UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Schedule 13D
Under the Securities Exchange Act of 1934
(Amendment No. 2)*
Norton Drilling Services, Inc.
(Name of Issuer)
Common Stock Par Value $0.01 per share (the "Common Stock")
(Title of Class of Securities)
668632-10-2
(CUSIP Number)
David W. Ridley c/o Norton Drilling Company, 5211 Brownfield Hwy. #230
Lubbock, Texas 79407-3501, (806) 785-8400
(Name, Address and Telephone Number of Person Authorized to Receive Notices
and Communications)
February 6, 1998
(Date of Event which Requires Filing of this Statement)
If the filing person has previous 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 [ ].
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.
* 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("Act") or otherwise subject to the liabilities of that section of
the Act but shall be subject to all other provision of the Act (however, see
the Notes).
Page 1 of 13
SCHEDULE 13D
CUSIP No.668632-10-2
1) Names of Reporting Persons S.S. or I.R.S. Identification Nos. Of Above
Persons
Sherman H. Norton, Jr.
2) Check the Appropriate Box if a Member of a Group (See Instructions)
(a) [ ]
(b) [X]
3) SEC Use Only
4) Source of Funds (See Instructions)
PF
5)Check if Disclosure of Legal Proceedings is Required Pursuant to Items
2(d)or 2(e)
6) Citizenship or Place of Organization
United States of America
7) Sole Voting Power
Number 2,763,359 shares of Common Stock (See Item 5)
of
shares 8) Shared Voting Power
beneficially
owned None
by
each 9) Sole Dispositive Power
reporting
person 2,763,359 shares of Common Stock (See Item 5)
with
10)Shared Dispositive Power
None
11) Aggregate Amount Beneficially Owned by Each Reporting Person
2,763,359
12) Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See
Instructions)
13) Percent of Class Represented by Amount in Row (11)
10.4% (See Item 5)
14) Type of Reporting Person (See Instructions)
IN
Page 2 of 13
SCHEDULE 13D
CUSIP No. 668632-10-2
1) Names of Reporting Persons S.S. or I.R.S. Identification Nos. Of Above
Persons
S. Howard Norton, III.
2) Check the Appropriate Box if a Member of a Group (See Instructions)
(a) [ ]
(b) [X]
3) SEC Use Only
4) Source of Funds (See Instructions)
00
5)Check if Disclosure of Legal Proceedings is Required Pursuant to Items
2(d)or 2(e)
6) Citizenship or Place of Organization
United States of America
7) Sole Voting Power
Number 1,025,696 shares of Common Stock (See Item 5)
of
shares 8) Shared Voting Power
beneficially
owned None
by
each 9) Sole Dispositive Power
reporting
person 1,025,696 shares of Common Stock (See Item 5)
with
10)Shared Dispositive Power
None
11) Aggregate Amount Beneficially Owned by Each Reporting Person
1,025,696
12) Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See
Instructions)
13) Percent of Class Represented by Amount in Row (11)
3.9% (See Item 5)
14) Type of Reporting Person (See Instructions)
IN
Page 3 of 13
SCHEDULE 13D
CUSIP No. 668632-10-2
1) Names of Reporting Persons S.S. or I.R.S. Identification Nos. Of Above
Persons
John W. Norton
2) Check the Appropriate Box if a Member of a Group (See Instructions)
(a) [ ]
(b) [X]
3) SEC Use Only
4) Source of Funds (See Instructions)
00
5)Check if Disclosure of Legal Proceedings is Required Pursuant to Items
2(d)or 2(e)
6) Citizenship or Place of Organization
United States of America
7) Sole Voting Power
Number 1,043,096 shares of Common Stock (See Item 5)
of
shares 8) Shared Voting Power
beneficially
owned None
by
each 9) Sole Dispositive Power
reporting
person 1,043,096 shares of Common Stock (See Item 5)
with
10)Shared Dispositive Power
None
11) Aggregate Amount Beneficially Owned by Each Reporting Person
1,043,096
12) Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See
Instructions)
13) Percent of Class Represented by Amount in Row (11)
3.9% (See Item 5)
14) Type of Reporting Person (See Instructions)
IN
Page 4 of 13
SCHEDULE 13D
CUSIP No. 668632-10-2
1) Names of Reporting Persons S.S. or I.R.S. Identification Nos. Of Above
Persons
Barbara L. Norton
2) Check the Appropriate Box if a Member of a Group (See Instructions)
(a) [ ]
(b) [X]
3) SEC Use Only
4) Source of Funds (See Instructions)
00
5)Check if Disclosure of Legal Proceedings is Required Pursuant to Items
2(d)or 2(e)
6) Citizenship or Place of Organization
United States of America
7) Sole Voting Power
Number 941,480 shares of Common Stock (See Item 5)
of
shares 8) Shared Voting Power
beneficially
owned None
by
each 9) Sole Dispositive Power
reporting
person 941,480 shares of Common Stock (See Item 5)
with
10)Shared Dispositive Power
None
11) Aggregate Amount Beneficially Owned by Each Reporting Person
941,480
12) Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See
Instructions)
13) Percent of Class Represented by Amount in Row (11)
3.5% (See Item 5)
14) Type of Reporting Person (See Instructions)
IN
Page 5 of 13
SCHEDULE 13D
CUSIP No. 668632-10-2
1) Names of Reporting Persons S.S. or I.R.S. Identification Nos. Of Above
Persons
Johnie P. Rose
2) Check the Appropriate Box if a Member of a Group (See Instructions)
(a) [ ]
(b) [X]
3) SEC Use Only
4) Source of Funds (See Instructions)
PF
5)Check if Disclosure of Legal Proceedings is Required Pursuant to Items
2(d)or 2(e)
6) Citizenship or Place of Organization
United States of America
7) Sole Voting Power
Number 1,355,827 shares of Common Stock (See Item 5)
of
shares 8) Shared Voting Power
beneficially
owned None
by
each 9) Sole Dispositive Power
reporting
person 1,355,827 shares of Common Stock (See Item 5)
with
10)Shared Dispositive Power
None
11) Aggregate Amount Beneficially Owned by Each Reporting Person
1,355,827
12) Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See
Instructions)
13) Percent of Class Represented by Amount in Row (11)
5.1% (See Item 5)
14) Type of Reporting Person (See Instructions)
IN
Page 6 of 13
Item 1. Security and Issuer
This Amendment No. 2 (Amendment No. 2) amends and restates the Schedule 13D
(including Amendment #1 thereto) filed by the Original Reporting Persons
with the Securities and Exchange Commission (the "Commission") on December
17, 1991 and relates to the Common Stock, par value $0.01 per share (the
"Common Stock") of Norton Drilling Services, Inc., a Delaware corporation
(the "Issuer") the principal executive offices of which are located at 5211
Brownfield Hwy. #230, Lubbock, Texas, 79407-3501.
Item 2. Identity and Background
(a) This statement is filed by each of Messrs. Sherman H. Norton, Jr.
("S.H. Norton, Jr."), S. Howard Norton, III ("S.H. Norton, III"), John
W. Norton ("J.W. Norton"), Johnnie P. Rose ("J.P. Rose") and Ms.
Barbara L. Norton ("Barbara Norton"). S.H. Norton, Jr., S.H. Norton,
III, J.W. Norton, J.P. Rose and Barbara Norton are referred to herein
collectively as the "Reporting Persons".
(b)-(c) The business address of each of the Reporting Persons is c/o
Norton Drilling Company, 5211 Brownfield Hwy. #230, Lubbock,
Texas, 79407-3501. The present principal occupation of S. H.
Norton, Jr. is that of serving as the Chairman of the Board of
the Issuer and as a contract representative of Norton Drilling
Company, a Delaware corporation, ("Norton Drilling"). The
principal executive offices of both Norton Drilling and the
Issuer are located at 5211 Brownfield Hwy.#230, Lubbock,
Texas, 79407-3501. Norton Drilling's principal business is
that of domestic, on-shore oil and gas contract drilling.
