<PAGE> 1
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. ____________)
Filed by the Registrant [ x ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ x ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule
14a-12
[ ] Confidential, for Use of the Commission Only (as
permitted by Rule 14a-6(e)(2))
TMBR/SHARP DRILLING, INC.
------------------------------------------------
(Name of Registrant as Specified In Its Charter)
------------------------------------------------------------------------
(Name of Person(s) filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (check the appropriate box):
[ x ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1),
or 14a-6(i)(2) or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to
Exchange Act Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-
6(i)(4) and 0-11.
(1) Title of each class of securities to which
transaction applies:
(2) Aggregate number of securities to which
transaction applies:
(3) Per unit price or other underlying value of
transaction computed pursuant to Exchange Act Rule
0-11 (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
TMBR/SHARP DRILLING, INC.
4607 West Industrial Boulevard
Midland, Texas 79703
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
to be held August 29, 1996
To The Shareholders of
TMBR/Sharp Drilling, Inc.:
The 1996 Annual Meeting of Shareholders of TMBR/Sharp
Drilling, Inc. (the "Company"), a Texas corporation, will be held
on Thursday, August 29, 1996, at 10:00 a.m., local time, in the
Executive Room, Midland Petroleum Club, 501 West Wall, Midland,
Texas 79701, for the following purposes:
(1) To elect four Directors to hold office until
the next succeeding annual meeting of shareholders and
until their successors have been duly qualified and
elected; and
(2) To transact such other business as may
properly come before the meeting and any adjournments
thereof.
The Board of Directors has fixed the close of business on
July 24, 1996 as the record date for the determination of
shareholders entitled to notice of and to vote at such meeting
and any adjournments thereof. Only shareholders of record at the
close of business on July 24, 1996 will be entitled to vote at
the Annual Meeting and any adjournments thereof.
By Order of the Board of Directors
James M. Alsup
Secretary
Midland, Texas
July 29, 1996
Whether or not you plan to be present at the meeting in
person, please complete, sign, date and mail the enclosed Proxy
in the accompanying return envelope to which no postage need be
affixed by the sender if mailed within the United States. If you
receive more than one Proxy because your shares are registered in
different names or addresses, each such Proxy should be signed
and returned to assure that all of your shares will be voted.
<PAGE> 3
TMBR/SHARP DRILLING, INC.
4607 West Industrial Boulevard
Midland, Texas 79703
PROXY STATEMENT
The accompanying Proxy is solicited on behalf of the Board
of Directors of TMBR/Sharp Drilling, Inc. (the "Company") to be
voted at the Annual Meeting of Shareholders of the Company to be
held on Thursday, August 29, 1996, at the time and place and for
the purposes set forth in the accompanying Notice of Annual
Meeting, and at any adjournments thereof.
This Proxy Statement and the accompanying form of Proxy are
first being mailed to the shareholders on or about July 29, 1996.
Proxies, Solicitation and Voting
The record date for the determination of shareholders
entitled to notice of and to vote at the meeting is the close of
business on July 24, 1996. On the record date, there were
3,382,586 shares of the Company's $.10 par value common stock
(the "Common Stock") issued and outstanding. Each share of
Common Stock is entitled to one vote on all matters to be acted
upon at the meeting. The Company's Articles of Incorporation
deny cumulative voting rights.
With respect to matters to be voted upon at the Annual
Meeting, the attendance, in person or by Proxy, of the holders of
a majority of the shares of Common Stock entitled to vote on such
matters is necessary to constitute a quorum. For quorum
purposes, the total votes received, including abstentions and
broker non-votes, are counted in determining the number of shares
present. Under the Company's bylaws, when a quorum is present,
with respect to any matter (other than the election of
Directors), the affirmative vote of the holders of a majority of
the shares entitled to vote on such matter and represented in
person or by Proxy shall be the act of the shareholders. As to
the election of Directors, Directors are elected by a plurality
of votes cast. "Plurality" means that the individuals who
receive the largest number of votes cast are elected as Directors
up to the maximum number of Directors to be chosen at the
meeting. Consequently, any shares not voted (whether by
abstention, broker non-vote or otherwise) have no impact in the
election of Directors, except to the extent the failure to vote
for an individual results in another individual receiving a
larger number of votes.
Properly executed Proxies will be voted in accordance with
the instructions thereon or, if no instructions are indicated
thereon, the shares will be voted FOR the election of
management's nominees to the Board of Directors, and in the
discretion of the persons named as proxies, upon such other
matters as may properly come before the meeting.
