<PAGE> 1
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. ____________)
Filed by the Registrant [ x ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ x ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
TMBR/SHARP DRILLING, INC.
(Name of Registrant as Specified In Its Charter)
________________________________________________________________________
(Name of Person(s) filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (check the appropriate box):
[ x ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how
it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or Schedule
and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
TMBR/SHARP DRILLING, INC.
4607 West Industrial Boulevard
Midland, Texas 79703
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To The Shareholders of
TMBR/Sharp Drilling, Inc.:
The Annual Meeting of Shareholders of TMBR/Sharp Drilling, Inc.
(the "Company"), a Texas corporation, will be held on Tuesday, August 31,
1999, at 10:00 a.m., local time, in the Derrick Room, Midland Petroleum
Club, 501 West Wall, Midland, Texas 79701, for the following purposes:
(1) The election of four Directors to hold office until
the next succeeding annual meeting of shareholders and until
their successors have been duly qualified and elected;
(2) The approval of the TMBR/Sharp Drilling, Inc. 1998
Stock Option Plan; and
(3) The transaction of such other business as may properly
come before the meeting and any adjournments thereof.
The Board of Directors has fixed the close of business on
August 2, 1999 as the record date for the determination of shareholders
entitled to notice of and to vote at the Annual Meeting and any
adjournments thereof. Only shareholders of record at the close of
business on August 2, 1999 will be entitled to vote at the Annual Meeting
and any adjournments thereof.
By Order of the Board of Directors
James M. Alsup
Secretary
Midland, Texas
August 5, 1999
Whether or not you plan to be present at the meeting in person,
please complete, sign, date and mail the enclosed Proxy in the
accompanying return envelope to which no postage need be affixed by the
sender if mailed within the United States. If you receive more than one
Proxy because your shares are registered in different names or addresses,
each such Proxy should be signed and returned to assure that all of your
shares will be voted.
<PAGE> 3
TMBR/SHARP DRILLING, INC.
4607 West Industrial Boulevard
Midland, Texas 79703
PROXY STATEMENT
The accompanying Proxy is solicited on behalf of the Board of
Directors of TMBR/Sharp Drilling, Inc. (the "Company") to be voted at the
Annual Meeting of Shareholders of the Company to be held on Tuesday,
August 31, 1999, at the time and place and for the purposes set forth in
the accompanying Notice of Annual Meeting, and at any adjournments thereof.
This Proxy Statement and the accompanying form of Proxy are first
being mailed to the shareholders on or about August 5, 1999.
Proxies, Solicitation and Voting
The record date for the determination of shareholders entitled to
notice of and to vote at the meeting is the close of business on August 2,
1999. On the record date, there were 4,710,886 shares of the Company's
$.10 par value common stock (the "Common Stock") issued and outstanding.
Each share of Common Stock is entitled to one vote on all matters to be
acted upon at the meeting. Cumulative voting is not permitted.
With respect to matters to be voted upon at the Annual Meeting,
the attendance, in person or by Proxy, of the holders of a majority of the
shares of Common Stock entitled to vote at the meeting is necessary to
constitute a quorum. For quorum purposes, the total votes received,
including abstentions and broker non-votes, are counted as present and
entitled to vote in determining the number of shares present. A broker
non-vote occurs when a nominee holding shares for a beneficial owner does
not vote on a particular proposal because the nominee does not have
discretionary voting power with respect to that item and has not received
instructions from the beneficial owner.
Directors will be elected by a plurality of votes cast. A
plurality means that the individuals who receive the largest number of
votes cast are elected as Directors up to the maximum number of Directors
to be chosen at the meeting. Consequently, any shares not voted (whether
by abstention, broker non-vote or otherwise) have no impact in the election
of Directors, except to the extent the failure to vote for an individual
results in another individual receiving a larger number of votes. The
proposal to approve the TMBR/Sharp Drilling, Inc. 1998 Stock Option Plan
will require the affirmative vote of the holders of a majority of the
shares entitled to vote and represented in person or by Proxy at the
meeting. An abstention has the effect of a negative vote and broker
non-votes on this matter do not affect the outcome.
Properly executed Proxies will be voted in accordance with the
instructions thereon or, if no instructions are indicated thereon, the
shares will be voted FOR the election of management's nominees to the
Board of Directors, FOR the proposal to approve the TMBR/Sharp
Drilling, Inc. 1998 Stock Option Plan and in the discretion of the persons
named as proxies, upon such other matters as may properly come before the
meeting.
<PAGE> 4
Any shareholder giving a Proxy has the power to revoke it at any
time before it is voted by appearing and voting personally at the Annual
Meeting, by delivering a later dated Proxy or by delivering to the
Secretary of the Company a written revocation of such Proxy prior to the
Annual Meeting.
The cost of preparing, assembling, printing and mailing this Proxy
Statement and enclosed Proxy and the cost of soliciting Proxies relating to
the Annual Meeting will be borne solely by the Company. The Company may
request banks and brokers to solicit their customers who beneficially own
shares of Common Stock of the Company listed of record in names of nominees
and will reimburse such banks and brokers for their reasonable out-of-
pocket expenses of such solicitation. It is contemplated that the original
solicitation of Proxies by mail will be supplemented by telephone, telegram
and personal solicitation by officers, Directors and other regular
employees of the Company. No additional compensation will be paid to such
individuals for such activities.
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information as of August 2,
1999 (unless otherwise indicated) with respect to the Company's Common
Stock beneficially owned by (i) each person known to the Company to be
the beneficial owner of more than five percent of the outstanding shares of
the Company's Common Stock, (ii) the executive officers named in the
Summary Compensation Table under "Executive Compensation", (iii) each
Director and nominee for Director of the Company and (iv) all Directors
(and nominees) and executive officers of the Company as a group.
Amount and
Nature of Percent
Name and Address Beneficial of
of Beneficial Owner Ownership(1) Class
------------------- ------------ -------
Thomas C. Brown . . . . . . . . . . . . . . . . . 596,153(2) 11.58%
4607 West Industrial Blvd.
Midland, Texas 79703
Donald L. Evans . . . . . . . . . . . . . . . . . 7,146 *
500 Empire Plaza
Midland, Texas 79701
David N. Fitzgerald . . . . . . . . . . . . . . . 28,182 *
2300 West 42nd Street
Odessa, Texas 79764
Joe G. Roper . . . . . . . . . . . . . . . . . . 867,606 (3) 17.61%
4607 West Industrial Blvd.
Midland, Texas 79703
-2-
<PAGE> 5
Metropolitan Life Insurance Company . . . . . . 291,400(4) 6.19%
One Madison Avenue
New York, New York 10010
State Street Research & Management
Company, Inc. . . . . . . . . . . . . . . . . . . 903,800(4) 19.19%
One Financial Center,
Boston Massachusetts 02111
F. Howard Walsh, Jr. . . . . . . . . . . . . . . 274,300 (5) 5.82%
500 West Seventh St., Suite 1007
Fort Worth, Texas 76102
All Directors (and nominees . . . . . . . . . . . 1,613,102 (6) 29.62%
and executive officers as a
group (8 persons)
____________
* Less than 1%.
(1) Unless otherwise indicated, all shares of Common Stock are held
directly with sole voting and investment powers.
(2) Includes 436,500 shares of Common Stock underlying presently
exercisable stock options and 19,856 shares of Common Stock owned
by the Estate of C. V. Lyman, deceased, of which estate Mr. Brown
serves as Co-Executor.
(3) Includes 217,000 shares of Common Stock underlying presently
exercisable stock options.
(4) In Amendment No. 4 to Schedule 13G, dated February 6, 1999, filed
with the Securities and Exchange Commission (the "Commission") by
Metropolitan Life Insurance Company ("Met Life"), Met Life reported
beneficial ownership of such shares. Met Life further reported that
State Street Research & Management Company, Inc. ("State Street"),
an affiliate of Met Life and registered investment adviser, has sole
voting and dispositive powers with respect to such shares. In
Schedule 13G, dated February 11, 1999, filed by State Street with
the Commission, State Street reported beneficial ownership of
903,800 shares, of which it reported sole voting power with respect
to 815,300 shares and sole dispositive power with respect to
903,800 shares. State Street disclaimed any beneficial interest
in such securities.
-3-
<PAGE> 6
(5) As reported in Amendment No. 2 to Schedule 13D, dated November 3,
1997, filed with the Commission.
(6) Includes 734,500 shares of Common Stock underlying presently
exercisable stock options.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires,
among other things, that the Company's Directors and officers file at
specified times reports of beneficial ownership and changes in beneficial
ownership of the Company's Common Stock and other equity securities. To
the Company's knowledge, all Section 16(a) filing requirements for the year
ended March 31, 1999 have been complied with, except that one transaction
involving the sale by Mr. Roper of 1,400 shares of Common Stock was
reported late.
ELECTION OF DIRECTORS
Directors of the Company are elected annually by the shareholders
to hold office until the next succeeding annual meeting of shareholders
and until their successors are duly qualified and elected.
In accordance with the Company's bylaws, the Board of Directors
by resolution has fixed the total number of directors at four.
Accordingly, the Board of Directors is recommending that the four current
Directors of the Company be re-elected to serve until the next annual
meeting of shareholders is held and their respective successors have been
duly elected.
