As filed with the Securities and Exchange Commission on January 24, 1997.
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
----------------------
DI INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
TEXAS 74-2144774
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
450 GEARS ROAD, SUITE 625
HOUSTON, TEXAS 77067
(713) 874-0202
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
T. Scott O'Keefe, Senior Vice President and Chief Financial Officer
450 Gears Road, Suite 625
Houston, Texas 77067
(713) 874-0202
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
COPIES TO:
Nick D. Nicholas
Porter & Hedges, L.L.P.
700 Louisiana, 35th Floor
Houston, Texas 77002
(713) 226-0600
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: From time
to time after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ] ________
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering.
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
==================================================== ============== =================== =================== ===================
PROPOSED MAXIMUM PROPOSED MAXIMUM
AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES TO BE REGISTERED REGISTERED SHARE PRICE REGISTRATION FEE(1)
==================================================== ============== =================== =================== ===================
<S> <C> <C> <C> <C>
Common Stock, par value $0.10 par value............. 1,750,000 $3.125(1) $5,468,750 $1,657.20
==================================================== ============== =================== =================== ===================
</TABLE>
(1) Pursuant to Rule 457(c), the registration fee is calculated on the basis of
the average of the high and low sale prices for the Common Stock on the
American Stock Exchange on January 21, 1997, $3.125 per share.
PURSUANT TO THE PROVISIONS OF RULE 429 OF THE SECURITIES ACT OF 1933, AS
AMENDED, THE PROSPECTUS CONTAINED IN THIS REGISTRATION STATEMENT ALSO RELATES TO
7,500,000 AND 71,299,038 SHARES OF COMMON STOCK COVERED BY THE REGISTRANT'S
REGISTRATION STATEMENTS ON FORM S-3 (REG. NO. 333-14783) AND FORM S-3 (REG. NO.
333-6077), RESPECTIVELY. THE PREVIOUSLY FILED FORM S-3 (REG. NO. 333-14783)
REGISTERED 7,500,000 SHARES OF COMMON STOCK FOR WHICH THE REGISTRATION FEES WITH
RESPECT THERETO WERE PREVIOUSLY FILED. THE PREVIOUSLY FILED FORM S-3 (REG. NO.
333-6077) AMENDED A REGISTRATION STATEMENT ON FORM S-4 AND REGISTERED 82,337,956
SHARES OF COMMON STOCK, 9,038,918 OF WHICH HAVE BEEN SOLD AND 2,000,000 OF WHICH
RELATED TO SHARES UNDERLYING WARRANTS THAT HAVE TERMINATED. THE REGISTRATION
FEES WITH RESPECT THERETO WERE PREVIOUSLY PAID.
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<PAGE>
SUBJECT TO COMPLETION DATED JANUARY 24, 1997
PROSPECTUS 80,549,038 SHARES
DI INDUSTRIES, INC.
COMMON STOCK
------------------------------------
The 80,549,038 shares (the "Shares") of common stock, par value $0.10 per
share (the "Common Stock"), of DI Industries, Inc., a Texas corporation (the
"Company"), offered hereby are held by, or subject to certain warrants or
options held by, certain shareholders of the Company (the "Selling
Shareholders"). The Company will not receive any part of the proceeds of the
sale of the Shares offered hereby.
Sales of the Shares by the Selling Shareholders may be made from time to
time in one or more transactions, including block transactions, on the American
Stock Exchange ("AMEX"), or any other exchange or quotation system on which the
Common Stock may be listed or quoted (collectively, the "Exchanges"), pursuant
to and in accordance with the applicable rules of the Exchanges, or in the over
the counter market, in negotiated transactions or in a combination of any such
methods of sale, at fixed prices that may be changed, at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices or at negotiated prices. The Shares may be offered directly, to or
through agents designated from time to time, or to or through brokers or
dealers, or through any combination of such methods of sale. Such agents,
brokers or dealers may receive compensation in the form of discounts,
concessions or commissions from the Selling Shareholders and/or the purchasers
of the Shares for whom such broker-dealers may act as agents or to whom they
sell as principals, or both (which compensation as to a particular broker-dealer
might be in excess of customary commissions). A member firm of an Exchange may
be engaged to act as an agent in the sale of Shares by the Selling Shareholders.
See "Plan of Distribution."
The Selling Shareholders and any brokers, dealers, agents or others that
participate with the Selling Shareholders in the distribution of the Shares may
be deemed to be "underwriters" within the meaning of the Securities Act of 1933,
as amended (the "Securities Act"), and any commissions or fees received by such
persons and any profit on the resale of the Shares purchased by such persons may
be deemed to be underwriting commissions or discounts under the Securities Act.
The Company has agreed to indemnify certain of the Selling Shareholders against
certain liabilities, including liabilities under the Securities Act. See "Plan
of Distribution."
The total costs, fees and expenses incurred in connection with the
registration of the Shares are estimated to be approximately $18,657.20.
The Common Stock is traded on the AMEX under the symbol "DRL." On January
23, 1997, the closing sales price of the Common Stock as reported on the AMEX
was $3.06 per share.
------------------------------------
INVESTORS SHOULD CONSIDER CAREFULLY THE MATTERS SET FORTH UNDER THE CAPTION
"RISK FACTORS" BEGINNING ON PAGE 3.
------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------------------
The date of this Prospectus is January , 1997.
<PAGE>
THIS PROSPECTUS CONTAINS OR INCORPORATES BY REFERENCE, "FORWARD-LOOKING
STATEMENTS" WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT, AND SECTION
21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED (THE "EXCHANGE ACT"). ALL
STATEMENTS OTHER THAN STATEMENTS OF HISTORICAL FACTS SO INCLUDED IN THIS
PROSPECTUS INCLUDING, WITHOUT LIMITATION, STATEMENTS REGARDING THE COMPANY'S
BUSINESS STRATEGY, PLANS, OBJECTIVES AND BELIEFS OF MANAGEMENT FOR FUTURE
OPERATIONS, THE ANTICIPATED CLOSING AND METHODS OF FINANCING THE PROPOSED
ACQUISITION OF ASSETS FROM FLOURNOY DRILLING COMPANY ARE FORWARD-LOOKING
STATEMENTS. ALTHOUGH THE COMPANY BELIEVES THE EXPECTATIONS AND BELIEFS REFLECTED
IN SUCH FORWARD-LOOKING STATEMENTS ARE REASONABLE, IT CAN GIVE NO ASSURANCE THAT
SUCH EXPECTATIONS WILL PROVE TO HAVE BEEN CORRECT. IMPORTANT FACTORS THAT COULD
CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THE COMPANY'S EXPECTATIONS
("CAUTIONARY STATEMENTS") ARE DISCUSSED HEREIN UNDER THE CAPTIONS "RISK FACTORS"
AND "RECENT DEVELOPMENTS" AND IN THE COMPANY'S ANNUAL REPORT ON FORM 10-K/A AND
QUARTERLY REPORTS ON FORM 10-Q, INCORPORATED HEREIN BY REFERENCE UNDER THE
CAPTION "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS."