Norton Drilling is a wholly owned subsidiary of the Issuer.
The Issuer is a holding company with one operating subsidiary,
Norton Drilling. The present principal occupation of S.H.
Norton, III is that of President, Secretary and Chief
Executive Officer of the Issuer and a contract representative
of Norton Drilling. The present principal occupation of J. W.
Norton is that of Assistant Secretary and Chief Operating
Officer of the Issuer and as a contract representative of
Norton Drilling. The present occupation of J. P. Rose is that
of serving as a drilling superintendent of Norton Drilling.
The present occupation of Barbara Norton is that of serving as
a receptionist/secretary of Norton Drilling. S.H. Norton, III,
J. W. Norton and Barbara Norton are the children of S. H.
Norton, Jr. J. P. Rose has no familial relationship to the
other Reporting Persons.
(d) None of the Reporting Persons, nor any other person identified in this
Item 2, has during the last five years been convicted in a criminal
proceeding (excluding traffic violations or similar misdemeanors).
(e) None of the Reporting Persons, nor any other person identified in this
Item 2, has during the last five years been 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.
(f) Each of the natural persons identified in this Item 2 are citizens of
the United States of America.
Page 7 of 13
Item 3. Source and Amount of Funds and Other Consideration
See the response to Items 4 and 6 (which are reported by reference herein)
for a description of the consideration paid by the Reporting Persons for the
shares of Common Stock acquired and the method of such acquisition.
Item 4. Purpose of Transactions
On October 1, 1991 (the "Closing Date"), the Issuer and its wholly owned
subsidiary Norton Drilling, closed the merger and related transactions
contemplated by the Agreement and Plan of Merger (the "Merger Agreement"),
dated as of September 13, 1991, by and among the Issuer, Norton Drilling,
Norton Drilling Company, a Texas corporation ("Norton Drilling/Texas") and
the Reporting Persons as the then holders of all the capital Stock of Norton
Drilling/Texas. Pursuant to the Merger Agreement, on the Closing Date the
Reporting Persons surrendered for cancellation all the shares of capital
Stock of Norton Drilling/Texas and caused Norton Drilling/Texas to be merged
into Norton Drilling in exchange for the Issuer's payment to them of
5,000,000 shares of the Common Stock (the "Merger Shares"). The Issuer
agreed in the Merger Agreement to issue 65,000 shares of the Merger Shares
directly to a third party which acted as a financial consultant (the
"Consultant") to Norton Drilling/Texas and the Reporting Persons in
connection with the negotiation of the Merger Agreement and consummation of
the transactions contemplated thereby (the Consultant received an additional
160,000 shares of the Common Stock pursuant to the Merger Agreement which
shares were not deemed a part of the Merger Shares). Pursuant to the
conversion formula provided in the Merger Agreement, each Reporting Person
received 4500.45 shares of the Common Stock for each share of the Common
Stock, par value $1.00 per share, of Norton Drilling/Texas held by such
Reporting Person as of the Closing Date. Accordingly, after deducting the
65,000 shares of Common Stock issued to the Consultant out of the Merger
Shares, as of the Closing Date, S.H. Norton, Jr. held 1,723,474 shares of
Common Stock, S.H. Norton, III held 741,805 shares of Common Stock, J.W.
Norton held 741,805 shares of Common Stock, J.P. Rose held 986,111 shares of
Common Stock and Barbara Norton held 741,805 shares of Common Stock.
The Issuer agreed in the Merger Agreement to pay to the Reporting Persons an
additional 1,000,000 to 1,250,000 shares of its Common Stock (the
"Performance Consideration"), depending upon the market price thereof at the
time of issuance, if Norton Drilling's oil and gas drilling operations, as
acquired, earn an average of $3,000,000 per year for either the first two,
three, four or five years after the Closing Date.
