SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14 (A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e) (2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Under Sec. 240.14a-12
NABORS INDUSTRIES LTD.
--------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box): [X] No fee required.
[ ] $125 per Exchange Act Rules 0-11 (c) (1) (ii), 14a-6 (i) (1), 14a-6 (i) (2)
or Item 22 (a) (2) of Schedule 14A.
[ ] Fee computed on table below per Exchange Act Rules 14a-6 (i) (1) and 0-11.
(1) Title of each class of securities to which transaction applies:
----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
----------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a) (2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
----------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------
(3) Filing Party:
---------------------------------------------------------
(4) Date Filed:
-----------------------------------------------------------
-----------------------------------------------------------
NOTICE
OF
2003 ANNUAL GENERAL MEETING
OF
SHAREHOLDERS
AND
PROXY STATEMENT
-----------------------------------------------------------
(NABORS INDUSTRIES LOGO)
NABORS INDUSTRIES LTD.
2ND FLOOR INTERNATIONAL TRADING CENTER
WARRENS
ST. MICHAEL, BARBADOS
May 8, 2003
TO OUR SHAREHOLDERS:
You are cordially invited to attend the 2003 Annual General Meeting of
Shareholders of Nabors Industries Ltd., which will be held on Tuesday, June 3,
2003, beginning at 11:00 a.m., Central Daylight Time, at the Wyndham Greenspoint
Hotel, 12400 Greenspoint Drive, Houston, Texas.
Information about the annual general meeting, including matters on which
shareholders will act, may be found in the notice of annual general meeting and
proxy statement accompanying this letter. I look forward to greeting in person
as many of our shareholders as possible.
Your vote is important. Whether or not you plan to attend the meeting in
person, it is important that your shares be represented at the meeting. After
reading the enclosed notice of annual general meeting and proxy statement,
please sign, date and return the enclosed proxy in the stamped envelope included
with this letter.
On behalf of the Board of Directors and the management of Nabors, I extend
our appreciation for your continued support.
Sincerely yours,
/s/ EUGENE M. ISENBERG
EUGENE M. ISENBERG
Chairman of the Board
NABORS INDUSTRIES LTD.
2ND FLOOR INTERNATIONAL TRADING CENTER
WARRENS
ST. MICHAEL, BARBADOS
---------------
NOTICE OF ANNUAL GENERAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 3, 2003
---------------
The 2003 Annual General Meeting of Shareholders of Nabors Industries Ltd.
will be held at the Wyndham Greenspoint Hotel, 12400 Greenspoint Drive, Houston,
Texas on Tuesday, June 3, 2003 at 11:00 a.m., Central Daylight Time, to consider
and act upon the following matters:
1. The election of two Class III directors for terms expiring in 2006;
2. Appointment of PricewaterhouseCoopers LLP as independent auditors
and to authorize the Audit Committee of the Board of Directors to
set auditors' remuneration;
3. Approval of the 2003 Employee Stock Plan; and
4. Such other business as may properly come before the annual general
meeting.
The financial statements for the Company's 2002 fiscal year will also be
presented at the annual general meeting.
The Board of Directors has fixed the close of business on April 10, 2003
as the record date for determining the shareholders who are entitled to notice
of and to vote at the annual general meeting and any adjournment or postponement
of the meeting.
By Order of the Board of Directors,
/s/ DANIEL MCLACHLIN
DANIEL MCLACHLIN
Secretary
Dated: May 8, 2003
Please date and sign the enclosed proxy, and return it at your earliest
convenience in the enclosed stamped envelope, so that, if you are unable to
attend the annual general meeting, your shares may be voted.
1
NABORS INDUSTRIES LTD.
---------------
PROXY STATEMENT
---------------
2003 ANNUAL GENERAL MEETING OF SHAREHOLDERS
JUNE 3, 2003
GENERAL INFORMATION
Nabors Industries Ltd. ("Nabors"), a Bermuda company, is the successor to
Nabors Industries, Inc. ("Nabors Delaware"), a Delaware corporation, following a
corporate reorganization which occurred on June 24, 2002. As a result of the
reorganization, shareholders of Nabors Delaware, on the date of the
reorganization, became shareholders of Nabors. Nabors and its subsidiaries
continue to conduct the business previously conducted by Nabors Delaware and its
subsidiaries. Nabors Delaware continues to exist as an indirect, wholly-owned
subsidiary of Nabors.
In this proxy statement, "Nabors", the "Company", "we", "us" and "our"
refer to Nabors Industries Ltd. or, for information pertaining to periods prior
to June 24, 2002, to Nabors Delaware. Where the context requires, such
references also include our subsidiaries.
INFORMATION CONCERNING VOTING AND SOLICITATION
The Board of Directors of Nabors prepared this proxy statement for the
purpose of soliciting proxies for the 2003 Annual General Meeting of
Shareholders. Our annual general meeting will be held at the Wyndham Greenspoint
Hotel, 12400 Greenspoint Drive, Houston, Texas at 11:00 a.m., Central Daylight
Time, on Tuesday, June 3, 2003 unless adjourned or postponed. The Board is
making this solicitation by mail, and Nabors will pay all costs associated with
this solicitation. This proxy statement and accompanying notice of annual
general meeting and proxy are first being mailed to shareholders on or about May
8, 2003.
Our principal executive offices are located at 2nd Floor International
Trading Center, Warrens, P.O. Box 905E, St. Michael, Barbados. The telephone
number there is 246-421-9471.
ENTITLED TO VOTE
Only shareholders of record at the close of business on April 10, 2003 are
entitled to vote at the annual general meeting. At the annual general meeting,
each Nabors common share will be entitled to one vote. In addition, the holder
of record of one Special Voting Preferred Share of Nabors shall be entitled to a
number of votes equal to the number of exchangeable shares of Nabors Exchangeco
(Canada), Inc., a corporation incorporated under the laws of Canada, outstanding
from time to time which are not owned by Nabors or any of its affiliates, in
accordance with the instructions received from the holders of such shares. On
April 10, 2003, there were 565,497 shares of Nabors Exchangeco (Canada) Inc.
outstanding. A quorum is necessary to transact business at the annual general
meeting. The presence at the annual general meeting, in person or by proxy, of
holders of a majority of the shares outstanding on April 10, 2003, constitutes a
quorum. On April 10, 2003, there were 145,991,619 shares outstanding and
entitled to vote, each of which is entitled to one vote for each matter to be
voted on at the annual general meeting.
VOTING PROCEDURES
Shareholders of record can vote at the meeting by completing, signing and
returning the enclosed proxy card. Shareholders who hold their shares through a
broker ("in street name") must vote their shares in the manner prescribed by
their brokers.
2
Proxies timely received will be voted in accordance with the shareholders'
directions given in the proxies. In the absence of directions, shares for which
we have received executed proxies will be voted FOR the nominees for election as
directors named in this proxy statement, FOR the appointment of
PricewaterhouseCoopers LLP as independent auditors and authorization of the
Audit Committee of the Board to set the auditors' remuneration and FOR the
approval of the 2003 Employee Stock Plan.
REVOCATION OF PROXIES
You may revoke your proxy at any time before it is actually voted by:
o filing with the Secretary of Nabors, at or before the annual general
meeting and prior to the vote, a written notice of revocation
bearing a date later than the proxy being revoked;
o duly signing and delivering, prior to the annual general meeting, a
subsequent proxy relating to the annual general meeting; or
o voting in person at the annual general meeting (although attendance
at the annual general meeting will not, by itself, constitute a
revocation of a proxy).
You must send any written notice revoking your proxy to the Secretary at
our principal executive offices, 2nd Floor, International Trading Center,
Warrens, P.O. Box 905E, St. Michael, Barbados. Alternatively, you may hand
deliver your revocation notice at the annual general meeting. The financial
statements for the Company's 2002 fiscal year will also be presented at the
annual general meeting.
QUORUM AND REQUIRED VOTES
Nabors' Bye-laws provide that (a) the affirmative vote of a plurality of
the votes cast at a meeting at which a quorum is present is required for the
election of directors, and (b) the affirmative vote of the holders of a majority
of shares present in person or represented by proxy and entitled to vote thereon
is required to approve the appointment of the auditors and to approve the 2003
Employee Stock Plan.
Abstentions or votes that are withheld, are votes withheld by shareholders
who are present in person or by proxy at a meeting and entitled to vote.
Abstentions and withheld votes will be counted for purposes of establishing a
quorum. Abstentions and withheld votes are not considered votes cast on a matter
and will not be counted in the vote with respect to any proposal from which the
shareholder abstains or withholds his vote.
Broker non-votes occur when the person, usually a broker, holding the
certificate in street name does not have discretionary authority to vote on a
matter, and has not received instructions on how to vote from the beneficial
owner of the shares. Broker non-votes will be counted for purposes of
establishing a quorum, but will not be counted as votes cast or entitled to vote
on any proposals at the meeting. This will have the effect of reducing the
absolute number of shares required to approve a matter to be voted on at the
meeting.
SOLICITATION
Nabors has retained Georgeson Shareholder Communications Inc., 17 State
Street, New York, New York 10004 to solicit proxies on behalf of the Board of
Directors at an estimated cost of $12,000 plus reasonable out-of-pocket
expenses. Proxies may be solicited on behalf of the Board of Directors by mail,
in person and by telephone. Proxy materials will also be provided for
distribution through brokers, custodians, and other nominees and fiduciaries.
Nabors will reimburse such parties for their reasonable out-of-pocket expenses
for forwarding the proxy materials.
3
PROPOSALS TO VOTE ON
1. ELECTION OF DIRECTORS
Nominees for directors this year are Eugene Isenberg and Jack Wexler. These two
directors currently comprise Class III of the three classes of directors. Each
director is currently a director of the Company and has consented to serve a
three-year term. Each of the two directors has previously stood for election.
For additional information on this proposal, see page 5.
THE BOARD RECOMMENDS A VOTE FOR THESE NOMINEES.
2. APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT AUDITORS OF THE
COMPANY AND TO AUTHORIZE THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS TO SET
THE AUDITORS' REMUNERATION.
We are asking the shareholders to appoint PricewaterhouseCoopers LLP ("PWC") as
independent auditors for the Company for 2003 and to authorize the Audit
Committee of the Board of Directors to set the auditors' remuneration. The Board
of Directors, upon recommendation of the Audit Committee, has unanimously
selected PWC as independent auditors for 2003, subject to approval of the
shareholders. For additional information on this proposal, see page 24.
THE BOARD RECOMMENDS A VOTE FOR APPOINTMENT OF PWC AS INDEPENDENT AUDITORS FOR
2003 AND TO AUTHORIZE THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS TO SET THE
AUDITORS' REMUNERATION.
3. APPROVAL OF THE 2003 EMPLOYEE STOCK PLAN.
We are asking the shareholders to approve the 2003 Employee Stock Plan. For
additional information on this proposal, see page 24.
THE BOARD RECOMMENDS A VOTE FOR THE APPROVAL OF THE 2003 EMPLOYEE STOCK PLAN.
OTHER BUSINESS
The Board of Directors knows of no other business to be considered at the
meeting. However, if any other matters are properly brought before the meeting,
the persons named in the accompanying form of proxy will vote in their
discretion on such matters, to the extent permitted under applicable law and the
American Stock Exchange rules and regulations.
4
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Bye-law 29 authorizes the Board to fix the number of directors from time
to time, but at no less than five nor more than eighteen. The number of
directors currently is established at eight. The Bye-laws also provide for three
classes of directors, designated Class I, Class II and Class III, each currently
having three-year terms of office. Each class of directors is to consist of, as
nearly as possible, one-third of the total number of directors constituting the
entire Board. Except for directors elected to fill vacancies (whether created by
death, resignation, removal or expansion of the Board), the directors of each
class will be elected for a term of three years or until their respective
successors have been duly elected and qualified. At the 2003 annual general
meeting, two Class III directors, Eugene Isenberg and Jack Wexler, are nominated
for election to the Board to serve for a three-year term.