AVAILABLE INFORMATION
The Company is subject to the information requirements of the Exchange Act,
and in accordance therewith files reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission"). The
Registration Statement (defined below), as well as such reports, proxy
statements and other information filed by the Company with the Commission can be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
its Regional Offices at Seven World Trade Center, New York, New York 10048 and
at Northwest Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such material can also be obtained at prescribed rates
from the Public Reference Section of the Commission at 450 Fifth Street, N.W.
Washington, D.C. 20549. The Common Stock is listed and traded on the AMEX and
certain of the Company's reports, proxy statements and other information can be
inspected at the offices of the American Stock Exchange, 86 Trinity Place, New
York, New York 10006. The Commission maintains a site on the World Wide Web that
contains certain documents filed with the Commission electronically. The address
of such site is http://www.sec.gov and the Registration Statement may be
inspected at such site.
The Company has filed with the Commission a Registration Statement on Form
S-3 (together with any amendments or supplements thereto, the "Registration
Statement") under the Securities Act with respect to the Shares. This Prospectus
does not contain all of the information set forth in the Registration Statement
and the exhibits thereto, certain parts of which are omitted in accordance with
the rules and regulations of the Commission. For further information, reference
is made to the Registration Statement and the exhibits thereto. Statements
contained in this Prospectus (or in any document incorporated into this
Prospectus by reference) as to the contents of any contract or other document
referred to herein (or therein) are not necessarily complete, and in each
instance reference is made to the copy of such contract or other document filed
as an exhibit to the Registration Statement, each such statement being qualified
in all respects by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which have been filed with the Commission pursuant
to the Exchange Act (File No. 1-8826), are incorporated herein by reference and
made a part of this Prospectus:
1. The Company's Annual Report on Form 10-K/A for the fiscal year ended
December 31, 1995.
2. The Company's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1996, June 30, 1996 and September 30, 1996.
3. The Company's Definitive Proxy Statement for the 1996 Annual Meeting
of Shareholders to be held August 27, 1996, including the description
of the Common Stock contained therein under the caption "Description
of Capital Stock of the Company."
4. The Company's Current Reports on Form 8-K dated June 24, 1996, October
2, 1996, November 4, 1996 and December 30, 1996.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering of the Common Stock covered hereby shall be
deemed to be incorporated by reference into this Prospectus and to be a part
hereof from the respective dates of filing of such documents. Any statement
contained in a document or information incorporated or deemed to be incorporated
herein by reference shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any
subsequently filed document that also is, or is deemed to be, incorporated
herein by reference, modifies or supersedes such statement. Any such statement
so modified or superseded shall not be deemed, expect as so modified or
superseded, to constitute a part of this Prospectus.
The Company undertakes to provide, without charge, to each person,
including any beneficial owner, to whom a copy of this Prospectus is delivered,
upon the written or oral request of such person, a copy of any and all of the
documents or information referred to above that has been or may be incorporated
by reference in this prospectus (excluding exhibits to such documents unless
such exhibits are specifically incorporated by reference). Requests should be
directed to the corporate secretary, DI Industries, Inc., 450 Gears Road, Suite
625, Houston, Texas 77067, telephone (713) 874-0202.
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<PAGE>
THE COMPANY
DI Industries, Inc., a Texas corporation formed in 1980, is engaged
primarily in the business of providing onshore contract drilling services to the
oil and gas industry. The Company conducts domestic operations in Texas,
Louisiana, Arkansas, Oklahoma, Ohio, Pennsylvania, New York, Michigan and other
states; and currently has international operations in Argentina and Venezuela.
The principal office of the Company is located at 450 Gears Road, Suite 625,
Houston, Texas 77067, and its telephone number is (713) 874-0202.
RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS, THE
FOLLOWING SHOULD BE CAREFULLY CONSIDERED IN EVALUATING THE COMPANY AND ITS
BUSINESS BEFORE PURCHASING THE COMMON STOCK OFFERED HEREBY.
CHANGE IN BUSINESS STRATEGY AND MANAGEMENT
In early 1996, the Company began implementing a new business strategy
which involves new management, focusing its resources toward higher margin
markets and recapitalizing the Company to provide for growth capacity.
Implementing the new strategy will involve redeploying its rigs to more
profitable markets, refurbishing and upgrading certain of its rigs, and
acquiring businesses and assets complementing the Company's land drilling
operations. Inherent in such strategy are certain risks, such as increasing
demand for liquidity and capital resources, increasing debt service
requirements, combining disparate company cultures and facilities, and
conducting operations in geographically and competitively diverse markets.
Material changes in the Company's management and business strategy have
only recently occurred. The Company is therefore unable to predict the effect of
these material changes on the Company's financial condition and results of
operations. This is particularly so in light of the rapid consolidation and
competitive changes in the Company's most profitable markets. The success of the
Company's new business strategy and its ability to repay increased debt service
will depend in part on the Company's ability (i) to redeploy its rigs to higher
margin markets, (ii) to finance and timely complete the refurbishment and
upgrade of its rig inventory on a cost effective basis and, (iii) to continue to
contract for, finance and integrate into its business future acquisitions. There
can be no assurance these material changes will result in the desired effect of
improving the Company's competitive position and its financial condition. See
"Recent Developments."
LEVERAGE AND LIQUIDITY
The Company currently has approximately $27.2 million of debt
obligations. Accordingly, the Company will require substantial cash flow to meet
its debt service requirements. Payment of principal and interest on these
obligations will depend on the Company's future performance, which is subject to
general economic and business factors beyond the Company's control.
The Company's programs of rig refurbishment and upgrades will require
increasing amounts of capital and to the extent, if any, it is unable to
continue such programs, the Company will have fewer rigs available for service.
Further debt may be needed to finance any future acquisitions. It is likely
therefore, that the Company's exposure to the risks associated with leverage
will increase as its new business strategy is implemented.
The Company's current credit facility (the "Facility") restricts, among
other things, the Company's ability to incur additional indebtedness in excess
of certain amounts, encumber certain of its properties and make certain asset
dispositions. Furthermore, the Facility prohibits the payment of dividends by
the Company and requires the Company to maintain a minimum working capital
balance of $5.0 million and minimum net worth of $60.0 million. In addition, the
Facility requires the Company to maintain certain financial ratios. These
restrictions could limit the Company's flexibility in responding to changing
market conditions and impair its ability to achieve its new business strategy.
See "Recent Developments."
DEPENDENCE ON KEY PERSONNEL
Since April 1996, the Company has hired a majority of its current
senior management team. In addition, in August 1996, the shareholders of the
Company elected a Board of Directors comprised of five members, all but one of
which were elected to the Board for the first time. The Company believes that
its operations are dependent upon this small group of relatively new management
personnel, the loss of any of whom could have a material adverse effect on the
Company. See "Recent Developments."
3
<PAGE>
INTENSE COMPETITION; INDUSTRY CONDITIONS
The Company experiences intense competition in its onshore drilling
markets. The contract drilling industry is cyclical and is characterized by high
capital and maintenance costs. Due to an oversupply of rigs, the onshore
drilling market is highly competitive and no one competitor is dominant. While
price is a primary factor in the selection of drilling contractors, a
contractor's safety record, crew quality, service record and equipment
capability are also important factors. Certain of the Company's competitors have
greater financial and other resources than the Company and may commit more
resources than the Company to these important factors.
