
TO RECEIVE TWO ADDITIONAL SHARES OF COMMON STOCK FOR
EACH ONE SHARE OWNED) AND A CORRESPONDING REDUCTION
OF THE PAR VALUE PER SHARE OF THE COMMON STOCK FROM
$.10 TO 3 1/3(CENTS).
This will triple the number of outstanding shares of
the Company held by shareholders by giving each
holder of Common Stock two additional shares for each
one share owned.
PROPOSAL 4 CHANGE THE VOTING RIGHTS OF THE COMMON STOCK FROM
ONE VOTE PER SHAREHOLDER TO ONE VOTE PER SHARE.
This will eliminate the highly unusual voting feature
of the Common Stock of one vote per holder. The Board
believes this change will make the Common Stock more
attractive to investors. To protect the Company's
shareholders from unsolicited and unfair takeover
offers, the Board is proposing a supermajority vote
for approval of certain takeover, merger or other
extraordinary corporate transactions.
PROPOSAL 5 IMPOSE A SUPERMAJORITY VOTE FOR CERTAIN TAKEOVER,
MERGER OR OTHER EXTRAORDINARY CORPORATE TRANSACTIONS.
This provision would require the approval of holders
of 66 2/3% of the Company's Common Stock for certain
takeover, merger or other extraordinary transactions.
THE BOARD CONSIDERS THESE PROPOSALS TO BE EXTREMELY SIGNIFICANT TO THE
COMPANY'S FUTURE. THE BOARD HAS CALLED THIS SPECIAL MEETING SOLELY FOR THE
PURPOSE OF CONSIDERING THESE PROPOSALS. ALL SHAREHOLDERS ARE URGED TO APPROVE
EACH OF THE FIVE PROPOSALS. PLEASE READ CAREFULLY THE FOLLOWING DISCUSSION OF
THESE PROPOSALS.
PLEASE VOTE BECAUSE ANY UNRETURNED PROXY WILL HAVE THE SAME EFFECT AS A
NEGATIVE VOTE. EACH SHAREHOLDER IS URGED TO RETURN THE ENCLOSED PROXY CARD
MARKED "FOR" EACH PROPOSAL.
SEE "QUORUM" AND "VOTE REQUIRED."
THE BOARD RECOMMENDS A VOTE "FOR" EACH OF THE FIVE PROPOSALS.
5
<PAGE> 12
PROPOSAL TO APPROVE CHANGE IN DURATION OF THE COMPANY TO PERPETUAL DURATION FROM
FIFTY YEARS
(PROPOSAL 1)
The Board has approved and recommends that the shareholders adopt an
amendment to the Company's Articles of Incorporation changing the duration of
the Company to perpetual duration from fifty years. The provisions of the
current Oklahoma General Corporation Act permit a corporation to have perpetual
duration. The Company's limited duration is highly unusual among publicly traded
corporations whose duration is generally perpetual.
The Company was incorporated in 1978 under the former Oklahoma Business
Corporation Act. Under the current provisions of its Articles of Incorporation,
the Company's duration will expire in 2028. On expiration, the Company would
cease to exist and its assets would be distributed to its shareholders.
If the Company's duration is allowed to expire and if its assets,
including its various oil and gas and mineral rights most of which are
perpetual, are distributed to the shareholders, the shareholders will receive an
extensive number of small fractional undivided interests in such rights. The
Board believes that direct ownership of these rights by the shareholders will
result in an administrative burden that will be extremely undesirable to the
Company's shareholders.
Accordingly, the Board believes that it is in the best interests of the
Company and its shareholders that the duration of the Company be changed to
perpetual duration. The proposed change to perpetual duration will not otherwise
affect the rights, powers or privileges of the holders of Common Stock and will
not have any U.S. federal income tax consequences to the shareholders.
If the proposed change in duration is approved, the Company will
continue perpetually unless and until it is merged or consolidated into another
entity or is dissolved in accordance with applicable law. Under the Oklahoma
General Corporation Act, the Company may be dissolved if a majority of the Board
adopts a resolution providing for dissolution and the holders of a majority of
the outstanding shares of Common Stock approve the dissolution. Also, unless
Proposal 4 relating to a change in the voting rights of the Common Stock to one
vote per share is approved, the affirmative vote of a majority in number of the
holders of Common Stock will also be required to approve any dissolution of the
Company.
THE BOARD RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" THE PROPOSAL TO CHANGE THE
DURATION OF THE COMPANY TO PERPETUAL DURATION.
REMEMBER THAT ANY UNRETURNED PROXY WILL HAVE
THE SAME EFFECT AS A NEGATIVE VOTE.
PLEASE VOTE!
6
<PAGE> 13
PROPOSAL TO APPROVE INCREASE IN AUTHORIZED COMMON STOCK
(PROPOSAL 2)
The Board has unanimously approved and recommends that the shareholders
adopt an amendment to the Company's Articles of Incorporation to increase the
number of authorized shares of Common Stock from 1,000,000 shares to 6,000,000
shares. The increase in the number of authorized shares of Common Stock is
conditional upon the approval by the shareholders of the 3-for-1 stock split
and corresponding reduction in the par value per share described in Proposal 3.