If any nominee becomes unavailable for any reason, which is not
anticipated, a substitute nominee may be designated by the Board of
Directors and the shares represented by Proxy will be voted for any such
substitute nominee, unless the Board reduces the number of Directors. All
of the nominees listed below were previously elected Directors by the
shareholders at the last annual meeting of shareholders. There are no
family relationships among any of these nominees, or among any of these
nominees and any officer, except Patricia R. Elledge, the Controller of the
Company, is the daughter of Joe G. Roper, the President and a Director of
the Company. There are no arrangements or understandings between any
nominee and any other person pursuant to which the nominee was selected.
The four nominees for the Board of Directors are as follows:
Position with Company and Director
Nominee Age Principal Occupation Since
------- --- ------------------------- --------
Thomas C. Brown . . 72 Chairman of the Board 1982
of Directors and Chief
Executive Officer of the
Company; Director of
Tom Brown, Inc.
-4-
<PAGE> 7
Position with Company and Director
Nominee Age Principal Occupation Since
------- --- ------------------------- --------
Joe G. Roper . . . . 71 Director and President 1982
of the Company.
Donald L. Evans . . 52 Director of the Company; 1982
Chairman of the Board of
Directors and Chief Executive
Officer of Tom Brown, Inc.
David N. Fitzgerald . 76 Director of the Company; 1984
President and shareholder
of Dave Fitzgerald, Inc., a
privately held investment
company.
Unless otherwise directed on any duly executed and dated Proxy,
it is the intention of the persons named in such Proxy to vote the shares
of Common Stock represented by such Proxy for the election of the nominees
listed in the preceding table for the office of Director of the Company.
The Board of Directors recommends that the shareholders vote FOR
the proposal to elect its nominees to the Board of Directors.
Other Information
The Board of Directors held one meeting during the year ended
March 31, 1999 at which all Directors were present. The Directors also
took action by unanimous written consent on three occasions.
The Company does not have a standing nominating committee. The
review of recommendations for nominees for Directors is made by the full
Board of Directors.
Messrs. Donald L. Evans and David N. Fitzgerald served as members
of the Audit Committee of the Board of Directors during fiscal year 1999.
The Audit Committee was created for the purposes of recommending the firm
to be employed by the Company as its independent auditors, consulting with
the persons chosen to be the independent auditors with regard to the plan
of audit, reviewing with the independent auditors the report of audit and
management letters, if any, consulting with the independent auditors with
regard to the adequacy of internal accounting controls and performing such
other duties as may be advised or requested from time to time by the Board
of Directors of the Company. The Audit Committee held one meeting during
the year ended March 31, 1999.
-5-
<PAGE> 8
The Compensation Committee of the Board of Directors oversees and
is responsible for the administration of the Company's stock option plans.
Members of the Compensation Committee are appointed annually by the Board
of Directors. Members serve at the pleasure of the Board of Directors and
may be appointed or removed by the Board of Directors at will. Since
August, 1998, the Compensation Committee of the Board of Directors has
consisted of all four current Directors of the Company. Prior to that
time, Donald L. Evans and David N. Fitzgerald served as the Compensation
Committee of the Board of Directors. The Compensation Committee did not
hold any meetings during the year ended March 31, 1999, but took action by
unanimous written consent on one occasion.
APPROVAL OF STOCK OPTION PLAN
On September 1, 1998, the Board of Directors adopted the
TMBR/Sharp Drilling, Inc. 1998 Stock Option Plan (the 1998 Plan ). The
1998 Plan is attached to this Proxy Statement as Appendix A. The purpose
of the 1998 Plan is to provide a means whereby key employees of the Company
(including officers and Directors who are also key employees) and Directors
who are not employees may develop a sense of proprietorship and personal
involvement in the development and financial success of the Company, and
to encourage them to remain with and devote their best efforts to the
business of the Company, thereby advancing the interests of the Company
and its shareholders.
Stock options granted under the 1998 Plan to key employees may be
either "incentive stock options" within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), or stock options
which do not constitute incentive stock options ("nonqualified stock
options"). Options granted to non-employee Directors will be nonqualified
stock options.
When the 1998 Plan was adopted by the Board of Directors, the
Board granted nonqualified stock options to Messrs. Evans and Fitzgerald,
non-employee Directors of the Company. Both options are subject to
shareholder approval of the 1998 Plan. If the 1998 Plan is approved by
the shareholders, each option will entitle the holder to purchase a total
of 25,000 shares of Common Stock at an exercise price of $4.125 per share,
the fair market value of the Common Stock on the date of grant. The
options will expire ten years from date of grant and will become
exercisable as to all shares upon shareholder approval of the 1998 Plan.
No other options have been granted under the 1998 Plan. While it is
expected that employees and executive officers of the Company will be
granted options in the future, the employees and executive officers that
may receive such options, the number of options and dollar values, are not
currently determinable.
At the Annual Meeting, shareholders will be asked to approve and
ratify the action taken by the Board of Directors in adopting the 1998
Plan. The 1998 Plan was unanimously approved by the Board of Directors and
the Board of Directors recommends that the adoption of the 1998 Plan be
ratified and approved by the shareholders. Unless otherwise indicated,
the proxies received from shareholders will be voted in favor thereof.
-6-
<PAGE> 9
While shareholder approval of the 1998 Plan is not required under Texas
law, the Code and certain rules of The Nasdaq Stock Market require the
1998 Plan to be approved by the Company's shareholders. If the required
shareholder approval is not obtained, the options granted to Mr. Evans
and Mr. Fitzgerald will be cancelled, the 1998 Plan will be terminated
and no options under the 1998 Plan will be granted.
Administration. The 1998 Plan may be administered by the
Board of Directors of the Company or a committee of two or more
Directors of the Company. The full Board of Directors, acting as the
Compensation Committee, presently administers the 1998 Plan. The
Compensation Committee has the sole authority to select the employees
and non-employee Directors who are to be granted options and to
establish the number of shares issuable under each option. The
Compensation Committee is authorized to interpret the 1998 Plan, and
to adopt such rules and regulations, consistent with the provisions of
the 1998 Plan, as it may deem advisable.
Eligibility. Only key employees and non-employee Directors of
the Company whom the Compensation Committee selects shall be eligible to
receive one or more options under the 1998 Plan.
Stock to be Optioned. The aggregate number of shares of Common
Stock which may be issued pursuant to the exercise of stock options granted
under the 1998 Plan may not exceed in the aggregate 750,000 shares, subject
to adjustments in the number of shares with respect to options and purchase
prices therefor in the event of stock splits or stock dividends, and for
equitable adjustments in the event of recapitalization, mergers,
consolidations, acquisitions of more than 50% of the outstanding shares of
Common Stock by any person or entity, dissolution and liquidation, and
similar events. If any outstanding option granted under the 1998 Plan
expires or terminates prior to its exercise in full, the shares allocable
to the unexercised portion of such option may be subsequently granted under
the 1998 Plan. Exercise of an option in any manner shall result in a
decrease in the number of shares of stock which may thereafter be
available, both for purposes of the 1998 Plan and for sale to any one
individual, by the number of shares as to which the option is exercised.
Terms of Grants. Options granted under the 1998 Plan contain
such terms and conditions and may be exercisable for such periods, as may
be approved by the Compensation Committee. The Compensation Committee is
empowered and authorized, but is not required, to provide for the exercise
of options by payment in cash or by delivering to the Company shares of
Common Stock having a fair market value equal to the purchase price, or any
combination of cash or Common Stock. The purchase price of Common Stock
issued under each option will not be less than the fair market value of the
stock subject to the option at the time of grant.
Options granted under the 1998 Plan are not transferable other
than by will or the laws of descent and distribution and are exercisable
during the optionee's lifetime only by the optionee and while the optionee
is an employee or director of the Company, except that if the optionee
-7-
<PAGE> 10
ceases to be an employee or director of the Company as a result of death
or disability, any options held by the optionee may be exercised in full
by the optionee's legal representative at any time during the period of
one year following such termination. If an optionee ceases to be an
employee or director of the Company other than for cause, death or
disability, options may be exercised within three months thereafter, but
only as to the number of shares the optionee was entitled to purchase as
of the date the optionee ceased to be an employee or director of the
Company.
Amendment or Termination. The Board of Directors of the
Company may amend or terminate the 1998 Plan at any time, but may not in
any way impair the rights of an optionee under an outstanding option
without the consent of such optionee.
Term of Plan. The 1998 Plan will terminate upon and no further
options shall be granted after the expiration of ten years from the date
of its adoption by the Board of Directors.
Federal Tax Aspects. Employees who receive incentive stock
options under the 1998 Plan will not recognize any income for federal
income tax purposes as a result of the receipt of such options. An
optionee, upon exercise of an incentive option under the 1998 Plan, will
not recognize taxable income nor will the Company then be entitled to a
deduction. Any gain or loss realized upon the subsequent disposition
of the stock acquired upon exercise of incentive options will be treated
as long term capital gain or loss, provided that no such disposition is
made within two years after the option was granted and one year after the
option was exercised. If such holding period requirements are not
satisfied, the optionee will recognize ordinary income equal to the lesser
of (i) the fair market value of the stock on the date of exercise minus
the exercise price or (ii) the amount realized on disposition minus the
exercise price. Any gain in excess of the amount taxed as ordinary income
will be recognized as capital gain. If the stock is sold for less than
the option price, the loss is a capital loss.
