<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 10-Q
____________________
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1997
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-12757
TMBR/SHARP DRILLING, INC.
(Exact name of registrant as specified in its charter)
TEXAS 75-1835108
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4607 WEST INDUSTRIAL BLVD.
MIDLAND, TEXAS 79703
(Address of principal executive offices) (Zip Code)
Registrant's telephone number (area code) (915) 699-5050
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Common Stock, $.10 Par Value Outstanding at February 9, 1998
(Title of Class) 4,708,886
<PAGE> 2
TMBR/SHARP DRILLING, INC.
FORM 10-Q REPORT
INDEX
Page No.
Part I. Financial Information (Unaudited)
Item 1. Financial Statements
Balance Sheets, December 31, 1997 and
March 31, 1997 . . . . . . . . . . . . . . . . . . . . 3
Statements of Operations, Three Months
Ended December 31, 1997 and 1996 . . . . . . . . . . . 5
Statements of Operations, Nine Months
Ended December 31, 1997 and 1996 . . . . . . . . . . . 7
Statements of Stockholders'
Equity . . . . . . . . . . . . . . . . . . . . . . . 9
Statements of Cash Flows, Nine Months
Ended December 31, 1997 and 1996 . . . . . . . . . . . 10
Notes to Financial Statements . . . . . . . . . . . . . 11
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . 15
Part II. Other Information
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . 17
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . 19
<PAGE> 3
PART ONE - FINANCIAL INFORMATION (UNAUDITED)
Item 1. FINANCIAL STATEMENTS
TMBR/SHARP DRILLING, INC.
BALANCE SHEETS
December 31, 1997 (Unaudited) and March 31, 1997
(In thousands, except per share data)
December 31,
1997 March 31,
ASSETS (Unaudited) 1997
------ ------------- -----------
Current assets:
Cash and cash equivalents $ 1,697 $ 1,048
Marketable securities 87 87
Trade receivables,
net of allowance for doubtful
accounts of $1,135 at both
December 31, and March 31, 1997 9,733 6,218
Inventories 49 74
Deposits 104 73
Other 273 560
-------- --------
Total current assets 11,943 8,060
-------- --------
Property and equipment, at cost:
Drilling equipment 47,352 42,690
Oil and gas properties, based on
successful efforts accounting 15,185 13,102
Other property and equipment 3,782 3,584
-------- --------
66,319 59,376
Less accumulated depreciation,
depletion and amortization (50,246) (47,851)
-------- --------
Net property and equipment 16,073 11,525
-------- --------
Other assets 174 176
-------- --------
Total assets $ 28,190 $ 19,761
======== ========
See accompanying notes to financial statements.
-3-
<PAGE> 4
TMBR/SHARP DRILLING, INC.
BALANCE SHEETS
December 31, 1997 (Unaudited) and March 31, 1997
(In thousands, except per share data)
December 31,
1997 March 31,
LIABILITIES AND STOCKHOLDERS' EQUITY (Unaudited) 1997
------------------------------------ ------------ -----------
Current liabilities:
Trade payables $ 4,440 $ 2,739
Accrued workers' compensation 531 1,245
Other 1,003 1,405
-------- --------
Total current liabilities 5,974 5,389
-------- --------
Contingencies
Stockholders' equity:
Common stock, $0.10 par value
Authorized, 50,000,000 shares;
issued, 5,977,625 and 5,696,825
shares at December 31, and
March 31, 1997, respectively 598 570
Additional paid-in capital 69,412 68,413
Accumulated deficit (47,644) (54,461)
Treasury stock-common, 1,268,739
shares at December 31, and
March 31, 1997, at cost (150) (150)
-------- --------
Total stockholders' equity 22,216 14,372
-------- --------
Total liabilities and
stockholders' equity $ 28,190 $ 19,761
======== ========
See accompanying notes to financial statements.
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<PAGE> 5
TMBR/SHARP DRILLING, INC.
STATEMENTS OF OPERATIONS
Three months ended December 31, 1997 and 1996 (Unaudited)
(In thousands, except per share data)
Three months ended
December 31,
-----------------------------
1997 1996
----------- -----------
Revenues:
Contract drilling $ 8,914 $ 5,051
Oil and gas 566 494
----------- -----------
Total revenues 9,480 5,545
----------- -----------
Operating costs and expenses:
Contract drilling 5,907 3,792
Oil and gas production 274 136
Dry holes and abandonments 282 105
Depreciation, depletion and
amortization 1,033 463
General and administrative 482 382
----------- -----------
Total operating costs
and expenses 7,978 4,878
----------- -----------
Operating income 1,502 667
----------- -----------
Other income (expense):
Interest 43 (95)
Gain on sales of assets 95 --
Other, net 39 7
----------- -----------
Total other income (expense) 177 (88)
----------- -----------
Net income before income
tax provision 1,679 579
Provision for income taxes (30) (16)
----------- -----------
Net income $ 1,649 $ 563
=========== ===========
See accompanying notes to financial statements.
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<PAGE> 6
TMBR/SHARP DRILLING, INC.
STATEMENTS OF OPERATIONS
Three months ended December 31 1997 and 1996 (Unaudited)
(In thousands, except per share data)
Three months ended
December 31,
-----------------------------
1997 1996
----------- -----------
Net income per share
of common stock:
Basic $ .35 $ .16
Diluted .32 .14
=========== ===========
Weighted average number of
common shares outstanding:
Basic 4,704,065 3,554,409
Diluted 5,229,999 4,144,592
=========== ===========
See accompanying notes to financial statements.
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<PAGE> 7
TMBR/SHARP DRILLING, INC.
STATEMENTS OF OPERATIONS
Nine months ended December 31, 1997 and 1996 (Unaudited)
(In thousands, except per share data)
Nine months ended
December 31,
-----------------------------
1997 1996
----------- -----------
Revenues:
Contract drilling $ 27,368 $ 11,820
Oil and gas 1,519 1,439
----------- -----------
Total revenues 28,887 13,259
----------- -----------
Operating costs and expenses:
Contract drilling 17,930 9,052
Oil and gas production 689 589
Dry holes and abandonments 415 442
Depreciation, depletion and
amortization 2,744 1,071
General and administrative 1,428 1,143
----------- -----------
Total operating costs
and expenses 23,206 12,297
----------- -----------
Operating income 5,681 962
----------- -----------
Other income (expense):
Interest 110 (236)
Gain on sales of assets 179 65
Other, net 987 29
----------- -----------
Total other income (expense) 1,276 (142)
----------- -----------
Net income before income
tax provision 6,957 820
Provision for income taxes (140) (16)
----------- -----------
Net income $ 6,817 $ 804
=========== ===========
See accompanying notes to financial statements.
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<PAGE> 8
TMBR/SHARP DRILLING, INC.
STATEMENTS OF OPERATIONS
Nine months ended December 31, 1997 and 1996 (Unaudited)
(In thousands, except per share data)
Nine months ended
December 31,
-----------------------------
1997 1996
----------- -----------
Net income per share
of common stock:
Basic $ 1.49 $ .23
Diluted 1.35 .20
=========== ===========
Weighted average number of
common shares outstanding:
Basic 4,584,125 3,453,693
Diluted 5,042,417 3,962,298
=========== ===========
See accompanying notes to financial statements.
-8-
<PAGE> 9
TMBR/SHARP DRILLING, INC.
STATEMENTS OF STOCKHOLDERS EQUITY
Nine Months Ended December 31, 1997 (Unaudited) and
Year Ended March 31, 1997
(In thousands)
<TABLE>
<CAPTION>
Treasury Stock
--------------
Common Stock Additional Common Stock Total
-------------- Paid-In Accumulated -------------- Stockholders'
Shares Amount Capital Deficit Shares Amount Equity
------ ------ ------- ----------- ------- ------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance,
March 31, 1997 5,697 $ 570 $ 68,413 $(54,461) 1,270 $(150) $ 14,372
Exercise of
stock options 281 28 999 -- -- -- 1,027
Net income -- -- -- 6,817 -- -- 6,817
----- ----- ------- -------- ----- ----- -------
Balance,
December 31,
1997 5,978 $ 598 $ 69,412 $(47,644) 1,270 $(150) $ 22,216
===== ===== ======= ======== ===== ===== =======
</TABLE>
See accompanying notes to financial statements.
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<PAGE> 10
TMBR/SHARP DRILLING, INC.
STATEMENTS OF CASH FLOWS
For the nine months ended December 31, 1997 and 1996 (Unaudited)
(In thousands)
Nine months ended December 31,
------------------------------
1997 1996
--------- ---------
Cash flows from operating activities:
Net income $ 6,817 $ 804
Adjustments to reconcile net income
to net cash provided (required) by
operating activities:
Depreciation, depletion and
amortization 2,744 1,071
Dry holes and abandonments 415 442
Gain on sales of assets (179) (65)
Changes in assets and liabilities:
Trade receivables (3,515) (595)
Deposits (31) 350
Inventories and other assets 350 231
Trade payables 1,701 (900)
Accrued interest and other liabilities (1,116) (197)
-------- --------
Total adjustments 369 337
-------- --------
Net cash provided by
operating activities 7,186 1,141
Cash flows from investing activities:
Additions to property and equipment (7,826) (4,339)
Proceeds from sales of property and
equipment 262 102
-------- --------
Net cash required by
investing activities (7,564) (4,237)
Cash flows from financing activities:
Issuance of common stock 1,027 88
Loans from bank -- 3,200
-------- --------
Net cash provided by
financing activities 1,027 3,288
-------- --------
Net increase (decrease) in
cash and cash equivalents 649 192
Cash and cash equivalents at beginning
of period 1,048 339
-------- --------
Cash and cash equivalents at end of
period $ 1,697 $ 531
======== ========
See accompanying notes to financial statements.
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<PAGE> 11
TMBR/SHARP DRILLING, INC.
NOTES TO FINANCIAL STATEMENTS
The amounts presented in the balance sheet as of March 31, 1997 were
derived from the Company's audited financial statements included in its
Form 10-K Report filed for the year then ended. The notes to such
statements are incorporated herein by reference.
(1) Management's Representation
In the opinion of management, the accompanying unaudited financial
statements contain all adjustments (all of which are of a normal recurring
nature) necessary to present fairly the Company's financial position as of
December 31, 1997 and March 31, 1997, the results of operations for the
three and nine months ended December 31, 1997 and 1996, and the cash flows
for the nine month periods ended December 31, 1997 and 1996.
While the Company believes that the disclosures presented are adequate
to make the information not misleading, it is suggested that these
condensed financial statements be read in conjunction with the financial
statements and the related notes in the Company's Annual Report on Form 10-
K for the fiscal year ended March 31, 1997.
(2) Summary of Significant Accounting Policies
Marketable Securities
The Company's marketable securities are classified as available-for-
sale securities and are to be reported at market value, with unrealized
gains and losses, net of income taxes, excluded from earnings and reported
as a separate component of stockholders' equity. The market value of these
securities at December 31, 1997 was not materially different from the
historical cost, and therefore, no unrealized gains or losses have been
recorded.
Inventories
Inventories consist primarily of casing and tubing. The Company
values its inventories at the lower of cost or estimated net recoverable
value using the specific identification method.
Property and Equipment
Drilling equipment is depreciated on a units-of-production method
based on the monthly utilization of the equipment. Drilling equipment
which is not utilized during a month is depreciated using a minimum
utilization rate of approximately twenty-five percent. Estimated useful
lives range from four to eight years. Other property and equipment is
depreciated using the straight-line method of depreciation with estimated
useful lives of three to seven years.
Oil and gas properties are accounted for using the successful efforts
method. Accordingly, the costs incurred to acquire property (proved and
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<PAGE> 12
unproved), all development costs and successful exploratory costs are
capitalized, whereas the costs of unsuccessful exploratory wells are
expensed. Geological and geophysical costs, including seismic costs, are
charged to expense when incurred. In cases where the Company provides
contract drilling services related to oil and gas properties in which it
has an ownership interest, the Company's proportionate share of costs
related to these properties is capitalized as stated above, net of the
Company's working interest share of profits from the related drilling
contracts. Capitalized costs of undeveloped properties, which are not
depleted until proved reserves can be associated with the properties, are
periodically reviewed for possible impairment.
Depletion, depreciation and amortization of capitalized oil and gas
property costs was provided using the units-of-production method based on
estimated proved or proved developed oil and gas reserves, as applicable,
of the respective property units.
Major renewals and betterments are capitalized in the appropriate
property accounts while the cost of repairs and maintenance is charged to
operating expense in the period incurred. For assets sold or otherwise
retired, the cost and related accumulated depreciation amounts are removed
from the accounts and any resulting gain or loss is recognized.
Net Income Per Common Share
In December, 1997, the Company adopted Statement of Financial
Accounting Standards No. 128 ("SFAS 128") "Earnings Per Share" which
superseded Accounting Principles Board Opinion No. 15 ("APB 15") "Earnings
Per Share". SFAS 128 simplifies earnings per share ("EPS") calculations by
replacing previously reported primary EPS with what is called basic EPS
which is calculated by dividing reported earnings available to common
shareholders by the weighted average shares outstanding. No dilution for
potentially dilutive securities is included in basic EPS. Previously
reported fully diluted EPS is called diluted EPS which will include all
potentially dilutive securities.
(3) Stockholders' Equity
1984 Stock Option Plan
In August of 1984, the Company adopted the 1984 Stock Option Plan (the
"Plan") which initially authorized 375,000 shares of the Company's common
stock to be issued as either incentive stock options or nonqualified stock
options. This Plan was amended in August 1986 to increase the authorized
shares to 475,000 shares of the Company's common stock. In January 1988,
the Plan was amended to reduce the option price on certain options issued
prior to March 31, 1986, to reflect the then current fair market value of
the Company's common stock. The Plan provides that options may be granted
to key employees or directors for various terms at a price not less than
the fair market value of the shares on the date of the grant. Options to
purchase 100,000 shares of common stock are currently outstanding under the
Plan. All of these options are earned and exercisable at December 31,
1997. No additional shares are available for grant as the Plan expired by
its own terms in August 1994. The options that were granted prior to the
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<PAGE> 13
expiration of the Plan, and which are outstanding, remain subject to the
terms of the Plan.
1994 Stock Option Plan
In July 1994, the Company adopted its 1994 Stock Option Plan (the
"1994 Plan") which authorized the grant of options to purchase up to
750,000 shares of the Company's common stock. These options may be issued
as either incentive or nonqualified stock options. The 1994 Plan provides
that options may be granted to key employees or directors for various terms
at a price not less than the fair market value of the shares on the date of
grant. The 1994 Plan was ratified and approved by the stockholders at the
Company's annual meeting of stockholders held on August 30, 1994.
On September 3, 1996, the Company granted 465,000 shares of
nonqualified stock options to key employees under the 1994 Plan. The
following sets forth certain information concerning these nonqualified
options.
Number Option Price
of -------------------
Shares Per Share Total
------ -------------------
Outstanding March 31, 1997 465,000 $7.75 $3,603,750
Exercised 125,500 $7.75 $ 972,625
------- ---- ---------
Outstanding December 31,
1997 339,500 $7.75 $2,631,125
======= ==== =========
All of the nonqualified stock options granted on September 3, 1996 are
earned and exercisable as of May 1, 1997.
(4) Employee Benefits
Effective May 1, 1995, the Company established the TMBR/Sharp
Drilling, Inc. Employee Retirement Plan which is a 401(K) profit sharing
plan. Company contributions are discretionary and have been currently set
at 25% for each dollar contributed by each eligible employee, limited,
however, to a maximum of 5% of the employee's compensation.
(5) Contingencies
In March 1992, the Company was notified by the Texas Department of
Insurance that the Company's former workers' compensation insurance
carriers, Sir Lloyd's Insurance Company and its affiliate, Standard
Financial Indemnity Corporation ("SFIC"), had been placed in liquidation by
order of the 201st District Court of Travis County, Texas on March 12, 1992
in Cause No. 92-12765, The State of Texas vs. Sir Lloyd's Insurance Company
and Sir Insurance Agency, Inc., and in Cause No. 91-12766, The State of
Texas vs. Standard Financial Indemnity Corporation. Approximately two
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<PAGE> 14
months before being ordered into liquidation, SFIC requested that the
Company pay policy premiums in the amount of $646,476. On July 22, 1993
the special deputy receiver of SFIC billed the Company approximately
$1,061,000 for retrospective premiums, but adjusted the amount to $854,153
on January 12, 1994.
In November, 1995, the Company was notified that a lawsuit had been
filed in Travis County, Texas styled Texas Property and Casualty Insurance
Guaranty Association vs. TMBR/Sharp Drilling, Inc. (Cause No. 95-12318).
The Texas Property and Casualty Insurance Guaranty Association ("Guaranty
Association") was seeking a recovery of past workers' compensation claims
advanced by the Guaranty Association related to the Company's workers
compensation insurance program with SFIC. The Guaranty Association was
seeking to recover a total of $803,057.11.
On September 9, 1997, the Company entered into a settlement agreement
with the Guaranty Association. The Company agreed to pay to the Guaranty
Association the sum of $375,000 in full satisfaction of any liability
relating to the Company's workers compensation insurance program with SFIC
and Sir Lloyd's Insurance Company and the lawsuit brought by the Guaranty
Association. The Company originally accrued $854,153 relating to the
Guaranty Association's claim for reimbursement. As a result of the
settlement, the Company has eliminated the accrual of $854,153 and the
difference between the accrued amount and the settlement amount ($479,153)
has been recognized as miscellaneous income in the Company's financial
statements.