If Proposal 3 is not approved, the number of authorized shares of Common Stock
will not be increased.
As of March 19, 1999, there were 682,514 shares of Common Stock issued
and outstanding, leaving only 317,486 remaining shares available for subsequent
issuance. After giving effect to the proposed increase in the number of
authorized shares and the 3-for-1 stock split described in Proposal 3, there
will be a total of 2,047,542 post-split shares of Common Stock issued and
outstanding out of a total of 6,000,000 authorized shares, leaving 3,952,458
remaining shares available for subsequent issuance by the Board.
The proposed increase in the number of authorized shares of Common
Stock would permit the 3-for-1 stock split and would allow the remaining
unissued shares to be used by the Board in the future for proper corporate
purposes without further shareholder action. For example, the shares may be
issued in strategic transactions intended to encourage the growth of the Company
and to increase shareholder value, such as reserve acquisitions or business
combinations pursuant to which Common Stock may be issued for all or part of the
purchase price. The Company does not have any current plans or intentions to
issue any of the proposed additional authorized shares of Common Stock other
than as required in connection with the 3-for-1 stock split.
The increase in the number of authorized shares will not alter any
existing rights, powers or privileges of the holders of Common Stock.
A brief summary of the rights, powers and privileges of the Common
Stock follows: the Common Stock has no redemption, conversion, sinking fund
provisions or other similar rights. On liquidation of the Company, the holders
of Common Stock are entitled to share ratably together with the holders of Class
B Common Stock in the net assets of the Company available for distribution.
Holders of Common Stock are entitled to such dividends as may be declared by the
Board from funds legally available therefor. Each holder of Common Stock is
entitled to one vote with respect to matters presented to the shareholders,
regardless of the number of shares owned by such shareholder. If Proposal 4 is
adopted, each share of Common Stock will be entitled to one vote on all matters
submitted to a vote of shareholders. The Common Stock does not have preemptive
rights.
7
<PAGE> 14
The proposed increase in the number of authorized shares of Common
Stock will not increase or otherwise affect the number of authorized shares of
non-voting Class B Common Stock of the Company, all of which is owned by a
subsidiary of the Company.
The Board reserves the right not to proceed with the increase in the
authorized number of shares and the 3-for-1 stock split described in Proposal 3
if, subsequent to shareholder approval but prior to the effectiveness of the
increase and the stock split, the Board determines that such transactions are no
longer advisable based on market conditions or other factors. In no event will
the number of authorized shares of Common Stock be increased unless also
accompanied by the 3-for-1 stock split.
THE BOARD RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" THE PROPOSAL TO APPROVE
THE INCREASE IN THE AUTHORIZED COMMON STOCK.
REMEMBER THAT ANY UNRETURNED PROXY WILL HAVE
THE SAME EFFECT AS A NEGATIVE VOTE.
PLEASE VOTE!
PROPOSAL TO APPROVE 3-FOR-1 STOCK SPLIT AND CORRESPONDING REDUCTION OF THE PAR
VALUE PER SHARE OF THE COMMON STOCK FROM $.10 TO 3 1/3(CENTS)
(PROPOSAL 3)
The Board has unanimously approved and recommends that the shareholders
adopt an amendment to the Company's Articles of Incorporation to effect a
3-for-1 stock split of the outstanding Common Stock (entitling each shareholder
to receive two additional shares of Common Stock for each one share owned) and a
corresponding reduction of the par value per share of the Common Stock from $.10
to 31/3(cent). Because the Company currently does not have a sufficient number
of authorized shares of Common Stock to permit the 3-for-1 stock split, the
3-for-1 stock split is contingent upon the approval by the shareholders of the
increase in the number of authorized shares of Common Stock described in
Proposal 2. If Proposal 2 is not approved, the 3-for-1 stock split and
corresponding reduction of the par value per share described in this Proposal 3
will not be effected.
The Board believes that the 3-for-1 stock split is in the best
interests of the Company and its shareholders and that the 3-for-1 stock split
will help to broaden interest in the Common Stock by reducing the market price
per share and increasing the shares available for trading in the Nasdaq Stock
Market. However, there is no assurance that the 3-for-1 stock split will have a
positive effect on the market price of the Common Stock.
8
<PAGE> 15
If the shareholders approve the increase in the authorized shares and
the 3-for-1 stock split, the stock split will become effective as of the date of
filing of the amendment to the Company's Articles of Incorporation which is
anticipated to be May 7, 1999 (the "Effective Date"). Then each shareholder will
receive two additional shares for each share owned. As soon as practicable after
the Effective Date, a certificate for the shares to be issued pursuant to the
3-for-1 stock split will be issued to each shareholder of record on the
Effective Date. Stock certificates representing shares issued prior to the
Effective Date will continue to represent the same number of shares of Common
Stock as stock certificates did prior to the Effective Date. For example, if a
shareholder holds 100 shares of the Common Stock on the Effective Date, the
Corporation will mail to him or her a share certificate for 200 shares so that
the shareholder will then be the owner of 300 shares of Common Stock.