If the enclosed proxy is signed and returned, it will be voted as you
direct in the proxy. If you do not direct how the proxy should be voted, it will
be voted FOR the election of Mr. Isenberg and Mr. Wexler as Class III directors,
to serve until the 2006 annual general meeting of shareholders or until their
respective successors have been duly elected and qualified. However, should any
nominee become unavailable or prove unable to serve for any reason, the proxy
will be voted for the election of such other person as the Board may select to
replace such nominee, unless the Board instead fixes the number of directors at
less than eight. The Board has no reason to believe that the nominees will not
be available or will prove unable to serve.
The following tables set forth certain information concerning each Class
III director nominee, the continuing Class I and Class II directors and
executive officers of Nabors who are neither directors nor nominees for election
as directors. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE
CLASS III DIRECTOR NOMINEES IDENTIFIED BELOW.
CLASS III DIRECTOR NOMINEES - TERMS EXPIRING IN 2003
DIRECTOR
POSITION WITH NABORS OF NABORS
NAME AGE AND PRIOR BUSINESS EXPERIENCE SINCE
---- --- ----------------------------- ---------
Eugene M. Isenberg... 73 Chairman of the Board, Chairman of the Executive Committee of the 1987
Board and Chief Executive Officer of Nabors since 1987. Mr.
Isenberg has served as a Director of Danielson Holding Company
(a financial services holding company) since 1990. He has been
a Governor of the National Association of Securities Dealers
(NASD) since 1998 and the American Stock Exchange (AMEX) since
1996. He has served as a member of the National Petroleum
Council since 2000. From 1969 to 1982, Mr. Isenberg was
Chairman of the Board and principal shareholder of Genimar, Inc.
(a steel trading and building products manufacturing company),
which was sold in 1982. From 1955 to 1968, Mr. Isenberg was
employed in various management capacities with Exxon Corporation.
Jack Wexler............. 77 Chairman of the Compensation Committee of the Board, a member of 1987
the Executive and Audit Committees of the Board since 1987 and a
member of the Governance and Nominating Committee since 2002.
Mr. Wexler was employed by Exxon Corporation and its affiliates,
serving in senior staff and operating management positions in
the United States and the Far East until his retirement in 1982.
5
CLASS I CONTINUING DIRECTORS - TERMS EXPIRING IN 2004
DIRECTOR
POSITION WITH NABORS OF NABORS
NAME AGE AND PRIOR BUSINESS EXPERIENCE SINCE
---- --- ----------------------------- ---------
James L. Payne.......... 66 Chairman of the Governance and Nominating Committee of the 1999
Board since 2002 and a member of the Technical and Safety
Committee of the Board since 1999. Mr. Payne is currently
Chairman, Chief Executive Officer and President of Nuevo
Energy Company (a company engaged in the acquisition,
production and exploration of oil and natural gas
properties). He also serves as a Director of BJ Services
and Global Industries. He was a Director of Pool Energy
Services Co. from 1993 until its acquisition by Nabors in
November 1999. He retired as Vice Chairman of Devon Corp.
in February 2001. Prior to the merger between Devon Corp.
and Santa Fe Snyder Company in 2000, he had served as
Chairman and Chief Executive Officer of Santa Fe Snyder
Company. He was Chairman and Chief Executive Officer of
Santa Fe Energy Company from 1990 to 1999 when it merged
with Snyder Oil Company. Mr. Payne is a graduate of the
Colorado School of Mines where he was named a Distinguished
Achievement Medalist in 1993. He holds an MBA degree from
Golden Gate University and has completed the Stanford
Executive Program.
Hans W. Schmidt...... 73 Chairman of the Technical and Safety Committee of the Board 1993
since 1998 and a member of the Governance and Nominating
Committee of the Board since 2002. From 1958 to his
retirement in 1992, Mr. Schmidt held a number of positions
with C. Deilmann A.G., a diversified energy company located
in Bad Bentheim, Germany, including serving as a Director
from 1982 to 1992. From 1965 to 1992 he served as Director
of a subsidiary of C. Deilmann A.G., Deutag Drilling, a
company with worldwide drilling operations. From 1988 to
1991, Mr. Schmidt served as President of Transocean
Drilling Company, a company of which he was also a Director
from 1981 until 1991.
6
Richard F. Syron 59 Member of the Governance and Nominating Committee of the 2003
Board since 2003 and a member of the Compensation Committee
of the Board since 2003. Mr. Syron has served as Executive
Chairman of Thermo Electron Corporation (a manufacturer of
electronic measurement equipment, laboratory gems and other
scientific instruments) since November 2002; was Chairman
of the Board of Directors of Thermo Electron since January
2000, and was the Chief Executive Officer of Thermo
Electron from June 1999 to July 2000. Mr. Syron served
from April 1994 to May 1999 as the Chairman and Chief
Executive Officer of the American Stock Exchange. From
1989 to 1994, he served as president of the Federal Reserve
Bank of Boston, and as a member of the Federal Open Market
Committee. From 1986 to 1989, he was president of the
Federal Home Loan Bank of Boston. Earlier, he served as
assistant to then-Federal Reserve Chairman Paul Volcker,
and as Deputy Assistant Secretary of the U.S. Treasury
Department in Washington D.C. Mr. Syron is Trustee and
past Chairman of the Boston College Board of Trustees and
serves as Trustee for the Woods Hole Oceanographic
Institution in Massachusetts. He also serves as a Director
of John Hancock Financial Services, Inc., McKesson
Corporation and the American Stock Exchange.
7
CLASS II CONTINUING DIRECTORS - TERMS EXPIRING IN 2005
DIRECTOR
POSITION WITH NABORS OF NABORS
NAME AGE AND PRIOR BUSINESS EXPERIENCE SINCE
---- --- ----------------------------- ---------
Anthony G. Petrello.... 48 President and Chief Operating Officer of Nabors since 1992, Deputy 1991
Chairman since 2003, and a member of the Executive Committee of
the Board since 1991. From 1979 to 1991, Mr. Petrello was with
the law firm Baker & McKenzie, where he had been Managing Partner
of its New York Office from 1986 until his resignation in 1991.
Mr. Petrello holds a J.D. degree from Harvard Law School and B.S.
and M.S. degrees in Mathematics from Yale University.
Myron M. Sheinfeld.... 73 Chairman of the Audit Committee of the Board since 1988, a member 1988
of the Compensation Committee of the Board since 1993 and a
member of the Governance and Nominating Committee of the Board
since 2002. He is Senior Counsel to the law firm Akin, Gump,
Strauss, Hauer & Feld, L.L.P. From 1970 until April 2001 he held
various positions in the law firm Sheinfeld, Maley & Kay P.C.,
most recently as counsel to the firm. Mr. Sheinfeld was an
adjunct professor of law at the University of Texas, School of
Law from 1975 to 1991, and has been a contributing author to
numerous legal publications, and a contributor, co-editor and
co-author of Collier On Bankruptcy, and a co-author of Collier On
Bankruptcy Tax for Matthew Bender & Co., Inc. He is a member of
the Board of Editors of "The Practical Lawyer."
Martin J. Whitman..... 78 Member of the Audit Committee of the Board since 1993 and a member 1991
of the Governance and Nominating Committee of the Board since
2002. Chief Executive Officer until June 2002 and a Director of
Danielson Holding Company (an insurance products holding company)
since 1990 (Chairman of the Board until July 1999); Chairman,
Chief Executive Officer and Trustee of Third Avenue Trust and its
predecessor and Chief Investment Officer of Third Avenue
Management LLC and its predecessor (the adviser to Third Avenue
Trust) since 1990; Director of Tejon Ranch Co. (an agricultural
and land management company) from 1997 to 2001; and, Director of
Stewart Information Services, Inc. (a title insurance company)
from 2000 until 2002. Mr. Whitman was an Adjunct Lecturer,
Adjunct Professor and Distinguished Fellow in Finance, Yale
University School of Management from 1972 to 1984 and 1992 to
1999 and is currently an Adjunct Lecturer in Finance at Yale
University. He was an Adjunct Professor at the Columbia
University Graduate School of Business in 2001. Mr. Whitman is
co-author of The Aggressive Conservative Investor and author of
Value Investing: A Balanced Approach.
8
OTHER EXECUTIVE OFFICERS
POSITION WITH NABORS
NAME AGE AND PRIOR BUSINESS EXPERIENCE
---- --- -----------------------------
Bruce P. Koch........... 43 Vice President and Chief Financial Officer since February 2003, Vice
President-Finance from January 1996 to February 2003, and Corporate
Controller of Nabors from March 1990 to 1995. He was employed with the
accounting firm of Coopers & Lybrand from 1983 to 1990 in a number of
capacities, including Audit Manager from 1987 until 1990.
Daniel McLachlin.... 65 Vice President-Administration and Secretary of Nabors since 1986. He was
Manager, Administration of Nabors from 1984 to 1986. From 1979 to 1984 he
was the Vice President, Human Resources of Nabors Drilling Limited, a
subsidiary of Nabors.
9
COMMITTEES AND MEETINGS OF THE BOARD
The Board of Directors met six times during 2002. Each of our incumbent
directors attended at least 89% of the aggregate of the meetings of the Board
and the committees on which he served during 2002. The Board has five committees
- the Audit Committee, the Compensation Committee, the Governance and Nominating
Committee, the Technical and Safety Committee and the Executive Committee. The
independent directors of the Board meet in executive sessions following each
Board meeting. Appointments and chairmanships of the committees are recommended
by the Governance and Nominating Committee and selected by the Board. All
committees report their activities to the Board. The charters of each of our
Audit Committee, Compensation Committee, and Governance and Nominating Committee
are set forth in Annexes A, B and C, respectively.
AUDIT COMMITTEE
The primary purpose of our Audit Committee is to assist the Board in monitoring
(a) the quality and integrity of the financial statements of the Company, (b)
the independent auditors' qualifications and independence; (c) the performance
of the Company's independent auditors; and (d) compliance by the Company with
legal and regulatory requirements. The Audit Committee met seven (7) times
during 2002. The members of the Audit Committee are Myron M. Sheinfeld
(Chairman), Jack Wexler and Martin J. Whitman.
COMPENSATION COMMITTEE
The primary purpose of our Compensation Committee is to: (a) discharge the
Board's responsibilities relating to the compensation of our executives,
including overseeing the administration of our compensation programs and setting
the compensation of our key executives; (b) assist the Board in its oversight of
the development, implementation, and effectiveness of our policies and
strategies relating to our human capital function; and (c) prepare any report on
executive compensation required by the rules and regulations of the SEC. The
Compensation Committee met two (2) times during 2002. The members of the
Compensation Committee are Jack Wexler (Chairman), Myron M. Sheinfeld and
Richard F. Syron.
GOVERNANCE AND NOMINATING COMMITTEE
The primary purpose of the Governance and Nominating Committee is to recommend
individuals to the Board of Directors for nomination, election or appointment as
members of the Board and its committees and to take a leadership role in shaping
the corporate governance of Nabors, including developing, recommending to the
Board and reviewing on an ongoing basis the corporate governance principles and
practices that should apply to Nabors. The Governance and Nominating Committee
will consider nominees recommended by shareholders. Shareholders who wish to
submit nominees for director for consideration by the Governance and Nominating
Committee for election to our 2004 annual general meeting of shareholders may do
so by submitting such nominee's names, in compliance with the procedures and
along with the other information required by our Bye-Laws, to the Company's
principal executive offices no later than January 6, 2004. The Governance and
Nominating Committee met two (2) times during 2002. The members of the
Governance and Nominating Committee are James L. Payne (Chairman), Hans W.
Schmidt, Myron M. Sheinfeld, Richard F. Syron, Jack Wexler and Martin J.
Whitman.
TECHNICAL AND SAFETY COMMITTEE
The Technical and Safety Committee provides leadership in developing policies,
implementing programs and monitoring performance in the technical and safety
aspects of Nabors' operations. The Technical and Safety Committee met two (2)
times during 2002. The members of the Technical and Safety Committee are Hans W.
Schmidt (Chairman) and James L. Payne.
EXECUTIVE COMMITTEE
The Executive Committee has the authority to exercise all powers, rights and
authority of the Board between meetings, except with respect to certain actions
as provided in Nabors' Bye-Laws or applicable law. The members of the Executive
Committee are Eugene M. Isenberg (Chairman), Anthony G. Petrello and Jack
Wexler. The Executive Committee met one (1) time during 2002.