Pursuant to the Merger Agreement, the Issuer expanded its Board of Directors
by three positions and appointed S.H. Norton, Jr., S.H. Norton, III, and
J.W. Norton, as designees of the Reporting Persons, to fill such new
positions. The Issuer covenanted to nominate and recommend for election to
its Board up to three such designees so long as the Reporting Persons and
certain permitted transferees ("Permitted Transferees") hold 75% or more of
the shares of Common Stock constituting the Merger Shares; the Issuer is
obliged to nominate and recommend for election or re-election, as the case
may be, only two designees of the Reporting Persons as of such time as they
and any Permitted Transferees collectively hold less than 75% (but not less
than 25%) of the Merger Shares and no such designees as of such time as such
persons and transferees hold less than 25% of the Merger Shares. "Permitted
Transferees" is defined in the Merger Agreement to include, but is not
limited to, certain members of the Reporting Persons' respective families,
the Consultant and the Lubbock Bank (defined at Item 6).
The Reporting Persons entered into the Merger Agreement in order to realize
value on their investments in Norton Drilling/Texas and affiliate with a
publicly traded corporation which may be better able to obtain future
Page 8 of 13
financing, if necessary.
On January 16, 1992, S. H. Norton, Jr. transferred by way of gift in private
placements (i) 8000 shares of Common Stock (an aggregate of 24,000 shares)
to each of S.H. Norton, III, J.W. Norton and Barbara Norton and (ii) an
aggregate of 34,000 shares of Common Stock to certain employees of Norton
Drilling.
On October 22, 1992, Barbara Norton sold 20,000 shares of Common Stock on
the open market.
On April 30, 1993, S.H. Norton, Jr. transferred by way of gift in private
placements 22,000 shares of Common Stock (an aggregate of 66,000 shares) to
each of S.H. Norton, III, J.W. Norton and Barbara Norton.
On May 21, 1993, Norton Drilling paid an aggregate of $2,500,000 to the
First National Bank at Lubbock ("First National Banks") in full and final
payment of a loan of $3,913,098.06 made by the First National Bank to Norton
Drilling pursuant to a loan agreement dated September 30, 1991 as amended.
The payment of $2,500,000 was financed as follows: (i) $1,900,000 was
provided by The Plains National Bank of Lubbock ("Plains Bank") pursuant to
a Loan Agreement with Norton Drilling dated May 21, 1993 at Plains Bank
Prime Rate plus 3.5% (ii) $410,000 was provided by S. H. Norton, Jr. in
exchange for a Subordinated Convertible Note due May 1998 (the "Notes")
issued by Norton Drilling at an annual rate of interest equal to Plains Bank
Prime Rate which Note is convertible at the option of the Note holder into
shares of Common Stock of the Issuer at a conversion price ("Conversion
Price") of $0.44 per share at any time before close business on May 18, 1998
(iii) $90,000 was provided by J. P. Rose in exchange for a Note upon the
same terms and conditions as the Note issued to S. H. Norton, Jr. described
in (ii) above and (iv) $100,000 of the payment was provided by the Issuer.
Copies of the Notes issued to each of S. H. Norton, Jr. and J. P. Rose are
attached hereto as Exhibits D and F and are incorporated by reference
herein. The Notes and the shares of Common Stock into which they are
convertible are sometimes referred to herein as (the "Securities").
Personal funds of S. H. Norton, Jr. and J. P. Rose were used to purchase the
Notes.
In connection with the purchase of the Notes, S. H. Norton Jr. and J. P.
Rose entered into Subscription Agreements pursuant to which they each
represented that they are acquiring the Securities solely for investment
purposes and not with a view to or for resale in connection with any
distribution. S. H. Norton, Jr. and J. P. Rose purchased the Notes in order
to provide part of the financing necessary to enable Norton Drilling to take
advantage of the favorable debt restructuring offered and to enable the
Issuer to substantially reduce its consolidated debt.