SHAREHOLDERS SHOULD NOT DESTROY THEIR EXISTING CERTIFICATES AND SHOULD
NOT RETURN THEM TO THE COMPANY OR ITS TRANSFER AGENT. THE EXISTING CERTIFICATES
AND THE CERTIFICATES FOR THE ADDITIONAL SHARES THAT WILL BE MAILED TO
SHAREHOLDERS TOGETHER WILL REPRESENT THE PROPER NUMBER OF SHARES AFTER THE
3-FOR-1 STOCK SPLIT BECOMES EFFECTIVE.
The Company believes that the 3-for-1 stock split will not result in
any taxable income or in any gain or loss to shareholders for U. S. federal
income tax purposes. Immediately after the 3-for-1 stock split, the income tax
basis of each share of Common Stock will be one-third of the income tax basis
before the 3-for-1 stock split. For federal income tax purposes, each new share
will be deemed to have been acquired at the same time as the original shares
prior to the 3-for-1 stock split.
The 3-for-1 stock split will not alter any existing rights, powers or
privileges of the holders of Common Stock. These rights are described Proposal
2. After giving effect to the proposed increase in the number of authorized
shares described in Proposal 2 and the 3-for-1 stock split, there will be a
total of 2,047,542 post-split shares of Common Stock issued and outstanding out
of a total of 6,000,000 authorized shares, leaving 3,952,458 remaining shares
available for subsequent issuance by the Board as described in Proposal 2.
The Board reserves the right not to proceed with the 3-for-1 stock
split and the increase in the authorized number of shares described in Proposal
2 if, subsequent to shareholder approval but prior to the effectiveness of the
stock split and the increase, the Board determines that such transactions are no
longer advisable based on market conditions or other factors. In no event will
the 3-for-1 stock split be effected unless also accompanied by the increase in
the number of authorized shares of Common Stock.
THE BOARD RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" THE PROPOSAL TO EFFECT THE
3-FOR-1 STOCK SPLIT AND CORRESPONDING
9
<PAGE> 16
REDUCTION OF THE PAR VALUE PER SHARE OF THE COMMON STOCK FROM $.10 TO
3 1/3(CENTS).
REMEMBER THAT ANY UNRETURNED PROXY WILL HAVE
THE SAME EFFECT AS A NEGATIVE VOTE.
PLEASE VOTE!
PROPOSAL TO APPROVE CHANGE IN VOTING RIGHTS OF COMMON STOCK FROM ONE
VOTE PER SHAREHOLDER TO ONE VOTE PER SHARE
(PROPOSAL 4)
The Board has approved and recommends that the shareholders adopt
amendments to the Company's Articles of Incorporation and its Bylaws in order to
modify the voting rights of the holders of Common Stock of the Company. The text
of the proposed amendments is attached as Annex A.
The Company's Articles of Incorporation and Bylaws currently provide
that each shareholder is entitled to cast one vote in connection with matters
presented to the holders of Common Stock, without regard to the number of shares
owned by the shareholder. This voting provision is a carryover from the 1970's
when the Company's predecessor was a cooperative corporation. This voting
arrangement is outdated and no longer serves the best interests of the Company.
The Board proposes to eliminate the one vote per shareholder concept and provide
that each holder of Common Stock shall be entitled to one vote for each share
held of record.
As of March 19, 1999, the Company had 682,514 shares of Common Stock
outstanding held by an estimated 2,600 holders. Because each shareholder is
currently entitled to one vote, as of such date there were a possible 2,600
estimated votes with respect to any matter presented to the shareholders, and
each shareholder holds the same percentage of the aggregate potential voting
power as each of the other shareholders. By linking voting rights to the number
of shares held by each shareholder, the proposed amendments will have the effect
of decreasing the relative voting power of some shareholders and of increasing
the relative voting power of other shareholders. The magnitude of the increase
or decrease in relative voting power as to any particular shareholder will
depend on the number of shares owned by the shareholder.
The Company's current voting arrangement is highly unusual for a
publicly held company and the Board does not know of any other public company
with a similar voting arrangement.
The Board believes that the current voting rights of the Common Stock
are highly unattractive to potential investors or to existing shareholders that
might otherwise be interested in
10
<PAGE> 17
acquiring Common Stock. Regardless of the number of shares owned, each
shareholder has one vote. The Board believes that replacement of the one vote
per shareholder with one vote for each share owned will broaden interest in the
Company's Common Stock which is currently traded on the Nasdaq Stock Market.
However, there is no assurance concerning the effect, if any, that the proposed
change in voting rights would have, if any, on the market price of the Common
Stock.
