-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PrYfgdBCEHDCKYcZIoPH3lSLtJ6XovoiPV00TOUgiOs/Z/kw9h27YtUAsD0LHPvw w0WYGCRRo+EhqxK25mq4tQ== 0000950117-96-001087.txt : 19960910 0000950117-96-001087.hdr.sgml : 19960910 ACCESSION NUMBER: 0000950117-96-001087 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 6 FILED AS OF DATE: 19960909 SROS: AMEX GROUP MEMBERS: EER NATIONAL 78 PARTNERSHIP, LTD. GROUP MEMBERS: FRANK CAPSTICK GROUP MEMBERS: GCT INVESTMENTS, INC. GROUP MEMBERS: KRISTIAN SIEM GROUP MEMBERS: MIKE L. MULLEN GROUP MEMBERS: MIKE MULLEN ENERGY EQUIPMENT RESOURCE, INC. GROUP MEMBERS: NOREX DRILLING LTD. GROUP MEMBERS: NOREX INDUSTRIES, LTD. GROUP MEMBERS: PRD RIG PARTNERSHIP 1995, LTD. GROUP MEMBERS: PRONOR HOLDINGS LTD. GROUP MEMBERS: PROSPERITY INVESTMENTS, INC. GROUP MEMBERS: ROY T. OLIVER, JR. GROUP MEMBERS: SOMERSET CAPITAL PARTNERS GROUP MEMBERS: SOMERSET DRILLING ASSOCIATES, L.L.C. GROUP MEMBERS: STEVEN A. WEBSTER GROUP MEMBERS: THOMAS H. O'NEILL, JR. GROUP MEMBERS: U.S. RIG AND EQUIPMENT, INC. GROUP MEMBERS: WILLIAM R. ZIEGLER SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: DI INDUSTRIES INC CENTRAL INDEX KEY: 0000320186 STANDARD INDUSTRIAL CLASSIFICATION: DRILLING OIL & GAS WELLS [1381] IRS NUMBER: 742144774 STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-33055 FILM NUMBER: 96627442 BUSINESS ADDRESS: STREET 1: 450 GEARS RD STE 625 CITY: HOUSTON STATE: TX ZIP: 77067 BUSINESS PHONE: 7138740202 MAIL ADDRESS: STREET 1: 450 GEARS RD STREET 2: SUITE 625 CITY: HOUSTON STATE: TX ZIP: 77067 FORMER COMPANY: FORMER CONFORMED NAME: DRILLERS INC DATE OF NAME CHANGE: 19870519 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: SOMERSET CAPITAL PARTNERS CENTRAL INDEX KEY: 0001022343 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 161506952 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 69 DELAWARE AVENUE STREET 2: BUFFALO CITY: BUFFALO STATE: NY ZIP: 14202 BUSINESS PHONE: 7168420711 MAIL ADDRESS: STREET 1: 69 DELAWARE AVENUE STREET 2: SUITE 200 CITY: BUFFALO STATE: NY ZIP: 14202 SC 13D 1 SOMERSET CAPITAL PARTNERS 13D SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 ------------- SCHEDULE 13D Under The Securities Exchange Act of 1934 (Amendment No. )(1) DI Industries, Inc. - ------------------------------------------------------------------------------ (Name of issuer) Common Stock, par value $0.10 per share - ------------------------------------------------------------------------------ (Title of class of securities) 232909-10-1 - ------------------------------------------------------------------------------ (CUSIP Number) c/o William R. Ziegler Parson & Brown 666 Third Avenue, 9th Floor New York, New York 10017; (212) 551-9860 - ------------------------------------------------------------------------------ (Name, address and telephone number of person authorized to receive notices and communications) August 28, 1996 - ------------------------------------------------------------------------------ (Date of event which requires filing of this statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1 (b)(3) or (4), check the following box |_|. Check the following box if a fee is being paid with the statement |X|. (A fee is not required only if the reporting person: (1) has a previous statement on file reporting beneficial ownership of more than five percent of the class of securities described in Item 1; and (2) has filed no amendment subsequent thereto reporting beneficial ownership of five percent or less of such class.) (See Rule 13d-7.) Note. Six copies of this statement including all exhibits, should be filed with the Commission. See Rule 13d-1 (a) for other parties to whom copies are to be sent. (Continued on following pages) - -------- (1) The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). Page 1 of Pages - -------------------------------------------------------------------------------- CUSIP No. 232909-10-1 13D Page 2 of Pages - -------------------------------------------------------------------------------- NAME OF REPORTING PERSONS S.S OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS 1 Somerset Drilling Associates, L.L.C. - -------------------------------------------------------------------------------- CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) |_| 2 (b) |_| - -------------------------------------------------------------------------------- SEC USE ONLY 3 - -------------------------------------------------------------------------------- SOURCE OF FUNDS* 4 OO (See Item 3) - -------------------------------------------------------------------------------- CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e) 5 |_| - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - -------------------------------------------------------------------------------- NUMBER OF 7 SOLE VOTING POWER SHARES See Item 5(b) BENEFICIALLY ------------------------------------------------------------- OWNED BY 8 SHARED VOTING POWER EACH See Item 5(b) REPORTING ------------------------------------------------------------- PERSON WITH 9 SOLE DISPOSITIVE POWER See Item 5(b) ------------------------------------------------------------- 10 SHARED DISPOSITIVE POWER See Item 5(b) - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 35,428,978 - -------------------------------------------------------------------------------- CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES 12 CERTAIN SHARES* |X| See Item 5(a) - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 30.1% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* 00 (Limited Liability Company) - -------------------------------------------------------------------------------- *SEE INSTRUCTIONS BEFORE FILLING OUT! - -------------------------------------------------------------------------------- CUSIP No. 232909-10-1 13D Page 3 of Pages - -------------------------------------------------------------------------------- NAME OF REPORTING PERSONS S.S OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS 1 Somerset Capital Partners - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) |_| (b) |_| - -------------------------------------------------------------------------------- SEC USE ONLY 3 - -------------------------------------------------------------------------------- SOURCE OF FUNDS* 4 OO (See Item 3) - -------------------------------------------------------------------------------- CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e) 5 |_| - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION New York - -------------------------------------------------------------------------------- NUMBER OF 7 SOLE VOTING POWER SHARES See Item 5(b) BENEFICIALLY ------------------------------------------------------------- OWNED BY 8 SHARED VOTING POWER EACH See Item 5(b) REPORTING ------------------------------------------------------------- PERSON WITH 9 SOLE DISPOSITIVE POWER See Item 5(b) ------------------------------------------------------------- 10 SHARED DISPOSITIVE POWER See Item 5(b) - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 35,428,978 - -------------------------------------------------------------------------------- CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES 12 CERTAIN SHARES* |X| See Item 5(a) - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 30.1% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* PN - -------------------------------------------------------------------------------- *SEE INSTRUCTIONS BEFORE FILLING OUT! - -------------------------------------------------------------------------------- CUSIP No. 232909-10-1 13D Page 4 of Pages - -------------------------------------------------------------------------------- NAME OF REPORTING PERSONS S.S OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS 1 Thomas H. O'Neill, Jr. - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) |_| (b) |_| - -------------------------------------------------------------------------------- SEC USE ONLY 3 - -------------------------------------------------------------------------------- SOURCE OF FUNDS* 4 PF (See Item 3) - -------------------------------------------------------------------------------- CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e) 5 |-| - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION United States - -------------------------------------------------------------------------------- NUMBER OF 7 SOLE VOTING POWER SHARES See Item 5(b) BENEFICIALLY ------------------------------------------------------------- OWNED BY 8 SHARED VOTING POWER EACH See Item 5(b) REPORTING ------------------------------------------------------------- PERSON WITH 9 SOLE DISPOSITIVE POWER See Item 5(b) ------------------------------------------------------------- 10 SHARED DISPOSITIVE POWER See Item 5(b) - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 35,428,978 - -------------------------------------------------------------------------------- CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES 12 CERTAIN SHARES* |X| See Item 5(a) - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 30.1% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* IN - -------------------------------------------------------------------------------- *SEE INSTRUCTIONS BEFORE FILLING OUT! - -------------------------------------------------------------------------------- CUSIP No. 232909-10-1 13D Page 5 of Pages - -------------------------------------------------------------------------------- NAME OF REPORTING PERSONS S.S OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS 1 Steven A. Webster - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) |_| (b) |_| - -------------------------------------------------------------------------------- SEC USE ONLY 3 - -------------------------------------------------------------------------------- SOURCE OF FUNDS* 4 BK (See Item 3) - -------------------------------------------------------------------------------- CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e) 5 |_| - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION United States - -------------------------------------------------------------------------------- NUMBER OF 7 SOLE VOTING POWER SHARES See Item 5(b) BENEFICIALLY ------------------------------------------------------------- OWNED BY 8 SHARED VOTING POWER EACH See Item 5(b) REPORTING ------------------------------------------------------------- PERSON WITH 9 SOLE DISPOSITIVE POWER See Item 5(b) ------------------------------------------------------------- 10 SHARED DISPOSITIVE POWER See Item 5(b) - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 35,428,978 - -------------------------------------------------------------------------------- CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES 12 CERTAIN SHARES* |X| See Item 5(a) - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 30.1% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* IN - -------------------------------------------------------------------------------- *SEE INSTRUCTIONS BEFORE FILLING OUT! - -------------------------------------------------------------------------------- CUSIP No. 232909-10-1 13D Page 6 of Pages - -------------------------------------------------------------------------------- NAME OF REPORTING PERSONS S.S OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS 1 William R. Ziegler - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) |_| (b) |_| - -------------------------------------------------------------------------------- SEC USE ONLY 3 - -------------------------------------------------------------------------------- SOURCE OF FUNDS* 4 BK (See Item 3) - -------------------------------------------------------------------------------- CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e) 5 |_| - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION United States - -------------------------------------------------------------------------------- NUMBER OF 7 SOLE VOTING POWER SHARES See Item 5(b) BENEFICIALLY ------------------------------------------------------------- OWNED BY 8 SHARED VOTING POWER EACH See Item 5(b) REPORTING ------------------------------------------------------------- PERSON WITH 9 SOLE DISPOSITIVE POWER See Item 5(b) ------------------------------------------------------------- 10 SHARED DISPOSITIVE POWER See Item 5(b) - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 35,428,978 - -------------------------------------------------------------------------------- CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES 12 CERTAIN SHARES* |X| See Item 5(a) - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 30.1% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* IN - -------------------------------------------------------------------------------- *SEE INSTRUCTIONS BEFORE FILLING OUT! - -------------------------------------------------------------------------------- CUSIP No. 232909-10-1 13D Page 7 of Pages - -------------------------------------------------------------------------------- NAME OF REPORTING PERSONS S.S OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS 1 U.S. Rig and Equipment, Inc. - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) |_| (b) |_| - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- SOURCE OF FUNDS* 4 OO (See Item 3) - -------------------------------------------------------------------------------- CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e) 5 |_| - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Oklahoma - -------------------------------------------------------------------------------- NUMBER OF 7 SOLE VOTING POWER SHARES See Item 5(b) BENEFICIALLY ------------------------------------------------------------- OWNED BY 8 SHARED VOTING POWER EACH See Item 5(b) REPORTING ------------------------------------------------------------- PERSON WITH 9 SOLE DISPOSITIVE POWER See Item 5(b) ------------------------------------------------------------- 10 SHARED DISPOSITIVE POWER See Item 5(b) - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 33,200,407 - -------------------------------------------------------------------------------- CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES 12 CERTAIN SHARES* |X| See Item 5(a) - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 28.20% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* CO - -------------------------------------------------------------------------------- *SEE INSTRUCTIONS BEFORE FILLING OUT! - -------------------------------------------------------------------------------- CUSIP No. 232909-10-1 13D Page 8 of Pages - -------------------------------------------------------------------------------- NAME OF REPORTING PERSONS S.S OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS 1 Mike Mullen Energy Equipment Resource, Inc. - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) |_| (b) |_| - -------------------------------------------------------------------------------- SEC USE ONLY 3 - -------------------------------------------------------------------------------- SOURCE OF FUNDS* 4 OO (See Item 3) - -------------------------------------------------------------------------------- CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e) 5 |_| - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Texas - -------------------------------------------------------------------------------- NUMBER OF 7 SOLE VOTING POWER SHARES See Item 5(b) BENEFICIALLY ------------------------------------------------------------- OWNED BY 8 SHARED VOTING POWER EACH See Item 5(b) REPORTING ------------------------------------------------------------- PERSON WITH 9 SOLE DISPOSITIVE POWER See Item 5(b) ------------------------------------------------------------- 10 SHARED DISPOSITIVE POWER See Item 5(b) - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 33,200,407 - -------------------------------------------------------------------------------- CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES 12 CERTAIN SHARES* |X| See Item 5(a) - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 28.20% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* CO - -------------------------------------------------------------------------------- *SEE INSTRUCTIONS BEFORE FILLING OUT! - -------------------------------------------------------------------------------- CUSIP No. 232909-10-1 13D Page 9 of Pages - -------------------------------------------------------------------------------- NAME OF REPORTING PERSONS S.S OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS 1 GCT Investments, Inc. - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) |_| (b) |_| - -------------------------------------------------------------------------------- SEC USE ONLY 3 - -------------------------------------------------------------------------------- SOURCE OF FUNDS* 4 OO (See Item 3) - -------------------------------------------------------------------------------- CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e) 5 |_| - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Texas - -------------------------------------------------------------------------------- NUMBER OF 7 SOLE VOTING POWER SHARES See Item 5(b) BENEFICIALLY ------------------------------------------------------------- OWNED BY 8 SHARED VOTING POWER EACH See Item 5(b) REPORTING ------------------------------------------------------------- PERSON WITH 9 SOLE DISPOSITIVE POWER See Item 5(b) ------------------------------------------------------------- 10 SHARED DISPOSITIVE POWER See Item 5(b) - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 33,200,407 - -------------------------------------------------------------------------------- CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES 12 CERTAIN SHARES* |X| See Item 5(a) - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 28.20% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* CO - -------------------------------------------------------------------------------- *SEE INSTRUCTIONS BEFORE FILLING OUT! - -------------------------------------------------------------------------------- CUSIP No. 232909-10-1 13D Page 10 of Pages - -------------------------------------------------------------------------------- NAME OF REPORTING PERSONS S.S OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS 1 PRD Rig Partnership 1995, Ltd. - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) |_| (b) |_| - -------------------------------------------------------------------------------- SEC USE ONLY 3 - -------------------------------------------------------------------------------- SOURCE OF FUNDS* 4 OO (See Item 3) - -------------------------------------------------------------------------------- CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e) 5 |_| - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Texas - -------------------------------------------------------------------------------- NUMBER OF 7 SOLE VOTING POWER SHARES See Item 5(b) BENEFICIALLY ------------------------------------------------------------- OWNED BY 8 SHARED VOTING POWER EACH See Item 5(b) REPORTING ------------------------------------------------------------- PERSON WITH 9 SOLE DISPOSITIVE POWER See Item 5(b) ------------------------------------------------------------- 10 SHARED DISPOSITIVE POWER See Item 5(b) - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 33,200,407 - -------------------------------------------------------------------------------- CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES 12 CERTAIN SHARES* |X| See Item 5(a) - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 28.20% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* PN - -------------------------------------------------------------------------------- *SEE INSTRUCTIONS BEFORE FILLING OUT! - -------------------------------------------------------------------------------- CUSIP No. 232909-10-1 13D Page 11 of Pages - -------------------------------------------------------------------------------- NAME OF REPORTING PERSONS S.S OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS 1 EER National 78 Partnership, Ltd. - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) |_| (b) |_| - -------------------------------------------------------------------------------- SEC USE ONLY 3 - -------------------------------------------------------------------------------- SOURCE OF FUNDS* 4 OO (See Item 3) - -------------------------------------------------------------------------------- CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e) 5 |_| - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Texas - -------------------------------------------------------------------------------- NUMBER OF 7 SOLE VOTING POWER SHARES See Item 5(b) BENEFICIALLY ------------------------------------------------------------- OWNED BY 8 SHARED VOTING POWER EACH See Item 5(b) REPORTING ------------------------------------------------------------- PERSON WITH 9 SOLE DISPOSITIVE POWER See Item 5(b) ------------------------------------------------------------- 10 SHARED DISPOSITIVE POWER See Item 5(b) - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 33,200,407 - -------------------------------------------------------------------------------- CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES 12 CERTAIN SHARES* |X| See Item 5(a) - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 28.20% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* PN - -------------------------------------------------------------------------------- *SEE INSTRUCTIONS BEFORE FILLING OUT! - -------------------------------------------------------------------------------- CUSIP No. 232909-10-1 13D Page 12 of Pages - -------------------------------------------------------------------------------- NAME OF REPORTING PERSONS S.S OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS 1 Roy T. Oliver, Jr. - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) |_| (b) |_| - -------------------------------------------------------------------------------- SEC USE ONLY 3 - -------------------------------------------------------------------------------- SOURCE OF FUNDS* 4 OO (See Item 3) - -------------------------------------------------------------------------------- CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e) 5 |_| - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION United States - -------------------------------------------------------------------------------- NUMBER OF 7 SOLE VOTING POWER SHARES See Item 5(b) BENEFICIALLY ------------------------------------------------------------- OWNED BY 8 SHARED VOTING POWER EACH See Item 5(b) REPORTING ------------------------------------------------------------- PERSON WITH 9 SOLE DISPOSITIVE POWER See Item 5(b) ------------------------------------------------------------- 10 SHARED DISPOSITIVE POWER See Item 5(b) - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 33,200,407 - -------------------------------------------------------------------------------- CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES 12 CERTAIN SHARES* |X| See Item 5(a) - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 28.20% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* IN - -------------------------------------------------------------------------------- *SEE INSTRUCTIONS BEFORE FILLING OUT! - -------------------------------------------------------------------------------- CUSIP No. 232909-10-1 13D Page 13 of Pages - -------------------------------------------------------------------------------- NAME OF REPORTING PERSONS S.S OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS 1 Mike L. Mullen - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) |_| (b) |_| - -------------------------------------------------------------------------------- SEC USE ONLY 3 - -------------------------------------------------------------------------------- SOURCE OF FUNDS* 4 OO (See Item 3) - -------------------------------------------------------------------------------- CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e) 5 |_| - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION United States - -------------------------------------------------------------------------------- NUMBER OF 7 SOLE VOTING POWER SHARES See Item 5(b) BENEFICIALLY ------------------------------------------------------------- OWNED BY 8 SHARED VOTING POWER EACH See Item 5(b) REPORTING ------------------------------------------------------------- PERSON WITH 9 SOLE DISPOSITIVE POWER See Item 5(b) ------------------------------------------------------------- 10 SHARED DISPOSITIVE POWER See Item 5(b) - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 33,200,407 - -------------------------------------------------------------------------------- CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES 12 CERTAIN SHARES* |X| See Item 5(a) - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 28.20% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* IN - -------------------------------------------------------------------------------- *SEE INSTRUCTIONS BEFORE FILLING OUT! - -------------------------------------------------------------------------------- CUSIP No. 232909-10-1 13D Page 14 of Pages - -------------------------------------------------------------------------------- NAME OF REPORTING PERSONS S.S OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS 1 Norex Drilling Ltd. - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) |_| (b) |_| - -------------------------------------------------------------------------------- SEC USE ONLY 3 - -------------------------------------------------------------------------------- SOURCE OF FUNDS* 4 WC (See Item 3) - -------------------------------------------------------------------------------- CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e) 5 |_| - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Bermuda - -------------------------------------------------------------------------------- NUMBER OF 7 SOLE VOTING POWER SHARES See Item 5(b) BENEFICIALLY ------------------------------------------------------------- OWNED BY 8 SHARED VOTING POWER EACH See Item 5(b) REPORTING ------------------------------------------------------------- PERSON WITH 9 SOLE DISPOSITIVE POWER See Item 5(b) ------------------------------------------------------------- 10 SHARED DISPOSITIVE POWER See Item 5(b) - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 18,730,105 - -------------------------------------------------------------------------------- CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES 12 CERTAIN SHARES* |X| See Item 5(a) - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 15.91% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* CO - -------------------------------------------------------------------------------- *SEE INSTRUCTIONS BEFORE FILLING OUT! - -------------------------------------------------------------------------------- CUSIP No. 232909-10-1 13D Page 15 of Pages - -------------------------------------------------------------------------------- NAME OF REPORTING PERSONS S.S OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS 1 Pronor Holdings Ltd. - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) |_| (b) |_| - -------------------------------------------------------------------------------- SEC USE ONLY 3 - -------------------------------------------------------------------------------- SOURCE OF FUNDS* 4 OO (See Item 3) - -------------------------------------------------------------------------------- CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e) 5 |_| - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION British Virgin Islands - -------------------------------------------------------------------------------- NUMBER OF 7 SOLE VOTING POWER SHARES See Item 5(b) BENEFICIALLY ------------------------------------------------------------- OWNED BY 8 SHARED VOTING POWER EACH See Item 5(b) REPORTING ------------------------------------------------------------- PERSON WITH 9 SOLE DISPOSITIVE POWER See Item 5(b) ------------------------------------------------------------- 10 SHARED DISPOSITIVE POWER See Item 5(b) - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 18,730,105 - -------------------------------------------------------------------------------- CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES 12 CERTAIN SHARES* |X| See Item 5(a) - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 15.91% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* CO - -------------------------------------------------------------------------------- *SEE INSTRUCTIONS BEFORE FILLING OUT! - -------------------------------------------------------------------------------- CUSIP No. 232909-10-1 13D Page 16 of Pages - -------------------------------------------------------------------------------- NAME OF REPORTING PERSONS S.S OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS 1 Norex Industries, Inc. - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) |_| (b) |_| - -------------------------------------------------------------------------------- SEC USE ONLY 3 - -------------------------------------------------------------------------------- SOURCE OF FUNDS* 4 OO (See Item 3) - -------------------------------------------------------------------------------- CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e) 5 |_| - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Cayman Islands - -------------------------------------------------------------------------------- NUMBER OF 7 SOLE VOTING POWER SHARES See Item 5(b) BENEFICIALLY ------------------------------------------------------------- OWNED BY 8 SHARED VOTING POWER EACH See Item 5(b) REPORTING ------------------------------------------------------------- PERSON WITH 9 SOLE DISPOSITIVE POWER See Item 5(b) ------------------------------------------------------------- 10 SHARED DISPOSITIVE POWER See Item 5(b) - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 18,730,105 - -------------------------------------------------------------------------------- CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES 12 CERTAIN SHARES* |X| See Item 5(a) - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 15.91% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* CO - -------------------------------------------------------------------------------- *SEE INSTRUCTIONS BEFORE FILLING OUT! - -------------------------------------------------------------------------------- CUSIP