<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 Thursday, August 31, 2000,
at 10:00 a.m., local time, in the Basin 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; and
(2) 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 July 27, 2000 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 July 27, 2000 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 2, 2000
Whether or not you plan to be present at the meeting in person, please
complete, sign, date and mail the enclosed Proxy in the accompanying return
envelope to which no postage need be affixed by the sender if mailed within
the United States. If you receive more than one Proxy because your shares
are registered in different names or addresses, each such Proxy should be
signed and returned to assure that all of your shares will be voted.
<PAGE> 3
TMBR/SHARP DRILLING, INC.
4607 West Industrial Boulevard
Midland, Texas 79703
PROXY STATEMENT
The accompanying Proxy is solicited on behalf of the Board of Directors of
TMBR/Sharp Drilling, Inc. (the "Company") to be voted at the Annual Meeting of
Shareholders of the Company to be held on Thursday, August 31, 2000, 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 2, 2000.
Proxies, Solicitation and Voting
The record date for the determination of shareholders entitled to notice of
and to vote at the meeting is the close of business on July 27, 2000. On the
record date, there were 4,958,386 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.
Properly executed Proxies will be voted in accordance with the instructions
thereon or, if no instructions are indicated thereon, the shares will be voted
FOR the election of management's nominees to the Board of Directors and in the
discretion of the persons named as proxies, upon such other matters as may
properly come before the meeting.
<PAGE> 4
Any shareholder giving a Proxy has the power to revoke it at any time
before it is voted by appearing and voting personally at the Annual Meeting,
by delivering a later dated Proxy or by delivering to the Secretary of the
Company a written revocation of such Proxy prior to the Annual Meeting.
The cost of preparing, assembling, printing and mailing this Proxy Statement
and enclosed Proxy and the cost of soliciting Proxies relating to the Annual
Meeting will be borne solely by the Company. The Company may request banks and
brokers to solicit their customers who beneficially own shares of Common Stock
of the Company listed of record in names of nominees and will reimburse such
banks and brokers for their reasonable out-of-pocket expenses of such
solicitation. It is contemplated that the original solicitation of Proxies by
mail will be supplemented by telephone, telegram and personal solicitation by
officers, Directors and other regular employees of the Company. No additional
compensation will be paid to such individuals for such activities.
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information as of July 27, 2000
(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. . . . . . . . . . . . 429,153 (2) 8.26%
4607 West Industrial Blvd.
Midland, Texas 79703
Donald L. Evans. . . . . . . . . . . . . 28,146 (3) *
500 Empire Plaza
Midland, Texas 79701
David N. Fitzgerald. . . . . . . . . . . 53,182 1.07%
2300 West 42nd Street
Odessa, Texas 79764
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Joe G. Roper . . . . . . . . . . . . . . 239,000 (4) 4.60%
4607 West Industrial Blvd.
Midland, Texas 79703
Roper Operations, Inc. . . . . . . . . . 657,854 (5) 13.27%
4607 West Industrial Blvd.
Midland, Texas 79703
Roper Family Properties, Ltd.. . . . . . 657,854 (5) 13.27%
4607 West Industrial Blvd.
Midland, Texas 79703
Metropolitan Life Insurance Company. . . 290,900 (6) 5.87%
One Madison Avenue
New York, New York 10010
State Street Research & Management
Company. . . . . . . . . . . . . . . . 795,700 (7) 16.05%
One Financial Center,
Boston Massachusetts 02111
F. Howard Walsh, Jr. . . . . . . . . . . 274,300 (8) 5.53%
500 West Seventh St., Suite 1007
Fort Worth, Texas 76102
All Directors (and nominees) . . . . . . 889,642 (9) 16.05%
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 239,000 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 25,000 shares of Common Stock underlying presently exercisable
stock options.
(4) Such shares of Common Stock may be acquired upon exercise of presently
exercisable stock options. Excluded are 546,019 shares of common stock
which are owned directly by Roper Family Properties, Ltd., a family limited
partnership, and which are attributable to Mr. Roper's 83% limited
partnership interest in the partnership. As a limited partner, Mr. Roper
has a pecuniary interest in such shares, but does not have or share voting
or investment powers with respect to the shares held by Roper Family
Properties, Ltd.
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<PAGE> 6
(5) All of such shares are held directly by Roper Family Properties, Ltd. The
sole general partner of the partnership is Roper Operations, Inc., which
owns a 1% interest in the limited partnership. By virtue of its position
as general partner of the partnership, Roper Operations, Inc. has indirect
ownership of such shares and shared voting and investment powers.
(6) In Amendment No. 5 to Schedule 13G, dated December 31, 1999, filed with the
Securities and Exchange Commission (the "Commission") by Metropolitan Life
Insurance Company ("Met Life"), Met Life reported the ownership of, and
sole voting and dispositive powers with respect to, 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.