By making the Common Stock more attractive to investors, the Board
believes that the Company will have more opportunities to use Common Stock as a
means to foster the growth of the Company and to enhance shareholder value.
These opportunities may include reserve acquisitions or business combinations in
which Common Stock is issued as all or part of the purchase price. The Company
does not have any current plans or intentions relating to any such sale or
issuance of additional shares of Common Stock in a business combination or other
strategic transaction.
As of March 19, 1999, the directors and executive officers of the
Company owned 37,495 shares of Common Stock. The proposed amendment will result
in an increase in the voting power of directors and executive officers of the
Company from approximately 0.35% of the total voting power under the current
voting rights to approximately 5.5% after giving effect to the proposed
amendments. Although the relative voting power of directors and executive
officers will increase as a result of the proposed amendment which could make it
more difficult for directors and executive officers to be removed, the effect on
them as individual shareholders will be the same as the effect on all other
holders of similar numbers of shares. The proposed amendment is not a part of
any plan for the entrenchment of existing management.
By linking voting power to the number of shares owned, the proposed
amendments could also have the effect of making it easier for existing
shareholders or outsiders to acquire control of the Company by acquiring a
majority of the outstanding Common Stock and could thereby cause the Company to
become more attractive as a potential target of an unsolicited takeover attempt.
While such transactions could result in benefits to the Company's shareholders,
they may also be disruptive and detrimental to the Company and its shareholders.
In adopting and recommending that the shareholders approve the proposed
amendments, the Board has attempted to balance the risks associated with hostile
tender offers or unnegotiated takeover attempts with the potential benefits that
the Board believes the change in voting rights may bring to the Company and its
shareholders.
The Company has other features that may be considered to have an
"anti-takeover" effect. The Bylaws of the Company provide for a staggered Board.
This provision makes it more difficult for an acquiror rapidly to replace a
majority of the directors because only approximately one-third of the directors
are elected each year and the directors may only be removed for cause. Also, the
Board has proposed a further amendment to the Articles of Incorporation of the
Company described under Proposal 5 herein requiring a "supermajority" vote in
connection with certain takeover, merger or other extraordinary corporate
transactions which could also have an "anti-takeover" effect.
11
<PAGE> 18
THE BOARD RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" THE PROPOSAL TO APPROVE
CHANGE IN VOTING RIGHTS OF THE COMMON STOCK FROM ONE VOTE PER SHAREHOLDER TO ONE
VOTE PER SHARE.
REMEMBER THAT ANY UNRETURNED PROXY WILL HAVE
THE SAME EFFECT AS A NEGATIVE VOTE.
PLEASE VOTE!
PROPOSAL TO APPROVE REQUIREMENT OF SUPERMAJORITY VOTE FOR CERTAIN
TAKEOVER, MERGER OR OTHER EXTRAORDINARY CORPORATE TRANSACTIONS
(PROPOSAL 5)
The Board has approved and recommends that the shareholders adopt an
amendment to the Company's Articles of Incorporation to provide that any merger,
consolidation, liquidation or dissolution of the Company, or sale of
substantially all of the Company's assets (collectively "takeover or merger
transaction") will require the affirmative vote of the holders of 66-2/3% or
more of the Company's outstanding Common Stock. This supermajority vote is
intended to protect the Company's shareholders from unfriendly takeover or
merger transactions. There is one exception proposed to the supermajority vote.
If two-thirds of the whole Board has approved the transaction, only the
affirmative vote of the holders of a majority of the Company's outstanding
Common Stock will be necessary. The text of the proposed amendment is attached
as Annex B.
The Board's approval of this supermajority vote proposal is conditioned
upon adoption by the shareholders of the change in voting rights described in
Proposal 4 (one vote per share). If Proposal 4 is not adopted, the supermajority
vote proposal will not be adopted. Under the Oklahoma General Corporation Act
and, assuming Proposal 4 (one vote per share) is adopted, a takeover or merger
transaction generally would only require the affirmative vote of the holders a
majority of the outstanding Common Stock.
The supermajority vote will not be required if two-thirds of the whole
Board approves the takeover or merger transaction prior to submitting the
takeover or merger transaction to the shareholders for approval. This encourages
a potential acquiror of the Company to first negotiate with the Board giving the
Board an opportunity to negotiate on behalf of the shareholders and to determine
if the proposed takeover or merger is in the shareholders' best interests.
The proposed supermajority vote amendment is intended to ensure that
any takeover or merger transaction could be effected only if the takeover or
merger transaction receives a clear mandate from the Company's shareholders. In
the absence of this supermajority provision, a potential takeover bidder could
acquire a simple majority of the Company's outstanding Common Stock through any
combination of tender offers, exchange offers, open market purchases or private
12
<PAGE> 19
purchases, and follow such acquisition with a business combination forced on the
Company's remaining minority shareholders. In this situation, the terms of such
takeover or merger transaction could be accomplished without arms-length
negotiation since the takeover bidder controls both sides of the negotiation and
would have sufficient votes necessary to approve any such transaction
irrespective of the views of the remaining minority shareholders of the Company.