The Company's operations are materially dependent upon the levels of
activity in the exploration, development and production of oil and natural gas
in the United States and worldwide. Such activity levels are affected both by
short-term and long-term trends in the prices of oil and natural gas. In recent
years, oil and natural gas prices, and therefore the level of drilling and
exploration activity, have been volatile. Worldwide military, political and
economic events have contributed to, and are likely to continue to contribute
to, such price volatility. Any prolonged reduction in oil and natural gas prices
would depress the level of exploration and development activity and would result
in a corresponding decline in the demand for the Company's services and
therefore have a material adverse effect on the Company's financial condition
and results of operations.
LOSSES FROM OPERATIONS
The historical financial data for the Company reflect net losses of
$13.4 million and $3.5 million (unaudited) for the calendar years ended December
31, 1995 and 1994, which included a non-cash impairment provision of $5.3
million during the fourth quarter of 1995 for certain drilling rigs and
equipment. This provision was the result of market indications that the carrying
amount was not fully recoverable based on appraisals, comparable sales data and
management estimates. The Company continues to experience losses, realizing a
net loss to Common Stock of $559,000 (unaudited) for the nine months ended
September 30, 1996. There can be no assurance that any capital needed for the
future will be available on acceptable terms.
INTERNATIONAL OPERATIONS
A major portion of the Company's revenues has been attributable to
international operations. Revenues from international sources accounted for
approximately 41.2 percent and 52.7 percent of the Company's operating revenues
for the nine-month period ended September 30, 1996 and the year ended December
31, 1995, respectively. In addition to the risks inherent in the drilling
business, the Company's international operations are subject to certain
political, economic and other uncertainties, including, among others, risks of
war and civil disturbances, expropriation, nationalization, renegotiation or
modification of existing contracts, taxation policies, foreign exchange
restrictions, international monetary fluctuations and other hazards arising out
of foreign operations. See "Recent Developments."
SHARES ELIGIBLE FOR FUTURE SALE
There are 80.5 million shares of Common Stock which are available for
sale under this Prospectus, including 3.49 million shares issuable upon exercise
of warrants or options. On a fully diluted basis, such shares represent
approximately 63% of the Company's outstanding Common Stock. The Company
presently expects to grant shelf registration rights with respect to
approximately 12.43 million shares issuable upon closing of a pending
acquisition. Upon effectiveness of these additional registrations, a total of
approximately 93 million shares of Common Stock (approximately 66% on a fully
diluted basis) of the Company's then outstanding Common Stock will be available
for resale under shelf registration statements, less any prior sales. The
contractual registration periods for such shares terminate at various times
during the period ending on the later of August 29, 1999, and three years after
exercise of any Shadow Warrants (defined under "Recent Developments -
Acquisitions"). The Company also may be required to issue additional shares of
Common Stock under certain repricing provisions of a private placement and
pending acquisition. Any additional shares issued under these obligations would
also be subject to similar shelf registration rights. There can be no assurances
that additional shares will not be issued under these provisions or that the
Company may not agree to similar provisions in connection with future
acquisitions. Future sale of substantial amounts of Common Stock in the public
market could adversely affect prevailing market prices. See "Recent Developments
- - Acquisitions."
ABSENCE OF DIVIDENDS ON THE COMMON STOCK
The Company has never paid any cash dividends on the Common Stock and
does not anticipate paying dividends on the Common Stock at any time in the
foreseeable future. Additionally, certain of its debt covenants prohibit the
Company from paying dividends without the consent of the lender.
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<PAGE>
LIMITATIONS ON THE AVAILABILITY OF THE COMPANY'S NET OPERATING LOSS
CARRYFORWARDS
As a result of the Mergers (as hereinafter defined), the Company has
undergone an "ownership change" within the meaning of Section 382 of the
Internal Revenue Code of 1986, as amended. Therefore, the right of the Company
to use its existing net operating loss carryforwards ("NOLs") and certain other
tax attributes for both regular tax and alternative minimum tax purposes during
each future year is limited to a percentage (currently approximately six
percent) of the fair market value of the Company's Common Stock immediately
before the ownership change (the "Section 382 Limitation"). To the extent that
taxable income exceeds the Section 382 Limitation in any year subsequent to the
ownership change, such excess income may not be offset by NOLs from years prior
to the ownership change. To the extent the amount of taxable income in any
subsequent year is less than the Section 382 Limitation for such year, the
Section 382 Limitation for future years is correspondingly increased. There is
generally no restriction on the use of NOLs arising after the ownership change,
although Section 382 applies anew each time there is an ownership change. The
actual effect, if any, of such utilization of NOLs will depend on the Company's
profitability in future years. As of December 31, 1995, the Company had
approximately $64.0 million of NOLs, a significant portion of which are already
subject to a Section 382 Limitation resulting from ownership changes in years
prior to 1996.
OPERATIONAL RISKS
The Company's operations are subject to the many hazards inherent in
the drilling business, including blowouts, cratering, fires and collisions.
These hazards could cause personal injury and loss of life, suspend drilling
operations or seriously damage or destroy the property and equipment involved
and, in addition to environmental damage, could cause damage to producing
formations and surrounding areas. Although the Company maintains insurance
against many of these hazards, the Company does not have casualty or other
insurance with respect to the rigs themselves, and such other insurance is
subject to substantial deductibles and provides for premium adjustments based on
claims. Certain other matters are also excluded from coverage, such as loss of
earnings on certain rigs.
GOVERNMENTAL AND ENVIRONMENTAL MATTERS
Many aspects of the Company's operations are affected by domestic and
foreign political developments and are subject to numerous domestic and foreign
governmental regulations that may relate directly or indirectly to the contract
drilling industry. The regulations applicable to the Company's operations
include certain regulations that control the discharge of materials into the
environment or require remediation of contaminations, under certain
circumstances. Usually these environmental laws and regulations impose "strict
liability," rendering a person liable without regard to negligence or fault on
the part of such person. Such environmental laws and regulations may expose the
Company to liability for the conduct of, or conditions caused by, others, or for
acts of the Company that were in compliance with all applicable laws at the time
such acts were performed.
CONTROL CONSIDERATIONS
On May 7, 1996, certain shareholders of the Company entered into a
Shareholders' Agreement (the "Shareholders' Agreement"), which shareholders and
their affiliates beneficially own approximately 64% of the issued and
outstanding shares of Common Stock as of the date of this Prospectus. The
Shareholders' Agreement provides that all of the parties thereto, and certain of
their successors will be required to vote their shares of Common Stock so as to
maintain the size of the Board of Directors at five, and to vote their shares at
any annual or special meeting of the shareholders for three directors designated
by such parties and two independent directors. By reason of their shareholdings
and the Shareholders' Agreement, the parties to the Shareholders' Agreement, and
certain of their successors will each exercise considerable influence over the
Company and will be able to collectively control all of its business and affairs
for so long as they own these shares. Several of the Selling Shareholders are
party to the Shareholders' Agreement.