Mr. Syron was appointed to the Board of Directors on February 20, 2003 and
on March 1, 2003 was appointed to serve on the Compensation Committee and the
Governance and Nominating Committee.
10
DIRECTOR COMPENSATION
Nabors compensates its directors through a combination of an annual
retainer and stock options. Beginning June 25, 2002, all directors receive an
annual retainer of $28,000 for service on the Board and for non-employee
directors an additional annual retainer of $3,000 for serving as chairman of a
Board committee. No additional amounts are paid for attendance at Board or
committee meetings. Non-employee directors who serve on the Executive Committee
receive an additional annual retainer of $125,000. In the event of retirement,
permanent and total disability or death of a non-employee director who served on
the Executive Committee, the $125,000 annual retainer, together with the amount
of the annual retainer for serving as a Board member shall continue for an
additional five years following the end of the quarter in which retirement,
permanent and total disability, or death occurs. Prior to June 25, 2002,
non-employee directors received an annual retainer of $28,000 and an additional
annual retainer of $3,000 for serving as chairman of a Board committee. Employed
directors did not receive compensation for their service on the Board. Each of
the employed director's annual salary was reduced by an amount equal to the
annual retainer they receive for service on the Board, beginning June 25, 2002.
Nabors also issues stock options to its non-employee directors to align
their interests with Nabors' shareholders. Option awards are made pursuant to
option plans adopted from time to time for non-employee directors. Each
non-employee director was awarded on February 20, 2003, options to purchase at
least 30,000 shares and certain non-employee directors received additional
awards in recognition of their service as a committee member or committee
chairman. The awards were as follows: Mr. Payne, 35,000 options; Mr. Schmidt,
35,000 options; Mr. Sheinfeld, 40,000 options; Mr. Syron, 30,000 options; Mr.
Wexler, 45,000 options; and Mr. Whitman, 30,000 options. In addition, Mr. Syron,
who joined the Board on February 20, 2003, received options to purchase an
additional 30,000 shares upon his appointment. All of the options were granted
at a per share price of $38.75, the market value of the Company's shares on the
date of grant. The options generally vest in three equal annual installments
beginning on the first anniversary of the date of the grant and are exercisable
for ten years from the date of grant.
SHARE OWNERSHIP OF MANAGEMENT AND PRINCIPAL SHAREHOLDERS
The following table sets forth, as of April 10, 2003, certain information
with respect to the beneficial ownership of Nabors' outstanding common shares by
(a) each current director, (b) each executive officer named in the Summary
Compensation Table appearing elsewhere herein (the "Named Executive Officers"),
(c) all directors and executive officers as a group, and (d) any other person or
entity known by Nabors to be the beneficial owner of more than 5% of Nabors'
common shares:
11
COMMON SHARES BENEFICIALLY OWNED
----------------------------------------
BENEFICIAL OWNER (1) NUMBER OF SHARES PERCENT OF TOTAL(2)
-------------------- ---------------- -------------------
DIRECTORS
Eugene M. Isenberg (2) (3)....................................... 11,969,347 7.66%
James L. Payne (2)............................................... 87,500 *
Anthony G. Petrello (2).......................................... 5,421,260 3.58%
Hans W. Schmidt (2).............................................. 116,500 *
Myron M. Sheinfeld (2) (4)....................................... 163,635 *
Richard A. Stratton (2).......................................... 2,016,999 1.36%
Richard F. Syron................................................. 0
Jack Wexler (2).................................................. 124,700 *
Martin J. Whitman (2) (5)........................................ 265,366 *
OTHER EXECUTIVE OFFICERS
Bruce P. Koch (2)................................................ 71,600 *
Daniel McLachlin (2)............................................. 1,591 *
All Directors/Executive Officers as a group (11 persons) (2)-(5) 20,238,498 12.32%
OTHER
FMR Corp. (6) 13,555,816 9.29%
---------------
* Less than 1%
(1) The address of each of the directors and officers listed is in care of
Nabors Industries Ltd., 2nd Floor International Trading Center, Warrens,
P.O. Box 905E, St. Michael, Barbados.
(2) As of April 10, 2003, Nabors had 145,991,619 shares outstanding and
entitled to vote. For purposes of this table, "beneficial ownership" is
determined in accordance with Rule 13d-3 under the U.S. Securities
Exchange Act of 1934, pursuant to which a person or group of persons is
deemed to have "beneficial ownership" of any common shares that such
person has the right to acquire within 60 days. We have included in the
table common shares underlying fully vested stock options (without giving
effect to accelerated vesting that might occur in certain circumstances).
For purposes of computing the percentage of outstanding common shares held
by each person or group of persons named above, any shares which such
person or persons has the right to acquire within 60 days (as well as
common shares underlying fully vested stock options) are deemed to be
outstanding, but are not deemed to be outstanding for purposes of
computing the percentage ownership of any other person.
The number of common shares underlying fully vested stock options included
in the table are as follows: Mr. Isenberg - 10,295,079; Mr. Payne -
83,450; Mr. Petrello - 5,320,248; Mr. Schmidt - 116,500; Mr. Sheinfeld -
146,500; Mr. Stratton - 2,016,568; Mr. Wexler - 121,500; Mr. Whitman -
132,500; Mr. Koch - 71,600; Mr. McLachlin - 1,500, and all directors and
Named Executive Officers as a group - 18,305,445.
(3) The shares listed for Mr. Isenberg are held directly or indirectly through
certain trusts, defined benefit plans and individual retirement accounts
of which Mr. Isenberg is a grantor, trustee or beneficiary. Not included
in the table are 386 shares owned directly or held in trust by Mr.
Isenberg's spouse.
(4) The shares listed for Mr. Sheinfeld include 292 shares owned directly by
Mr. Sheinfeld's spouse. Mr. Sheinfeld disclaims beneficial ownership of
these shares.
12
(5) The shares listed for Mr. Whitman include 132,819 shares of Nabors common
stock owned by M. J. Whitman & Co., Inc. Because Mr. Whitman is a majority
stockholder in M.J. Whitman & Co, Inc., he may be deemed to have
beneficial ownership of the Nabors shares owned by the company. The shares
listed for Mr. Whitman also include 47 shares owned directly by Mr.
Whitman.
(6) Based on the information contained in Schedule 13G/A of FMR Corp. filed
with the Securities and Exchange Commission on February 14, 2003, the
shares listed include (i) 10,146,412 shares beneficially owned by Fidelity
Management & Research Company, (ii) 905,357 shares beneficially owned by
Fidelity Management Trust Company, (iii) 507 shares of beneficially owned
by Geode Capital Management, LLC and (iv) 2,503,540 shares beneficially
owned by Fidelity International Limited. FMR Corp. has sole voting power
with respect to 3,315,004 shares and sole dispositive power with respect
to 13,555,816 shares. The address of FMR Corp.'s principal business office
is 82 Devonshire Street, Boston, Massachusetts 02109.
13
MANAGEMENT COMPENSATION
SUMMARY COMPENSATION TABLE
The table below sets forth all reportable compensation awarded to, earned
by or paid to the named executive officers for services rendered in all
capacities to Nabors and its subsidiaries whose compensation for the year exceed
$100,000 for each of the last three fiscal years.
===============================================================================================================================
ANNUAL COMPENSATION AWARDS
-------------------------------------------------------------------------------------------------------------------------------
RESTRICTED SECURITIES
OTHER ANNUAL STOCK UNDERLYING ALL OTHER
NAME AND PRINCIPAL COMPENSATION AWARD(S) OPTIONS/ COMPENSATION
POSITION PERIOD SALARY($) BONUS($) ($) ($) SARS (1) ($)
------------------------ --------- --------- --------- ------------ ------------ ---------- -------------
Eugene M. Isenberg 2002 325,000(2) 1,400,000(3) 273,270(4) 0 1,900,000 134,012(5)
Chairman of the
Board, Director and 2001 325,000 2,000,000(3) 134,748 0 0 119,542
Chief Executive Officer
2000 325,000 1,350,000 75,730 0 3,548,839 101,215
Anthony G. Petrello 2002 275,000(6) 700,000(7) 112,267(8) 0 950,000 88,031(9)
Director, Deputy
Chairman, President and 2001 275,000 1,000,000(7) 127,956 0 0 137,424
Chief Operating Officer
2000 275,000 700,000 313,424 0 1,740,325 414,941
Richard A. Stratton(10) 2002 275,000(11) 0 35,411(12) 0 400,000 15,816(13)
Vice Chairman of the
Board and Director 2001 275,000 550,000 36,782 0 0 15,524
2000 275,000 500,000 34,623 0 565,943 17,000
Bruce P. Koch 2002 185,000 40,000 -- 0 25,000 8,325(14)
Vice President and
Chief Financial Officer 2001 185,000 40,000 -- 0 0 7,650
2000 185,000 37,000 -- 0 15,000 7,650
Daniel McLachlin 2002 92,000 10,000 18,636(15) 0 5,000 4,140(16)
Vice
President-Administration 2001 92,000 14,000 -- 0 0 4,140
and Secretary
2000 87,000 12,500 -- 0 3,000 3,915
(1) The awards reflected on the table above for 2002 were awards made in early
2002 relating to performance for 2001. The awards reflected on the table
above for 2000 relate to performance for calendar years 1999 and 2000.
Each of the Named Executive Officers received the number of options
indicated below, effective February 20, 2003 for performance during 2002.
The exercise price of the options awarded is $38.75, the closing price per
share of our common stock on the American Stock Exchange on the grant
date. The options vest in three equal annual installments beginning on the
first anniversary of the date of the grant for Mr. Isenberg and Mr.
Petrello and four equal annual installments beginning on the first
anniversary date of the grant for Mr. Koch and Mr. McLachlin: Mr. Isenberg
- 950,000, Mr. Petrello - 475,000, Mr. Koch - 20,000 and Mr. McLachlin -
4,000.
(2) Includes $14,538 paid as director's fees.
(3) Mr. Isenberg is entitled to receive an annual bonus as provided in his
employment agreement. For each of fiscal years 2002 and 2001, Mr. Isenberg
agreed to accept a bonus that was less than the bonus he was entitled to
receive under his employment agreement.
14
(4) Includes various club dues; auto allowance; imputed life insurance; tax
preparation fees ($84,925); and gross-up amount for auto allowance and tax
preparation fees ($72,827).
(5) Includes (a) Nabors' matching contributions to a retirement savings plan
and a non-qualified deferred compensation plan of $9,000; and (b) $125,012
that is the net benefit to Mr. Isenberg of the premiums paid by Nabors, as
projected on an actuarial basis, for a split dollar life insurance
arrangement (Nabors has suspended additional premium payments under these
policies pending clarification of certain provisions of the Sarbanes -
Oxley Act of 2002).
(6) Includes $14,538 paid as director's fees.
(7) Mr. Petrello is entitled to receive an annual bonus as provided in his
employment agreement. For fiscal year 2001 Mr. Petrello agreed to accept a
bonus that was less than the bonus he was entitled to receive under his
employment agreement.
(8) Includes club dues; auto allowance; imputed life insurance; and gross-up
amounts for auto allowance and imputed interest ($64,433).
(9) Includes (a) Nabors' matching contributions to a retirement savings plan
and a non-qualified deferred compensation plan of $9,000; (b) $6,643 that
is the net benefit to Mr. Petrello of the premiums paid by Nabors, as
projected on an actuarial basis, for a split dollar life insurance
arrangement (Nabors has suspended additional premium payments under these
policies pending clarification of certain provisions of the Sarbanes -
Oxley Act of 2002); and (c) imputed interest of $72,388 on a loan from
Nabors in the maximum amount of $2,881,915 pursuant to his employment
agreement in connection with his relocation to Houston, the balance of
which was $2,881,915 as of March 31, 2003, and on which no interest has
been paid or charged thereon.
(10) Mr. Stratton retired from Nabors effective as of February 20, 2003.
(11) Includes $14,538 paid as director's fees.
(12) Includes club dues ($13,466); auto allowance ($11,400); imputed life
insurance and gross-up amounts for auto allowance and imputed interest
($9,366).