The Company will not be entitled to a compensation deduction for
federal income tax purposes with respect to the grant of an incentive
option to an employee under the 1998 Plan or the exercise of the incentive
option by the employee. Upon an employee's disposition of shares acquired
pursuant to an incentive option, the Company will be entitled to a
deduction for federal income tax purposes equal to the amount, if any, of
ordinary income recognized by such employee.
Nonqualified options under the 1998 Plan will not have a readily
ascertainable value at the time of the grant of such options or at any time
until the options are exercised, and as a result, an optionee who receives
a nonqualified option will not be taxed upon the receipt of the option.
An optionee who receives a nonqualified option will generally
recognize ordinary income upon the exercise of the option in the amount by
which the fair market value of the underlying shares at the time of
exercise exceeds the exercise price. The Company will be entitled to a
deduction from income as an ordinary and necessary business expense when
and to the extent ordinary income is recognized by an optionee.
-8-
<PAGE> 11
Upon the sale of the shares received upon the exercise of a
nonqualified option, the seller will generally recognize either short-term
or long-term capital gain or loss, depending upon the holding period of
the shares. The required holding period for long-term capital gain or loss
treatment is more than one year. The measure of the taxable gain or loss
is determined by the difference between the price paid for the shares upon
the exercise of the options (plus the amount of income recognized) and the
selling price of the shares.
The foregoing statements are based upon current federal income
tax laws and regulations and are subject to change if the tax laws and
regulations, or interpretations thereof, change.
The Board of Directors recommends a vote FOR the proposal to
approve the 1998 Stock Option Plan.
REPORT OF COMPENSATION COMMITTEE
Since August, 1998, the full Board of Directors has functioned
as the Board's Compensation Committee. Prior to that time, Mr. Evans and
Mr. Fitzgerald, non-employee Directors of the Company, served as the
Compensation Committee. The Board does not presently have a separate
Compensation Committee. Thomas C. Brown and Joe G. Roper, Directors of
the Company, are also employees and executive officers of the Company.
During the last completed fiscal year, there were no meetings of
the Board at which deliberations regarding executive officer compensation
occurred.
The Company does not presently have written employment contracts
with any executive officer. Like all of the Company's employees, the
executive officers are "at-will employees", meaning either the employee or
the Company can terminate the employment relationship at any time for any
reason or for no reason.
It has been the Company's practice for many years that the
executive compensation program consists primarily of a base salary and
stock options. In addition, the Company usually provides automobiles to
its executive officers, other than Mr. Brown. The Company has a history
of relying upon stock options as an important element of each executive's
compensation package. All stock options are granted pursuant to one of
the Company's stock option plans. Stock option grants are made with
exercise prices of not less than 100% of the market price on the date of
grant. This program has generally enabled the Company to keep salaries
and other compensation benefits at relatively modest levels. The cash
component of compensating the Company's executive officers, including
Mr. Brown, has been left to the judgment and discretion of Mr. Brown and
Mr. Roper. The Board has left cash compensation matters to the discretion
of Mr. Brown and Mr. Roper because the compensation levels of all executive
officers have historically been reasonable in the judgment of the Board of
Directors, and because the Company has not been burdened with excessive
compensation costs or perquisites. Mr. Brown and Mr. Roper have
historically determined their own salaries.
-9-
<PAGE> 12
There is no specific relationship of corporate performance to
executive compensation. No formula or specific evaluation procedure is
followed. Rather, compensation policies have been subjective and
informal. However, compensation for executives is based generally on the
principles that compensation must be sufficiently high, in relation to the
Company's competitors, to help motivate and retain the talent needed to
grow the Company's business and to provide a sufficient incentive for
executive officers to remain with the Company and devote their best
efforts to the business of the Company.
The Company's salary levels are determined by comparisons with
similar companies of similar size, overall market conditions in the
domestic oil and gas industry, the financial performance of the Company,
the individual performance of the executive, and any promotions of, or
increased responsibilities assumed by, the executive.
In addition to their cash compensation, executive officers, along
with all other employees of the Company, have been eligible to participate
in the Company's 401(k) retirement plan. However, the plan was terminated
in March, 1999. This plan was available to all employees after they had
been employed by the Company for at least one year. The plan allowed
employees to make contributions to the plan from salary reductions each
year, up to an annual limit of 15% of a participant's annual compensation.
Under the 401(k) plan, the Company matched 25% of a participant's
contribution up to 5% of his or her salary. Employees were fully vested
in their own contributions and became fully vested in any contributions
made by the Company after seven years of service.
The compensation of Thomas C. Brown, the Chairman of the Board
and Chief Executive Officer of the Company, consists of a base salary and
stock options. There is no specific relationship between the Company's
performance and Mr. Brown's compensation. Only subjective, informal
periodic reviews of Mr. Brown's compensation are followed. Specific
factors considered include his length of service as chief executive
officer, competitive CEO pay information, compensation paid in previous
years, the Company's growth, the market value of the Company's Common
Stock, the overall financial condition of the Company and market conditions
in general. During fiscal 1999, the Company's revenues were adversely
impacted by the recent and sustained deterioration in oil and gas prices.
As in the case of prior downturns in the oil and gas industry, cost-savings
measures were again implemented by the Company to help offset the adverse
effects of low oil and gas prices. In this regard, and because of the
adverse conditions in the oil and gas industry in general, the Company did
not increase the salaries of any of its executives, including Mr. Brown,
during the year ended March 31, 1999. Mr. Brown's previous salary increase
was on September 1, 1997 when his salary was increased from $72,000 to
$162,000 per year. Last fiscal year, Mr. Brown did not receive a salary
increase or a cash bonus. In addition, because of the termination of the
401(k) retirement plan, Mr. Brown, as well as all other employees and
executives, will no longer participate in a Company sponsored retirement
plan, and the Company's change of control agreement with Mr. Brown was
cancelled in December, 1998. In view of these factors, and in order to
recognize Mr. Brown's skills, leadership and experience in managing the
-10-
<PAGE> 13
Company, particularly during adverse market conditions, the full Board of
Directors, acting in its capacity as the Compensation Committee, granted
an incentive stock option on September 1, 1998 to Mr. Brown to purchase
72,000 shares of Common Stock and, at the same time, repriced a
nonqualified stock option originally granted to Mr. Brown in September,
1996. The option was repriced from an exercise price of $7.75 per share
to $4.125 per share, the fair market value of the Company's Common Stock
on September 1, 1998, the date the option was repriced. The option
expiration date was not extended.
Under Section 162(m) of the Internal Revenue Code, effective
January 1, 1994, no income tax deduction is allowed to a publicly held
corporation for remuneration paid to certain executive officers (including
the CEO) to the extent that the amount of remuneration with respect to any
given employee/executive officer for the taxable year exceeds $1,000,000.
Section 162(m) has not been a factor in determining the overall
compensation of executive officers since the remuneration paid to any one
employee during a given tax year is significantly less than, and is
expected to continue to be less than, the Section 162(m) limits.
Thomas C. Brown
Joe G. Roper
Donald L. Evans
David N. Fitzgerald
-11-
<PAGE> 14
EXECUTIVE COMPENSATION
Summary of Annual Compensation
The following table sets forth for each of the three fiscal years
ended March 31, 1999, a summary of the types and amounts of compensation
paid to the Chief Executive Officer of the Company and the only other
executive officer of the Company whose salary and bonuses for the fiscal
year ended March 31, 1999 exceeded $100,000.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term Compensation
----------------------
Annual Compensation Awards Payouts
--------------------------- -------------------------- -------
Other Securities
Annual Restricted Underlying All Other
Compen- Stock Options/ LTIP Compen-
Name and Principal Salary Bonus sation Awards SARs Payouts sation
Position Year ($) ($) ($) ($) (#) ($) ($)
------------------ ---- ------- ------ ------- ---------- ------------ ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Thomas C. Brown, 1999 162,000 0 (1) 0 267,000(2) 0 1,197(3)
Chairman of the Board 1998 120,462 0 (1) 0 0 0 1,506(3)
of Directors and Chief 1997 72,000 0 (1) 0 195,000(2) 0 762(3)
Executive Officer
Joe G. Roper, 1999 171,306 0 (1) 0 172,000(2) 0 1,197(4)
President and Director 1998 162,771 0 (1) 0 0 0 1,956(4)
1997 156,251 0 (1) 0 100,000(2) 0 12,902(4)
</TABLE>
_________________
(1) The named executive officers of the Company were also
provided certain non-cash compensation and personal
benefits. However, the aggregate amount of such other
compensation did not exceed $50,000 or 10% of the named
executive officer's salary during such fiscal year.
(2) The total number of securities underlying stock options
granted last fiscal year includes 195,000 shares of
common stock underlying the stock option granted to
Mr. Brown in September, 1996 and 100,000 shares of common
stock underlying the stock option granted to Mr. Roper in
September, 1996. Both of these options were repriced
last fiscal year. For additional information regarding
these and other options granted last fiscal year, see
"--Stock Options" and "--Repricing of Options" below.
(3) Such amount was allocated to Mr. Brown's account under
the Company's 401(k) Profit Sharing Plan.
-12-
<PAGE> 15
(4) Such amount includes (i) $1,197 allocated to Mr. Roper's
account under the Company's 401(k) profit sharing plan
for the fiscal year ended March 31, 1999; $1,956 for
1998; and $1,587 for 1997; and (ii) insurance premiums
paid by the Company in the amount of $11,315 for the year
ended March 31, 1997 for a whole life insurance policy on
the life of Mr. Roper.