In addition, the Company has entered into a settlement agreement with
the insurance agent that represented the Company at the time the workers
compensation insurance policies were purchased from Sir Lloyd's and SFIC.
The agent has paid the Company the sum of $180,000 in full settlement of
all claims and liabilities relating to SFIC and Sir Lloyd's Insurance
Company. This amount has been recognized as miscellaneous income in the
Company's financial statements.
The Company provides for its workers' compensation claims based upon
the most recent information available from its insurance carrier concerning
claims and estimated costs. However, in future years the Company may
receive retroactive adjustments, both favorable and unfavorable, related to
estimates of claim costs for previous years, which may be material to the
Company's results of operations. No provision for retroactive adjustments
to claim costs is recorded until the Company receives notification from its
insurance carrier because this amount, if any, cannot be estimated. For
claims incurred November 1993 to September 1997, the Company is generally
responsible for the first $10,000 ($100,000 prior to November 1993) in
claim costs for each workers' compensation injury. Currently the Company
is covered by a fully insured workers compensation policy.
The Company is a defendant in various lawsuits generally incidental to
its business. The Company does not believe that the ultimate resolution of
such litigation will have a significant effect on the Company's financial
position or results of operations.
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<PAGE> 15
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
In addition to historical information, this discussion contains
certain forward-looking statements that involve risks and uncertainties
about the business, long-term strategy, financial condition and future of
the Company. Factors that may affect future results are included in the
discussion below and in Part I, Items 1 and 2 of the Company's Form 10-K
for the year ended March 31, 1997. Actual results could differ materially
from those forward-looking statements.
Results of Operations
Total revenues were $9,480,000 and $28,887,000 for the three and nine
months ended December 31, 1997 which represents a 71% and 118% increase
over the same periods in 1996. Operating expenses as a percent of revenues
were 84% and 80% for the three and nine months ended December 31, 1997
versus 88% and 93% for the same periods of the prior year. The operating
results were positively affected by an increase in rig utilization rates,
coupled with an increase in the prices received for contract drilling
services. The Company has experienced an increase in demand for its
contract drilling services which has positively impacted the rig
utilization rates. Rig utilization rates were 81% and 79% for the three
and nine months ended December 31, 1997 compared to 58% and 45% in the same
periods in 1996.
Oil and gas revenues increased by approximately 15% and 6% for the
three and nine months ended December 31, 1997 compared to the same periods
in 1996. Oil and gas production expenses increased 101% and 17% for the
three and nine months ended December 31, 1997 when compared to the three
and nine months ended December 31, 1996. The increase in production
expenses for the quarter ended December 31, 1997 can be attributed to
workover expenses on existing wells. General and administrative expense
increased due to an increase in payroll costs and an increase in payroll
related taxes in connection with the exercise of stock options.
During the first quarter of this fiscal year, the Company completed
the assembly of an additional drilling rig from its inventory of rig
components. This U-15 Unit rig is capable of drilling to a depth of
approximately 8,500 feet. The addition of this drilling rig brings the
Company's available fleet to 16 rigs. Depreciation, depletion and
amortization expense has increased due to the addition of the U-15 Unit
drilling rig, drill pipe and miscellaneous drilling equipment along with an
increase in the number of producing wells in which the Company has an
ownership interest.
Miscellaneous income consists of approximately $659,000 which was
recorded as the result of the settlement of a lawsuit. (See Liquidity and
Capital Resources.) In addition, approximately $236,000 of miscellaneous
income was recognized in relation to the sale of junk drill bits.
Net working capital was $6.0 million at December 31, 1997 compared to
$2.7 million at March 31, 1997. The increase in working capital can be
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<PAGE> 16
attributed to an increase in cash and cash equivalents and accounts
receivable due to increased drilling activity.
Liquidity and Capital Resources
In January 1996, the Company entered into a loan agreement with its
bank lender providing for a revolving credit facility (the "Credit
Facility") maturing on January 15, 1998. The aggregate principal amount of
the Company's borrowings outstanding at any one time under the revolving
facility are limited to the lesser of $3.0 million or one-third of the
borrowing base amount then in effect. The borrowing base amount is
redetermined by the bank monthly. The Credit Facility was established to
finance the Company's purchases of drill pipe and oil and gas exploration
activities. Interest only is payable monthly and the entire principal
amount is due and payable on January 15, 1998. The Credit Facility bears
interest at the bank's base rate and is secured by substantially all of the
Company's accounts receivable, drilling rigs and related equipment. At
December 31, 1997, there were no amounts outstanding under the Credit
Facility.
In August 1996, the Company entered into a second loan agreement with
its bank lender. This second loan agreement provides for a $2.0 million
revolving line of credit (the "Line of Credit") secured by substantially
all of the Company's producing oil and gas properties. The Line of Credit
was established to finance the Company's oil and gas exploration activities
and for general corporate purposes. The Line of Credit bears interest at
the bank's base rate and interest only is payable monthly. The Line of
Credit matures on February 15, 1998, at which time the principal amount
then outstanding is due and payable, plus any accrued and unpaid interest.
At December 31, 1997, no amounts were outstanding under the Line of Credit.
The Company intends to meet its fiscal 1998 cash flow requirements
through cash flow provided from operations and, if needed, additional
borrowings under the Credit Facility and Line of Credit. As described in
"Item 1 - Legal Proceedings", the Company was a defendant in a lawsuit
filed against it by Texas Property and Casualty Insurance Guaranty
Association which had resulted in the Company's accrual of approximately
$854,000 for a contingent liability. On September 9, 1997, the Company
entered into a settlement agreement with the Guaranty Association. The
Company agreed to pay to the Guaranty Association the sum of $375,000 in
full satisfaction of any liability relating to the Company's workers
compensation programs with SFIC and Sir Lloyd's Insurance Company and the
lawsuit brought by the Guaranty Association. As a result of the
settlement, the Company recognized approximately $479,000 as miscellaneous
income during the quarter ended September 30, 1997.
In addition, the Company has entered into a settlement agreement with
the insurance agent that represented the Company at the time the workers
compensation insurance policies were purchased from Sir Lloyd's and SFIC.
The agent has paid the Company the sum of $180,000 in full settlement of
all claims and liabilities relating to SFIC and Sir Lloyd's Insurance
Company. This amount was recognized as miscellaneous income in the quarter
ended September 30, 1997.
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<PAGE> 17
Trends and Prices
Although the domestic onshore contract drilling business is currently
experiencing increased demand for drilling services, primarily due to
stronger oil and gas prices and technological advances, the market for
onshore contract drilling services has generally been depressed since 1982,
when oil and gas prices began to weaken. The Company cannot predict either
the future level of demand for its contract drilling services or future
conditions in the contract drilling industry.
The contract drilling industry is experiencing a shortage of qualified
drilling rig personnel. The continued growth and expansion of the Company
will depend upon, among other factors, the successful retention of skilled
and qualified drilling rig personnel. If the Company is unable to attract
and retain additional qualified personnel, its ability to market and
operate more drilling rigs and expand its operations will continue to be
restricted.
In recent years, oil and gas prices have been extremely volatile.
Prices for oil and gas are affected by market supply and demand factors as
well as actions of state and local agencies, the U. S. and foreign
governments and international cartels. The Company has no way of
accurately predicting the supply and demand for oil and gas, domestic or
worldwide political events or the effects of any such factors on the prices
received by the Company for its oil and gas.
PART TWO - OTHER INFORMATION
Item 1. Legal Proceedings
In March 1992, the Company was notified by the Texas Department of
Insurance that the Company's former workers' compensation insurance
carriers, Sir Lloyd's Insurance Company and its affiliate, Standard
Financial Indemnity Corporation ("SFIC"), had been placed in liquidation by
order of the 201st District Court of Travis County, Texas on March 12, 1992
in Cause No. 92-12765, The State of Texas vs. Sir Lloyd's Insurance Company
and Sir Insurance Agency, Inc., and in Cause No. 91-12766, The State of
Texas vs. Standard Financial Indemnity Corporation. Approximately two
months before being ordered into liquidation, SFIC requested that the
Company pay policy premiums in the amount of $646,476. On July 22, 1993
the special deputy receiver of SFIC billed the Company approximately
$1,061,000 for retrospective premiums, but adjusted the amount to $854,153
on January 12, 1994.
In November, 1995, the Company was notified that a lawsuit had been
filed in Travis County, Texas styled Texas Property and Casualty Insurance
Guaranty Association vs. TMBR/Sharp Drilling, Inc. (Cause No. 95-12318).
The Texas Property and Casualty Insurance Guaranty Association ("Guaranty
Association") was seeking a recovery of past workers' compensation claims
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<PAGE> 18
advanced by the Guaranty Association related to the Company's workers
compensation insurance program with SFIC. The Guaranty Association was
seeking to recover a total of $803,057.11.
On September 9, 1997, the Company entered into a settlement agreement
with the Guaranty Association. The Company agreed to pay to the Guaranty
Association the sum of $375,000 in full satisfaction of any liability
relating to the Company's workers compensation insurance program with SFIC
and Sir Lloyd's Insurance Company and the lawsuit brought by the Guaranty
Association. The Company originally accrued $854,153 relating to the
Guaranty Association's claim for reimbursement. As a result of the
settlement, the Company has eliminated the accrual of $854,153 and the
difference between the accrued amount and the settlement amount ($479,153)
has been recognized as miscellaneous income in the Company's financial
statements.
In addition, the Company has entered into a settlement agreement with
the insurance agent that represented the Company at the time the workers
compensation insurance policies were purchased from Sir Lloyd's and SFIC.
The agent has paid the Company the sum of $180,000 in full settlement of
all claims and liabilities relating to SFIC and Sir Lloyd's Insurance
Company. This amount has been recognized as miscellaneous income in the
Company's financial statements.
The Company provides for its workers' compensation claims based upon
the most recent information available from its insurance carrier concerning
claims and estimated costs. However, in future years the Company may
receive retroactive adjustments, both favorable and unfavorable, related to
estimates of claim costs for previous years, which may be material to the
Company's results of operations. No provision for retroactive adjustments
to claim costs is recorded until the Company receives notification from its
insurance carrier because this amount, if any, cannot be estimated. For
claims incurred November 1993 to September 1997, the Company is generally
responsible for the first $10,000 ($100,000 prior to November 1993) in
claim costs for each workers' compensation injury. Currently the Company
is covered by a fully insured workers compensation policy.
The Company is a defendant in various lawsuits generally incidental to
its business. The Company does not believe that the ultimate resolution of
such litigation will have a significant effect on the Company's financial
position or results of operations.
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<PAGE> 19
Item 6. Exhibits and reports on Form 8-K.
(a) Exhibits:
10.01 - Bonus Agreement dated October 2, 1997, between Joe G.
Roper and the Registrant.
10.02 - Bonus Agreement dated October 2, 1997, between Thomas C.
Brown and the Registrant.
10.03 - Bonus Agreement dated October 3, 1997, between David N.
Fitzgerald and the Registrant.
10.04 - Bonus Agreement dated October 3, 1997, between Donald L.
Evans and the Registrant.
10.05 - Bonus Agreement dated October 2, 1997, between Patricia
R. Elledge and the Registrant.
10.06 - Bonus Agreement dated October 2, 1997, between Don H.
Lawson and the Registrant.
10.07 - Bonus Agreement dated October 2, 1997, between Jeffrey D.
Phillips and the Registrant.
10.08 - Form of Key Employee Bonus Agreement dated October 3,
1997, between nine Key Employees and the Registrant
10.09 - Form of Bonus Agreement dated October 3, 1997, between
three Superintendents and the Registrant.
10.10 - Form of Bonus Agreement dated October 3, 1997, between
thirty Toolpushers and the Registrant.
27 - Financial Data Schedule
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the quarter ended
December 31, 1997.
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<PAGE> 20
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
TMBR/SHARP DRILLING, INC.
February 11, 1998 By: /s/ Patricia R. Elledge
----------------- -------------------------
Date Patricia R. Elledge
Controller/Treasurer
(Ms. Elledge is the Chief Financial
Officer and has been duly authorized
to sign on behalf of the Registrant)
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<PAGE> 21
Exhibit Index
Exhibit Page
Number Description Number
------- ----------- -------
10.01 - Bonus Agreement dated October 2, 1997, between 22
Joe G. Roper and the Registrant.
10.02 - Bonus Agreement dated October 2, 1997, between 28
Thomas C. Brown and the Registrant.
10.03 - Bonus Agreement dated October 3, 1997, between 34
David N. Fitzgerald and the Registrant.
10.04 - Bonus Agreement dated October 3, 1997, between 39
Donald L. Evans and the Registrant.
10.05 - Bonus Agreement dated October 2, 1997, between 44
Patricia R. Elledge and the Registrant.
10.06 - Bonus Agreement dated October 2, 1997, between 50
Don H. Lawson and the Registrant.
10.07 - Bonus Agreement dated October 2, 1997, between 56
Jeffrey D. Phillips and the Registrant.
10.08 - Form of Key Employee Bonus Agreement dated 62
October 3, 1997, between nine Key Employees
and the Registrant.
10.09 - Form of Bonus Agreement dated October 3, 1997, 69
between three Superintendents and the
Registrant.
10.10 - Form of Bonus Agreement dated October 3, 1997, 75
between thirty Toolpushers and the Registrant.
27 - Financial Data Schedule 82
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<PAGE> 22
Exhibit 10.1
TMBR/SHARP DRILLING, INC.
BONUS AGREEMENT
FOR OFFICERS AND SUPERINTENDENTS
Agreement (the Agreement ), dated as of October 2, 1997 between
TMBR/SHARP DRILLING, INC., a Texas corporation (the "Company"), and JOE G.
ROPER ( Employee ).
RECITATIONS
The Company may seek to sell a significant portions of the operating
assets of the Company (an Asset Acquisition" as defined in Section 1(a)
hereof) to another Person (as defined in Section 1(e) hereof) or the
Company may enter into a transaction which could involve a Change in
Control (as defined in Section 1(c) hereof) or the Company may otherwise
become subject to a proposed or threatened Change in Control; and
The Board of Directors of the Company (the Board ) has determined
that it is imperative that the Company and the Board be able to rely upon
the Employee to continue in the Employee s position as President of the
Company, and that the Company be able to receive and rely upon the
Employee's services and advice, if requested, as to the best interests of
the Company and its shareholders without concern that the Employee might be
distracted by the personal uncertainties and risks created by any such
proposed Asset Acquisition or Change in Control;
The Board has authorized the Company to enter into a bonus agreement
in the form hereof with the Employee;
NOW, THEREFORE, to assure the Company that it will have the continued
dedication of the Employee and the availability of the Employee's services,
advice and counsel notwithstanding the anticipated consummation of any
transactions contemplated by an Asset Acquisition or the possibility,
threat or occurrence of a Change of Control, and to induce the Employee to
remain in the employ of the Company, and for other good and valuable
consideration, the Company and the Employee agree as follows:
-22-
<PAGE> 23
1. Certain Definitions. For purposes of this Agreement:
(a) an Asset Acquisition" shall be deemed to have occurred if
any Person, or a group or groups of related or unrelated Persons
acquires more than fifty-one percent (51%) in value of the assets of
the Company pursuant to one or more transactions with the Company
during the term of this Agreement.
(b) "Beneficial Owner" shall have the meaning set forth in Rules
13d-3 and 13d-5 under the Securities Exchange Act of 1934, as in
effect on September 1, 1997.
(c) a "Change in Control" shall be deemed to have occurred if
(i) any Person is or becomes the Beneficial Owner of securities of the
Company representing fifty-one percent (51%) or more of the Voting
Power (as defined in Section 1(f) hereof), (ii) there shall occur a
change in the composition of a majority of the Board which change
shall not have been approved by a majority of the Board as constituted
immediately prior to such change in composition, (ii) at any meeting
of the shareholders of the Company called for the purpose of electing
directors, more than one of the persons nominated by the Board for
election as directors shall fail to be elected, or (iv) the
consummation of a merger, consolidation, sale of substantially all
assets or other reorganization of the Company, other than a
reincorporation, in which the Company does not survive.
(d) "Earnings" shall mean the total of (i) the base salary paid
by the Company to the Employee during the twelve month period
preceding the Bonus Vesting Date from the Company without giving
effect to any reduction thereof that may have been made without the
Employee's consent; and (ii) the amount of Company contributions
consistent with the Company's past practices which would have been
made on the Employee's behalf in respect of such base salary had he
continued to participate in the Company's Employee Retirement Plan for
one (1) full plan year.
(e) "Person" shall have the meaning set forth in Sections
3(a)(9) and 13(d)(3) of the Securities Exchange Act of 1934, as in
effect on September 1, 1997.
(f) "Voting Power" shall mean the voting power of the
outstanding securities of the Company having the right under ordinary
circumstances to vote at an election of the Board.
2. Services During Certain Events. If the Employee remains in
continuous employment as a superintendent for the Company from the date
hereof until either (a) an Asset Acquisition is consummated, (b) a Change
in Control occurs or (c) the Employee s employment with the Company is
terminated by the Company for a reason other than Cause (with the earliest
of such event to occur being referred to herein as the Bonus Vesting
Date ), then the Employee shall be entitled to receive a bonus in the
-23-
<PAGE> 24
amount determined pursuant to Section 3 hereof.
3. Payment of Bonus.
(a) The Company agrees that the Employee shall be paid a bonus
by the Company within ten (10) days following the Bonus Vesting Date
in an amount equal to 2.99 times the Employee s Earnings (as such term
is defined below).