<PAGE> 4
Any shareholder giving a Proxy has the power to revoke it at
any time before it is voted by appearing and voting personally at
the Annual Meeting, by delivering a later dated Proxy or by
delivering to the Secretary of the Company a written revocation
of such Proxy prior to the Annual Meeting.
The cost of preparing, assembling, printing and mailing this
Proxy Statement and enclosed Proxy and the cost of soliciting
Proxies relating to the Annual Meeting will be borne solely by
the Company. The Company may request banks and brokers to
solicit their customers who beneficially own shares of Common
Stock of the Company listed of record in names of nominees and
will reimburse such banks and brokers for their reasonable
out-of-pocket expenses of such solicitation. It is contemplated
that the original solicitation of Proxies by mail will be
supplemented by telephone, telegram and personal solicitation by
officers, Directors and other regular employees of the Company.
No additional compensation will be paid to such individuals for
such activities.
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information as of
July 24, 1996 with respect to the Company's Common Stock
beneficially owned by (i) each person known to the Company to be
the beneficial owner of more than five percent of the outstanding
shares of the Company's Common Stock, (ii) the executive officers
named in the Summary Compensation Table under "Executive
Compensation", (iii) each Director and nominee for Director of
the Company and (iv) all Directors (and nominees) and executive
officers of the Company as a group.
Amount and
Nature of Percent
Name and Address Beneficial of
of Beneficial Owner Ownership(1) Class
------------------- ------------ -------
Thomas C. Brown . . . . . . . 482,153(2) 12.54%
4607 West Industrial Blvd.
Midland, Texas 79703
Donald L. Evans . . . . . . . 48,246 1.43%
500 Empire Plaza
Midland, Texas 79701
David N. Fitzgerald . . . . . 30,182(3) *
2300 West 42nd Street
Odessa, Texas 79764
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<PAGE> 5
Joe G. Roper . . . . . . . . 867,418(4) 23.74%
4607 West Industrial Blvd.
Midland, Texas 79703
State Farm Mutual Automobile 400,000(5) 11.83%
Insurance Company
One State Farm Plaza
Bloomington, Illinois 61710
F. Howard Walsh, Jr. . . . . 266,246(6) 7.87%
500 West Seventh St., Suite 1007
Fort Worth, Texas 76102-4782
All Directors (and nominees . 1,492,463(7) 36.26%
and executive officers as a
group (7 persons)
____________
* Less than 1%.
(1) Unless otherwise indicated, all shares of Common Stock are
held directly with sole voting and investment powers.
(2) Includes 462,000 shares of Common Stock underlying a
presently exercisable stock option and 19,856 shares of
Common Stock owned by the Estate of C. V. Lyman, deceased,
of which estate Mr. Brown serves as Co-Executor.
(3) Includes 5,000 shares of Common Stock held by Mr.
Fitzgerald's wife as her separate property. Mr. Fitzgerald
disclaims beneficial ownership of such shares.
(4) Includes 271,450 shares of Common Stock underlying presently
exercisable stock options.
(5) Includes 5,250 shares of Common Stock which are reported to
be beneficially owned by State Farm Fire and Casualty
Company.
(6) As reported in Schedule 13D, as amended, filed with the
Securities and Exchange Commission, Mr. Walsh has sole
voting and dispositive power with respect to 261,900 shares
and shared voting and dispositive power with respect to
4,346 shares.
(7) Includes 733,450 shares of Common Stock underlying presently
exercisable stock options.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934
requires, among other things, that the Company's Directors and
officers file at specified times reports of beneficial ownership
and changes in beneficial ownership of the Company's Common Stock
and other equity securities. To the Company's knowledge, all
Section 16(a) filing requirements for the year ended March 31,
1996 have been complied with, except that Mr. Don H. Lawson, Vice
President - Operations of the Company, was delinquent in the
filing of one Form 4 Report during the fiscal year.
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<PAGE> 6
ELECTION OF DIRECTORS
Directors of the Company are elected annually by the
shareholders to hold office until the next succeeding annual
meeting of shareholders and until their successors are duly
qualified and elected.
In accordance with the Company's bylaws, the number of
Directors is established by resolution of the Board of Directors.
The Board of Directors has established the size of the Board at
four Directors. Accordingly, the Board of Directors is
recommending that the four current Directors of the Company be
re-elected to serve until the next annual meeting of shareholders
is held and their respective successors have been duly elected.