No. 232909-10-1 13D Page 17 of Pages - -------------------------------------------------------------------------------- NAME OF REPORTING PERSONS S.S OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS 1 Prosperity Investments, Inc. - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) |_| (b) |_| - -------------------------------------------------------------------------------- SEC USE ONLY 3 - -------------------------------------------------------------------------------- SOURCE OF FUNDS* 4 OO (See Item 3) - -------------------------------------------------------------------------------- CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e) 5 |_| - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION British Virgin Islands - -------------------------------------------------------------------------------- NUMBER OF 7 SOLE VOTING POWER SHARES See Item 5(b) BENEFICIALLY ------------------------------------------------------------- OWNED BY 8 SHARED VOTING POWER EACH See Item 5(b) REPORTING ------------------------------------------------------------- PERSON WITH 9 SOLE DISPOSITIVE POWER See Item 5(b) ------------------------------------------------------------- 10 SHARED DISPOSITIVE POWER See Item 5(b) - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 18,730,105 - -------------------------------------------------------------------------------- CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES 12 CERTAIN SHARES* |X| See Item 5(a) - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 15.91% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* CO - -------------------------------------------------------------------------------- *SEE INSTRUCTIONS BEFORE FILLING OUT! - -------------------------------------------------------------------------------- CUSIP No. 232909-10-1 13D Page 18 of Pages - -------------------------------------------------------------------------------- NAME OF REPORTING PERSONS S.S OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS 1 Kristian Siem - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) |_| (b) |_| - -------------------------------------------------------------------------------- SEC USE ONLY 3 - -------------------------------------------------------------------------------- SOURCE OF FUNDS* 4 N/A - -------------------------------------------------------------------------------- CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e) 5 |_| - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Norway - -------------------------------------------------------------------------------- NUMBER OF 7 SOLE VOTING POWER SHARES See Item 5(b) BENEFICIALLY ------------------------------------------------------------- OWNED BY 8 SHARED VOTING POWER EACH See Item 5(b) REPORTING ------------------------------------------------------------- PERSON WITH 9 SOLE DISPOSITIVE POWER See Item 5(b) ------------------------------------------------------------- 10 SHARED DISPOSITIVE POWER See Item 5(b) - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON See Item 5(a) - -------------------------------------------------------------------------------- CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES 12 CERTAIN SHARES* |_| See Item 5(a) - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) See Item 5(a) - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* IN - -------------------------------------------------------------------------------- *SEE INSTRUCTIONS BEFORE FILLING OUT! - -------------------------------------------------------------------------------- CUSIP No. 232909-10-1 13D Page 19 of Pages - -------------------------------------------------------------------------------- NAME OF REPORTING PERSONS S.S OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS 1 Frank Capstick - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) |_| (b) |_| - -------------------------------------------------------------------------------- SEC USE ONLY 3 - -------------------------------------------------------------------------------- SOURCE OF FUNDS* 4 N/A - -------------------------------------------------------------------------------- CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e) 5 |_| - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Bermuda - -------------------------------------------------------------------------------- NUMBER OF 7 SOLE VOTING POWER SHARES See Item 5(b) BENEFICIALLY ------------------------------------------------------------- OWNED BY 8 SHARED VOTING POWER EACH See Item 5(b) REPORTING ------------------------------------------------------------- PERSON WITH 9 SOLE DISPOSITIVE POWER See Item 5(b) ------------------------------------------------------------- 10 SHARED DISPOSITIVE POWER See Item 5(b) - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON See Item 5(a) - -------------------------------------------------------------------------------- CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES 12 CERTAIN SHARES* |_| See Item 5(a) - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) See Item 5(a) - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* IN - -------------------------------------------------------------------------------- *SEE INSTRUCTIONS BEFORE FILLING OUT! SCHEDULE 13D Introduction. The reporting persons named in Item 2 below (collectively, the "Group") are hereby jointly filing this Schedule 13D as a group solely because they may be deemed a "group" within the meaning of Rule 13d-5(b)(1) promulgated pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange Act"), by virtue of the fact that the shares of common stock of the issuer directly or indirectly beneficially owned by them are held subject to certain agreements with respect to the voting and disposition of same under the terms and conditions of a certain shareholders' agreement dated May 7, 1996, as amended on June 11, 1996 (as amended, the "Shareholders' Agreement"). In accordance with Rule 13d-1(f) promulgated pursuant to the Exchange Act, the persons named in Item 2 below have executed a written agreement relating to the joint filing of this Schedule 13D (the "Group Filing Agreement"), a copy of which is attached hereto as Exhibit I. Item 1. Security and Issuer. This statement relates to the common stock, par value $0.10 per share (the "Common Stock") of DI Industries, Inc., a Texas corporation (the "Company"). The address of the principal executive offices of the Company is 450 Gears Road, Suite 625, Houston, Texas 77067. Item 2. Identity and Background. The reporting persons are the signatories to the Shareholders' Agreement and the control persons of such signatories, and are comprised of three subgroups, as follows: (i) Somerset Drilling Associates, L.L.C., a Delaware limited liability company ("Somerset"), Somerset Capital Partners, a New York general partnership and the managing member of Somerset ("SCP"), Thomas H. O'Neill, Jr., an individual ("O'Neill"), Steven A. Webster, an individual ("Webster") and William R. Ziegler, an individual ("Ziegler"), being the three general partners of SCP (collectively, the "SCP Partners"; and together with Somerset and SCP, the "Somerset Group"); (ii) Roy T. Oliver, Jr., an individual ("Oliver"), U.S. Rig and Equipment, Inc., an Oklahoma corporation ("USRE"), Mike Mullen Energy Equipment Resource, Inc., a Texas corporation ("MMEER"), GCT Investments, Inc., a Texas corporation ("GCT"), Mike L. Mullen, an individual ("Mullen" ), PRD Rig Partnership 1995, Ltd., a Texas limited partnership ("PRD"), and EER National 78 Partnership, Ltd., a Texas limited partnership ("N78"; together with Oliver, USRE, MMEER, GCT, Mullen, and PRD, the "Mullen/Oliver Group"); and (iii) Norex Drilling Ltd., a Bermuda corporation ("Norex Drilling"), Pronor Holdings Ltd., a British Virgin Islands corporation ("Pronor"), Norex Industries, Inc., a Cayman Islands company ("NXA"), Prosperity Investments Inc., a British Virgin Islands company ("Prosperity"), Kristian Siem, an individual ("Siem") and Frank Capstick, an individual ("Capstick") (NXA, Prosperity, Siem and Capstick, together with Norex Drilling and Pronor, the "Drilling Group"). The members of the Somerset Group, the Mullen/Oliver Group and the Drilling Group are hereinafter sometimes referred to individually as a "Reporting Person" and collectively as the "Reporting Persons"). Somerset Group Somerset is a Delaware limited liability company that was formed recently to serve as a principal shareholder of Somerset Investment Corp., a Texas corporation ("SIC") that was formed to participate in the Somerset Merger (as hereinafter defined), and to acquire, own and hold the shares of Common Stock of the Company to be issued to Somerset in the Somerset Merger. The address of the principal business and the principal office of Somerset is 69 Delaware Avenue, Buffalo, New York 14202. The sole managing member of Somerset is Somerset Capital Partners. SCP is a New York general partnership that was formed recently to serve as a principal shareholder of SIC and as the managing member of Somerset, and to acquire, own and hold the shares of Common Stock of the Company to be issued to SCP in the Somerset Merger. The address of the principal business and the principal office of SCP is 69 Delaware Avenue, Buffalo, New York 14202. The only partners of SCP are Thomas H. O'Neill, Jr., Steven A. Webster and William R. Ziegler. O'Neill is a natural person and one of the three general partners of SCP and has a business address of 69 Delaware Avenue, Buffalo, New York 14202. The present principal occupation or employment of O'Neill is as the Chairman and Chief Executive Officer of Somerset Exploration Corporation, an oil and gas exploration and production company with its principal place of business located at 69 Delaware Avenue, Buffalo, New York 14202. O'Neill is a United States citizen. Webster is a natural person and one of the three general partners of SCP and has a business address of 1900 West Loop South, Suite 1800, Houston, Texas 77027. The present principal occupation or employment of Webster is as the Chairman, Chief Executive Officer and Treasurer of Falcon Drilling Company, Inc., a marine oil and gas drilling contractor with its principal place of business located at 1900 West Loop South, Suite 1800, Houston, Texas 77027. Webster is a United States citizen. Ziegler is a natural person and one of the three general partners of SCP and has a business address of 666 Third Avenue, 9th Floor, New York, New York 10017. The present principal occupation or employment of Ziegler is as a partner of Parson & Brown, a law firm with its principal place of business located at 666 Third Avenue, 9th Floor, New York, New York 10017. Ziegler is a United States citizen. During the last five years, no member of the Somerset Group has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors). During the last five years, no member of the Somerset Group was a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating -2- activities subject to, federal or state securities laws or finding any violation with respect to such laws. Mullen/Oliver Group Oliver is a natural person who has a business address of 6601 S.W. 29th Street, Oklahoma City, Oklahoma 73179. The present principal occupation or employment of Oliver is as the Chairman, President and Chief Executive Officer of U.S. Rig and Equipment, Inc., a worldwide supplier of drilling equipment with its principal place of business located at 6601 S.W. 29th Street, Oklahoma City, Oklahoma 73179. Oliver is a United States citizen. USRE is an Oklahoma corporation whose principal business is as a worldwide supplier of drilling equipment. The address of the principal business and principal office of USRE is 6601 S.W. 29th Street, Oklahoma City, Oklahoma 73179. Oliver is the sole executive office, director and control person of USRE. MMEER is a Texas corporation whose principal business is as a worldwide supplier of drilling equipment. The address of the principal business and principal office of MMEER is 8411 Preston Road, Suite 730, LB2, Dallas, Texas 75225. Mullen is the sole executive officer, director and control person of MMEER. GCT is a Texas corporation whose principal business is as a worldwide supplier of drilling equipment. The address of the principal business and principal office of GCT is 8411 Preston Road Suite 730, LB2, Dallas, Texas 75225. Mullen is the sole executive officer, director and control person of GCT. Mullen is a natural person who has a business address of 8411 Preston Road Suite 730, LB2, Dallas, Texas 75225. The present principal occupation or employment of Mullen is as the President and Chief Executive Officer of MMEER and GCT. Mullen is a United States citizen. PRD is a Texas limited partnership whose principal business is the acquisition, holding and disposition of a single specified land drilling rig. The address of the principal business and principal office of PRD is 8411 Preston Road Suite 730, LB2, Dallas, Texas 75225. MMEER is the sole general partner of PRD. N78 is a Texas limited partnership whose principal business is the acquisition, holding and disposition of a single specified land drilling rig. The address of the principal business and principal office of N78 is 8411 Preston Road Suite 730, LB2, Dallas, Texas 75225. MMEER is the sole general partner of N78. During the last five years, no member of the Mullen/Oliver Group has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors). During the last five years, no member of the Mullen/Oliver Group was a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or -3- mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws. Drilling Group Norex Drilling is a Bermuda corporation whose principal business is investments in accordance with directions received from its sole shareholder, NXA. The address of the principal business and principal office of Norex Drilling is Cedar House, 41 Cedar Avenue, Hamilton, HM-12, Bermuda. The executive officers and directors of Norex Drilling are listed in Annex A attached hereto. NXA is considered the control person of Norex Drilling. Other control persons may be deemed to include Elderberry Holdings Limited, a Bahamas company ("Elderberry"), Harrington Trust Limited, a Bermuda trust company (the "Trustee") and Sero Trust, a Bermuda trust (the "Trust"). Elderberry owns approximately 35.15% of the issued and outstanding common stock of NXA. The Trustee owns Elderberry and approximately 3.48% of the issued and outstanding common stock of NXA on behalf of the Trust whose potential beneficiaries include the mother and four brothers of Kristian Siem, referred to below. NXA is a Cayman Islands company whose principal business is investments in securities issued by oil and gas industry companies and in oil and gas drilling rigs. NXA owns 100% of the issued and outstanding capital stock of Norex Drilling. The address of the principal business and principal office of NXA is P.O. Box HM 429, Hamilton, HM BX, Bermuda (Registered office: c/o Appleby Spurling & Kempe, Cedar House, 41 Cedar Avenue, Hamilton, HM-12, Bermuda). The executive officers and directors of NXA are listed in Annex B attached hereto; there are no other control persons of NXA, except for Elderberry, Trustee and the Trust. Siem, the Chairman of the Board, Director and Vice President of Norex Drilling, the Chairman of the Board, Director and CEO of NXA, the Chairman of the Board and Managing Director of Pronor and the Chairman of the Board and Managing Director of Prosperity, is a natural person who lives at 30 Hyde Park Gate, London, England. The present principal occupation or employment of Siem is as Chairman of the Board and Chief Executive Officer of NXA. Siem is a citizen of Norway. Capstick, a Director and the President of Norex Drilling and the President of NXA, is a natural person whose registered business address is Cedar House, 41 Cedar Avenue, Hamilton, HM-12, Bermuda. The present principal occupation or employment of Capstick is as a Director and President of NXA. Capstick is a citizen of Bermuda. Pronor is a British Virgin Islands company whose principal business is investments. The address of the principal business and principal office of Pronor is c/o Morgan & Morgan Trust Corp. Ltd., Road Town, Pasea Estate, Tortola, British Virgin Islands. The executive officers and directors of Pronor are listed in Annex C attached hereto; there are no other control persons of Pronor, except for Prosperity, NXA and Orkla ASA, a Kingdom of Norway company ("Orkla"). Prosperity is a British Virgin Islands company formed as a joint venture between NXA and Orkla, whose principal business is investments. Prosperity owns 100% of the -4- outstanding capital stock of Pronor. The address of the principal business and principal office of Prosperity is c/o Morgan & Morgan Trust Corp. Ltd., Road Town, Pasea Estate, Tortola, British Virgin Islands. The executive officers and directors of Prosperity are listed in Annex D attached hereto; there are no other control persons of Prosperity, except for NXA and Orkla, the principal shareholders of Prosperity. Orkla is a Kingdom of Norway company. Orkla owns approximately 47.06% of the outstanding capital stock of Pronor. The members of the Drilling Group believe that the principal business of Orkla is investments and that the address of the principal business and principal office of Orkla is P.O. Box 308, 1342 Lysaker, Norway. On September 5, 1996, Orkla accepted an offer from NXA, pursuant to which NXA will purchase Orkla's 47.06% interest in Prosperity for $4,000,000, with an approximate closing date of September 12, 1996. See Item 6 and Exhibits X and XI attached hereto. During the last five years, no member of the Drilling Group (and, to the best knowledge of the members of the Drilling Group, no executive officer, director and/or control person of any member of the Drilling Group) has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors). During the last five years, no member of the Drilling Group (and, to the best knowledge of the members of the Drilling Group, no executive officer, director and/or control person of any member of the Drilling Group) was a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws. Item 3. Source and Amount of Funds or Other Consideration. Somerset Group Pursuant to the terms and conditions of that certain Agreement and Plan of Merger between the Company and SIC dated May 7, 1996, as amended by an Amendment dated June 11, 1996, and a Second Amendment dated July 26, 1996 (as amended, the "Somerset Merger Agreement"), on August 29, 1996 (the "Effective Date"), SIC was merged with and into the Company and each outstanding share of common stock of SIC (individually, a "Somerset Share" and collectively, the "Somerset Shares") was converted into the right to receive 39,423.978 shares of Company Common Stock, or an aggregate of 39,423,978 shares of Company Common Stock (hereinafter, the "Somerset Merger"). The Somerset Merger exchange ratio was based on a $25,000,000 valuation placed upon the Somerset Shares, based upon cash contributions by the shareholders of SIC (individually, a "Somerset Shareholder" and collectively, the "Somerset Shareholders") to SIC of at least $25,000,000. In addition to the 39,423,978 shares of Company Common Stock issued to the Somerset Shareholders (inclusive of Somerset and SCP, as well as certain other persons that are not members of the Somerset Group and are not Reporting Persons), in the Somerset Merger, in accordance with the terms of the Somerset Merger Agreement, the Company also issued to the Somerset Shareholders certain warrants (collectively, the "Somerset Shareholder Shadow Warrants"), which provide the Somerset Shareholders the right to purchase up to 1,720,000 shares of Company Common Stock, exercisable only in the -5- event that the issued and outstanding Series A Preferred Stock of the Company is converted into Company Common Stock or a certain option to acquire shares of Company Common Stock is exercised, and in such event, only with respect to an equivalent number of shares as are subject to such conversion or exercise. (See Item 4 below for further details with respect to the Somerset Shareholder Shadow Warrants.) The shares of Company Common Stock issued in the Somerset Merger to the Somerset Shareholders represent approximately one-third of the shares of the Company Common Stock outstanding immediately after the Somerset Merger and the Rig Merger (as such term is hereinafter defined; the Somerset Merger and the Rig Merger being sometimes hereinafter collectively referred to as the "Mergers"). Of the aggregate 39,423,978 shares of Company Common Stock issued to the Somerset Shareholders in the Somerset Merger, (i) 35,423,978 shares of Company Common Stock were issued to members of the Somerset Group, are held subject to the terms and conditions of the Shareholders Agreement and are part of the aggregate number of shares deemed beneficially owned by the reporting persons named in Item 2 above and signatory hereto as members of the Group described in the Introduction section of this Schedule 13D and (ii) 4,000,000 shares of Company Common Stock were issued to Somerset Shareholders who are not members of the Somerset Group, and such shares are not held subject to the terms and conditions of the Shareholders Agreement and are not part of the aggregate number of shares deemed beneficially owned by the reporting persons named in Item 2 above and signatory hereto as members of the Group described in the Introduction section of this Schedule 13D. Of the aggregate 1,720,000 shares of Company Common Stock that are the subject of the Somerset Shareholder Shadow Warrants, (i) 1,545,487 shares of Company Common Stock are the subject of Somerset Shareholder Shadow Warrants issued to members of the Somerset Group (hereinafter, the "Somerset Group Shadow Warrants") and (ii) 174,513 shares of Company Common Stock are the subject of Somerset Shareholder Shadow Warrants issued to Somerset Shareholders who are not members of the Somerset Group. The shares of Company Common Stock issued in the Somerset Merger to the Somerset Shareholders that are members of the Somerset Group represent approximately 30.09% of the shares of the Company Common Stock outstanding immediately after the Mergers. The source of funds for the $19,000,000 cash contribution made by Somerset to SIC was the offering and sale of limited liability company interests in Somerset in a private placement transaction. The source of funds for the $6,000,000 cash contribution made by SCP to SIC was as follows: (i) $2,000,000 borrowed by Webster and Ziegler from Citibank N.A., secured by common stock of a company not affiliated with the Company that is owned indirectly by them through a corporation that they own and control, and contributed to SCP for their general partnership interest therein, (ii) $1,000,000 contributed by O'Neill for his general partnership interest in SCP and (iii) $3,000,000 contributed by other investors who are not part of the Somerset Group and not Reporting Persons. Mullen/Oliver Group Pursuant to the terms and conditions of that certain Agreement and Plan of Merger among the Company, DI Merger Sub, Inc. ("Company Sub"), Oliver, Mullen, R.T. Oliver, Inc. ("RTO") and Land Rig Acquisition Corp. ("LRAC") dated May 7, 1996, as amended by an -6- Amendment dated June 11, 1996 and a Second Amendment dated July 26, 1996 (as amended, the "Rig Merger Agreement"; and together with the Somerset Merger Agreement, the "Merger Agreements"), on the Effective Date, (i) RTO and Company Sub were merged with and into LRAC, with LRAC as the surviving corporation, and LRAC became a wholly-owned subsidiary of the Company, (ii) each of the outstanding shares of common stock of RTO (individually, a "RTO Share" and collectively, the "RTO Shares") was converted into the right to receive 22,650.652 shares of Company Common Stock, or an aggregate of 11,325,326 shares of Company Common Stock and (iii) each of the outstanding shares of common stock of LRAC (individually, a "LRAC Share" and collectively, the "LRAC Shares"; the RTO Shares and the LRAC Shares being sometimes hereinafter collectively referred to as the "RTO/LRAC Shares") was converted into the right to receive 28,098.652 shares of Company Common Stock, or an aggregate of 28,098,652 shares of Company Common Stock (hereinafter, the "Rig Merger"). The Rig Merger exchange ratio was based on a $25,000,000 valuation placed upon the RTO/LRAC Shares, based upon a valuation of an 18-unit fleet of all electric land drilling rigs (collectively, the "Merger Rigs") owned by RTO and LRAC prior to the Rig Merger and owned solely by LRAC upon consummation of the Rig Merger. In addition to the 39,423,978 shares of Company Common Stock issued to the shareholders of RTO and LRAC (inclusive of the members of the Mullen/Oliver Group, as well as certain other persons that are not members of the Mullen/Oliver Group and are not Reporting Persons) in the Rig Merger (hereinafter, sometimes collectively referred to as the "RTO/LRAC Shareholders"), in the Rig Merger, in accordance with the terms of the Rig Merger Agreement, the Company also issued to the RTO/LRAC Shareholders certain warrants (collectively, the "RTO/LRAC Shadow Warrants"), which provide the RTO/LRAC Shareholders the right to purchase up to 1,720,000 shares of Company Common Stock, exercisable only in the event that the issued and outstanding Series A Preferred Stock of the Company is converted into Company Common Stock or a certain option to acquire shares of Company Common Stock is exercised, and in such event, only with respect to an equivalent number of shares as are subject to such conversion or exercise. (See Item 4 below for further details with respect to the RTO/LRAC Shareholder Shadow Warrants.) The shares of Company Common Stock issued in the Rig Merger to the RTO/LRAC Shareholders represent approximately one-third of the shares of the Company Common Stock outstanding immediately after the Mergers. Of the aggregate 39,423,978 shares of Company Common Stock issued to the RTO/LRAC Shareholders in the Rig Merger, (i) 33,200,407 shares of Company Common Stock were issued to members of the Mullen/Oliver Group, are held subject to the terms and conditions of the Shareholders Agreement and are part of the aggregate number of shares deemed beneficially owned by the reporting persons named in Item 2 above and signatory hereto as members of the Group described in the Introduction section of this Schedule 13D and (ii) 6,223,571 shares of Company Common Stock were issued to RTO/LRAC Shareholders who are not members of the Mullen/Oliver Group, and such shares are not held subject to the terms and conditions of the Shareholders Agreement and are not part of the aggregate number of shares deemed beneficially owned by the reporting persons named in Item 2 above and signatory hereto as members of the Group described in the Introduction section of this Schedule 13D. Of the aggregate 1,720,000 shares of Company Common Stock that are the subject of the RTO/LRAC Shadow Warrants, (i) 1,448,445 shares of Company Common Stock are the subject of RTO/LRAC Shadow Warrants issued to members of the Mullen/Oliver Group (hereinafter, the -7- "Mullen/Oliver Shadow Warrants") and (ii) 271,555 shares of Company Common Stock are the subject of RTO/LRAC Shadow Warrants issued to RTO/LRAC Shareholders who are not members of the Mullen/Oliver Group. The shares of Company Common Stock issued in the Rig Merger to the RTO/LRAC Shareholders that are members of the Mullen/Oliver Group represent approximately 28.20% of the shares of the Company Common Stock outstanding immediately after the Mergers. The Merger Rigs which indirectly served as the consideration for the acquisition by the members of the Mullen/Oliver Group of the shares of Common Stock of the Company received by them in the Rig Merger were existing oil rig inventory of RTO and LRAC. Drilling Group The source and amount of funds for the original 20,690,105 shares of Common Stock acquired by Norex Drilling on June 2, 1994 (inclusive of the aggregate 18,730,105 shares currently owned by the Drilling Group) was working capital of Norex Drilling and/or its sole shareholder, NXA, in the aggregate amount of $14,483,073, or $0.70 per share, paid in cash to the seller of such shares. On July 1, 1994, Norex Drilling and NXA sold 1,960,000 of the shares of Common Stock acquired by them in June of 1994. In October of 1995, NXA and Orkla formed Prosperity as a joint venture company and part of the shareholder contribution made by NXA to capitalize Prosperity was 8,300,000 shares of Common Stock of the Company that were subsequently transferred, together with other assets, by Prosperity to its wholly-owned subsidiary, Pronor. Item 4. Purpose of Transaction. As disclosed in Item 3 above, the members of the Drilling Group acquired the shares of Company Common Stock owned by them prior to the contemplation of the Mergers in private transactions, the members of the Somerset Group acquired the shares of Company Common Stock owned by them in the Somerset Merger and the members of the Mullen/Oliver Group acquired the shares of Company Common Stock owned by them in the Rig Merger. The purpose of the initial acquisition of the 18,730,105 shares of Company Common Stock acquired by Norex Drilling and NXA in June of 1994, as previously disclosed in that certain Schedule 13D dated May 26, 1994, as amended by Amendment 1 to Schedule 13D dated August 24, 1994, filed by Norex Drilling and NXA with the Commission, was investment, and the purpose of the transfer of the 8,300,000 shares of Company Common Stock by Norex Drilling and NXA to Pronor in October of 1995, as previously disclosed in that certain Amendment No. 2 to Schedule 13D dated October 17, 1995, filed by Norex Drilling, NXA and Pronor with the Commission, was to satisfy the shareholder contribution requirements agreed to by each of NXA and Orkla for the purpose of capitalizing both Prosperity and Pronor. The members of the Drilling Group have retained the shares of Common Stock primarily for investment purposes, but also with a view towards influencing management. The 35,423,978 shares of Company Common Stock issued to the members of the Somerset Group in the Somerset Merger and the 33,200,407 shares of Company Common Stock -8- issued to members of the Mullen/Oliver Group in the Rig Merger were acquired by such reporting persons primarily for investment purposes, but