<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 ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-
6(i)(4) and 0-11.
(1) Title of each class of securities to which
transaction applies:
(2) Aggregate number of securities to which
transaction applies:
(3) Per unit price or other underlying value of
transaction computed pursuant to Exchange Act Rule
0-11 (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 The Shareholders of
TMBR/Sharp Drilling, Inc.:
The Annual Meeting of Shareholders of TMBR/Sharp Drilling, Inc.
(the "Company"), a Texas corporation, will be held on Friday,
August 29, 1997, at 10:00 a.m., local time, in the Derrick 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, 1997 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,
1997 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 28, 1997
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.
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<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 Friday,
August 29, 1997, 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 28, 1997.
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, 1997. On the record date, there were 4,503,086 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 will be 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.
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.
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<PAGE> 4
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,
1997 (unless otherwise indicated) 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.
<TABLE>
<CAPTION>
Amount and
Nature of Percent
Name and Address Beneficial of
of Beneficial Owner Ownership(1) Class
------------------ ------------ -------
<S> <C> <C>
Thomas C. Brown . . . . . . . . . . . . . . . . . 616,153(2) 12.3%
4607 West Industrial Blvd.
Midland, Texas 79703
Donald L. Evans . . . . . . . . . . . . . . . . . . 12,846 *
500 Empire Plaza
Midland, Texas 79701
David N. Fitzgerald . . . . . . . . . . . . . . . . 30,182(3) *
2300 West 42nd Street
Odessa, Texas 79764
Joe G. Roper . . . . . . . . . . . . . . . . . . . 902,946(4) 19.2%
4607 West Industrial Blvd.
Midland, Texas 79703
</TABLE>
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<PAGE> 5
<TABLE>
<CAPTION>
Amount and
Nature of Percent
Name and Address Beneficial of
of Beneficial Owner Ownership(1) Class
------------------- ------------ -------
<S> <C> <C>
State Farm Mutual Automobile . . . . . . . . . . . 400,000(5) 8.9%
Insurance Company
One State Farm Plaza
Bloomington, Illinois 61710
Metropolitan Life Insurance Company . . . . . . . 778,900(6) 17.3%
One Madison Avenue
New York, New York 10010
F. Howard Walsh, Jr. . . . . . . . . . . . . . . . 266,246(7) 5.9%
500 West Seventh St., Suite 1007
Fort Worth, Texas 76102-4782
All Directors (and nominees . . . . . . . . . . . . 1,637,702(8) 31.2%
and executive officers as a
group (7 persons)
____________
</TABLE>
* Less than 1%.
(1) Unless otherwise indicated, all shares of Common Stock are held
directly with sole voting and investment powers.
(2) Includes 514,500 shares of Common Stock underlying presently
exercisable stock options 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 195,000 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) In Amendment No. 2 to Schedule 13G, dated June 10, 1997, filed
with the Securities and Exchange Commission (the "Commission")
by Metropolitan Life Insurance Company ("Met Life"), a parent
holding company, Met Life reported the indirect beneficial
ownership of such shares. Met Life further reported that State
Street Research and Management Company, Inc. ("State Street"),
an affiliate of Met Life and registered investment adviser, has
sole voting and dispositive powers with respect to such shares.
In Amendment No. 2 to Schedule 13G, also dated June 10, 1997, filed
by State Street with the Commission, State Street reported sole
voting power with respect to 657,600 shares and sole dispositive
power with respect to 778,900 shares. State Street disclaimed any
beneficial interest in such securities.
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<PAGE> 6
(7) As reported in Schedule 13D, as amended, filed with the 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.
(8) Includes 749,500 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, 1997 have been complied with.
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 Board of Directors
by resolution has fixed the total number of directors at four.
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, the President and a
Director of the Company. 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 Director
Nominee Age Principal Occupation Since
------- --- --------------------- --------
<S> <C> <C> <C>
Thomas C. Brown . . . . . . . . 70 Chairman of the Board 1982
of Directors and Chief
Executive Officer of the
Company; Director of
Tom Brown, Inc.
</TABLE>
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<PAGE> 7
<TABLE>
<CAPTION>
Position with Company
and Director
Nominee Age Principal Occupation Since
------- --- --------------------- --------
<S> <C> <C> <C>
Joe G. Roper . . . . . . . . . 69 Director and President 1982
of the Company.