(b) Other Benefit Plans. The bonus provided for in this
Agreement is not intended to require or to exclude the Employee's
continued participation in other benefit plans in which the Employee
currently participates or which are available to the Company s
personnel generally in the class or category of the Employee or to
preclude other compensation or benefits as may be authorized by the
Board from time to time.
4. Conditions to the Obligations of the Company. The Company shall
have no obligation to pay or cause to be paid to the Employee the bonus
described herein (a) if the Company shall terminate the Employee's
employment for (i) dishonesty, (ii) conviction of a felony, or (iii) the
continued failure by the Employee to perform the duties assigned to the
Employee that are consistent with the position of the Employee with the
Company (termination for "Cause") or (b) if the Employee dies, becomes
disabled, retires, ceases to be a superintendent for the Company or
voluntarily terminates his employment with the Company prior to the Bonus
Vesting Date.
5. Confidentiality.
(a) Confidentiality. The Employee agrees that at all times
following the execution hereof, the Employee will not without the
prior written consent of the Company, disclose to any person, firm or
corporation any confidential information of the Company or its
subsidiaries which is now known to the Employee or which hereafter may
become known to the Employee as a result of his employment or
association with the Company and which could be helpful to a
competitor, unless such disclosure is required under the terms of a
valid and effective subpoena or order issued by a court or
governmental body; provided, however, that the foregoing shall not
apply to confidential information which becomes publicly disseminated
by means other than a breach of this Agreement.
(b) Remedies for Breach. It is recognized that damages in the
event of breach of this Section 5 by the Employee would be difficult,
if not impossible, to ascertain, and it is therefore agreed that the
Company, in addition to and without limiting any other remedy or right
it may have, shall have the right to an injunction or other equitable
relief in any court of competent jurisdiction enjoining any such
breach, and the Employee hereby waives any and all defenses the
Employee may have on the ground of lack of jurisdiction or competence
of the court to grant such an injunction or other equitable relief.
-24-
<PAGE> 25
The existence of this right shall not preclude the Company from
pursuing any other rights and remedies at law or in equity which the
Company may have.
6. Reduction in Payments. Notwithstanding the provisions of Section
3(a) hereof in no event shall any payment to be made under Section 3(a)
exceed $1.00 less than three times the Employee's "Base Amount" within the
meaning of Section 280G of the Internal Revenue Code of 1986, as amended
(the "Code"). If any portion of the payments or benefits to be made
available to the Employee pursuant to Section 3 would be considered an
"Excess Parachute Payment" within the meaning of Section 28OG of the Code,
the amount of cash otherwise payable to the Employee pursuant to Section
3(a) hereof shall be reduced to the extent (but only to the extent)
necessary to cause no portion of the payments or benefits made available to
the Employee pursuant to Section 3 hereof to be considered an Excess
Parachute Payment within the meaning of Section 28OG of the Code. Arthur
Andersen LLP or such other accounting firm that may be agreed upon by the
Company and the Employee (the Accounting Firm") shall determine the
Employee's Base Amount and the amount of any Excess Parachute Payments for
purposes of this Section 6. All determinations made by the Accounting Firm
shall be made within 60 days of the Bonus Vesting Date and shall be binding
on the Company and the Employee. All fees and expenses of the Accounting
Firm shall be borne solely by the Company.
7. Term of Agreement. Unless terminated earlier as a result of
Employee s termination of employment with the Company, this Agreement shall
remain in full force and effect through December 31, 1998, and, beginning
each January lst thereafter, this Agreement shall be automatically extended
for additional one (1) year periods, unless by September 30th of any year
the Company gives notice that this Agreement will not be so extended.
8. Miscellaneous.
(a) Assignment. No right, benefit or interest hereunder shall
be subject to assignment, anticipation, alienation, sale, encumbrance,
charge, pledge, hypothecation or set-off in respect of any claim, debt
or obligation, or to execution, attachment, levy or similar process;
provided, however, that the Employee may assign any right, benefit or
interest hereunder if such assignment is permitted under the terms of
any plan or policy of insurance or annuity contract governing such
right, benefit or interest.
(b) Construction of Agreement. Except as expressly provided
herein, nothing in this Agreement shall be construed to amend any
provision of any plan or policy of the Company. This Agreement is not
and nothing herein shall be deemed to create, a commitment of
continued employment of the Employee by the Company. The benefits
provided under this Agreement shall be in addition to any other
compensation agreement or arrangement that the Company may have with
the Employee.
(c) Amendment. This Agreement may not be amended, modified or
-25-
<PAGE> 26
canceled except by written agreement of the Company and the Employee.
(d) Waiver. No provision of this Agreement may be waived except
by a writing signed by the party to be bound thereby.
(e) Severability. In the event that any provision or portion of
this Agreement shall be determined to be invalid or unenforceable for
any reason, the remaining provisions of this Agreement shall remain in
full force and effect to the fullest extent permitted by law.
(f) Successors.
(i) The Company will require any successor, whether direct
or indirect, by purchase, merger, consolidation or otherwise, to
all or substantially all of the business and/or assets of the
Company to expressly assume and agree to perform this Agreement
in the same manner and to the same extent that the Company would
be required to perform it if no such succession had taken place.
(ii) This Agreement shall inure to the benefit of, and be
enforceable by, the Employee's personal or legal representatives,
executors, administrators, successors, heirs, distributees,
devisees and legates. If the Employee dies after the Bonus
Vesting Date but prior to the receipt of the bonus payable
hereunder with respect to events occurring prior to death, such
bonus shall be paid pursuant to the last beneficiary designation
executed by the Employee and filed with the Company. If no
beneficiary form has been filed with respect to this Agreement,
the bonus shall be paid to the Employee's estate.
(g) Taxes. Any payment or delivery required under this
Agreement shall be subject to all requirements of the law with regard
to withholding of taxes, filing, making of reports and the like, and
the Company shall use its best efforts to satisfy promptly all such
requirements.
(h) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, WITHOUT
GIVING EFFECT TO ITS CONFLICTS OF LAWS PRINCIPLES.
(i) Not Contract of Employment. Subject to the provisions
of Section 3 of this Agreement, the entering into of this Agreement
shall not be deemed to be a contract of employment between the Company
and the Employee, or to be consideration for the employment of the
Employee, and nothing herein contained shall be deemed to give the
Employee the right to be retained in the employ of the Company or to
restrict the right of the Company to discharge the Employee at any
time.
(j) Gender. Wherever in this instrument words are used in the
masculine or neuter gender, they shall be read and construed as in the
masculine, feminine or neuter gender wherever they would so apply, and
-26-
<PAGE> 27
vice versa. Wherever words appear in the singular or plural, they
shall be read and construed as in the plural or singular,
respectively, wherever they would so apply.
(k) Headings. The headings of the Sections herein are included
solely for reference convenience, and shall not in any way affect the
meaning or interpretation of the Agreement.
(1) Entire Agreement. This Agreement sets forth the entire
agreement and understanding of the parties hereto with respect to the
matters covered hereby.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
TMBR/SHARP DRILLING, INC.
By:
Thomas C. Brown
Chairman of the Board of Directors
EMPLOYEE
Joe G. Roper
i:\pbooker\jma\tmbr sharp\officer bonus agreement
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<PAGE> 28
Exhibit 10.2
TMBR/SHARP DRILLING, INC.
BONUS AGREEMENT
FOR OFFICERS AND SUPERINTENDENTS
Agreement (the Agreement ), dated as of October 2, 1997 between
TMBR/SHARP DRILLING, INC., a Texas corporation (the "Company"), and THOMAS
C. BROWN ( Employee ).
RECITATIONS
The Company may seek to sell a significant portions of the operating
assets of the Company (an Asset Acquisition" as defined in Section 1(a)
hereof) to another Person (as defined in Section 1(e) hereof) or the
Company may enter into a transaction which could involve a Change in
Control (as defined in Section 1(c) hereof) or the Company may otherwise
become subject to a proposed or threatened Change in Control; and
The Board of Directors of the Company (the Board ) has determined
that it is imperative that the Company and the Board be able to rely upon
the Employee to continue in the Employee s position as Chairman of the
Board of Directors and Chief Executive Officer of the Company, and that the
Company be able to receive and rely upon the Employee's services and
advice, if requested, as to the best interests of the Company and its
shareholders without concern that the Employee might be distracted by the
personal uncertainties and risks created by any such proposed Asset
Acquisition or Change in Control;
The Board has authorized the Company to enter into a bonus agreement
in the form hereof with the Employee;
NOW, THEREFORE, to assure the Company that it will have the continued
dedication of the Employee and the availability of the Employee's services,
advice and counsel notwithstanding the anticipated consummation of any
transactions contemplated by an Asset Acquisition or the possibility,
threat or occurrence of a Change of Control, and to induce the Employee to
remain in the employ of the Company, and for other good and valuable
consideration, the Company and the Employee agree as follows:
-28-
<PAGE> 29
1. Certain Definitions. For purposes of this Agreement:
(a) an Asset Acquisition" shall be deemed to have occurred if
any Person, or a group or groups of related or unrelated Persons
acquires more than fifty-one percent (51%) in value of the assets of
the Company pursuant to one or more transactions with the Company
during the term of this Agreement.
(b) "Beneficial Owner" shall have the meaning set forth in Rules
13d-3 and 13d-5 under the Securities Exchange Act of 1934, as in
effect on September 1, 1997.
(c) a "Change in Control" shall be deemed to have occurred if
(i) any Person is or becomes the Beneficial Owner of securities of the
Company representing fifty-one percent (51%) or more of the Voting
Power (as defined in Section 1(f) hereof), (ii) there shall occur a
change in the composition of a majority of the Board which change
shall not have been approved by a majority of the Board as constituted
immediately prior to such change in composition, (ii) at any meeting
of the shareholders of the Company called for the purpose of electing
directors, more than one of the persons nominated by the Board for
election as directors shall fail to be elected, or (iv) the
consummation of a merger, consolidation, sale of substantially all
assets or other reorganization of the Company, other than a
reincorporation, in which the Company does not survive.
(d) "Earnings" shall mean the total of (i) the base salary paid
by the Company to the Employee during the twelve month period
preceding the Bonus Vesting Date from the Company without giving
effect to any reduction thereof that may have been made without the
Employee's consent; and (ii) the amount of Company contributions
consistent with the Company's past practices which would have been
made on the Employee's behalf in respect of such base salary had he
continued to participate in the Company's Employee Retirement Plan for
one (1) full plan year.
(e) "Person" shall have the meaning set forth in Sections
3(a)(9) and 13(d)(3) of the Securities Exchange Act of 1934, as in
effect on September 1, 1997.
(f) "Voting Power" shall mean the voting power of the
outstanding securities of the Company having the right under ordinary
circumstances to vote at an election of the Board.
2. Services During Certain Events. If the Employee remains in
continuous employment for the Company from the date hereof until either (a)
an Asset Acquisition is consummated, (b) a Change in Control occurs or (c)
the Employee s employment with the Company is terminated by the Company for
a reason other than Cause (with the earliest of such event to occur being
referred to herein as the Bonus Vesting Date ), then the Employee shall be
entitled to receive a bonus in the amount determined pursuant to Section 3
-29-
<PAGE> 30
hereof.
3. Payment of Bonus.
(a) The Company agrees that the Employee shall be paid a bonus
by the Company within ten (10) days following the Bonus Vesting Date
in an amount equal to 2.99 times the Employee s Earnings (as such term
is defined below).
(b) Other Benefit Plans. The bonus provided for in this
Agreement is not intended to require or to exclude the Employee's
continued participation in other benefit plans in which the Employee
currently participates or which are available to the Company s
personnel generally in the class or category of the Employee or to
preclude other compensation or benefits as may be authorized by the
Board from time to time.
4. Conditions to the Obligations of the Company. The Company shall
have no obligation to pay or cause to be paid to the Employee the bonus
described herein (a) if the Company shall terminate the Employee's
employment for (i) dishonesty, (ii) conviction of a felony, or (iii) the
continued failure by the Employee to perform the duties assigned to the
Employee that are consistent with the position of the Employee with the
Company (termination for "Cause") or (b) if the Employee dies, becomes
disabled, retires or voluntarily terminates his employment with the Company
prior to the Bonus Vesting Date.
5. Confidentiality.
(a) Confidentiality. The Employee agrees that at all times
following the execution hereof, the Employee will not without the
prior written consent of the Company, disclose to any person, firm or
corporation any confidential information of the Company or its
subsidiaries which is now known to the Employee or which hereafter may
become known to the Employee as a result of his employment or
association with the Company and which could be helpful to a
competitor, unless such disclosure is required under the terms of a
valid and effective subpoena or order issued by a court or
governmental body; provided, however, that the foregoing shall not
apply to confidential information which becomes publicly disseminated
by means other than a breach of this Agreement.
(b) Remedies for Breach. It is recognized that damages in the
event of breach of this Section 5 by the Employee would be difficult,
if not impossible, to ascertain, and it is therefore agreed that the
Company, in addition to and without limiting any other remedy or right
it may have, shall have the right to an injunction or other equitable
relief in any court of competent jurisdiction enjoining any such
breach, and the Employee hereby waives any and all defenses the
Employee may have on the ground of lack of jurisdiction or competence
of the court to grant such an injunction or other equitable relief.
The existence of this right shall not preclude the Company from
pursuing any other rights and remedies at law or in equity which the
Company may have.
-30-
<PAGE> 31
6. Reduction in Payments. Notwithstanding the provisions of Section
3(a) hereof in no event shall any payment to be made under Section 3(a)
exceed $1.00 less than three times the Employee's "Base Amount" within the
meaning of Section 280G of the Internal Revenue Code of 1986, as amended
(the "Code"). If any portion of the payments or benefits to be made
available to the Employee pursuant to Section 3 would be considered an
"Excess Parachute Payment" within the meaning of Section 28OG of the Code,
the amount of cash otherwise payable to the Employee pursuant to Section
3(a) hereof shall be reduced to the extent (but only to the extent)
necessary to cause no portion of the payments or benefits made available to
the Employee pursuant to Section 3 hereof to be considered an Excess
Parachute Payment within the meaning of Section 28OG of the Code. Arthur
Andersen LLP or such other accounting firm that may be agreed upon by the
Company and the Employee (the Accounting Firm") shall determine the
Employee's Base Amount and the amount of any Excess Parachute Payments for
purposes of this Section 6. All determinations made by the Accounting Firm
shall be made within 60 days of the Bonus Vesting Date and shall be binding
on the Company and the Employee. All fees and expenses of the Accounting
Firm shall be borne solely by the Company.
7. Term of Agreement. Unless terminated earlier as a result of
Employee s termination of employment with the Company, this Agreement shall
remain in full force and effect through December 31, 1998, and, beginning
each January lst thereafter, this Agreement shall be automatically extended
for additional one (1) year periods, unless by September 30th of any year
the Company gives notice that this Agreement will not be so extended.
8. Miscellaneous.
(a) Assignment. No right, benefit or interest hereunder shall
be subject to assignment, anticipation, alienation, sale, encumbrance,
charge, pledge, hypothecation or set-off in respect of any claim, debt
or obligation, or to execution, attachment, levy or similar process;
provided, however, that the Employee may assign any right, benefit or
interest hereunder if such assignment is permitted under the terms of
any plan or policy of insurance or annuity contract governing such
right, benefit or interest.
(b) Construction of Agreement. Except as expressly provided
herein, nothing in this Agreement shall be construed to amend any
provision of any plan or policy of the Company. This Agreement is not
and nothing herein shall be deemed to create, a commitment of
continued employment of the Employee by the Company. The benefits
provided under this Agreement shall be in addition to any other
compensation agreement or arrangement that the Company may have with
the Employee.
(c) Amendment. This Agreement may not be amended, modified or
canceled except by written agreement of the Company and the Employee.
-31-
<PAGE> 32
(d) Waiver. No provision of this Agreement may be waived except
by a writing signed by the party to be bound thereby.
(e) Severability. In the event that any provision or portion of
this Agreement shall be determined to be invalid or unenforceable for
any reason, the remaining provisions of this Agreement shall remain in
full force and effect to the fullest extent permitted by law.
(f) Successors.
(i) The Company will require any successor, whether direct
or indirect, by purchase, merger, consolidation or otherwise, to
all or substantially all of the business and/or assets of the
Company to expressly assume and agree to perform this Agreement
in the same manner and to the same extent that the Company would
be required to perform it if no such succession had taken place.
(ii) This Agreement shall inure to the benefit of, and be
enforceable by, the Employee's personal or legal representatives,
executors, administrators, successors, heirs, distributees,
devisees and legates. If the Employee dies after the Bonus
Vesting Date but prior to the receipt of the bonus payable
hereunder with respect to events occurring prior to death, such
bonus shall be paid pursuant to the last beneficiary designation
executed by the Employee and filed with the Company. If no
beneficiary form has been filed with respect to this Agreement,
the bonus shall be paid to the Employee's estate.
(g) Taxes. Any payment or delivery required under this
Agreement shall be subject to all requirements of the law with regard
to withholding of taxes, filing, making of reports and the like, and
the Company shall use its best efforts to satisfy promptly all such
requirements.
(h) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, WITHOUT
GIVING EFFECT TO ITS CONFLICTS OF LAWS PRINCIPLES.
(i) Not Contract of Employment. Subject to the provisions
of Section 3 of this Agreement, the entering into of this Agreement
shall not be deemed to be a contract of employment between the Company
and the Employee, or to be consideration for the employment of the
Employee, and nothing herein contained shall be deemed to give the
Employee the right to be retained in the employ of the Company or to
restrict the right of the Company to discharge the Employee at any
time.