(13) Includes (a) Nabors' matching contributions to a retirement savings plan
and non-qualified deferred compensation plan of $9,000; (b) $4,194 that is
the benefit to Mr. Stratton of the premiums paid by Nabors, as projected
on an actuarial basis, for a split dollar life insurance arrangement
(Nabors has suspended additional premium payments under these policies
pending clarification of certain provisions of the Sarbanes - Oxley Act of
2002); and (c) imputed interest of $2,622 on a loan from Nabors in the
maximum amount of $104,374 in connection with his relocation to Houston,
the balance of which was $104,374 as of March 31, 2003, and on which no
interest has been paid or charged thereon.
(14) Includes Nabors' matching contributions to a retirement savings plan and a
non-qualified deferred compensation plan of $8,325.
(15) Includes club dues ($8,990); auto allowance ($4,800) and imputed life
insurance ($4,846).
(16) Includes Nabors' matching contributions to a retirement savings plan and a
non-qualified deferred compensation plan of $4,140.
15
STOCK OPTION/SAR GRANT TABLE
The following table provides information with respect to stock options
granted during the fiscal year ended December 31, 2002 to the Named Executive
Officers. Nabors did not grant any stock appreciation rights to the Named
Executive Officers during the fiscal year ended December 31, 2002.
INDIVIDUAL GRANTS
NUMBER OF % OF TOTAL
SECURITIES OPTIONS EXERCISE OR
UNDERLYING GRANTED TO BASE GRANT DATE
OPTIONS EMPLOYEES IN PRICE EXPIRATION PRESENT
NAME GRANTED FISCAL YEAR ($/SH) DATE VALUE ($)(1)
------------------- ---------- ------------- ------------- ------------- -------------
Eugene M. Isenberg 1,900,000(2) 36.12% 27.05 01/22/2012 20,114,160
Anthony G. Petrello 950,000(2) 18.06% 27.05 01/22/2012 10,057,080
Richard A. Stratton 400,000(2) 7.60% 27.05 01/22/2012 4,234,560
Bruce P. Koch 25,000(3) .48% 27.05 01/22/2012 264,660
Daniel McLachlin 5,000(3) .10% 27.05 01/22/2012 52,932
(1) All options are granted at an exercise price equal to the market value of
Nabors' common stock on the date of grant. Therefore, if there is no
appreciation in the market value, no value will be realizable. In
accordance with Securities and Exchange Commission rules, the
Black-Scholes option pricing model was chosen to estimate the grant date
present value of the options set forth in this table. Nabors' use of this
model should not be construed as an endorsement of its accuracy at valuing
options. All stock option valuation models, including the Black-Scholes
model, require a prediction about the future movement of the stock price.
The following assumptions were made for purposes of calculating the grant
date present value: (a) the expected term is assumed to be three and a
half years, (b) volatility of 48.1931%, (c) dividend of $0 per share and
(d) risk-free rate of return of 3.84%. The figures given are not intended
to forecast future price appreciation of the shares. The real value of the
options in this table depends solely upon the actual performance of the
Nabors' stock during the applicable period.
(2) These options were granted on January 22, 2002 and vest six months from
the date of grant.
(3) These options were granted on January 22, 2002 and vest in four annual
installments beginning on January 22, 2003.
16
OPTION/EXERCISES DURING 2002 AND YEAR-END OPTION VALUES
The following table provides information with respect to stock options
exercised during 2002 and the value as of December 31, 2002 of unexercised
in-the-money options held by the Named Executive Officers. The value realized on
the exercise of options is calculated using the difference between the per share
option exercise price and the market value of a share on the date of the
exercise. The value of unexercised in-the-money options at fiscal year end is
calculated using the difference between the per share option exercise price and
the market value of $35.27 per share at December 31, 2002.
SHARES VALUE OF UNEXERCISED
ACQUIRED VALUE NUMBER OF SECURITIES UNDERLYING IN-THE-MONEY
ON REALIZED UNEXERCISED OPTIONS OPTIONS AT
NAME EXERCISE ($) AT FISCAL YEAR-END FISCAL YEAR-END ($)
EXERCISABLE / UNEXERCISABLE EXERCISABLE / UNEXERCISABLE
Eugene M. Isenberg 0 0 10,295,079 / 0 107,591,885 / 0
Anthony G. Petrello 0 0 5,320,248 / 0 58,442,347 / 0
Richard A. Stratton 0 0 2,066,568 / 0 23,874,319 / 0
Bruce P. Koch 0 0 58,950 / 45,150 954,629 / 423,378
Daniel McLachlin 4,338 119,001 3,000 / 9,900 15,780 / 102,043
EMPLOYMENT CONTRACTS
Mr. Isenberg and Mr. Petrello's employment contracts were amended and
restated effective October 1, 1996 and both contracts currently are set to
expire on September 30, 2007. The expiration date automatically extends for an
additional one-year term on each anniversary date, unless Nabors provides notice
to the contrary ten days prior to such anniversary. Mr. Isenberg's salary is
subject to annual review for increase at the discretion of the Board and its
Compensation Committee. The formula for the calculation of his cash bonus
remained as it had been under the prior version, a shareholder approved
contract, which provided that Mr. Isenberg is entitled to receive an annual cash
bonus equal to 6% of Nabors' net cash flow (as defined in the employment
contract) in excess of 15% of the average stockholders' equity for such fiscal
year. Mr. Petrello's salary is subject to annual review for increase at the
discretion of the Board and its Compensation Committee. His annual bonus
remained as it had been at the greater of $700,000 or 2% of the net cash flow
(as defined in the employment contract) in excess of 15% of the average
stockholders' equity in such year. Mr. Isenberg and Mr. Petrello are eligible
for stock options and grants; may participate in annual long-term incentive
programs, and pension and welfare plans, on the same basis as other executives;
and may receive special bonuses from time to time as determined by the Board.
Effective June 24, 2002, Mr. Isenberg's and Mr. Petrello's employment contracts
were amended to reflect a reduction in salary equivalent to the amount of
director's fees to be paid by Nabors as of that date. Pursuant to an Executive
Cost Allocation Agreement, a percentage of Mr. Isenberg's and Mr. Petrello's
salary, bonus, stock options or other compensation payable pursuant to their
employment agreements will be paid by Nabors Corporate Services, Inc. for
services performed for that Company, beginning on June 25, 2002.
In addition to salary and bonus, each of Mr. Isenberg and Mr. Petrello
receive group life insurance at an amount at least equal to three times their
respective base salaries; various split-dollar life insurance policies,
reimbursement of expenses, various perquisites and a personal umbrella policy in
the amount of $5 million. Further, if Mr. Isenberg or Mr. Petrello is subject to
the tax imposed by Section 4999 of the Internal Revenue Code, Nabors has agreed
to reimburse them for such tax on an after-tax basis. Premiums payable under the
split dollar life insurance policies have been suspended pending clarification
of certain provisions of the Sarbanes - Oxley Act of 2002.
In the event that either Mr. Isenberg's or Mr. Petrello's employment
contract is terminated by Nabors by reason of death, disability, or any reason
other than for cause, or is terminated by either individual for Constructive
17
Termination Without Cause (as defined in the respective agreements) or is
terminated as a result of or following a Change in Control (as defined in the
respective agreements), the terminated individual will be entitled to receive:
(a) all base salary which would have been payable through the expiration date of
the contract or three times his then current base salary, whichever is greater;
(b) all annual cash bonus which would have been payable through the expiration
date, or three times the highest bonus, (including the imputed value of grants
of stock awards and stock options), paid or payable during the last three fiscal
years prior to termination, whichever is greater; (c) any restricted stock
outstanding, which shall immediately and fully vest; (d) any outstanding stock
options, which shall immediately and fully vest; (e) any amounts earned, accrued
or owing to the executive but not yet paid (including executive benefits, life
insurance, disability benefits and reimbursement of expenses and perquisites)
shall be continued through the later of the expiration date or three years after
the termination date; (f) continued participation in medical, dental and life
insurance coverage until the executive receives equivalent benefits or coverage
through a subsequent employer or until the death of the executive or his spouse,
whichever is later; and (g) any other or additional benefits in accordance with
applicable plans and program of Nabors. In the event that either Mr. Isenberg's
or Mr. Petrello's termination is related to a Change in Control, the terminated
individual, at his election, would be entitled to receive a cash amount equal to
one dollar less than the amount that would constitute an "excess parachute
payment" as defined in Section 280G of the Internal Revenue Code, in place of
the salary and bonus referred to in (a) and (b) above. In addition, the
terminated individual would be entitled, at his election, to terminate his
employment because of such Change in Control, and to receive instead of any such
number of outstanding options, as selected by the individual, an amount of cash
in exchange therefor equal to (x) the excess of the Change in Control Price (as
defined in the respective agreements) over the exercise price of the options per
share of common stock multiplied by (y) the number of options selected by the
individual. In addition, the terminated individual would be entitled a grant of
additional vested options exercisable for five years, at a price equal to the
average closing price per share during the 20 days prior to the Change in
Control in an amount equal to the highest number of options granted during any
fiscal year during the period comprising the then current fiscal year and the
three fiscal years preceding the Change in Control. In the event that either Mr.
Isenberg's or Mr. Petrello's employment contract is terminated for cause or as a
result of resignation (other than as described above), the terminated individual
will be entitled to receive: (1) base salary through the date of termination;
(2) all annual cash bonus which would have been payable through the date of
termination; (3) all restricted stock that has vested on or prior to the date of
termination; (4) any outstanding stock options vested on or prior to the date of
termination; (5) any amounts earned, accrued or owing to the executive but not
yet paid (including executive benefits, life insurance, disability benefits and
reimbursement of expenses and perquisites if to be performed following
termination); and (6) other or additional benefits in accordance with applicable
plans and program of Nabors. If Mr. Petrello's employment is terminated for any
reason, he also is entitled to certain relocation benefits as set forth in his
employment agreement.
On February 20, 2003, Mr. Stratton resigned as an officer, director,
employee and all other positions held with Nabors. Pursuant to a letter of
agreement regarding his retirement which was reviewed by the Executive
Committee, Mr. Stratton will (a) receive bi-weekly payments through September
30, 2007, each in the gross amount of $12,576.04; (b) along with his spouse and
children, be entitled to participate under the medical and dental portions of
the group insurance plan at his own cost and expense so long as he is receiving
bi-weekly payments; (c) be entitled to exercise all vested options pursuant to
the terms of the initial awards; (d) repay in full the principal amount of his
loan in the amount of $104,374; (e) be treated the same as other senior
executive with respect to future premium payments of split dollar life insurance
policies; (f) agree for a period of five years not to accept any employment with
or render any services to any person, firm or corporation that competes with the
Company and if he should do so the Company may cease to make bi-weekly payment;
and (g) in the event of Mr. Stratton's death his beneficiaries would be entitled
to receive the unpaid balance of his bi-weekly payments.
During 2002 Mr. Stratton received compensation and benefits in accordance
with his employment contract entered into effective October 1, 1996. Pursuant to
that agreement, Mr. Stratton received, in addition to his base pay and incentive
compensation, vacation, reimbursement of expenses, comprehensive medical,
disability and life insurance protection, a split-dollar life insurance
agreement in an amount of not less than $2 million, other perquisites and a
personal umbrella policy in the amount of $5 million. Premium payments under the
split dollar life insurance policy have been suspended pending resolution of
certain issues under the Sarbanes - Oxley Act of 2002.
18
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
This section discusses certain direct and indirect relationships and
transactions involving Nabors and any director or Named Executive Officer.
During fiscal 2002 Nabors provided drilling and logistical services to
Nuevo Energy Company, of which Mr. James L. Payne, serves as Chairman, Chief
Executive Officer and President. The drilling and logistical services were
provided by Nabors to Nuevo Energy Company at prevailing market rates. Amounts
received for such services from Nuevo Energy Company combined represented
approximately 0.06% of Nabors consolidated operating revenues. Amounts received
for such services represented approximately 0.3% of Nuevo Energy Company's gross
revenues.