As a result, substantial unfairness could be imposed on the Company's remaining
minority shareholders. The Board believes that the supermajority vote provisions
discourage surprise takeover or merger bids and encourage any potential acquiror
to negotiate with the Board, allowing the Board to protect the best interests of
shareholders.
However, in evaluating this proposal, the shareholders should also
consider that the supermajority provision could give the Board enhanced control
over proposed takeover or merger transactions, even though the takeover or
merger transactions might be attractive to the holders of a simple majority of
Common Stock. If the Board does not grant its prior approval, a takeover bidder
may still proceed with an acquisition although any resulting takeover of the
Company may be more difficult and expensive. The proposed supermajority
amendment will give the holders of more than 33-1/3% of the Common Stock the
power to reject any proposed takeover or merger transaction unless two-thirds of
the whole Board gives its prior approval. The proposed amendment could
discourage accumulation of Common Stock, not just surprise takeover bids, which
could adversely affect the market for the Common Stock. Nonetheless, the Board
believes that the advantages to the shareholders of increasing the likelihood
that a potential takeover bidder would first negotiate satisfactory terms with
the Board outweigh any potential disadvantages.
The Board has no current plans to propose or adopt any other
"anti-takeover" provisions. The Board is not aware of any specific effort to
accumulate the Company's Common Stock or obtain control of the Company, but is
proposing the supermajority vote amendment to reduce the likelihood that the
Company could become a target for a surprise and unnegotiated takeover in the
future.
The proposed supermajority amendment also provides that once adopted by
the shareholders, the supermajority vote provision can only be amended by either
(i) the holders of 66-2/3% of the Common Stock, or (ii) by the vote of
two-thirds of the whole Board and of the holders of a majority of the
outstanding Common Stock. This provision clarifies that a supermajority vote of
the shareholders or the whole Board will be needed in order to amend or repeal
the provision requiring a supermajority vote for takeover or merger
transactions. This provision is consistent with the Oklahoma General Corporation
Act, which provides that whenever the articles of incorporation require the vote
of a greater number of shares than is otherwise required by the Oklahoma General
Corporation Act, the provision of the articles of incorporation shall not be
amended, altered or repealed except by such greater vote.
THE BOARD RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" THE PROPOSAL TO APPROVE
THE REQUIREMENT OF A SUPERMAJORITY VOTE FOR THE TAKEOVER, MERGER OR OTHER
EXTRAORDINARY CORPORATE TRANSACTIONS DESCRIBED ABOVE.
13
<PAGE> 20
REMEMBER THAT ANY UNRETURNED PROXY WILL HAVE
THE SAME EFFECT AS A NEGATIVE VOTE.
PLEASE VOTE!
QUORUM
Brokers holding shares of record for customers generally are not
entitled to vote on certain nonroutine matters unless they receive voting
instructions from their customers. As used herein, "uninstructed shares" means
shares held by a broker who has not received instructions from its customers on
such matters and the broker has so notified the Company on a proxy form in
accordance with industry practice or has otherwise advised the Company that it
lacks voting authority. As used herein, "broker non-votes" means the votes that
could have been cast on the matter in question by brokers with respect to
uninstructed shares if the brokers had received their customers' instructions.
Although there are no controlling precedents under Oklahoma law regarding the
treatment of broker non-votes in certain circumstances, the Company intends to
apply the principles set forth below.
The presence at the Special Meeting, in person or by proxy, of
shareholders representing a majority of the outstanding shares of Common Stock
is necessary to constitute a quorum for the Special Meeting. For purposes of
determining the presence of a quorum, shareholders who are present at the
Special Meeting in person or by proxy and who abstain, including broker
non-votes, are considered shareholders who are present and entitled to vote and
will count toward the quorum requirements.
VOTE REQUIRED
To be approved, each Proposal must receive:
- - the affirmative vote of a majority in number of the holders of the
Common Stock (with each holder being entitled to one vote), and
- - the affirmative vote of the holders of a majority of the outstanding
Common Stock.
Except for Proposals 2 (increase in authorized shares) and 3 (stock
split), each of which is conditioned upon the approval of the other, and for
Proposal 5 (supermajority vote requirement), which is conditioned upon the
approval of Proposal 4 (one vote per share), each of the Proposals will be
considered independently of the other Proposals, and the failure to approve or
the approval of any single Proposal will not affect the remaining Proposals.
THE FAILURE TO RETURN A PROXY OR TO ATTEND AND VOTE AT THE SPECIAL
MEETING OR THE RETURN OF A PROXY MARKED "WITHHOLD AUTHORITY" WITH RESPECT TO THE
PROPOSAL WILL HAVE THE SAME EFFECT
14
<PAGE> 21
AS A NEGATIVE VOTE. UNINSTRUCTED SHARES MAY NOT VOTE ON ANY OF THE PROPOSALS SO
ANY BROKER NON-VOTES WILL ALSO HAVE THE SAME EFFECT AS A NEGATIVE VOTE.