(j) Gender. Wherever in this instrument words are used in the
masculine or neuter gender, they shall be read and construed as in the
masculine, feminine or neuter gender wherever they would so apply, and
vice versa. Wherever words appear in the singular or plural, they
shall be read and construed as in the plural or singular,
respectively, wherever they would so apply.
-32-
<PAGE> 33
(k) Headings. The headings of the Sections herein are included
solely for reference convenience, and shall not in any way affect the
meaning or interpretation of the Agreement.
(1) Entire Agreement. This Agreement sets forth the entire
agreement and understanding of the parties hereto with respect to the
matters covered hereby.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
TMBR/SHARP DRILLING, INC.
By:
Thomas C. Brown
Chairman of the Board of Directors
EMPLOYEE
Thomas C. Brown
i:\pbooker\jma\tmbr sharp\officer bonus agreement
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<PAGE> 34
Exhibit 10.3
TMBR/SHARP DRILLING, INC.
BONUS AGREEMENT
Agreement (the Agreement ), dated as of October 3, 1997 between
TMBR/SHARP DRILLING, INC., a Texas corporation (the "Company"), and DAVID
N. FITZGERALD ( Fitzgerald ).
RECITATIONS
The Company may seek to sell a significant portions of the operating
assets of the Company (an Asset Acquisition" as defined in Section 1(a)
hereof) to another Person (as defined in Section 1(e) hereof) or the
Company may enter into a transaction which could involve a Change in
Control (as defined in Section 1(c) hereof) or the Company may otherwise
become subject to a proposed or threatened Change in Control; and
The Board of Directors of the Company (the Board ) has determined
that it is imperative that the Company and the Board be able to rely upon
Fitzgerald to continue in his position as an outside Director of the
Company, and that the Company be able to receive and rely upon Fitzgerald's
services and advice, if requested, as to the best interests of the Company
and its shareholders without concern that Fitzgerald might be distracted by
the personal uncertainties and risks created by any such proposed Asset
Acquisition or Change in Control;
The Board has authorized the Company to enter into a bonus agreement
in the form hereof with Fitzgerald;
NOW, THEREFORE, to assure the Company that it will have the continued
dedication of Fitzgerald and the availability of his services, advice and
counsel notwithstanding the anticipated consummation of any transactions
contemplated by an Asset Acquisition or the possibility, threat or
occurrence of a Change of Control, and to induce Fitzgerald to remain in
the employ of the Company, and for other good and valuable consideration,
the Company and Fitzgerald agree as follows:
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<PAGE> 35
1. Certain Definitions. For purposes of this Agreement:
(a) an Asset Acquisition" shall be deemed to have occurred if
any Person, or a group or groups of related or unrelated Persons
acquires more than fifty-one percent (51%) in value of the assets of
the Company pursuant to one or more transactions with the Company
during the term of this Agreement.
(b) "Beneficial Owner" shall have the meaning set forth in Rules
13d-3 and 13d-5 under the Securities Exchange Act of 1934, as in
effect on September 1, 1997.
(c) a "Change in Control" shall be deemed to have occurred if
(i) any Person is or becomes the Beneficial Owner of securities of the
Company representing fifty-one percent (51%) or more of the Voting
Power (as defined in Section 1(f) hereof), (ii) there shall occur a
change in the composition of a majority of the Board which change
shall not have been approved by a majority of the Board as constituted
immediately prior to such change in composition, (ii) at any meeting
of the shareholders of the Company called for the purpose of electing
directors, more than one of the persons nominated by the Board for
election as directors shall fail to be elected, or (iv) the
consummation of a merger, consolidation, sale of substantially all
assets or other reorganization of the Company, other than a
reincorporation, in which the Company does not survive.
(d) "Person" shall have the meaning set forth in Sections
3(a)(9) and 13(d)(3) of the Securities Exchange Act of 1934, as in
effect on September 1, 1997.
(e) "Voting Power" shall mean the voting power of the
outstanding securities of the Company having the right under ordinary
circumstances to vote at an election of the Board.
2. Services During Certain Events. If Fitzgerald continues to serve
as an outside Director of the Company from the date hereof until either (a)
an Asset Acquisition is consummated or (b) a Change in Control occurs (with
the earliest of such event to occur being referred to herein as the Bonus
Vesting Date ), then he shall be entitled to receive a bonus in the amount
specified in Section 3 hereof.
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<PAGE> 36
3. Payment of Bonus.
(a) The Company agrees that Fitzgerald shall be paid a bonus by
the Company within ten (10) days following the Bonus Vesting Date in
the amount of $100,000.
(b) Other Benefit Plans. The bonus provided for in this
Agreement is not intended to require or to exclude Fitzgerald's
continued participation in other benefit plans in which he currently
participates or to preclude other compensation or benefits as may be
authorized by the Board from time to time.
4. Conditions to the Obligations of the Company. The Company shall
have no obligation to pay or cause to be paid to Fitzgerald the bonus
described herein if Fitzgerald dies, becomes disabled, retires, resigns or
is removed as an outside Director of the Company prior to the Bonus Vesting
Date.
5. Confidentiality.
(a) Confidentiality. Fitzgerald agrees that at all times
following the execution hereof, he will not without the prior written
consent of the Company, disclose to any person, firm or corporation
any confidential information of the Company or its subsidiaries which
is now known to Fitzgerald or which hereafter may become known to him
as a result of his service as a Director or his association with the
Company and which could be helpful to a competitor, unless such
disclosure is required under the terms of a valid and effective
subpoena or order issued by a court or governmental body; provided,
however, that the foregoing shall not apply to confidential
information which becomes publicly disseminated by means other than a
breach of this Agreement.
(b) Remedies for Breach. It is recognized that damages in the
event of breach of this Section 5 by Fitzgerald would be difficult, if
not impossible, to ascertain, and it is therefore agreed that the
Company, in addition to and without limiting any other remedy or right
it may have, shall have the right to an injunction or other equitable
relief in any court of competent jurisdiction enjoining any such
breach, and Fitzgerald hereby waives any and all defenses he may have
on the ground of lack of jurisdiction or competence of the court to
grant such an injunction or other equitable relief. The existence of
this right shall not preclude the Company from pursuing any other
rights and remedies at law or in equity which the Company may have.
6. Term of Agreement. This Agreement shall remain in full force
and effect through December 31, 1998, and, beginning each January lst
thereafter, this Agreement shall be automatically extended for additional
one (1) year periods, unless by September 30th of any year the Company
gives notice that this Agreement will not be so extended.
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<PAGE> 37
7. Miscellaneous.
(a) Assignment. Except as provided in Section 7(f)(ii) below,
no right, benefit or interest hereunder shall be subject to
assignment, anticipation, alienation, sale, encumbrance, charge,
pledge, hypothecation or set-off in respect of any claim, debt or
obligation, or to execution, attachment, levy or similar process.
(b) Construction of Agreement. Except as expressly provided
herein, nothing in this Agreement shall be construed to amend any
provision of any plan or policy of the Company. This Agreement is not
and nothing herein shall be deemed to create, a commitment of
continued service by Fitzgerald as a Director to the Company. The
benefits provided under this Agreement shall be in addition to any
other compensation agreement or arrangement that the Company may have
with Fitzgerald.
(c) Amendment. This Agreement may not be amended, modified or
canceled except by written agreement of the Company and Fitzgerald.
(d) Waiver. No provision of this Agreement may be waived except
by a writing signed by the party to be bound thereby.
(e) Severability. If any provision or portion of this Agreement
shall be determined to be invalid or unenforceable for any reason, the
remaining provisions of this Agreement shall remain in full force and
effect to the fullest extent permitted by law.
(f) Successors.
(i) The Company will require any successor, whether direct
or indirect, by purchase, merger, consolidation or otherwise, to
all or substantially all of the business and/or assets of the
Company to expressly assume and agree to perform this Agreement
in the same manner and to the same extent that the Company would
be required to perform it if no such succession had taken place.
(ii) This Agreement shall inure to the benefit of, and be
enforceable by, Fitzgerald's personal or legal representatives,
executors, administrators, successors, heirs, distributees,
devisees and legates. If the Director dies after the Bonus
Vesting Date but prior to the receipt of the bonus payable
hereunder with respect to events occurring prior to death, such
bonus shall be paid pursuant to the last beneficiary designation
executed by Fitzgerald and filed with the Company. If no
beneficiary form has been filed with respect to this Agreement,
the bonus shall be paid to Fitzgerald's estate.
(g) Taxes. Any payment or delivery required under this
Agreement shall be subject to all requirements of the law with regard
to withholding of taxes, filing, making of reports and the like, and
the Company shall use its best efforts to satisfy promptly all such
requirements.
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<PAGE> 38
(h) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, WITHOUT
GIVING EFFECT TO ITS CONFLICTS OF LAWS PRINCIPLES.
(i) Gender. Wherever in this instrument words are used in
the masculine or neuter gender, they shall be read and construed
as in the masculine, feminine or neuter gender wherever they
would so apply, and vice versa. Wherever words appear in the
singular or plural, they shall be read and construed as in the
plural or singular, respectively, wherever they would so apply.
(j) Headings. The headings of the Sections herein are included
solely for reference convenience, and shall not in any way affect the
meaning or interpretation of the Agreement.
(k) Entire Agreement. This Agreement sets forth the entire
agreement and understanding of the parties hereto with respect to the
matters covered hereby.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
TMBR/SHARP DRILLING, INC.
By:
Thomas C. Brown
Chairman of the Board of Directors
FITZGERALD
David N. Fitzgerald
i:\pbooker\jma\tmbr sharp\fitzgerald bonus agreement
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<PAGE> 39
Exhibit 10.4
TMBR/SHARP DRILLING, INC.
BONUS AGREEMENT
Agreement (the Agreement ), dated as of October 3, 1997 between
TMBR/SHARP DRILLING, INC., a Texas corporation (the "Company"), and DONALD
L. EVANS ( Evans ).
RECITATIONS
The Company may seek to sell a significant portions of the operating
assets of the Company (an Asset Acquisition" as defined in Section 1(a)
hereof) to another Person (as defined in Section 1(e) hereof) or the
Company may enter into a transaction which could involve a Change in
Control (as defined in Section 1(c) hereof) or the Company may otherwise
become subject to a proposed or threatened Change in Control; and
The Board of Directors of the Company (the Board ) has determined
that it is imperative that the Company and the Board be able to rely upon
Evans to continue in his position as an outside Director of the Company,
and that the Company be able to receive and rely upon Evans's services and
advice, if requested, as to the best interests of the Company and its
shareholders without concern that Evans might be distracted by the personal
uncertainties and risks created by any such proposed Asset Acquisition or
Change in Control;
The Board has authorized the Company to enter into a bonus agreement
in the form hereof with Evans;
NOW, THEREFORE, to assure the Company that it will have the continued
dedication of Evans and the availability of his services, advice and
counsel notwithstanding the anticipated consummation of any transactions
contemplated by an Asset Acquisition or the possibility, threat or
occurrence of a Change of Control, and to induce Evans to remain in the
employ of the Company, and for other good and valuable consideration, the
Company and Evans agree as follows:
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<PAGE> 40
1. Certain Definitions. For purposes of this Agreement:
(a) an Asset Acquisition" shall be deemed to have occurred if
any Person, or a group or groups of related or unrelated Persons
acquires more than fifty-one percent (51%) in value of the assets of
the Company pursuant to one or more transactions with the Company
during the term of this Agreement.
(b) "Beneficial Owner" shall have the meaning set forth in Rules
13d-3 and 13d-5 under the Securities Exchange Act of 1934, as in
effect on September 1, 1997.
(c) a "Change in Control" shall be deemed to have occurred if
(i) any Person is or becomes the Beneficial Owner of securities of the
Company representing fifty-one percent (51%) or more of the Voting
Power (as defined in Section 1(f) hereof), (ii) there shall occur a
change in the composition of a majority of the Board which change
shall not have been approved by a majority of the Board as constituted
immediately prior to such change in composition, (ii) at any meeting
of the shareholders of the Company called for the purpose of electing
directors, more than one of the persons nominated by the Board for
election as directors shall fail to be elected, or (iv) the
consummation of a merger, consolidation, sale of substantially all
assets or other reorganization of the Company, other than a
reincorporation, in which the Company does not survive.
(d) "Person" shall have the meaning set forth in Sections
3(a)(9) and 13(d)(3) of the Securities Exchange Act of 1934, as in
effect on September 1, 1997.
(e) "Voting Power" shall mean the voting power of the
outstanding securities of the Company having the right under ordinary
circumstances to vote at an election of the Board.
2. Services During Certain Events. If Evans continues to serve as
an outside Director of the Company from the date hereof until either (a) an
Asset Acquisition is consummated or (b) a Change in Control occurs (with
the earliest of such event to occur being referred to herein as the Bonus
Vesting Date ), then he shall be entitled to receive a bonus in the amount
specified in Section 3 hereof.
-40-
<PAGE> 41
3. Payment of Bonus.
(a) The Company agrees that Evans shall be paid a bonus by the
Company within ten (10) days following the Bonus Vesting Date in the
amount of $100,000.
(b) Other Benefit Plans. The bonus provided for in this
Agreement is not intended to require or to exclude Evan's continued
participation in other benefit plans in which he currently
participates or to preclude other compensation or benefits as may be
authorized by the Board from time to time.
4. Conditions to the Obligations of the Company. The Company shall
have no obligation to pay or cause to be paid to Evans the bonus described
herein if Evans dies, becomes disabled, retires, resigns or is removed as
an outside Director of the Company prior to the Bonus Vesting Date.
5. Confidentiality.
(a) Confidentiality. Evans agrees that at all times following
the execution hereof, he will not without the prior written consent of
the Company, disclose to any person, firm or corporation any
confidential information of the Company or its subsidiaries which is
now known to Evans or which hereafter may become known to him as a
result of his service as a Director or his association with the
Company and which could be helpful to a competitor, unless such
disclosure is required under the terms of a valid and effective
subpoena or order issued by a court or governmental body; provided,
however, that the foregoing shall not apply to confidential
information which becomes publicly disseminated by means other than a
breach of this Agreement.
(b) Remedies for Breach. It is recognized that damages in the
event of breach of this Section 5 by Evans would be difficult, if not
impossible, to ascertain, and it is therefore agreed that the Company,
in addition to and without limiting any other remedy or right it may
have, shall have the right to an injunction or other equitable relief
in any court of competent jurisdiction enjoining any such breach, and
Evans hereby waives any and all defenses he may have on the ground of
lack of jurisdiction or competence of the court to grant such an
injunction or other equitable relief. The existence of this right
shall not preclude the Company from pursuing any other rights and
remedies at law or in equity which the Company may have.
6. Term of Agreement. This Agreement shall remain in full force
and effect through December 31, 1998, and, beginning each January lst
thereafter, this Agreement shall be automatically extended for additional
one (1) year periods, unless by September 30th of any year the Company
gives notice that this Agreement will not be so extended.
7. Miscellaneous.
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<PAGE> 42
(a) Assignment. Except as provided in Section 7(f)(ii) below,
no right, benefit or interest hereunder shall be subject to
assignment, anticipation, alienation, sale, encumbrance, charge,
pledge, hypothecation or set-off in respect of any claim, debt or
obligation, or to execution, attachment, levy or similar process.
(b) Construction of Agreement. Except as expressly provided
herein, nothing in this Agreement shall be construed to amend any
provision of any plan or policy of the Company. This Agreement is not
and nothing herein shall be deemed to create, a commitment of
continued service by Evans as a Director to the Company. The benefits
provided under this Agreement shall be in addition to any other
compensation agreement or arrangement that the Company may have with
Evans.
(c) Amendment. This Agreement may not be amended, modified or
canceled except by written agreement of the Company and Evans.
(d) Waiver. No provision of this Agreement may be waived except
by a writing signed by the party to be bound thereby.
(e) Severability. If any provision or portion of this Agreement
shall be determined to be invalid or unenforceable for any reason, the
remaining provisions of this Agreement shall remain in full force and
effect to the fullest extent permitted by law.
(f) Successors.
(i) The Company will require any successor, whether direct
or indirect, by purchase, merger, consolidation or otherwise, to
all or substantially all of the business and/or assets of the
Company to expressly assume and agree to perform this Agreement
in the same manner and to the same extent that the Company would
be required to perform it if no such succession had taken place.
(ii) This Agreement shall inure to the benefit of, and be
enforceable by, Evans' personal or legal representatives,
executors, administrators, successors, heirs, distributees,
devisees and legates. If the Director dies after the Bonus
Vesting Date but prior to the receipt of the bonus payable
hereunder with respect to events occurring prior to death, such
bonus shall be paid pursuant to the last beneficiary designation
executed by Evans and filed with the Company. If no beneficiary
form has been filed with respect to this Agreement, the bonus
shall be paid to0 Evans' estate.
(g) Taxes. Any payment or delivery required under this
Agreement shall be subject to all requirements of the law with regard
to withholding of taxes, filing, making of reports and the like, and
the Company shall use its best efforts to satisfy promptly all such
requirements.
-42-
<PAGE> 43
(h) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, WITHOUT
GIVING EFFECT TO ITS CONFLICTS OF LAWS PRINCIPLES.
(i) Gender. Wherever in this instrument words are used in
the masculine or neuter gender, they shall be read and construed
as in the masculine, feminine or neuter gender wherever they
would so apply, and vice versa. Wherever words appear in the
singular or plural, they shall be read and construed as in the
plural or singular, respectively, wherever they would so apply.