If any nominee becomes unavailable for any reason, which is
not anticipated, a substitute nominee may be designated by the
Board of Directors and the shares represented by Proxy will be
voted for any such substitute nominee, unless the Board reduces
the number of Directors. All of the nominees listed below were
previously elected Directors by the shareholders at the last
annual meeting of shareholders. There are no family
relationships among any of these nominees, or among any of these
nominees and any officer, except Patricia R. Elledge, the
Controller of the Company, is the daughter of Joe G. Roper.
There are no arrangements or understandings between any nominee
and any other person pursuant to which the nominee was selected.
The four nominees for the Board of Directors are as follows:
<TABLE>
<CAPTION>
Position with
Company and
Principal Director
Nominee Age Occupation Since
------- --- ---------------------- --------
<S> <C> <C> <C>
Thomas C. Brown . . . . 69 Chairman of the Board 1982
of Directors and Chief
Executive Officer of the
Company; Director of
Tom Brown, Inc.
Joe G. Roper . . . . . 68 Director and President 1982
of the Company.
Donald L. Evans . . . . 49 Director of the Company; 1982
Chairman of the Board of
Directors and Chief
Executive Officer of
Tom Brown, Inc.
-4-
<PAGE> 7
David N. Fitzgerald . . 73 Director of the Company; 1984
Chairman of the Board of
Directors of Mineral
Development, Inc.;
President and principal
shareholder of Exit
Oilfield Equipment, Inc.
and President of Dave
Fitzgerald, Inc., both
privately held oilfield
equipment sales companies.
</TABLE>
Unless otherwise directed on any duly executed and dated
Proxy, it is the intention of the persons named in such Proxy to
vote the shares of Common Stock represented by such Proxy for the
election of the nominees listed in the preceding table for the
office of Director of the Company.
The Board of Directors recommends that the shareholders vote
FOR the proposal to elect its nominees to the Board of Directors.
Other Information
The Board of Directors held one meeting during the year
ended March 31, 1996 at which all Directors were present. The
Directors also took action by unanimous written consent on four
occasions.
The Company does not have a standing nominating committee.
The review of recommendations for nominees for Directors is made
by the full Board of Directors.
Messrs. Donald L. Evans and David N. Fitzgerald served as
members of the Audit Committee of the Board of Directors during
fiscal year 1996. The Audit Committee was created for the
purposes of recommending the firm to be employed by the Company
as its independent auditors, consulting with the persons chosen
to be the independent auditors with regard to the plan of audit,
reviewing and consulting with the independent auditors the report
of audit and management letters, if any, consulting with the
independent auditors with regard to the adequacy of internal
accounting controls and performing such other duties as may be
advised or requested from time to time by the Board of Directors
of the Company. The Audit Committee did not hold any meetings
during the year ended March 31, 1996.
The Company's Compensation Committee, which also consists of
Messrs. Evans and Fitzgerald, oversees and is responsible for the
administration of the Company's stock option plans. Members of
the Compensation Committee are appointed annually by the Board of
Directors. Members serve at the pleasure of the Board of
Directors and may be appointed or removed by the Board of
Directors at will. The Compensation Committee did not hold any
meetings during the year ended March 31, 1996.
-5-
<PAGE> 8
EXECUTIVE COMPENSATION
Summary of Annual Compensation
The following table sets forth for each of the three fiscal
years ended March 31, 1996, a summary of the types and amounts of
compensation paid to the Chief Executive Officer of the Company
and the only other executive officer of the Company whose salary
and bonuses for the fiscal year ended March 31, 1996 exceeded
$100,000.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term Compensation
-----------------------------------
Annual Compensation Awards Payouts
---------------------------- ----------------------- -------
Other Securities All
Annual Restricted Underlying Other
Compen- Stock Options/ LTIP Compen-
Name and Salary Bonus sation Awards SARs Payouts sation
Principal Position Year ($) ($) ($) ($) (#) ($) ($)
---------------------- ---- ------ ----- ------- ---------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Thomas C. Brown, 1996 72,000 0 (1) 0 0 0 0
Chairman of the Board 1995 72,000 0 (1) 0 0 0 0
of Directors and Chief 1994 72,000 0 (1) 0 0 0 0
Executive Officer
Joe G. Roper, 1996 150,615 0 (1) 0 0 0 244,808(2)
President and Director 1995 150,398 0 (1) 0 0 0 234,146(2)
1994 144,913 0 (1) 0 95,000 0 229,087(2)
</TABLE>
_________________
(1) The named executive officers of the Company were also
provided certain non-cash compensation and personal
benefits. However, the aggregate amount of such other
compensation did not exceed $50,000 or 10% of the
named executive officer's salary during such fiscal year.