RECENT DEVELOPMENTS
OVERVIEW
In 1996, the Company's elected a substantially new board of directors,
installed new senior management and completed several transactions that
significantly improved its liquidity and added drilling rigs to its existing
fleet. The combined effect of these changes has materially changed the Company's
principal shareholders, management, capital structure, and business strategy.
CHANGE IN MANAGEMENT
The Company began its management restructuring in April 1996, with the
termination of its former President and Chief Executive Officer, Max M. Dillard
on April 9, 1996. Since that date, the Company has hired a majority of its
current senior
5
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management team, including Thomas P. Richards, President and Chief Executive
Officer, Forrest M. Conley, Jr., Senior Vice President - International, Donald
J. Guedry, Treasurer, Ronnie E. McBride, Senior Vice President - Operations, T.
Scott O'Keefe, Senior Vice President and Chief Financial Officer, and David W.
Wehlmann, Vice President and Controller. Mr. Wehlmann was hired in July 1996
while Messrs. Conley, McBride, O'Keefe and Richards began employment in
September 1996. Mr. Guedry joined the Company in October 1996. In addition, on
August 27, 1996, the shareholders of the Company elected a Board of Directors
comprised of five members, all but one of which were elected to the Board for
the first time. Returning to the Board as Chairman was Ivar Siem. Directors Roy
T. Oliver, Steven A. Webster, William R. Ziegler and Peter M. Holt were newly
elected to the Board of Directors of the Company.
CHANGE IN BUSINESS STRATEGY
The Company also began implementing in 1996 a new business strategy
intended to return the Company to profitability and to enable it to keep pace
with rapidly changing competitive conditions in the land drilling business
which, management believes, is undergoing a period of rapid consolidation. This
strategy involves:
o redeploying its drilling rigs and related assets where
feasible to geographic markets with greater potential for
increased gross operating margin;
o restoring certain of its stacked rigs to marketable condition
through a program of capital expenditures; and
o acquiring businesses and assets complementing its land
drilling operations.
To meet the increased capital resources and liquidity requirements of its new
business strategy, the Company will incur additional bank debt and may be
required to pursue other financing methods.
REDEPLOYMENT OF OPERATING ASSETS
Due to continuing operating losses, the Company has recently withdrawn
all four of its rigs from Mexico. These rigs have been returned to Texas for
subsequent service in the higher margin markets of Texas, Oklahoma, Arkansas and
Louisiana. The Company is considering withdrawing from Argentina and certain
other low margin domestic markets.
REFURBISHMENT OF STACKED RIGS
The majority of the Company's existing drilling rigs were built during
1979 to 1981, the industry's most recent rig building cycle. As of the date of
this Prospectus, approximately one third of its rig fleet is stacked. Over the
years, the Company has deferred some maintenance on its stacked rigs. Management
believes that the market for land drilling rigs in the southern United States
("U.S."), particularly in Arkansas, Louisiana, Oklahoma and Texas, has improved
sufficiently to justify a program to restore certain of its stacked rigs to
marketable condition. Accordingly, as market conditions warrant and the
Company's finances permit, the Company plans to undertake capital expenditures
to refurbish and upgrade certain of its rig inventory. As noted below, the
Company recently placed in service one of the deep land drilling rigs acquired
in the Mergers (hereinafter defined.) The Company is currently refurbishing
three of its rigs at an estimated cost of approximately $1.5 to $2.0 million.
These rigs should be ready for redeployment into the Company's U.S. based rig
fleet in the first quarter of 1997.
ACQUISITIONS
Four major acquisitions have been completed since the Company's change
of management. Two of the acquisitions were pursuant to separate merger
agreements and effected a $25.0 million equity infusion and the acquisition of
deep drilling equipment. The third acquisition was completed pursuant to an
asset purchase agreement for three rigs operating in South Texas and three
stacked rigs in exchange for 5,500,000 shares of Common Stock. The fourth
acquisition was pursuant to an asset purchase agreement to acquire all of the
South Texas operational assets of Diamond M Onshore, Inc., a wholly- owned
subsidiary of Diamond Offshore Drilling, Inc. ("Diamond M"). These assets
consist of ten land drilling rigs, all of which are currently operating, 19 rig
hauling trucks, a yard facility in Alice, Texas and various other equipment and
drill pipe. The Diamond M assets were acquired for approximately $26.0 million
in cash and were funded with the new credit facility described below.
The two mergers (collectively, the "Mergers") were closed on August 29,
1996. Under the first agreement, the capital stock of R. T. Oliver, Inc., an
Oklahoma corporation ("RTO"), and Land Rig Acquisition Corp., a Delaware
corporation("LRAC"), was exchanged for 39,423,978 shares of the Common Stock. In
addition, RTO's and LRAC's stockholders were issued warrants to acquire up to
1,720,000 additional shares of the Common Stock ("Shadow Warrants"), the
exercise of which is contingent upon the occurrence of certain events. Since the
date of issuance, one million of these shadow warrants have been terminated.
This
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Merger resulted in the acquisition of 18 inactive, deep capacity land drilling
rigs. The Company believes that these rigs can be brought up to operating
condition within a reasonable time on an economic basis and that this group of
rigs represents a significant concentration of the relatively small number of
such deep drilling land rigs currently available in the market. The Company has
placed one of these rigs in operation. Under the second agreement, the capital
stock of Somerset Investment Corp., a Texas corporation ("Somerset"), was
exchanged for 39,423,978 shares of the Common Stock. In addition, Somerset's
shareholders were issued Shadow Warrants to acquire up to 1,720,000 shares of
the Common Stock were issued, the exercise of which is contingent upon the
occurrence of certain events. Since the date of issuance, one million of these
Shadow Warrants have been terminated. This Merger resulted in a $25.0 million
equity infusion into the Company and it is anticipated that these funds will be
used for combined rig fleet refurbishment and general corporate purposes.
The Company entered into a definitive asset purchase agreement dated as
of December 31, 1996, to acquire the operating assets of Flournoy Drilling
Company ("Flournoy") for approximately 12.43 million shares of Common Stock and
assumption of approximately $800,000 of Flournoy's debt, which the Company will
refinance at closing. The assets to be acquired include 13 land drilling rigs,
17 rig hauling trucks, a yard and office facility in Alice, Texas and various
other equipment and drill pipe. The Company expects to offer employment to
Flournoy's operating personnel. Mr. Lucien Flournoy, the founder of Flournoy,
will join the Company's Board of Directors. The Company anticipates closing this
acquisition in the first quarter of 1997, subject to review of the transaction
by federal antitrust authorities, and satisfaction of other conditions contained
in the definitive asset purchase agreement. With respect to one-half of the
shares to be issued in the transaction, the Company agreed to issue additional
shares if the shareholders of Flournoy hold value less than $2.00 per share
one-year from closing.
NEW CREDIT FACILITY
As of December 31, 1996, the Company entered into a $35.0 million
reducing revolving credit facility (the "Facility") to fund the Diamond M
acquisition and for other general corporation purposes. The Facility provides
for an initial loan commitment of $35.0 million which reduces by $5.0 million
each year until maturity on December 31, 1999. The Facility is secured by
substantially all of the Company's assets and calls for quarterly interest
payments on the outstanding balance at either LIBOR plus 3% or the lending
institution's prime rate plus 2%. In connection with entering into the Facility,
the Company utilized existing working capital to repay the $9.4 million balance
outstanding under its previous term loan agreement.