also with a view towards influencing management. In addition, as members of the Mullen/Oliver Group are suppliers of drilling equipment, another reason for the consummation of the Rig Merger by the members of the Mullen/Oliver Group was to provide for the sale of the interests in the Merger Rigs by LRAC and RTO. As disclosed in Item 3 above, (i) in addition to the 35,423,978 shares of Company Common Stock issued to the members of the Somerset Group in the Somerset Merger, in accordance with the terms of the Somerset Merger Agreement, the Company also issued to the members of the Somerset Group the Somerset Group Shadow Warrants, which provide the members of the Somerset Group the right to purchase up to 1,545,487 shares of Company Common Stock under certain circumstances and (ii) in addition to the 33,200,407 shares of Company Common Stock issued to the members of the Mullen/Oliver Group in the Rig Merger, in accordance with the terms of the Rig Merger Agreement, the Company also issued to the members of the Mullen/Oliver Group the Mullen/Oliver Shadow Warrants, which provide the Mullen Oliver Group the right to purchase up to 1,448,445 shares of Company Common Stock under certain circumstances. The Somerset Group Shadow Warrants and the Mullen/Oliver Shadow Warrants (collectively, the "Reporting Group Shadow Warrants"; and together with the other shadow warrants issued in the Mergers to Somerset Shareholders and LRAC Shareholders who are not Reporting Persons, the "Shadow Warrants") are essentially anti-dilution devices that are exercisable only in the event that the issued and outstanding Series A Preferred Stock of the Company is converted into Company Common Stock or a certain option to acquire shares of Company Common Stock (the "Option") is exercised, and in such event, only with respect to an equivalent number of shares as are subject to such conversion or exercise. The Shadow Warrants (inclusive of the Reporting Group Shadow Warrants) will be exercisable at the conversion price or option price (as applicable) at which the shares of Series A Preferred Stock are converted (i.e., $1.25 per share) or the Option is exercised (i.e., $1.00 per share), if at all. As further described in Item 6 below, contemporaneously with the execution and delivery of the Merger Agreements, Somerset and SCP, each of the members of the Mullen/Oliver Group other than PRD and N78 (although the shares of Company Common Stock owned of record by them are held subject to the terms of the Shareholders' Agreement) and Norex Drilling and Pronor entered into the Shareholders' Agreement, which became effective as of the Effective Date of the Mergers. Pursuant to the terms of the Shareholders' Agreement, the Shareholders' Agreement Parties are required to vote their Company Common Stock so as to ensure that the Board of Directors and the board of directors of any material subsidiary (as defined) of the Company consists of five directors, of which the Drilling Group, the Mullen/Oliver Group and the Somerset Group will each be entitled to designate and maintain one director and the remaining two of which (the "Non-Party Directors") shall be persons who are not officers of the Company and do not represent any concentrated or family holdings of shares of stock of the Company (including any of the Shareholders' Agreement Parties). The initial nominees under the Shareholders' Agreement were William R. Ziegler on behalf of the Somerset Group, Ivar Siem on behalf of the Drilling Group, Roy T. Oliver, Jr. on behalf of the Muller/Oliver Group and Steven A. Webster and Peter M. Holt as the Non-Party Directors. In addition, each of the Shareholders' Agreement Parties has granted the other parties a four year irrevocable proxy to enforce the foregoing provisions (individually, an "Irrevocable Proxy" and collectively, the "Irrevocable -9- Proxies"). At the Annual Meeting of the Shareholders of the Company held on August 27, 1996, the above-listed director nominees were elected by the shareholders as the directors of the Company to serve until the next Annual Meeting of the Shareholders of the Company and the Mergers were approved by the shareholders of the Company. See Item 6 for further details with respect to the Shareholders' Agreement. The consummation of the transactions contemplated by the Merger Agreements was subject to the satisfaction of various conditions that were outside of the control of the parties to such agreements, including, without limitation, the approval of such transactions by the shareholders of the Company (which approval was obtained on August 27, 1996) and the approval by the American Stock Exchange of the listing of the shares of Company Common Stock to be issued in the Mergers (which approval was obtained on August 28, 1996). The Mergers were effected and the shares of Company Common Stock were issued on August 29, 1996. Although there is no present intention to do so any of the Reporting Persons may decide to make additional purchases of Common Stock in the future either in the open market or in private transactions, subject to their evaluation of the Company's business, prospects and financial condition, the market for the Common Stock, other opportunities available to the Reporting Persons, prospects for the respective business' of the Reporting Persons, general economic conditions, money and stock market conditions and other future developments. PRD and N78 intend to distribute to their respective partners all shares of the Common Stock of the Company acquired by them in connection with the Rig Merger. None of such partners other than MMEER is a Reporting Person. In addition, MMEER and Oliver intend to transfer a presently undeterminable number of shares of the Common Stock to persons who are not Reporting Persons in satisfaction of certain contractual obligations that are unrelated to the Company or Common Stock of the Company. As previously disclosed in Item 2 above, pursuant to the terms of that certain Stock Purchase Agreement dated September 5, 1996 between NXA and Orkla (the "NXA Stock Purchase Agreement"), NXA has the right to acquire Orkla's 47.06% interest in Prosperity, the sole shareholder of Pronor, which owns 8,300,000 shares of Common Stock. The consummation of this transaction, presently scheduled to take place on September 12, 1996, would result in NXA acquiring full beneficial ownership of these shares of Common Stock. See Item 6 and Exhibits X and XI attached hereto. Depending upon the results of the reviews and the other factors mentioned above, any one of the Reporting Persons, at any time, may decide to change its intention with respect to the acquisition and/or retention of shares of Common Stock, including, without limitation, a determination to increase, decrease or entirely dispose of its holdings of Common Stock, although, except for the contemplated distribution of shares of Common Stock by PRD and N78 to its partners and by MMEER and Oliver in satisfaction of certain contractual obligations and the proposed acquisition by NXA of the direct interest in Prosperity (and therefore the indirect interest in the shares of Common Stock owned by Pronor) described above, none of the Reporting Persons has any current intention to do so. Any one of the Reporting Persons may also approach members of the Company's management either directly or indirectly through the director representatives of the three shareholder groups under the Shareholders' Agreement in connection with the foregoing and/or any other matter enumerated in clauses (a) through (j) of Item 4 of Schedule 13D and/or each of Ivar Siem, Oliver and Ziegler, in their capacities as directors of the Company, may seek to influence the management of the Company. The descriptions of the Merger Agreements, the Reporting Group Shadow Warrants, the Shareholders' Agreement (inclusive of the other agreements which are exhibits -10- thereto, including, without limitation, the Form of Irrevocable Proxy) and the NXA Stock Purchase Agreement contained in this Item 4 are summaries and are subject to and qualified in their entirety by reference to the detailed provisions of such documents, copies of which are attached hereto as Exhibits and incorporated herein by reference (see Item 7 below for specific Exhibit references). Except as discussed above in this Item 4 (inclusive of the provisions of the documents incorporated herein by reference), none of the Reporting Persons nor, to the best knowledge of the Reporting Persons, any director or executive officer of any Reporting Person that is not a Reporting Person hereunder, has any current plans or proposals which relate to or would result in the occurrence of any actions or events specified in clauses (a) through (j) of Item 4 of Schedule 13D. Item 5. Interest in Securities of the Issuer. (a) The aggregate number and percentage of shares of Common Stock beneficially owned by each person named in Item 2 above are as follows: Somerset Group The aggregate number and percentage of the Common Stock which are owned beneficially and of record by Somerset on the date hereof are 29,962,223 shares of Common Stock, or approximately 25.45% of the 117,720,734 shares of Common Stock issued and outstanding after giving effect to the consummation of the Mergers. The aggregate number and percentage of the Common Stock which are owned beneficially by SCP on the date hereof are 35,423,978 shares of Common Stock, or approximately 30.09% of the 117,720,734 shares of Common Stock issued and outstanding after giving effect to the consummation of the Mergers, which number and percentage include the 29,962,223 shares owned of record by Somerset, since SCP is the managing member of Somerset, as well as the 5,461,755 shares owned of record by SCP. The aggregate number and percentage of the Common Stock which are owned beneficially by each of O'Neill and Webster on the date hereof are 35,423,978 shares of Common Stock, or approximately 30.09% of the 117,720,734 shares of Common Stock issued and outstanding after giving effect to the consummation of the Mergers, which number and percentage include the 29,962,223 shares owned of record by Somerset and the 5,461,755 shares owned of record by SCP, since each of O'Neill and Webster is a partner of SCP and SCP is the managing member of Somerset. The aggregate number and percentage of the Common Stock which are owned beneficially by Ziegler on the date hereof are 35,428,978 shares of Common Stock, or approximately 30.1% of the 117,720,734 shares of Common Stock issued and outstanding after giving effect to the consummation of the Mergers, which number and percentage include the 29,962,223 shares owned of record by Somerset and the 5,461,755 shares owned of record by -11- SCP, since Ziegler is a partner of SCP and SCP is the managing member of Somerset, as well as 5,000 shares owned of record by Ziegler. Notwithstanding the foregoing, if each of Somerset, SCP, O'Neill, Webster and Ziegler are deemed to constitute a "group" within the meaning of Section 13(d)(3) and Rule 13d-5(b) by virtue of their action in concert in connection with the acquisition of an aggregate of 35,423,978 shares of Common Stock pursuant to the Somerset Merger Agreement, then each of the foregoing members of the Somerset Group may be deemed to beneficially own an aggregate of 35,428,978 shares of Company Common Stock, or approximately 30.1% of the 117,720,734 shares of Common Stock issued and outstanding after giving effect to the consummation of the Mergers (inclusive of the 35,423,978 shares of Common Stock acquired by such persons pursuant to the Somerset Merger Agreement and the 5,000 shares of Common Stock acquired individually by Ziegler several years ago). The foregoing aggregate number and percentage of the Common Stock beneficially owned by the various members of the Somerset Group as of the date hereof does not include any shares of Common Stock that any member of the Somerset Group may have the right to acquire upon any exercise of the Somerset Group Shadow Warrant, as any such right to acquire shares of Common Stock pursuant to the Somerset Shadow Warrant is contingent upon the occurrence of events not within the control of any member of the Somerset Group and which may or may not occur within 60 days of the date hereof. Mullen/Oliver Group The aggregate number and percentage of the Common Stock which are owned beneficially and of record by USRE on the date hereof are 3,097,876 shares of Common Stock, or approximately 2.63% of the 117,720,734 shares of Common Stock issued and outstanding after giving effect to the consummation of the Mergers. The aggregate number and percentage of the Common Stock which are owned beneficially and of record by Oliver on the date hereof are 15,214,208 shares of Common Stock, or approximately 12.92% of the 117,720,734 shares of Common Stock issued and outstanding after giving effect to the consummation of the Mergers, which number and percentage include (i) the 3,097,876 shares owned of record by USRE, since USRE is a corporation wholly-owned and controlled by Oliver, (ii) the 11,325,326 shares owned of record by Oliver and (iii) 791,006 shares owned beneficially by Oliver as a result of an oral understanding with MMEER. The aggregate number and percentage of the Common Stock which are owned beneficially and of record by PRD on the date hereof are 2,329,097 shares of Common Stock, or approximately 1.98% of the 117,720,734 shares of Common Stock issued and outstanding after giving effect to the consummation of the Mergers. The aggregate number and percentage of the Common Stock which are owned beneficially and of record by N78 on the date hereof are 1,497,096 shares of Common Stock, or approximately 1.27% of the 117,720,734 shares of Common Stock issued and outstanding after giving effect to the consummation of the Mergers. -12- The aggregate number and percentage of the Common Stock which are owned beneficially and of record by GCT on the date hereof are 3,616,016 shares of Common Stock, or approximately 3.07% of the 117,720,734 shares of Common Stock issued and outstanding after giving effect to the consummation of the Mergers. The aggregate number and percentage of the Common Stock which are owned beneficially by MMEER on the date hereof are 15,161,189 shares of Common Stock, or approximately 12.88% of the 117,720,734 shares of Common Stock issued and outstanding after giving effect to the consummation of the Mergers, which number and percentage include the 3,826,193 shares collectively owned of record by PRD and N78, since MMEER is the sole general partner of each of PRD and N78, as well as the 11,334,996 shares owned of record by MMEER. The aggregate number and percentage of the Common Stock which are owned beneficially by Mullen on the date hereof are 18,777,205 shares of Common Stock, or approximately 15.95% of the 117,720,734 shares of Common Stock issued and outstanding after giving effect to the consummation of the Mergers, which number and percentage include the 15,161,189 shares owned beneficially by MMEER (of which 11,334,996 shares are owned of record by MMEER and an aggregate of 3,826,193 shares are beneficially owned through PRD and N78) and the 3,616,016 shares owned beneficially and of record by GCT, since each of MMEER and GCT is a corporation controlled by Mullen. Notwithstanding the foregoing, if each of USRE, Oliver, PRD, N78, GCT, MMEER and Mullen are deemed to constitute a "group" within the meaning of Section 13(d)(3) and Rule 13d-5(b) by virtue of their action in concert in connection with the acquisition of an aggregate of 33,200,407 shares of Common Stock pursuant to the Rig Merger Agreement, then each of the foregoing members of the Mullen/Oliver Group may be deemed to beneficially own all 33,200,407 shares of Common Stock, or approximately 28.20% of the 117,720,734 shares of Common Stock issued and outstanding after giving effect to the consummation of the Mergers, acquired by such persons pursuant to the Rig Merger Agreement. The foregoing aggregate number and percentage of the Common Stock beneficially owned by the various members of the Mullen/Oliver Group as of the date hereof does not include any shares of Common Stock that any member of the Mullen/Oliver Group may have the right to acquire upon any exercise of the Mullen/Oliver Shadow Warrants, as any such right to acquire shares of Common Stock pursuant to the Mullen/Oliver Shadow Warrants is contingent upon the occurrence of events not within the control of any member of the Mullen/Oliver Group and which may or may not occur within 60 days of the date hereof. Drilling Group The aggregate number and percentage of the Common Stock which are owned beneficially and of record by Norex Drilling on the date hereof are 10,430,105 shares of Common Stock, or approximately 8.86% of the 117,720,734 shares of Common Stock issued and outstanding after giving effect to the consummation of the Mergers. -13- The aggregate number and percentage of the Common Stock which are owned beneficially and of record by Pronor on the date hereof are 8,300,000 shares of Common Stock, or approximately 7.05% of the 117,720,734 shares of Common Stock issued and outstanding after giving effect to the consummation of the Mergers. NXA, as the control person of Norex Drilling, may be deemed to beneficially own the 10,430,105 shares of Common Stock owned of record by Norex Drilling, or approximately 8.86% of the 117,720,734 shares of Common Stock issued and outstanding after giving effect to the consummation of the Mergers. In addition, NXA, as a principal shareholder of Prosperity, which is the sole shareholder of Pronor, may be deemed to beneficially own the 8,300,000 shares of Common Stock owned of record by Pronor, or approximately 7.05% of the 117,720,734 shares of Common Stock issued and outstanding after giving effect to the consummation of the Mergers. Notwithstanding the foregoing, until the consummation of the transactions contemplated by the NXA Stock Purchase Agreement, Orkla, as a principal shareholder of Prosperity, which is the sole shareholder of Pronor, may be deemed to share beneficial ownership of the 8,300,000 shares of Common Stock owned of record by Pronor, or approximately 7.05% of the 117,720,734 shares of Common Stock issued and outstanding after giving effect to the consummation of the Mergers. Notwithstanding the foregoing, if each of Norex Drilling, Pronor, NXA (after giving effect to the pending purchase of Orkla's interest in Prosperity by NXA), Prosperity, Siem and Capstick are deemed to constitute a "group" within the meaning of Section 13(d)(3) and Rule 13d-5(b) by virtue of their action in concert in connection with the initial acquisition of an aggregate of 18,730,105 shares of Common Stock by Norex Drilling and Pronor, then each of the foregoing members of the Drilling Group may be deemed to beneficially own all 18,730,105 shares of Common Stock, or approximately 15.91% of the 117,720,734 shares of Common Stock issued and outstanding after giving effect to the consummation of the Mergers, so acquired and held by the individual members of the Drilling Group. Each of Siem and Capstick and each of the other individuals listed on Annexes A - D attached hereto expressly disclaims beneficial ownership of any shares of Common Stock covered by this Statement. Reporting Group Notwithstanding the foregoing, if each of the members of the Somerset Group, the Mullen/Oliver Group and the Drilling Group are deemed to constitute a "group" within the meaning of Section 13(d)(3) and Rule 13d-5(b) by virtue of the fact that the shares of Common Stock of the Company directly or indirectly beneficially owned by them are held subject to the certain agreements with respect to the voting and disposition of same under the terms and conditions of the Shareholders Agreement, then each of the foregoing members of each of the Somerset Group, the Mullen/Oliver Group and the Drilling Group may be deemed to beneficially own all of the 87,359,490 shares of Common Stock, or approximately 74.21% of the 117,720,734 shares of Common Stock issued and outstanding after giving effect to the consummation of the Mergers, held subject to the terms and conditions of the Shareholders Agreement. Each of the members of the Somerset Group expressly disclaims beneficial -14- ownership of the shares of Common Stock acquired and owned of record by any members of each of the Mullen/Oliver Group and the Drilling Group; each of the members of the Mullen/Oliver Group expressly disclaims beneficial ownership of the shares of Common Stock acquired and owned of record by any members of each of the Somerset Group and the Drilling Group; and each of the members of the Drilling Group expressly disclaims beneficial ownership of the shares of Common Stock acquired and owned of record by any members of each of the Somerset Group and the Mullen/Oliver Group. (b) With respect to each person named in response to paragraph (a) of this Item 5 of Schedule 13D, set forth below are the number of shares of Common Stock as to which there is sole power to vote or to direct the vote, shared power to vote or direct the vote, and sole or shared power to dispose or direct the disposition: Somerset Group Subject to the terms and conditions of the Shareholders Agreement and the Irrevocable Proxy executed and delivered by Somerset thereunder, (i) Somerset may be deemed to have the sole power to vote (and direct the vote of) and to dispose of (and direct the disposition of) the 29,962,223 shares of Common Stock owned of record by it and (ii) notwithstanding the foregoing, SCP, as the sole managing member of Somerset, and each of O'Neill, Webster and Ziegler, as the general partners of SCP, may be deemed to share the power to vote (and direct the vote of) and to dispose of (and direct the disposition of) the 29,962,223 shares of Common Stock owned of record by Somerset. Subject to the terms and conditions of the Shareholders Agreement and the Irrevocable Proxy executed and delivered by SCP thereunder, (i) SCP may be deemed to (A) have the sole power to vote (and direct the vote of) and to dispose of (and direct the disposition of) the 5,461,755 shares of Common Stock owned of record by it and (B) as the sole managing member of Somerset, share the power to vote (and direct the vote of) and to dispose of (and direct the disposition of) the 29,962,223 shares of Common Stock owned of record by Somerset and (ii) notwithstanding the foregoing, each of O'Neill, Webster and Ziegler, as the general partners of SCP, may be deemed to share the power to vote (and direct the vote of) and to dispose of (and direct the disposition of) (A) the 5,461,755 shares of Common Stock owned of record by SCP and (B) the 29,962,223 shares of Common Stock owned of record by Somerset and beneficially by SCP. Subject to the terms and conditions of the Shareholders Agreement and the Irrevocable Proxies executed and delivered by each of Somerset and SCP thereunder, (i) each of O'Neill, Webster and Ziegler, as the general partners of SCP, may be deemed to share the power to vote (and direct the vote of) and to dispose of (and direct the disposition of) the 35,423,978 shares of Common Stock beneficially owned by SCP 5,461,755 shares of which are owned of record by SCP and 29,962,223 shares of which are owned of record by Somerset) and (ii) Ziegler may be deemed to have the sole power to vote (and direct the vote of) and to dispose of (and direct the disposition of) the 5,000 shares of Common Stock owned of record by him. -15- In addition, notwithstanding the foregoing, (i) if each of Somerset, SCP, O'Neill, Webster and Ziegler are deemed to constitute a "group" within the meaning of Section 13(d)(3) and Rule 13d-5(b) by virtue of their action in concert in connection with the acquisition of an aggregate of 35,423,978 shares of Common Stock pursuant to the Somerset Merger Agreement, then (A) Somerset may be deemed to share with SCP and each of O'Neill, Webster and Ziegler, the power to vote (and direct the vote of) and to dispose of (and direct the disposition of) the 5,461,755 shares of Common Stock owned of record by SCP and (B) each of Somerset, SCP, O'Neill and Webster may be deemed to share with Ziegler the power to vote (and direct the vote of) and to dispose of (and direct the disposition of) the 5,000 shares of Common Stock owned of record by Ziegler and (ii) if each of the members of the Somerset Group, the Mullen/Oliver Group and the Drilling Group are deemed to constitute a "group" within the meaning of Section 13(d)(3) and Rule 13d-5(b) by virtue of the fact that the shares of Common Stock of the Company directly or indirectly beneficially owned by them are held subject to the certain agreements with respect to the voting and disposition of same under the terms and conditions of the Shareholders Agreement and the Irrevocable Proxies executed and delivered thereunder, then (A) each of the foregoing members of the Somerset Group may be deemed to share with the members of each of the Mullen/Oliver Group and the Drilling Group, the power to vote (and direct the vote of) and to dispose of (and direct the disposition of) the 33,200,407 shares of Common Stock owned of record by the various members of the Mullen/Oliver Group and the 18,730,105 shares of Common Stock owned of record by the various members of the Drilling Group and (B) each of the members of the Mullen/Oliver Group and the Drilling Group may be deemed to share with the members of the Somerset Group, the power to vote (and direct the vote of) and to dispose of (and direct the disposition of) the 35,428,978 shares of Common Stock owned of record by the various members of the Somerset Group. Each of the members of the Somerset Group expressly disclaims beneficial ownership of the shares of Common Stock acquired and owned of record by any members of each of the Mullen/Oliver Group and the Drilling Group. Mullen/Oliver Group Subject to the terms and conditions of the Shareholders Agreement and the Irrevocable Proxy executed and delivered by USRE thereunder, (i) USRE may be deemed to have the sole power to vote (and direct the vote of) and to dispose of (and direct the disposition of) the 3,097,876 shares of Common Stock owned of record by it and (ii) notwithstanding the foregoing, Oliver, as the sole owner and control person of USRE, may be deemed to share the power to vote (and direct the vote of) and to dispose of (and direct the disposition of) the 3,097,876 shares of Common Stock owned of record by USRE. Subject to the terms and conditions of the Shareholders Agreement and the Irrevocable Proxies executed and delivered by each of USRE and Oliver thereunder, Oliver may be deemed to (i) have the sole power to vote (and direct the vote of) and to dispose of (and direct the disposition of) the 11,325,326 shares owned of record by Oliver, (ii) as the sole owner and control person of USRE, share the power to vote (and direct the vote of) and to dispose of (and direct the disposition of) the 3,097,876 shares of Common Stock owned of record by USRE, and (iii) as a result of an oral understanding with MMEER, share the power to vote (and to direct the vote of) and to dispose of (and direct the disposition of) 791,006 shares of Common Stock owned of record by MMEER and/or entities controlled by MMEER. -16- Subject to the terms and conditions of the Shareholders Agreement and the Irrevocable Proxy executed and delivered by MMEER, the sole general partner of PRD, thereunder, (i) PRD may be deemed to have the sole power to vote (and direct the vote of) and to dispose of (and direct the disposition of) the 2,329,097 shares of Common Stock owned of record by it and (ii) notwithstanding the foregoing, MMEER, as the sole general partner of PRD, and Mullen, as the control person of MMEER, may be deemed to share the power to vote (and direct the vote of) and to dispose of (and direct the disposition of) the 2,329,097 shares of Common Stock owned of record by PRD. Subject to the terms and conditions of the Shareholders Agreement and the Irrevocable Proxy executed and delivered by MMEER, the sole general partner of N78, thereunder, (i) N78 may be deemed to have the sole power to vote (and direct the vote of) and to dispose of (and direct the disposition of) the 1,497,096 shares of Common Stock owned of record by it and (ii) notwithstanding the foregoing, MMEER, as the sole general partner of N78, and Mullen, as the sole control person of MMEER, may be deemed to share the power to vote (and direct the vote of) and to dispose of (and direct the disposition of) the 1,497,096 shares of Common Stock owned of record by N78. Subject to the terms and conditions of the Shareholders Agreement and the Irrevocable Proxy executed and delivered by GCT thereunder, (i) GCT may be deemed to have the sole power to vote (and direct the vote of) and to dispose of (and direct the disposition of) the 3,616,016 shares of Common Stock owned of record by it and (ii) notwithstanding the foregoing, Mullen, as the sole control person of GCT, may be deemed to share the power to vote (and direct the vote of) and to dispose of (and direct the disposition of) the 3,616,016 shares of Common Stock owned of record by GCT. Subject to the terms and conditions of the Shareholders Agreement and the Irrevocable Proxy executed and delivered by MMEER thereunder, (i) MMEER may be deemed to (A) have the sole power to vote (and direct the vote of) and to dispose of (and direct the disposition of) the 11,334,996 shares of Common Stock owned of record by it and (B) as the sole general partner of each of PRD and N78, share the power to vote (and direct the vote of) and to dispose of (and direct the disposition of) the 3,826,193 shares owned of record by PRD and N78 and (ii) notwithstanding the foregoing, (A) Mullen, as the sole control person of MMEER, may be deemed to share the power to vote (and direct the vote of) and to dispose of (and direct the disposition of) (x) the 11,334,996 shares of Common Stock owned of record by MMEER and (y) the 3,826,193 shares of Common Stock owned of record by PRD and N78 and beneficially by MMEER and (B) Oliver, as a result of an oral understanding with MMEER, may be deemed to share the power to vote (and to direct the vote of) and to dispose of (and direct the disposition of) 791,006 shares of Common Stock owned of record by MMEER and/or entities controlled by MMEER. Subject to the terms and conditions of the Shareholders Agreement and the Irrevocable Proxies executed and