On January 23, 1996 and February 29, 1996, S. H. Norton, Jr. purchased
125,000 and 50,000 shares, respectively, of Common Stock in a private
placement.
On February 29, 1996, J. P. Rose purchased 50,000 shares of Common Stock in
a private placement.
On November 6, 1996, S. H. Norton, Jr. purchased 10,000 shares of Common
Stock on the open market.
On February 14, 1997, S. H. Norton, Jr. transferred by way of gift 16,000
shares of Common Stock to each of S. H. Norton, III and J. W. Norton and
10,000 shares of Common Stock to Barbara Norton for a total of 42,000
shares.
Page 9 of 13
On February 24, 1997, the Issuer issued to S. H. Norton, Jr. 657,024
warrants to purchase Common Stock of the Issuer as compensation for his
guarantee of certain obligations of Norton Drilling to The Plains National
Bank of West Texas. 640,000 of the warrants were issued at the conversion
price of $0.50 and 17,024 of the warrants were issued at the conversion
price of $0.78125. The warrants expire on February 24, 2007.
On March 23, 1997 the Issuer approved the issuance of 396,071 shares of
Common Stock as payment for compensation which had been earned in prior
years, but not paid, to the following individuals in the following amounts:
S. H. Norton, Jr. 147,067 shares of Common Stock
S. H. Norton, III 58,217 shares of Common Stock
J. W. Norton 75,616 shares of Common Stock
J. P. Rose 115,171 shares of Common Stock
On April 1, 1997, S. H. Norton, Jr. received warrants to purchase 32,000
shares of Common Stock as compensation for his guarantee of certain
obligations of Norton Drilling to The Plains National Bank of West Texas.
The options were issued at a conversion price of $0.625.
On September 5, 1997, S. H. Norton, Jr. transferred by way of gift warrants
to purchase 689,024 shares of Common Stock to the Norton Family Trust. The
trust's three beneficiaries who each share equally in the trust are S. H.
Norton, III, J. W. Norton and Barbara Norton.
On November 4, 1997, each of S. H. Norton, Jr., S. H. Norton, III, J. W.
Norton and Barbara Norton sold 4,250 shares of Common Stock on the open
market at $3.7849 per share for a total of 17,000 shares.
On November 5, 1997, each of S. H. Norton, Jr., S. H. Norton, III, J. W.
Norton and Barbara Norton sold 21,750 shares of Common Stock on the open
market at $3.804 per share for a total of 87,000 shares.
On November 6, 1997, each of S. H. Norton, Jr., S. H. Norton, III, J. W.
Norton and Barbara Norton sold 24,000 shares of Common Stock on the open
market at $3.8551 per share for a total of 96,000 shares.
On November 13, 1997, S. H. Norton and J. P. Rose converted the subordinated
convertible notes into 1,136,363 shares of Common Stock.
On December 22, 1997, S. H. Norton, Jr. transferred by way of gift 8,000
shares of Common Stock to his step-daughter, Jennifer Swigart.
On February 6, 1998, the Issuer granted options to purchase shares of its
Common Stock to each of the following Reporting Persons in the quantities
listed. One-third of the options each year vest to each person if that
person is in the employ of Norton Drilling on the vesting dates. The option
price is $1.50 per share.
Reporting Person Quantity Vesting Dates
S. H. Norton, III 180,000 February 1, 1999, 2000 and 2001
J. W. Norton 180,000 February 1, 1999, 2000 and 2001
Barbara Norton 3,000 February 1, 1999, 2000 and 2001
J. P. Rose 60,000 February 1, 1999, 2000 and 2001
Other than as reported above, the Reporting Persons have no plans or
proposals which relate to or would result in any of the following matters:
(a) The acquisition by any person of additional securities of the Issuer,
or the disposition of securities of the Issuer;
Page 10 of 13
(b) An extraordinary corporate transaction, such as a merger,
reorganization or liquidation, involving the Issuer or any of its
subsidiaries;
(c) A sale or transfer of a material amount of assets of the Issuer or any
of its subsidiaries;
(d) Any change in the present board of directors or management of the
Issuer, including any plans or proposals to change the number of 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 Issuer;
(f) Any other material change in the Issuer's business or corporate;
(g) Changes in the Issuer's charter, bylaws or instruments corresponding
thereto or to the actions which may impede the acquisition of control
of the Issuer by any person;
(h) Causing a class of securities of the Issuer 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 Issuer 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.