(j) Headings. The headings of the Sections herein are included
solely for reference convenience, and shall not in any way affect the
meaning or interpretation of the Agreement.
(k) Entire Agreement. This Agreement sets forth the entire
agreement and understanding of the parties hereto with respect to the
matters covered hereby.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
TMBR/SHARP DRILLING, INC.
By:
Thomas C. Brown
Chairman of the Board of Directors
EVANS
Donald L. Evans
i:\pbooker\jma\tmbr sharp\fitzgerald bonus agreement
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<PAGE> 44
Exhibit 10.5
TMBR/SHARP DRILLING, INC.
BONUS AGREEMENT
FOR OFFICERS AND SUPERINTENDENTS
Agreement (the Agreement ), dated as of October 2, 1997 between
TMBR/SHARP DRILLING, INC., a Texas corporation (the "Company"), and
PATRICIA R. ELLEDGE ( Employee ).
RECITATIONS
The Company may seek to sell a significant portions of the operating
assets of the Company (an Asset Acquisition" as defined in Section 1(a)
hereof) to another Person (as defined in Section 1(e) hereof) or the
Company may enter into a transaction which could involve a Change in
Control (as defined in Section 1(c) hereof) or the Company may otherwise
become subject to a proposed or threatened Change in Control; and
The Board of Directors of the Company (the Board ) has determined
that it is imperative that the Company and the Board be able to rely upon
the Employee to continue in the Employee s position as Controller,
Treasurer and Assistant Secretary of the Company, and that the Company be
able to receive and rely upon the Employee's services and advice, if
requested, as to the best interests of the Company and its shareholders
without concern that the Employee might be distracted by the personal
uncertainties and risks created by any such proposed Asset Acquisition or
Change in Control;
The Board has authorized the Company to enter into a bonus agreement
in the form hereof with the Employee;
NOW, THEREFORE, to assure the Company that it will have the continued
dedication of the Employee and the availability of the Employee's services,
advice and counsel notwithstanding the anticipated consummation of any
transactions contemplated by an Asset Acquisition or the possibility,
threat or occurrence of a Change of Control, and to induce the Employee to
remain in the employ of the Company, and for other good and valuable
consideration, the Company and the Employee agree as follows:
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<PAGE> 45
1. Certain Definitions. For purposes of this Agreement:
(a) an Asset Acquisition" shall be deemed to have occurred if
any Person, or a group or groups of related or unrelated Persons
acquires more than fifty-one percent (51%) in value of the assets of
the Company pursuant to one or more transactions with the Company
during the term of this Agreement.
(b) "Beneficial Owner" shall have the meaning set forth in Rules
13d-3 and 13d-5 under the Securities Exchange Act of 1934, as in
effect on September 1, 1997.
(c) a "Change in Control" shall be deemed to have occurred if
(i) any Person is or becomes the Beneficial Owner of securities of the
Company representing fifty-one percent (51%) or more of the Voting
Power (as defined in Section 1(f) hereof), (ii) there shall occur a
change in the composition of a majority of the Board which change
shall not have been approved by a majority of the Board as constituted
immediately prior to such change in composition, (ii) at any meeting
of the shareholders of the Company called for the purpose of electing
directors, more than one of the persons nominated by the Board for
election as directors shall fail to be elected, or (iv) the
consummation of a merger, consolidation, sale of substantially all
assets or other reorganization of the Company, other than a
reincorporation, in which the Company does not survive.
(d) "Earnings" shall mean the total of (i) the base salary paid
by the Company to the Employee during the twelve month period
preceding the Bonus Vesting Date from the Company without giving
effect to any reduction thereof that may have been made without the
Employee's consent; and (ii) the amount of Company contributions
consistent with the Company's past practices which would have been
made on the Employee's behalf in respect of such base salary had she
continued to participate in the Company's Employee Retirement Plan for
one (1) full plan year.
(e) "Person" shall have the meaning set forth in Sections
3(a)(9) and 13(d)(3) of the Securities Exchange Act of 1934, as in
effect on September 1, 1997.
(f) "Voting Power" shall mean the voting power of the
outstanding securities of the Company having the right under ordinary
circumstances to vote at an election of the Board.
2. Services During Certain Events. If the Employee remains in
continuous employment for the Company from the date hereof until either (a)
an Asset Acquisition is consummated, (b) a Change in Control occurs or (c)
the Employee s employment with the Company is terminated by the Company for
a reason other than Cause (with the earliest of such event to occur being
referred to herein as the Bonus Vesting Date ), then the Employee shall be
entitled to receive a bonus in the amount determined pursuant to Section 3
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<PAGE> 46
hereof.
3. Payment of Bonus.
(a) The Company agrees that the Employee shall be paid a bonus
by the Company within ten (10) days following the Bonus Vesting Date
in an amount equal to 2 times the Employee s Earnings (as such term is
defined below).
(b) Other Benefit Plans. The bonus provided for in this
Agreement is not intended to require or to exclude the Employee's
continued participation in other benefit plans in which the Employee
currently participates or which are available to the Company s
personnel generally in the class or category of the Employee or to
preclude other compensation or benefits as may be authorized by the
Board from time to time.
4. Conditions to the Obligations of the Company. The Company shall
have no obligation to pay or cause to be paid to the Employee the bonus
described herein (a) if the Company shall terminate the Employee's
employment for (i) dishonesty, (ii) conviction of a felony, or (iii) the
continued failure by the Employee to perform the duties assigned to the
Employee that are consistent with the position of the Employee with the
Company (termination for "Cause") or (b) if the Employee dies, becomes
disabled, retires or voluntarily terminates her employment with the Company
prior to the Bonus Vesting Date.
5. Confidentiality.
(a) Confidentiality. The Employee agrees that at all times
following the execution hereof, the Employee will not without the
prior written consent of the Company, disclose to any person, firm or
corporation any confidential information of the Company or its
subsidiaries which is now known to the Employee or which hereafter may
become known to the Employee as a result of her employment or
association with the Company and which could be helpful to a
competitor, unless such disclosure is required under the terms of a
valid and effective subpoena or order issued by a court or
governmental body; provided, however, that the foregoing shall not
apply to confidential information which becomes publicly disseminated
by means other than a breach of this Agreement.
(b) Remedies for Breach. It is recognized that damages in the
event of breach of this Section 5 by the Employee would be difficult,
if not impossible, to ascertain, and it is therefore agreed that the
Company, in addition to and without limiting any other remedy or right
it may have, shall have the right to an injunction or other equitable
relief in any court of competent jurisdiction enjoining any such
breach, and the Employee hereby waives any and all defenses the
Employee may have on the ground of lack of jurisdiction or competence
of the court to grant such an injunction or other equitable relief.
The existence of this right shall not preclude the Company from
pursuing any other rights and remedies at law or in equity which the
Company may have.
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<PAGE> 47
6. Reduction in Payments. Notwithstanding the provisions of Section
3(a) hereof in no event shall any payment to be made under Section 3(a)
exceed $1.00 less than three times the Employee's "Base Amount" within the
meaning of Section 280G of the Internal Revenue Code of 1986, as amended
(the "Code"). If any portion of the payments or benefits to be made
available to the Employee pursuant to Section 3 would be considered an
"Excess Parachute Payment" within the meaning of Section 28OG of the Code,
the amount of cash otherwise payable to the Employee pursuant to Section
3(a) hereof shall be reduced to the extent (but only to the extent)
necessary to cause no portion of the payments or benefits made available to
the Employee pursuant to Section 3 hereof to be considered an Excess
Parachute Payment within the meaning of Section 28OG of the Code. Arthur
Andersen LLP or such other accounting firm that may be agreed upon by the
Company and the Employee (the Accounting Firm") shall determine the
Employee's Base Amount and the amount of any Excess Parachute Payments for
purposes of this Section 6. All determinations made by the Accounting Firm
shall be made within 60 days of the Bonus Vesting Date and shall be binding
on the Company and the Employee. All fees and expenses of the Accounting
Firm shall be borne solely by the Company.
7. Term of Agreement. Unless terminated earlier as a result of
Employee s termination of employment with the Company, this Agreement shall
remain in full force and effect through December 31, 1998, and, beginning
each January lst thereafter, this Agreement shall be automatically extended
for additional one (1) year periods, unless by September 30th of any year
the Company gives notice that this Agreement will not be so extended.
8. Miscellaneous.
(a) Assignment. No right, benefit or interest hereunder shall
be subject to assignment, anticipation, alienation, sale, encumbrance,
charge, pledge, hypothecation or set-off in respect of any claim, debt
or obligation, or to execution, attachment, levy or similar process;
provided, however, that the Employee may assign any right, benefit or
interest hereunder if such assignment is permitted under the terms of
any plan or policy of insurance or annuity contract governing such
right, benefit or interest.
(b) Construction of Agreement. Except as expressly provided
herein, nothing in this Agreement shall be construed to amend any
provision of any plan or policy of the Company. This Agreement is not
and nothing herein shall be deemed to create, a commitment of
continued employment of the Employee by the Company. The benefits
provided under this Agreement shall be in addition to any other
compensation agreement or arrangement that the Company may have with
the Employee.
(c) Amendment. This Agreement may not be amended, modified or
canceled except by written agreement of the Company and the Employee.
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<PAGE> 48
(d) Waiver. No provision of this Agreement may be waived except
by a writing signed by the party to be bound thereby.
(e) Severability. In the event that any provision or portion of
this Agreement shall be determined to be invalid or unenforceable for
any reason, the remaining provisions of this Agreement shall remain in
full force and effect to the fullest extent permitted by law.
(f) Successors.
(i) The Company will require any successor, whether direct
or indirect, by purchase, merger, consolidation or otherwise, to
all or substantially all of the business and/or assets of the
Company to expressly assume and agree to perform this Agreement
in the same manner and to the same extent that the Company would
be required to perform it if no such succession had taken place.
(ii) This Agreement shall inure to the benefit of, and be
enforceable by, the Employee's personal or legal representatives,
executors, administrators, successors, heirs, distributees,
devisees and legates. If the Employee dies after the Bonus
Vesting Date but prior to the receipt of the bonus payable
hereunder with respect to events occurring prior to death, such
bonus shall be paid pursuant to the last beneficiary designation
executed by the Employee and filed with the Company. If no
beneficiary form has been filed with respect to this Agreement,
the bonus shall be paid to the Employee's estate.
(g) Taxes. Any payment or delivery required under this
Agreement shall be subject to all requirements of the law with regard
to withholding of taxes, filing, making of reports and the like, and
the Company shall use its best efforts to satisfy promptly all such
requirements.
(h) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, WITHOUT
GIVING EFFECT TO ITS CONFLICTS OF LAWS PRINCIPLES.
(i) Not Contract of Employment. Subject to the provisions
of Section 3 of this Agreement, the entering into of this Agreement
shall not be deemed to be a contract of employment between the Company
and the Employee, or to be consideration for the employment of the
Employee, and nothing herein contained shall be deemed to give the
Employee the right to be retained in the employ of the Company or to
restrict the right of the Company to discharge the Employee at any
time.
(j) Gender. Wherever in this instrument words are used in the
masculine or neuter gender, they shall be read and construed as in the
masculine, feminine or neuter gender wherever they would so apply, and
vice versa. Wherever words appear in the singular or plural, they
shall be read and construed as in the plural or singular,
respectively, wherever they would so apply.
-48-
<PAGE> 49
(k) Headings. The headings of the Sections herein are included
solely for reference convenience, and shall not in any way affect the
meaning or interpretation of the Agreement.
(1) Entire Agreement. This Agreement sets forth the entire
agreement and understanding of the parties hereto with respect to the
matters covered hereby.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
TMBR/SHARP DRILLING, INC.
By:
Thomas C. Brown
Chairman of the Board of Directors
EMPLOYEE
Patricia R. Elledge
i:\pbooker\jma\tmbr sharp\officer bonus agreement
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<PAGE> 50
Exhibit 10.6
TMBR/SHARP DRILLING, INC.
BONUS AGREEMENT
FOR OFFICERS AND SUPERINTENDENTS
Agreement (the Agreement ), dated as of October 2, 1997 between
TMBR/SHARP DRILLING, INC., a Texas corporation (the "Company"), and DON H.
LAWSON ( Employee ).
RECITATIONS
The Company may seek to sell a significant portions of the operating
assets of the Company (an Asset Acquisition" as defined in Section 1(a)
hereof) to another Person (as defined in Section 1(e) hereof) or the
Company may enter into a transaction which could involve a Change in
Control (as defined in Section 1(c) hereof) or the Company may otherwise
become subject to a proposed or threatened Change in Control; and
The Board of Directors of the Company (the Board ) has determined
that it is imperative that the Company and the Board be able to rely upon
the Employee to continue in the Employee s position as Vice President-
Operations of the Company, and that the Company be able to receive and rely
upon the Employee's services and advice, if requested, as to the best
interests of the Company and its shareholders without concern that the
Employee might be distracted by the personal uncertainties and risks
created by any such proposed Asset Acquisition or Change in Control;
The Board has authorized the Company to enter into a bonus agreement
in the form hereof with the Employee;
NOW, THEREFORE, to assure the Company that it will have the continued
dedication of the Employee and the availability of the Employee's services,
advice and counsel notwithstanding the anticipated consummation of any
transactions contemplated by an Asset Acquisition or the possibility,
threat or occurrence of a Change of Control, and to induce the Employee to
remain in the employ of the Company, and for other good and valuable
consideration, the Company and the Employee agree as follows:
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<PAGE> 51
1. Certain Definitions. For purposes of this Agreement:
(a) an Asset Acquisition" shall be deemed to have occurred if
any Person, or a group or groups of related or unrelated Persons
acquires more than fifty-one percent (51%) in value of the assets of
the Company pursuant to one or more transactions with the Company
during the term of this Agreement.
(b) "Beneficial Owner" shall have the meaning set forth in Rules
13d-3 and 13d-5 under the Securities Exchange Act of 1934, as in
effect on September 1, 1997.
(c) a "Change in Control" shall be deemed to have occurred if
(i) any Person is or becomes the Beneficial Owner of securities of the
Company representing fifty-one percent (51%) or more of the Voting
Power (as defined in Section 1(f) hereof), (ii) there shall occur a
change in the composition of a majority of the Board which change
shall not have been approved by a majority of the Board as constituted
immediately prior to such change in composition, (ii) at any meeting
of the shareholders of the Company called for the purpose of electing
directors, more than one of the persons nominated by the Board for
election as directors shall fail to be elected, or (iv) the
consummation of a merger, consolidation, sale of substantially all
assets or other reorganization of the Company, other than a
reincorporation, in which the Company does not survive.
(d) "Earnings" shall mean the total of (i) the base salary paid
by the Company to the Employee during the twelve month period
preceding the Bonus Vesting Date from the Company without giving
effect to any reduction thereof that may have been made without the
Employee's consent; and (ii) the amount of Company contributions
consistent with the Company's past practices which would have been
made on the Employee's behalf in respect of such base salary had he
continued to participate in the Company's Employee Retirement Plan for
one (1) full plan year.
(e) "Person" shall have the meaning set forth in Sections
3(a)(9) and 13(d)(3) of the Securities Exchange Act of 1934, as in
effect on September 1, 1997.
(f) "Voting Power" shall mean the voting power of the
outstanding securities of the Company having the right under ordinary
circumstances to vote at an election of the Board.
2. Services During Certain Events. If the Employee remains in
continuous employment for the Company from the date hereof until either (a)
an Asset Acquisition is consummated, (b) a Change in Control occurs or (c)
the Employee s employment with the Company is terminated by the Company for
a reason other than Cause (with the earliest of such event to occur being
referred to herein as the Bonus Vesting Date ), then the Employee shall be
entitled to receive a bonus in the amount determined pursuant to Section 3
-51-
<PAGE> 52
hereof.
3. Payment of Bonus.
(a) The Company agrees that the Employee shall be paid a bonus
by the Company within ten (10) days following the Bonus Vesting Date
in an amount equal to 2 times the Employee s Earnings (as such term is
defined below).
(b) Other Benefit Plans. The bonus provided for in this
Agreement is not intended to require or to exclude the Employee's
continued participation in other benefit plans in which the Employee
currently participates or which are available to the Company s
personnel generally in the class or category of the Employee or to
preclude other compensation or benefits as may be authorized by the
Board from time to time.
4. Conditions to the Obligations of the Company. The Company shall
have no obligation to pay or cause to be paid to the Employee the bonus
described herein (a) if the Company shall terminate the Employee's
employment for (i) dishonesty, (ii) conviction of a felony, or (iii) the
continued failure by the Employee to perform the duties assigned to the
Employee that are consistent with the position of the Employee with the
Company (termination for "Cause") or (b) if the Employee dies, becomes
disabled, retires or voluntarily terminates his employment with the Company
prior to the Bonus Vesting Date.
5. Confidentiality.
(a) Confidentiality. The Employee agrees that at all times
following the execution hereof, the Employee will not without the
prior written consent of the Company, disclose to any person, firm or
corporation any confidential information of the Company or its
subsidiaries which is now known to the Employee or which hereafter may
become known to the Employee as a result of his employment or
association with the Company and which could be helpful to a
competitor, unless such disclosure is required under the terms of a
valid and effective subpoena or order issued by a court or
governmental body; provided, however, that the foregoing shall not
apply to confidential information which becomes publicly disseminated
by means other than a breach of this Agreement.