(2) Includes (i) $1,152 allocated to Mr. Roper's account under
the Company's 401(k) profit sharing plan for the fiscal
year ended March 31, 1996, (ii) insurance premiums paid
by the Company in the amounts of $38,896, $29,386 and
$24,327 for the years ended March 31, 1996, 1995 and 1994,
respectively, for an insurance policy on the life of
Mr. Roper and (iii) $204,760 for premiums under a split-
dollar life insurance plan maintained by the Company
on behalf of Mr. Roper, of which $17,697, $16,868 and
$15,543 is attributable to term life insurance for the
fiscal years ended March 31, 1996, 1995 and 1994,
-6-
<PAGE> 9
respectively. During the years ended March 31, 1996, 1995
and 1994, and pursuant to the terms of the split-dollar
agreement, the Company borrowed aggregate amounts of
$339,855, $316,655 and $126,453, respectively, against the
cash value of such insurance policy to pay the policy
premiums and a portion of the accrued interest on the
cumulative amount of such borrowings. The remaining
portion of the accrued interest on such borrowings is paid
annually by the Company. At March 31, 1996, 1995 and
1994, the outstanding loan balances were $3,174,386,
$2,834,530 and $2,517,875, respectively. The interest
expense paid by the Company for the fiscal years ended
March 31, 1996, 1995 and 1994 was $91,412, $89,309 and
$78,307, respectively. A portion of the death benefit of
the split-dollar policy equal to the Company's net premium
outlay is payable to the Company upon the death of Mr. Roper,
and the aggregate loan amount is deducted from the insurance
proceeds payable to the beneficiaries of the policy. The
balance of the proceeds are payable to Mr. Roper's
beneficiaries. The Company is not the beneficiary of either
insurance policy.
Stock Options
The Company has in the past utilized stock options as part
of its overall compensation of Directors, officers and employees.
However, no options were granted during the fiscal year ended
March 31, 1996 to either of the executive officers named in the
preceding Summary Compensation Table. Narrative descriptions of
the Company's stock option plans and outstanding stock options
are set forth under the captions "1984 Stock Option Plan" and
"1994 Stock Option Plan" below.
-7-
<PAGE> 10
The following table sets forth certain information with
respect to stock option exercises during the fiscal year ended
March 31, 1996 by the named executive officers of the Company,
and the value of each such officer's unexercised stock options at
March 31, 1996.
Aggregated Option/SAR Exercises in
Last Fiscal Year and Fiscal Year - End Option/SAR Values
<TABLE>
<CAPTION>
Number of Value of
Securities Underlying Unexercised
Shares Unexercised in-the-Money
Acquired Options/SARs Options/SARs
on Value at Fiscal Year-End (#) at Fiscal Year-End ($)(2)
Exercise Realized ---------------------------- ---------------------------
Name (#) ($)(1) Exercisable Unexercisable Exercisable Unexercisable
----------- ------- ---------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
T. C. Brown - - 462,000 - $3,003,000 -
J. G. Roper 164,000 $1,226,575 283,500 47,500 $1,697,875 $163,875
</TABLE>
_________
(1) The "value realized" is equal to the fair market value of a
share of Common Stock on the date of exercise (based on the
closing price of the Company's Common Stock), less the
exercise price.
(2) Value of in-the-money options is equal to the fair market
value of a share of Common Stock at fiscal year-end (based
on the closing price of the Company's Common Stock), less
the exercise price.
Profit Sharing Plan
The Company maintains under Section 401(k) of the Internal
Revenue Code of 1986, as amended (the "Code"), a profit sharing
plan (the "Profit Sharing Plan") for the benefit of all em-
ployees. Under the Profit Sharing Plan, the Company contributes
to a trust administered by a third party trustee, out of current
or accumulated net profits, such amounts as it may, from time to
time, deem advisable. The contributions are invested by the
Profit Sharing Trustee in various investments selected by
employee participants. Company contributions to the Profit
Sharing Plan are allocated monthly to the individual accounts of
employee-participants. A participant's accrued benefit derived
from Company contributions is 100% vested after seven years of
continuous employment, upon attaining age 65, or upon death or
disability. Each employee of the Company becomes eligible to
participate in the Profit Sharing Plan after one year of
continuous employment. Directors of the Company who are not also
-8-
<PAGE> 11
employees of the Company are not eligible to participate in the
Profit Sharing Plan. In addition to Company contributions,
participants may also contribute such amount as the participant
determines each year, subject to certain annual maximum
limitations. Participants are always 100% vested in their
individual contributions. For the year ended March 31, 1996, the
Company contributed an amount equal to 25% of the contributions
made by eligible employees, limited, however, to a maximum of 5%
of each eligible employee's compensation. During the fiscal year
ended March 31, 1996, the Company made cash contributions in the
total amount of $14,409 to the Profit Sharing Plan on behalf of
participating employees, of which $1,152 was allocated to the
account of Mr. Roper.