delivered by MMEER and GCT thereunder, Mullen, as the sole control person of each of MMEER and GCT, may be deemed to share the power to vote (and direct the vote of) and to dispose of (and direct the disposition of) the (i) 15,161,189 shares owned beneficially by MMEER 11,334,996 shares of which are owned of record by MMEER and -17- 3,826,193 shares of which collectively are owned of record by PRD and N78) and (ii) 3,616,016 shares owned beneficially and of record by GCT. In addition, notwithstanding the foregoing, (i) if each of USRE, Oliver, PRD, N78, GCT, MMEER and Mullen are deemed to constitute a "group" within the meaning of Section 13(d)(3) and Rule 13d-5(b) by virtue of their action in concert in connection with the acquisition of an aggregate of 33,200,407 shares of Common Stock pursuant to the Rig Merger Agreement, then each member of the Mullen/Oliver Group may be deemed to share with all of the other members of the Mullen/Oliver Group the power to vote (and direct the vote of) and to dispose of (and direct the disposition of) all 33,200,407 shares of Common Stock owned of record by any member of the Mullen/Oliver Group and (ii) if each of the members of the Somerset Group, the Mullen/Oliver Group and the Drilling Group are deemed to constitute a "group" within the meaning of Section 13(d)(3) and Rule 13d-5(b) by virtue of the fact that the shares of Common Stock of the Company directly or indirectly beneficially owned by them are held subject to the certain agreements with respect to the voting and disposition of same under the terms and conditions of the Shareholders Agreement and the Irrevocable Proxies executed and delivered thereunder, then (A) each of the foregoing members of the Mullen/Oliver Group may be deemed to share with the members of each of the Somerset Group and the Drilling Group, the power to vote (and direct the vote of) and to dispose of (and direct the disposition of) the 35,428,978 shares of Common Stock owned of record by the various members of the Somerset Group and the 18,730,105 shares of Common Stock owned of record by the various members of the Drilling Group and (B) each of the members of the Somerset Group and the Drilling Group may be deemed to share with the members of the Mullen/Oliver Group, the power to vote (and direct the vote of) and to dispose of (and direct the disposition of) the 33,200,407 shares of Common Stock owned of record by the various members of the Mullen/Oliver Group. Each of the members of the Mullen/Oliver Group expressly disclaims beneficial ownership of the shares of Common Stock acquired and owned of record by any members of each of the Somerset Group and the Drilling Group. Drilling Group Subject to the terms and conditions of the Shareholders Agreement and the Irrevocable Proxy executed and delivered by Norex Drilling thereunder, (i) Norex Drilling may be deemed to have the sole power to vote (and direct the vote of) and to dispose of (and direct the disposition of) the 10,430,105 shares of Common Stock owned of record by it and (ii) notwithstanding the foregoing, NXA, as the sole control person of Norex Drilling, may be deemed to share the power to vote (and direct the vote of) and to dispose of (and direct the disposition of) the 10,430,105 shares of Common Stock owned of record by Norex Drilling. Subject to the terms and conditions of the Shareholders Agreement and the Irrevocable Proxy executed and delivered by Pronor thereunder, (i) Pronor may be deemed to have the sole power to vote (and direct the vote of) and to dispose of (and direct the disposition of) the 8,300,000 shares of Common Stock owned of record by it and (ii) notwithstanding the foregoing, Prosperity and NXA (after giving effect to the pending purchase of Orkla's interest in Prosperity by NXA), as control persons of Pronor, may be deemed to share the power to vote -18- (and direct the vote of) and to dispose of (and direct the disposition of) the 8,300,000 shares of Common Stock owned of record by Pronor. In addition, notwithstanding the foregoing, (i) if each of Norex Drilling, Pronor, NXA (after giving effect to the pending purchase of Orkla's interest in Prosperity by NXA), Prosperity, Siem and Capstick are deemed to constitute a "group" within the meaning of Section 13(d)(3) and Rule 13d-5(b) by virtue of their action in concert in connection with the initial acquisition of an aggregate of 18,730,105 shares of Common Stock by Norex Drilling and Pronor, then each member of the Drilling Group may be deemed to share with all of the other members of the Drilling Group the power to vote (and direct the vote of) and to dispose of (and direct the disposition of) all 18,730,105 shares of Common Stock owned of record by any member of the Drilling Group and (ii) if each of the members of the Somerset Group, the Mullen/Oliver Group and the Drilling Group are deemed to constitute a "group" within the meaning of Section 13(d)(3) and Rule 13d-5(b) by virtue of the fact that the shares of Common Stock of the Company directly or indirectly beneficially owned by them are held subject to the certain agreements with respect to the voting and disposition of same under the terms and conditions of the Shareholders Agreement and the Irrevocable Proxies executed and delivered thereunder, then (A) each of the foregoing members of the Drilling Group may be deemed to share with the members of each of the Somerset Group and the Mullen/Oliver Group, the power to vote (and direct the vote of) and to dispose of (and direct the disposition of) the 35,428,978 shares of Common Stock owned of record by the various members of the Somerset Group and the 33,200,407 shares of Common Stock owned of record by the various members of the Mullen/Oliver Group and (B) each of the members of the Somerset Group and the Mullen/Oliver Group may be deemed to share with the members of the Drilling Group, the power to vote (and direct the vote of) and to dispose of (and direct the disposition of) the 18,730,105 shares of Common Stock owned of record by the various members of the Drilling Group. Each of the members of the Drilling Group expressly disclaims beneficial ownership of the shares of Common Stock acquired and owned of record by any members of each of the Somerset Group and the Mullen/Oliver Group. In addition, as previously stated, each of Siem and Capstick and each of the other individuals listed on Annexes A - D attached hereto expressly disclaims beneficial ownership of any shares of Common Stock covered by this Statement. (c) Except for the acquisitions of an aggregate of 68,629,385 shares of Common Stock by members of the Somerset Group and the Mullen/Oliver Group pursuant to the terms of the Merger Agreements disclosed in response to Items 3 and 4 above, during the past 60 days, none of the Reporting Persons nor, to the best knowledge of the Reporting Persons, any director or executive officer of any Reporting Person that is not a Reporting Person hereunder, has effected any transaction in the Common Stock. See Items 3 and 4 above and subsection (a) and (b) of this Item 5 for further details in connection with the acquisition of shares of Common Stock pursuant to the Merger Agreements. (d) Not applicable. (e) Not applicable. -19- Item 6. Contracts, Arrangements, Understandings or Relationships With Respect to Securities of the Issuer. As previously disclosed in Item 4 above, Somerset and SCP, each of the members of the Mullen/Oliver Group other than PRD and N78 (although the shares of Company Common Stock owned of record by them are held subject to the terms of the Shareholders' Agreement) and Norex Drilling and Pronor (Norex Drilling and Pronor being sometimes hereinafter collectively referred to as the "Company Parties") entered into the Shareholders' Agreement, which contains various agreements among such parties with respect to the Company Common Stock owned or to be acquired by them, as further described below. The Shareholders' Agreement became effective as of the Effective Date of the Mergers and terminates four years thereafter, unless sooner terminated under the terms of the Shareholders' Agreement. Upon the consummation of the Mergers, the parties to the Shareholders' Agreement (hereinafter sometimes collectively referred to as the "Shareholders' Agreement Parties") held an aggregate of 87,359,490 shares, or 74.21%, of the 117,720,734 shares of Company Common Stock issued and outstanding as of the Effective Date. The Shareholders' Agreement requires that the Shareholders' Agreement Parties vote their Company Common Stock so as to ensure that the Board of Directors and the board of directors of any material subsidiary (as defined) of the Company consists of five directors, of which the Company Parties, the Mullen/Oliver Group and the Somerset Group will each be entitled to designate and maintain one director and the remaining two of which (the "Non-Party Directors") shall be persons who are not officers of the Company and do not represent any concentrated or family holdings of shares of stock of the Company (including any of the Shareholders' Agreement Parties). The initial nominees under the Shareholders' Agreement were William R. Ziegler on behalf of the Somerset Group, Ivar Siem on behalf of the Company Parties, Roy T. Oliver, Jr. on behalf of the Mullen/Oliver Group and Steven A. Webster and Peter M. Holt as the Non-Party Directors. Each of the Shareholders' Agreement Parties has granted the other parties an Irrevocable Proxy to enforce the foregoing provisions. The Shareholders' Agreement also contains (i) certain standstill provisions that effectively deprive the Shareholders' Agreement Parties of voting rights with respect to any additional shares of the Company that they may thereafter acquire so as to limit their relative voting power to their voting power as of the Effective Date, and (ii) certain provisions that provide rights of first refusal and co-sale among the Shareholders' Agreement Parties as to certain sales or dispositions of shares of the Company to third parties. As previously disclosed in Items 3 and 4 above, (i) SIC, a corporation owned by the Somerset Shareholders (including Somerset and SCP), was a party to the Somerset Merger Agreement, which agreement provided, among other things, for (A) the merger of SIC with and into the Company, (B) the issuance by the Company to the Somerset Shareholders (including Somerset and SCP) of an aggregate of 39,423,978 shares of Company Common Stock for all of the Somerset Shares, and (C) the issuance to the Somerset Shareholders of the Somerset Shareholder Shadow Warrants (inclusive of the issuance to Somerset and SCP of the Somerset Group Shadow Warrants) and (ii) certain members of the Mullen/Oliver Group were parties to the Rig Merger Agreement, which agreement provided, among other things, for (A) the merger of each of RTO and Company Sub with and into LRAC, with LRAC (which became a wholly-owned -20- subsidiary of the Company as part of such merger) as the surviving corporation, (B) the issuance by the Company to Oliver, as the sole shareholder of RTO, of 11,325,326 shares of Company Common Stock for all of the RTO Shares, (C) the issuance by the Company to the shareholders of LRAC (including Mullen and certain entities owned and controlled by Mullen) of an aggregate of 28,098,652 shares of Company Common Stock for all of the LRAC Shares, and (D) the issuance to the RTO/LRAC Shareholders of the RTO/LRAC Shadow Warrants (inclusive of the issuance to members of the Mullen/Oliver Group of the Mullen/Oliver Shadow Warrants). See Items 3 and 4 above for more detailed information with respect to the Mergers and the Shadow Warrants. In addition, contemporaneously with the execution and delivery of the Merger Agreements, the Company and certain members of the Somerset Group and the Mullen/Oliver Group, as well as certain members of the Drilling Group (collectively the "Registration Rights Agreement Parties"), entered into a Registration Rights Agreement dated May 7, 1996, as amended June 11, 1996, and further amended as of July 26, 1996 (as amended, the "Registration Rights Agreement"), that requires the Company, upon the occurrence of certain events, to register for resale under the Securities Act of 1933, as amended (the "Securities Act"), the shares of Company Common Stock owned by the Registration Rights Agreement Parties and certain permitted assignees thereof, including a requirement of the Company to file promptly and maintain the effectiveness of a Registration Statement on Form S-3 covering the resale of the shares of Company Common Stock issued in the Mergers (inclusive of any shares of Company Common Stock (i) issued in the Mergers to Somerset Shareholders and/or LRAC Shareholders who are not Registration Rights Agreement Parties and/or (ii) issuable upon exercise of the Somerset Shareholder Shadow Warrants and the RTO/LRAC Shadow Warrants). Contemporaneously with the execution and delivery of the Somerset Merger Agreement, the Company entered into an investment monitoring agreement with SCP dated May 7, 1996, but effective as of the Effective Date (the "Investment Monitoring Agreement") providing for a one time payment by the Company of $75,000 (the "Investment Monitoring Fee") to SCP to monitor on behalf of Somerset and SCP the investment in the Company by Somerset and SCP resulting from the Somerset Merger. The Investment Monitoring Fee was paid by the Company on the Effective Date of the Mergers. Pursuant to Article V of that certain Limited Liability Company Agreement of Somerset dated July 1, 1996 (the "Somerset LLC Agreement"), once the members of Somerset have received distributions of cash and/or securities equal in value to the sum of a specified priority return on their investment in Somerset and the amount of such investment, SCP, as the managing member of Somerset, is entitled to receive 20% of all subsequent distributions made by Somerset of (i) available cash flow from Somerset (which may include proceeds from the sale of Common Stock) and (ii) securities of the Company, in addition to its pro rata share of any such distributions made to the members of Somerset in proportion to their respective capital contributions to Somerset. As previously disclosed in Item 5 above, pursuant to an oral understanding between MMEER and Oliver, Oliver may be deemed to share with MMEER voting and -21- dispositive with respect to 791,006 shares of Common Stock owned of record by MMEER and/or entities controlled by MMEER. As previously disclosed in Item 2 above, Prosperity, which is the sole shareholder of Pronor, which owns 8,300,000 shares of Common Stock, is a joint venture between NXA and Orkla. Pursuant to the terms of that certain Shareholders' Agreement dated October 11, 1995 between NXA and Orkla (the "NXA Shareholders Agreement"), the managing director of Prosperity, which is to be chosen by NXA, shall be entitled to vote all shares of stock owned by Prosperity and Pronor, including the 8,300,000 shares of Common Stock owned by Pronor, subject only to a requirement that such managing director consult with and consider the interests of each of Orkla and NXA in connection therewith. The NXA Shareholders Agreement also provides for a purchase option, pursuant to which NXA has the right to acquire 50% of Orkla's interest in Prosperity. Pursuant to an exercise notice dated September 5, 1996 from NXA to Orkla (the "NXA Option Exercise Notice"), NXA exercised its option to acquire 50% of Orkla's interest in Prosperity. In addition, pursuant to the NXA Stock Purchase Agreement described in Item 4 above, NXA has the right to acquire the remaining 50% of Orkla's interest in Prosperity. Therefore, upon the consummation of the transactions contemplated by the NXA Stock Purchase Agreement, scheduled to take place on September 12, 1996, NXA will directly own all of Orkla's interest in Prosperity and Orkla will no longer share beneficial ownership of the 8,300,000 shares of Common Stock owned of record by Pronor. As a practical matter, the consummation of the transactions contemplated by the NXA Stock Purchase Agreement will also result in the termination of the NXA Shareholders Agreement. The descriptions of the Merger Agreements, the Reporting Group Shadow Warrants, the Shareholders' Agreement (inclusive of the other agreements which are exhibits thereto, including, without limitation, the Form of Irrevocable Proxy), the Registration Rights Agreement, the Investment Monitoring Agreement, the Somerset LLC Agreement , the NXA Shareholders Agreement, the NXA Option Exercise Notice and the NXA Stock Purchase Agreement contained in this Item 6 are summaries and are subject to and qualified in their entirety by reference to the detailed provisions of such documents, copies of which are attached hereto as Exhibits and incorporated herein by reference (see Item 7 below for specific Exhibit references). Except as discussed in this Item 6 and in Item 4 above (in each case, inclusive of the provisions of the documents incorporated herein by reference), none of the Reporting Persons nor, to the best knowledge of the Reporting Persons, any director or executive officer of any Reporting Person that is not a Reporting Person hereunder, is a party to any contract, arrangement, understanding or relationship (legal or otherwise) among the Reporting Persons named in Item 2 above or between any such Reporting Persons and any other person with respect to any securities of the Company, including, without limitation, those relating to the transfer or voting of any securities, finder's fees, joint ventures, loan or option arrangements, puts or calls, guarantees of profits, division of profits or loss, the giving or withholding of proxies, the pledge of securities or any other arrangement involving a contingency the occurrence of which would give another person voting power or investment power over such securities. -22- Item 7. Material to be Filed as Exhibits. I. Group Filing Agreement referred to in the Introduction. II. Rig Merger Agreement referred to in Items 3, 4 and 6. III. Somerset Merger Agreement referred to in Items 3, 4 and 6. IV. Shareholders Agreement (inclusive of the Form of Irrevocable Proxy) referred to in the Introduction and Items 3, 4 and 6. V. Form of Shadow Warrant referred to in Items 3, 4 and 6. VI. Registration Rights Agreement referred to in Item 6. VII. Investment Monitoring Agreement referred to in Item 6. VIII. Somerset LLC Agreement referred to in Item 6. IX. NXA Shareholders' Agreement referred to in Item 6. X. NXA Option Exercise Notice referred to in Item 6. XI. NXA Stock Purchase Agreement referred to in Item 4 and 6 . -23- SIGNATURE After reasonable inquiry and to the best knowledge and belief of the undersigned, each of the undersigned hereby certifies that the information set forth in this statement is true, complete and correct. SOMERSET GROUP: Dated: September 5, 1996 SOMERSET DRILLING ASSOCIATES, L.L.C. By: Somerset Capital Partners, its Managing Member By: /s/ William R. Ziegler ------------------------------------ William R. Ziegler, Partner Dated: September 5, 1996 SOMERSET CAPITAL PARTNERS By: /s/ William R. Ziegler ------------------------------------ William R. Ziegler, Partner Dated: September 5, 1996 /s/ Thomas H. O'Neill, Jr. ------------------------------------ Thomas H. O'Neill, Jr., Individually Dated: September 5, 1996 /s/ Steven A. Webster ------------------------------------ Steven A. Webster, Individually Dated: September 5, 1996 /s/ William R. Ziegler ------------------------------------ William R. Ziegler, Individually -24- MULLEN/OLIVER GROUP: Dated: September 5, 1996 U.S. RIG AND EQUIPMENT, INC. By: /s/ Roy T. Oliver, Jr. ------------------------------------ Name: Roy T. Oliver, Jr. Title: President Dated: September 5, 1996 MIKE MULLEN ENERGY EQUIPMENT RESOURCE, INC. By: /s/ Mike L. Mullen ------------------------------------ Name: Mike L. Mullen Title: President Dated: September 5, 1996 GCT INVESTMENTS, INC. By: /s/ Mike L. Mullen ------------------------------------ Name: Mike L. Mullen Title: President Dated: September 5, 1996 PRD RIG PARTNERSHIP 1995, LTD. By: Mike Mullen Energy Equipment Resource, Inc., its General Partner By: /s/ Mike L. Mullen ------------------------------------ Name: Mike L. Mullen Title: President Dated: September 5, 1996 EER NATIONAL 78 PARTNERSHIP, LTD. By: Mike Mullen Energy Equipment Resource, Inc., its General Partner By: /s/ Mike L. Mullen ------------------------------------ Name: Mike L. Mullen Title: President -25- Dated: September 5, 1996 /s/ Roy T. Oliver, Jr. ------------------------------------ Roy T. Oliver, Jr., Individually Dated: September 5, 1996 /s/ Mike L. Mullen ------------------------------------ Mike L. Mullen, Individually -26- DRILLING GROUP: Dated: September 6, 1996 NOREX DRILLING LTD. By: /s/ Frank Capstick ------------------------------------ Name: Frank Capstick Title: President Dated: September 7, 1996 PRONOR HOLDINGS LTD. By: /s/ Kristian Siem ------------------------------------ Name: Kristian Siem Title: Managing Director Dated: September 6, 1996 NOREX INDUSTRIES, INC. By: /s/ Frank Capstick ------------------------------------ Name: Frank Capstick Title: President Dated: September 7, 1996 PROSPERITY INVESTMENTS, INC. By: /s/ Kristian Siem ------------------------------------ Name: Kristian Siem Title: Managing Director Dated: September 7, 1996 /s/ Kristian Siem ------------------------------------ Kristian Siem, Individually Dated: September 6, 1996 /s/ Frank Capstick ------------------------------------ Frank Capstick, Individually -27- EXHIBIT INDEX Exhibit Number Description - ------ ----------- I Schedule 13D Group Filing Agreement dated August 27, 1996 among Somerset Drilling Associates, L.L.C., Somerset Capital Partners, Thomas H. O'Neill, Jr., Steven A. Webster, William R. Ziegler, Roy T. Oliver, Jr., U.S. Rig and Equipment, Inc., Mike Mullen Energy Equipment Resource, Inc., GCT Investments, Inc., Mike L. Mullen, PRD Rig Partnership 1995, Ltd., EER National 78 Partnership, Ltd., Norex Drilling Ltd., Pronor Holdings Ltd., Norex Industries, Inc., Prosperity Investments, Inc., Kristian Siem and Frank Capstick. II(a) Agreement and Plan of Merger dated May 7, 1996, among DI Industries, Inc., DI Merger Sub, Inc., Roy T. Oliver, Jr., Mike L. Mullen, R.T. Oliver, Inc. and Land Rig Acquisition Corp. (Incorporated by reference to Exhibit 2.1 to the Registration Statement of the Company on Form S-4 filed on June 14, 1996 (No. 333-6077). II(b) Amendment to Agreement and Plan of Merger dated June 11, 1996, among DI Industries, Inc., DI Merger Sub, Inc., Roy T. Oliver, Jr., Mike L. Mullen, R.T. Oliver, Inc. and Land Rig Acquisition Corp. (Incorporated by reference to Exhibit 2.1.1 to the Registration Statement of the Company on Form S-4 filed on June 14, 1996 (No. 333-6077). II(c) Second Amendment to Agreement and Plan of Merger dated July 26, 1996, among DI Industries, Inc., DI Merger Sub, Inc., Roy T. Oliver, Jr., Mike L. Mullen, R.T. Oliver, Inc. and Land Rig Acquisition Corp. (Incorporated by reference to Exhibit 2.1.2 to the Registration Statement on Form S-3 (Amendment No. 1 to Registration Statement on Form S-4) of the Company filed on August 15, 1996 (No. 333-6077). III(a) Agreement and Plan of Merger dated May 7, 1996, among DI Industries, Inc. and Somerset Investment Corp. (Incorporated by reference to Exhibit 2.2 to the Registration Statement of the Company on Form S-4 filed on June 14, 1996 (No. 333-6077). III(b) Amendment to Agreement and Plan of Merger dated June 11, 1996, among DI Industries, Inc. and Somerset Investment Corp. (Incorporated by reference to Exhibit 2.2.1 to the Registration Statement of the Company on Form S-4 filed on June 14, 1996 (No. 333-6077). -28- III(c) Second Amendment to Agreement and Plan of Merger dated July 26, 1996, among DI Industries, Inc. and Somerset Investment Corp. (Incorporated by reference to Exhibit 2.2.2 to the Registration Statement on Form S-3 (Amendment No. 1 to Registration Statement on Form S-4) of the Company filed on August 15, 1996 (No. 333-6077). IV(a) Shareholders' Agreement dated May 7, 1996, among Somerset Drilling Associates, L.L.C., Roy T. Oliver, Jr., U.S. Rig and Equipment, Inc., Mike Mullen Energy Equipment Resource, Inc., GCT Investments, Inc., Mike L. Mullen, Norex Drilling Ltd., and Pronor Holdings, Ltd., inclusive of the Form of Irrevocable Proxy attached as an Exhibit thereto (Incorporated by reference to Exhibit 10.9 to the Registration Statement of the Company on Form S-4 filed on June 14, 1996 (No. 333-6077). IV(b) Amendment to Shareholders Agreement dated June 11, 1996, among Somerset Drilling Associates, L.L.C., Somerset Capital Partners, Roy T. Oliver, Jr., U.S. Rig and Equipment, Inc., Mike Mullen Energy Equipment Resource, Inc., GCT Investments, Inc., Mike L. Mullen, Norex Drilling Ltd., and Pronor Holdings, Ltd. (Incorporated by reference to Exhibit 10.9.1 to the Registration Statement of the Company on Form S-4 filed on June 14, 1996 (No. 333-6077). V(a) Form of Shadow Warrant to be issued to the shareholders of Somerset Investment Corporation (Incorporated by reference to Exhibit 10.10 to the Registration Statement of the Company on Form S-4 filed on June 14, 1996 (No. 333-6077). V(b) Form of Shadow Warrant to be issued to the shareholders of R.T. Oliver, Inc. and Land Rig Acquisition Corporation (Incorporated by reference to Exhibit 10.11 to the Registration Statement of the Company on Form S-4 filed on June 14, 1996 (No. 333-6077). VI(a) Registration Rights Agreement dated May 7, 1996, among Somerset Drilling Associates, L.L.C., Roy T. Oliver, Jr., U.S. Rig and Equipment, Inc., Mike Mullen Energy Equipment Resource, Inc., GCT Investments, Inc., Norex Drilling Ltd., and Pronor Holdings, Ltd. (Incorporated by reference to Exhibit 10.12 to the Registration Statement of the Company on Form S-4 filed on June 14, 1996 (No. 333-6077). VI(b) Amendment to Registration Rights Agreement dated June 11, 1996, among Somerset Drilling Associates, L.L.C., Somerset Capital Partners, Roy T. Oliver, Jr., U.S. Rig and Equipment, Inc., Mike Mullen Energy Equipment Resource, Inc., GCT Investments, Inc., Norex Drilling Ltd., and Pronor Holdings, Ltd. (Incorporated by reference to Exhibit 10.12.1 to the Registration Statement of the Company on Form S-4 filed on June 14, 1996 (No. 333-6077). -29- VI(c) Second Amendment to Registration Rights Agreement dated July 26, 1996, among Somerset Drilling Associates, L.L.C., Somerset Capital partners, Roy T. Oliver, Jr., U.S. Rig and Equipment, Inc., Mike Mullen Energy Equipment Resource, Inc., GCT Investments, Inc., Norex Drilling Ltd., and Pronor Holdings, Ltd. (Incorporated by reference to Exhibit 10.4.2 to the Registration Statement on Form S-3 (Amendment No. 1 to Registration Statement on Form S-4) of the Company filed on August 15, 1996 (No. 333-6077). VII Investment Monitoring Agreement dated May 7, 1996, among DI Industries, Inc., Somerset Capital Partners and Somerset Drilling Associates, L.L.C. (Incorporated by reference to Exhibit 10.13 to the Registration Statement of the Company on Form S-4 filed on June 14, 1996 (No. 333-6077). VIII Limited Liability Company Agreement of Somerset Drilling Associates, L.L.C. dated July 1, 1996 IX. Shareholders' Agreement dated October 11, 1995 between Norex America Inc. (n/k/a Norex Industries, Inc.) and Orkla AS X. Option Exercise Notice dated September 5, 1996 from Norex Industries, Inc. to Orkla ASA XI. Stock Purchase Agreement dated September 5, 1996 between Norex Industries, Inc. and Orkla ASA -30- ANNEX A DIRECTORS AND EXECUTIVE OFFICERS OF NOREX DRILLING LTD.
Principal Occupation Name and Address Citizenship or Employment ---------------- ----------- -------------------- Kristian Siem Norway Chairman of the Board of Directors Business address: and Chief Executive Officer of Norex Norex Offshore Holding Industries Inc. 12 Jerpefaret 0104 Oslo Norway Frank Capstick Bermuda President of Norex Industries Inc. Business address: P.O. Box HM 429 Hamilton, HM BX Bermuda David J. Doyle Bermuda Attorney and barrister of Appleby, Business address: Spurling & Kempe Appleby, Spurling & Kempe Cedar House 41 Cedar Avenue Hamilton, HM EX Bermuda Michael Delouche United States Controller of Norex Industries Inc. Business address: 11 Greenway Plaza Houston, TX 77046
-31- ANNEX B DIRECTORS AND EXECUTIVE OFFICERS OF NOREX INDUSTRIES, INC.
Principal Occupation Name and Address Citizenship or Employment ---------------- ----------- -------------------- Kristian Siem Norway Chairman of the Board of Directors Business address: and Chief Executive Officer of Norex Norex Offshore Holding Industries Inc. 12 Jerpefaret 0104 Oslo Norway Dudley B. Sanger United Kingdom Private Investor Home address: 29 Kingston House South London SW7 1NF England Riulf Rustad Norway President of UNI Storebrand Business address: Investment Management and a UNI Storebrand ASA member of Group Executive Ruselokkveien 26 Committee of UNI Storebrand ASA N-0114 Olso Norway Gilbert W. Smith United States Private Investor Home address: 9723 Lindsay Blake Lane Great Falls, VA 22066 Ivar Siem Norway Chairman of Avenir AS Business address: Avenir AS Furulundtoppen 25 0281 Oslo Norway M.D. Moross United Kingdom Private Investor Home address: 7 Prince's Gate London SW7 1QL England Barry W. Ridings United States Managing Director of Alex, Brown & Business address: Sons Incorporated Alex, Brown & Sons Inc. 1290 Avenue of Americas New York, NY 10104 Frank Capstick Bermuda President of Norex Industries Inc. Business address: P.O. Box HM 429 Hamilton, HM BX Bermuda Michael Delouche United States Controller of Norex Industries Inc. Business address: 11 Greenway Plaza Houston, TX 77046
-32- ANNEX C DIRECTORS AND EXECUTIVE OFFICERS OF PRONOR HOLDINGS LTD.
Principal Occupation Name and Address Citizenship or Employment ---------------- ----------- -------------------- Kristian Siem Norway Chairman of the Board of Directors Business address: and Chief Executive Officer of Norex Norex Offshore Holding Industries Inc. 12 Jerpefaret 0104 Oslo Norway Tom Vidar Rygh Norway Managing Director of Orkla ASA Business address: Orkla ASA Lilleakerveien 2 0283 Oslo Norway Morten Blix Norway Vice-President of Orkla ASA Business address: Orkla ASA Lilleakerveien 2 0283 Oslo Norway Michael Delouche United States Controller of Norex Industries Inc. Business address: 11 Greenway Plaza Houston, TX 77046
-33- ANNEX D DIRECTORS AND EXECUTIVE OFFICERS OF PROSPERITY INVESTMENTS, INC.