THE BOARD STRONGLY URGES ALL SHAREHOLDERS TO APPROVE EACH OF THE
PROPOSALS. BECAUSE ANY UNRETURNED PROXY OR BROKER NON-VOTE WILL HAVE THE SAME
EFFECT AS A NEGATIVE VOTE, IT IS IMPORTANT THAT EACH SHAREHOLDERS RETURN THE
ENCLOSED PROXY CARD OR, ANY BROKER'S REQUEST FOR VOTING INSTRUCTIONS MARKED
"FOR" EACH PROPOSAL.
MANNER OF DETERMINING HOLDERS FOR PURPOSES OF "ONE VOTE PER HOLDER" REQUIREMENTS
As is the case with most publicly held companies, a significant number
of the outstanding shares of Common Stock of the Company are owned in "street
name" by individual shareholders through accounts with brokers or other
custodians. These "street name" shares are ultimately held of record by brokers
or other custodians or by nominees of these entities, and, as described above in
connection with the description of broker non-votes, the broker or other
nominees will vote the shares in accordance with the instructions received from
account holders. The current voting rights of the Common Stock require one vote
per holder of Common Stock rather than one vote per share. Although there are no
controlling precedents under Oklahoma law, the Company intends to apply the
following principles to determine the number of holders entitled to vote at the
Special Meeting and to tabulate the votes cast by such holders.
Each record holder of Common Stock as of March 19, 1999, the record
date for the Special Meeting, will be considered one holder, except where such
record holder is known by the Company to be a securities industry nominee holder
for a number of separate shareholder accounts. The Company will inquire of each
nominee holder and will attempt to ascertain the number of separate shareholder
accounts serviced by the nominee and the voting instructions delivered to the
nominee by the holders of each such account. The holders of each separate
shareholder account will be considered as separate single holders for purposes
of the one vote per holder tabulations at the Special Meeting.
If the Company is not able to ascertain the number of separate
shareholder accounts and the voting instructions received from the holders of
such accounts, the Company will consider the applicable broker or other nominee
holder as a single holder for purposes of the one vote per holder tabulations at
the Special Meeting. In this case, the aggregate votes cast by the broker or
other nominee holder will reflect the voting instructions of individual
accounts. Since the breakdown of voting instructions will not be known to the
Company, the broker or other nominee (considered as a single holder) will be
considered to have approved any Proposal only if the votes cast by the broker or
other nominee "for" the Proposal are in excess of 50% of the total number of
shares held in the accounts represented by the broker or other nominee. This
method of counting votes for purposes of the one vote per shareholder tabulation
necessarily is not able to take into account the separate votes of individual
"street name" holders for which separate voting information is not available to
15
<PAGE> 22
the Company. As a result, votes "for" a proposal as well as broker non-votes and
shares as to which voting authority is withheld (which would otherwise have the
same effect as a negative vote) attributable to the "street name" holders for
which information is not available to the Company will be effectively eliminated
from the one vote per shareholder tabulation, except to the extent that the
aggregate totals of the votes or broker non-votes attributable to such "street
name" holders influences the overall votes cast by the applicable nominee holder
of such "street name" accounts, which will be counted in the manner described
above.
OTHER MATTERS
The Board is aware of no other matters which may come before the
Special Meeting. If any such matters should properly come before the Special
Meeting, it is the intention of the persons named in the enclosed proxy to vote
such proxy as the Board may, in its discretion, recommend.
FUTURE PROPOSALS
If a shareholder wishes to submit a proposal for presentation at the
2000 annual meeting of shareholders, such proposal must be received at the
Company's principal office on or before September 24, 1999, if it is to be
included in the Company's proxy statement for that meeting.
FORM 10-KSB
A copy of the Company's annual report to the Securities and Exchange
Commission on Form 10-KSB is available, free of charge, upon request made to
Michael C. Coffman, Secretary, Panhandle Royalty Company, Grand Centre, Suite
210, 5400 N. Grand Boulevard, Oklahoma City, OK 73112.
16
<PAGE> 23
PROPOSAL 4 ANNEX A
PROPOSED AMENDMENTS TO THE COMPANY'S ARTICLES OF INCORPORATION AND BYLAWS
PROVIDING FOR A CHANGE IN VOTING RIGHTS OF THE COMMON STOCK FROM ONE VOTE PER
SHAREHOLDER TO ONE VOTE PER SHARE
The last paragraph of Article FIVE of the Articles of Incorporation of
the Company providing for one vote per shareholder shall be amended in its
entirety to read as follows:
With respect to all matters as to which the holders of Class A Common
Stock are entitled to vote, each holder of Class A Common Stock shall
be entitled to one vote for each share of Class A Common Stock that is
registered in such shareholder's name on the applicable record date,
except as may be otherwise required by law. Class B Common Stock shall
be nonvoting stock of the corporation.