Item 5. Interest in Securities of the Issuer
(a) The Reporting Persons as a group may be deemed to be the beneficial
owners of 7,129,458 shares of Common Stock.
As of the date of this statement there are 25,844,799 shares of Common
Stock outstanding and together with the warrants for 689,024 shares of
Common Stock held by The Norton Family Trust, constitute a total of
26,533,823 shares (the "Outstanding Shares"). The shares of Common
Stock held by the Reporting Persons represent 26.7% of the Outstanding
Shares.
(b) S. H. Norton, Jr. may be deemed to have direct power to vote and
dispose of and to direct the voting and disposition of 2,763,359
shares of Common Stock; such shares represent 10.4% of the Outstanding
Shares.
By virtue of the warrants to purchase 229,674 shares of Common Stock
he now holds, S. H. Norton, III may be deemed to have direct power to
vote and dispose of and to direct the voting and disposition of
1,025,696 shares of Common Stock; such shares represent 3.9% of the
Outstanding Shares.
By virtue of the warrants to purchase 229,675 shares of Common Stock
he now holds, J. W. Norton may be deemed to have direct power to vote
and dispose of and to direct the voting and disposition of 1,043,096
shares of Common Stock; such shares represent 3.9% of the Outstanding
Shares.
By virtue of the warrants to purchase 229,675 shares of Common Stock
she now holds, Barbara Norton may be deemed to have direct power to
Page 11 of 13
vote and dispose of and to direct the voting and disposition of
941,480 shares of Common Stock; such shares represent 3.5% of the
Outstanding Shares.
J. P. Rose may be deemed to have direct power to vote and dispose of
and to direct the voting and disposition of 1,355,827 shares of Common
Stock; such shares represent 5.1% of the Outstanding Shares.
(c) Other than described in this Item 5, none of the Reporting Persons
have engaged in any transactions with respect to the shares of Common
Stock required to be reported in response to this Item 5 during the
past sixty (60) days.
(d) Except as expressly set forth in this Statement, no persons other than
the Reporting Persons beneficially own any of the shares of Common
Stock which may be deemed beneficially owned by the Reporting Persons
and the Reporting Persons do not know of any other persons who have
the right to receive or the power to direct the receipt of dividends
from, or the proceeds from the sale of, any of the shares owned
beneficially by the Reporting Persons.
(e) Not applicable.
Notwithstanding anything contained in this Item 5, neither the filing of
this Statement nor any of its contents shall be deemed to constitute an
admission that nay of the Reporting Persons, nor any other person identified
in Item 2 hereof, is the beneficial owner of any of the Issuer's securities
for the purposes of Section 13(d) of the Securities Exchange Act of 1934, as
amended, Regulation 13D-G of the General Rules and Regulations under such
Act or for any other purpose.
Item 6. Contracts, Arrangements, Understandings or Relationships with
respect to Securities of the Issuer
Also pursuant to the Merger Agreement the Issuer granted to the Reporting
Persons two "demand" and two "piggy-back" registration rights with respect
to the Merger Shares and the Performance Compensation, if any. Permitted
Transferees of any shares of Common Stock comprising the Merger Shares or
Performance Compensation are entitled to the benefits of such registration
rights. Section 6.2(c) of the Merger Agreement (attached hereto as Exhibit
B) is incorporated by reference herein.