Compensation of Directors
The Company has, from time to time, paid fees to its
Directors for attending Directors' meetings and reimbursed
Directors for their expenses incurred in connection with
attending meetings. However, no such fees or reimbursements were
paid to any Director of the Company during the fiscal year ended
March 31, 1996.
In order to attract, retain and reward qualified Directors
for the successful conduct of the Company's business, the Company
has in the past granted stock options to its Directors. However,
no options were granted to any of the Company's Directors during
the fiscal year ended March 31, 1996.
1984 Stock Option Plan
The Board of Directors authorized and adopted the TMBR/Sharp
Drilling, Inc. Stock Option Plan (the "1984 Plan") in August,
1984. Although the 1984 Plan expired by its own terms on August
8, 1994, options granted under the 1984 Plan prior to August 8,
1994 will remain outstanding until such options are exercised or
expire by their own terms, and will continue to be subject to all
terms and conditions of the 1984 Plan. No additional options may
be granted under the 1984 Plan. Options granted under the 1984
Plan are either incentive stock options within the meaning of
Section 422 of the Code, or options which do not constitute
incentive stock options. Options granted under the 1984 Plan
have been, as provided in the 1984 Plan, granted only to key
employees (including officers and Directors who were also key
employees) of the Company.
The 1984 Plan is administered by the Compensation Committee
of the Board of Directors. Members of the Compensation Committee
were not eligible for selection as a person to whom options could
be granted pursuant to the 1984 Plan, and were not eligible to
participate in the 1984 Plan or any other stock plan of the
Company during the one year period prior to their appointment to
the Compensation Committee. Options granted under the 1984 Plan
have exercise prices equal to the fair market value of the shares
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<PAGE> 12
at the time the options were granted, as determined by the
Compensation Committee. Options granted under the 1984 Plan are
exercisable for such periods as have been approved by the
Compensation Committee, except that such options are not
exercisable, in any event, for a period in excess of ten years
from the date of grant.
An aggregate of 475,000 shares of the Company's Common
Stock, $.10 par value, are authorized to be issued under the 1984
Plan. Common Stock issued under the 1984 Plan may be from
authorized but unissued shares of Common Stock or previously
issued shares reacquired by the Company. The shares of Common
Stock with respect to which options have been granted are subject
to adjustment upon the occurrence of certain corporate
reorganizations or recapitalizations, including stock splits or
stock dividends.
As required by the terms of the 1984 Plan, for an option
granted under the 1984 Plan to qualify as an incentive stock
option, the aggregate fair market value (determined at the time
of grant) of the stock with respect to which the incentive stock
option was exercisable for the first time by an employee during
any calendar year could not exceed $100,000 and could not be
issued to an employee if, at the time the option was granted,
such employee owned stock possessing more than 10% of the
combined voting power of all classes of the Company's outstanding
stock, unless (i) at the time the option was granted the exercise
price of such option was at least 110% of the fair market value
of the Common Stock on the date of grant and (ii) such option was
not exercisable after five years from the date of grant.
All or part of an option may be exercised by tendering cash
or shares of Common Stock having a fair market value equal to the
option price, or a combination of shares and cash. At the
discretion of the Compensation Committee, an option agreement may
provide for the right to surrender an option in return for a
payment in cash and/or shares of Common Stock equal to the excess
of the fair market value of the shares with respect to which the
option is surrendered over the option price therefor, on such
terms and conditions as the Compensation Committee shall
determine.
At July 24, 1996, there were outstanding under the 1984 Plan
incentive stock options to purchase a total of 108,000 shares of
Common Stock.
1994 Stock Option Plan
In July, 1994, the Board of Directors adopted the Company's
1994 Stock Option Plan (the "1994 Plan"), which was ratified and
adopted by the Company's shareholders at the 1994 annual meeting
of shareholders held on August 30, 1994. Options granted under
the 1994 Plan may be either incentive stock options within the
meaning of Section 422 of the Code, or options which do not
constitute incentive stock options. Key employees (including
officers and Directors who are also key employees) of the Company
are eligible to receive options under the 1994 Plan.