Met Life disclaimed beneficial ownership in these shares.
(7) In Schedule 13G, dated February 1, 2000, filed by State Street with the
Commission, State Street reported beneficial ownership of 795,700 shares,
of which it reported sole voting power with respect to 767,000 shares and
sole dispositive power with respect to 795,700 shares. State Street
disclaimed any beneficial interest in these shares.
(8) As reported in Amendment No. 2 to Schedule 13D, dated November 3, 1997,
filed with the Commission.
(9) Includes 584,000 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,
2000 have been complied with.
ELECTION OF DIRECTORS
Directors of the Company are elected annually by the shareholders to hold
office until the next succeeding annual meeting of shareholders and until their
successors are duly qualified and elected.
In accordance with the Company's bylaws, the Board of Directors by
resolution has fixed the total number of directors at four. Accordingly, the
Board of Directors is recommending that the four current Directors of the
Company be re-elected to serve until the next annual meeting of shareholders
is held and their respective successors have been duly elected.
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<PAGE> 7
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. . . . . . . . 73 Chairman of the Board 1982
of Directors and Chief
Executive Officer of the
Company; Director of
Tom Brown, Inc.
Joe G. Roper . . . . . . . . . 72 Director and President 1982
of the Company.
Donald L. Evans. . . . . . . . 53 Director of the Company; 1982
Chairman of the Board of
Directors and Chief Executive
Officer of Tom Brown, Inc.
David N. Fitzgerald. . . . . . 77 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.
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<PAGE> 8
Other Information
The Board of Directors held one meeting during the year ended March 31, 2000
at which all Directors were present. The Directors also took action by
unanimous written consent on six occasions.
The Company does not have a standing nominating committee. The review of
recommendations for nominees for Directors is made by the full Board of
Directors.
Messrs. Donald L. Evans and David N. Fitzgerald served as members of the
Audit Committee of the Board of Directors during fiscal year 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, 2000.
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.
REPORT OF COMPENSATION COMMITTEE
The full Board of Directors functions as the Board's 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.
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<PAGE> 9
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 has provided automobiles to its executive officers,
including 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.
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 and no contributions to the plan were made by the Company last fiscal year.
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 and the first six months of
last fiscal year, the Company's financial condition was adversely impacted by
deteriorating 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 fiscal years ended March 31, 1999 or March 31, 2000.
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<PAGE> 10
Mr. Brown's previous salary increase was on September 1, 1997 when his salary
was increased to $162,000 per year. Due to an extra pay period in fiscal year
2000, Mr. Brown's actual salary for the year ended March 31, 2000 was $168,231.
Mr. Brown did not receive any cash bonuses or stock options during the fiscal
year ended March 31, 2000. The Board of Directors is satisfied that the
compensation paid to the executive officers of the Company is adequate to
ensure the continued efforts of all executive officers for the benefit of the
Company and its shareholders.
Under Section 162(m) of the Internal Revenue Code, 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 the Company's executive officers.
Thomas C. Brown
Donald L. Evans
David N. Fitzgerald
Joe G. Roper
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<PAGE> 11
EXECUTIVE COMPENSATION
Summary of Annual Compensation
The following table sets forth for each of the three fiscal years ended
March 31, 2000, 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, 2000
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, 2000 168,231 0 (1) 0 0 0 --
Chairman of the Board 1999 162,000 0 (1) 0 267,000(2) 0 1,197(3)
of Directors and Chief 1998 120,462 0 (1) 0 0 0 1,506(3)
Executive Officer
Joe G. Roper,
President and Director 2000 175,294 0 (1) 0 0 0 --
1999 171,306 0 (1) 0 172,000(2) 0 1,197(3)
1998 162,771 0 (1) 0 0 0 1,956(3)
</TABLE>
_________________
(1) The named executive officers of the Company were also provided certain
non-cash compensation and personal benefits. However, the aggregate
amount of such other compensation did not exceed $50,000 or 10% of the
named executive officer's salary during such fiscal year.
(2) The total number of securities underlying stock options granted in the
fiscal year ended March 31, 1999 includes 195,000 shares of common
stock underlying a stock option granted to Mr. Brown in September, 1996
and 100,000 shares of common stock underlying a stock option granted to
Mr. Roper in September, 1996. Both of these options were repriced in
the fiscal year ended March 31, 1999.
(3) Such amount was allocated to the account of the named executive officer
under the Company's 401(k) Profit Sharing Plan.
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<PAGE> 12
Stock Options
The Company has in the past utilized stock options as part of its overall
compensation of Directors, officers and employees. However, no stock options
were granted to the named executive officers during the fiscal year ended
March 31, 2000.
The following table sets forth certain information with respect to stock
option exercises during the fiscal year ended March 31, 2000 by the named
executive officers of the Company, and the value of each such officer's
unexercised stock options at March 31, 2000.