(b) Remedies for Breach. It is recognized that damages in the
event of breach of this Section 5 by the Employee would be difficult,
if not impossible, to ascertain, and it is therefore agreed that the
Company, in addition to and without limiting any other remedy or right
it may have, shall have the right to an injunction or other equitable
relief in any court of competent jurisdiction enjoining any such
breach, and the Employee hereby waives any and all defenses the
Employee may have on the ground of lack of jurisdiction or competence
of the court to grant such an injunction or other equitable relief.
The existence of this right shall not preclude the Company from
pursuing any other rights and remedies at law or in equity which the
Company may have.
-52-
<PAGE> 53
6. Reduction in Payments. Notwithstanding the provisions of Section
3(a) hereof in no event shall any payment to be made under Section 3(a)
exceed $1.00 less than three times the Employee's "Base Amount" within the
meaning of Section 280G of the Internal Revenue Code of 1986, as amended
(the "Code"). If any portion of the payments or benefits to be made
available to the Employee pursuant to Section 3 would be considered an
"Excess Parachute Payment" within the meaning of Section 28OG of the Code,
the amount of cash otherwise payable to the Employee pursuant to Section
3(a) hereof shall be reduced to the extent (but only to the extent)
necessary to cause no portion of the payments or benefits made available to
the Employee pursuant to Section 3 hereof to be considered an Excess
Parachute Payment within the meaning of Section 28OG of the Code. Arthur
Andersen LLP or such other accounting firm that may be agreed upon by the
Company and the Employee (the Accounting Firm") shall determine the
Employee's Base Amount and the amount of any Excess Parachute Payments for
purposes of this Section 6. All determinations made by the Accounting Firm
shall be made within 60 days of the Bonus Vesting Date and shall be binding
on the Company and the Employee. All fees and expenses of the Accounting
Firm shall be borne solely by the Company.
7. Term of Agreement. Unless terminated earlier as a result of
Employee s termination of employment with the Company, this Agreement shall
remain in full force and effect through December 31, 1998, and, beginning
each January lst thereafter, this Agreement shall be automatically extended
for additional one (1) year periods, unless by September 30th of any year
the Company gives notice that this Agreement will not be so extended.
8. Miscellaneous.
(a) Assignment. No right, benefit or interest hereunder shall
be subject to assignment, anticipation, alienation, sale, encumbrance,
charge, pledge, hypothecation or set-off in respect of any claim, debt
or obligation, or to execution, attachment, levy or similar process;
provided, however, that the Employee may assign any right, benefit or
interest hereunder if such assignment is permitted under the terms of
any plan or policy of insurance or annuity contract governing such
right, benefit or interest.
(b) Construction of Agreement. Except as expressly provided
herein, nothing in this Agreement shall be construed to amend any
provision of any plan or policy of the Company. This Agreement is not
and nothing herein shall be deemed to create, a commitment of
continued employment of the Employee by the Company. The benefits
provided under this Agreement shall be in addition to any other
compensation agreement or arrangement that the Company may have with
the Employee.
(c) Amendment. This Agreement may not be amended, modified or
canceled except by written agreement of the Company and the Employee.
-53-
<PAGE> 54
(d) Waiver. No provision of this Agreement may be waived except
by a writing signed by the party to be bound thereby.
(e) Severability. In the event that any provision or portion of
this Agreement shall be determined to be invalid or unenforceable for
any reason, the remaining provisions of this Agreement shall remain in
full force and effect to the fullest extent permitted by law.
(f) Successors.
(i) The Company will require any successor, whether direct
or indirect, by purchase, merger, consolidation or otherwise, to
all or substantially all of the business and/or assets of the
Company to expressly assume and agree to perform this Agreement
in the same manner and to the same extent that the Company would
be required to perform it if no such succession had taken place.
(ii) This Agreement shall inure to the benefit of, and be
enforceable by, the Employee's personal or legal representatives,
executors, administrators, successors, heirs, distributees,
devisees and legates. If the Employee dies after the Bonus
Vesting Date but prior to the receipt of the bonus payable
hereunder with respect to events occurring prior to death, such
bonus shall be paid pursuant to the last beneficiary designation
executed by the Employee and filed with the Company. If no
beneficiary form has been filed with respect to this Agreement,
the bonus shall be paid to the Employee's estate.
(g) Taxes. Any payment or delivery required under this
Agreement shall be subject to all requirements of the law with regard
to withholding of taxes, filing, making of reports and the like, and
the Company shall use its best efforts to satisfy promptly all such
requirements.
(h) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, WITHOUT
GIVING EFFECT TO ITS CONFLICTS OF LAWS PRINCIPLES.
(i) Not Contract of Employment. Subject to the provisions
of Section 3 of this Agreement, the entering into of this Agreement
shall not be deemed to be a contract of employment between the Company
and the Employee, or to be consideration for the employment of the
Employee, and nothing herein contained shall be deemed to give the
Employee the right to be retained in the employ of the Company or to
restrict the right of the Company to discharge the Employee at any
time.
(j) Gender. Wherever in this instrument words are used in the
masculine or neuter gender, they shall be read and construed as in the
masculine, feminine or neuter gender wherever they would so apply, and
vice versa. Wherever words appear in the singular or plural, they
shall be read and construed as in the plural or singular,
respectively, wherever they would so apply.
-54-
<PAGE> 55
(k) Headings. The headings of the Sections herein are included
solely for reference convenience, and shall not in any way affect the
meaning or interpretation of the Agreement.
(1) Entire Agreement. This Agreement sets forth the entire
agreement and understanding of the parties hereto with respect to the
matters covered hereby.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
TMBR/SHARP DRILLING, INC.
By:
Thomas C. Brown
Chairman of the Board of Directors
EMPLOYEE
Don H. Lawson
i:\pbooker\jma\tmbr sharp\officer bonus agreement
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<PAGE> 56
Exhibit 10.7
TMBR/SHARP DRILLING, INC.
BONUS AGREEMENT
FOR OFFICERS AND SUPERINTENDENTS
Agreement (the Agreement ), dated as of October 2, 1997 between
TMBR/SHARP DRILLING, INC., a Texas corporation (the "Company"), and
JEFFREY D. PHILLIPS ( Employee ).
RECITATIONS
The Company may seek to sell a significant portions of the operating
assets of the Company (an Asset Acquisition" as defined in Section 1(a)
hereof) to another Person (as defined in Section 1(e) hereof) or the
Company may enter into a transaction which could involve a Change in
Control (as defined in Section 1(c) hereof) or the Company may otherwise
become subject to a proposed or threatened Change in Control; and
The Board of Directors of the Company (the Board ) has determined
that it is imperative that the Company and the Board be able to rely upon
the Employee to continue in the Employee s position as Vice President-
Production of the Company, and that the Company be able to receive and rely
upon the Employee's services and advice, if requested, as to the best
interests of the Company and its shareholders without concern that the
Employee might be distracted by the personal uncertainties and risks
created by any such proposed Asset Acquisition or Change in Control;
The Board has authorized the Company to enter into a bonus agreement
in the form hereof with the Employee;
NOW, THEREFORE, to assure the Company that it will have the continued
dedication of the Employee and the availability of the Employee's services,
advice and counsel notwithstanding the anticipated consummation of any
transactions contemplated by an Asset Acquisition or the possibility,
threat or occurrence of a Change of Control, and to induce the Employee to
remain in the employ of the Company, and for other good and valuable
consideration, the Company and the Employee agree as follows:
-56-
<PAGE> 57
1. Certain Definitions. For purposes of this Agreement:
(a) an Asset Acquisition" shall be deemed to have occurred if
any Person, or a group or groups of related or unrelated Persons
acquires more than fifty-one percent (51%) in value of the assets of
the Company pursuant to one or more transactions with the Company
during the term of this Agreement.
(b) "Beneficial Owner" shall have the meaning set forth in Rules
13d-3 and 13d-5 under the Securities Exchange Act of 1934, as in
effect on September 1, 1997.
(c) a "Change in Control" shall be deemed to have occurred if
(i) any Person is or becomes the Beneficial Owner of securities of the
Company representing fifty-one percent (51%) or more of the Voting
Power (as defined in Section 1(f) hereof), (ii) there shall occur a
change in the composition of a majority of the Board which change
shall not have been approved by a majority of the Board as constituted
immediately prior to such change in composition, (ii) at any meeting
of the shareholders of the Company called for the purpose of electing
directors, more than one of the persons nominated by the Board for
election as directors shall fail to be elected, or (iv) the
consummation of a merger, consolidation, sale of substantially all
assets or other reorganization of the Company, other than a
reincorporation, in which the Company does not survive.
(d) "Earnings" shall mean the total of (i) the base salary paid
by the Company to the Employee during the twelve month period
preceding the Bonus Vesting Date from the Company without giving
effect to any reduction thereof that may have been made without the
Employee's consent; and (ii) the amount of Company contributions
consistent with the Company's past practices which would have been
made on the Employee's behalf in respect of such base salary had he
continued to participate in the Company's Employee Retirement Plan for
one (1) full plan year.
(e) "Person" shall have the meaning set forth in Sections
3(a)(9) and 13(d)(3) of the Securities Exchange Act of 1934, as in
effect on September 1, 1997.
(f) "Voting Power" shall mean the voting power of the
outstanding securities of the Company having the right under ordinary
circumstances to vote at an election of the Board.
2. Services During Certain Events. If the Employee remains in
continuous employment for the Company from the date hereof until either (a)
an Asset Acquisition is consummated, (b) a Change in Control occurs or (c)
the Employee s employment with the Company is terminated by the Company for
a reason other than Cause (with the earliest of such event to occur being
referred to herein as the Bonus Vesting Date ), then the Employee shall be
entitled to receive a bonus in the amount determined pursuant to Section 3
-57-
<PAGE> 58
hereof.
3. Payment of Bonus.
(a) The Company agrees that the Employee shall be paid a bonus
by the Company within ten (10) days following the Bonus Vesting Date
in an amount equal to 2 times the Employee s Earnings (as such term is
defined below).
(b) Other Benefit Plans. The bonus provided for in this
Agreement is not intended to require or to exclude the Employee's
continued participation in other benefit plans in which the Employee
currently participates or which are available to the Company s
personnel generally in the class or category of the Employee or to
preclude other compensation or benefits as may be authorized by the
Board from time to time.
4. Conditions to the Obligations of the Company. The Company shall
have no obligation to pay or cause to be paid to the Employee the bonus
described herein (a) if the Company shall terminate the Employee's
employment for (i) dishonesty, (ii) conviction of a felony, or (iii) the
continued failure by the Employee to perform the duties assigned to the
Employee that are consistent with the position of the Employee with the
Company (termination for "Cause") or (b) if the Employee dies, becomes
disabled, retires or voluntarily terminates his employment with the Company
prior to the Bonus Vesting Date.
5. Confidentiality.
(a) Confidentiality. The Employee agrees that at all times
following the execution hereof, the Employee will not without the
prior written consent of the Company, disclose to any person, firm or
corporation any confidential information of the Company or its
subsidiaries which is now known to the Employee or which hereafter may
become known to the Employee as a result of his employment or
association with the Company and which could be helpful to a
competitor, unless such disclosure is required under the terms of a
valid and effective subpoena or order issued by a court or
governmental body; provided, however, that the foregoing shall not
apply to confidential information which becomes publicly disseminated
by means other than a breach of this Agreement.
(b) Remedies for Breach. It is recognized that damages in the
event of breach of this Section 5 by the Employee would be difficult,
if not impossible, to ascertain, and it is therefore agreed that the
Company, in addition to and without limiting any other remedy or right
it may have, shall have the right to an injunction or other equitable
relief in any court of competent jurisdiction enjoining any such
breach, and the Employee hereby waives any and all defenses the
Employee may have on the ground of lack of jurisdiction or competence
of the court to grant such an injunction or other equitable relief.
The existence of this right shall not preclude the Company from
pursuing any other rights and remedies at law or in equity which the
Company may have.
-58-
<PAGE> 59
6. Reduction in Payments. Notwithstanding the provisions of Section
3(a) hereof in no event shall any payment to be made under Section 3(a)
exceed $1.00 less than three times the Employee's "Base Amount" within the
meaning of Section 280G of the Internal Revenue Code of 1986, as amended
(the "Code"). If any portion of the payments or benefits to be made
available to the Employee pursuant to Section 3 would be considered an
"Excess Parachute Payment" within the meaning of Section 28OG of the Code,
the amount of cash otherwise payable to the Employee pursuant to Section
3(a) hereof shall be reduced to the extent (but only to the extent)
necessary to cause no portion of the payments or benefits made available to
the Employee pursuant to Section 3 hereof to be considered an Excess
Parachute Payment within the meaning of Section 28OG of the Code. Arthur
Andersen LLP or such other accounting firm that may be agreed upon by the
Company and the Employee (the Accounting Firm") shall determine the
Employee's Base Amount and the amount of any Excess Parachute Payments for
purposes of this Section 6. All determinations made by the Accounting Firm
shall be made within 60 days of the Bonus Vesting Date and shall be binding
on the Company and the Employee. All fees and expenses of the Accounting
Firm shall be borne solely by the Company.
7. Term of Agreement. Unless terminated earlier as a result of
Employee s termination of employment with the Company, this Agreement shall
remain in full force and effect through December 31, 1998, and, beginning
each January lst thereafter, this Agreement shall be automatically extended
for additional one (1) year periods, unless by September 30th of any year
the Company gives notice that this Agreement will not be so extended.
8. Miscellaneous.
(a) Assignment. No right, benefit or interest hereunder shall
be subject to assignment, anticipation, alienation, sale, encumbrance,
charge, pledge, hypothecation or set-off in respect of any claim, debt
or obligation, or to execution, attachment, levy or similar process;
provided, however, that the Employee may assign any right, benefit or
interest hereunder if such assignment is permitted under the terms of
any plan or policy of insurance or annuity contract governing such
right, benefit or interest.
(b) Construction of Agreement. Except as expressly provided
herein, nothing in this Agreement shall be construed to amend any
provision of any plan or policy of the Company. This Agreement is not
and nothing herein shall be deemed to create, a commitment of
continued employment of the Employee by the Company. The benefits
provided under this Agreement shall be in addition to any other
compensation agreement or arrangement that the Company may have with
the Employee.
(c) Amendment. This Agreement may not be amended, modified or
canceled except by written agreement of the Company and the Employee.
-59-
<PAGE> 60
(d) Waiver. No provision of this Agreement may be waived except
by a writing signed by the party to be bound thereby.
(e) Severability. In the event that any provision or portion of
this Agreement shall be determined to be invalid or unenforceable for
any reason, the remaining provisions of this Agreement shall remain in
full force and effect to the fullest extent permitted by law.
(f) Successors.
(i) The Company will require any successor, whether direct
or indirect, by purchase, merger, consolidation or otherwise, to
all or substantially all of the business and/or assets of the
Company to expressly assume and agree to perform this Agreement
in the same manner and to the same extent that the Company would
be required to perform it if no such succession had taken place.
(ii) This Agreement shall inure to the benefit of, and be
enforceable by, the Employee's personal or legal representatives,
executors, administrators, successors, heirs, distributees,
devisees and legates. If the Employee dies after the Bonus
Vesting Date but prior to the receipt of the bonus payable
hereunder with respect to events occurring prior to death, such
bonus shall be paid pursuant to the last beneficiary designation
executed by the Employee and filed with the Company. If no
beneficiary form has been filed with respect to this Agreement,
the bonus shall be paid to the Employee's estate.
(g) Taxes. Any payment or delivery required under this
Agreement shall be subject to all requirements of the law with regard
to withholding of taxes, filing, making of reports and the like, and
the Company shall use its best efforts to satisfy promptly all such
requirements.
(h) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, WITHOUT
GIVING EFFECT TO ITS CONFLICTS OF LAWS PRINCIPLES.
(i) Not Contract of Employment. Subject to the provisions
of Section 3 of this Agreement, the entering into of this Agreement
shall not be deemed to be a contract of employment between the Company
and the Employee, or to be consideration for the employment of the
Employee, and nothing herein contained shall be deemed to give the
Employee the right to be retained in the employ of the Company or to
restrict the right of the Company to discharge the Employee at any
time.
(j) Gender. Wherever in this instrument words are used in the
masculine or neuter gender, they shall be read and construed as in the
masculine, feminine or neuter gender wherever they would so apply, and
vice versa. Wherever words appear in the singular or plural, they
shall be read and construed as in the plural or singular,
respectively, wherever they would so apply.
-60-
<PAGE> 61
(k) Headings. The headings of the Sections herein are included
solely for reference convenience, and shall not in any way affect the
meaning or interpretation of the Agreement.
(1) Entire Agreement. This Agreement sets forth the entire
agreement and understanding of the parties hereto with respect to the
matters covered hereby. IN WITNESS WHEREOF, the parties have executed
this Agreement as of the date first above written.
TMBR/SHARP DRILLING, INC.
By:
Thomas C. Brown
Chairman of the Board of Directors
EMPLOYEE
Jeffrey D. Phillips
i:]pbooker\jma\tmbr\ sharp\officer bonus agreement
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<PAGE> 62
Exhibit 10.8
TMBR/SHARP DRILLING, INC.
KEY EMPLOYEE BONUS AGREEMENT
Key Employee Bonus Agreement (the Agreement ), dated as of October 3,
1997 between TMBR/SHARP DRILLING, INC., a Texas corporation (the
"Company"), and ________________ ( Employee ).