-10-
<PAGE> 13
The 1994 Plan is administered by the Compensation Committee,
none of whom are eligible to participate in the 1994 Plan. The
Compensation Committee has the sole authority to select the
employees who are to be granted options and to establish the
number of shares issuable under each option. Options granted to
an employee contain such terms and conditions and may be
exercisable for such periods as may be approved by the
Compensation Committee. The purchase price of Common Stock
issued under each option will not be less than the fair market
value of the stock subject to the option at the time of grant.
The Compensation Committee, in its discretion, may provide for
the payment of the option price, in whole or in part, (i) in cash
at the time of such exercise, (ii) by the delivery of a number of
shares of Common Stock (plus cash if necessary) having a fair
market value on the date of delivery equal to such option price,
or (iii) any combination of cash and stock.
The aggregate number of shares of Common Stock which may be
issued pursuant to the exercise of stock options granted under
the 1994 Plan may not exceed 750,000 shares, subject to
adjustment in the number of shares with respect to options and
purchase prices therefor in the event of stock splits or stock
dividends, and for equitable adjustments in the event of certain
recapitalizations, mergers, consolidations or acquisitions. If
any outstanding option granted under the 1994 Plan expires or
terminates prior to its exercise in full, the shares allocable to
the unexercised portion of such option may be subsequently
granted under the 1994 Plan.
The 1994 Plan provides that to the extent the aggregate fair
market value of the Common Stock (determined at the time of
grant) with respect to which incentive options are exercisable
for the first time by an individual during any calendar year
under all incentive stock option plans of the Company exceeds
$100,000, such incentive stock options shall be treated as
options which do not constitute incentive stock options. The
Compensation Committee determines, in accordance with applicable
provisions of the Code, which of an optionee's incentive stock
options will not constitute incentive stock options because of
such limitation. No incentive stock option may be granted to an
individual if, at the time the option is granted, such individual
owns stock possessing more than 10% of the total combined voting
power of all classes of stock of the Company, unless (i) at the
time such option is granted the option price is at least 110% of
the fair market value of the stock subject to the option and (ii)
such option by its terms is not exercisable after the expiration
of five years from the date of grant.
An option may be granted in exchange for an individual's
right and option to purchase shares of Common Stock pursuant to
the terms of an agreement that existed prior to the date such
option is granted ("Prior Option"). An option agreement that
grants an option in exchange for a Prior Option must provide for
the surrender and cancellation of the Prior Option. The purchase
price of Common Stock issued under an option granted in exchange
for a Prior Option shall be determined by the Compensation
-11-
<PAGE> 14
Committee and, such purchase price may, without limitation, be
equal to the price for which the optionee could have purchased
Common Stock under the Prior Option.
The Board of Directors of the Company may amend or terminate
the 1994 Plan at any time, but may not in any way impair the
rights of an optionee under an outstanding option without the
consent of such optionee. In addition, in order to obtain the
benefits provided by Section 422 of the Code and Rule 16b-3 under
the Securities Exchange Act of 1934, as amended, the Board of
Directors will determine at the time of making each amendment
whether or not it is necessary to submit the amendment to the
shareholders for approval. Generally, however, no amendment may
be made without shareholder approval if such amendment would
materially increase the benefits accruing to employee optionees
under the 1994 Plan; materially increase the number of securities
issuable under the 1994 Plan; or materially modify the
requirements as to eligibility for participation in the 1994
Plan. Unless earlier terminated, the 1994 Plan will terminate
upon and no further options may be granted after the expiration
of ten years from the date of its adoption by the Board of
Directors.
Change of Control Arrangements
The Company's 1984 and 1994 stock option plans, and its
stock option agreements with Messrs. Brown and Roper and other
employees of the Company, contain provisions which, upon the
occurrence of certain events, could result in additional
compensation to such option holders, including Mr. Brown and Mr.