SELLING SHAREHOLDERS
The following table sets forth certain information, as of the date
hereof, with respect to the number of Shares beneficially owned and being
offered hereby by the Selling Shareholders.
<TABLE>
<CAPTION>
Shares Shares
Beneficially Beneficially
Name of Beneficial Owner Owned and to Shares Offered Owned after
be Owned(1) Hereby(1) the Offering
- -------------------------------------------------------- ------------------ ----------------- -----------------
<S> <C> <C> <C>
Wexford Special Situations 1996, L.P.................... 1,175,300(2) 1,175,300 --
Wexford-Euris Special Situations 1996, L.P.............. 301,350(2) 301,350 --
Wexford Special Situations 1996 Institutional, L.P...... 214,550(2) 214,500 --
Wexford Special Situations 1996 Limited................. 58,800(2) 58,800 --
Somerset Capital Partners ("SCP") (3), (4).............. 35,423,978(5) 35,423,978 (5) --
Somerset Drilling Associates, L.L.C. ("SDA") (3), (4)... 29,962,223 29,962,223 --
John Winfield (4)....................................... 500,000 500,000 --
Intergroup Corporation (4).............................. 500,000 500,000 --
PMG Investment Club(4) ................................. 105,000 105,000 --
Winston Partners, L.P.(4)............................... 2,000,000 2,000,000 --
Roy T. Oliver, Jr.(3), (4).............................. 15,703,306(6) 15,279,827 423,479*
U.S. Rig & Equipment, Inc.(3), (4)...................... 2,701,051 2,701,051 --
Don Bodard 1995 Revocable Trust (4)..................... 2,524,102 2,524,102 --
Roberds Johnson Industries, Inc.(4)..................... 399,282 399,282 --
Craig Cannon (4)........................................ 1,070,703 277,053 793,650*
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
Shares Shares
Beneficially Beneficially
Name of Beneficial Owner Owned and to Shares Offered Owned after
be Owned(1) Hereby(1) the Offering
- -------------------------------------------------------- ------------------ ----------------- -----------------
<S> <C> <C> <C>
Mike Mullen Energy Equipment
Resource, Inc.(3), (4).............................. 7,373,620 7,373,620 --
GCT Investments, Inc., (3), (4)......................... 3,219,191 3,219,191 --
Empire Holdings, Ltd., (4).............................. 215,657 215,657 --
Layton Humphrey, (4) ................................... 755,222 705,222 50,000*
John Mullen, III (4).................................... 508,605 508,605 --
NRY #1 Family Ltd. Partnership (4)...................... 73,323 73,323 --
PAN #1 Family Ltd. Partnership (4)...................... 73,323 73,323 --
La Patagonia Offshore, Inc. (4)......................... 887,692 887,692 --
R.E. Ferrell (4)........................................ 83,039 83,039 --
Lloyd Haggard (4)....................................... 41,520 41,520 --
Jack Witkin Family LLC (4).............................. 41,520 41,520 --
Lee Irrevocable Trust #1 (4)............................ 41,520 41,520 --
Alan Munoz (4).......................................... 41,520 41,520 --
James L. Northrup (4)................................... 166,079 166,079 --
Lee Financial Corporation (4)........................... 7,607 2,158 5,449*
Dr. Brady Allen (4)..................................... 31,256 8,862 22,394*
Dr. F. Allen Barber (4)................................. 60,501 17,154 43,347*
BMRN Family Partners, Ltd. (4).......................... 12,100 3,431 8,669*
Dr. Francisco Cardenas (4).............................. 30,251 8,577 21,674*
Mrs. Bobbie A. Chrest (4)............................... 31,256 8,862 22,394*
David Franklin (4)...................................... 52,201 14,801 37,400*
Gonzalez Partners L.P. (4).............................. 31,256 8,862 22,394*
Dr. Robert W. Hahn (4).................................. 31,256 8,862 22,394*
Marilyn L. Hanna Trust (4).............................. 30,251 8,577 21,674*
Polly Pierson Living Trust (4).......................... 30,251 8,577 21,674*
RRG #1 Family Limited Partnership (4)................... 15,126 4,289 10,837*
Ronald L. Skaggs (4).................................... 62,514 17,725 44,789*
David C. Vaughn (4)..................................... 62,514 17,725 44,789*
Ronald D. Watson (4).................................... 30,251 8,577 21,674*
Jack A. Witkin.......................................... 242,008 68,618 173,390*
Scott O'Keefe .......................................... 50,000(7) 50,000 --
Spencer Finance Corp. (8)............................... 3,297,436 3,297,436 --
Scan Atlantic, Inc. (8)................................ 618,540 618,540 --
B.F. Interests, Inc. (8)................................ 618,540 618,540 --
Gilbo Invest A/S (8).................................... 422,581 422,581 --
Vantage Industry Partners, Inc. (8)..................... 542,903 542,903 --
Thomas P. Richards...................................... 2,000,000(9) 2,000,000 --
</TABLE>
- ------------------
* Less than one percent.
(1) Unless otherwise noted, all Shares reflected are beneficially owned and
of record. These amounts do not reflect 1,440,000 shares which may be
issued, subject to certain contingencies, under the Shadow Warrants.
8
<PAGE>
(2) The Company issued these shares to the respective Selling Shareholders
in a private placement on December 30, 1996. The proceeds of the
private placement were utilized to repay a $4.0 million note.
(3) Party to the Shareholders' Agreement or, in the case of SCP, a person
that controls a party to the Shareholders' Agreement. See "Risk
Factors-- Control Considerations."
(4) The Company issued 78,847,956 shares of Common Stock directly to: (i)
these Selling Shareholders; (ii) other Shareholders who have since sold
such shares; or (iii) partnerships in which certain of these Selling
Shareholders were partners, in a private placement in connection with
the consummation of the Mergers. As of the date of this Prospectus,
9,038,918 of such shares of Common Stock have been resold. See "Recent
Developments."
(5) Includes 29,962,223 shares owned beneficially through SDA of which SCP
is the managing member.
(6) Includes 12,114,563 shares owned beneficially and of record by Mr.
Oliver, 2,701,051 shares beneficially owned through U.S. Rig &
Equipment, Inc., a corporation wholly-owned and controlled by him, and
887,692 shares beneficially owned through La Patagonia Offshore, Inc.,
a corporation jointly-owned and controlled by Mr. Oliver.
(7) Represents shares issuable to Mr. O'Keefe upon the exercise of options
granted pursuant to a letter agreement dated April 2, 1996. The options
were granted to Mr. O'Keefe as partial compensation for consulting
services provided by him to the Company. The options may be exercised
at any time and expire on April 1, 1997.
(8) The Company issued 5,500,000 shares of Common Stock directly to
Meritus, Inc., a Texas corporation, Mesa Rig 4 L.L.C., a Texas Limited
Liability company, Mesa Venture, a Texas general partnership and Mesa
Drilling, Inc., a Texas corporation (collectively, "Mesa"), in which
these Selling Shareholders were shareholders, members or partners, in a
private placement in connection with the consummation of an asset
purchase from Mesa and the other transactions contemplated thereby. See
"Recent Developments."