Principal Occupation Name and Address Citizenship or Employment ---------------- ----------- -------------------- Kristian Siem Norway Chairman of the Board of Directors Business address: and Chief Executive Officer of Norex Norex Offshore Holding Industries Inc. 12 Jerpefaret 0104 Oslo Norway Tom Vidar Rygh Norway Managing Director of Orkla ASA Business address: Orkla ASA Lilleakerveien 2 0283 Oslo Norway Morten Blix Norway Vice-President of Orkla ASA Business address: Orkla ASA Lilleakerveien 2 0283 Oslo Norway Michael Delouche United States Controller of Norex Industries Inc. Business address: 11 Greenway Plaza Houston, TX 77046
-34- EX-99 2 EXHIBIT I EXHIBIT I SCHEDULE 13D GROUP FILING AGREEMENT AGREEMENT (this "Agreement"), made as of this 27th day of August, 1996, by and among Somerset Drilling Associates, L.L.C., a Delaware limited liability company ("Somerset"), Somerset Capital Partners, a New York general partnership and the managing member of Somerset ("SCP"; and together with Somerset, the "Somerset Group"), Roy T. Oliver, Jr., an individual ("Oliver"), U.S. Rig and Equipment, Inc., an Oklahoma corporation ("USRE"), Mike Mullen Energy Equipment Resource, Inc., a Texas corporation ("EER"), GCT Investments, Inc., a Texas corporation ("GCT"), Mike L. Mullen, an individual ("Mullen" and together with Oliver, USRE, EER and GCT, the "Mullen/Oliver Group"), Norex Drilling Ltd., a Bermuda corporation ("Norex Drilling"), and Pronor Holdings Ltd., a British Virgin Island corporation ("Pronor" and, together with Norex Drilling, the "Drilling Group") (the Somerset Group, the Mullen/Oliver Group, Norex Drilling and Pronor are hereinafter sometimes referred to individually as a "Shareholder" and collectively as the "Shareholders") and the following persons: Thomas H. O'Neill, Jr., an individual ("O'Neill"), Steven A. Webster , an individual ("Webster"), William R. Ziegler, an individual ("Ziegler"), PRD Rig Partnership 1995, Ltd., a Texas limited partnership ("PRD"), EER National 78 Partnership, Ltd., a Texas limited partnership ("N78"), Norex Industries, Inc., a Cayman Islands company ("NXA"), Prosperity Investments, Inc., a British Virgin Islands company ("Prosperity"), Kristian Siem ("Siem") and Frank Capstick ("Capstick") (each, an "Indirect Beneficial Owner" and collectively, the "Indirect Beneficial Owners"; the Shareholders and the Indirect Beneficial Owners being sometimes hereinafter individually referred to as a "Reporting Person" and collectively as the "Reporting Persons"). WHEREAS, Norex Drilling and Pronor are corporate shareholders of DI Industries, Inc., a Texas corporation (the "Corporation"), that owned stock in, and were the controlling shareholder group of, the Corporation prior to the execution of the Merger Agreements and the Shareholders Agreement (as each term is hereinafter defined); WHEREAS, pursuant to two separate merger agreements, each dated May 7, 1996, and amended as of June 11, 1996 (as amended, collectively, the "Merger Agreements"), the Somerset Group and the Mullen/Oliver Group will receive, upon the effective date of the mergers contemplated by the Merger Agreements (the "Mergers"), Common Stock and warrants to acquire Common Stock of the Corporation; WHEREAS, the Shareholders are parties to a certain Shareholders Agreement dated May 7, 1996, and amended as of June 11, 1996, but effective as of the effective date of the Mergers (as amended, the "Shareholders Agreement"), which provides, among other things, for certain agreements with respect to the transfer and the voting of shares of the Corporation owned or to be owned by the Shareholders; WHEREAS, by virtue of certain provisions of the Shareholders Agreement, upon the effective date of the Mergers, the Reporting Persons may be deemed a "group" within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and the rules and regulations promulgated by the Securities and Exchange Commission (the "Commission") pursuant thereto; and WHEREAS, the Reporting Persons desire to set forth their agreement with respect to a joint filing, on behalf of the "group" and each of its members, of an initial statement, on Schedule 13D, and any and all required amendments thereto, with respect to the beneficial ownership of securities of the Corporation by the group and its members, inclusive of the grant 2 of a power of attorney with respect to the preparation, execution and filing of such Schedule 13D and any and all amendments thereto; NOW, THEREFORE, in consideration of the premises and the mutual promises herein contained, the parties hereto, each intending to be legally bound, hereby agree as follows: 1. Effective Date. This Agreement shall become effective upon the effectiveness of the Mergers, except that the provisions of Sections 3 and 5 shall be effective as of the date of the execution of this Agreement. 2. Joint Filing of Schedule 13D and Amendments. Each of the undersigned Reporting Persons agrees to file jointly (or cause the joint filing of, as the case may be), as a "group" within the meaning of Section 13(d)(3) of the Exchange Act and the rules and regulations promulgated by the Commission thereunder (the "Group"), with the Commission and send (or cause to be sent) to each of the American Stock Exchange ("AMEX") (or to any national stock exchange on which the equity securities of the Corporation may then be listed) and the Corporation, (i) an initial statement, on Schedule 13D, with respect to the beneficial ownership of securities of the Corporation by the Group and its members after giving effect to the Mergers (the "Initial Statement"), as promptly as possible following the effective date of the Mergers, but in any event on or prior to the 10th day after the effective date of the Mergers, and (ii) thereafter, during the term of this Agreement, any and all required amendments to such Initial Statement (individually, an "Amendment" and, collectively, the "Amendments"), as promptly as practicable following the date of the event, occurrence, transaction or other change in the facts stated in the Initial Statement that requires the filing of an amendment thereto, in each case, in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated by the Commission thereunder. Each of the undersigned Reporting Persons further agrees that the 3 Initial Statement and any and all Amendments filed with the Commission by or on behalf of the Group comprised of the undersigned Reporting Persons, in respect of the beneficial ownership of equity securities of the Corporation, shall be deemed to be filed by or on behalf of each of the undersigned Reporting Persons. 3. Power of Attorney. (a) Each of the undersigned Reporting Persons hereby constitutes and appoints each of Edwin T. Markham and Marybeth Riordan, acting singly, as his, her or its true and lawful attorney-in-fact, with full power of substitution and revocation, to prepare, execute and file on behalf of the undersigned, as a member of the Group, the Initial Statement and any and all Amendments thereto, and each of the undersigned Reporting Persons does hereby ratify and confirm all that said attorneys-in-fact shall do or cause to be done by virtue thereof. THIS POWER OF ATTORNEY IS IRREVOCABLE during the term of this Agreement and shall terminate contemporaneously with the termination of this Agreement pursuant to the provisions of Section 6 hereof. (b) Each of the undersigned Reporting Persons hereby expressly acknowledges that: (i) the power of attorney provided above is merely a grant to such attorneys-in-fact of authority to act on behalf of such Reporting Person and shall not be deemed to create any duty or obligation, express or implied, on the part of any such attorney-in-fact to actually exercise such authority or to take or refrain from taking any action on behalf of such Reporting Person; (ii) any obligation under the securities laws of any Reporting Person to file any Schedule 13D (inclusive of amendments thereof) with respect to the equity securities of the Corporation or any successor thereto, whether by virtue of his, her or its direct or indirect ownership of shares, status as a signatory to the Shareholders Agreement or otherwise, shall remain the sole obligation of such Reporting Person and no attorney-in-fact shall be deemed to have assumed any such obligation 4 or duty of any Reporting Person under the securities laws by virtue of the grant of the power of attorney provided above; and (iii) such Reporting Person shall remain liable for the accuracy and completeness of any and all information with respect to such Reporting Person contained (or, with respect to any omission, that should have been contained) in any Initial Statement or Amendment that is filed by or on behalf of such Reporting Person and no attorney-in-fact shall be deemed to have assumed any obligation or liability of any Reporting Person under the securities laws for any misstatements or omissions with respect to any such Initial Statement or Amendment. (c) Each of the undersigned Reporting Persons hereby expressly agrees to indemnify, defend and hold harmless, each attorney-in-fact named above and any substitute thereof, from and against any and all liability, loss, claim, expense, cost, damage, action or other charges brought against or incurred or suffered by, any such attorney-in-fact, arising out of or in connection with the grant of the power of attorney provided above, any exercise by such attorney-in-fact of such power, any action or inaction taken or refrained to be taken, as the case may be, by any attorney-in-fact in connection with or related to such power, and any misstatements or omissions with respect to any information contained, or required to be contained, in any Initial Statement or Amendment, other than any liability, loss, claim, expense, cost, damage, action or other charges brought against or incurred or suffered by such attorney-in-fact as a result of any willful malfeasance, bad faith or intentional misconduct on the part of such attorney-in fact. 4. Representations and Warranties of Shareholder Groups. 4.1 Representations and Warranties of the Somerset Group. Each of the undersigned members of the Somerset Group, after consultation with his or its legal counsel, 5 hereby represents and warrants in favor of each of the members of the Drilling Group and the Mullen/Oliver Group that: (i) O'Neill, Webster and Ziegler are the only persons enumerated by General Instruction C of Schedule 13D that are required to provide the information called for by Items 2 - 6 of Schedule 13D with respect to the shares to be issued to Somerset and SCP in the Mergers and to be held by the Somerset Group pursuant to the terms and conditions of the Shareholders Agreement; (ii) there are no beneficial owners (within the meaning of Section 13(d) of the Exchange Act and the rules and regulations promulgated by the Commission thereunder), direct or indirect, of the shares to be owned and held by the Somerset Group subject to the terms of the Shareholders Agreement, other than the persons signatory hereto under the caption "Somerset Group" on the signature pages hereof; (iii) such person has reviewed the draft Initial Statement (inclusive of the Exhibit list contained therein) attached hereto as Exhibit A and confirms the accuracy and completeness of the information and documentation with respect to such Reporting Person and his, her or its beneficial interest in any shares contained therein, or referred to therein, as the case may be; and (iv) such person will promptly notify the attorneys-in-fact named above of the addition of any new member to the Somerset Group as signatory to the Shareholders Agreement or the addition of any new beneficial owner (within the meaning of Section 13(d) of the Exchange Act and the rules and regulations promulgated by the Commission thereunder), direct or indirect, of shares that become subject to the terms and conditions of the Shareholders Agreement and will use his or its best efforts to cause any such new beneficial owner of shares subject to the Shareholders Agreement, irrespective of whether or not such person becomes a signatory to the Shareholders Agreement, to acknowledge his or its membership in the Group and to evidence same by executing and delivering a joinder to this Agreement. 6 4.2 Representations and Warranties of the Drilling Group. Each of the undersigned members of the Drilling Group, after consultation with his or its legal counsel, hereby represents and warrants in favor of each of the members of the Somerset Group and the Mullen/Oliver Group that: (i) Norex Drilling, Pronor, NXA, Prosperity, Siem and Capstick are the only persons enumerated by General Instruction C of Schedule 13D that are required to provide the information called for by Items 2 - 6 of Schedule 13D with respect to the shares owned and to be held by the Drilling Group pursuant to the terms and conditions of the Shareholders Agreement; (ii) there are no beneficial owners (within the meaning of Section 13(d) of the Exchange Act and the rules and regulations promulgated by the Commission thereunder), direct or indirect, of the shares owned and to be held by the Drilling Group subject to the terms of the Shareholders Agreement, other than the persons signatory hereto under the caption "Drilling Group" on the signature pages hereof; (iii) such person has reviewed the draft Initial Statement (inclusive of the Exhibit list contained therein) attached hereto as Exhibit A and confirms the accuracy and completeness of the information and documentation with respect to such Reporting Person and his, her or its beneficial interest in any shares contained therein, or referred to therein, as the case may be; and (iv) such person will promptly notify the attorneys-in-fact named above of the addition of any new member to the Drilling Group as signatory to the Shareholders Agreement or the addition of any new beneficial owner (within the meaning of Section 13(d) of the Exchange Act and the rules and regulations promulgated by the Commission thereunder), direct or indirect, of shares that become subject to the terms and conditions of the Shareholders Agreement and will use his or its best efforts to cause any such new beneficial owner of shares subject to the Shareholders Agreement, irrespective of whether or not such person becomes a signatory to the Shareholders Agreement, to acknowledge his or its 7 membership in the Group and to evidence same by executing and delivering a joinder to this Agreement. 4.3 Representations and Warranties of the Mullen/Oliver Group. Each of the undersigned members of the Mullen/Oliver Group, after consultation with his or its legal counsel, hereby represents and warrants in favor of each of the members of the Somerset Group and the Drilling Group that: (i) USRE, MMEER, GCT, PRD, EER, Mullen and Oliver are the only persons enumerated by General Instruction C of Schedule 13D that are required to provide the information called for by Items 2 - 6 of Schedule 13D with respect to the shares to be owned and held by the Mullen/Oliver Group pursuant to the terms and conditions of the Shareholders Agreement; (ii) there are no beneficial owners (within the meaning of Section 13(d) of the Exchange Act and the rules and regulations promulgated by the Commission thereunder), direct or indirect, of the shares to be owned and held by the Mullen/Oliver Group subject to the terms of the Shareholders Agreement, other than listed in Schedule 2.3 to the Shareholders' Agreement and the persons signatory hereto under the caption "Mullen/Oliver Group" on the signature pages hereof; (iii) such person has reviewed the draft Initial Statement (inclusive of the Exhibit list contained therein) attached hereto as Exhibit A and confirms the accuracy and completeness of the information and documentation with respect to such Reporting Person and his, her or its beneficial interest in any shares contained therein, or referred to therein, as the case may be; and (iv) such person will promptly notify the attorneys-in-fact named above of the addition of any new member to the Mullen/Oliver Group as signatory to the Shareholders Agreement or the addition of any new beneficial owner (within the meaning of Section 13(d) of the Exchange Act and the rules and regulations promulgated by the Commission thereunder), direct or indirect, of shares that become subject to the terms and conditions of the Shareholders Agreement and will 8 use his or its best efforts to cause any such new beneficial owner of shares subject to the Shareholders Agreement, irrespective of whether or not such person becomes a signatory to the Shareholders Agreement, to acknowledge his or its membership in the Group and to evidence same by executing and delivering a joinder to this Agreement. 5. Provision of Information; Notification of Material Changes. Each of the undersigned Reporting Persons agrees promptly to: (i) provide to (A) the attorneys-in-fact named above and/or their designated representative and (B) each of the other signatories to this Agreement, any and all information and documents with respect to such Reporting Person and his, her or its direct or indirect beneficial ownership of shares as may be reasonably requested by such person in connection with the preparation of the Initial Statement or any Amendment thereto; (ii) review for accuracy and completeness any information or documentation with respect to such Reporting Person and his, her or its beneficial interest in any shares contained in any draft of any Initial Statement or Amendment (inclusive of any schedules or exhibits thereto) submitted to such person for review and comment and provide any corrections or additions to the information or documentation contained therein as shall be necessary to ensure the accuracy and completeness thereof; (iii) review for accuracy and completeness, and for purposes of providing any information or documentation required to be contained in any Amendment required as a result of any subsequent material change to the facts set forth therein, any Initial Statement or Amendment that is filed with the Commission and a copy of which is distributed to such person; and (iv) inform (A) the attorneys-in-fact named above and/or their designated representative and (B) each of the other signatories to this Agreement, of any material change in the facts set forth in the Initial Statement or any Amendment of which the Reporting Person becomes aware and provide to such attorneys-in-fact and other signatories to this Agreement any and all information 9 and documentation in connection therewith as is in the possession of such person for purposes of facilitating the preparation and filing by the attorneys-in-fact and/or any party signatory to this Agreement of any required Amendment in connection therewith. By way of example, and not by limitation, for purposes of this Agreement, a change in material facts shall include (i) an acquisition or disposition of any shares or other transaction with respect to any shares (inclusive of a grant to any person of the right to receive or the power to direct the receipt of dividends from, or the proceeds of sale of, such securities) or any event or occurrence which causes any Reporting Person to cease to be the beneficial owner of shares or member of the Group, (ii) any new contracts, arrangements, understandings or relationships (legal or otherwise) among any of the Reporting Persons or between any of such Reporting Persons and any other person with respect to any securities of the Corporation (including, without limitation, those relating to the transfer or voting of any securities, finder's fees, joint ventures, loan or option arrangements, puts or calls, guarantees of profits, division of profits or loss, or the giving or withholding of proxies, pledge of securities or any other arrangement involving a contingency the occurrence of which would give another person voting power or investment power over such securities), or any amendment or termination of any such contract, arrangement, understanding or relationship disclosed in the Initial Statement or any Amendment; (iii) the purpose or purposes of the acquisition of any additional shares of the Corporation (and the source and amount of funds therefor, including disclosure of any financing arrangements), or any change in intent with respect to the ownership of shares, or any plans or proposals that relate to or would result in: (a) the acquisition by any person of additional securities of the Corporation, or the disposition of securities of the Corporation; 10 (b) an extraordinary corporate transaction, such as a merger, reorganization or liquidation, involving the Corporation or any of its subsidiaries; (c) a sale or transfer of a material amount of assets of the Corporation or of any of its subsidiaries; (d) any change in the present board of directors or management of the Corporation, including any plans or proposals to change the number or term of directors or to fill any existing vacancies on the board; (e) any material change in the present capitalization or dividend policy of the Corporation; (f) any other material change in the Corporation's business or corporate structure; (g) changes in the Corporation's charter, bylaws or instruments corresponding thereto or other actions which may impede the acquisition of control of the Corporation by any person; (h) causing a class of securities of the Corporation to be delisted from a national securities exchange or to cease to be authorized to be quoted in an inter-dealer quotation system of a registered national securities association; (i) a class of equity securities of the Corporation becoming eligible for termination of registration pursuant to Section 12(g)(4) of the Act; or (j) any action similar to any of those enumerated above; or (iv) a change in any of the following: the identity of any control person(s) of any Reporting Person, the business address of any Reporting Person, the principal occupation or employment (with respect to any natural person) or business (with respect to any entity) of any Reporting Person, the citizenship of any Reporting Person, or whether any Reporting Person has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result thereof is subject to a judgment, decree or final order enjoining future violations of or 11 prohibiting or mandating activities subject to federal or state securities laws or finding any violation with respect to such laws. 6. Termination. This Agreement shall terminate upon the earlier to occur of (i) the termination of the Shareholders Agreement or (ii) the date that the Group ceases to beneficially own, within the meaning of Section 13(d) of the Exchange Act and the rules and regulations promulgated by the Commission thereunder, at least five percent (5%) of the voting securities of the Corporation; provided, however, that notwithstanding the foregoing, the provisions of this Agreement shall remain in full force and effect until any required final Amendment shall have been filed with the Commission to reflect the termination of the Group's filing obligations under Section 13(d) of the Exchange Act and the rules and regulations promulgated by the Commission thereunder. In addition, this Agreement shall terminate as to any Reporting Person on the date that such Shareholder (or with respect to any Indirect Beneficial Owner, the date that the Shareholder through whom he, she or it has an indirect beneficial interest in the securities of the Corporation) ceases to be a party to, or in any manner subject to the obligations or entitled to the benefits of, the Shareholders Agreement; provided, however, that notwithstanding the foregoing, the provisions of this Agreement shall remain in full force and effect with respect to such Reporting Person until any required Amendment shall have been filed with the Commission to reflect that such Reporting Person is no longer a member of the Group. 7. Certain Definitions. As used herein the following terms shall have the meanings set forth below: 12 7.1 The term "affiliate" means, with respect to any person, any other person that directly or indirectly controls or is controlled by or is under common control with such person. 7.2 The term "control" as used herein shall have the meaning specified in Rule 405 promulgated by the Commission under the Securities Act of 1933, as amended. 7.3 The term "Indirect Beneficial Owner" as used herein shall include, in addition to each control person of the original Shareholders signatory to the Shareholders Agreement, each of whom is also an original signatory to this Agreement, any control person of any transferee of any Shareholder that is required to execute and deliver to the Corporation an Acknowledgment pursuant to Section 16 of the Shareholders Agreement, any transferee of or successor to any Indirect Beneficial Owner with respect to any indirect beneficial interest in any shares and any person who hereinafter becomes a control person of any Reporting Person, in each respect, only so long as such person is a beneficial owner, within the meaning of Section 13D of the Exchange Act and the rules and regulations promulgated by the Commission thereunder, of any shares that are subject to the terms of the Shareholders Agreement. 7.4 The term "party" or "party to this Agreement" as used herein shall mean (i) any person signatory to this Agreement, (ii) any transferee of any shares owned by any Shareholder that is required to execute and deliver to the Corporation an Acknowledgment pursuant to Section 16 of the Shareholders Agreement in connection with its acquisition of shares, (iii) any control person of any such transferee that would be deemed the indirect beneficial owner, within the meaning of Section 13D of the Exchange Act and the rules and regulations promulgated by the Commission thereunder, of any such shares acquired by such transferee and (iv) any transferee of or successor to any Indirect Beneficial Owner with respect to 13 any indirect beneficial interest in any shares and any person who hereafter becomes a control person of any Reporting Person. 7.5 The term "person" as used herein means any individual, corporation, company, partnership, joint venture, trust, association, unincorporated organization, or other entity or group. 7.6 The term "shares" as used herein shall be deemed to refer to all the shares of the Common Stock of the Corporation, or warrants to purchase such Common Stock, owned by the Shareholders or any Indirect Beneficial Owner at the time of execution of this Agreement; any additional shares of the Common Stock of the Corporation hereafter acquired by any Shareholder or any Indirect Beneficial Owner; any shares of the Common Stock of the Corporation hereafter issued in exchange therefor by way of reclassification of shares, merger, consolidation, reorganization, recapitalization or otherwise; any additional shares issued to the respective Shareholders or any Indirect Beneficial Owner by reason of stock dividends, share distributions, increases in the outstanding shares; and (unless the context does not permit such interpretation) any shares of the Common Stock of the Corporation issuable to any Shareholder or any Indirect Beneficial Owner upon exercise of options, warrants, rights, and conversion rights or privileges. 7.7 The term "Shareholder" as used herein shall include, in addition to the original signatories to the Shareholders Agreement, each of whom is also a signatory to this Agreement, any transferee of any Shareholder that is required to execute and deliver to the Corporation an Acknowledgment pursuant to Section 16 of the Shareholders Agreement, in each respect, only so long as such person holds shares. 14 8. Merger. In the event of the merger of the Corporation with and into any other corporation whose equity securities are registered with the Commission pursuant to the Exchange Act, this Agreement shall continue in effect and thereafter any references in this Agreement to the Corporation shall refer to the surviving corporation pursuant to such merger. 9. Binding Effect; Successors and Assigns. This Agreement shall inure to the benefit of and shall bind the parties hereto and their respective heirs, personal representatives, successors and permitted assigns. The provisions of this Agreement shall be binding upon (i) transferees of Shareholders (other than Unrestricted Transferees (as such term is defined in the Shareholders Agreement)), (ii) any control person of any such transferee that would be deemed the indirect beneficial owner, within the meaning of Section 13(d) of the Exchange Act and the rules and regulations promulgated by the Commission thereunder, of any such shares acquired by such transferee, (iii) transferees of Indirect Beneficial Owners with respect to any indirect beneficial ownership of any shares, (iv) any transferee of or successor to any Indirect Beneficial Owner with respect to any indirect beneficial interest in any shares and (v) any person who hereinafter becomes a control person of any Reporting Person (each, a "New Reporting Person"). No Reporting Person signatory hereto shall transfer any direct or indirect beneficial interest in any shares to any person that is not a signatory to this Agreement (other than any transfer of shares by any Shareholder to an Unrestricted Transferee (as defined in the Shareholders Agreement) in accordance with the terms of the Shareholders Agreement), and no person shall hereinafter become a control person of any Reporting Person, unless said person shall execute a Joinder to this Agreement and agree to be bound hereby. Upon execution of any such Joinder, said new Reporting Person shall be deemed to be a party hereto subject to the obligations created hereby. 15 10. Further Assurances. The parties agree to make, execute and deliver any and all agreements, instruments and documents, and to do any and all other acts, deeds and things, which may be necessary or advisable to carry out the provisions of this Agreement or to effectuate the intent and purpose thereof. 11. Notices. Any and all notices, designations, consents, offers, acceptances or other communications provided for herein shall be given in writing by certified or registered mail, telecopier, Federal Express, Express Mail, or personal delivery against written receipt addressed, transmitted or delivered, to the respective addresses of the parties set forth on the signature pages hereto, or to such other address as may be designated by any of them in a notice given to the other parties hereto as provided above. Each such notice shall be deemed given at the time it is received by the addressee. 12. Amendment. This Agreement (inclusive of the Power of Attorney provided for herein) supersedes and cancels all prior agreements and understandings among the parties hereto, and contains all of the terms and conditions agreed upon by the parties, with respect to the subject matter hereof, and none of the parties shall be bound by any representations, warranties, covenants or conditions with respect thereto not expressly set forth herein. No modification of this Agreement shall be binding or given effect unless the same shall be in writing and signed by all of the parties. 13. Waiver. Any failure by a party hereto to comply with any obligation, agreement or condition herein may be expressly waived in writing by each of the other parties hereto, but such waiver or failure to insist upon strict compliance with such obligation, agreement or condition shall not operate as a wavier of, or estoppel with respect to, any such subsequent or other failure. 16 14. Counterparts. This Agreement may be executed in one or more counterparts, all of which taken together shall constitute one and the same instrument. 17 IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto as of the date and year first above written. SOMERSET GROUP: 69 Delaware Avenue SOMERSET DRILLING ASSOCIATES, L.L.C. Buffalo, New York 14202 By: Somerset Capital Partners, its Managing Telephone No.: (716) 842-0711 Member Telefax No.: (716) 842-2514 By: /s/ William R. Ziegler ---------------------------------------- William R. Ziegler, Partner 69 Delaware Avenue SOMERSET CAPITAL PARTNERS Buffalo, New York 14202 Telephone No.: (716) 842-0711 Telefax No.: (716) 842-2514 By: /s/ William R. Ziegler ---------------------------------------- William R. Ziegler, Partner 69 Delaware Avenue /s/ Thomas H. O'Neill, Jr. Buffalo, New York 14202 -------------------------------------------- Telephone No.: (716) 842-0711 Thomas H. O'Neill, Jr., Individually Telefax No.: (716) 842-2514 1900 West Loop South, Suite 1800 /s/ Steven A. Webster Houston, Texas 77027 -------------------------------------------- Telephone No.: (713) 623-8984 Steven A. Webster, Individually Telefax No.: (713) 623-8103 666 Third Avenue, 9th Floor /s/ William R. Ziegler New York, New York 10017 -------------------------------------------- Telephone No.: (212) 551-9860 William R. Ziegler, Individually Telefax No.: (212) 682-9112 18 MULLEN/OLIVER GROUP: 6601 S.W. 29th Street U.S. RIG AND EQUIPMENT, INC. Oklahoma City, OK 73179 Telephone No.: (405) 745-4137 Telefax No.: (405) 745-4557 By: /s/ Roy T. Oliver, Jr. ---------------------------------------- Name: Roy T. Oliver, Jr. Title: President 8411 Preston Road MIKE MULLEN ENERGY EQUIPMENT Suite 730, LB2 RESOURCE, INC. Dallas, TX 75225 Telephone No.: (214) 692-6690 Telefax No.: (214) 692-6101 By: /s/ Mike L. Mullen ---------------------------------------- Name: Mike L. Mullen Title: President 8411 Preston Road GCT INVESTMENTS, INC. Suite 730, LB2 Dallas, TX 75225 Telephone No.: (214) 692-6690 By: /s/ Mike L. Mullen Telefax No.: (214) 692-6101 ---------------------------------------- Name: Mike L. Mullen Title: President 8411 Preston Road PRD RIG PARTNERSHIP 1995, LTD. Suite 730, LB2 By: Mike Mullen Energy Equipment Resource, Dallas, TX 75225 Inc., its General Partner Telephone No.: (214) 692-6690 Telefax No.: (214) 692-6101 By: /s/ Mike L. Mullen ---------------------------------------- Name: Mike L. Mullen Title: President 8411 Preston Road EER NATIONAL 78 PARTNERSHIP, LTD. Suite 730, LB2 By: Mike Mullen Energy Equipment Resource, Dallas, TX 75225 Inc., its General Partner Telephone No.: (214) 692-6690 Telefax No.: (214) 692-6101 By: /s/ Mike L. Mullen ---------------------------------------- Name: Mike L. Mullen Title: President 19 c/o U.S. Rig and Equipment, Inc. /s/ Roy T. Oliver 6601 S.W. 29th Street -------------------------------------------- Oklahoma City, OK 73179 Roy T. Oliver, Jr., Individually Telephone No.: (405) 745-4137 Telefax No.: (405) 745-4557 c/o Mike Mullen Energy Equipment /s/ Mike L. Mullen Resource, Inc. -------------------------------------------- 8411 Preston Road Mike L. Mullen, Individually Suite 730, LB2 Dallas, TX 75225 Telephone No.: (214) 692-6690 Telefax No.: (214) 692-6101 20 DRILLING GROUP: Cedar House NOREX DRILLING LTD. 41 Cedar Avenue Hamilton, HM-12, Bermuda Telephone No.: +1 441 283 2058 By: /s/ Frank Capstick Telefax No.: +1 441 283 3231 ----------------------------------------- Name: Frank Capstick Title: President c/o Morgan & Morgan Trust PRONOR HOLDINGS LTD. Corp. Ltd. Road Town Pasea Estate Tortola, British Virgin Islands By: /s/ Kristian Siem Telephone No.: +1 441 293 2058 ----------------------------------------- Telefax No.: +1 441 293 3231 Name: Kristian Siem Title: Managing Director Cedar House NOREX INDUSTRIES, INC. 41 Cedar Avenue Hamilton, HM-12, Bermuda Telephone No.: +1 441 283 2058 By: /s/ Frank Capstick Telefax No.: +1 441 283 3231 ----------------------------------------- Name: Frank Capstick Title: President c/o Morgan & Morgan Trust PROSPERITY INVESTMENTS, INC. Corp. Ltd. Road Town Pasea Estate Tortola, British Virgin Islands By: /s/ Kristian Siem Telephone No.: +1 441 293 2058 ----------------------------------------- Telefax No.: +1 441 293 3231 Name: Kristian Siem Title: Managing Director c/o Norex Offshore Holdings AS /s/ Kristian Siem Jerpefaret 12, Oslo, Norway -------------------------------------------- Telephone No.: Kristian Siem, Individually Telefax No.: Cedar House /s/ Frank Capstick 41 Cedar Avenue -------------------------------------------- Hamilton, HM-12, Bermuda Frank Capstick, Individually Telephone No.: +1 441 283 2058 Telefax No.: +1 441 283 3231 21 EX-99 3 EXHIBIT VIII EXHIBIT VIII ================================================================================ LIMITED LIABILITY COMPANY AGREEMENT OF SOMERSET DRILLING ASSOCIATES, L.L.C. Dated as of July 1, 1996 ================================================================================ TABLE OF CONTENTS