Roper. Such events include the following: if (i) the Company is
not the surviving entity in any merger or consolidation, (ii) the
Company sells, leases or exchanges or agrees to sell, lease or
exchange all or substantially all of its assets, (iii) the
Company is to be dissolved and liquidated, (iv) any person or
entity, including a "group" as contemplated by Section 13(d)(3)
of the Securities Exchange Act of 1934, as amended, acquires or
gains ownership or control of more than 50% of the outstanding
shares of Common Stock, or (v) as a result of or in connection
with a contested election of directors, the persons who were
directors of the Company before such election shall cease to
constitute a majority of the Board (each such event is referred
to herein as a "Corporate Change"), then the Compensation
Committee shall effect one or more of the following alternatives
with respect to the then outstanding options held by employees,
which may vary among individual employee optionees: (1)
accelerate the time at which such options may be exercised so
that such options may be exercised in full for a limited period
of time on or before a specified date (before or after such
Corporate Change) fixed by the Compensation Committee, after
which specified date all unexercised options and all rights of
employee optionees thereunder shall terminate, (2) require the
mandatory surrender to the Company by selected optionees of some
or all of such options as of a date specified by the Compensation
Committee, in which event the Compensation Committee shall cancel
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<PAGE> 15
such options and pay to each optionee an amount of cash per share
equal to the excess of the fair market value, or in the case of
stock options granted under the 1994 stock option plan the
"Change of Control Value" of the shares subject to such option,
over the exercise price(s) under such options for such shares,
(3) make such adjustments to such options as the Compensation
Committee deems appropriate to reflect such Corporate Change or
(4) provide that thereafter upon any exercise of an option
theretofore granted the optionee shall be entitled to purchase
under such option, in lieu of the number of shares of Common
Stock as to which such option shall then be exercisable, the
number and class of shares of stock or other securities or
property to which the optionee would have been entitled pursuant
to the terms of the agreement of merger, consolidation or sale of
assets and dissolution if, immediately prior to such merger,
consolidation or sale of assets and dissolution the optionee had
been the holder of record of the number of shares of Common Stock
as to which such option is then exercisable.
For purposes of the 1994 stock option plan, the "Change of
Control Value" is an amount determined as follows, whichever is
applicable: (i) the per share price offered to shareholders of
the Company in any such merger, consolidation, sale of assets or
dissolution transaction, (ii) the price per share offered to
shareholders of the Company in any tender offer or exchange offer
whereby a Corporate Change takes place, or (iii) if such
Corporate Change occurs other than pursuant to a tender or
exchange offer, the fair market value per share of the shares
into which such options being surrendered are exercisable, as
determined by the Compensation Committee as of the date
determined by the Compensation Committee to be the date of
cancellation and surrender of such options. If the consideration
offered to shareholders of the Company consists of anything other
than cash, the Compensation Committee shall determine the fair
cash equivalent of the portion of the consideration offered which
is other than cash.
Compensation Committee Interlocks and Insider Participation
Thomas C. Brown, the Chairman of the Board of Directors and
Chief Executive Officer of the Company, is a Director of Tom
Brown, Inc. and Donald L. Evans, the Chairman of the Board of
Directors and Chief Executive Officer of Tom Brown, Inc., is a
Director of the Company and serves on the Compensation Committee
of the Company's Board of Directors.
Certain Transactions
Until September, 1984, the Company was a wholly owned
subsidiary of Tom Brown, Inc. ("TBI"). In September, 1984, TBI
distributed the Common Stock of the Company to the stockholders
of TBI. Mr. Brown, the Chairman of the Board of Directors and
Chief Executive Officer of the Company, is also a Director of TBI
and Mr. Evans, a Director of the Company, is the Chairman of the
Board of Directors and Chief Executive Officer of TBI. Following
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<PAGE> 16
the spin-off of the Company, TBI and the Company have each made
available to the other certain personnel, office services and
records with each party being reimbursed for any costs and
expenses incurred in connection therewith. During the fiscal
year ended March 31, 1996, TBI charged the Company approximately
$72,500 for such services provided by TBI, of which approximately
$13,100 was outstanding and unpaid at March 31, 1996.
Historically, the Company has provided contract drilling and
other related oil and gas services to TBI in connection with
TBI's oil and gas exploration and development activities, and it
is anticipated that the Company will continue to perform similar
services for TBI in the future. Such services are provided in
instances where the Company and TBI both own, for their separate
accounts, interests in oil and gas leases being drilled, as well
as in instances where only TBI and other third parties own
interests. During the fiscal year ended March 31, 1996, the
Company billed TBI the aggregate amount of approximately $555,800
for TBI's pro rata share of contract drilling expenses, lease
acquisition costs and operating expenses. At March 31, 1996, TBI
owed the Company approximately $16,300 for such expenses. The
largest aggregate amount owed by TBI to the Company at one time
during the fiscal year ended March 31, 1996 was approximately
$216,900. TBI and the Company participate on the same or similar
terms afforded non-affiliated third parties.