(9) Represents shares issuable to Mr. Richards upon the exercise of options
granted pursuant to a Non-Qualified Stock Option Agreement dated
September 3, 1996 (the "Option Agreement"). The options were granted to
Mr. Richards as partial consideration for his employment as the
President and Chief Executive Officer of the Company. The options may
be exercised as to 20% of the total option shares currently, and as to
20% of the total option shares beginning on the next four annual
anniversaries of the date of the Option Agreement.
Wexford Special Situations 1996, L.P., Wexford - Euris Special
Situations 1996, L.P., Wexford Special Situations 1996 Institutional, L.P. and
Wexford Special Situations 1996 Limited (the "Wexford Entities") are members of
SDA and collectively own approximately 10.5 percent of SDA's outstanding
capital. The Wexford Entities are not managing members of SDA and disclaim
control of SDA. Roy T. Oliver, Jr. is a director of the Company. Thomas P.
Richards is the President and Chief Executive Officer of the Company. Scott
O'Keefe provided consulting services to the Company from April, 1996, until
September, 1996, when he was appointed Senior Vice President and Chief Financial
Officer. William R. Ziegler and Steven A. Webster, both general partners of SCP,
are also directors. The Company has entered into an investment monitoring
agreement providing for a one-time $75,000 payment by the Company to SCP to
monitor SDA's investment in the Company.
In connection with the Mergers, 3,440,000 shares of Common Stock were
issuable upon the occurrence of certain events, to the shareholders of LRAC, RTO
and Somerset upon the exercise of the Shadow Warrants. As of the date of this
Prospectus, 2,000,000 of the Shadow Warrants have been terminated.
Except as otherwise noted, none of the other Selling Shareholders have
held any position or office or had any other material relationship with the
Company.
PLAN OF DISTRIBUTION
Sales of the Shares by the Selling Shareholders may be made from time
to time in one or more transactions, including block transactions, on the AMEX
or any other exchange or quotation system on which the Common Stock may be
listed or quoted pursuant to and in accordance with the applicable rules of the
Exchanges, or in the over the counter market, in negotiated transactions or in a
combination of any such methods of sale, at fixed prices that may be changed, at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices. The Shares may be offered
directly, to or through agents designated from time to time, or to or through
brokers or dealers, or through any combination of these methods of sale. Such
agents, brokers or dealers may receive compensation in the form of discounts,
concessions or commissions from the Selling Shareholders and/or the purchasers
of the Shares for whom such broker-dealers may act as agents or to whom they
sell as principals, or both (which compensation as to a particular broker-dealer
might be in excess of customary commissions). A member firm of an Exchange may
be engaged to act as an agent in the sale of Shares by the Selling Shareholders.
9
<PAGE>
The Selling Shareholders and any brokers, dealers, agents or others
that participate with the Selling Shareholders in the distribution of the Shares
may be deemed to be "underwriters" within the meaning of the Securities Act, and
any commissions or fees received by such persons and any profit on the resale of
the Shares purchased by such persons may be deemed to be underwriting
commissions or discounts under the Securities Act.
Agents, brokers and dealers may be entitled under agreements entered
into by the Selling Shareholders and/or the Company to indemnification against
certain civil liabilities, including liabilities under the Securities Act.
There is no assurance that the Selling Shareholders will sell any or
all of the Shares offered hereby.
EXPERTS
The financial statements and the related financial statement schedules
incorporated in this Prospectus by reference from the Company's Definitive Proxy
Statement for the 1996 Annual Meeting of Shareholders for the year ended
December 31, 1995 and Form 8-K dated December 30, 1996 have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their reports which
are incorporated herein by reference, and have been so incorporated in reliance
upon the reports of such firm given upon their authority as experts in
accounting and auditing.
LEGAL MATTERS
Certain legal matters in connection with the Shares have been passed
upon for the Company by Porter & Hedges, L.L.P., Houston, Texas.
10
<PAGE>
================================================================================
NO PERSONS HAVE BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH
THE OFFERING OF SECURITIES MADE HEREBY AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY OR ANY OTHER PERSON. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL, NOR A SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES IN ANY JURISDICTION
TO OR FROM ANY PERSON TO OR FROM WHOM IT IS NOT LAWFUL TO MAKE ANY SUCH OFFER OR
SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY DISTRIBUTION OF SECURITIES MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES
CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE
COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION HEREIN IS CORRECT AS OF
ANY TIME SUBSEQUENT TO ITS DATE.
------------------------------------
TABLE OF CONTENTS
Available Information ..................................................... 2
Incorporation of Certain Documents by Reference ........................... 2
The Company ............................................................... 3
Risk Factors .............................................................. 3
Recent Developments ....................................................... 5
Selling Shareholders ...................................................... 7
Plan of Distribution ...................................................... 9
Experts ................................................................... 10
Legal Matters ............................................................. 10
================================================================================
================================================================================
80,549,038 SHARES
DI INDUSTRIES, INC.
COMMON STOCK
(PAR VALUE $0.10 PER SHARE)
--------------
[LOGO OMITTED]
--------------
January 24, 1997
================================================================================
11
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
SEC registration fee .......... $ 1,657.20
Blue Sky fees and expenses .... 1,000.00
Legal fees and expenses ....... 5,000.00
Printing expenses ............. 7,000.00
Accounting fees and expenses .. 2,000.00
Miscellaneous ................. 2,000.00
----------
Total Expenses $18,657.20
==========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under Article 1302-7.06 of the Texas Miscellaneous Corporation Laws
Act, the articles of incorporation of a Texas corporation may provide that a
director of that corporation shall not be liable, or shall be liable only to the
extent provided in the articles of incorporation, to the corporation or its
shareholders for monetary damages for acts or omissions in the director's
capacity as a director, except that the articles of incorporation cannot provide
for the elimination or limitation of liability of a director to the extent that
the director is found liable for (i) a breach of the director's duty of loyalty
to the corporation or its shareholders, (ii) acts or omissions not in good faith
that constitutes a breach of duty of the director to the corporation or an act
or omission that involves intentional misconduct or a knowing violation of the
law, (iii) any transaction from which the director received an improper personal
benefit, or (iv) an act or omission for which the liability of a director is
expressly provided by an applicable statute. Article XII of the Company's
Articles of Incorporation, as amended, states that a director of the Company
shall not be liable to the Company or its shareholders for monetary damages
except to the extent otherwise expressly provided by the statutes of the State
of Texas.