Mr. Petrello has a loan from Nabors in the maximum amount of $2,881,915
pursuant to his employment agreement in connection with his relocation to
Houston, the balance of which was $2,881,915 as of December 31, 2002. The
repayment of the loan was automatically extended an additional year on each
anniversary of his employment agreement. In September 2002 Mr. Petrello signed a
waiver discontinuing the automatic extensions of the loan repayment. The loan is
scheduled to be paid on or before September 30, 2006 and shall not be further
extended.
Mr. Stratton has a loan from Nabors for $104,374 related to his relocation
to Houston, the balance of which was $104,374 as of December 31, 2002. Pursuant
to a letter of agreement regarding his retirement, Mr. Stratton has agreed to
repay this loan.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee for fiscal 2002 was comprised of two
non-employee directors: Mr. Wexler (Chairman) and Mr. Sheinfeld. Neither Mr.
Wexler nor Mr. Sheinfeld has ever served as an officer or employee of Nabors or
any of its subsidiaries, nor has either participated in any transaction during
the last fiscal year required to be disclosed pursuant to the federal proxy
rules. No executive officer of Nabors serves on any board of directors of any
entity of which Mr. Wexler or Mr. Sheinfeld is an employee.
The adult son of one of our directors, Jack Wexler, is an employee of
Nabors Corporate Services, Inc., a subsidiary of Nabors, and has been employed
by Nabors since February 1, 1992. The employee is paid an annual salary of
$108,000 and is eligible to receive cash bonuses and stock options.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
COMPENSATION AND ROLE OF THE COMPENSATION COMMITTEE
The Compensation Committee is responsible for overseeing the administration
of our compensation programs and setting the compensation of our key executives.
Each member of our Compensation Committee is an independent director. The
Compensation Committee recently adopted a new charter, which is set forth in
Annex B to this proxy statement. We discuss below our policies for compensating
our executives and aligning the interests of management with the long-term
interests of investors and other stakeholders.
19
COMPENSATION POLICIES
The Compensation Committee's goal is to incentivize and reward superior
executive performance that will create long-term investor value and to attract
and retain executives who deliver that level of performance. The Compensation
Committee is mindful that the oil field services industry, particularly the
contract drilling segment, has been volatile, undergoing severe contractions in
activity forcing many companies to withdraw or be eliminated from the market
place followed by periods of rapid expansion when market conditions improve. The
ability of companies to compete in this market place depends in part on the
ability to attract and retain executives with the necessary industry knowledge
and management and financial skills to preserve and enhance Nabors' position,
notwithstanding the industry's characteristics. For this reason, the
Compensation Committee also is of the view that attracting executive talent from
both inside and outside the industry is important to the continued enhancement
of Nabors. The Compensation Committee reviews and approves all of the policies
under which compensation is paid to our senior executive officers. The
Compensation Committee will regularly oversee and evaluate the effectiveness of
the executive compensation programs in hiring, motivating and retaining key
employees.
Nabors' executive compensation program includes base salary and incentive
bonuses as follows:
Base Salary: The Compensation Committee reviews the performance of each
senior executive officer individually with the Chief Executive Officer and
determines an appropriate salary level for each senior executive officer based
primarily on individual performance and competitive factors. These competitive
factors include as a reference the base salary of other top executives of
drilling contractors and the oil service sector generally, and also the
compensation levels needed to attract and retain highly talented executives from
outside the industry. For fiscal 2002 the Compensation Committee noted that the
salaries of the Chief Executive Officer and the other Named Executive Officers
were, in most cases, below the mean of the salaries for the same categories of
Nabors' competitors, as reported in the latest available proxy statements of the
five companies other than Nabors that comprise the Dow Jones Oil Drilling,
Equipment and Services Index. The salaries of the Chief Executive Officer and
the President have remained the same since 1987 and 1992, respectively.
Incentive Bonus Program: The Compensation Committee administers annual
review programs to determine rewards to senior executive officers and key
employees based upon Nabors' performance in relation to performance goals.
Financial performance goals for the Chief Executive Officer and President are
set forth in the contractual bonus formulae described above under "MANAGEMENT
COMPENSATION-Employment Contracts". With respect to other senior executive
officers, the performance goals include both financial and non-financial
objectives, including achieving certain financial targets in relation to
internal budgets, developing internal infrastructure and enhancing positions in
certain markets. The financial criteria include, among other things, increasing
revenues, controlling direct and overhead expenses and increasing cash flow from
operations. The nonfinancial criteria include: obtainment of safety goals,
maintaining Nabors' share in its principal geographic markets, enhancing Nabors'
technical capabilities and developing operations in identified strategic
markets. Based on these reviews, the Compensation Committee recommends annual
incentive rewards. Annual incentive awards include cash, options or shares, or a
combination thereof. Share awards or stock option grants typically have been
issued on a four-year vesting schedule, but the Compensation Committee reserves
the right to modify the vesting schedule in its discretion. Annual incentive
bonus awards are not guaranteed except for those provided under contractual
arrangements. The Compensation Committee believes that stock option grants and
share awards are critical in motivating and rewarding the creation of long-term
shareholder value, and the Compensation Committee has established a policy of
awarding stock options from time to time based on continuing progress of Nabors
and on individual performance.
For 2002 the bonus and stock options granted to the Chief Executive Officer
and the next two most highly compensated executive officers were higher than
those for the same categories of Nabors' competitors, as reported in the latest
available proxy statements of the five companies other than Nabors that comprise
the Dow Jones Oil Drilling, Equipment and Services Index. Mr. Isenberg's and Mr.
Petrello's cash bonuses are determined under a contractual formula based upon
financial results (see "MANAGEMENT COMPENSATION - Employment Contracts").
However, for 2002, Mr. Isenberg voluntarily recommended and the Compensation
Committee concurred to reduce the amount of cash bonus which he was entitled to
receive under his contractual arrangements and awarded Mr. Isenberg $1,400,000.
Mr. Petrello received for 2002 the minimum bonus which he was entitled to
receive under his contractual arrangement ($700,000). On February 20, 2003, the
Committee granted to Mr. Isenberg and Mr.
20
Petrello 950,000 and 475,000 stock options, respectively, with a per share
exercise price of $38.75, the market value of an underlying share on the date of
grant. The options vest in three equal annual installments beginning on the
first anniversary of the date of the grant.
Section 162(m) of the Internal Revenue Code of 1986, as amended, limits to
$1,000,000 the amount of compensation that may be deducted by Nabors in any year
with respect to certain of Nabors' highest paid executives. Certain
performance-based compensation that has been approved by shareholders is not
subject to the $1,000,000 limit, nor is compensation paid pursuant to employment
contracts in existence prior to the adoption of Section 162(m) in 1993. Section
162(m) applied to Nabors for the first time in fiscal 1995. Although the
contractual bonus arrangements remained the same from their previous contracts,
certain bonus compensation, as well as the share options granted to Mr. Isenberg
and Mr. Petrello pursuant to the new and amended employment contracts entered
into in 1996 may not be exempt from Section 162(m). Consequently, Nabors may not
be able to deduct that portion of such compensation that exceeds $1,000,000 (see
"MANAGEMENT COMPENSATION-Option/Exercises During 2002 and Year-End Options
Values" and "- Employment Contracts"). While Nabors intends to take reasonable
steps to obtain deductibility of compensation, it reserves the right not to do
so in its judgment, particularly with respect to retaining the service of its
principal executive officers.
CHIEF EXECUTIVE OFFICER AND PRESIDENT
Nabors' arrangements with its Chief Executive Officer and President have
been designed from the outset to align compensation to enhancing shareholder
value. Mr. Isenberg's compensation is made pursuant to a contractual formula
that was negotiated with the creditors committee in 1987 in connection with the
bankruptcy proceedings of Nabors Delaware's predecessor corporation. These
arrangements were subsequently approved by the various constituencies in such
bankruptcy proceedings, including equity and debt holders, and confirmed by the
United States Bankruptcy Court. Mr. Isenberg's base salary has remained constant
since 1987 and Mr. Petrello's base salary has not changed since his employment
began in 1991. The major portion of Mr. Isenberg's and Mr. Petrello's cash
compensation is the performance-based bonus compensation. Under their
agreements, Mr. Isenberg and Mr. Petrello are entitled to receive a cash bonus
according to a formula based on a percentage during 2002 (Isenberg-6%,
Petrello-2%) of cash flow in excess of a 15% return on shareholders' average
book equity. Mr. Petrello is entitled to a minimum annual cash bonus of
$700,000. The Compensation Committee believes that tying the cash bonus to
Nabors' cash flow in excess of a return on shareholders' average equity aligns
Mr. Isenberg's and Mr. Petrello's bonuses to the objective of achieving superior
financial results that should enhance shareholder value. In order to ensure that
Mr. Isenberg and Mr. Petrello would continue to be available to Nabors, the
Compensation Committee amended and restated their employment contracts effective
October 1, 1996 for additional five-year terms that renew annually absent notice
to the contrary (see "MANAGEMENT COMPENSATION - Employment Contracts"). Mr.
Isenberg's contractual bonus (as well as Mr. Petrello's) provides for the
mandatory application of their respective bonus formulae. However, as indicated
above, for 2002 the Compensation Committee, upon the recommendation of Mr.
Isenberg, reduced the cash bonus award to which Mr. Isenberg was entitled under
the formula arrangement.
In reviewing Mr. Isenberg's and Mr. Petrello's compensation, the
Compensation Committee noted that Nabors' financial results in 2002 were the
fifth best in the Company's history at $0.81 per diluted share even though there
was a severe industry downturn that persisted throughout the year. Despite the
intense competitive and volatile conditions prevailing in the industry this
year, there were a number of noteworthy achievements in virtually every
operating and business category/activity that further enhanced the Company's
potential as the market recovers. Financial strength was maintained, and the
Company is recognized as a dynamic, excellently managed organization, well
positioned to maintain its leadership and growth. The senior executive
management team in place for many years has demonstrated its versatility and
leadership in forging a stable and effective organization. The Compensation
Committee also noted The Wall Street Journal's special supplement published on
March 10, 2003 ranking the 1,000 largest US companies in 80 business segments in
order of average return to shareholders. The energy industry listing consisted
of 47 companies in three sectors: Major Oil Companies, Secondary Oil Companies
and Oil Equipment and Service Companies. Nabors again was ranked among the top
companies in achieving superior long-term returns to its shareholders with a
ten-year compounded return of 18.4%.
The Compensation Committee believes that the consistent high ranking of
Nabors in such studies throughout the industry's cyclical ups and downs validate
its assertion that the current management team has delivered consistent
21
superior returns to its shareholders over the long-term. These returns have been
well in excess of those for companies in the S&P 500 Index and of a significant
majority of its peers in both the energy industry and general US business. The
Compensation Committee believes that these objective, third-party studies
validate its assertion that the current management team has delivered consistent
superior returns to its shareholders over the long-term. The Compensation
Committee also believes that retention and financial motivation of the current
management team is vital to sustaining this level of performance.
FINANCIAL HIGHLIGHTS - NABORS INDUSTRIES LTD. AND SUBSIDIARIES
(In millions, except per share amounts)
2002 VERSUS 2001 2002 VERSUS 1997
---------------------- ----------------------
FISCAL YEAR (1) INCREASE/(DECREASE) INCREASE/(DECREASE)
--------------------------------- ---------------------- ----------------------
FINANCIAL DATA 2002 2001 1997 $ % $ %
------------------------------- --------- --------- --------- --------- --------- --------- ---------
Revenues and earnings from
unconsolidated affiliates ..... $ 1,481 $ 2,228 $ 1,115 (747) (34) 366 33
Net income .................... 121.5 357.5 136.0 (236) (66) (14.5) (11)
Net income per diluted share .. .81 2.24 1.24 (1.43) (64) (.43) (35)
Stockholders' equity .......... 2,158.5 1,857.9 767.3 300.6 16 1,391.2 181
Year end market value of
shares outstanding ........ $ 5,047.7 $ 4,916.3 $ 3,170.0 131.4 3 1,877.7 59
(1) The fiscal years ended 2002, 2001 and 1997 are for the period January 1
through December 31. The financial data for 1997 reflects Nabors' change in
its fiscal year end effective January 1, 1998.