Stock Options
The Company has in the past utilized stock options as part of its
overall compensation of Directors, officers and employees. The following
table shows certain information with respect to stock options granted to
the named executive officers during the fiscal year ended March 31, 1999.
<TABLE>
<CAPTION>
Option/Sar Grants in Last Fiscal Year
Individual Grant
--------------------------------------------------------------
Potential Realizable
Value at Assumed
Number of Percent of Annual Rates of Stock
Securities Total Options Price Appreciation for
Underlying Granted to Exercise or Option Term (1)
Options Employees in Base Price Expiration -----------------------
Name Granted (#) Fiscal Year ($/Sh) Date 5%($) 10%($)
----------- ----------- ------------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
T. C. Brown 195,000 (2) 34.36% $4.125 9-3-06 $383,175 $919,425
72,000 (3) 12.69% $4.538 9-1-03 $ 51,984 $151,344
J. G. Roper 100,000 (4) 17.62% $4.125 9-3-06 $196,500 $471,500
72,000 (5) 12.69% $4.538 9-1-03 $ 51,984 $151,344
</TABLE>
_________
(1) These amounts are calculated based on the indicated annual rates
of appreciation and annual compounding from the date of grant to
the end of the option term. Actual gains, if any, on stock
option exercises are dependent on the future performance of the
common stock and overall stock market conditions. There is no
assurance that the amounts reflected in this table will be
achieved.
(2) A nonqualified stock option to purchase 195,000 shares of common
stock was originally granted to Mr. Brown on September 3, 1996
pursuant to the 1994 Stock Option Plan. The option became
exercisable in its entirety on May 1, 1997. This option was
repriced on September 1, 1998 and is included in the table as an
option grant during the last fiscal year. The expiration date
of the option was not extended. See "--Repricing of Options"
below.
-13-
<PAGE> 16
(3) On September 1, 1998, an incentive stock option to purchase
72,000 shares of common stock was granted to Mr. Brown pursuant
to the 1994 Stock Option Plan. The option became exercisable
as to 22,000 shares on March 9, 1999 and becomes exercisable as
to an additional 22,000 shares on each of March 9, 2000 and
March 9, 2001. The remaining 6,000 shares become exercisable
on March 9, 2002. The option expires five years from the date
of grant and the option exercise price is 110% of the fair
market value of the Company's Common Stock on the date of grant.
(4) A nonqualified stock option to purchase 100,000 shares of common
stock was originally granted to Mr. Roper on September 3, 1996
pursuant to the 1994 Stock Option Plan. The option became
exercisable in its entirety on May 1, 1997. This option was
repriced on September 1, 1998 and is included in the table as
an option grant during the last fiscal year. The expiration
date of the option was not extended. See "--Repricing of
Options" below.
(5) On September 1, 1998, an incentive stock option to purchase
72,000 shares of common stock was granted to Mr. Roper pursuant
to the 1994 Stock Option Plan. The option became exercisable
as to 22,000 shares on March 9, 1999 and becomes exercisable as
to an additional 22,000 shares on each of March 9, 2000 and
March 9, 2001. The remaining 6,000 shares become exercisable
on March 9, 2002. The option expires five years from the date
of grant and the option exercise price is 110% of the fair
market value of the Company's Common Stock on the date of grant.
The following table sets forth certain information with respect
to stock option exercises during the fiscal year ended March 31, 1999 by
the named executive officers of the Company, and the value of each such
officer's unexercised stock options at March 31, 1999.
Aggregated Option/SAR Exercises in
Last Fiscal Year and Fiscal Year - End Option/SAR Values
<TABLE>
<CAPTION>
Value of
Number of Unexercised
Securities Underlying Unexercised In-The-Money
Shares Options/SARs Options/SARs
Acquired Value at Fiscal Year-End (#) at Fiscal Year-End ($)(1)
on Exercise Realized --------------------------------- ----------------------------
Name (#) ($) Exercisable Unexercisable Exercisable Unexercisable
------------ ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
T. C. Brown 0 0 436,500 50,000 902,375 0
J. G. Roper 0 0 217,000 50,000 102,750 0
</TABLE>
_________
-14-
<PAGE> 17
(1) Value of in-the-money options is equal to the fair market
value of a share of Common Stock at fiscal year-end ($4.25
per share), based on the closing price of the Company's
Common Stock, less the exercise price.
Repricing of Options
The table below sets forth certain information regarding stock
options held by each executive officer of the Company that were repriced
during the ten-year period ended March 31, 1999.
Ten-Year Option/SAR Repricings
<TABLE>
<CAPTION>
Length of
Exercise Original Option
Number of Market Price of Price at Time Term Remaining
Options/SARs Stock at Time of Repricing New at Date of
Repriced or of Repricing or or Exercise Repricing or
Name Date Amended Amendment (1) Amendment Price Amendment
----------------------- ------ ------------ --------------- ------------- -------- ---------------
<S> <C> <C> <C> <C> <C> <C>
T. C. Brown, 9-1-98 195,000 (2) $4.125 $7.75 $4.125 8 years
Chairman of the Board
of Directors and Chief
Executive Officer
J. G. Roper, 9-1-98 100,000 (2) $4.125 $7.75 $4.125 8 years
President and Director
J. D. Phillips 9-1-98 10,000 (2) $4.125 $7.75 $4.125 8 years
Vice President-Production
P. R. Elledge 9-1-98 10,000 (2) $4.125 $7.75 $4.125 8 years
Controller - Treasurer
</TABLE>
_________
(1) Average of the high and low sales prices as reported by the
NASDAQ National Market System.
(2) Nonqualified stock option granted on September 3, 1996.
-15-
<PAGE> 18
STOCK PERFORMANCE GRAPH
Comparison of Five-Year Cumulative Total Returns
[Graph]
Legend
<TABLE>
<CAPTION>
Symbol Total Returns Index for: 3/31/94 3/31/95 3/31/96 3/31/97 3/31/98 3/31/99
------ ------------------------ ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
______ TMBR/Sharp Drilling, Inc. 100.00 131.6 139.4 245.2 237.4 87.7
.. ___ . Nasdaq Stock Market (US Companies) 100.00 111.2 151.1 167.9 254.6 342.7
------ Nasdaq Non-Financial Stocks 100.00 109.6 147.9 159.5 239.3 332.5
(US & Foreign)
</TABLE>
Notes:
A. The lines represent monthly index levels derived from compounded
daily returns that include all dividends.
B. The indexes are reweighted daily, using the market capitalization
on the previous trading day.
C. If the monthly interval, based on the fiscal year-end, is not a
trading day, the preceding trading day is used.
D. The index level for all series was set to $100.00 on 3/31/94.
-16-
<PAGE> 19
The indexes in the performance graph compare the annual
cumulative total stockholder return on the Company's Common Stock with
the cumulative total return of The Nasdaq Stock Market (U.S.) Index and
the Nasdaq Non-financial Stock Index (U.S. and foreign). The table
assumes that the value of an investment in the Company's Common Stock
and each index was $100.00 on March 31, 1994 and that all dividends were
reinvested.
Profit Sharing Plan
Prior to its termination in March, 1999, the Company maintained
a profit sharing plan under Section 401(k) of the Internal Revenue Code
(the "Profit Sharing Plan") for the benefit of all employees. Under the
Profit Sharing Plan, the Company contributed to a trust administered by a
third party trustee, out of current or accumulated net profits, such
amounts as it deemed advisable. The contributions were invested by the
Profit Sharing Trustee in various investments selected by employee
participants. Company contributions to the Profit Sharing Plan were
allocated monthly to the individual accounts of employee-participants. A
participant's accrued benefit derived from Company contributions was 100%
vested after seven years of continuous employment, upon attaining age 65,
or upon death or disability. Each employee of the Company was eligible to
participate in the Profit Sharing Plan after one year of continuous
employment. Non-employee Directors of the Company were not eligible to
participate in the Profit Sharing Plan. In addition to Company
contributions, participants could contribute such amount as the
participant determined each year, subject to certain annual maximum
limitations. Participants were 100% vested in their individual
contributions. For the year ended March 31, 1999, the Company contributed
an amount equal to 25% of the contributions made by eligible employees,
limited, however, to a maximum of 5% of each eligible employee's
compensation. During the fiscal year ended March 31, 1999, the Company
made cash contributions in the total amount of $29,883 to the Profit
Sharing Plan on behalf of participating employees, of which $1,197 was
allocated to the account of Mr. Roper and $1,197 was allocated to
Mr. Brown's account.
Compensation of Directors
The Company has, from time to time, paid fees to its Directors
for attending Directors' meetings and reimbursed Directors for their
expenses incurred in connection with attending meetings. However, no fees
or reimbursements were paid to any Director of the Company during the
fiscal year ended March 31, 1999.
Directors who are employees of the Company are eligible to
participate in the Company s stock option plans. Non-employee Directors
of the Company will be eligible to participate in the 1998 Stock Option
Plan if the plan is approved by the shareholders at the Annual Meeting.
Directors who are employees were eligible to participate in the Company's
401(k) profit sharing plan, until the plan was terminated in March, 1999.
Directors do not receive retainer fees or other compensation for service
on the Board of Directors.
-17-
<PAGE> 20
In October, 1997, the Company entered into Bonus Agreements with
Donald L. Evans and David N. Fitzgerald, non-employee Directors of the
Company, providing for cash bonus payments in the amount of $100,000.00
to each of Messrs. Evans and Fitzgerald within ten days after the
occurrence of (i) an Asset Acquisition or (ii) a Change in Control.