From time to time, the Company acquires interests in leases
from TBI and participates with TBI and other interest owners in
the drilling and development of such leases where TBI acts as
operator. The Company participates in such drilling ventures
under standard form operating agreements on the same or similar
terms afforded by TBI to unaffiliated third parties. TBI
invoices all working interest owners, including the Company, on a
monthly basis for their respective share of operating and
drilling expenses. During the year ended March 31, 1996, TBI
billed the Company approximately $52,700 for the Company's
proportionate share of drilling costs and related expenses
incurred on properties operated by TBI. The largest amount owed
by the Company to TBI at any one time during the fiscal year
ended March 31, 1996 for its share of drilling costs and related
expenses and for services provided by TBI was approximately
$35,400, and at March 31, 1996 the Company owed TBI approximately
$6,100 for lease operating expenses.
INDEPENDENT AUDITORS
Arthur Andersen LLP has served as the Company's independent
auditor since March, 1990 and will continue as the Company's
independent auditor for the current year. Representatives of
Arthur Andersen LLP are expected to be present at the Annual
Meeting and will have the opportunity to make a statement to the
shareholders if they desire to do so, and to respond to
appropriate questions.
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<PAGE> 17
SHAREHOLDER PROPOSALS
Shareholder proposals intended to be presented at the 1997
Annual Meeting of Shareholders must be received by the Company
for possible inclusion in its Proxy Statement and form of Proxy
relating to such meeting no later than March 28, 1997.
OTHER MATTERS
The Board of Directors of the Company knows of no matters,
other than those stated above, which are to be brought before the
Annual Meeting. If any other matter properly comes before the
meeting, however, it is intended that the persons named in the
enclosed Proxy may, in the absence of instructions to the
contrary, vote the Proxy in accordance with their best judgment.
The 1996 Annual Report to Shareholders, which includes the
Company's Annual Report on Form 10-K for the year ended March 31,
1996, includingaudited financial statements, isenclosed herewith.
A copy of the Company's Annual Report on Form 10-K will be
furnished at no charge to each "beneficial owner" of securities
of the Company upon receipt of a written request of such person
addressed to: Secretary, TMBR/Sharp Drilling, Inc., 4607 West
Industrial Blvd., Midland, Texas 79703, containing a good faith
representation that, as of July 24, 1996, such person was a
beneficial owner of securities of the Company entitled to vote at
the Annual Meeting of Shareholders to be held August 29, 1996.
BY ORDER OF THE BOARD OF DIRECTORS
James M. Alsup
Secretary
Midland, Texas
July 29, 1996
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<PAGE> 18
[Front of Card]
TMBR/SHARP DRILLING, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Thomas C. Brown, Donald L.
Evans and Joe G. Roper and each of them, attorneys, agents and
proxies, with full power of substitution, to represent and to
vote all shares of common stock of TMBR/SHARP DRILLING, INC. held of
record by the undersigned on July 24, 1996, at the Annual Meeting
of Shareholders of TMBR/SHARP DRILLING, INC. to be held on August 29,
1996, and at any adjournments or postponements thereof, in
accordance with the instructions on the reverse side.
(Continued and to be signed on reverse side)
SEE REVERSE
SIDE
<PAGE> 19
[Back of Card]
Please mark your
/ X / votes as in this
example.
WITHHOLD Nominees: Thomas C. Brown
1. Election of FOR all nominees AUTHORITY Donald L. Evans
Directors listed at right to vote for all David N. Fitzgerald
nominees listed Joe G. Roper
at right
/ / / /
* To withhold authority to vote for any individual nominee,
write that nominee's name in the space provided below:
------------------------------------------------------
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE SHARE-
HOLDER'S SPECIFICATION HEREON. IN THE ABSENCE OF SUCH
SPECIFICATION, THE PROXY WILL BE VOTED FOR THE NOMINEES FOR
DIRECTORS NAMED ON THIS PROXY CARD AND IN THE DISCRETION OF
THE PERSONS NAMED AS PROXIES ON THE REVERSE HEREOF, WITH
RESPECT TO ANY OTHER MATTER THAT MAY PROPERLY COME BEFORE
THE MEETING OR ANY ADJOURNMENT(S) HEREOF.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY
USING THE ENCLOSED ENVELOPE.
<TABLE>
<S> <C> <C> <C>
SIGNATURE DATE SIGNATURE DATE
------------------------------- ------------- --------------------- ----------
</TABLE>
NOTE: Please sign exactly as name appears hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee or guardian,
please give full title as such.