S.H. Norton, Jr. personally guaranteed (the "Guarantee") a loan (the "Loan")
made by the First National Bank of Lubbock (the "Lubbock Bank") to Norton
Drilling/Texas pursuant to a Loan Agreement (the "Loan Agreement"), dated
September 30, 1991, between Norton Drilling/Texas and the Lubbock Bank. In
the Loan Agreement, S.H. Norton, Jr. covenanted to secure his Guarantee by
entering into a security agreement (the "Security Agreement") with the
Lubbock Bank and pledging to it 1,400,000 shares of the Common Stock he
acquired under the Merger Agreement. The principal amount of the Loan was
$4,390,487.10 as of September 30, 1991 and was payable in twenty-three equal
monthly installments of $92,500 commencing October 10, 1991, and a
twenty-fourth installment of the balance of principal and interest on or before
September 10, 1993. S.H. Norton, Jr. may be released from his obligations
under the Guarantee under certain conditions specified therein. The
Guarantee is attached hereto as Exhibit C.
Except as set forth herein, the Reporting Person do not have any contracts,
arrangements, understandings or relationships with any person with respect
to any securities of the Issuer, including but not limited to any agreements
concerning (i) transfer or voting of any securities of the Issuer, (ii)
finder's fee, (iii) joint ventures, (iv) loan or profits, (vii) division of
Page 12 of 13
profits or losses or (viii) the giving or withholding of proxies.
On May 26, 1993, S. H. Norton, Jr. and J. P. Rose entered into Subscription
Agreements with the Issuer and Norton Drilling pursuant to which they
purchased Subordinated Convertible Notes in the principal amounts of
$410,000 and $90,000 respectively. The Notes, which mature on May 18, 1998,
are at an annual rate of interest of Prime Rate as published by the Plains
Bank of Lubbock and provide for (i) the redemption of the Notes, at 100% of
their principal amount at any time, at the option of Norton Drilling,
without prepayment penalty, provided that without the written consent of the
Plains Bank, the Note may not be redeemed prior to the repayment in full by
Norton Drilling of all amounts owing to the Plains Bank, (ii) the conversion
of the principal amount of the Notes or any part thereof (not less than
$1000) into shares of Common Stock of the Issuer at a conversion price of
$0.44 per share (the "Conversion Price") and (iii) the subordination of the
Note to all present indebtedness of Norton Drilling, including indebtedness
pursuant to that certain loan-agreement between the Company and the Plains
Bank dated May 21, 1993. The Conversion Price was determined by the Board of
Directors of the Company at its meeting on May 19, 1993, at a premium over
the average of the bid and ask price of the shares of Common Stock on the
close of business of May 18, 1993.
The Subscription Agreements provide among other things, that both S. H.
Norton, Jr. and J. P. Rose are purchasing the Securities for investment
purposes and not with a view to resale or distribution.
The Subscription Agreements further provide that the Securities have not
been registered under the Securities Act of 1933 by reason of specific
exemptions under the provisions thereof which depend in part upon the
investment intent of S. H. Norton, Jr. and J. P. Rose and that the Notes are
and the shares of Common Stock of the Issuer when issued pursuant to the
conversion provisions of the Note will be "restricted securities" under
applicable federal securities laws. The Issuer has made no undertaking nor
given any assurance in the Subscription Agreements or elsewhere to register
any of the Securities under the Securities Act or to take any action so as
to permit sales pursuant to the Securities Act. Accordingly, S. H. Norton,
Jr. and J. P. Rose have agreed in the Subscription Agreements that they will
not dispose of the Securities except pursuant to a registration of the
Securities under the Securities Act of 1933 and all applicable state
securities laws or in a transaction which is exempt therefrom and that the
certificates evidencing the Securities may bear a legend making reference to
the foregoing restrictions.
Item 7. Material to be Filed as Exhibits
None
Signature
After reasonable inquiry and to the best knowledge and belief of each of the
undersigned, the undersigned hereby certify that the information set forth
in this statement is true, complete and correct.
April 20, 1998
/s/ Sherman H. Norton, Jr.
Sherman H. Norton, Jr., on his own behalf and as attorney-in-fact for the
other Reporting Persons named in this Statement.
Page 13 of 13