The Bonus Agreements with Messrs. Evans and Fitzgerald were
cancelled effective December 31, 1998.
For purposes of the Bonus Agreements, an Asset Acquisition was
deemed to have occurred if a person acquired more than 51% in value of
the assets of the Company. A Change in Control was deemed to have
occurred if (i) any person became the beneficial owner of 51% or more of
the voting power of the outstanding securities of the Company, (ii) a
change in the composition of a majority of the Board occurred which had
not been approved by a majority of the Board as constituted immediately
prior to the change, (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 fails to be
elected, or (iv) upon the consummation of a merger, consolidation, sale of
substantially all of the assets or other reorganization of the Company,
other than a reincorporation in which the Company does not survive.
1984 Stock Option Plan
The Board of Directors authorized and adopted the TMBR/Sharp
Drilling, Inc. Stock Option Plan (the "1984 Plan") in August, 1984.
Although the 1984 Plan expired by its own terms on August 8, 1994, options
granted under the 1984 Plan prior to August 8, 1994 will remain
outstanding until such options are exercised or expire by their own terms,
and will continue to be subject to all terms and conditions of the 1984
Plan. No additional options may be granted under the 1984 Plan. Options
granted under the 1984 Plan are either incentive stock options within the
meaning of Section 422 of the Code, or options which do not constitute
incentive stock options. Options granted under the 1984 Plan have been,
as provided in the 1984 Plan, granted only to key employees (including
officers and Directors who were also key employees) of the Company.
The 1984 Plan is presently administered by the full Board of
Directors, acting in its capacity as the Compensation Committee. Options
granted under the 1984 Plan have exercise prices equal to the fair market
value of the shares at the time the options were granted, as determined
by the Compensation Committee. Options granted under the 1984 Plan are
exercisable for such periods as have been approved by the Compensation
Committee, except that such options are not exercisable, in any event,
for a period in excess of ten years from the date of grant.
-18-
<PAGE> 21
An aggregate of 475,000 shares of the Company's Common Stock,
$.10 par value, are authorized to be issued under the 1984 Plan. Common
Stock issued under the 1984 Plan may be from authorized but unissued
shares of Common Stock or previously issued shares reacquired by the
Company. The shares of Common Stock with respect to which options have
been granted are subject to adjustment upon the occurrence of certain
corporate reorganizations or recapitalizations, including stock splits or
stock dividends.
As required by the terms of the 1984 Plan, for an option granted
under the 1984 Plan to qualify as an incentive stock option, the aggregate
fair market value (determined at the time of grant) of the stock with
respect to which the incentive stock option was exercisable for the first
time by an employee during any calendar year could not exceed $100,000 and
could not be issued to an employee if, at the time the option was granted,
such employee owned stock possessing more than 10% of the combined voting
power of all classes of the Company's outstanding stock, unless (i) at the
time the option was granted the exercise price of such option was at least
110% of the fair market value of the Common Stock on the date of grant and
(ii) such option was not exercisable after five years from the date of
grant.
All or part of an option may be exercised by tendering cash or
shares of Common Stock having a fair market value equal to the option
price, or a combination of shares and cash. At the discretion of the
Compensation Committee, an option agreement may provide for the right to
surrender an option in return for a payment in cash and/or shares of
Common Stock equal to the excess of the fair market value of the shares
with respect to which the option is surrendered over the option price
therefor, on such terms and conditions as the Compensation Committee
shall determine.
1994 Stock Option Plan
In July, 1994, the Board of Directors adopted the Company's 1994
Stock Option Plan (the "1994 Plan"), which was ratified and adopted by the
Company's shareholders at the 1994 annual meeting of shareholders held on
August 30, 1994. Options granted under the 1994 Plan may be either
incentive stock options within the meaning of Section 422 of the Code, or
options which do not constitute incentive stock options. Key employees
(including officers and Directors who are also key employees) of the
Company are eligible to receive options under the 1994 Plan.
-19-
<PAGE> 22
The 1994 Plan is presently administered by the full Board of
Directors, acting in its capacity as the Compensation Committee. The
Compensation Committee has the authority to select the employees who are
to be granted options and to establish the number of shares issuable under
each option. Options granted to an employee contain such terms and
conditions and may be exercisable for such periods as may be approved by
the Compensation Committee. The purchase price of Common Stock issued
under each option will not be less than the fair market value of the stock
subject to the option at the time of grant. The Compensation Committee,
in its discretion, may provide for the payment of the option price, in
whole or in part, (i) in cash at the time of such exercise, (ii) by the
delivery of a number of shares of Common Stock (plus cash if necessary)
having a fair market value on the date of delivery equal to such option
price, or (iii) any combination of cash and stock.
The aggregate number of shares of Common Stock which may be
issued pursuant to the exercise of stock options granted under the 1994
Plan may not exceed 750,000 shares, subject to adjustment in the number of
shares with respect to options and purchase prices therefor in the event
of stock splits or stock dividends, and for equitable adjustments in the
event of certain recapitalizations, mergers, consolidations or
acquisitions. If any outstanding option granted under the 1994 Plan
expires or terminates prior to its exercise in full, the shares allocable
to the unexercised portion of such option may be subsequently granted
under the 1994 Plan.
The 1994 Plan provides that to the extent the aggregate fair
market value of the Common Stock (determined at the time of grant) with
respect to which incentive options are exercisable for the first time by
an individual during any calendar year under all incentive stock option
plans of the Company exceeds $100,000, such incentive stock options shall
be treated as options which do not constitute incentive stock options.
The Compensation Committee determines, in accordance with applicable
provisions of the Code, which of an optionee's incentive stock options
will not constitute incentive stock options because of such limitation.
No incentive stock option may be granted to an individual if, at the time
the option is granted, such individual owns stock possessing more than 10%
of the total combined voting power of all classes of stock of the Company,
unless (i) at the time such option is granted the option price is at least
110% of the fair market value of the stock subject to the option and
(ii) such option by its terms is not exercisable after the expiration of
five years from the date of grant.
An option may be granted in exchange for an individual's right
and option to purchase shares of Common Stock pursuant to the terms of an
agreement that existed prior to the date such option is granted ("Prior
Option"). An option agreement that grants an option in exchange for a
Prior Option must provide for the surrender and cancellation of the Prior
Option. The purchase price of Common Stock issued under an option granted
-20-
<PAGE> 23
in exchange for a Prior Option shall be determined by the Compensation
Committee and, such purchase price may, without limitation, be equal to
the price for which the optionee could have purchased Common Stock under
the Prior Option.
The Board of Directors of the Company may amend or terminate
the 1994 Plan at any time, but may not in any way impair the rights of an
optionee under an outstanding option without the consent of such optionee.
In addition, in order to obtain the benefits provided by Section 422 of
the Code, the Board of Directors will determine at the time of making each
amendment whether or not it is necessary to submit the amendment to the
shareholders for approval. Generally, however, no amendment may be made
without shareholder approval if such amendment would materially increase
the benefits accruing to employee optionees under the 1994 Plan;
materially increase the number of securities issuable under the 1994 Plan;
or materially modify the requirements as to eligibility for participation
in the 1994 Plan. Unless earlier terminated, the 1994 Plan will terminate
upon and no further options may be granted after the expiration of ten
years from the date of its adoption by the Board of Directors.
Bonus Agreements and Change of Control Arrangements
In October, 1997, the Company entered into Bonus Agreements with
48 employees, including Joe G. Roper and Thomas C. Brown, which provided
for cash bonus payments within ten days after the occurrence of (i) an
Asset Acquisition, (ii) a Change in Control or (iii) the termination of
employment by the Company for reasons other than for cause. Generally,
the bonus payment amounts were specified multiples of an employee's cash
compensation. In the case of Messrs. Brown and Roper, each was entitled
to receive a lump sum cash bonus payment in an amount equal to 2.99 times
his base salary and the amount contributed by the Company to his 401(k)
plan account.
The Bonus Agreements with Messrs. Roper and Brown were cancelled
effective December 31, 1998.
For purposes of the Bonus Agreements, an Asset Acquisition was
deemed to have occurred if a person acquired more than 51% in value of the
assets of the Company. A Change in Control was deemed to have occurred if
(i) any person became the beneficial owner of 51% or more of the voting
power of the outstanding securities of the Company, (ii) a change in the
composition of a majority of the Board occurred which had not been
approved by a majority of the Board as constituted immediately prior to
the change, (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 (iv) upon the consummation of a merger, consolidation, sale of
substantially all of the assets or other reorganization of the Company,
other than a reincorporation in which the Company does not survive.