RECITATIONS
The Company may seek to sell a significant portions of the operating
assets of the Company (an Asset Acquisition" as defined in Section 1(a)
hereof) to another Person (as defined in Section 1(e) hereof) or the
Company may enter into a transaction which could involve a Change in
Control (as defined in Section 1(c) hereof) or the Company may otherwise
become subject to a proposed or threatened Change in Control; and
The Board of Directors of the Company (the Board ) has determined
that it is imperative that the Company and the Board be able to rely upon
the Employee to continue in the Employee s position with the Company, and
that the Company be able to receive and rely upon the Employee's services
and advice, if requested, as to the best interests of the Company and its
shareholders without concern that the Employee might be distracted by the
personal uncertainties and risks created by any such proposed Asset
Acquisition or Change in Control;
The Board has authorized the Company to enter into a bonus agreement
in the form hereof with the Employee;
NOW, THEREFORE, to assure the Company that it will have the continued
dedication of the Employee and the availability of the Employee's services,
advice and counsel notwithstanding the anticipated consummation of any
transactions contemplated by an Asset Acquisition or the possibility,
threat or occurrence of a Change of Control, and to induce the Employee to
remain in the employ of the Company, and for other good and valuable
consideration, the Company and the Employee agree as follows:
-62-
<PAGE> 63
1. Certain Definitions. For purposes of this Agreement:
(a) an Asset Acquisition" shall be deemed to have occurred if
any Person, or a group or groups of related or unrelated Persons
acquires more than fifty-one percent (51%) in value of the assets of
the Company pursuant to one or more transactions with the Company
during the term of this Agreement.
(b) "Beneficial Owner" shall have the meaning set forth in Rules
13d-3 and 13d-5 under the Securities Exchange Act of 1934, as in
effect on September 1, 1997.
(c) a "Change in Control" shall be deemed to have occurred if
(i) any Person is or becomes the Beneficial Owner of securities of the
Company representing fifty-one percent (51%) or more of the Voting
Power (as defined in Section 1(f) hereof, (ii) there shall occur a
change in the composition of a majority of the Board which change
shall not have been approved by a majority of the Board as constituted
immediately prior to such change in composition, (iii) at any meeting
of the shareholders of the Company called for the purpose of electing
directors, more than one of the persons nominated by the Board for
election as directors shall fail to be elected, or (vi) the
consummation of a merger, consolidation, sale of substantially all
assets or other reorganization of the Company, other than a
reincorporation, in which the Company does not survive.
(d) "Earnings" shall mean the total of (i) the base salary paid
by the Company to the Employee during the twelve month period
preceding the Bonus Vesting Date from the Company without giving
effect to any reduction thereof that may have been made without the
Employee's consent; and (ii) the amount of Company contributions
consistent with the Company's past practices which would have been
made on the Employee's behalf in respect of such base salary had he
continued to participate in the Company's Employee Retirement Plan for
one (1) full plan year.
(e) "Person" shall have the meaning set forth in Sections
3(a)(9) and 13(d)(3) of the Securities Exchange Act of 1934, as in
effect on September 1, 1997.
(f) "Voting Power" shall mean the voting power of the
outstanding securities of the Company having the right under ordinary
circumstances to vote at an election of the Board.
2. Services During Certain Events. If the Employee remains in the
continuous employment of the Company from the date hereof until either (a)
an Asset Acquisition is consummated, (b) a Change in Control occurs or (c)
the Employee s employment with the Company is terminated by the Company for
a reason other than Cause (with the earliest of such event to occur being
referred to herein as the Bonus Vesting Date ), then the Employee shall be
entitled to receive a bonus in the amount determined pursuant to Section 3
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hereof.
3. Payment of Bonus.
(a) The Company agrees that the Employee shall be paid a bonus
by the Company within ten (10) days following the Bonus Vesting Date
in an amount equal to one times the Employee s Earnings (as such term
is defined below) multiplied by a percentage determined by the number
of years the Employee has been employed by the Company as of the Bonus
Vesting Date, with such percentage to be determined in accordance with
the following:
If Employee's employment with the Company has been less than
one year - 10 percent
If Employee's employment with the Company has been more than
one year but less than two years - 20 percent
If Employee's employment with the Company has been more than
two years but less than three years - 30 percent
If Employee's employment with the Company has been more than
three years but less than four years - 40 percent
If Employee's employment with the Company has been more than
four years but less than five years - 50 percent
If Employee's employment with the Company has been more than
five years but less than six years - 60 percent
If Employee's employment with the Company has been more than
six years but less than seven years - 70 percent
If Employee's employment with the Company has been more than
seven years but less than eight years - 80 percent
If Employee's employment with the Company has been more than
eight years but less than nine years - 90 percent
If Employee's employment with the Company has been more than
nine years - 100%
(b) Other Benefit Plans. The bonus provided for in this
Agreement is not intended to require or to exclude the Employee's
continued participation in other benefit plans in which the Employee
currently participates or which are available to the Company s
personnel generally in the class or category of the Employee or to
preclude other compensation or benefits as may be authorized by the
Board from time to time.
4. Conditions to the Obligations of the Company. The Company shall
have no obligation to pay or cause to be paid to the Employee the bonus
described herein (a) if the Company shall terminate the Employee's
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<PAGE> 65
employment for (i) dishonesty, (ii) conviction of a felony, or (iii) the
continued failure by the Employee to perform the duties assigned to the
Employee that are consistent with the position of the Employee with the
Company (termination for "Cause") or (b) if the Employee dies, becomes
disabled, retires or voluntarily terminates his employment with the Company
prior to the Bonus Vesting Date.
5. Confidentiality.
(a) Confidentiality. The Employee agrees that at all times
following the execution hereof, the Employee will not without the
prior written consent of the Company, disclose to any person, firm or
corporation any confidential information of the Company or its
subsidiaries which is now known to the Employee or which hereafter may
become known to the Employee as a result of his employment or
association with the Company and which could be helpful to a
competitor, unless such disclosure is required under the terms of a
valid and effective subpoena or order issued by a court or
governmental body; provided, however, that the foregoing shall not
apply to confidential information which becomes publicly disseminated
by means other than a breach of this Agreement.
(b) Remedies for Breach. It is recognized that damages in the
event of breach of this Section 5 by the Employee would be difficult,
if not impossible, to ascertain, and it is therefore agreed that the
Company, in addition to and without limiting any other remedy or right
it may have, shall have the right to an injunction or other equitable
relief in any court of competent jurisdiction enjoining any such
breach, and the Employee hereby waives any and all defenses the
Employee may have on the ground of lack of jurisdiction or competence
of the court to grant such an injunction or other equitable relief.
The existence of this right shall not preclude the Company from
pursuing any other rights and remedies at law or in equity which the
Company may have.
6. Reduction in Payments. Notwithstanding the provisions of Section
3(a) hereof in no event shall any payment to be made under Section 3(a)
exceed $1.00 less than three times the Employee's "Base Amount" within the
meaning of Section 280G of the Internal Revenue Code of 1986, as amended
(the "Code"). If any portion of the payments or benefits to be made
available to the Employee pursuant to Section 3 would be considered an
"Excess Parachute Payment" within the meaning of Section 28OG of the Code,
the amount of cash otherwise payable to the Employee pursuant to Section
3(a) hereof shall be reduced to the extent (but only to the extent)
necessary to cause no portion of the payments or benefits made available to
the Employee pursuant to Section 3 hereof to be considered an Excess
Parachute Payment within the meaning of Section 28OG of the Code. Arthur
Andersen LLP or such other accounting firm that may be agreed upon by the
Company and the Employee (the Accounting Firm") shall determine the
Employee's Base Amount and the amount of any Excess Parachute Payments for
purposes of this Section 6. All determinations made by the Accounting Firm
shall be made within 60 days of the Bonus Vesting Date and shall be binding
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<PAGE> 66
on the Company and the Employee. All fees and expenses of the Accounting
Firm shall be borne solely by the Company.
7. Term of Agreement. Unless terminated earlier as a result of
Employee s termination of employment with the Company, this Agreement shall
remain in full force and effect through December 31, 1998, and, beginning
each January lst thereafter, this Agreement shall be automatically extended
for additional one (1) year periods, unless by September 30th of any year
the Company gives notice that this Agreement will not be so extended.
8. Miscellaneous.
(a) Assignment. No right, benefit or interest hereunder shall
be subject to assignment, anticipation, alienation, sale, encumbrance,
charge, pledge, hypothecation or set-off in respect of any claim, debt
or obligation, or to execution, attachment, levy or similar process;
provided, however, that the Employee may assign any right, benefit or
interest hereunder if such assignment is permitted under the terms of
any plan or policy of insurance or annuity contract governing such
right, benefit or interest.
(b) Construction of Agreement. Except as expressly provided
herein, nothing in this Agreement shall be construed to amend any
provision of any plan or policy of the Company. This Agreement is not
and nothing herein shall be deemed to create, a commitment of
continued employment of the Employee by the Company. The benefits
provided under this Agreement shall be in addition to any other
compensation agreement or arrangement that the Company may have with
the Employee.
(c) Amendment. This Agreement may not be amended, modified or
canceled except by written agreement of the Company and the Employee.
(d) Waiver. No provision of this Agreement may be waived except
by a writing signed by the party to be bound thereby.
(e) Severability. In the event that any provision or portion of
this Agreement shall be determined to be invalid or unenforceable for
any reason, the remaining provisions of this Agreement shall remain in
full force and effect to the fullest extent permitted by law.
(f) Successors.
(i) The Company will require any successor, whether direct
or indirect, by purchase, merger, consolidation or otherwise, to
all or substantially all of the business and/or assets of the
Company to expressly assume and agree to perform this Agreement
in the same manner and to the same extent that the Company would
be required to perform it if no such succession had taken place.
(ii) This Agreement shall inure to the benefit of, and be
enforceable by, the Employee's personal or legal representatives,
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<PAGE> 67
executors, administrators, successors, heirs, distributees,
devisees and legates. If the Employee dies after the Bonus
Vesting Date but prior to the receipt of the bonus payable
hereunder with respect to events occurring prior to death, such
bonus shall be paid pursuant to the last beneficiary designation
executed by the Employee and filed with the Company. If no
beneficiary form has been filed with respect to this Agreement,
the bonus shall be paid to the Employee's estate.
(g) Taxes. Any payment or delivery required under this
Agreement shall be subject to all requirements of the law with regard
to withholding of taxes, filing, making of reports and the like, and
the Company shall use its best efforts to satisfy promptly all such
requirements.
(h) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, WITHOUT
GIVING EFFECT TO ITS CONFLICTS OF LAWS PRINCIPLES.
(i) Not Contract of Employment. Subject to the provisions
of Section 1 of this Agreement, the entering into of this Agreement
shall not be deemed to be a contract of employment between the Company
and the Employee, or to be consideration for the employment of the
Employee, and nothing herein contained shall be deemed to give the
Employee the right to be retained in the employ of the Company or to
restrict the right of the Company to discharge the Employee at any
time.
(j) Gender. Wherever in this instrument words are used in the
masculine or neuter gender, they shall be read and construed as in the
masculine, feminine or neuter gender wherever they would so apply, and
vice versa. Wherever words appear in the singular or plural, they
shall be read and construed as in the plural or singular,
respectively, wherever they would so apply.
(k) Headings. The headings of the Sections herein are included
solely for reference convenience, and shall not in any way affect the
meaning or interpretation of the Agreement.
(1) Entire Agreement. This Agreement sets forth the entire
agreement and understanding of the parties hereto with respect to the
matters covered hereby.
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<PAGE> 68
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
TMBR/SHARP DRILLING, INC.
By:______________________________
Joe G. Roper, President
KEY EMPLOYEE
_________________________________
Employee Signature
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<PAGE> 69
Exhibit 10.9
TMBR/SHARP DRILLING, INC.
BONUS AGREEMENT
FOR OFFICERS AND SUPERINTENDENTS
Agreement (the Agreement ), dated as of October 3, 1997 between
TMBR/SHARP DRILLING, INC., a Texas corporation (the "Company"), and
__________________ ( Employee ).
RECITATIONS
The Company may seek to sell a significant portions of the operating
assets of the Company (an Asset Acquisition" as defined in Section 1(a)
hereof) to another Person (as defined in Section 1(e) hereof) or the
Company may enter into a transaction which could involve a Change in
Control (as defined in Section 1(c) hereof) or the Company may otherwise
become subject to a proposed or threatened Change in Control; and
The Board of Directors of the Company (the Board ) has determined
that it is imperative that the Company and the Board be able to rely upon
the Employee to continue in the Employee s position as a Superintendent of
the Company, and that the Company be able to receive and rely upon the
Employee's services and advice, if requested, as to the best interests of
the Company and its shareholders without concern that the Employee might be
distracted by the personal uncertainties and risks created by any such
proposed Asset Acquisition or Change in Control;
The Board has authorized the Company to enter into a bonus agreement
in the form hereof with the Employee;
NOW, THEREFORE, to assure the Company that it will have the continued
dedication of the Employee and the availability of the Employee's services,
advice and counsel notwithstanding the anticipated consummation of any
transactions contemplated by an Asset Acquisition or the possibility,
threat or occurrence of a Change of Control, and to induce the Employee to
remain in the employ of the Company, and for other good and valuable
consideration, the Company and the Employee agree as follows:
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<PAGE> 70
1. Certain Definitions. For purposes of this Agreement:
(a) an Asset Acquisition" shall be deemed to have occurred if
any Person, or a group or groups of related or unrelated Persons
acquires more than fifty-one percent (51%) in value of the assets of
the Company pursuant to one or more transactions with the Company
during the term of this Agreement.
(b) "Beneficial Owner" shall have the meaning set forth in Rules
13d-3 and 13d-5 under the Securities Exchange Act of 1934, as in
effect on September 1, 1997.
(c) a "Change in Control" shall be deemed to have occurred if
(i) any Person is or becomes the Beneficial Owner of securities of the
Company representing fifty-one percent (51%) or more of the Voting
Power (as defined in Section 1(f) hereof), (ii) there shall occur a
change in the composition of a majority of the Board which change
shall not have been approved by a majority of the Board as constituted
immediately prior to such change in composition, (ii) at any meeting
of the shareholders of the Company called for the purpose of electing
directors, more than one of the persons nominated by the Board for
election as directors shall fail to be elected, or (iv) the
consummation of a merger, consolidation, sale of substantially all
assets or other reorganization of the Company, other than a
reincorporation, in which the Company does not survive.
(d) "Earnings" shall mean the total of (i) the base salary paid
by the Company to the Employee during the twelve month period
preceding the Bonus Vesting Date from the Company without giving
effect to any reduction thereof that may have been made without the
Employee's consent; and (ii) the amount of Company contributions
consistent with the Company's past practices which would have been
made on the Employee's behalf in respect of such base salary had he
continued to participate in the Company's Employee Retirement Plan for
one (1) full plan year.
(e) "Person" shall have the meaning set forth in Sections
3(a)(9) and 13(d)(3) of the Securities Exchange Act of 1934, as in
effect on September 1, 1997.
(f) "Voting Power" shall mean the voting power of the
outstanding securities of the Company having the right under ordinary
circumstances to vote at an election of the Board.
2. Services During Certain Events. If the Employee remains in
continuous employment as a superintendent for the Company from the date
hereof until either (a) an Asset Acquisition is consummated, (b) a Change
in Control occurs or (c) the Employee s employment with the Company is
terminated by the Company for a reason other than Cause (with the earliest
of such event to occur being referred to herein as the Bonus Vesting
Date ), then the Employee shall be entitled to receive a bonus in the
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<PAGE> 71
amount determined pursuant to Section 3 hereof.
3. Payment of Bonus.
(a) The Company agrees that the Employee shall be paid a bonus
by the Company within ten (10) days following the Bonus Vesting Date
in an amount equal to 1.5 times the Employee s Earnings (as such term
is defined below).
(b) Other Benefit Plans. The bonus provided for in this
Agreement is not intended to require or to exclude the Employee's
continued participation in other benefit plans in which the Employee
currently participates or which are available to the Company s
personnel generally in the class or category of the Employee or to
preclude other compensation or benefits as may be authorized by the
Board from time to time.
4. Conditions to the Obligations of the Company. The Company shall
have no obligation to pay or cause to be paid to the Employee the bonus
described herein (a) if the Company shall terminate the Employee's
employment for (i) dishonesty, (ii) conviction of a felony, or (iii) the
continued failure by the Employee to perform the duties assigned to the
Employee that are consistent with the position of the Employee with the
Company (termination for "Cause") or (b) if the Employee dies, becomes
disabled, retires, ceases to be a superintendent for the Company or
voluntarily terminates his employment with the Company prior to the Bonus
Vesting Date.
5. Confidentiality.
(a) Confidentiality. The Employee agrees that at all times
following the execution hereof, the Employee will not without the
prior written consent of the Company, disclose to any person, firm or
corporation any confidential information of the Company or its
subsidiaries which is now known to the Employee or which hereafter may
become known to the Employee as a result of his employment or
association with the Company and which could be helpful to a
competitor, unless such disclosure is required under the terms of a
valid and effective subpoena or order issued by a court or
governmental body; provided, however, that the foregoing shall not
apply to confidential information which becomes publicly disseminated
by means other than a breach of this Agreement.
(b) Remedies for Breach. It is recognized that damages in the
event of breach of this Section 5 by the Employee would be difficult,
if not impossible, to ascertain, and it is therefore agreed that the
Company, in addition to and without limiting any other remedy or right
it may have, shall have the right to an injunction or other equitable
relief in any court of competent jurisdiction enjoining any such
breach, and the Employee hereby waives any and all defenses the
Employee may have on the ground of lack of jurisdiction or competence
of the court to grant such an injunction or other equitable relief.
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<PAGE> 72
The existence of this right shall not preclude the Company from
pursuing any other rights and remedies at law or in equity which the
Company may have.