Aggregated Option/SAR Exercises in
Last Fiscal Year and Fiscal Year - End Option/SAR Values
<TABLE>
<CAPTION>
Value of
Number of Unexercised
Shares Securities Underlying Unexercised In-The-Money
Acquired Options/SARs Options/SARs
on Value at Fiscal Year-End (#) at Fiscal Year-End ($)(2)
Exercise Realized --------------------------------- ----------------------------
Name (#) ($)(1) Exercisable Unexercisable Exercisable Unexercisable
------------ -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
T. C. Brown 219,500 $1,755,000 239,000 28,000 $1,923,725 $215,950
J. G. Roper 0 0 239,000 28,000 $2,002,100 $215,950
</TABLE>
_________
(1) The "value realized" is equal to the fair market value of a share of Common
Stock on the dates of exercise, based on the last sale price of the
Company's common Stock, less the exercise price.
(2) Value of in-the-money options is equal to the fair market value of a share
of Common Stock at fiscal year-end, based on the last sale price of the
Company's Common Stock, less the exercise price.
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<PAGE> 13
STOCK PERFORMANCE GRAPH
Comparison of Five-Year Cumulative Total Returns
[Graph is here]
Legend
<TABLE>
<CAPTION>
Symbol Total Returns Index for: 3/31/95 3/31/96 3/31/97 3/31/98 3/31/99 3/31/00
------ ------------------------ ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
______ TMBR/Sharp Drilling, Inc. 100.00 105.9 186.3 180.4 66.7 192.2
--- Nasdaq Stock Market (US Companies) 100.00 135.8 151.0 228.9 309.2 575.1
- - - - - Nasdaq Non-Financial Stocks 100.00 134.9 145.5 218.3 305.1 597.2
(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 3/31/95.
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<PAGE> 14
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,
1995 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. The Company did not make any contributions to the
Profit Sharing Plan for the year ended March 31, 2000.
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, 2000.
Directors who are employees of the Company are eligible to participate in
the Company's stock option plans. Non-employee Directors of the Company are
eligible to participate in the 1998 Stock Option Plan. 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.
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<PAGE> 15
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.
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
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<PAGE> 16
option in return for a payment in cash and/or shares of Common Stock equal to
the excess of the fair market value of the shares with respect to which the
option is surrendered over the option price therefor, on such terms and
conditions as the Compensation Committee shall determine.
1994 Stock Option Plan
In July, 1994, the Board of Directors adopted the Company's 1994 Stock
Option Plan (the "1994 Plan"), which was ratified and adopted by the Company's
shareholders at the 1994 annual meeting of shareholders held on August 30,
1994. Options granted under the 1994 Plan may be either incentive stock
options within the meaning of Section 422 of the Code, or options which do
not constitute incentive stock options. Key employees (including officers and
Directors who are also key employees) of the Company are eligible to receive
options under the 1994 Plan.
The 1994 Plan is 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
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<PAGE> 17
such limitation. No incentive stock option may be granted to an individual if,
at the time the option is granted, such individual owns stock possessing more
than 10% of the total combined voting power of all classes of stock of the
Company, unless (i) at the time such option is granted the option price is at
least 110% of the fair market value of the stock subject to the option and
(ii) such option by its terms is not exercisable after the expiration of five
years from the date of grant.
An option may be granted in exchange for an individual's right and option
to purchase shares of Common Stock pursuant to the terms of an agreement that
existed prior to the date such option is granted ("Prior Option"). An option
agreement that grants an option in exchange for a Prior Option must provide for
the surrender and cancellation of the Prior Option. The purchase price of
Common Stock issued under an option granted in exchange for a Prior Option
shall be determined by the Compensation Committee and, such purchase price may,
without limitation, be equal to the price for which the optionee could have
purchased Common Stock under the Prior Option.
The Board of Directors of the Company may amend or terminate the 1994 Plan
at any time, but may not in any way impair the rights of an optionee under an
outstanding option without the consent of such optionee. In addition, in order
to obtain the benefits provided by Section 422 of the Code, the Board of
Directors will determine at the time of making each amendment whether or not
it is necessary to submit the amendment to the shareholders for approval.
Generally, however, no amendment may be made without shareholder approval if
such amendment would materially increase the benefits accruing to employee
optionees under the 1994 Plan; materially increase the number of securities
issuable under the 1994 Plan; or materially modify the requirements as to
eligibility for participation in the 1994 Plan. Unless earlier terminated, the
1994 Plan will terminate upon and no further options may be granted after the
expiration of ten years from the date of its adoption by the Board of Directors.
1998 Stock Option Plan
On September 1, 1998, the Board of Directors adopted the TMBR/Sharp
Drilling, Inc. 1998 Stock Option Plan (the "1998 Plan"), which was ratified and
adopted by the Company's shareholders at the 1999 Annual Meeting of Shareholders
held on August 31, 1999. Only key employees and non-employee Directors of the
Company whom the Compensation Committee selects are eligible to receive one or
more options under the 1998 Plan.