-21-
<PAGE> 24
The Company's 1984 and 1994 stock option plans, and its stock
option agreements with Messrs. Brown and Roper and other employees of the
Company, contain provisions which, upon the occurrence of certain events,
could result in additional compensation to such option holders, including
Mr. Brown and Mr. Roper. Such events include the following: if (i) the
Company is not the surviving entity in any merger or consolidation,
(ii) the Company sells, leases or exchanges or agrees to sell, lease or
exchange all or substantially all of its assets, (iii) the Company is to
be dissolved and liquidated, (iv) any person or entity, including a
"group" as contemplated by Section 13(d)(3) of the Securities Exchange Act
of 1934, as amended, acquires or gains ownership or control of more than
50% of the outstanding shares of Common Stock, or (v) as a result of or in
connection with a contested election of directors, the persons who were
directors of the Company before such election shall cease to constitute a
majority of the Board (each such event is referred to herein as a
"Corporate Change"), then the Compensation Committee shall effect one or
more of the following alternatives with respect to the then outstanding
options held by employees, which may vary among individual employee
optionees: (1) accelerate the time at which such options may be exercised
so that such options may be exercised in full for a limited period of time
on or before a specified date (before or after such Corporate Change)
fixed by the Compensation Committee, after which specified date all
unexercised options and all rights of employee optionees thereunder shall
terminate, (2) require the mandatory surrender to the Company by selected
optionees of some or all of such options as of a date specified by the
Compensation Committee, in which event the Compensation Committee shall
cancel such options and pay to each optionee an amount of cash per share
equal to the excess of the fair market value, or in the case of stock
options granted under the 1994 stock option plan the "Change of Control
Value" of the shares subject to such option, over the exercise price(s)
under such options for such shares, (3) make such adjustments to such
options as the Compensation Committee deems appropriate to reflect such
Corporate Change or (4) provide that thereafter upon any exercise of an
option theretofore granted the optionee shall be entitled to purchase
under such option, in lieu of the number of shares of Common Stock as to
which such option shall then be exercisable, the number and class of
shares of stock or other securities or property to which the optionee
would have been entitled pursuant to the terms of the agreement of merger,
consolidation or sale of assets and dissolution if, immediately prior to
such merger, consolidation or sale of assets and dissolution the optionee
had been the holder of record of the number of shares of Common Stock as
to which such option is then exercisable.
For purposes of the 1994 stock option plan, the "Change of
Control Value" is an amount determined as follows, whichever is
applicable: (i) the per share price offered to shareholders of the
Company in any such merger, consolidation, sale of assets or dissolution
transaction, (ii) the price per share offered to shareholders of the
Company in any tender offer or exchange offer whereby a Corporate Change
takes place, or (iii) if such Corporate Change occurs other than pursuant
to a tender or exchange offer, the fair market value per share of the
-22-
<PAGE> 25
shares into which such options being surrendered are exercisable, as
determined by the Compensation Committee as of the date determined by the
Compensation Committee to be the date of cancellation and surrender of
such options. If the consideration offered to shareholders of the
Company consists of anything other than cash, the Compensation Committee
shall determine the fair cash equivalent of the portion of the
consideration offered which is other than cash.
Compensation Committee Interlocks and Insider Participation
Thomas C. Brown, the Chairman of the Board of Directors and
Chief Executive Officer of the Company, is a Director of Tom Brown, Inc.
and Donald L. Evans, the Chairman of the Board of Directors and Chief
Executive Officer of Tom Brown, Inc., is a Director of the Company. As
a Director of the Company, Mr. Evans serves with all of the other
Directors as a member of the Compensation Committee of the Company's
Board of Directors.
Certain Transactions
Until September, 1984, the Company was a wholly owned subsidiary
of Tom Brown, Inc. ("TBI"). In September, 1984, TBI distributed the
Common Stock of the Company to the stockholders of TBI. Mr. Brown, the
Chairman of the Board of Directors and Chief Executive Officer of the
Company, is also a Director of TBI and Mr. Evans, a Director of the
Company, is the Chairman of the Board of Directors and Chief Executive
Officer of TBI. Following the spin-off of the Company, TBI and the
Company have each made available to the other certain personnel, office
services and records with each party being reimbursed for any costs and
expenses incurred in connection therewith. During the fiscal year ended
March 31, 1999, TBI charged the Company approximately $85,400 for such
services provided by TBI, of which approximately $13,900 was outstanding
and unpaid at March 31, 1999.
The Company has historically provided contract drilling services
to TBI in connection with TBI's oil and gas exploration and development
activities, and it is anticipated that the Company will continue to
perform contract drilling services for TBI in the future. During the
fiscal year ended March 31, 1999, the Company invoiced TBI approximately
$1,743,000 for contract drilling services performed for TBI. All amounts
invoiced were paid by TBI to the Company during the year ended March 31,
1999 and no amounts were unpaid and outstanding at March 31, 1999. The
Company's contract drilling services are provided to TBI under standard
industry form drilling contracts on terms competitive with those provided
to other nonaffiliated third parties.
-23-
<PAGE> 26
From time to time, the Company acquires interests in leases from
TBI and participates with TBI and other interest owners in the drilling
and development of such leases where TBI acts as operator. The Company
participates in such drilling ventures under standard form operating
agreements on the same or similar terms afforded by TBI to unaffiliated
third parties. TBI invoices all working interest owners, including the
Company, on a monthly basis for their respective share of operating and
drilling expenses. During the year ended March 31, 1999, TBI billed the
Company approximately $44,400 for the Company's proportionate share of
drilling costs and related expenses incurred on properties operated by
TBI, approximately $3,135 of which was outstanding at March 31, 1999.
The largest amount owed by the Company to TBI at any one time during the
fiscal year ended March 31, 1999 for its share of drilling costs and
related expenses and for services provided by TBI was approximately
$31,130.
INDEPENDENT AUDITORS
Arthur Andersen LLP has served as the Company's independent
auditors since March, 1990 and will continue as the Company's independent
auditors for the current year. Representatives of Arthur Andersen LLP
are expected to be present at the Annual Meeting and will have the
opportunity to make a statement to the shareholders if they desire to do
so, and to respond to appropriate questions.
SHAREHOLDER PROPOSALS
Shareholder proposals intended to be presented at the 2000
Annual Meeting of Shareholders must be received by the Company for
possible inclusion in its Proxy Statement and form of Proxy relating to
such meeting no later than April 30, 2000. The use of certified mail,
return receipt requested, is suggested.
The proxy confers discretionary authority on the persons named
therein to vote with respect to the election of any person as a director
where the nominee is unable to serve and matters incident to the conduct
of the Annual Meeting, including matters of which the registrant did not
receive notice until after June 8, 1999. For the annual meeting in 2000,
management proxies will be permitted to use discretionary voting authority
for matters submitted at the annual meeting other than pursuant to the
procedures in SEC Rule 14a-8 if notice of the matter was not delivered to
the Company on or before June 21, 2000.
-24-
<PAGE> 27
OTHER MATTERS
The Board of Directors of the Company knows of no matters, other
than those described above, which are to be presented for shareholder
action at the meeting. There will be an address by the Chairman of the
Board and a general discussion period during which shareholders will have
an opportunity to ask questions about the Company's business. If any
matter not described herein properly comes before the meeting, or any
adjournment thereof, the persons named in the enclosed Proxy will, in the
absence of instructions to the contrary, vote the Proxy in accordance with
their best judgment.
The 1999 Annual Report to Shareholders for the fiscal year ended
March 31, 1999, which includes audited financial statements, is enclosed
herewith. The Annual Report does not form any part of the material for
the solicitation of proxies.
A copy of the Company's Annual Report on Form 10-K will be
furnished at no charge to each "beneficial owner" of securities of the
Company upon receipt of a written request of such person addressed to:
Secretary, TMBR/Sharp Drilling, Inc., 4607 West Industrial Blvd., Midland,
Texas 79703, containing a good faith representation that, as of August 2,
1999, such person was a beneficial owner of securities of the Company
entitled to vote at the Annual Meeting of Shareholders to be held
August 31, 1999.
BY ORDER OF THE BOARD OF DIRECTORS
James M. Alsup
Secretary
Midland, Texas
August 5, 1999
-25-
<PAGE> 28
Appendix A
TMBR/SHARP DRILLING, INC.
1998 STOCK OPTION PLAN
I. Purpose of the Plan
The TMBR/Sharp Drilling, Inc. 1998 Stock Option Plan (the "Plan")
is intended to provide a means whereby certain key employees (including
officers and directors who are also key employees) and directors who are
not employees ("Nonemployee Directors"), of TMBR/Sharp Drilling, Inc., a
Texas corporation (the "Company"), and its subsidiaries may develop a sense
of proprietorship and personal involvement in the development and financial
success of the Company, and to encourage them to remain with and devote
their best efforts to the business of the Company, thereby advancing the
interests of the Company and its shareholders. Accordingly, the Plan
provides for granting certain key employees and Nonemployee Directors (in
each case, "Optionee") the option ("Option") to purchase shares of the
common stock of the Company ("Stock"), as hereinafter set forth. Options
granted under the Plan to key employees may be either incentive stock
options ("Incentive Stock Options") within the meaning of Section 422 of
the Internal Revenue Code of 1986, as amended (the "Code"), or options
which do not constitute Incentive Stock Options. Options granted under
the Plan to Nonemployee Directors will be options which do not constitute
Incentive Stock Options.
II. Administration
The Plan shall be administered by the Board of Directors of the
Company (the "Board") or by a committee (the "Committee") of two or more
directors of the Company appointed by the Board. If a Committee is not
appointed by the Board, the Board shall act as and be deemed to be the
Committee for all purposes of the Plan. The Committee shall have sole
authority (within the limitations described herein) to select the key
employees and Nonemployee Directors who are to be granted Options from
among those eligible hereunder and to establish the number of shares
which may be issued to key employees and Nonemployee Directors under each
Option and to prescribe the form of the agreement embodying awards of
Options. The Committee is authorized to interpret the Plan and may from
time to time adopt such rules and regulations, consistent with the
provisions of the Plan, as it may deem advisable to carry out the Plan.