Page ---- ARTICLE I DEFINITIONS ARTICLE II THE COMPANY AND ITS BUSINESS 2.1 Formation ...................................................... 4 2.2 Certificate of Formation ....................................... 4 2.3 Name ........................................................... 4 2.4 Place of Business .............................................. 4 2.5 Registered Office and Agent .................................... 4 2.6 Purposes ....................................................... 4 2.7 Title to Property .............................................. 5 2.8 Duration ....................................................... 5 ARTICLE III CAPITAL CONTRIBUTIONS; CAPITAL ACCOUNTS 3.1 Member's Capital ............................................... 5 3.2 Limitations on Member's Liability and Return of Capital ........ 5 3.3 Capital Accounts ............................................... 5 3.4 Member Loans ................................................... 6 ARTICLE IV ALLOCATION OF PROFITS AND LOSSES 4.1 Allocation of Net Profits and Net Loss of the Company .......... 6 4.2 Residual Allocations ........................................... 7 4.3 Qualified Income Offset ........................................ 7 4.4 Minimum Gain Chargeback ........................................ 7 4.5 Special Allocations ............................................ 7 4.6 Fees to Members or Affiliates .................................. 7 4.7 Section 704(c) Allocation ...................................... 8 4.8 Distribution in Kind ........................................... 8 ARTICLE V DISTRIBUTIONS 5.1 Distributions of Available Cash Flow ........................... 8 5.2 Estimated Taxes and Withholding ................................ 9
i
ARTICLE VI CONTROL AND MANAGEMENT 6.1 Management of the Company ...................................... 9 6.2 Authority and Responsibility of the Managers ................... 9 6.3 Limitations on Authority of Managers ........................... 11 6.4 Participation by Members ....................................... 11 6.5 Other Activities of Managers or Members ........................ 12 6.6 Fees and Expenses; Compensation of Managers .................... 12 6.7 Liability for Acts and Omissions; Indemnification .............. 12 6.8 Number, Tenure and Qualifications of Managers .................. 12 6.9 Resignation of Managers ........................................ 13 6.10 Removal of a Manager ........................................... 13 6.11 Vacancies of Managers .......................................... 14 6.12 Place of Managers' Meetings .................................... 14 6.13 Special Meetings of Managers ................................... 14 6.14 Notice of Adjournment .......................................... 14 6.15 Waiver of Notice ............................................... 14 6.16 Action by Managers; Quorum; Voting; Action Without a Meeting ... 15 6.17 Meetings by Telephone .......................................... 15 6.18 Adjournment .................................................... 15 6.19 Committees of the Managers ..................................... 15 ARTICLE VII MEETINGS OF MEMBERS 7.1 Meetings ....................................................... 15 7.2 Place of Meetings .............................................. 16 7.3 Notice of Meetings ............................................. 16 7.4 Record Date .................................................... 16 7.5 Quorum ......................................................... 16 7.6 Manner of Acting ............................................... 16 7.7 Proxies ........................................................ 16 7.8 Action by Members Without a Meeting ............................ 17 7.9 Waiver of Notice ............................................... 18 7.10 Voting Agreements .............................................. 18 ARTICLE VIII TRANSFERS OF COMPANY INTERESTS 8.1 Investment Representation ...................................... 18 8.2 Assignment by Members .......................................... 18 8.3 Void Transfers; Effective Date ................................. 19
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ARTICLE IX ACCOUNTING AND RECORDS; CERTAIN TAX MATTERS 9.1 Books and Records .............................................. 20 9.2 Reports ........................................................ 20 9.3 Tax Returns .................................................... 20 9.4 Section 754 Election ........................................... 20 9.5 Tax Matters Partner ............................................ 20 9.6 Withholding .................................................... 21 9.7 Bank Accounts .................................................. 21 ARTICLE X DISSOLUTION AND TERMINATION 10.1 Withdrawal ..................................................... 21 10.2 Dissolution .................................................... 21 10.3 Distribution Upon Liquidation of the Company ................... 22 10.4 Capital Account Deficits ....................................... 22 10.5 Certificate of Cancellation .................................... 23 ARTICLE XI AMENDMENTS 11.1 Amendments Adopted Solely by the Managers ...................... 23 11.2 Amendments to be Adopted by Managers and Members ............... 23 ARTICLE XII VALUATION OF SECURITIES OF DI 12.1 Normal Valuation ............................................... 24 12.2 Legal Restrictions on Transfer ................................. 24 12.3 Objection to Valuation ......................................... 24 ARTICLE XIII MISCELLANEOUS 13.1 Notices ........................................................ 24 13.2 Successors and Assigns ......................................... 25 13.3 No Oral Modifications; Amendments .............................. 25 13.4 Captions ....................................................... 25 13.5 Terms .......................................................... 25 13.6 Invalidity ..................................................... 25 13.7 Further Assurances ............................................. 25 13.8 Complete Agreement ............................................. 25
iii 13.9 Attorneys' Fees ................................................ 25 13.10 Governing Law .................................................. 25 13.11 No Third Party Beneficiary ..................................... 25 13.12 Exhibits and Schedules ......................................... 26 13.13 References to this Agreement ................................... 26 13.14 Power of Attorney .............................................. 26 13.15 Reliance on Authority of Person Signing Agreement .............. 27 13.16 Consents and Approvals ......................................... 27 13.17 DI Common Stock ................................................ 27
iv LIMITED LIABILITY COMPANY AGREEMENT OF SOMERSET DRILLING ASSOCIATES, L.L.C. ------------------------------ This Limited Liability Company Agreement of Somerset Drilling Associates, L.L.C. (the "Company"), dated as of July 1, 1996, is made and entered into by and among Somerset Capital Partners, a general partnership, as a Member and the sole initial Manager (the "Managing Member"), and the other Persons listed on Schedule A hereto, as Members (the "Investor Members"), W I T N E S S E T H : In consideration of the mutual agreements made herein, the Members hereby agree to constitute a limited liability company pursuant to the Act as follows: ARTICLE I DEFINITIONS The following terms used in this Agreement shall have the respective meanings specified in this Article I: "Accountants" means any firm of independent certified public accountants as shall be engaged by the Company. "Act" means the Delaware Limited Liability Company Act, as amended from time to time. "Adjusted Capital Account Deficit" means, with respect to any Member, the deficit balance, if any, in such Member's Capital Account as of the end of the relevant Fiscal Year, after giving effect to the following adjustments: (i) increase such Capital Account by any amounts which such Member is obligated to contribute to the Company (pursuant to the terms of this Agreement or otherwise) or is deemed to be obligated to contribute to the Company pursuant to Treasury Regulations Sections 1.704-2(g) (1) and 1.704-2(i) (5); and (ii) reduce such Capital Account by the amount of the items described in Treasury Regulation Section 1.704-1(b) (2) (ii) (d) (4), (5) and (6). "Adjusted Invested Capital" (with respect to each Member) means, at any time, the sum of all Capital Contributions made by such Member pursuant to Article III less distributions previously made to that Member pursuant to Section 5.1 (ii). "Affiliate" means, when used with reference to a specified Person, (i) any Person directly or indirectly controlling, controlled by or under common control with such Person, (ii) -1- any Person owning or controlling 10% or more of the outstanding voting interests of such Person, and (iii) any relative or spouse of such Person. "Agreement" means this Limited Liability Company Agreement, as originally executed and as amended from time to time, as the context requires. "Available Cash Flow" means, with respect to any Fiscal Year or other period, the sum of all cash receipts of the Company from any and all sources, less all cash disbursements (including loan repayments, capital improvements and replacements) and a reasonable allowance for reserves, contingencies and anticipated obligations as determined by the Managers. "Bankruptcy" means, with respect to a Person, the occurrence of any of the following events: (a) the filing by that Person of a petition commencing a voluntary case in bankruptcy under applicable bankruptcy laws; (b) entry against that Person of an order for relief under applicable bankruptcy laws; (c) written admission by that Person of its inability to pay its debts as they mature, or an assignment by that Person for the benefit of creditors; or (d) appointment of a receiver for the property or affairs of that Person. "Capital Account" means, with respect to each Member, an account determined in accordance with the provisions of Section 3.4 of this Agreement. "Capital Contribution" means, with respect to each Member, the total amount of money and fair market value of any property contributed to the Company by such Member. "Code" means the Internal Revenue Code of 1986, as amended from time to time. "Company" means the limited liability company formed under this Agreement. "Company Minimum Gain" means the amount determined by computing with respect to each nonrecourse liability of the Company, the amount of gain (of whatever character), if any, that would be realized by the Company if it disposed (in a taxable transaction) of the Company's property subject to such liability in full satisfaction thereof, and by then aggregating the amounts so computed as set forth in Treasury Regulation Section 1.704-2(d). "Depreciation" shall mean, for each fiscal year or other period, an amount equal to the depreciation, amortization, or other cost recovery deduction allowable with respect to an asset for such year or other period, except that if the Gross Asset Value of an asset differs from its adjusted basis for federal income tax purposes at the beginning of such year or other period, Depreciation shall be an amount which bears the same ratio to such beginning Gross Asset Value as the Federal income tax depreciation, amortization, or other cost recovery deduction for such year or other period bears to such beginning adjusted tax basis. "DI" means DI Industries, Inc., a Texas corporation, or any successor thereto. -2- "Fiscal Year" means the fiscal year of the Company as determined the Managers. As used in this Agreement, a Fiscal Year shall include any partial Fiscal Year at the beginning and end of the Company term. "Interest" means a Member's percentage interest in the Company. "Majority-in-Interest of the Members" means such of the Members whose Capital Contributions equal (at the time of determination) more than 50% of the total Capital Contributions of all Members. "Managers" means the Managing Member or any other Persons who or which succeed the Managing Member or are added as Managers pursuant to this Agreement. "Member" means the Managing Member and each Person who or which is listed in Schedule A hereto and executes a counterpart of this Agreement as a Member and each Person who or which may hereafter become a party to this Agreement as a substitute Member. "Net Profits" and "Net Loss" shall mean, for each Fiscal Year or other period, an amount equal to the Company's taxable income or loss for such year or period, determined in accordance with Code Section 703(a) (for this purpose, all items of income, gain, loss or deduction required to be stated separately pursuant to Code Section 703(a)(1) shall be included in taxable income or loss), with the following adjustments: (a) Any income of the Company that is exempt from Federal income tax and not otherwise taken into account in computing Net Profits or Net Loss shall be added to such taxable income or loss; and (b) Any expenditures of the Company described in Code Section 705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(i) and not otherwise taken into account in computing Net Profits or Net Loss shall be subtracted from such taxable income or loss. "Person" means an individual, trust, estate, tax-exempt entity, partnership, joint venture, association, company, corporation, limited liability company, government or agency thereof, or other entity. "Prime Rate" means the base rate of interest announced from time to time by Chemical Bank, New York, N.Y. -3- "Priority Return" means, with respect to a Member, a sum equivalent to the Priority Return Rate, cumulative but not compounded (pro rated for any partial year), of the amount of the Adjusted Invested Capital of such Member from time to time, calculated from time to time during the period to which the Priority Return relates, commencing on the date the Member is admitted to the Company. "Priority Return Rate" means six percent (6%) per annum for the first one-year period to which the Priority Return Relates; nine percent (9%) for the second one-year period; twelve percent (12%) for the third one-year period; fifteen percent (15%) for the fourth one-year period; and eighteen percent (18%) for the fifth one-year period. "Treasury Regulations" means all proposed, temporary and final regulations promulgated under the Code, as such regulations may be amended from time to time. ARTICLE II THE COMPANY AND ITS BUSINESS 2.1 Formation. The Members hereby form a limited liability company under and pursuant to the provisions of the Act and upon the terms and conditions set forth in this Agreement. 2.2 Certificate of Formation. A Certificate of Formation has been filed in the office of the Delaware Secretary of State in accordance with the provisions of the Act. The Managers shall take any and all other actions reasonably necessary to perfect and maintain the status of the Company as a limited liability company under the Act. 2.3 Name. The name of the Company shall be Somerset Drilling Associates, L.L.C., and all business of the Company shall be conducted in such name. 2.4 Place of Business. The office of the Company shall be located at such place within or without the State of Delaware as may be determined by the Managers. 2.5 Registered Office and Agent. The registered office of the Company in the State of Delaware shall be at 32 Loockerman Square, Suite L-100, Dover, Delaware 19904. The registered agent of the Company for service of process at the address shall be Prentice Hall Legal and Financial Services. The Company may, upon compliance with the Act, change the location of its registered office in the State of Delaware or its registered agent for service of process in the State of Delaware as the Managers deem appropriate. 2.6 Purposes. The purposes of the Company shall be (i) to invest in DI, an onshore oil and gas drilling contractor, which investment is more fully described in the Private Placement Memorandum of the Company dated June 11, 1996, pursuant to which the -4- membership interests in the Company were offered, and (ii) to enter into any lawful transaction and engage in any lawful activities in furtherance of or incidental to the foregoing purposes. The Company shall not engage in any other activity except as set forth above. 2.7 Title to Property. All real and personal property owned by the Company shall be owned by the Company as an entity and, insofar as permitted by applicable law, no Member shall have any ownership interest in such property in its individual name or right and each Member's Interest shall be personal property for all purposes. 2.8 Duration. The Company shall commence as of the date the Certificate of Formation for the Company is filed in the office of the Delaware Secretary of State and shall continue for a period of five (5) years thereafter, unless sooner dissolved or terminated pursuant to statute or any provision of this Agreement. ARTICLE III CAPITAL CONTRIBUTIONS; CAPITAL ACCOUNTS 3.1 Member's Capital. Prior to or upon the execution of this Agreement, each of the Members shall contribute to the capital of the Company the sum designated opposite his or its name under the heading "Capital Contribution" on Schedule A. 3.2 Limitations on Member's Liability and Return of Capital. Subject to compliance with the other terms of this Agreement, the personal liability of each Member (in his capacity as a Member) arising out of or in any manner relating to the Company and its activities and obligations shall be limited to and shall not exceed the Member's Capital Contributions, except as provided by the Act. A Member shall not (i) be obligated to lend or advance funds to the Company for any purpose except as expressly provided in this Agreement, (ii) be liable for the obligations of any other Member, (iii) be entitled to the return of his or its Capital Contribution at any fixed time or upon demand, or (iv) receive any interest on capital. 3.3 Capital Accounts. The Company shall maintain for each Member a separate Capital Account in accordance with the rules of Treasury Regulations Section 1.704-1(b). Such Capital Account shall be increased by (i) such Member's cash contributions, (ii) the agreed fair market value of property contributed by such Member (net of liabilities secured by such contributed property that the Company is considered to assume or take subject to under Code Section 752), and (iii) all items of Company income and gain (including income and gain exempt from tax) allocated to such Member pursuant to Article IV or other provisions of this Agreement and decreased by (i) the amount of cash distributed to such Member, (ii) the agreed fair market value of all actual and deemed distributions of property made to such Member pursuant to this Agreement (net of liabilities secured by such distributed property that the Member is considered to assume or take subject to under Code Section 752), and (iii) all items of -5- Company deduction and loss allocated to such Member pursuant to Article IV or other provisions of this Agreement. In the event any Member transfers any Interest in accordance with the terms of this Agreement, the transferee shall succeed to the Capital Account of the transferor to the extent it relates to the transferred Interest. The foregoing provisions and the other provisions of this Agreement relating to the maintenance of Capital Accounts are intended to comply with Treasury Regulations Section 1.704-1(b), and shall be interpreted and applied in a manner consistent with such Regulations and any amendment or successor provision thereto. 3.4 Member Loans. In the event that additional funds (in excess of the Members' agreed Capital Contributions) are required by the Company for any purpose relating to the business of the Company or for any of its obligations, expenses, costs, or expenditures, including operating deficits, the Company may borrow such funds as are needed from any Member or other Person for such period of time and on such reasonable business terms as the Managers and the lender may agree and at the rate of interest then prevailing for comparable loans, or if such loan is from a Member or Affiliate, at an interest rate equal to the rate at which the lending Member or Affiliate has borrowed such funds, provided that such rate charged by a Member or Affiliate may not exceed the Prime Rate plus four percent (4%) per annum. Any security interest in the property of the Company which is given to any Member or Affiliate shall be subordinate to any security interest in Company property given by the Company to any lender who is not a Member or Affiliate of a Member. Loans made under this Section may be repaid out of Available Cash Flow, but any amount of any such loan that is outstanding at the time of the occurrence of any of the events described in Article X shall be repaid as provided in Article X. ARTICLE IV ALLOCATION OF PROFITS AND LOSSES 4.1 Allocation of Net Profits and Net Loss of the Company. Except as otherwise provided in this Article IV, Net Profits and Net Loss of the Company in each Fiscal Year shall be allocated among the Members as follows: (a) Net Profits. Net Profits shall be allocated among the Members as follows: (i) first, to each of the Members until the cumulative Net Profits allocated to such Member pursuant to this Section 4.1(a) is equal to the cumulative Net Loss previously allocated to the Member pursuant to Section 4.1(b); -6- (ii) second, to the Members until the cumulative Net Profits allocated to the Members pursuant to this Section 4.1(a)(ii) is equal to 100% of the accrued amount of the Members' Priority Return; and (iii) thereafter, 20% to the Managing Member and 80% to the Members (including the Investor Members and the Managing Member), in proportion to their Capital Contributions. (b) Allocation of Net Loss. Except as otherwise provided in this Article, Net Loss shall be allocated among the Members as follows: (i) first, in proportion to the positive balances, if any, in the Members' respective Capital Accounts, until such balances are reduced to zero; and (ii) thereafter, to the Members, in proportion to their Capital Contributions. 4.2 Residual Allocations. Except as otherwise provided in this Agreement, all items of Company income, gain, loss, deduction, and any other allocations not otherwise provided for shall be divided among the Members in the same proportions as they share Net Profits or Net Losses, as the case may be, for the Fiscal Year. 4.3 Qualified Income Offset. If any Member unexpectedly receives any adjustments, allocation or distributions described in clauses (4), (5) or (6) of Treasury Regulations Section 1.704-1(b)(2)(ii)(d), items of Company income shall be specially allocated to such Member in an amount and manner sufficient to eliminate the Adjusted Capital Account Deficit created by such adjustments, allocations or distributions as quickly as possible. This Section 4.3 is intended to constitute a "qualified income offset" within the meaning of Treasury Regulations Section 1.704-1(b)(2)(ii)(d)(3). 4.4 Minimum Gain Chargeback. If there is a net decrease in Company Minimum Gain during a Fiscal Year, each Member will be allocated, before any other allocation under this Article IV, items of income and gain for such Fiscal Year (and if necessary, subsequent years) in proportion to and to the extent of an amount equal to such Member's share of the net decrease in Company Minimum Gain determined in accordance with Treasury Regulations Section l.704-2(g)(2). This Section 4.4 is intended to comply with, and shall be interpreted consistently with, the "minimum gain chargeback" provisions of Treasury Regulations Section l.704-2(f). 4.5 Special Allocations. Any special allocations of items of Net Profits pursuant to Sections 4.3 and 4.4 shall be taken into account in computing subsequent allocations of Net Profits pursuant to Section 4.l, so that the net amount of any items so allocated and the gain, loss and any other item allocated to each Member pursuant to Section 4.l shall, to the extent possible, be equal to the net amount that would have been allocated to each such Member pursuant to the provisions of this Article if such special allocations had not occurred. -7- 4.6 Fees to Members or Affiliates. Notwithstanding the provisions of Section 4.l, in the event that any fees, interest, or other amounts paid to any Member or any Affiliate thereof pursuant to this Agreement or any other agreement between the Company and any Member or Affiliate thereof providing for the payment of such amount, and deducted by the Company in reliance on Section 707(a) and/or 707(c) of the Code, are disallowed as deductions to the Company on its federal income tax return and are treated as Company distributions, then (i) the Net Profits or Net Loss, as the case may be, for the Fiscal Year in which such fees, interest, or other amounts were paid shall be increased or decreased, as the case may be, by the amount of such fees, interest, or other amounts that are treated as Company distributions; and (ii) there shall be allocated to the Member to which (or to whose Affiliate) such fees, interest, or other amounts were paid, prior to the allocations pursuant to Section 4.l, an amount of gross income for the Fiscal Year equal to the amount of such fees, interest, or other amounts that are treated as Company distributions. 4.7 Section 704(c) Allocation. Any item of income, gain, loss, and deduction with respect to any property (other than cash) that has been contributed by a Member to the capital of the Company and which is required or permitted to be allocated to such Member for income tax purposes under Section 704(c) of the Code so as to take into account the variation between the tax basis of such property and its fair market value at the time of its contribution shall be allocated to such Member solely for income tax purposes in the manner so required or permitted. 4.8 Distribution in Kind. If assets of the Company are distributed in kind, Net Profits and Net Losses shall be allocated as if such assets had been sold for their fair market value on the date of distribution. For purposes of this allocation, the fair market value of such asset shall be determined as provided in Article XII hereof, with respect to securities of DI, or by the Managing Member, in all other cases. ARTICLE V DISTRIBUTIONS 5.1 Distributions of Available Cash Flow. Available Cash Flow shall be distributed as soon as practicable, and securities of DI may be distributed from time to time, to and among the Members as follows: (i) first, to each of the Members to the extent of its accrued Priority Return, reduced by any prior distributions made under this Section 5.1(i); -8- (ii) second, to each of the Members to the extent of its Adjusted Invested Capital; and (iii) thereafter, 20% to the Managing Member and 80% to the Members (including the Investor Members and the Managing Member), in proportion to their Capital Contributions. For the purposes hereof, securities of DI distributed to the Members shall be valued in accordance with Article XII hereof. 5.2 Estimated Taxes and Withholding Notwithstanding the provisions of Section 5.1, distributions of Available Cash Flow with respect to any fiscal year or other applicable period shall be made on a quarterly basis, based on estimated results of operations through any applicable quarter, to all Members to pay any required quarterly estimated federal and state income taxes with respect to any profits of the Company attributable to such fiscal year or other applicable period, assuming that all Members are subject to the highest marginal federal and New York income tax rates. Distributions on account of estimated income taxes shall be made at least ten (10) days prior to the due date of any quarterly estimated tax payment. Any amounts withheld by the Company with respect to any profits allocated to any Member as required under the Code or any provision of applicable state and local income tax law shall be treated as amounts distributed to the Members pursuant to this Article V. To the extent any distributions under this Section 5.2 exceed the amounts distributable to the Members under Section 5.1, any such excess shall be deemed to be an interest free advance to the Members receiving such excess distributions, payable to the Company from subsequent distributions as made. The foregoing distributions with respect to federal and state income taxes shall be made even if as of the applicable period the Company does not have sufficient Available Cash Flow to cover such distributions. ARTICLE VI CONTROL AND MANAGEMENT 6.1 Management of the Company. The overall management and control of the business and affairs of the Company shall be vested solely in the Managers, who shall be responsible for the management of the Company's business. 6.2 Authority and Responsibility of the Managers. (a) Except as expressly provided in this Agreement, all decisions respecting any matter set forth in this Agreement or otherwise affecting or arising out of the conduct of the business of the Company shall be made by the Managers, and the Managers shall have the exclusive right and full authority to manage, conduct and operate the Company's business. Specifically, but not by way of limitation, the Managers shall be authorized and responsible, -9- subject to the limitations elsewhere set forth in this Agreement, in the name and on behalf of the Company: (i) to borrow and lend money and, as security therefor, to mortgage, pledge or otherwise encumber the assets of the Company; (ii) to cause to be paid on or before the due date thereof all amounts due and payable by the Company to any Person, including, without limitation, to Affiliates of the Managers to the extent permitted under this Agreement; (iii) to employ such agents, employees, managers, accountants, attorneys, consultants and other Persons, (including, without limitation, itself and its Affiliates to the extent permitted under this Agreement) necessary or appropriate to carry out the business and affairs of the Company, and to pay such fees, expenses, salaries, wages and other compensation to such Persons as it shall, in its sole discretion, determine; (iv) to pay, extend, renew, modify, adjust, submit to arbitration, prosecute, defend or compromise, upon such terms as it may determine and upon such evidence as it may deem sufficient, any obligation, suit, liability, cause of action or claim, including taxes, either in favor of or against the Company; (v) to pay any and all fees and to make any and all expenditures which it, in its sole discretion, deems necessary or appropriate in connection with the organization of the Company, the management of the affairs of the Company, and the carrying out of its obligations and responsibilities under this Agreement; (vi) to cause to be paid any and all taxes, charges and assessments that may be levied, assessed or imposed upon any of the assets of the Company; (vii) to cause all payments and other income which become due with respect to the Company's investments to be collected; (viii) to sign checks and make proper disbursements of Company funds and to issue receipts for and on behalf of the Company; (ix) to sell or refinance all or any portion of the Company's investments; (x) to enter into the agreements and engage in transactions with entities and persons with which or whom the Managers are, is or may be affiliated or with other Persons; (xi) to make all elections required or permitted to be made by the Company under the Code, except as provided in Section 9.4; and -10- (xii) to assume and exercise all rights, powers, and responsibilities granted to Managers by the Act and, subject to the limitations set forth in this Agreement, to do any and all acts and things which shall be in furtherance of the Company's business as set forth in this Agreement. (b) With respect to all of its rights, powers and responsibilities under this Agreement, the Managers are authorized to execute and deliver, in the name and on behalf of the Company, such notes and other evidence of indebtedness, contracts, assignments, deeds, leases, loan agreements, mortgages and other security instruments as it deems proper, all on such terms and conditions as they deem proper. 