Donald L. Evans . . . . . . . . 50 Director of the Company; 1982
Chairman of the Board of
Directors and Chief Executive
Officer of Tom Brown, Inc.
David N. Fitzgerald . . . . . . 74 Director of the Company; 1984
Chairman of the Board of
Directors of EXCO Resources,
Inc.; President and shareholder
of Dave Fitzgerald, Inc., a
privately held investment
company.
</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, 1997 at which all Directors were present. The Directors also
took action by unanimous written consent on six 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 1997.
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 held one meeting during the year ended March 31, 1997.
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<PAGE> 8
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, 1997.
EXECUTIVE COMPENSATION
Summary of Annual Compensation
The following table sets forth for each of the three fiscal years
ended March 31, 1997, 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, 1997 exceeded $100,000.
<TABLE>
<CAPTION>
Summary Compensation Table
Long-Term Compensation
-----------------------------
Annual Compensation Awards Payouts
------------------- -------- -------
Other Securities All
Annual Restricted Underlying Other
Compen- Stock Options/ LTIP Compen-
Name and Salary Bonus sation Awards SARs Payouts sation
Principal Position Year ($) ($) ($) ($) (#) ($) ($)
------------------ ---- ------ ----- ------- ------ -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Thomas C. Brown, 1997 72,000 0 (1) 0 195,000 0 762(2)
Chairman of the Board 1996 72,000 0 (1) 0 0 0 0
of Directors and Chief 1995 72,000 0 (1) 0 0 0 0
Executive Officer
Joe G. Roper, 1997 156,251 0 (1) 0 100,000 0 12,902(3)
President and Director 1996 150,615 0 (1) 0 0 0 244,808(3)
1995 150,398 0 (1) 0 0 0 234,146(3)
_________________
</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) Such amount was allocated to Mr. Brown's account under the
Company's 401(k) Profit Sharing Plan.
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<PAGE> 9
(3) Such amount includes (i) $1,587 allocated to Mr. Roper's
account under the Company's 401(k) profit sharing plan for
the fiscal year ended March 31, 1997, and $1,152 allocated to
his account in 1996; (ii) insurance premiums paid by the
Company in the amounts of $11,315, $38,896 and $29,386 for
the years ended March 31, 1997, 1996 and 1995, respectively,
for a whole life insurance policy on the life of Mr. Roper; and
(iii) for each of fiscal years 1996 and 1995, $204,760 for
premiums under a split-dollar life insurance plan maintained
by the Company on behalf of Mr. Roper, of which $17,697 and
$16,868 was attributable to term life insurance for the fiscal
years ended March 31, 1996 and 1995, respectively. During
fiscal year 1997, and without having paid any premiums for the
split-dollar life insurance policy during such fiscal year, the
Company terminated both the whole life insurance policy and
the split-dollar agreement. During the years ended March 31,
1996 and 1995, and pursuant to the terms of the split-dollar
agreement, the Company borrowed the aggregate amounts of
$339,855 and $316,655, 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 was paid annually by the Company. At March 31,
1996 and 1995, the outstanding loan balances were $3,174,386 and
$2,834,530, respectively. The interest expense paid by the
Company for the fiscal years ended March 31, 1996 and 1995 was
$91,412 and $89,309, respectively. A portion of the death
benefit of the split-dollar policy equal to the Company's net
premium outlay was payable to the Company upon the death of
Mr. Roper, and the aggregate loan amount was deducted from the
insurance proceeds payable to the beneficiaries of the policy.
The balance of the proceeds were payable to Mr. Roper's
beneficiaries. The Company was not the beneficiary of either
insurance policy.
Stock Options
The Company has in the past utilized stock options as part of its
overall compensation of Directors, officers and employees. Narrative
descriptions of the Company's stock option plans and outstanding stock
options are set forth below under "1984 Stock Option Plan" and "1994
Stock Option Plan".
The table below sets forth certain information with respect to
stock options granted to the named executive officers during the fiscal
year ended March 31, 1997.