6. Reduction in Payments. Notwithstanding the provisions of Section
3(a) hereof in no event shall any payment to be made under Section 3(a)
exceed $1.00 less than three times the Employee's "Base Amount" within the
meaning of Section 280G of the Internal Revenue Code of 1986, as amended
(the "Code"). If any portion of the payments or benefits to be made
available to the Employee pursuant to Section 3 would be considered an
"Excess Parachute Payment" within the meaning of Section 28OG of the Code,
the amount of cash otherwise payable to the Employee pursuant to Section
3(a) hereof shall be reduced to the extent (but only to the extent)
necessary to cause no portion of the payments or benefits made available to
the Employee pursuant to Section 3 hereof to be considered an Excess
Parachute Payment within the meaning of Section 28OG of the Code. Arthur
Andersen LLP or such other accounting firm that may be agreed upon by the
Company and the Employee (the Accounting Firm") shall determine the
Employee's Base Amount and the amount of any Excess Parachute Payments for
purposes of this Section 6. All determinations made by the Accounting Firm
shall be made within 60 days of the Bonus Vesting Date and shall be binding
on the Company and the Employee. All fees and expenses of the Accounting
Firm shall be borne solely by the Company.
7. Term of Agreement. Unless terminated earlier as a result of
Employee s termination of employment with the Company, this Agreement shall
remain in full force and effect through December 31, 1998, and, beginning
each January lst thereafter, this Agreement shall be automatically extended
for additional one (1) year periods, unless by September 30th of any year
the Company gives notice that this Agreement will not be so extended.
8. Miscellaneous.
(a) Assignment. No right, benefit or interest hereunder shall
be subject to assignment, anticipation, alienation, sale, encumbrance,
charge, pledge, hypothecation or set-off in respect of any claim, debt
or obligation, or to execution, attachment, levy or similar process;
provided, however, that the Employee may assign any right, benefit or
interest hereunder if such assignment is permitted under the terms of
any plan or policy of insurance or annuity contract governing such
right, benefit or interest.
(b) Construction of Agreement. Except as expressly provided
herein, nothing in this Agreement shall be construed to amend any
provision of any plan or policy of the Company. This Agreement is not
and nothing herein shall be deemed to create, a commitment of
continued employment of the Employee by the Company. The benefits
provided under this Agreement shall be in addition to any other
compensation agreement or arrangement that the Company may have with
the Employee.
(c) Amendment. This Agreement may not be amended, modified or
canceled except by written agreement of the Company and the Employee.
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<PAGE> 73
(d) Waiver. No provision of this Agreement may be waived except
by a writing signed by the party to be bound thereby.
(e) Severability. In the event that any provision or portion of
this Agreement shall be determined to be invalid or unenforceable for
any reason, the remaining provisions of this Agreement shall remain in
full force and effect to the fullest extent permitted by law.
(f) Successors.
(i) The Company will require any successor, whether direct
or indirect, by purchase, merger, consolidation or otherwise, to
all or substantially all of the business and/or assets of the
Company to expressly assume and agree to perform this Agreement
in the same manner and to the same extent that the Company would
be required to perform it if no such succession had taken place.
(ii) This Agreement shall inure to the benefit of, and be
enforceable by, the Employee's personal or legal representatives,
executors, administrators, successors, heirs, distributees,
devisees and legates. If the Employee dies after the Bonus
Vesting Date but prior to the receipt of the bonus payable
hereunder with respect to events occurring prior to death, such
bonus shall be paid pursuant to the last beneficiary designation
executed by the Employee and filed with the Company. If no
beneficiary form has been filed with respect to this Agreement,
the bonus shall be paid to the Employee's estate.
(g) Taxes. Any payment or delivery required under this
Agreement shall be subject to all requirements of the law with regard
to withholding of taxes, filing, making of reports and the like, and
the Company shall use its best efforts to satisfy promptly all such
requirements.
(h) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, WITHOUT
GIVING EFFECT TO ITS CONFLICTS OF LAWS PRINCIPLES.
(i) Not Contract of Employment. Subject to the provisions
of Section 3 of this Agreement, the entering into of this Agreement
shall not be deemed to be a contract of employment between the Company
and the Employee, or to be consideration for the employment of the
Employee, and nothing herein contained shall be deemed to give the
Employee the right to be retained in the employ of the Company or to
restrict the right of the Company to discharge the Employee at any
time.
(j) Gender. Wherever in this instrument words are used in the
masculine or neuter gender, they shall be read and construed as in the
masculine, feminine or neuter gender wherever they would so apply, and
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<PAGE> 74
vice versa. Wherever words appear in the singular or plural, they
shall be read and construed as in the plural or singular,
respectively, wherever they would so apply.
(k) Headings. The headings of the Sections herein are included
solely for reference convenience, and shall not in any way affect the
meaning or interpretation of the Agreement.
(1) Entire Agreement. This Agreement sets forth the entire
agreement and understanding of the parties hereto with respect to the
matters covered hereby.
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the date first above written.
TMBR/SHARP DRILLING, INC.
By:
Thomas C. Brown
Chairman of the Board of Directors
EMPLOYEE
Employee Signature
i:\pbooker\jma\tmbr/sharp\officer bonus agreement
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<PAGE> 75
Exhibit 10.10
TMBR/SHARP DRILLING, INC.
KEY EMPLOYEE BONUS AGREEMENT
Key Employee Bonus Agreement (the Agreement ), dated as of October 3,
1997 between TMBR/SHARP DRILLING, INC., a Texas corporation (the
"Company"), and ________________ ( Employee ).
RECITATIONS
The Company may seek to sell a significant portions of the operating
assets of the Company (an Asset Acquisition" as defined in Section 1(a)
hereof) to another Person (as defined in Section 1(e) hereof) or the
Company may enter into a transaction which could involve a Change in
Control (as defined in Section 1(c) hereof) or the Company may otherwise
become subject to a proposed or threatened Change in Control; and
The Board of Directors of the Company (the Board ) has determined
that it is imperative that the Company and the Board be able to rely upon
the Employee to continue in the Employee s position as a toolpusher with
the Company, and that the Company be able to receive and rely upon the
Employee's services and advice, if requested, as to the best interests of
the Company and its shareholders without concern that the Employee might be
distracted by the personal uncertainties and risks created by any such
proposed Asset Acquisition or Change in Control;
The Board has authorized the Company to enter into a bonus agreement
in the form hereof with the Employee;
NOW, THEREFORE, to assure the Company that it will have the continued
dedication of the Employee and the availability of the Employee's services,
advice and counsel notwithstanding the anticipated consummation of any
transactions contemplated by an Asset Acquisition or the possibility,
threat or occurrence of a Change of Control, and to induce the Employee to
remain in the employ of the Company, and for other good and valuable
consideration, the Company and the Employee agree as follows:
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<PAGE> 76
1. Certain Definitions. For purposes of this Agreement:
(a) an Asset Acquisition" shall be deemed to have occurred if
any Person, or a group or groups of related or unrelated Persons
acquires more than fifty-one percent (51%) in value of the assets of
the Company pursuant to one or more transactions with the Company
during the term of this Agreement.
(b) "Beneficial Owner" shall have the meaning set forth in Rules
13d-3 and 13d-5 under the Securities Exchange Act of 1934, as in
effect on September 1, 1997.
(c) a "Change in Control" shall be deemed to have occurred if
(i) any Person is or becomes the Beneficial Owner of securities of the
Company representing fifty-one percent (51%) or more of the Voting
Power (as defined in Section 1(f) hereof, (ii) there shall occur a
change in the composition of a majority of the Board which change
shall not have been approved by a majority of the Board as constituted
immediately prior to such change in composition, (iii) at any meeting
of the shareholders of the Company called for the purpose of electing
directors, more than one of the persons nominated by the Board for
election as directors shall fail to be elected, or (vi) the
consummation of a merger, consolidation, sale of substantially all
assets or other reorganization of the Company, other than a
reincorporation, in which the Company does not survive.
(d) "Earnings" shall mean the total of (i) the base salary paid
by the Company to the Employee during the twelve month period
preceding the Bonus Vesting Date from the Company without giving
effect to any reduction thereof that may have been made without the
Employee's consent; and (ii) the amount of Company contributions
consistent with the Company's past practices which would have been
made on the Employee's behalf in respect of such base salary had he
continued to participate in the Company's Employee Retirement Plan for
one (1) full plan year.
(e) "Person" shall have the meaning set forth in Sections
3(a)(9) and 13(d)(3) of the Securities Exchange Act of 1934, as in
effect on September 1, 1997.
(f) "Voting Power" shall mean the voting power of the
outstanding securities of the Company having the right under ordinary
circumstances to vote at an election of the Board.
2. Services During Certain Events. If the Employee remains in the
continuous employment as a toolpusher for the Company from the date hereof
until either (a) an Asset Acquisition is consummated, (b) a Change in
Control occurs or (c) the Employee s employment with the Company is
terminated by the Company for a reason other than Cause (with the earliest
of such event to occur being referred to herein as the Bonus Vesting
Date ), then the Employee shall be entitled to receive a bonus in the
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<PAGE> 77
amount determined pursuant to Section 3 hereof.
3. Payment of Bonus.
(a) The Company agrees that the Employee shall be paid a bonus
by the Company within ten (10) days following the Bonus Vesting Date
in an amount equal to one times the Employee s Earnings (as such term
is defined below) multiplied by a percentage determined by the number
of years the Employee has been employed by the Company as a toolpusher
as of the Bonus Vesting Date, with such percentage to be determined in
accordance with the following:
If Employee's employment with the Company as a toolpusher
has been less than one year - 10 percent
If Employee's employment with the Company as a toolpusher
has been more than one year but less than two years - 20
percent
If Employee's employment with the Company as a toolpusher
has been more than two years but less than three years - 30
percent
If Employee's employment with the Company as a toolpusher
has been more than three years but less than four years - 40
percent
If Employee's employment with the Company as a toolpusher
has been more than four years but less than five years - 50
percent
If Employee's employment with the Company as a toolpusher
has been more than five years but less than six years - 60
percent
If Employee's employment with the Company as a toolpusher
has been more than six years but less than seven years - 70
percent
If Employee's employment with the Company as a toolpusher
has been more than seven years but less than eight years -
80 percent
If Employee's employment with the Company as a toolpusher
has been more than eight years but less than nine years - 90
percent
If Employee's employment with the Company as a toolpusher
has been more than nine years - 100%
(b) Other Benefit Plans. The bonus provided for in this
Agreement is not intended to require or to exclude the Employee's
continued participation in other benefit plans in which the Employee
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<PAGE> 78
currently participates or which are available to the Company s
personnel generally in the class or category of the Employee or to
preclude other compensation or benefits as may be authorized by the
Board from time to time.
4. Conditions to the Obligations of the Company. The Company shall
have no obligation to pay or cause to be paid to the Employee the bonus
described herein (a) if the Company shall terminate the Employee's
employment for (i) dishonesty, (ii) conviction of a felony, or (iii) the
continued failure by the Employee to perform the duties assigned to the
Employee that are consistent with the position of the Employee with the
Company (termination for "Cause") or (b) if the Employee dies, becomes
disabled, retires, or ceases to be a toolpusher or voluntarily terminates
his employment with the Company prior to the Bonus Vesting Date.
5. Confidentiality.
(a) Confidentiality. The Employee agrees that at all times
following the execution hereof, the Employee will not without the
prior written consent of the Company, disclose to any person, firm or
corporation any confidential information of the Company or its
subsidiaries which is now known to the Employee or which hereafter may
become known to the Employee as a result of his employment or
association with the Company and which could be helpful to a
competitor, unless such disclosure is required under the terms of a
valid and effective subpoena or order issued by a court or
governmental body; provided, however, that the foregoing shall not
apply to confidential information which becomes publicly disseminated
by means other than a breach of this Agreement.
(b) Remedies for Breach. It is recognized that damages in the
event of breach of this Section 5 by the Employee would be difficult,
if not impossible, to ascertain, and it is therefore agreed that the
Company, in addition to and without limiting any other remedy or right
it may have, shall have the right to an injunction or other equitable
relief in any court of competent jurisdiction enjoining any such
breach, and the Employee hereby waives any and all defenses the
Employee may have on the ground of lack of jurisdiction or competence
of the court to grant such an injunction or other equitable relief.
The existence of this right shall not preclude the Company from
pursuing any other rights and remedies at law or in equity which the
Company may have.
6. Reduction in Payments. Notwithstanding the provisions of Section
3(a) hereof in no event shall any payment to be made under Section 3(a)
exceed $1.00 less than three times the Employee's "Base Amount" within the
meaning of Section 280G of the Internal Revenue Code of 1986, as amended
(the "Code"). If any portion of the payments or benefits to be made
available to the Employee pursuant to Section 3 would be considered an
"Excess Parachute Payment" within the meaning of Section 28OG of the Code,
the amount of cash otherwise payable to the Employee pursuant to Section
3(a) hereof shall be reduced to the extent (but only to the extent)
-78-
<PAGE> 79
necessary to cause no portion of the payments or benefits made available to
the Employee pursuant to Section 3 hereof to be considered an Excess
Parachute Payment within the meaning of Section 28OG of the Code. Arthur
Andersen LLP or such other accounting firm that may be agreed upon by the
Company and the Employee (the Accounting Firm") shall determine the
Employee's Base Amount and the amount of any Excess Parachute Payments for
purposes of this Section 6. All determinations made by the Accounting Firm
shall be made within 60 days of the Bonus Vesting Date and shall be binding
on the Company and the Employee. All fees and expenses of the Accounting
Firm shall be borne solely by the Company.
7. Term of Agreement. Unless terminated earlier as a result of
Employee s termination of employment with the Company, this Agreement shall
remain in full force and effect through December 31, 1998, and, beginning
each January lst thereafter, this Agreement shall be automatically extended
for additional one (1) year periods, unless by September 30th of any year
the Company gives notice that this Agreement will not be so extended.
8. Miscellaneous.
(a) Assignment. No right, benefit or interest hereunder shall
be subject to assignment, anticipation, alienation, sale, encumbrance,
charge, pledge, hypothecation or set-off in respect of any claim, debt
or obligation, or to execution, attachment, levy or similar process;
provided, however, that the Employee may assign any right, benefit or
interest hereunder if such assignment is permitted under the terms of
any plan or policy of insurance or annuity contract governing such
right, benefit or interest.
(b) Construction of Agreement. Except as expressly provided
herein, nothing in this Agreement shall be construed to amend any
provision of any plan or policy of the Company. This Agreement is not
and nothing herein shall be deemed to create, a commitment of
continued employment of the Employee by the Company. The benefits
provided under this Agreement shall be in addition to any other
compensation agreement or arrangement that the Company may have with
the Employee.
(c) Amendment. This Agreement may not be amended, modified or
canceled except by written agreement of the Company and the Employee.
(d) Waiver. No provision of this Agreement may be waived except
by a writing signed by the party to be bound thereby.
(e) Severability. In the event that any provision or portion of
this Agreement shall be determined to be invalid or unenforceable for
any reason, the remaining provisions of this Agreement shall remain in
full force and effect to the fullest extent permitted by law.
(f) Successors.
(i) The Company will require any successor, whether direct
-79-
<PAGE> 80
or indirect, by purchase, merger, consolidation or otherwise, to
all or substantially all of the business and/or assets of the
Company to expressly assume and agree to perform this Agreement
in the same manner and to the same extent that the Company would
be required to perform it if no such succession had taken place.
(ii) This Agreement shall inure to the benefit of, and be
enforceable by, the Employee's personal or legal representatives,
executors, administrators, successors, heirs, distributees,
devisees and legates. If the Employee dies after the Bonus
Vesting Date but prior to the receipt of the bonus payable
hereunder with respect to events occurring prior to death, such
bonus shall be paid pursuant to the last beneficiary designation
executed by the Employee and filed with the Company. If no
beneficiary form has been filed with respect to this Agreement,
the bonus shall be paid to the Employee's estate.
(g) Taxes. Any payment or delivery required under this
Agreement shall be subject to all requirements of the law with regard
to withholding of taxes, filing, making of reports and the like, and
the Company shall use its best efforts to satisfy promptly all such
requirements.
(h) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, WITHOUT
GIVING EFFECT TO ITS CONFLICTS OF LAWS PRINCIPLES.
(i) Not Contract of Employment. Subject to the provisions
of Section 1 of this Agreement, the entering into of this Agreement
shall not be deemed to be a contract of employment between the Company
and the Employee, or to be consideration for the employment of the
Employee, and nothing herein contained shall be deemed to give the
Employee the right to be retained in the employ of the Company or to
restrict the right of the Company to discharge the Employee at any
time.
(j) Gender. Wherever in this instrument words are used in the
masculine or neuter gender, they shall be read and construed as in the
masculine, feminine or neuter gender wherever they would so apply, and
vice versa. Wherever words appear in the singular or plural, they
shall be read and construed as in the plural or singular,
respectively, wherever they would so apply.
(k) Headings. The headings of the Sections herein are included
solely for reference convenience, and shall not in any way affect the
meaning or interpretation of the Agreement.
(1) Entire Agreement. This Agreement sets forth the entire
agreement and understanding of the parties hereto with respect to the
matters covered hereby.
-80-
<PAGE> 81
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
TMBR/SHARP DRILLING, INC.
By:______________________________
Joe G. Roper, President
KEY EMPLOYEE
_________________________________
Employee Signature
i:\pbooker\jma\tmbr sharp\ office bonus agreement
-81-
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