All decisions made by the Committee in selecting the key employees and
Nonemployee Directors to whom Options shall be granted, in establishing
the number of shares which may be issued to key employees and Nonemployee
Directors under each Option and in construing the provisions of the Plan
shall be final. No member of the Board shall be liable for anything done
or omitted to be done by such member or by any other member of the Board
in connection with the Plan, except for such member's own willful
misconduct.
-26-
<PAGE> 29
III. Option Agreements; Terms and Conditions
Each Option granted under the Plan shall be evidenced by a
written stock option agreement and shall contain such terms and
conditions, and may be exercisable for such periods, as the Committee
shall prescribe from time to time in accordance with this Plan, and shall
comply with the following terms and conditions:
(a) The Option exercise price shall be the fair market value
of the Stock subject to the Option on the date the Option is granted. For
all purposes under the Plan, the fair market of a share of Stock on a
particular date shall be equal to the average of the high and low sales
prices of the Stock on the date of grant as reported on the Nasdaq
National Market tier of The Nasdaq Stock Market ("NMS"), or on the stock
exchange composite tape if the Stock is traded on a national stock
exchange on that date, or if no prices are reported on that date, on the
last preceding date on which such prices of the Stock are so reported. If
the Stock is not traded on the NMS or other stock exchange on that date,
but is otherwise traded over the counter at the time a determination of
its fair market value is required to be made hereunder, its fair market
value shall be deemed to be equal to the average between the reported high
and low or closing bid and asked prices of the Stock on the most recent
date on which the Stock was publicly traded. If the Stock is not publicly
traded at the time a determination of its value is required to be made
hereunder, the determination of its fair market value shall be made by the
Committee in such manner as it deems appropriate.
(b) Each Option and all rights granted thereunder shall not be
transferable otherwise than by will or the laws of descent and
distribution, and may be exercised only by the Optionee during the
Optionee's lifetime and while the Optionee remains employed by the Company
or as a director of the Company, as the case may be, except that: (i) if
the Optionee ceases to be an employee or director of the Company, as the
case may be, because of disability, the Option may be exercised in full by
the Optionee (or the Optionee's estate or the person who acquires the
Option by will or the laws of descent and distribution or otherwise by
reason of the death of the Optionee) at any time during the period of one
year following such termination; (ii) if the Optionee dies while he is an
employee or director of the Company, as the case may be, the Optionee's
estate, or the person who acquires the Option by will or the laws of
descent and distribution or otherwise by reason of the death of the
Optionee, may exercise the Option in full at any time during the period of
one year following the date of the Optionee's death; and (iii) if the
Optionee ceases to be an employee or director of the Company for any reason
other than as described in clause (i) or (ii) above, unless the Optionee is
removed for cause, the Option may be exercised by the Optionee at any time
during the period of three months following the date the Optionee ceases to
be an employee or director of the Company, as the case may be, or by the
Optionee's estate (or the person who acquires the Option by will or the
laws of descent and distribution or otherwise by reason of the death of
the Optionee) during a period of one year following the Optionee's death
if the Optionee dies during such three-month period, but in each case only
as to the number of shares the Optionee was entitled to purchase hereunder
upon exercise of the Option as of the date the Optionee ceases to be an
employee or director of the Company, as the case may be.
-27-
<PAGE> 30
(c) The Option shall not be exercisable in any event after the
expiration of ten years from the date of grant.
(d) The purchase price of shares as to which the Option is
exercised shall be paid in full at the time of exercise (a) in cash,
(b) by delivering to the Company shares of Stock having a fair market
value on the date of delivery equal to the purchase price, or (c) any
combination of cash or Stock, as shall be established by the Committee.
Unless and until a certificate or certificates representing such shares
shall have been issued by the Company to the Optionee, the Optionee (or
the person permitted to exercise the Option in the event of the Optionee's
death) shall not be or have any of the rights or privileges of a
shareholder of the Company with respect to shares acquirable upon an
exercise of the Option.
(e) The terms and conditions of the respective stock option
agreements need not be identical.
IV. Eligibility of Optionee
(a) Subject to the provisions of paragraph (b) below, Options
may be granted to individuals who are key employees (including officers
and directors who are also key employees) and Nonemployee Directors of
the Company or any parent or subsidiary corporation (as defined in Section
424 of the Code) of the Company at the time the Option is granted.
Options may be granted to the same Optionee on more than one occasion.
(b) No Incentive Stock Option shall be granted to an individual
if, at the time the Option is granted, such individual owns stock
possessing more than 10% of the total combined voting power of all classes
of stock of the Company or of its parent or subsidiary corporation, within
the meaning of Section 422(b)(6) of the Code, unless (i) at the time such
Option is granted the option price is at least 110% of the fair market
value of the Stock subject to the Option and (ii) such Option by its terms
is not exercisable after the expiration of five years from the date of
grant. To the extent that the aggregate fair market value (determined at
the time the respective Incentive Stock Option is granted) of stock with
respect to which Incentive Stock Options are exercisable for the first time
by an individual during any calendar year under all incentive stock option
plans of the Company and its parent and subsidiary corporations exceeds
$100,000, such Incentive Stock Options shall be treated as options which do
not constitute Incentive Stock Options. The Committee shall determine, in
accordance with applicable provisions of the Code, Treasury Regulations and
other administrative pronouncements, which of an employee Optionee's
Incentive Stock Options will not constitute Incentive Stock Options because
of such limitation and shall notify the employee Optionee of such
determination as soon as practicable after such determination.
-28-
<PAGE> 31
V. Shares Subject to the Plan
The aggregate number of shares which may be issued under Options
granted under the Plan shall not exceed 750,000 shares of Stock. Such
shares may consist of authorized but unissued shares of Stock or
previously issued shares of Stock reacquired by the Company. Any of such
shares which remain unissued and which are not subject to outstanding
Options at the termination of the Plan shall cease to be subject to the
Plan, but, until termination of the Plan, the Company shall at all times
make available a sufficient number of shares to meet the requirements of
the Plan. Should any Option hereunder expire or terminate prior to its
exercise in full, the shares theretofore subject to such Option may again
be subject to an Option granted under the Plan. The aggregate number of
shares which may be issued under the Plan shall be subject to adjustment
in the same manner as provided in Article VIII hereof with respect to
shares of Stock subject to Options then outstanding. Exercise of an
Option in any manner shall result in a decrease in the number of shares of
Stock which may thereafter be available, both for purposes of the Plan and
for sale to any one individual, by the number of shares as to which the
Option is exercised. Separate stock certificates shall be issued by the
Company for those shares acquired pursuant to the exercise of an Incentive
Stock Option and for those shares acquired pursuant to the exercise of any
Option which does not constitute an Incentive Stock Option.
VI. Options Exchanged for Prior Options
An Option may granted in exchange for an individual's right and
option to purchase shares of Stock pursuant to the terms of an agreement
that existed prior to the date such Option is granted ("Prior Option").
An Option agreement that grants an Option in exchange for a Prior Option
shall provide for the surrender and cancellation of the Prior Option.
The purchase price of Stock issued under an Option granted in exchange for
a Prior Option shall be determined by the Committee and, such purchase
price may, without limitation, be equal to the price for which the
Optionee could have purchased Stock under the Prior Option.
VII. Term of Plan
(a) The Plan shall be effective upon the date of its approval
and adoption by the Board, but no Option granted under the Plan shall
become exercisable, and no shares of Stock shall be issued, unless and
until the Plan shall have been approved by the Company's shareholders. If
such shareholder approval is not obtained within twelve months after the
date of the Board's adoption of the Plan, then all Options previously
granted under the Plan shall terminate and no further Options shall be
granted. Subject to such limitation, the Committee may grant Options
under the Plan at any time after the effective date and before the date
fixed herein for termination of the Plan.
(b) Except with respect to Options then outstanding, if not
sooner terminated under the provisions of Subparagraph (a) above or
Article IX, the Plan shall terminate upon and no further Options shall be
granted after the expiration of ten years from the date of its adoption by
the Board.
-29-
<PAGE> 32
VIII. Recapitalization or Reorganization
(a) The existence of the Plan and the Options granted hereunder
shall not affect in any way the right or power of the Board or the
shareholders of the Company to make or authorize any adjustment,
recapitalization, reorganization or other change in the Company's capital
structure or its business, any merger or consolidation of the Company, any
issue of debt or equity securities ahead of or affecting the Stock or the
rights thereof, the dissolution or liquidation of the Company or any sale,
lease, exchange or other disposition of all or any part of its assets or
business or any other corporate act or proceeding.
(b) The shares with respect to which Options may be granted are
shares of Stock as presently constituted, but if, and whenever, prior to
the expiration of an Option theretofore granted, the Company shall effect
a subdivision or consolidation of shares of Stock or the payment of a
stock dividend on Stock without receipt of consideration by the Company,
the number of shares of Stock with respect to which such Option may
thereafter be exercised (i) in the event of an increase in the number of
outstanding shares shall be proportionately increased, and the purchase
price per share shall be proportionately reduced, and (ii) in the event of
a reduction in the number of outstanding shares shall be proportionately
reduced, and the purchase price per share shall be proportionately
increased.