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<PAGE> 10
<TABLE>
<CAPTION>
Option/SAR Grants in Last Fiscal Year
Individual Grants
----------------------------------------------------- Potential Realizable
Number of Percent of Value at Assumed
Securities Total Options Exercise Annual Rates of Stock
Underlying Granted to or Base Price Appreciation for
Options Employees in Price Expiration Option Term(1)
Name Granted(#) Fiscal Year ($/Sh) Date 5%($) 10%($)
---- ---------- ----------- -------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
T. C. Brown 195,000(2) 42% 7.75 9-3-06 952,088 2,402,888
J. G. Roper 100,000(2) 22% 7.75 9-3-06 488,250 1,232,250
___________________
</TABLE>
(1) These amounts are calculated based on the indicated annual rates of
appreciation and annual compounding from the date of grant to the
end of the option term. Actual gains, if any, on stock option
exercises are dependent on the future performance of the Common
Stock and overall stock market conditions. There is no assurance
that the amounts reflected in this table will be achieved.
(2) Nonqualified stock options to purchase 195,000 and 100,000 shares of
Common Stock were granted to Mr. Brown and Mr. Roper, respectively,
on September 3, 1996 pursuant to the Company's 1994 Stock Option
Plan. The options were granted at an exercise price equal to the
fair market value of the Company's Common Stock on the date of grant.
The options became exercisable on May 1, 1997.
The following table sets forth certain information with respect to
stock option exercises during the fiscal year ended March 31, 1997 by the
named executive officers of the Company, and the value of each such
officer's unexercised stock options at March 31, 1997.
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<PAGE> 11
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 142,500 1,413,750 319,500 195,000 3,674,250 780,000
J. G. Roper 186,700 1,549,700 71,250 123,750 1,169,012 600,687
_________
</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 last sale 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 last sale
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 employees. 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 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, 1997, 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, 1997, the Company made cash contributions in the total
amount of $21,974 to the Profit Sharing Plan on behalf of participating
employees, of which $1,587 was allocated to the account of Mr. Roper
and $762 was allocated to Mr. Brown's account.
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<PAGE> 12
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, 1997.
Directors who are employees of the Company are eligible to
participate in the Company's stock option plans and 401(k) profit
sharing plan, but do not receive compensation for service on the Board
of Directors. Non-employee Directors of the Company are not eligible
to participate in the Company's benefit plans and do not receive
retainer fees or other compensation for their services.
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 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
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<PAGE> 13
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.
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.
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 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.
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<PAGE> 14
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 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, 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.
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<PAGE> 15
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 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
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<PAGE> 16
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 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, 1997, TBI charged the Company approximately $71,400 for such
services provided by TBI, of which approximately $14,900 was outstanding
and unpaid at March 31, 1997.
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, 1997, TBI billed the
Company approximately $49,400 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, 1997 for its share of drilling
costs and related expenses and for services provided by TBI was
approximately $14,700, and at March 31, 1997 the Company owed TBI
approximately $9,700 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 1998 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 31, 1998.
OTHER MATTERS
The Board of Directors of the Company knows of no matters,
other than those described above, which are to be presented for
shareholder action at the meeting. There will be an address by the
Chairman of the Board and a general discussion period during which
shareholders will have an opportunity to ask questions about the
Company's business. If any matter not described herein properly comes
before the meeting, or any adjournment thereof, the persons named in the
enclosed Proxy will, in the absence of instructions to the contrary,
vote the Proxy in accordance with their best judgment.
The 1997 Annual Report to Shareholders, which includes the
Company's Annual Report on Form 10-K for the year ended March 31, 1997,
including audited financial statements, is enclosed 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, 1997, 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, 1997.
BY ORDER OF THE BOARD OF DIRECTORS
James M. Alsup
Secretary
Midland, Texas
July 28, 1997
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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, 1997, at the Annual Meeting of Shareholders of TMBR/SHARP
DRILLING, INC. to be held on August 29, 1997, 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
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<PAGE> 19
[Back of Card]
Please date, sign and mail your proxy card back as soon as possible!
Annual Meeting of Shareholders
TMBR/Sharp Drilling, Inc.
August 29, 1997
Please detach and mail in the envelope provided
-----------------------------------------------
Please mark your
/ X / votes as in this
example.
WITHHOLD Nominees: Thomas C. Brown
FOR all nominees AUTHORITY Donald L. Evans
listed at right to vote for all David N. Fitzgerald
nominees listed Joe G. Roper
at right
/ / 1. Election of / /
Directors
* 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
SHAREHOLDER'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 OTHER MATTERS 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.
SIGNATURE_______________ DATE__________ SIGNATURE_____________ DATE____________
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.
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