6.3 Limitations on Authority of Managers. Notwithstanding anything to the contrary contained in this Agreement, the Managers shall not have the authority, (a) Without the approval of all the Members: (i) to do any willful act in contravention of this Agreement; (ii) to confess a judgment in a material amount against the Company; (iii) to convert property of the Company to its own use, or assign any rights in specific property of the Company for other than a purpose of the Company; (iv) to admit a person as a Manager or a Member, except as provided in this Agreement; (v) to perform any act that would subject the Members to liability other than as members of a limited liability company in any jurisdiction; (vi) to pay for any services performed by the Managers or an Affiliate thereof, except as otherwise permitted in this Agreement; (vii) to execute or deliver any general assignment for the benefit of the creditors of the Company; or (viii)to make any loan to a Manager or its Affiliates; or (b) without the vote or written consent of a Majority-in-Interest of the Members: (i) to admit additional or substitute Members, except as permitted hereunder; or (ii) to admit any new Managers, except as permitted hereunder. -11- 6.4 Participation by Members. No Investor Member shall participate in or interfere with the management of the Company or the operation of its business. The exercise by an Investor Member of any of his rights or powers granted in this Agreement shall not be deemed taking part in control of the business of the Company and shall not constitute a violation of this Section 6.4. No Investor Member shall have any power or authority to sign for or to bind the Company in any manner or for any purpose whatsoever. No Investor Member shall have priority over any other Member with respect to any rights or duties contained in this Agreement, unless expressly provided for in this Agreement. 6.5 Other Activities of Managers or Members. (a) The Managers shall not be required to devote their full time and effort to the affairs of the Company, but shall devote such time and effort as may reasonably be required to adequately promote the Company's interests. (b) The parties hereto expressly agree that any Manager or Member may at any time engage in and possess interests in other business ventures of any and every nature and description, independently or with others, including, but not limited to, engaging in activities which parallel or compete with the business of the Company, and neither the Company nor any Member shall by virtue of this Agreement have any right, title or interest in or to such independent activities or to the income or profits derived therefrom. 6.6 Fees and Expenses; Compensation of Managers. (a) Except as specifically provided in this Agreement, no fees shall be paid to any Member or Manager by the Company. However, the Managers shall be entitled to receive an annual fee from DI for its services in monitoring the Company's investment in DI and reimbursement for all reasonable out-of-pocket costs and expenses incurred on behalf of the Company. (b) Nothing in this Agreement shall be deemed to limit or restrict the rights of the Managers or any of their Affiliates to contract for and receive separate fees and benefits, directly or indirectly, as a result of their interests in any Person which supplies goods or services to, or otherwise transacts business with the Company or DI; provided, however, that the material terms of any such transaction with the Company shall be (i) disclosed to each Member or a predecessor in interest in writing at or prior to his admission to the Partnership, or (ii) approved by a Majority-in-Interest of the Members, or (iii) not materially less favorable to the Company than those which would be obtainable from an unrelated party in an arm's-length transaction. 6.7 Liability for Acts and Omissions; Indemnification. The Managers shall not be liable, responsible, or accountable in damages or otherwise to any of the Members for, and the Company shall indemnify and save harmless the Managers from, any loss or damage incurred by any of them by reason of an act or omission performed or omitted by any of them in good faith on behalf of the Company and in a manner reasonably believed by any of them to be within -12- the scope of the authority granted to them by this Agreement and in the best interests of the Company, except for willful misconduct. 6.8 Number, Tenure and Qualifications of Managers. The number of Managers of the Company may be amended from time to time by the vote or written consent of at least two-thirds of all Member's Interests. Each Manager shall hold office until the next annual meeting of Members or until a successor shall have been elected and qualified. Managers shall be elected by the vote or written consent of at least a Majority-in-Interest of the Members and need not be residents of the State of Delaware or Members of the Company. Notwithstanding the foregoing, the Managing Member shall be the sole Manager of the Company until it has resigned or been removed for cause as herein provided. 6.9 Resignation of Managers. Any Manager may resign at any time by giving written notice to the Company. The resignation of any Manager shall take effect upon receipt of such notice or at any later time specified in such notice. Unless otherwise specified in such notice, the acceptance of the resignation shall not be necessary to make it effective. The resignation of the Manager who is also a Member shall not affect the Manager's rights as a Member and shall not constitute a withdrawal as a Member. 6.10 Removal of a Manager. (a) The Members, at any time, upon the consent of two-thirds in Interest of the Members, may remove a Manager for "cause." For purposes hereof, "cause" means the occurrence of any one or more of the following acts on the part of the Manager(s): (1) willful and persistent inattention to his duties; (2) an act or acts amounting to gross negligence or willful malfeasance to the material detriment of the Company; or (3) a material breach of a Manager's obligations and duties pursuant to this Agreement. (b) To accomplish removal, the Members shall give notice to the Manager, who shall have sixty (60) days from such notice to cure the reason or reasons for such removal, and in the event of such cure he shall remain as a Manager. If, at the end of sixty (60) days he has not cured the reason or reasons for such removal, upon a further notice from the Members, the powers and authorities conferred on him as a Manager under this Agreement shall cease. If the Manager shall: (i) at or before the expiration of the 60-day period notify the Members that in his reasonable opinion there is no cause for his removal under the standards set forth in this Section 6.10 or (ii) upon its receipt from the Members of the notice stating he is being removed, notify the Members that in his reasonable opinion he has cured the reason for his proposed removal, then the question of whether the Manager is to be removed shall be referred to an impartial arbitrator mutually agreeable to the Manager and the Members, or, failing such agreement within ten (10) business days, the parties shall apply within fifteen (15) business days -13- to the American Arbitration Association for appointment of an independent arbitrator, who, in either case, shall have had no prior dealings with any Manager or Member. The determination of the arbitrator shall be made within sixty (60) business days of the date upon which he receives the question and shall be final, conclusive and binding upon such Manager and the Members. The costs of the arbitrator shall be borne equally by the Manager and the Members. (c) The removed Manager shall have no further right or obligation to bind or manage the Company. Otherwise, the removal of the Manager shall not affect any existing rights or obligations of such Manager with respect to the Company, including such Manager's right to exoneration and indemnification under Section 6.7 for acts or omissions prior to the date of his removal, or to his interest, if any, as a Member in the Company's capital, distributions, income, gains, losses and deductions. 6.11 Vacancies of Managers. Any vacancy occurring for any reason in the number of Managers may be filled by the vote or written consent of at least a majority of the remaining Managers then in office; provided, however, that if there are no remaining Managers, each vacancy shall be filled by the vote or written consent of at least a Majority-in-Interest of the Members. A Manager elected to fill a vacancy shall be elected for the unexpired term of the Manager's predecessor in office and shall hold office until the expiration of such term and until the Manager's successor has been elected and qualified. A Manager chosen to fill a position resulting from an increase in the number of Managers shall hold office until the next annual meeting of Members and until a successor has been elected and qualified. 6.12 Place of Managers' Meetings. Regular and special meetings of the Managers shall be held at any place within or without the State of Delaware which has been designated from time to time by resolution of the Managers or by the affirmative vote of a Majority-in-Interest of all the Members then entitled to vote at a meeting of Members. In the absence of such designation, all meetings shall be held at the principal office of the Company. 6.13 Special Meetings of Managers. Special meetings of the Managers for any purpose or purposes shall be called at any time by any Manager. Notice of such special meetings, unless waived by attendance thereat or by written consent to the holding of the meeting, shall be given by written notice mailed at least ten (10) days before the date of such meeting or be hand delivered or sent by facsimile at least ten (10) days before the date such meeting is to be held. 6.14 Notice of Adjournment. Notice of the time and place of holding an adjourned meeting need not be given to absent Managers if the time and place be fixed at the meeting adjourned. 6.15 Waiver of Notice. The transactions approved or the actions taken at any meeting of the Managers, however called and noticed or wherever held, shall be as valid as though such transactions had been approved or such other actions taken at a meeting duly held after regular call and notice, if (a) a quorum be present, and (b) either before or after the meeting, each of the Managers not present signs a written waiver of notice, or a consent to holding such -14- meeting, or an approval of the minutes thereof. All such waivers, consents or approvals shall be filed with the Company records or made a part of the minutes of the meeting. 6.16 Action by Managers; Quorum; Voting; Action Without a Meeting. (a) A majority of the total number of Managers shall be necessary to constitute a quorum for the transaction of business, except to adjourn as hereinafter provided. Every act or decision done or made by a majority of the Managers present at a meeting duly held at which a quorum is present shall be regarded as the act of the Company, unless a greater number be required by the Act. The Managers present at a duly called or held meeting at which a quorum is present may continue to do business until adjournment, notwithstanding the withdrawal of enough Managers to have less than a quorum. (b) Each Manager shall have one vote. Any action which under any provision of this Agreement may be taken at a meeting of the Managers may be taken without a meeting if authorized by a writing signed by a majority of Managers who would be entitled to vote upon such action at a meeting, unless the Agreement requires such action to be taken by the unanimous vote of all of the Managers, in which case such writing shall be signed by all of the Managers who would be entitled to vote upon such action at a meeting, in each case filed with the records of the Company. 6.17 Meetings by Telephone. Managers, or any committee designated by the Managers, may participate in a meeting of the Managers by means of conference telephone or similar communications equipment, by means of which all persons participating in the meeting can hear one another, and such participation in a meeting shall constitute presence in person at the meeting. 6.18 Adjournment. A majority of the Managers present may adjourn any Managers' meeting to meet again at a stated day and hour or until the time fixed for the next regular meeting of the Managers. 6.19 Committees of the Managers. The Managers, by resolution, may designate from among the Managers one or more committees, each of which shall comprise one or more of the Managers, and may designate one or more of the Managers as alternate members of any committee, who may, subject to any limitations imposed by the Managers, replace absent or disqualified Managers at any meeting of that committee. Any such committee, to the extent provided in such resolution, shall have and may exercise all of the authority of the Managers, subject to the restrictions contained in the Act and hereunder. ARTICLE VII MEETINGS OF MEMBERS -15- 7.1 Meetings. Meetings of the Members, for any purpose or purposes, may be called by any Manager or any Member holding not less than twenty percent (20%) of the Members' Interests. 7.2 Place of Meetings. Meetings of the Members may be held at any place, within or outside the State of Delaware, for any meeting of the Members designated in any notice of such meeting. If no such designation is made, the place of any such meeting shall be the principal office of the Company. 7.3 Notice of Meetings. Written notice stating the place, day and hour of the meeting indicating that it is being issued by or at the direction of the person or persons calling the meeting, stating the purpose or purposes for which the meeting is called shall be delivered no fewer than ten (10) nor more than sixty (60) days before the date of the meeting. 7.4 Record Date. For the purpose of determining the Members entitled to notice of or to vote at any meeting of Members or any adjournment of such meeting, or Members entitled to receive payment of any distribution, or to make a determination of Members for any other purpose, the date on which notice of the meeting is mailed or the date on which the resolution declaring a distribution is adopted, as the case may be, shall be the record date for making such a determination. When a determination of Members entitled to vote at any meeting of Members has been made pursuant to this Section, the determination shall apply to any adjournment of the meeting. 7.5 Quorum. Members holding not less than a majority of all Members' Interests, represented in person or by proxy, shall constitute a quorum at any meeting of Members. In the absence of a quorum at any meeting of Members, a majority of the Members' Interests so represented may adjourn the meeting from time to time for a period not to exceed sixty (60) days without further notice. However, if the adjournment is for more than sixty (60) days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each Member of record entitled to vote at such meeting. At an adjourned meeting at which a quorum shall be present or represented, any business may be transacted that might have been transacted at the meeting as originally noticed. The Members present at a meeting may continue to transact business until adjournment, notwithstanding the withdrawal during the meeting of Members' Interests whose absence results in less than a quorum being present. 7.6 Manner of Acting. If a quorum is present at any meeting, the vote or written consent of Members holding not less than a majority of Members' Interests shall be the act of the Members, unless the vote of a greater or less proportion or number is otherwise required by the Act or this Agreement. -16- 7.7 Proxies. (a) A Member may vote in person or by proxy executed in writing by the Member or by a duly authorized attorney-in-fact. (b) Every proxy must be signed by the Member or his attorney-in-fact. No proxy shall be valid after the expiration of eleven (11) months from the date thereof unless otherwise provided in the proxy. Every proxy shall be revocable at the pleasure of the Member executing it, except as otherwise provided in this Section. (c) The authority of the holder of a proxy to act shall not be revoked by the incompetence or death of the Member who executed the proxy unless, before the authority is exercised, written notice of an adjudication of such incompetence or of such death is received by any Manager. (d) Except when other provision shall have been made by written agreement between the parties, the record holder of a Member's Interest which he or it holds as pledgee or otherwise as security or which belong to another, shall issue to the pledgor or to such owner of such Member's Interest, upon demand therefor and payment of necessary expenses thereof, a proxy to vote or take other action thereon. (e) A proxy which is entitled "irrevocable proxy" and which states that it is irrevocable, is irrevocable when it is held by (i) a pledgee, (ii) a Person who has purchased or agreed to purchase the shares, (iii) a creditor or creditors of the corporation who extend or continue credit to the corporation in consideration of the proxy if the proxy states that it was given in consideration of such extension or continuation of credit, the amount thereof, and the name of the person extending or continuing credit, (iv) a Person who has contracted to perform services for the Company, if a proxy is required by the contract of employment, if the proxy states that it was given in consideration of such contract of employment, the name of the employee and the period of employment contracted for, or (v) a nominee of any of the Persons described in clauses (i)-(iv) of this sentence. (f) Notwithstanding a provision in a proxy described in Section 7.7(e)(i), (iii) or (iv) stating that it is irrevocable, the proxy becomes revocable after the pledge is redeemed, or the debt of the Company is paid, or the period of employment provided for in the contract of employment has terminated and, in a case provided for in Section 7.7(e)(iii) or (iv) of this Agreement, becomes revocable three (3) years after the date of the proxy or at the end of the period, if any, specified therein, whichever period is less, unless the period of irrevocability is renewed from time to time by the execution of a new irrevocable proxy as provided in this Section 7.7. This paragraph does not affect the duration of a proxy under paragraph (b) of this Section 7.7. (g) A proxy may be revoked, notwithstanding a provision making it irrevocable, by a purchaser of a Member's Interest without knowledge of the existence of such proxy. -17- 7.8 Action by Members Without a Meeting. (a) Whenever the Members of the Company are required or permitted to take any action by vote, such action may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken shall be signed by the Members who hold the voting interests having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all of the Members entitled to vote therein were present and voted and shall be delivered to the office of the Company, its principal place of business or a Manager, employee or agent of the Company. (b) Every written consent shall bear the date of signature of each Member who signs the consent, and no written consent shall be effective to take the action referred to therein unless, within sixty (60) days of the earliest dated consent delivered in the manner required by this Section to the Company, written consents signed by a sufficient number of Members to take the action are delivered to the office of the Company, its principal place of business or a Manager, employee or agent of the Company having custody of the records of the Company. (c) Prompt notice of the taking of the action without a meeting by less than unanimous written consent shall be given to each Member who has not consented in writing but who would have been entitled to vote thereon had such action been taken at a meeting. 7.9 Waiver of Notice. Notice of a meeting need not be given to any Member who submits a signed waiver of notice, in person or by proxy, whether before or after the meeting. The attendance of any Member at a meeting, in person or by proxy, without protesting prior to the conclusion of the meeting the lack of notice of such meeting, shall constitute a waiver of notice by him. 7.10 Voting Agreements. An agreement between two or more Members, if in writing and signed by the parties thereto, may provide that in exercising any voting rights, the Members' Interest held by them shall be voted as therein provided, or as they may agree, or as determined in accordance with a procedure agreed upon by them. ARTICLE VIII TRANSFERS OF COMPANY INTERESTS 8.1 Investment Representation. (a) Each Member represents and warrants that it is acquiring its Interest for its own account for investment purposes only and not with a view to the distribution or resale thereof, in whole or in part. -18- (b) Each Member agrees that he will not sell, assign or otherwise transfer his Interest or any fraction thereof to any Person who does not similarly represent and warrant and similarly agree not to sell, assign or transfer such Interest or fraction thereof to any Person who does not similarly represent and warrant and agree. 8.2 Assignment by Members. Except as otherwise expressly provided in this Section 8.2, a Member shall not sell, assign, transfer or encumber all or any part of his Interest to any other Person, whether or not a Member, unless the assignment is effected by substitution of the assignee as a Member in compliance with the following conditions: (a) the assignment shall be set forth in a written instrument in the form and substance acceptable to legal counsel to the Company which (i) states that the assignee desires to be substituted as a Member and accepts and adopts all of the terms and provisions of this Agreement, and (ii) provides for the payment by the parties to the assignment of all reasonable expenses incurred by the Company in connection with the substitution, including, but not limited to, the cost of obtaining opinions of legal counsel, preparing the necessary amendment to this Agreement, the filing of an amendment to the Certificate of Formation, if required, and all legal fees in connection with any of the foregoing; (b) a majority of the Managers that are also Members shall consent to the assignment, which any Manager/Member may refuse to do with or without cause; and (c) if requested by the Managers, the Company shall obtain an opinion of legal counsel acceptable to the Managers, or shall require the parties to the assignment to provide to the Company an opinion of legal counsel acceptable to the Managers, to the effect that (i) the assignment is exempt from registration and qualification under the Securities Act of 1933, as amended, and all applicable state securities laws and (ii) the assignment will not cause a termination of the Company for Federal income tax purposes. 8.3 Void Transfers; Effective Date. (a) Assignment of a Member's Interest to a minor or person adjudged insane or incompetent is prohibited (unless by will or intestate succession), and consent of the Managers to any such assignment shall be void and of no effect. (b) Any purported assignment of a Member's Interest otherwise than by way of substitution in accordance with this Article VIII shall be of no effect as between the Company and the purported assignee and shall be unenforceable as against the Company and the Members or the Managers. The Managers shall not be charged with actual or constructive notice of any such purported assignment and are expressly prohibited from making allocations and distributions under this Agreement in accordance with any such purported assignment. (c) Any substitution of Members shall (unless otherwise agreed by the Managers or required by law) become effective for all purposes as of the first day of the month in which all the conditions of the substitution have been satisfied. Any Person substituted as a -19- Member pursuant to Section 8.2 shall (except as otherwise expressly provided in this Agreement) be a Member for all purposes of this Agreement to the extent of the Interest acquired by that Person. ARTICLE IX ACCOUNTING AND RECORDS; CERTAIN TAX MATTERS 9.1 Books and Records. The Managers shall keep at the Company's principal office separate books of account for the Company which shall show a true and accurate record of all costs and expenses incurred, all charges made, all credits made and received and all income derived in connection with the operation of the Company business in accordance with generally accepted accounting principles consistently applied. Each Member shall, at its sole expense, have the right, upon reasonable notice to the Managers, to examine, copy and audit the Company's books and records during normal business hours. 9.2 Reports. The Managers, at the expense of the Company, shall cause to be prepared and distributed to the Members within 90 days after the expiration of each Fiscal Year, a balance sheet and profit and loss statement prepared by the Accountants. 9.3 Tax Returns. The Managers shall cause the Accountants to prepare all income and other tax returns of the Company to be filed not later than the date when such filings are required by law. The Managers shall furnish to each Member a copy of each such return as soon as it has been filed, together with any schedules or other information which each Member may require in connection with such Member's own tax affairs. Each of the Members shall, in its respective income tax return and other statements filed with the Internal Revenue Service or other taxing authority, report taxable income in accordance with the provisions of this Agreement. 9.4 Section 754 Election. In connection with any assignment or transfer of an Interest described in Sections 734(b) and 743(b) of the Code and which is permitted by the terms of this Agreement, the Managers shall in their reasonable discretion cause the Company, at the written request of the transferor, the transferee or the successor to such Interest, on behalf of the Company and at the time and in the manner provided in Treasury Regulations Section 1.754-1(b) (or any like statute or regulation then in effect) to make an election to adjust the basis of the Company's property in the manner provided in Section 755 of the Code provided such adjustment increases the basis of Company property, and such transferee shall pay all costs incurred by the Company in connection therewith, including, without limitation, reasonable attorneys' and accountants' fees. 9.5 Tax Matters Partner. The Managers shall designate one Manager as the "Tax Matters Partner" under Code Section 6231(a)(7), with all powers attendant thereto, who shall be authorized and required to represent the Company (at the Company's expense) in -20- connection with all examinations of the Company's affairs by tax authorities, including resulting administrative and judicial proceedings, and to expend Company funds for professional services and costs associated therewith. Each Member agrees to cooperate with the Managers and the Tax Matters Partner and to do or refrain from doing any or all things reasonably required by them to conduct such proceedings. The Managing Member shall be the initial Tax Matters Partner. 9.6 Withholding. If the Managers, in their reasonable judgment, determine that the Code requires the Company to withhold any tax with respect to a Member's distributive share of Company income, gain, loss, deduction or credit, distributions of Available Cash Flow, or liquidating distributions, the Managers shall cause the Company to withhold and pay the tax. Notwithstanding the foregoing, the Managers shall not undertake to withhold any such tax unless and until they have received a written opinion of counsel to the Company that such withholding is required. If at any time the amount required to be withheld exceeds the amount that would otherwise be distributed to the Member to whom the withholding requirement applies, that Member shall, as a condition to receiving any further distribution, make an additional Capital Contribution equal to the excess of the amount required to be withheld (and interest and penalties, if applicable) over the amount, if any, that would otherwise be distributed to that Member and which is available to be withheld. Any amount withheld with respect to a Member shall be deducted from the amount that would otherwise be distributed to that Member but shall be treated as though it had been distributed to that Member for all purposes of this Agreement. 9.7 Bank Accounts. The bank accounts of the Company shall be maintained in such banking institutions as the Managers determine and withdrawals shall be made only in the regular course of Company business and as otherwise authorized in this Agreement on such signature or signatures as the Managers may determine. The funds of the Company shall not be commingled with the funds of any other person. ARTICLE X DISSOLUTION AND TERMINATION 10.1 Withdrawal. Except as otherwise provided in this Agreement, no Member shall at any time retire or withdraw from the Company or withdraw any amount out of its Capital Account. Any Member retiring or withdrawing in contravention of this Section 10.1 shall indemnify, defend and hold harmless the Company and all other Members (other than a Member who is, at the time of such withdrawal, in default under this Agreement) from and against any losses, expenses, judgments, fines, settlements or damages suffered or incurred by the Company or any such other Member arising out of or resulting from such retirement or withdrawal. 10.2 Dissolution. The Company shall be dissolved and its business wound-up upon the earliest to occur of: -21- (i) the expiration of the term; (ii) the Managers and a Majority-in-Interest of the Members determine that the Company should be dissolved; (iii) the Bankruptcy of the Company; (iv) the Bankruptcy, dissolution, death, incapacity or withdrawal of any Manager that is also a Member or the occurrence of any other event that terminates the continued membership of any such Manager, unless within one hundred eighty (180) days after such event the Company is continued by the consent of a Majority-in-Interest of all of the remaining Members; and (v) the sale or other disposition of all or substantially all of the Company's assets. Except as otherwise set forth herein, upon the dissolution of the Company, the Managers shall take all actions deemed necessary or appropriate in their sole discretion to windup the business affairs of the Company. 10.3 Distribution Upon Liquidation of the Company. Any proceeds received by the Company in connection with the liquidation of the Company, or other distributions made on liquidation (including distributions of securities of DI), shall be distributed (after giving effect to all charges and credits to Capital Accounts resulting from allocations and prior distributions) as follows and in the following order or priority: (a) first, to the payment of debts and liabilities of the Company to the extent required (including all expenses of the Company incident to any such liquidation of the Company, other than loans or other debts and liabilities of the Company due to any Member or any Affiliate of any Member); (b) second, to the setting up of any reserves which the Managers deem reasonably necessary for contingent, unmatured or unforeseen liabilities or obligations of the Company; (c) third, to the repayment of any unrepaid loans theretofore made by any Member or any Affiliate of any Member to the Company for Company obligations, and to the payment of any other debts and liabilities of the Company to any Member or any Affiliate of any Member; (d) fourth, to the Members with positive Capital Accounts in an amount equal to and in accordance with their Capital Account balances, until such balances have been reduced to zero; and (e) fifth, to the Members pro-rata in accordance with their Interests. -22- For the purposes hereof, securities of DI distributed to the Members shall be valued in accordance with Article XII hereof. 10.4 Capital Account Deficits. If any Member has a deficit balance in its Capital Account following the liquidation of its Interest, as determined after taking into account all adjustments to such Capital Account for the Fiscal Year of the Company during which such liquidation occurs (other than those made pursuant to this Section 10.4), such Member shall have no obligation to make any Capital Contribution, and the negative balance of any Capital Account shall not be considered a debt owed by the Member to the Company or to any other Person for any purpose. 10.5 Certificate of Cancellation. Following the dissolution of the Company, or at any time there are less than two Members, the Managers shall file a Certificate of Cancellation with the Secretary of State of Delaware pursuant to the Act. ARTICLE XI AMENDMENTS 11.1 Amendments Adopted Solely by the Managers. The Managers may, without the consent of any Member, amend any provision of this Agreement and execute whatever documents may be required in connection therewith to reflect: (a) a change in the name of the Company or the location of the principal place of business of the Company; (b) the admission of a substituted Member in accordance with this Agreement; (c) a change which is necessary to qualify the Company under the laws of any jurisdiction or which is necessary and advisable in the opinion of the Managers to assure that the Company will not be treated as an association taxable as a corporation and not as a limited liability company; (d) a change of address of any Member; or (e) any other amendment which is ministerial or similar to the foregoing. 11.2 Amendments to be Adopted by Managers and Members. All amendments to this Agreement shall be in writing and, except as provided in Section 11.1, shall be approved by the Managers and by a Majority-in-Interest of the Members, unless a greater vote or the specific approval of a Member is required by this Agreement, in which case such greater vote or specific consent shall be required. -23- ARTICLE XII VALUATION OF SECURITIES OF DI 12.1 Normal Valuation. For the purposes of this Agreement, the value of any security of DI as of the date of distribution to the Members (or, in the event such date is a holiday or other day which is not a business day, as of the next preceding business day) will be determined as follows: (a) a security which is listed on a recognized securities exchange or the National Market System will be valued at its last sales price or, if no sale occurred on such date, at the last "bid" price; and (b) a security which is traded over-the-counter (other than on the National Market System) will be valued at the most recent "bid" price; and (c) all other securities will be valued on such date by the Managing Member at fair market value in such manner as it may reasonably determine. 12.2 Legal Restrictions on Transfer. Any security which is held under a representation that it has been acquired for investment and not with a view to public sale or distribution, or which is held subject to any other legal restrictions, will be valued at such discount, if any, from the value determined under 12.1 above as the Managing Member deems reasonably necessary in its sole discretion to reflect properly the effect of such legal restriction on the marketability of such security. 