Article III, Section 6 of the Bylaws of the Company providing for one
vote per shareholder shall be amended in its entirety to read as follows:
Section 6. At every such meeting each stockholder owning Class
A Common Stock shall be entitled to cast one vote for every share of
stock entitled to vote which is registered in such stockholder's name
on the record date for the meeting, except as may otherwise be required
by law; which vote may be cast by him or her either in person, or by
proxy, except as hereinafter provided. All proxies shall be in writing,
and shall be filed with the Secretary, and by him or her entered of
record in the minutes of the meeting.
<PAGE> 24
PROPOSAL 5 ANNEX B
PROPOSED AMENDMENT TO THE COMPANY'S ARTICLES OF INCORPORATION PROVIDING FOR
SUPERMAJORITY VOTE FOR CERTAIN TAKEOVER, MERGER OR OTHER EXTRAORDINARY CORPORATE
TRANSACTIONS
A new Article NINE shall be added to the Articles of Incorporation to
read as follows:
No merger, consolidation, liquidation or dissolution of the
corporation, nor any action that would result in the same or other
disposition of all or substantially all of the assets of the
corporation shall be valid unless first approved by the affirmative
vote of the holders of at least sixty-six and two-thirds percent
(66-2/3%) of the outstanding shares of capital stock then entitled to
vote on such matters; provided, however, that if any such action has
been approved prior to the vote by the shareholders by two-thirds of
the corporation's whole Board, the affirmative vote of the holders of a
majority of the outstanding shares of capital stock then entitled to
vote on such matters shall be required, to the extent such shareholder
approval is otherwise required by the Oklahoma General Corporation Act.
The provisions set forth in this Article may not be repealed,
altered or amended, in any respect whatsoever, unless such repeal,
alteration or amendment is approved by either (a) the affirmative vote
of holders of sixty-six and two-thirds percent (66-2/3%) of the shares
of capital stock of the corporation then issued and outstanding and
entitled to vote on such matters, or (b) the affirmative vote of
two-thirds of the whole Board of the corporation and the affirmative
vote of holders of a majority of the shares of the corporation's
capital stock then issued and outstanding and entitled to vote on such
matters.
<PAGE> 25
P R O X Y
PANHANDLE ROYALTY COMPANY
GRAND CENTRE #210
5400 N. GRAND BLVD.
OKLAHOMA CITY, OK 73112
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoint Jerry L. Smith and H. W. Peace, II, and each of
them, proxies and authorize them to represent and to cast a vote for the
undersigned on each proposal, as designated below, at the special meeting of
shareholders to be held on May 7, 1999, or any adjournments thereof. Should
other matters properly come before the meeting, the proxies are further
authorized to vote thereon as the Board of Directors may, in its discretion,
direct.
Proposal 1: Change the duration of the Company to perpetual duration from fifty
years.
[ ] FOR [ ] AGAINST [ ] WITHHOLD AUTHORITY TO VOTE FOR
Proposal 2: Increase the number of authorized shares of Common Stock from
1,000,000 shares to 6,000,000 shares.
[ ] FOR [ ] AGAINST [ ] WITHHOLD AUTHORITY TO VOTE FOR
Proposal 3: Effect a 3-for-1 stock split of the outstanding Common Stock
(entitling each shareholder to receive two additional shares of
Common Stock for each one share owned) and a corresponding reduction
of the par value per share of the Common Stock from $.10 to 3 1/3
(cents).
[ ] FOR [ ] AGAINST [ ] WITHHOLD AUTHORITY TO VOTE FOR
Proposal 4: Change the voting rights of the Common Stock from one vote per
shareholder to one vote per share.
[ ] FOR [ ] AGAINST [ ] WITHHOLD AUTHORITY TO VOTE FOR
Proposal 5: Require the approval of holders of 66 2/3% of the Common Stock in
connection with certain takeover, merger or other extraordinary
corporate transactions.
[ ] FOR [ ] AGAINST [ ] WITHHOLD AUTHORITY TO VOTE FOR
(Please Sign on Reverse Side)
<PAGE> 26
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 EACH OF THE PROPOSALS DESCRIBED ON THE REVERSE.
PLEASE SIGN EXACTLY AS NAME APPEARS BELOW.
Dated:______________________, 1999
No. of Shares: ___________________________________
Signature
_____________
___________________________________
Signature, if held jointly
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.
<PAGE> 27
[PANHANDLE ROYALTY COMPANY LETTERHEAD]
March 3, 1999
Dear Fellow Shareholders:
This letter is to invite you to attend any of a series of shareholder
information meetings to be hosted by Panhandle directors and officers during the
month of March. The purpose of the meetings is to discuss the condition of our
industry and to discuss changes which we feel will help your Company prosper in
difficult times. Enclosed is a list of the locations, times and dates for the
informational meetings.