THE COMPENSATION COMMITTEE
Jack Wexler, Chairman
Myron M. Sheinfeld
22
REPORT OF THE AUDIT COMMITTEE
The Audit Committee is comprised of three independent directors and
operates pursuant to a written Charter that is attached as Annex A. In 2002 the
Committee met seven times. The primary purposes of the our Audit Committee are
to assist the Board in monitoring (a) the quality and integrity of the financial
statements of Nabors; (b) the independent auditors' qualifications and
independence; (c) the performance of Nabors' independent auditors; and (d)
compliance by Nabors with legal and regulatory requirements. The Board of
Directors and the Governance and Nominating Committees have determined that each
member of the committee is "independent" and the Board of Directors has also
determined that each member is financially literate and at least one member has
accounting or related financial management expertise, in each case as such
qualifications are defined under the rules of the SEC and the American Stock
Exchange.
Management is responsible for the preparation, presentation and integrity
of Nabors' financial statements, accounting and financial reporting principles
and internal controls and procedures designed to assure compliance with
accounting standards and applicable laws and regulations. The independent
auditors are responsible for performing an independent audit of the financial
statements in accordance with generally accepted auditing standards. The
independent auditors have free access to the Audit Committee to discuss any
matters they deem appropriate.
In performing its oversight role, the Audit Committee has reviewed and
discussed the audited financial statements with management and the independent
auditors. The Audit Committee has also discussed with the independent auditors
the matters required to be discussed by Statement on Auditing Standards No. 61,
Communication with Audit Committees, as updated by Statement on Auditing
Standards No. 89, Audit Adjustments, and Statement on Auditing Standards No. 90,
Audit Committee Communications. The Committee has received the written
disclosures and the letter from the independent auditors required by
Independence Standards Board Standard No. 1, Independence Discussions with Audit
Committees, as currently in effect. The Audit Committee has also considered
whether the provision of certain non-audit services by the independent auditors
is compatible with maintaining the auditors' independence.
During fiscal 2002 the Audit Committee performed all of its duties and
responsibilities under the then-applicable Audit Committee Charter. In addition,
based on the review and discussions described in this Report of the Audit
Committee, the Audit Committee recommended to the Board of Directors that the
audited financial statements of Nabors for fiscal 2002 be included in its Annual
Report on Form 10-K for such fiscal year.
THE AUDIT COMMITTEE
Myron M. Sheinfeld, Chairman
Jack Wexler
Martin J. Whitman
PRINCIPAL AUDIT FEES AND SERVICES
Aggregate fees for professional services rendered for the Company by
PricewaterhouseCoopers LLP ("PricewaterhouseCoopers") as of or for* the years
ended December 31, 2002 and 2001 were:
2002 2001
---------- ----------
Audit $2,055,854 $1,239,507
Audit Related 273,481 379,919
Tax 632,199 327,969
All Other -- --
---------- ----------
Total $2,961,534 $1,947,395
========== ==========
23
The Audit fees for the years ended December 31, 2002 and 2001, respectively,
were for professional services rendered for the audits of the consolidated
financial statements of the Company, statutory and subsidiary audits, issuance
of comfort letters, consents, income tax provision procedures, and assistance
with review of various documents filed with the SEC.
The Audit Related fees as of the years ended December 31, 2002 and 2001,
respectively, were for assurance and related services related to employee
benefit plan audits, due diligence related to mergers and acquisitions, and
consultations concerning financial accounting and reporting standards.
Tax fees as of the years ended December 31, 2002 and 2001, respectively, were
for services related to tax compliance, including the preparation of tax returns
and claims for refund; and tax planning and tax advice, advice related to
mergers and acquisitions, and requests for rulings or technical advice from tax
authorities.
----------
* The aggregate fees included in Audit are fees billed for the fiscal years for
the audit of the registrant's annual financial statements and review of
financial statements and statutory and regulatory filings or engagements. The
aggregate fees included in each of the other categories are fees billed in the
fiscal years.
PROPOSAL NO. 2
APPOINTMENT OF INDEPENDENT AUDITORS
Under Bermuda law, our shareholders have the responsibility to appoint the
independent auditors of the Company to hold office until the close of the next
annual general meeting and to authorize the Audit Committee of the Board of
Directors to set the auditors' remuneration. At the annual general meeting, the
shareholders will be asked to approve the appointment of PricewaterhouseCoopers
LLP as our independent auditors and to authorize the Audit Committee of the
Board of Directors to set the independent auditors' remuneration.
PricewaterhouseCoopers LLP, or a predecessor, has been our independent auditors
since May 1987.
A representative from PricewaterhouseCoopers LLP is expected to be present
at the annual general meeting, will have the opportunity to make a statement if
he or she desires to do so, and will be available to respond to appropriate
questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPOINTMENT OF
PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT AUDITORS OF THE COMPANY AND TO
AUTHORIZE THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS TO SET THE AUDITORS'
REMUNERATION.
PROPOSAL NO. 3
APPROVAL OF THE 2003 EMPLOYEE STOCK PLAN
We are proposing the Nabors Industries Ltd. 2003 Employee Stock Plan
(the "Plan") for your approval at the annual general meeting. The Board of
Directors believes it to be in the best interest of the Company to adopt the
Plan to promote our long-term growth and profitability by providing our key
employees with incentives to improve the value of our shares. We are seeking
your approval so that we may use the Plan to grant incentive stock options
(options that enjoy certain favorable tax treatment under Sections 421 and 422
of the Internal Revenue Code of 1986, as amended (the "Code")), as well as to
enhance our ability to grant awards that qualify for the performance-based
exception to the federal income tax deduction limits that otherwise apply to us
under Section 162(m) of the Code.
The Plan is intended to encourage the key employees of the Company and
its subsidiaries and affiliates to own our common shares and to provide
additional incentive to those employees whose contributions are essential to the
growth and success of the Company's business, in order to strengthen the
commitment of such persons to the Company, motivate such persons to faithfully
and diligently perform their responsibilities and attract and retain competent
and dedicated persons whose efforts will result in the long-term growth and
profitability of the Company. The Equity Compensation Plan information that
begins on Page 30 sets forth information that may be relevant to your
consideration of this proposal.
In considering the dilutive potential of the Plan, the Compensation
Committee of the Board of Directors considered the fact that the senior
management of the Company and others currently hold significant numbers of
presently exercisable, in-the-money options to purchase Company shares. The
Compensation Committee believes
24
that the holding of these options evidences a greater commitment to ownership of
Company shares than would be the case if the options had been exercised and the
shares sold. Accordingly, in the Committee's view, the existence of these
outstanding options should not serve to reduce the number of shares made
available for future grants of equity incentive awards, and the Committee took
this consideration into account in determining the number of shares to be made
available for grants under the Plan.
VOTE REQUIRED
The affirmative vote of the holders of a majority of the shares present
in person or represented by proxy at the annual general meeting and entitled to
vote on this proposal is required for approval of the Plan. The Plan will become
effective upon such approval.
PLAN DESCRIPTION
The following is a brief description of the principal features of the
Plan. It does not purport to be complete and is qualified in its entirety by the
full text of the Plan, which is attached hereto as Annex D.
General
We have reserved for issuance under the Plan a maximum of 3,500,000
common shares. If an award granted under the Plan expires or is terminated, the
common shares underlying the award will again be available under the Plan. In
addition, to the extent common shares are used to exercise any award (as
described below) or to satisfy tax withholding obligations under the Plan, an
equal number of shares will remain available for issuance under the Plan.
No individual may be granted awards under the Plan in any calendar year
covering more than 1,500,000 shares.
In the event of any change in the Company's capitalization or in the
event of a corporate transaction such as a merger, amalgamation, consolidation,
separation or similar event, the Plan provides for appropriate adjustments in
the number and class of common shares available for issuance or grant and in the
number and/or price of shares subject to awards.
Types of Awards
The following awards may be granted under the Plan:
o stock options, including incentive stock options and non-qualified
stock options,
o restricted stock,
o restricted stock units,
o stock appreciation rights, and
o stock bonuses.
These awards are all described in more detail below.
Administration
The Plan will be administered by the Board of Directors or, in the
discretion of the Board of Directors, a committee of the Board. The Board
anticipates that the Compensation Committee will administer the Plan. For
convenience, the administrator of the Plan will be referred to below as the
Committee.
The Committee may, subject to the provisions of the Plan, determine the
persons to whom awards will be granted, the type of awards to be granted, the
number of shares to be made subject to awards and the exercise price. The
Committee may also condition the award on the attainment of certain goals,
determine other terms and conditions that shall apply to awards, interpret the
Plan and prescribe, amend and rescind rules and regulations relating to the
25
Plan. The Committee may delegate to any of our employees (or a committee of
employees) the authority to make grants of awards to our employees who are not
our executive officers or directors. The terms and conditions of each award
granted under the Plan will be set forth in a written award agreement relating
to the award.
In the event that the Committee grants an award that is intended to
constitute qualified performance-based compensation within the meaning Section
162(m) of the Code, the Committee in its discretion may condition payment under
the award in whole or in part on the attainment of (or a specified increase or
decrease in) one or more of the following business criteria as applied to an
award recipient under the Plan and/or a business unit of the Company or its
subsidiaries or affiliates: (i) income before federal taxes and net interest
expense; (ii) achievement of specific and measurable operational objectives in
the areas of rig operating costs, accident records, and employee turnover; (iii)
working capital, generally defined to include receivables, inventories and
controllable current liabilities, measured either in absolute dollars or
relative to sales; (iv) earnings growth, revenues, expenses, share price, market
share, return on assets, return or capital, equity or investment, regulatory
compliance, satisfactory internal or external audits, improvement of financial
ratings, or achievement of balance sheet, income statement or cash flow
objectives; (v) adjusted cash flow or adjusted income derived from operating
activities; and/or (vi) a percentage of cash flow in excess of a percentage of
shareholders' average book equity. Payments under such awards will be made, in
the case of employees covered under Section 162(m) of the Code, solely on
account of the attainment of such performance goals established in writing by
the Committee not later than the date on which 25% of the period of service to
which the award relates has elapsed (or if earlier, 90 days after the beginning
of the period).
Eligibility
Awards may be granted under the Plan to employees of the Company or its
subsidiaries or affiliates, as selected by the Committee in its sole discretion.
Specific grants under the Plan will be made in the discretion of the
Committee and, accordingly, are not yet determinable. In addition, benefits
under the Plan will depend on a number of factors, including the fair market
value of our common shares on future dates and the exercise decisions made by
the participants. Consequently, as of the date of this proxy statement, it is
not possible to determine the benefits that might be received by participants
under the Plan. As of May 7, 2003, the closing price per common share of the
Company on the American Stock Exchange was $39.77.
Awards may be granted under the Plan from time to time in substitution
for awards held by employees, directors or service providers of other
corporations who are about to become employees of the Company or a subsidiary or
affiliate as the result of a merger or consolidation or other corporate event
involving the employing corporation, as the result of which it merges with or
becomes a subsidiary or affiliate of the Company. The terms and conditions of
the awards so granted may vary from the terms and conditions otherwise set forth
in the Plan as the Committee may deem appropriate to conform, in whole or in
part, to the provisions of the awards in substitution for which they are made.
Terms and Conditions of Options
Stock options granted under the Plan may be either "incentive stock
options," as that term is defined in Section 422 of the Code, or non-qualified
stock options (i.e., any option that is not such an incentive stock option). The
exercise price of a stock option granted under the Plan will be determined by
the Committee at the time the option is granted, but the exercise price may not
be less than the fair market value of the common shares (determined generally as
the closing price per common share of the Company on the date of grant). Stock
options are exercisable at the times and upon the conditions that the Committee
may determine, as reflected in the applicable option agreement. The Committee
will also determine the maximum duration of the period in which the option may
be exercised, which may not exceed ten years from the date of grant.
The option exercise price must be paid in full at the time of exercise,
and is payable (in the discretion of the Committee) by any one of the following
methods or a combination thereof:
26
o in cash or cash equivalents,
o the surrender of previously acquired common shares that have been held
by the participant for at least six months prior to the date of
surrender, or
o to the extent permitted by applicable law, through a "broker cashless
exercise" procedure acceptable to the Committee.