12.3 Objection to Valuation. If a Majority-in-Interest of the Members object to the valuation of any security, the Managing Member will (at the Company's expense) cause an independent securities expert (mutually acceptable to the Managing Member and a Majority-in-Interest of the Members), to review such valuation, and such expert's determination will be binding on the parties. ARTICLE XIII MISCELLANEOUS 13.1 Notices. All notices required or permitted by this Agreement shall be in writing and may be delivered by hand to the party to be served or may be sent by registered or certified mail, with postage prepaid, return receipt requested, or may be transmitted by overnight courier service, and addressed in the case of the Company to 32 Loockerman Square, Suite L-100, Dover, Delaware 19904, with a copy to William R. Ziegler, Esq., Parson & Brown, 666 Third Avenue, New York, New York 10017, and in the case of the Members as set forth on Schedule A hereto, or to such other address as shall from time to time be supplied in writing by -24- any party to the other. Notice sent by registered or certified mail, post-paid, with return receipt requested, addressed as above provided, shall be deemed given four (4) days after deposit of same in the United States mail. Any notice or other document sent or delivered in any other manner shall be effective only if and when received. 13.2 Successors and Assigns. Subject to the restrictions on transfer set forth herein, this Agreement shall bind and inure to the benefit of the parties hereto and their respective legal representatives, successors and assigns. 13.3 No Oral Modifications; Amendments. No oral amendment of this Agreement shall be binding on the Members or the Company. Unless otherwise set forth hereunder, any modification or amendment of this Agreement must be in writing signed by all of the Members. 13.4 Captions. Any article, section or paragraph titles or captions contained in this Agreement and the table of contents are for convenience of reference only and shall not be deemed a part of this Agreement. 13.5 Terms. Common nouns and pronouns shall be deemed to refer to the masculine, feminine, neuter, singular and plural, as the identity of the Person may in the context require. Any references to the Code or other statutes or laws shall include all amendments, modifications or replacements of the specific sections and provisions concerned. 13.6 Invalidity. If any provision of this Agreement shall be held invalid, it shall not affect in any respect whatsoever the validity of the remainder of this Agreement. 13.7 Further Assurances. The parties hereto agree that they will cooperate with each other and will execute and deliver or cause to be delivered, all such other instruments, and will take all such other actions, as either party hereto may reasonably request from time to time in order to effectuate the provisions and purposes hereof. 13.8 Complete Agreement. This Agreement constitutes the complete and exclusive statement of the agreement between the Members. It supersedes all prior written and oral statements and no representation, statement, condition or warranty not contained in this Agreement shall be binding on the Members or have any force or effect whatsoever. 13.9 Attorneys' Fees. If any proceeding is brought by one Member against one or more of the other Members to enforce, or for breach of, any of the provisions in this Agreement, the prevailing Member(s) shall be entitled in such proceeding to recover reasonable attorneys' fees together with the costs of such proceeding therein incurred. 13.10 Governing Law. This Agreement shall be construed and enforced in accordance with the laws of the State of Delaware. -25- 13.11 No Third Party Beneficiary. Any agreement to pay any amount and any assumption of liability herein contained, express or implied, shall be only for the benefit of the Members and their respective heirs, successors and assigns, and such agreements and assumption shall not inure to the benefit of the obligees of any indebtedness or any other Person, whomsoever, it being the intention of the Members that no one shall be deemed to be a third party beneficiary of this Agreement. 13.12 Exhibits and Schedules. Each of the Exhibits and Schedules attached hereto are hereby incorporated herein and made a part hereof for all purposes, and references herein thereto shall be deemed to include this reference and incorporation. 13.13 References to this Agreement. Numbered or lettered articles, sections and subsections herein contained refer to articles, sections and subsections, respectively, of this Agreement unless otherwise expressly stated. The words "herein," "hereof," "hereunder," "hereby," "this Agreement" and other similar references shall be construed to mean and include this Agreement and all amendments thereof and supplements thereto unless the context shall clearly indicate or require otherwise. 13.14 Power of Attorney. (a) Each of the Members and each successor or assign thereof irrevocably constitutes and appoints each Manager his true and lawful attorney, in his name, place and stead, to make, execute, acknowledge, swear to and file any of the following documents: (i) any modifications or amendments of this Agreement as required under the laws of the State of Delaware or any other state; (ii) any modifications or amendments of the Certificate of Formation or other instrument which may be required to be filed by the Company under the laws of the State of Delaware or any other state; (iii) a certificate of fictitious name for the Company; (iv) any other instrument which may be required to be filed by the Company under the laws of any state or government or by any governmental agency, or which the Managers deem it advisable to file; and (v) any documents which may be required to effect the continuation of the Company, the admission of an additional or substituted Member or the dissolution and termination of the Company, provided such continuation, admission or dissolution and termination are in accordance with the terms of this Agreement. (b) The within and foregoing power of attorney: -26- (i) is a special power of attorney coupled with an interest and is irrevocable; and (ii) may be exercised by any Manager for each Member by listing all of the Members executing any instrument with a single signature of the Manager acting as attorney-in-fact for all of them. (c) Pursuant to the power of attorney hereinabove granted by each Member to each Manager with the execution of this Agreement, as hereinabove described, each Member authorizes said attorney to take any further action which said attorney shall consider necessary or convenient in connection with any of the foregoing, hereby giving said attorney full power and authority to do and perform each and every act and thing whatsoever requisite and necessary to be done in and about the foregoing as fully as said Member might or could do if personally present, and hereby ratifying and confirming all that said attorney shall lawfully do or cause to be done by virtue hereof. 13.15 Reliance on Authority of Person Signing Agreement. If a Member is a trust (with or without disclosed beneficiaries), general partnership, limited partnership, limited liability company, estate, corporation, or any entity other than a natural person, the Company and the Members shall: (a) not be required to determine the authority of the person signing this Agreement to make any commitment or undertaking on behalf of such entity or to determine any fact or circumstance bearing upon the existence of the authority of such entity or to determine any fact or circumstance bearing upon the existence of the authority of such person; (b) not be required to see to the application or distribution of proceeds paid or credited to persons signing this Agreement on behalf of such entity; (c) be entitled to rely on the authority of the person signing this Agreement with respect to the voting of the Interest of such entity and with respect to the giving of consent on behalf of such entity in connection with any matter for which consent is permitted or required under this Agreement; and (d) be entitled to rely upon the authority of any general partner, joint partner, or successor trustee, or president or vice president, as the case may be, of any such entity the same as if such person were the person originally signing this Agreement on behalf of such entity. 13.16 Consents and Approvals. Whenever the consent or approval of a Member is required by this Agreement, such Member shall have the right to give or withhold such consent or approval in his or its sole discretion, unless otherwise specified. 13.17 DI Common Stock. Each of the Members agrees, so long as he is a Member, not to establish or maintain a short position in the Common Stock of DI. -27- IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date and year first written above. MANAGING MEMBER: SOMERSET CAPITAL PARTNERS By: /s/ William R. Ziegler ------------------------- Name: William R. Ziegler Title: Partner -28- Form of Investor Member Signature Page INVESTOR MEMBER: ---------------------------- (Signature of Investor) ---------------------------- (Please print name) ---------------------------- (Number of Interests) Residence Address of Investor (please Mailing Address if different from print): residence address (please print): - ---------------------------------- ------------------------------------- (Street) (Street) - ---------------------------------- ------------------------------------- (City) (State) (Zip Code) (City) (State) (Zip Code) - ---------------------------------- ------------------------------------- (Telephone Number) (Telephone Number) -29- EX-99 4 EXHIBIT IX EXHIBIT IX SHAREHOLDERS' AGREEMENT THIS SHAREHOLDERS' AGREEMENT (Agreement) is entered into by Orkla AS (Orkla), a company organized under the laws of Norway and Norex America, Inc. (NXA), a company organized under the laws of the Cayman Islands. WITNESSETH: WHEREAS, Orkla is the owner of 1,415,200 shares of Norex America, Inc . common stock, $1.00 par value per share (NXA Shares); and WHEREAS, NXA is the owner of: (1) an 8.5% Unsecured Exchangeable Note Due 1996 Dated August 27, 1993 issued by Zapata Corporation with a remaining outstanding balance of $4,795,814.13 (Zapata Note); (2) 13% Senior Secured Notes Due 2003 issued by Kloster Cruise Limited (Kloster) with a face value of $1,335,000 (KCL Notes) with accrued interest through the Closing Date, which date is hereinafter defined, payable to NXA within five days of receipt of payment from Kloster; (3) 290,000 shares of Wilrig AS, NOK30 par value per share or the equivalent in Transocean AS shares (Wilrig Shares); (4) 8,300,000 share of DI Industries, Inc. common stock, $0.10 par value per share (DI Shares); and (5) $3,693,784.87 net receivables due from Engelburn Investments, Inc. (Engelburn Receivables) secured by a second ship mortgage on the MT Saraband (Vessel); and WHEREAS, Orkla desires to contribute the NXA Shares to Prosperity Investments, Inc. (Prosperity) in exchange (1) for capital of $2,000,000 as represented by 800 shares of Prosperity common stock, or a 44.44% interest in the issued and outstanding shares of Prosperity, $l.00 par value per share, and paid-in capital, (2) $13,000,000 cash and (3) a $7,500,000 Note issued by Pronor Holdings Limited (Pronor), a wholly-owned subsidiary of Prosperity, bearing interest at 8% p. a., with a single payment of principal and accrued interest due one year from the date of issue (Pronor Note) with the Pronor Note secured with first priority by the (1) Wilrig Shares, (2) the DI Shares and (3) the Engelburn Receivables all of which shall be owned by Pronor, with no recourse to Prosperity; and WHEREAS, NXA desires to contribute (1) $3,700,000 cash, (2) Zapata Note, (3) KCL Notes, (4) Wilrig Shares, (5) DI Shares and (6) Engelburn Receivables to Prosperity in exchange (1) for capital of $2,000,000 as represented by 800 shares of Prosperity common stock, or a 44.44% interest in the issued and outstanding shares of Prosperity, $1.00 par value per share, and paid-in capital and (2) a $15,700,000 Note issued by Prosperity, bearing interest at 8% p. a., with interest deferred and added to principal outstanding at the end of each twelve month period with a single payment of principal and deferred and accrued interest due 39 months from the date of issue (Prosperity Note) and secured by a second lien over the assets of Prosperity; and WHEREAS, Orkla and NXA both desire to add one or more shareholders who will contribute a total $500,000 cash in exchange for a total capital of $500,000 as represented by 200 shares of Prosperity common stock, or an 11.11% interest in the issued and outstanding shares of Prosperity, $1.00 par value per share, and paid-in capital; however, Orkla and NXA recognize that the additional shareholder(s) may not be identified as of the Closing Date and, consequently, the 44.44% interest to be acquired by each of Orkla and NXA as mentioned hereinabove will temporarily comprise and constitute 50.0% interest to be held by each of Orkla and NXA; and NOW THEREFORE, in consideration of the premises and mutual covenants herein contained, Orkla and NXA hereby agree as follows: I. SHAREHOLDER EXCHANGE 1.1 Exchange Based upon the representations, warranties and agreements of Orkla and NXA herein contained, and on the terms and subject to the conditions set forth in this Agreement, on the Closing Date, Orkla hereby agrees to contribute, assign, transfer and deliver to Prosperity the NXA Shares at a value of $15.90 per share which value is agreed to by Orkla and NXA in exchange for (a) a 44.44% interest in the issued and outstanding shares of Prosperity, (b) $13,000,000 cash and (c) the Pronor Note, and NXA agrees to contribute, assign, transfer and deliver to Prosperity (a) $3,700,000 cash, (b) Zapata Note valued at par, (c) KCL Notes valued at $750 per $1,000 par value of bonds, (d) Wilrig Shares valued at $3,000,000, (e) DI Shares valued at $4,150,000 and (f) Engelburn Receivables valued at $1,050,000 each of which values are agreed to by Orkla and NXA in exchange for (a) a 44.44% interest in the issued and outstanding shares of Prosperity and (b) the Prosperity Note. NXA hereby represents and warrants that the balance sheets of Prosperity and Pronor shall, as at the Closing Date, be as set out in the balance sheets appended as Exhibit I hereto and that there are no other liabilities, whether actual or contingent, in either company other than as disclosed therein. 1.2 Delivery The parties hereto hereby agree that these actions set out herein shall be consummated through NordlandsBanken AS of Oslo acting as escrow agent (the "Escrow Agent") to the parties. The following deliveries shall be made on the Closing Date: a) From Orkla to the Escrow Agent to the order of Prosperity: (i) The NXA Shares, transfer instructions in favor of Prosperity and notification to DnB that the NXA Shares are blocked in favor of the Escrow Agent. b) From NXA to the Escrow Agent to the order of Prosperity: (i) $3,700,000 in cash. - 2 - (ii) A share certificate representing 18,730,105 shares of DI Industries, Inc. together with stock power and instructions to the Escrow Agent to arrange for the issuance of two new share certificates in registered form in exchange thereof, one of which to represent the DI Shares in the name of Pronor. c) From Prosperity to the Escrow Agent to the order of Orkla: (i) $13,000,000 to be transferred to a blocked account with the Escrow Agent, to be released at the option of Orkla against delivery of the NXA Shares. Prosperity shall pay interest on any unpaid amount from 9 October, 1995 until payment is made at a rate of 8% p.a. for a period of 10 days. Thereafter the interest rate shall increase to 12% p.a. until all amounts and accrued interest are paid. The following deliveries shall be made on the Closing Date or at least on the 10th business day thereafter: a) From NXA to the Escrow Agent to the order of Prosperity: (i) The Zapata Note duly endorsed for transfer to Prosperity together with notice of assignment and satisfactory evidence of delivery of the notice. (ii) The KCL Notes duly endorsed for transfer to Prosperity together with notice of assignment and satisfactory evidence of delivery of the notice. b) From NXA to the Escrow Agent to the order of Pronor: (i) Transfer instructions in favor of Pronor in respect of the Wilrig Shares together with notification to DnB that the account to which the shares are credited has been blocked in favor of the Escrow Agent. (ii) The Engelburn Receivables duly endorsed for transfer to Pronor together with assignment agreement, notice of assignment, acknowledgment from Engelburn and a second priority ship mortgage deed in the amount of $53,683,785 duly recorded against the Vessel, as security for the Pronor Note. c) From Prosperity to the Escrow Agent to the order of Orkla: (i) Share certificate representing 800 Prosperity Shares in registered form. d) From Pronor to the Escrow Agent to the order of Orkla: - 3 - (i) $7,500,000 Pronor Note. (ii) Evidence that a first priority pledge over the Wilrig Shares securing the Pronor Note has been recorded with VPS. (iii) A share certificate in respect of the DI Shares endorsed for transfer in blank together with the pledge agreement, irrevocable proxy and stock power as security for the Pronor Note. (iv) The Engelburn Receivables duly endorsed for transfer to Orkla together with assignment agreement, notice of assignment, acknowledgment from Engelburn and a second priority ship mortgage deed in the amount of $3,683,785 duly recorded against the Vessel as security for the Pronor Note. e) From Prosperity to the Escrow Agent to the order of NXA: (i) 800 Prosperity Shares in registered form. (ii) $15,700,000 subordinated Prosperity Note, together with the assignment agreement and notices. If either party has not fulfilled its obligations hereunder by the date falling due 30 business days after the Closing Date, the non-defaulting party may terminate the shareholders' agreement and instruct the Escrow Agent to release and return the documents and sums held in escrow to the owners thereof. II. REPRESENTATIONS AND WARRANTIES OF ORKLA Orkla hereby warrants and represents to and agrees with NXA as follows: 2.1 Lawful Owner On the Closing Date, Orkla will be the lawful owner of the NXA Shares with full right, power and authority to contribute, assign, transfer and deliver the NXA Shares, free and clear of any and all security interests, encumbrances and adverse claims, all pursuant to the provisions of this Agreement, and by so contributing and transferring the NXA Shares, Orkla will not be in violation of any contractual or other commitment to any person or entity whatsoever. All of the NXA Shares will on the Closing Date be duly authorized, validly issued and outstanding, fully paid and nonassessable. 2.2 Valid Agreement This Agreement has been duly executed and delivered by Orkla and constitutes a valid, legal and binding obligation of Orkla, enforceable in accordance with its terms. - 4 - III. REPRESENTATIONS AND WARRANTIES OF NXA NXA hereby warrants and represents to and agrees with Orkla as follows: 3.1 Lawful Owner On the Closing Date, NXA will be the lawful owner of the Notes and Shares with full right, power and authority to contribute, assign, transfer and deliver the Notes and Shares, free and clear of any and all security interests, encumbrances and adverse claims, all pursuant to the provisions of this Agreement, and by so contributing and transferring the Notes and Shares, NXA will not be in violation of any contractual or other commitment to any person or entity whatsoever. All of the Wilrig Shares and DI Shares will on the Closing Date be duly authorized, validly issued and outstanding, fully paid and nonassessable. 3.2 Valid Agreement This Agreement has been duly executed and delivered by NXA and constitutes a valid, legal and binding obligation of NXA, enforceable in accordance with its terms. IV. PRONOR NOTE 4.1. Payment The rights of Orkla as holder of the Pronor Note preempt those of Prosperity, with an exception as noted in 4.2 below, only to the extent that the Pronor Note and related accrued interest remain outstanding after maturity. Upon full and complete payment of the Pronor Note and related accrued interest at maturity by either cash payment or transfer of assets, Orkla and NXA have agreed that Pronor shall be liquidated commencing upon the date of maturity of the Pronor Note and all rights to the remaining assets, if any, shall be distributed to Prosperity. 4.2 Engelburn Revolving Credit A noninterest-bearing revolving credit line (Prosperity Revolver) will be provided by Prosperity to Pronor and by Pronor to Engelburn. The purpose of the Prosperity Revolver is to maintain the commercial value of the Vessel until the time of its sale. Orkla and NXA recognize that efforts are presently underway to sell the Vessel as soon as possible at a reasonable price and the progress of such efforts will be provided from time to time or as requested. The outstanding balance of drawdowns under the Prosperity Revolver will be limited to a maximum of $1,700,000 subject always to availability under a $11,000,000 Revolving Credit Facility to be provided to Prosperity by NordlandsBanken AS of Norway. The Prosperity Revolver will have a senior claim over that of the Pronor Note with respect to the Engelburn Receivables which senior claim will be limited to a maximum outstanding balance of drawdowns of $1,200,000 and the remaining balance of drawdowns, if any, will be unsecured. - 5 - 4.3 Sale or Transfer of Assets at Maturity At maturity of the Pronor Note, Orkla holds the right to sell for cash or to transfer to its designated account the assets of Pronor, provided, however, that Orkla must deliver written notice of its intent to sell (Notice of Intent to Sell) to NXA and identify the price or prices agreed. If within seven days of the date of delivery of the Notice of Intent to Sell, NA delivers written notice of its intent to purchase all or certain of the assets (Notice of Intent to Purchase) at the price or prices identified in the Notice of Intent to Sell, then Orkla agrees to sell to NXA and NXA agrees to buy from Orkla and NXA will cause the transfer of payment to be made within three business days from the date of delivery of the Notice of Intent to Purchase to an account designated by Orkla. 4.4 Sale or Transfer of Assets Prior to Maturity Prior to the maturity of the Pronor Note, the sale, transfer or disposition of assets of Pronor can only be accomplished with the agreement of each of the directors representing Orkla and NXA. 4.5 DI Shares NXA agrees that, if it decides to sell certain of its remaining holdings in DI Industries Shares after the contribution of such shares mentioned above, it will deliver written notice to Orkla of its intent to sell and, if Orkla so decides, permit Pronor to participate in the sale or sales of DI Shares up to and including an equal number of shares. 4.6 Prepayment of Pronor Note All cash received from asset sales or dividends will be used to prepay the Pronor Note with the exception, however, that cash from the liquidation of the Engelburn Receivables will first be used to repay the outstanding balance under the Prosperity Revolver, if any, to an amount not to exceed $1,200,000. V. PROSPERITY NOTE 5.1 Payment The rights of NXA as holder of the Prosperity Note preempt those of shareholders of Prosperity only to the extent that the Prosperity Note and related accrued interest remain outstanding after maturity. Upon full and complete payment of the Prosperity Note and related accrued interest at maturity by either cash payment or transfer of assets, Orkla and NXA have agreed that Prosperity shall be liquidated commencing upon the date of maturity of the Prosperity Note, and all rights to the remaining assets shall be distributed to the shareholders of Prosperity. - 6 - 5.2 Conversion Option NXA may convert, at its option, an amount of the Prosperity Note at par into Prosperity Shares provided that (a) the amount to be converted shall not exceed $4,500,000 (which is equal to 1,800 Prosperity Shares), and (b) the conversion option shall be exercised prior to the third anniversary date of the Closing Date. 5.3 Sale, Transfer or Redemption of NXA Shares Sales of NXA Shares to shareholders of Prosperity or related persons or entities are prohibited unless agreed to by each of the directors representing Orkla's and NXA's interests. If the NXA Shares are not sold prior to the maturity of the Prosperity Note, the NXA Shares which are redeemed or transferred for purposes of payment of the Prosperity Note and related accrued interest will be valued as the sum of (1) 50% of the average closing price per share of NXA shares for the twenty business days immediately preceding the date of transfer or redemption as quoted on the American Stock Exchange and (2) 50% of the book value per share as determined from the most recent released balance sheet of NXA. VI. NEW INVESTMENTS Orkla and NXA agree to consider investment opportunities which are presented to the Board of Directors. Any decision by the Board of Directors to authorize any officer or other designee to act on behalf of Prosperity for the purpose of entering into, committing and executing an agreement must, at a minimum, be approved by each of the four directors representing Orkla and NXA. VII. VOTING OF EQUITY INVESTMENTS The managing director, after consultation with and consideration of the interests of Orkla and NXA, shall vote on behalf of Prosperity at each shareholder meeting for each equity investment owned by Prosperity. VIII. RELEASE AND SETTLE For and in consideration of this Agreement, Orkla and its successors and assigns hereby release, acquit and discharge NXA and all of its affiliated companies, employees, agents, representatives, successors and assigns of and from any and all possible claims, demands and causes of action up to the date of this agreement. This Agreement constitutes the entire agreement between Orkla and NXA relating to Orkla's holdings in NXA shares and supersedes any and all prior agreements or representations, whether written or oral, all of which are hereby waived. - 7 - IX. PURCHASE OPTION Orkla and NXA have agreed to a purchase option exercisable by NXA whereby upon its exercise, Orkla has agreed to sell, assign, transfer and deliver to NXA and NXA has agreed to purchase, acquire and accept from Orkla a total of 400 shares of Prosperity Shares, or 50% of the interest acquired by Orkla at Closing, in exchange for a payment by NXA in the amount of $1,100,000 on the first anniversary of the date of Closing or a payment by NXA in the amount of $1,200,000 on the second anniversary of the date of Closing (Purchase Option); provided, however, that such exercise of the Purchase Option is only effective upon delivery of notice of such exercise a minimum of 10 business days prior to the respective anniversary date. X. CLOSING DATE The closing hereunder will take place in Oslo on 11 October 1995 (Closing Date), at which time the delivery of NXA Shares and Notes and Shares, as described in Section 1.2, will occur. XI. MISCELLANEOUS 11.1 Composition of Board of Directors Orkla and NXA agree that they shall be represented on the Board of Directors of Prosperity with two members each and the third shareholder (if any) shall be represented by one member. NXA will be entitled to name one of its Directors as Chairman and to name the managing director. Orkla and NXA agree that they shall be represented on the Board of Directors of Pronor, limited to four directors, with two members each. 11.2 Expenses Each party to this Agreement will pay his or its respective expenses incurred in connection with the performance of this Agreement, and no party shall be entitled to reimbursement therefor from any other party. 11.3 Counterparts This Agreement may be executed in multiple counterparts, each of which shall be deemed to be and have the same force and effect of an original, and all of which when taken together shall constitute and be construed to be a single instrument. 11.4 Choice of Law This Agreement is governed by Norwegian law and Orkla and NXA hereby agree that any dispute arising from or in connection with this Agreement shall be resolved by arbitration in Oslo pursuant to Chapter 32 of the Norwegian Civil Procedure Act. - 8 - IN WITNESS WHEREOF, Orkla and NXA have caused this Agreement to be executed by their duly authorized officers on the date below written. Orkla AS Norex America, Inc. /s/ Morten Blix /s/ Frank Capstick - ----------------------------- --------------------------------- Morten Blix Frank Capstick, President 11 October 1995 - ----------------------------- Date - 9 - EX-99 5 EXHIBIT X EXHIBIT X NOREX INDUSTRIES INC. P.O. Box HM429, HAMILTON, HMBX, BERMUDA TELEPHONE: +1 1441 293 5 September 1996 Orkla ASA Attn: Mr. Morten Blix Investment Division Lilleakerveien 2 0283 Oslo, Norway Re: NOTICE OF EXERCISE Dear Morten, With reference to the Shareholders' Agreement (the "Agreement") dated 11 October 1995 between Orkla ASA and Norex Industries Inc. defining our relationship as it pertains to Prosperity Investments, Inc. and a purchase option granted therein to Norex Industries by Orkla: PURSUANT TO SECTION 9 OF THE AGREEMENT, NOTICE IS HEREBY GIVEN THAT NOREX INDUSTRIES INC. HAS ELECTED TO EXERCISE SUCH PURCHASE OPTION. Norex Industries will make a payment of the $1,100,00 option price into a bank account specified by Orkla for this purpose seven days from the date first-above written. Please send the wire transfer instructions for the bank account. Thank you. Best regards, /s/ Frank Capstick Frank Capstick, President EX-99 6 EXHIBIT XI EXHIBIT XI STOCK PURCHASE AGREEMENT This Stock Purchase Agreement (the "Agreement") is by and between Norex Industries Inc. ("Buyer"), a Cayman Islands company, and Orkla ASA ("Seller"), a Norwegian company and holder of capital stock of Prosperity Investments, Inc. ("Prosperity"), a British West Indies company. WITNESSETH: WHEREAS, the authorized capital stock of Prosperity consists of 1,800 shares of capital stock, $1.00 par value (the "Prosperity Stock"), of which 1,700 shares are issued and outstanding; and WHEREAS, Seller owns a total of 800 shares of Prosperity Stock; and WHEREAS, Buyer has given due notice of the exercise of an option under that certain Shareholders' Agreement dated 11 October 1995 between the Buyer and the Seller pursuant to which the Buyer will acquire 400 shares of Prosperity Stock (the "Option") at a price of $1,100,000 (the "Option Price") from the Seller; and WHEREAS, Seller desires to sell and transfer the remaining 400 shares of Prosperity Stock (the "Remaining Prosperity Stock") to the Buyer in exchange for $2,900,000 and Buyer desires to effectuate such purchase, all upon the terms and subject to the conditions hereinafter contained; NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, the parties hereto hereby agree as follows: I. PURCHASE OF SHARES 1.1 Purchase. Based upon the representations, warranties and agreements of Buyer and Seller herein contained, and on the terms and subject to the conditions set forth in this Agreement, on the Closing Date (as defined below), the Buyer hereby agrees to purchase, acquire and accept from Seller the Remaining Prosperity Stock and Seller hereby agrees to sell, assign, transfer and deliver to Buyer the Remaining Prosperity Stock free and clear of all security interests, encumbrances and adverse claims for a total of $2,900,000 (the "Purchase Price") to be paid via wire transfer in immediately available funds to an account designated by the Seller. 1.2 Delivery. On the Closing Date, Seller shall deliver a certificate to the Buyer representing the Remaining Prosperity Stock, duly endorsed in blank for transfer, or with appropriate stock powers in blank attached, free and clear of all security interests, encumbrances and adverse claims. Against such delivery, the Buyer shall pay the Purchase Price in immediately available funds to an account designated by the Seller. II. REPRESENTATIONS AND WARRANTIES OF BUYER Buyer hereby warrants and represents to and agrees with Seller as follows: 2.1 Status of Buyer. Buyer is a duly organized and validly existing company, organized under the laws of the Cayman Islands, and has full power and authority to execute and deliver this Agreement and to pay the Purchase Price to the Seller hereunder. 2.2 Valid Agreement. This Agreement has been duly executed and delivered by Seller and constitutes a valid, legal and binding obligation of Buyer, enforceable in accordance with its terms. III. REPRESENTATIONS AND WARRANTIES OF SELLER Seller hereby warrants and represents to and agrees with Buyer as follows: 3.1 Lawful Owner. On the Closing Date, Seller will be the lawful owner of the Remaining Prosperity Stock, with full right, power and authority to sell, assign, transfer and deliver the Remaining Prosperity Stock, free and clear of any and all security interests, encumbrances and adverse claims, all pursuant to the provisions of this Agreement, and by so selling and transferring the Remaining Prosperity Stock, the Seller will not be in violation of any contractual or other commitment to any person or entity whatsoever. All of the Remaining Prosperity Stock will on the Closing Date be duly authorized, validly issued and outstanding, fully paid and nonassessable. 3.2 Valid Agreement. This Agreement has been duly executed and delivered by Seller and constitutes a valid, legal and binding obligation of Seller, enforceable in accordance with its terms. IV. CLOSING The Closing hereunder will take place (Closing Date) seven days after the date of acceptance by the Seller at which time the delivery of the Purchase Price and Remaining Prosperity Shares, as described in Section 1.2, will occur. V. MISCELLANEOUS 5.1 Expenses. Whether or not the transactions provided for herein are consummated, each party to this Agreement will pay his or its respective expenses incurred in connection with the performance of this Agreement, and no party shall be entitled to reimbursement therefore from any other party. 5.2 Counterparts. This Agreement may be executed in multiple counterparts, each of which shall be deemed an original and all of which taken together shall be but a single instrument. - 2 - 5.3 Choice of Law. This Agreement is governed by Norwegian law and Buyer and Seller hereby agree that any dispute arising from or in connection with this Agreement shall be resolved by arbitration in Oslo pursuant to Chapter 32 of the Norwegian Civil Procedure Act. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the date below written. ON BEHALF OF ON BEHALF OF NOREX INDUSTRIES INC. ORKLA ASA /s/ Kristian Siem /s/ Morten Blix - ---------------------------------------- --------------------------------- Kristian Siem, Chief Executive Officer Morten Blix, Portfolio Manager 5 September 1996 --------------------------------- Date - 3 - -----END PRIVACY-ENHANCED MESSAGE-----