It's tough to make a profit in the oil and gas business now. The prices of oil
are very low by historical standards and could be low for some time to come. Oil
is in abundant supply world-wide. Demand is low due to depressed demand in many
Asian and Latin American countries.
We believe that hard times create great opportunities for strong companies.
Panhandle is a strong company, with good cash flow and low debt. We can weather
the storm. But we would like to do better than just "weather the storm."
Doing better is why we want to meet with you and tell you of our plans for the
future of Panhandle. We will recommend changes which will allow us to take
advantage of rock-bottom prices for all types of oil and gas properties. We want
to buy oil and gas reserves. We want to buy minerals. We may want even to buy
other companies.
To really be able to take advantage of the opportunities we are seeing, a few
changes are needed. Specifically, the board is proposing the following items:
1. To effect a three-for-one stock split of the outstanding
shares, after increasing the number of authorized shares from
1,000,000 to 6,000,000.
2. To change the voting rights of the common stock.
3. To make an unfriendly takeover of Panhandle difficult.
A fourth "housekeeping" item will change the legal duration of the company to
perpetual.
A greater number of authorized shares will allow us to trade Panhandle shares
for assets of other companies. Splitting the stock will encourage more trading,
which
<PAGE> 28
Fellow Shareholders
Page 2
March 3, 1999
should improve the market price. Changing the voting rights will make it easier
for Panhandle to buy other assets using our own stock rather than cash. Finally,
Panhandle needs to be able to better defend itself against unfriendly takeover
bids.
You will receive at the meeting a copy of our preliminary proxy material
describing these changes. A "Special Shareholders' Meeting" has been scheduled
for May 7, 1999. Final copies of the proxy material will be mailed to all
shareholders in early April. You will be able to vote in person at the May 7,
1999, meeting or by mail.
That brings us back to the March meetings. We would like to invite you to any or
all of the meetings described on the attached page. We will talk about Panhandle
and tell you why we are so excited about the opportunities we see in the days
ahead.
The Board is interested in your opinion on this Plan and also wishes to provide
you with more information on the Plan and the Board's reasoning. To do this, we
have arranged for meetings in several locations where there are large
concentrations of shareholders. On the following page is a listing of the
locations, times and dates of these meetings. These meetings will include a
slide presentation on the company, Director's presentation on the Plan, and a
time to answer questions you may have.
YOU ARE CORDIALLY INVITED TO ATTEND ANY OF THESE MEETINGS. PLEASE MARK
THIS ON YOUR CALENDAR. WE LOOK FORWARD TO SEEING YOU THERE.
Sincerely.
/s/ H W Peace II
-------------------------------
HW Peace II
President and CEO
<PAGE> 29
PANHANDLE ROYALTY COMPANY
SHAREHOLDER INFORMATIONAL
MEETINGS
----------
OKLAHOMA CITY, OKLAHOMA
HILTON INN NORTHWEST
2945 NW EXPRESSWAY - 73112
(405) 848-4811
TIME: 6:00 - 8:00 P.M.
DATE: THURSDAY, MARCH 11, 1999
ELK CITY, OKLAHOMA
HOLIDAY INN HOLIDOME
I-40 & STATE HIGHWAY 6
101 MEADOW RIDGE - 73648
(580) 225-6637
TIME: 2:00 - 4:00 P.M.
DATE: SATURDAY, MARCH 13, 1999
ROSWELL, NEW MEXICO
BEST WESTERN SALLY PORT INN
2000 NORTH MAIN
(505) 622-6430
TIME: 6:00 - 8:00 P.M.
DATE: TUESDAY, MARCH 16, 1999
WOODWARD, OKLAHOMA
NORTHWEST INN
HI-WAY 270 AND FIRST STREET
(580) 256-7600
TIME: 6:00 - 8:00
DATE: THURSDAY, MARCH 18, 1999
COSTA MESA CALIFORNIA (ORANGE CO. AIRPORT)
DOUBLE TREE HOTEL
3050 BRISTOL STREET
(714) 540-7000
TIME: 6:00 - 8:00 P.M.
DATE: TUESDAY, MARCH 30, 1999
<PAGE> 30
DEAR SHAREHOLDERS:
You recently received proxy material asking you to vote on four changes to
Panhandle's Articles of Incorporation. THIS VOTE IS THE MOST IMPORTANT
SHAREHOLDER APPROVAL CHANGE SINCE THE COMPANY CONVERTED FROM ITS COOPERATIVE
STATUS IN 1979.
PLEASE VOTE. A BALLOT NOT CAST COUNTS THE SAME AS A "NO" VOTE TO CHANGE THE
ARTICLES OF INCORPORATION. The Board of Directors unequivocally and strongly
recommends you vote for all four proposals presented in the proxy statement.
Should you have any questions please feel free to call me collect at
(405) 948-1560. If you have already voted, thank you for your vote.
Sincerely,
HW Peace II
President