Restricted Stock
The Plan provides for awards of common shares that are subject to
restrictions on transferability and other restrictions that may be determined by
the Committee in its discretion. Such restrictions will lapse on terms
established by the Committee. Except as may be otherwise provided under the
award agreement relating to the restricted stock, a participant granted
restricted stock will have all the rights of a shareholder (for instance, the
right to receive dividends on the shares of restricted stock, if any, and the
right to vote the shares). The restricted period shall not be less than three
years, but the restricted period can be shortened to one or more years if
vesting of the restricted stock is conditioned upon the attainment of the
performance goals identified above or other corporate or individual performance
goals established by the Committee at the time of grant.
Restricted Stock Units
The Plan provides for awards of restricted stock units which, upon
vesting, entitle the participant to receive an amount in cash or common shares
(as determined by the Committee and set forth in the applicable award agreement)
equal to the fair market value of the number of shares made subject to the
award. Vesting of all or a portion of a restricted stock unit award may be
subject to terms and conditions established by the Committee. As with awards of
restricted stock, the restricted period shall not be less than three years, but
the restricted period can be shortened to one or more years if vesting of the
restricted stock unit is conditioned upon the attainment of the performance
goals identified above or other corporate or individual performance goals
established by the Committee at the time of grant.
Stock Appreciation Rights ("SARs")
The Plan provides that the Committee, in its discretion, may award
stock appreciation rights, either in tandem with stock options or freestanding
and unrelated to options. The grant price of a freestanding SAR will be the fair
market value of a common share (as described above). The grant price of tandem
SARs will equal the exercise price of the related option. Tandem SARs may be
exercised for all or part of the shares subject to the related option upon
surrender of the right to exercise the equivalent portion of the related option.
Freestanding SARs may be exercised upon whatever terms and conditions the
Committee imposes. SARs will be payable in cash, common shares or a combination
of both, as determined in the Committee's discretion and set forth in the
applicable award agreement.
Stock Bonuses
The Plan provides that the Committee, in its discretion, may award
common shares to employees that are not subject to restrictions on
transferability or otherwise, but only in lieu of salary or a cash bonus
otherwise payable to the employee.
Change in Control
The Committee in its discretion may provide that, in the event of a
change in control (as defined in an applicable award agreement), whether alone
or in combination with other events, the vesting and exercisability restrictions
on any outstanding award that is not yet fully vested and exercisable will lapse
in part or in full.
Termination of Employment
Unless otherwise determined by the Committee in an award agreement, the
termination of a participant's employment or service will immediately cancel any
awards granted to the participants under the Plan, whether or not it is then
exercisable. However, in
27
no case may an option be exercised after it expires.
Amendment and Termination
The Board of Directors may modify or terminate the Plan or any portion
of the Plan at any time, except that an amendment that requires shareholder
approval in order for the Plan to continue to comply with any law, regulation or
stock exchange requirement will not be effective unless approved by the
requisite vote of our shareholders. In addition, any amendment shall be subject
to approval of our shareholders if it materially increases the benefits accruing
to participants under the Plan, materially increases the number of shares that
may be issued under the Plan, or materially modifies the requirements for
participation in the Plan. Any amendment to the Plan or an award agreement that
accelerates the date on which an award is exercisable or payable or that reduces
the exercise price of any outstanding option will also be subject to the
approval of our shareholders. No awards may be granted under the Plan after the
day prior to the tenth anniversary of the date of its approval by the Company's
shareholders, but awards granted prior to that time can continue after such time
in accordance with their terms.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF OPTIONS
The following is a discussion of certain federal income tax effects
currently applicable to stock options granted under the Plan. The discussion is
a summary only, and the applicable law is subject to change. Reference is made
to the Code for a complete statement of all relevant federal tax provisions.
Nonqualified Stock Options ("NSOs")
An optionee generally will not recognize taxable income upon the grant
of an NSO. Rather, at the time of exercise of such NSO, the optionee will
recognize ordinary income for income tax purposes in an amount equal to the
excess of the fair market value of the shares purchased over the exercise price.
The Company will generally be entitled to a tax deduction at such time and in
the same amount that the optionee recognizes ordinary income.
If shares acquired upon exercise of an NSO are later sold or exchanged,
then the difference between the amount received upon such sale, exchange or
disposition and the fair market value of such shares on the date of such
exercise will generally be taxable as long-term or short-term capital gain or
loss (if the shares are a capital asset of the optionee) depending upon the
length of time such shares were held by the optionee.
Incentive Stock Options ("ISOs")
An optionee will not recognize any ordinary income (and the Company
will not be permitted any deduction) upon the grant or timely exercise of an
ISO. However, the amount by which the fair market value of the common shares on
the exercise date of an ISO exceeds the purchase price generally will constitute
an item which increases the optionee's "alternative minimum taxable income."
Exercise of an ISO will be timely if made during its term and if the
optionee remains an employee of the Company or a subsidiary at all times during
the period beginning on the date of grant of the ISO and ending on the date
three months before the date of exercise (or one year before the date of
exercise in the case of a disabled optionee, and without limit in the case of
death). The tax consequences of an untimely exercise of an ISO will be
determined in accordance with the rules applicable to NSOs, discussed above.
If shares acquired pursuant to the timely exercise of an ISO are later
disposed of, and if the shares are a capital asset of the optionee, the optionee
generally will recognize short-term or long-term capital gain or loss (depending
upon the length of time such shares were held by the optionee) equal to the
difference between the amount realized upon such sale and the exercise price.
The Company, under these circumstances, will not be entitled to any income tax
deduction in connection with either the exercise of the ISO or the sale of such
shares by the optionee.
If, however, shares acquired pursuant to the exercise of an ISO is
disposed of by the optionee prior to the
28
expiration of two years from the date of grant of the ISO or within one year
from the date such shares are transferred to him or her upon exercise (a
"disqualifying disposition"), any gain realized by the optionee generally will
be taxable at the time of such disqualifying disposition as follows: (i) at
ordinary income rates to the extent of the difference between the exercise price
and the lesser of the fair market value of the shares on the date the ISO is
exercised or the amount realized on such disqualifying disposition and (ii) if
the shares are a capital asset of the optionee, as short-term or long-term
capital gain (depending upon the length of time such shares were held by the
optionee) to the extent of any excess of the amount realized on such
disqualifying disposition over the sum of the exercise price and any ordinary
income recognized by the optionee. In such case, the Company may claim an income
tax deduction at the time of such disqualifying disposition for the amount
taxable to the optionee as ordinary income.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE NABORS
INDUSTRIES LTD. 2003 EMPLOYEE STOCK PLAN.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires Nabors'
directors and executive officers, and persons who own more than 10% of a
registered class of Nabors' equity securities, to file with the Securities and
Exchange Commission and the American Stock Exchange initial reports of ownership
and reports of changes in ownership of common stock and other equity securities
of Nabors. Officers, directors and greater than 10% shareholders are required by
SEC regulation to furnish Nabors with all Section 16(a) forms which they file.
To our knowledge, based solely on review of the copies of Forms 3 and 4 and
amendments thereto furnished to us during 2002 and Form 5 and amendments thereto
furnished to us with respect to the year 2002, and written representations that
no other reports were required, all Section 16 (a) filings required to be made
by Nabors' officers, directors and greater than 10% beneficial owners with
respect to the fiscal year 2002 were timely filed, except that Mr. Jack Wexler
filed one Form 4 late with respect to a single purchase transaction that
occurred in December 2002 and Mr. Martin Whitman filed one Form 5 late with
respect to a single option grant that occurred in January 2002.
29
EQUITY COMPENSATION PLAN INFORMATION
The Company maintains twelve different equity compensation plans: the 1993 Stock
Option Plan for Non-Employee Directors, 1994 Sundowner Offshore Option Exchange
Plan, 1996 Executive Officers Incentive Stock Plan, 1996 Employee Stock Plan,
1996 Chairman's Executive Stock Plan, 1996 Executive Officers Stock Plan, 1997
Executive Officers Incentive Stock Plan, 1998 Employee Stock Plan, 1998
Chairman's Executive Stock Plan, 1999 Stock Option Plan for Non-Employee
Directors, 1999 Bayard Employee Option Exchange Plan and 1999 Pool
Employee/Director Option Exchange Plan, pursuant to which it may grant equity
awards to eligible persons from certain plans. The terms of the Company's Equity
Compensation Plans are described more fully below.
The following table gives information about these equity compensation plans as
of December 28, 2002:
(a) (b) (c)
----------------------- ------------------------------ ---------------------------- ---------------------------------
Number of securities remaining
Number of securities to be Weighted-average exercise available for future issuance
issued upon exercise of price of outstanding under equity compensation plans
outstanding options, options, warrants and (excluding securities reflected
Plan category warrants and rights rights in column (a))
----------------------- ------------------------------ ---------------------------- ---------------------------------
Equity
compensation
plans approved by
security holders 8,035,103 $31.4228 1,138,509(1)
Equity compensation
plans not approved by
security holders
2/3/4/5/6 15,952,841 $25.6814 3,877,747
Total 23,987,944 5,016,256
(1) The 1996 Employee Stock Plan incorporates an evergreen formula
pursuant to which on each January 1, the aggregate number of shares
reserved for issuance under the 1996 Employee Stock Plan will increase
by an amount equal to 1 1/2 % of the shares of common stock
outstanding on December 31 of the immediately preceding fiscal year.
(2) The Company issued 982,800 stock options under the 1994 SOS Employee
Option Exchange Plan. The remaining options are exercisable for 79,800
shares of the Company's common stock. The options have a
weighted-average exercise price of $4.77 per share. No further awards
will be made under the plan.
(3) The Company issued 230,000 stock options under the 1999 Bayard
Employee Option Exchange Plan of Bayard Drilling Technologies, Inc.
The remaining options are exercisable for 95,447 shares of the
Company's common stock (after giving effect to the exchange ratio
provided in the acquisition agreement). The options have a
weighted-average exercise price of $51.6543 per share. No further
awards will be made under the 1999 Bayard Employee Option Exchange
Plan.
(4) The Company issued 153,519 stock options under the 1999 Pool
Employee/Director Option Exchange Plan of Pool Energy Services Co. The
remaining options are exercisable for 15,779 shares of the Company's
common stock (after giving effect to the exchange ratio provided in
the acquisition agreement). The options have a weighted-average
exercise price of $15.6652 per share. No further awards will be made
under the 1999 Pool Employee/Director Option Exchange Plan.
(5) The Company assumed 200,000 warrants upon its acquisition of New
Prospect Drilling Company in April 1998. The warrants have an exercise
price of $30.00 per share and expire on April 30, 2003.
(6) The Company assumed 118,850 warrants upon its acquisition of Enserco
Energy Service Company Inc. in April 2002. The warrants have an
exercise price of $6.08 and expire on November 12, 2003.
30
Following is a brief summary of the material terms of the plans that have not
been approved by our shareholders.
1994 SOS EMPLOYEE OPTION EXCHANGE PLAN
In August 1994 the Board approved the 1994 SOS Employee Option Exchange Plan,
which has not been approved by shareholders.
The 1994 SOS Employee Option Exchange Plan reserves for issuance up to 982,800
shares of the Company's common stock pursuant to the exercise of options granted
under the plan. The plan is administered by a committee appointed by the
Company's Board of Directors. Options were granted to certain employees of
Sundowner Offshore Services, Inc., upon its acquisition by the Company. No
further options will be issued under this plan.
Options granted under the plan are non-qualified stock options for U.S. federal
income tax purposes, are non-transferable, and the exercise price of each option
was determined by the committee at the time of the grant. Payment of the
exercise price may be made in cash, or at the discretion of the committee, in a
cashless tender of stock of the Company. Options awarded under the plan expire
no later than ten years from the date of award. If an option holder ceases to be
an employee of the company for any reason, the option holder must exercise any
options granted under the plan within three months of such event, which period
may be extended by the Company in its discretion.
1996 EXECUTIVE OFFICERS INCENTIVE STOCK PLAN
In October 1996, the Board adopted the 1996 Executive Officers Incentive Stock
Plan which has not been approved by shareholders.