In addition, Article 2.02-1 of the Texas Business Corporations Act (the
"TBCA") authorizes a Texas corporation to indemnify a person who was, is, or is
threatened to be made a named defendant or respondent in a proceeding, including
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative, arbitrative, or investigative because the person is or
was a director. The TBCA provides that unless a court of competent jurisdiction
determines otherwise, the indemnification is permitted only if it is determined
that the person (1) conducted himself in good faith; (2) reasonably believed (a)
in the case of conduct in his official capacity as a director of the
corporation, that his conduct was in the corporation's best interests; and (b)
in all other cases, that his conduct was at least not opposed to the
corporation's best interests; and (3) in the case of any criminal proceeding,
had no reasonable cause to believe his conduct was unlawful. A person may be
indemnified under Article 2.02-1 against judgments, penalties (including excise
and similar taxes), fines, settlements, and reasonable expenses actually
incurred by the person (including court costs and attorneys' fees), but if the
person is found liable to the corporation or is found liable on the basis that
personal benefit was improperly received by him, the indemnification is limited
to reasonable expenses actually incurred and shall not be made in respect of any
proceeding in which the person has been found liable for willful or intentional
misconduct in the performance of his duty to the corporation. A corporation is
obligated under Article 2.02-1 to indemnify a director or officer against
reasonable expenses incurred by him in connection with a proceeding in which he
is named defendant or respondent because he is or was a director or officer if
he has been wholly successful, on the merits or otherwise, in the defense of the
proceeding. Under Article 2.02-1 a corporation may (i) indemnify and advance
expenses to an officer, employee, agent or other persons who are or were serving
at the request of the corporation as a director, officer, partner venturer,
proprietor, trustee, employee, agent or similar functionary of another entity to
the same extent that it may indemnify and advance expenses to its directors,
(ii) indemnify and advance expenses to directors and such other persons
identified in (i) to such further extent, consistent with law, as may be
provided in the corporation's articles of incorporation, bylaws, action of its
board of directors, or contract or as permitted by common law and (iii) purchase
and maintain insurance or another arrangement on behalf of directors and such
other persons identified in (i) against any liability asserted against him and
incurred by him in such a capacity or arising out of his status as such a
person. The Bylaws of the Company set forth specific provisions for
indemnification of directors, officers, agents and other persons which are
substantially identical to the provisions of Article 2.02-1 described above. The
Company maintains directors and officers insurance.
II-1
<PAGE>
ITEM 16. EXHIBITS
(A) EXHIBITS
The exhibits listed in the Exhibit Index below are filed as part of the
Registration Statement:
Exhibit
NUMBER DESCRIPTION
------ -----------
2.1 -- 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 herein by reference to Exhibit 2.1 to
Registration Statement No. 333-6077).
2.1.1 -- Amendment to 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 herein by reference to
Exhibit 2.1.1 to Registration Statement No. 333-6077).
2.1.2 -- 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 herein
by reference to Exhibit 2.1.2 to Amendment No. 1 to
Registration Statement No. 333-6077).
2.2 -- Agreement and Plan of Merger dated May 7, 1996, among DI
Industries, Inc. and Somerset Investment Corp.
(Incorporated herein by reference to Exhibit 2.2 to
Registration Statement No. 333-6077).
2.2.1 -- Amendment to Agreement and Plan of Merger dated May 7,
1996, among DI Industries, Inc. and Somerset Investment
Corp. (Incorporated herein by reference to Exhibit 2.2.1
to Registration Statement No. 333-6077).
2.2.2 -- Second Amendment to Agreement and Plan of Merger dated
July 26, 1996, among DI Industries, Inc. and Somerset
Investment Corp. (Incorporated herein by reference to
Exhibit 2.2.2 to Amendment No. 1 to Registration Statement
No. 333-6077).
2.3 -- Asset Purchase Agreement dated October 3, 1996, by and
between the Company and Meritus, Inc., a Texas
corporation, Mesa Rig 4 L.L.C., a Texas limited liability
company, Mesa Venture, a Texas general partnership and
Mesa Drilling, Inc., a Texas corporation (Incorporated by
reference to Exhibit 2.1 to Registration No. 333-14783).
2.4.1 - Asset Purchase Agreement dated November 12, 1996, between
Diamond M Onshore, Inc. and Drillers, Inc. (the "Asset
Purchase Agreement") (Incorporated herein by reference to
Exhibit 2.1 to Form 8-K dated December 30, 1996).
2.4.2 - Letter Agreement dated December 31, 1996, between Diamond
M Onshore and Drillers, Inc. amending the Asset Purchase
Agreement (Incorporated herein by reference to Exhibit 2.2
to Form 8-K dated December 30, 1996).
5* -- Opinion of Porter & Hedges, L.L.P.
10.1 -- 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.
(Incorporated herein by reference to Exhibit 10.9 to
Registration Statement No. 333-6077).
10.1.1 -- Amendment to Shareholders' Agreement dated May 7, 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
herein by reference to Exhibit 10.9.1 to Registration
Statement No. 333- 6077).
10.2 -- Form of Shadow Warrant to be issued to the shareholders of
Somerset Investment Corporation (Incorporated herein by
reference to Exhibit 10.10 to Registration Statement No.
333-6077).
II-2
<PAGE>
10.3 -- Form of Shadow Warrant to be issued to the shareholders of
R.T. Oliver, Inc. and Land Rig Acquisition Corporation
(Incorporated herein by reference to Exhibit 10.11 to
Registration Statement No. 333-6077).
10.4 -- 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 herein by
reference to Exhibit 10.12 to Registration Statement No.
333-6077).
10.4.1 -- Amendment to Registration Rights Agreement dated May 7,
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 herein by reference to
Exhibit 10.12.1 to Registration Statement No. 333-6077).
10.4.2 -- 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 herein by
reference to Exhibit 10.4.2 to Amendment No. 1 to
Registration Statement No. 333-6077).
10.5 -- Investment Monitoring Agreement dated May 7, 1996, among
DI Industries, Inc., Somerset Capital Partners and
Somerset Drilling Associates, L.L.C. (Incorporated herein
by reference to Exhibit 10.13 to Registration Statement
No. 333-6077).
10.6 -- Form of Non-Competition Agreement to be executed among DI
Industries, Inc., Roy T. Oliver, Jr., U.S. Rig and
Equipment, Inc., Mike L. Mullen and Mike Mullen Energy
Equipment Resource, Inc. (Incorporated herein by reference
to Exhibit 10.14 to Registration Statement No. 333-6077).
10.7 -- Employment Agreement dated September 3, 1996, by and
between the Company and Thomas P. Richards (Incorporated
herein by reference to Exhibit 10.1 to Registration
Statement No. 333-14783).
10.8 -- Non-Qualified Stock Option Agreement dated September 3,
1996, by and between the Company and Thomas P. Richards
(Incorporated herein by reference to Exhibit 10.2 to
Registration Statement No. 333-14783).
10.9 -- Letter Agreement dated April 2, 1996, by and between the
Company and T. Scott O'Keefe, regarding consulting
arrangement and stock options (Incorporated herein by
reference to Exhibit 10.9 to Post Effective Amendment No.
1 to Registration Statement No. 333-14783).
10.10 -- Letter Agreement dated August 31, 1996, by and between the
Company and T. Scott O'Keefe, regarding employment and
stock options (Incorporated herein by reference to Exhibit
10.10 to Post Effective Amendment No. 1 to Registration
Statement No. 333-14783).
10.11 -- Employment Agreement dated September 17, 1996, by and
between the Company and Forrest M. Conley, Jr.
(Incorporated herein by reference to Exhibit 10.11 to Post
Effective Amendment No. 1 to Registration Statement No.
333-14783).