(c) If the Company recapitalizes or otherwise changes its
capital structure, thereafter upon any exercise of an Option theretofore
granted the Optionee shall be entitled to purchase under such Option, in
lieu of the number of shares of Stock as to which such Option shall then
be exercisable, the number and class of shares of stock and securities to
which the Optionee would have been entitled pursuant to the terms of the
recapitalization if, immediately prior to such recapitalization, the
Optionee had been the holder of record of the number of shares of Stock as
to which such Option is then exercisable. If (i) the Company shall not be
the surviving entity in any merger or consolidation (or survives only as a
subsidiary of an entity other than a previously wholly-owned subsidiary of
the Company), (ii) the Company sells, leases or exchanges or agrees to
sell, lease or exchange all or substantially all of its assets to any
other person or entity (other than a wholly-owned subsidiary of the
Company), (iii) the Company is to be dissolved and liquidated, (iv) any
person or entity, including a "group" as contemplated by Section 13(d)(3)
of the Securities Exchange Act of 1934, as amended, acquires or gains
ownership or control (including, without limitation, power to vote) of
more than 50% of the outstanding shares of Stock, or (v) as a result of or
in connection with a contested election of directors, the persons who were
directors of the Company before such election shall cease to constitute a
majority of the Board (each such event, a "Corporate Change"), then
effective as of a date selected by the Committee, the Committee acting in
its sole discretion without the consent or approval of any Optionee, shall
effect one or more of the following alternatives with respect to the then
outstanding Options held by Optionees, which may vary among individual
Optionees: (1) accelerate the time at which such Options may be exercised
so that such Options may be exercised in full on or before a specified
date (before or after such Corporate Change) fixed by the Committee, after
-30-
<PAGE> 33
which specified date all unexercised Options and all rights of Optionees
thereunder shall terminate, (2) require the mandatory surrender to the
Company by selected Optionees of some or all of such Options (irrespective
of whether such Options are then exercisable under the provisions of the
Plan) as of a date, before or after such Corporate Change, specified by
the Committee, in which event the Committee shall thereupon cancel such
Options and pay to each Optionee an amount of cash per share equal to the
excess of the amount calculated in Subparagraph (d) below (the "Change
of Control Value") of the shares subject to such Option over the exercise
price(s) under such Options for such shares, (3) make such adjustments to
such Options as the Committee deems appropriate to reflect such Corporate
Change, (4) make no adjustments to such Options as the Committee may
determine in its sole discretion or (5) provide that thereafter upon any
exercise of an Option theretofore granted the Optionee shall be entitled
to purchase under such Option, in lieu of the number of shares of Stock
as to which such Option shall then be exercisable, the number and class of
shares of stock or other securities or property to which the Optionee
would have been entitled pursuant to the terms of the agreement of merger,
consolidation or sale of assets and dissolution if, immediately prior to
such merger, consolidation or sale of assets and dissolution, the Optionee
had been the holder of record of the number of shares of Stock as to which
such Option is then exercisable.
(d) For the purposes of clause (2) in paragraph (c) above, the
"Change of Control Value" shall equal the amount determined in clause (i),
(ii) or (iii), whichever is applicable, as follows: (i) the per share
price offered to shareholders of the Company in any such merger,
consolidation, sale of assets or dissolution transaction, (ii) the price
per share offered to shareholders of the Company in any tender offer or
exchange offer whereby a Corporate Change takes place, or (iii) if such
Corporate Change occurs other than pursuant to a tender or exchange offer,
the fair market value per share of the shares into which such Options
being surrendered are exercisable, as determined by the Committee as of
the date determined by the Committee to be the date of cancellation and
surrender of such Options. In the event that the consideration offered to
shareholders of the Company in any transaction described in this
Subparagraph (d) or Subparagraph (c) above consists of anything other
than cash, the Committee shall determine the fair cash equivalent of the
portion of the consideration offered which is other than cash.
(e) Any adjustment provided for in Subparagraphs (b) or (c)
above shall be subject to any required shareholder action.
(f) Except as hereinbefore expressly provided, the issuance by
the Company of shares of stock of any class or securities convertible into
shares of stock of any class, for cash, property, labor or services, upon
direct sale, upon the exercise of rights or warrants to subscribe
therefor, or upon conversion of shares or obligations of the Company
convertible into such shares or other securities, and in any case whether
or not for fair value, shall not affect, and no adjustment by reason
thereof shall be made with respect to, the number of shares of Stock
subject to Options theretofore granted or the purchase price per share.
-31-
<PAGE> 34
IX. Amendment or Termination of the Plan
The Board in its discretion may terminate the Plan at any time
with respect to any shares for which Options have not theretofore been
granted. The Board shall have the right to alter or amend the Plan or any
part thereof from time to time, provided, that no change in any Option
theretofore granted may be made which would impair the rights of the
Optionee without the consent of such Optionee.
X. Miscellaneous Provisions
(a) Neither the Plan nor any action taken hereunder shall be
construed as giving any key employee or Nonemployee Director any right to
be retained in the service of the Company or the right to have an Option
granted to such person.
(b) An Optionee's rights and interest under the Plan may not be
assigned or transferred in whole or in part either directly or by operation
of law or otherwise (except in the event of an Optionee's death or
disability, by will or the laws of descent and distribution, all as
provided in Article III), including, but not by way of limitation,
execution, levy, garnishment, attachment, pledge, bankruptcy, or in any
other manner, and no such right or interest of any participant in the Plan
shall be subject to any obligation or liability of such participant.
(c) No shares of Stock shall be issued hereunder unless counsel
for the Company shall be satisfied that such issuance will be in compliance
with applicable Federal, state, and other securities laws and regulations.
(d) It shall be a condition to the obligation of the Company to
issue shares of Stock upon exercise of an Option, that the Optionee (or
any beneficiary or person entitled to act under or through Optionee as
provided herein) pay to the Company, upon its demand, such amount as may
be requested by the Company for the purpose of satisfying any liability to
withhold Federal, state, local, or foreign income or other taxes. If the
amount requested is not paid, the Company may refuse to issue shares of
Stock.
(e) By accepting any Option under the Plan, each Optionee and
each person claiming under or through such person shall be conclusively
deemed to have indicated his or her acceptance and ratification of, and
consent to, any action taken under the Plan by the Company, the Board or
the Committee.
-32-
<PAGE> 35
[Front of Card]
TMBR/SHARP DRILLING, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Thomas C. Brown, Donald L. Evans
and Joe G. Roper and each of them, attorneys, agents and proxies, with
full power of substitution, to represent and to vote all shares of common
stock of TMBR/SHARP DRILLING, INC. held of record by the undersigned on
August 2, 1999, at the Annual Meeting of Shareholders of TMBR/SHARP
DRILLING, INC. to be held on August 31, 1999, and at any adjournments or
postponements thereof, in accordance with the instructions on the reverse
side.
(Continued and to be signed on reverse side)
___________________________________________________________SEE REVERSE
SIDE
-33-
<PAGE> 36
[Back of Card]
Please date, sign and mail your proxy card back as soon as possible!
Annual Meeting of Shareholders
TMBR/Sharp Drilling, Inc.
August 31, 1999
Please detach and mail in the envelope provided
- ------------------------------------------------------------------------------
Please mark your
[ X ] votes as in this
example.
WITHHOLD Nominees: Thomas C. Brown
FOR all nominees AUTHORITY Donald L. Evans
listed at right to vote for all David N. Fitzgerald
nominees listed Joe G. Roper
at right
1. Election of
Directors [ ] [ ]
2. Approval of 1998 Stock Option Plan
[ ] FOR [ ] AGAINST [ ] ABSTAIN
* To withhold authority to vote for any individual nominee,
write that nominee's name in the space provided below:
________________________________________________
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE
SHAREHOLDER'S SPECIFICATION HEREON. IN THE
ABSENCE OF SUCH SPECIFICATION, THE PROXY WILL BE
VOTED FOR THE NOMINEES FOR DIRECTORS NAMED ON
THIS PROXY CARD, FOR THE APPROVAL OF THE 1998
STOCK OPTION PLAN AND IN THE DISCRETION OF THE
PERSONS NAMED AS PROXIES ON THE REVERSE HEREOF,
WITH RESPECT TO OTHER MATTERS THAT MAY PROPERLY
COME BEFORE THE MEETING OR ANY ADJOURNMENT(S).
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY
PROMPTLY USING THE ENCLOSED ENVELOPE.
SIGNATURE________________ DATE_________ SIGNATURE_______________ DATE_________
NOTE: Please sign exactly as name appears hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee or
guardian, please give full title as such.
-34-
<PAGE> 37
LYNCH, CHAPPELL & ALSUP
A Professional Corporation
The Summit, Suite 700
300 North Marienfeld
Midland, Texas 79701
(915) 683-3351
Telecopier (915) 683-8346
July 28, 1999
Securities and Exchange Commission
Judiciary Plaza Office Building
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: TMBR/Sharp Drilling, Inc.; Definitive Proxy Material
Gentlemen:
Pursuant to Rule 14a-6(b) and Regulation 14A under the Securities
Exchange Act of 1934, as amended, transmitted herewith on behalf of
TMBR/Sharp Drilling, Inc. (the "Company") is the Company's definitive proxy
statement (including the form of proxy card) to be sent to the shareholders
of the Company on August 5, 1999 in connection with the Company's annual
meeting of shareholders scheduled to be held on August 31, 1999.
If the staff has any questions, it would be appreciated if they
would call the undersigned at (915) 683-3351 or Ms. Patti Elledge at the
Company's offices (915) 699-5050.
Very truly yours,
/S/ Thomas W. Ortloff
TWO/ds
-35-