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.
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<PAGE> 18
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 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.
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 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.
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.
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<PAGE> 19
The 1998 Plan will terminate ten years from the date of its adoption by the
Board of Directors.
Change of Control Arrangements
The Company's 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.
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<PAGE> 20
For purposes of the 1994 stock option plan, the "Change of Control Value"
is an amount determined as follows, whichever is applicable: (i) the per share
price offered to shareholders of the Company in any such merger, consolidation,
sale of assets or dissolution transaction, (ii) the price per share offered to
shareholders of the Company in any tender offer or exchange offer whereby a
Corporate Change takes place, or (iii) if such Corporate Change occurs other
than pursuant to a tender or exchange offer, the fair market value per share of
the shares into which such options being surrendered are exercisable, as
determined by the Compensation Committee as of the date determined by the
Compensation Committee to be the date of cancellation and surrender of such
options. If the consideration offered to shareholders of the Company consists
of anything other than cash, the Compensation Committee shall determine the fair
cash equivalent of the portion of the consideration offered which is other than
cash.
Compensation Committee Interlocks and Insider Participation
Thomas C. Brown, the Chairman of the Board of Directors and Chief Executive
Officer of the Company, is a Director of Tom Brown, Inc. and Donald L. Evans,
the Chairman of the Board of Directors and Chief Executive Officer of Tom Brown,
Inc., is a Director of the Company. 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, 2000, TBI charged the Company approximately $60,200 for such
services provided by TBI, none of which was outstanding and unpaid at March 31,
2000.
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, 2000,
the Company invoiced TBI approximately $1,806,800 for contract drilling services
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<PAGE> 21
performed for TBI. Less than $1,000 was unpaid and outstanding at March 31,
2000. 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.
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, 2000, TBI billed the Company approximately $20,800 for the
Company's proportionate share of drilling costs and related expenses incurred
on properties operated by TBI, approximately $1,100 of which was outstanding at
March 31, 2000. The largest amount owed by the Company to TBI at any one time
during the fiscal year ended March 31, 2000 for its share of drilling costs and
related expenses and for services provided by TBI was approximately $4,200.
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 2001 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 7,
2001. 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 21, 2000. For the annual meeting in 2001, 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, 2001.
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<PAGE> 22
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 Annual Report to Shareholders for the fiscal year ended March 31, 2000,
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 July 27, 2000, 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, 2000.
BY ORDER OF THE BOARD OF DIRECTORS
James M. Alsup
Secretary
Midland, Texas
August 2, 2000
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<PAGE> 23
[Front of Card]
TMBR/SHARP DRILLING, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Thomas C. Brown, Donald L. Evans and
Joe G. Roper and each of them, attorneys, agents and proxies, with full power
of substitution, to represent and to vote all shares of common stock of
TMBR/Sharp Drilling, Inc. held of record by the undersigned on July 27, 2000,
at the Annual Meeting of Shareholders of TMBR/Sharp Drilling, Inc. to be held
on August 31, 2000, and at any adjournments or postponements thereof, in
accordance with the instructions on the reverse side.
(Continued and to be signed on reverse side) SEE REVERSE
SIDE
<PAGE> 24
[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, 2000
Please Detach and Mail in the Envelope Provided
A [ X ] Please mark
your votes
as in this
example L
WITHHOLD
AUTHORITY
FOR to vote for all
all nominees nominees
listed at right listed at right
<TABLE>
<S> <C> <C> <C> <C>
1. Election of [ ] [ ] Nominees: Thomas C. Brown THIS PROXY WILL BE VOTED IN ACCORDANCE WITH
Directors Donald L. Evans THE SHAREHOLDER'S SPECIFICATION HEREON. IN
David N. Fitzgerald THE ABSENCE OF SUCH SPECIFICATION, THIS PROXY
Joe G. Roper WILL BE VOTED FOR THE NOMINEES FOR DIRECTORS
NAMED ON THIS PROXY CARD, AND IN THE
DISCRETION OF THE PERSONS NAMED AS PROXIES
*To withhold authority to vote for ON THE REVERSE HEREOF, WITH RESPECT TO OTHER
any individual nominee, write that MATTERS THAT MAY PROPERLY COME BEFORE THE
nominee's name in the space MEETING OR ANY ADJOURNMENTS(S).
provided below:
PLEASE MARK, SIGN, DATE, AND RETURN THIS
____________________________ PROXY PROMPTLY USING THE ENCLOSED
ENVELOPE.
</TABLE>
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.
<PAGE> 25
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, 2000
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 2, 2000 in connection with the Company's annual meeting of
shareholders scheduled to be held on August 31, 2000.
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