10.12 -- Incentive Stock Option Agreement dated September 17, 1996,
by and between the Company and Forrest M. Conley
(Incorporated herein by reference to Exhibit 10.12 to Post
Effective Amendment No. 1 to Registration Statement No.
333-14783).
10.13 -- Employment Agreement dated September 3, 1996, by and
between the Company and Ronnie E. McBride (Incorporated
herein by reference to Exhibit 10.13 to Post Effective
Amendment No. 1 to Registration Statement No. 333-14783).
10.14 -- Incentive Stock Option Agreement dated September 3, 1996,
by and between the Company and Ronnie E. McBride
(Incorporated herein by reference to Exhibit 10.14 to Post
Effective Amendment No. 1 to Registration Statement No.
333-14783).
II-3
<PAGE>
10.15 -- Non-Qualified Stock Option Agreement dated September 3,
1996, by and between the Company and Ronnie E. McBride
(Incorporated herein by reference to Exhibit 10.15 to Post
Effective Amendment No. 1 to Registration Statement No.
333-14783).
10.16 -- Employment Agreement dated October 1, 1996, by and between
the Company and Terrell L. Sadler (Incorporated herein by
reference to Exhibit 10.16 to Post Effective Amendment No.
1 to Registration Statement No. 333-14783).
10.17 -- Non-Qualified Stock Option Agreement dated October 1,
1996, by and between the Company and Terrell L. Sadler
(Incorporated herein by reference to Exhibit 10.17 to Post
Effective Amendment No. 1 to Registration Statement No.
333-14783).
10.18 -- Incentive Stock Option Agreement dated October 1, 1996, by
and between the Company and Terrell L. Sadler
(Incorporated herein by reference to Exhibit 10.18 to Post
Effective Amendment No. 1 to Registration Statement No.
333-14783).
10.19 -- Stock Purchase Agreement dated as of December 28, 1996,
between DI Industries, Inc., and Wexford Special
Situations 1996, L.P., Wexford-Euris Special Situations
1996, L.P., Wexford Special Situations 1996 Institutional,
L.P. and Wexford Special Situations 1996 Limited
(Incorporated herein by reference to Exhibit 10.1 to Form
8-K dated December 30, 1996).
10.20 - Senior Secured Reducing Revolving Credit Agreement dated
as of December 31, 1996, among DI Industries, Inc. and
Drillers, Inc. (as borrowers), DI International, Inc. (as
guarantor), Bankers Trust Company (as agent and
administrative agent), ING (US) Capital Corporation (as
co-agent) and Nordlandsbanken AS (as lender) (Incorporated
herein by reference to Exhibit 99.1 to Form 8-K dated
December 30, 1996).
23.1* -- Consent of Deloitte & Touche LLP.
23.2 -- Consent of Porter & Hedges, L.L.P. (included in their
opinion filed as Exhibit 5 hereto.)
24 -- Powers of Attorney (included on signature page hereto.)
- ------
* Filed herewith.
ITEM 17. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration statement:
(i) to include any prospectus required by section
10(a)(3) of the Securities Act of 1933 (the "Securities Act");
(ii) to reflect in the prospectus any facts or events
arising after the effective date of the registration statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement; and
(iii) to include any material information with
respect to the plan of distribution not previously disclosed
in the registration statement or any material change to such
information in the registration statement;
PROVIDED, HOWEVER, that clauses (a)(1)(i) and (a)(1)(ii) of this
paragraph do not apply if the information required to be included in a
post-effective amendment by those clauses is contained in periodic
reports filed with or furnished to the Securities and Exchange
Commission by the registrant pursuant to Section 13 or Section 15(d) of
the Securities Exchange Act of 1934 that are incorporated by reference
in the registration statement.
II-4
<PAGE>
(2) That, for the purpose of determining any liability under
the Securities Act, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof; and
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering;
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by registrant
of expenses incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
II-5
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints T. Scott O'Keefe and David W. Wehlmann,
and each of them, either of whom may act without joinder of the other, his true
and lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all pre- and post-effective amendments to this
Registration Statement, and to file the same, with all exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto such attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, and each of them, or the
substitute or substitutes of either of them, may lawfully do or cause to be done
by virtue hereof.
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE
REGISTRANT CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL
OF THE REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF HOUSTON, STATE OF TEXAS, ON JANUARY 24, 1997.
DI INDUSTRIES, INC.
By: /s/ T. SCOTT O'KEEFE
T. Scott O'Keefe, Senior Vice President and
Chief Financial Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
<S> <C> <C>
SIGNATURES TITLE DATE
President and Chief
/s/ THOMAS P. RICHARDS Executive Officer January 24 1997
Thomas P. Richards
Senior Vice President
/s/ T. SCOTT O'KEEFE and Chief Financial January 24 1997
T. Scott O'Keefe Officer
Vice President
/s/ DAVID W. WEHLMANN and Controller January 24 1997
David W. Wehlmann
/s/ PETER M. HOLT Director January 24 1997
Peter M. Holt
/s/ ROY T. OLIVER, JR. Director January 24 1997
Roy T. Oliver, Jr.
/s/ IVAR SIEM Director January 24 1997
Ivar Siem
/s/ STEVEN A. WEBSTER Director January 24 1997
Steven A. Webster
/s/ WILLIAM R. ZIEGLER Director January 24 1997
William R. Ziegler
</TABLE>
II-6
EXHIBIT 5
January 24, 1997
DI Industries, Inc.
450 Gears Road, Suite 625
Houston, Texas 77067
Re: DI INDUSTRIES, INC. REGISTRATION STATEMENT ON FORM S-3
Ladies and Gentlemen:
At your request, we have examined the Articles of Incorporation, as
amended, of DI Industries, Inc., a Texas corporation (the "Company"), the bylaws
and all corporate proceedings of the Company in connection with the proposed
sale to the public by Wexford Special Situations 1996, L.P., Wexford-Euris
Special Situations 1996, L.P., Wexford Special Situations 1996 Institutional,
L.P. and Wexford Special Situations 1996 Limited of up to 1,750,000 shares (the
"Shares") of common stock, par value $0.10 per share (the "Common Stock"), and
have reviewed such other matters as we deem relevant in the premises, and based
upon such review and examination, we are of the opinion that the Shares have
been duly authorized and are validly issued, fully-paid and nonassessable
outstanding shares of Common Stock of the Company.
We hereby consent to the reference to our firm under the caption "Counsel"
in the Prospectus included in the Registration Statement on Form S-3 being filed
by the Company with the Securities and Exchange Commission in connection with
the offering of the Shares.
Very truly yours,
PORTER & HEDGES, L.L.P.
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
DI Industries, Inc. on Form S-3 of our report dated March 28, 1996(June 10, 1996
as to Note 13) appearing in DI Industries, Inc.'s definitive Proxy Statement for
the 1996 annual meeting of shareholders for the year ended December 31, 1995 and
our report dated December 16, 1996 appearing in DI Industries, Inc.'s Form 8-K
dated December 30, 1996.
We also consent to the reference to us under the heading "Experts" in the
Prospectus, which is part of this Registration Statement.
DELOITTE & TOUCHE LLP
Houston, Texas
January 24, 1997