The 1996 Executive Officers Incentive Stock Plan reserves for issuance up to
3,600,000 shares of the Company's common stock pursuant to the exercise of
options granted under the plan. The plan is administered by an independent
committee appointed by the Company's Board of Directors. Options may be granted
under the plan to executive officers of the Company. No optionee may receive
grants in excess of 50% of the total shares of common stock authorized to be
issued under the plan. Options granted under the plan are nonstatutory options
not intended to qualify under Section 422 of the Internal Revenue Code of 1986,
as amended (NSOs).
The exercise price of options granted under the plan are set by the committee,
but shall be no less than the fair market value per share of common stock on the
date of the grant of the option. The term of the NSO may not exceed ten years.
Unless otherwise determined by the committee in its discretion, an option may
not be exercised after the optionee has ceased to be in the employ of the
Company.
1996 CHAIRMAN'S EXECUTIVE STOCK PLAN
In December 1996, the Board adopted the 1996 Chairman's Executive Stock Plan
which has not been approved by shareholders.
The 1996 Chairman's Executive Stock Plan reserves for issuance up to 850,000
shares of the Company's common stock pursuant to the exercise of options granted
under the plan. The plan is administered by an independent committee appointed
by the Company's Board of Directors. Options may be granted under the plan to
the Chairman of the Board of the Company. Options granted under the plan are
NSOs.
The exercise price of options granted under the plan are set by the committee,
but shall be no less than the fair market value per share of common stock on the
date of the grant of the option. The term of the NSO may not exceed ten years.
In the event of a termination of employment for any reason, except by the
Company for cause or by voluntary resignation by optionee, all unvested options
shall be immediately exercisable as of the date of his termination of his
employment.
31
1996 EXECUTIVE OFFICERS STOCK PLAN
In August 1997, the Board adopted the 1996 Executive Officers Stock Plan, which
has not been approved by shareholders.
The 1996 Executive Officers Stock Plan reserves for issuance up to 860,000
shares of the Company's common stock pursuant to the exercise of options granted
under the plan. The plan is administered by an independent committee appointed
by the Company's Board of Directors. Options may be granted under the plan to
executive officers of the Company. No optionee may receive grants in excess of
50% of the total shares of common stock authorized to be issued under the Plan.
Options granted under the plan are NSOs.
The exercise price of options granted under the plan shall be set by the
committee, but shall be no less than the fair market value per share of common
stock on the date of the grant of the option. The term of the NSO may not exceed
ten years.
Unless otherwise determined by the committee in its discretion, an option may
not be exercised after the optionee has ceased to be in the employ of the
Company.
1997 EXECUTIVE OFFICERS INCENTIVE STOCK PLAN
In August 1997, the Board adopted the 1997 Executive Officers Incentive Stock
Plan, which has not been approved by shareholders.
The 1997 Executive Officers Incentive Stock Plan reserves for issuance up to
2,450,000 shares of the Company's common stock pursuant to the exercise of
options granted under the plan. The plan is administered by an independent
committee appointed by the Company's Board of Directors. Options may be granted
under the plan to executive officers of the Company. No optionee may receive
grants in excess of 50% of the total shares of common stock authorized to be
issued under the plan. Options granted under the plan are NSOs.
The exercise price of options granted under the plan shall be set by the
committee, but shall be no less than the fair market value per share of common
stock on the date of the grant of the option. The term of the NSO may not exceed
ten years.
Unless otherwise determined by the committee in its discretion, an option may
not be exercised after the optionee has ceased to be in the employ of the
Company.
1998 EMPLOYEE STOCK PLAN
In March 1998, the Board adopted the 1998 Employee Stock Plan, which has not
been approved by shareholders. Amendments were approved by the Board on December
11, 1998.
The 1998 Employee Stock Plan reserves for issuance up to 17,500,000 shares of
the Company's common stock pursuant to the exercise of options granted under the
plan. The plan is administered by an independent committee appointed by the
Company's Board of Directors. The persons who shall be eligible to participate
in the plan are employees and consultants of the company. Options granted to
employees may either be awards of stock, non-qualified stock options (NQSOs),
incentive stock options (ISOs) or stock appreciation rights (SARs).
The exercise price of NQSOs shall be no less than 100% of the fair market value
per share of common stock on the date of the grant of the option. As determined
by the committee, on the date of the grant, an optionee may reduce the option
exercise price by paying the Company in cash, shares, options, or the
equivalent, an amount equal to the difference between the exercise price and the
reduced exercise price of the option. The committee may specify a period for
exercise of an option which period shall be in no event more than ten years from
the date of grant. The committee shall establish performance goals for stock
awards in writing not later than the date required for compliance under IRC
Section 162(m) and the vesting of such stock shall be contingent upon the
attainment of such
32
performance goals. Stock awards shall vest over a period determined by the
Committee which period shall expire no later than January 18, 2006. The
committee may grant ISOs of not less than 100% of the fair market value per
share of common stock on the date of grant; except that in the event the
optionee owns on the date of grant, securities possessing more than 10% of the
total combined voting power of all classes of securities of the Company or of
any subsidiary of the Company, the price per share shall not be less than 110%
of the fair market value per share of common stock on the date of the grant and
such option shall expire five years from the date such option is granted. SARs
may be granted in conjunction with all or part of any option granted under the
plan, in which case the exercise of the SAR shall require the cancellation of a
corresponding portion of the option and the exercise of the option will result
in cancellation of a corresponding portion of the SAR. In the case of a NQSO,
such rights may be granted either at or after the time of grant of such option.
In the case of an ISO, such rights may be granted only at the time of grant of
such option. A SAR may also be granted on a stand alone basis. The term of an
SAR shall be established by the committee. The exercise price of a SAR shall in
no event be less than 100% of the fair market value per share of common stock on
the date of grant.
Unless otherwise determined by the committee, an option may not be exercised
after the optionee has ceased to be in the employ of the Company. The committee
shall have the authority to make provisions in its award and grant agreements to
address vesting and other issues arising in connection with a change of control.
1998 CHAIRMAN'S EXECUTIVE STOCK PLAN
In March 1998, the Board adopted the 1998 Chairman's Executive Stock Plan, which
has not been approved by shareholders.
The 1998 Chairman's Executive Stock Plan reserves for issuance up to 764,924
shares of the Company's common stock pursuant to the exercise of options granted
under the plan. The plan is administered by an independent committee appointed
by the Company's Board of Directors. Options may be granted under the plan to
the Chairman of the Board of the Company. Options granted under the plan are
NSOs.
The exercise price of options granted under the plan shall be set by the
committee, but shall be no less than the fair market value per share of common
stock on the date of the grant of the option. The term of the NSO may not exceed
ten years.
In the event of a termination of employment for any reason, except by the
Company for cause or by voluntary resignation by optionee, all unvested options
shall be immediately exercisable as of the date of his termination of his
employment.
1999 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
In December 1998, the Executive Committee of the Board adopted the 1999 Stock
Option Plan for Non-Employee Directors, which has not been approved by
shareholders.
The 1999 Stock Option Plan for Non-Employee Directors reserves for issuance up
to 1,500,000 shares of the Company's common stock pursuant to the exercise of
options granted under the plan. The plan is administered by the Company's Board
of Directors, provided that the Board may appoint a committee to administer the
plan. In no event shall an eligible director consider or vote on the
administration of this plan or serve as a member of the committee. Options may
be granted under the plan to non-employee directors of the Company. Options
granted under the plan are NSOs.
The exercise price of options granted under the plan shall not be less than the
fair market value on the date of grant. The term of the NSO may not exceed ten
years.
Options shall vest and become non-forfeitable on the date specified in the award
agreement. In the event of termination of an optionee's service as a director by
reason of voluntary retirement or declining to stand for re-election, all
unvested options granted pursuant to this Plan shall automatically vest and
become nonforfeitable. In the
33
event of death or disablement of an optionee while the optionee is a director,
the then-outstanding options of such optionee shall be exercisable for two years
from the date of the death or disablement of the optionee or by his/her
successors in interest. All unvested options shall automatically vest and become
non-forfeitable as of the date of death or disablement and shall be exercisable
for two years from the date of the death of optionee or until the stated grant
expiration date, whichever is earlier, by the optionee or by his/her successors
in interest.
1999 BAYARD EMPLOYEE OPTION EXCHANGE PLAN
In October 1998 the Board adopted the 1999 Bayard Employee Option Exchange Plan,
which has not been approved by shareholders.
The 1999 Bayard Employee Option Exchange Plan reserves for issuance up to
322,711 shares of the Company's common stock pursuant to the exercise of options
granted under the plan. The plan is administered by a committee appointed by the
Board of Directors of the Company. Options may be granted under the plan to
employees of the Company that are designated by the committee. Options granted
under the plan are NSOs.
The exercise price of options granted under the plan were determined by the
committee at the time of grant. For non-qualified stock options, the purchase
price was equal to at least the greater of (i) the par value of the common
stock, or (ii) 50% of the fair market value of the common stock on the date of
grant. The term of an NSO may not exceed ten years.
Options may be made exercisable only under the conditions the committee may
establish. Except to the extent that the committee provides otherwise in a
written agreement evidencing an incentive award, incentive awards (whether or
not vested) held by a participant generally shall expire immediately and/or be
forfeited upon termination of such participant's employment.
In the event of a change of control of the Company as described in the plan, the
committee may, in its discretion, without obtaining shareholder approval, take
any one or more of the following actions, with respect to any participant: (a)
accelerate the exercise dates of any or all outstanding stock options or make
some or all such stock options immediately fully vested and exercisable; or (b)
pay cash to any or all holders of stock options in exchange for the cancellation
of their outstanding stock options.
1999 POOL EMPLOYEE/DIRECTOR OPTION EXCHANGE PLAN
In November 1999 the Board adopted the 1999 Pool Employee/Director Option
Exchange Plan, which has not been approved by shareholders.
The 1999 Pool Employee/Director Option Exchange Plan reserves for issuance up to
1,466,010 shares of the Company's common stock pursuant to the exercise of
options granted under the plan. The plan is administered by a committee
appointed by the Board of Directors of the Company. Options may be granted under
the plan to former employees and non-employee directors of Pool Energy Services
Co. or its subsidiaries who hold options to purchase shares of Pool common stock
pursuant to certain stock option plans of Pool. Options granted under the plan
are NSOs.
The exercise price of options granted under the plan shall equal the exercise
price per share of the corresponding Pool option, divided by 1.025 (rounding the
resulting exercise price up to the nearest whole cent). The term of an NSO may
not exceed ten years after the acquisition date of the merger.
The period for exercise of an option shall be the same as the period for
exercise of the corresponding Pool option. If an optionee has ceased to be in
the employ of the Company or its subsidiaries, any outstanding options, whether
or not vested, generally may not be exercised after the optionee's date of
termination and shall be forfeited; provided however, in its sole discretion the
committee may extend the time to exercise any option to a period ending on it
applicable expiration date. The committee, in its discretion, shall have the
authority to make provisions in its grant agreements to address vesting and
other issues arising in connection with a change of control.
34
SHAREHOLDER MATTERS
Bermuda has exchange controls which apply to residents in respect of the
Bermudian dollar. As an exempt company, Nabors is considered to be nonresident
for such controls; consequently, there are no Bermuda governmental restrictions
on the Company's ability to make transfers and carry out transactions in all
other currencies, including currency of the United States.
There is no reciprocal tax treaty between Bermuda and the United States
regarding withholding taxes. Under existing Bermuda law, there is no Bermuda
income or withholding tax on dividends, if any, paid by Nabors to its
shareholders. Furthermore, no Bermuda tax or other levy is payable on the sale
or other transfer (including by gift or on the death of the shareholder) of
Nabors common shares (other than by shareholders resident in Bermuda).
35
STOCK PERFORMANCE GRAPH
The following graph illustrates comparisons of five-year cumulative total
returns among Nabors Industries Ltd., the S&P 500 Index and the Dow Jones Oil
Drilling, Equipment and Services Index. Total returns assumes $100 invested on
December 31, 1997 in shares of Nabors Industries Ltd., the S&P 500 Index, and
the Dow Jones Oil Drilling, Equipment and Services Index. It also assumes
reinvestment of dividends and is calculated at the end of each calendar year,
December 31, 1997 to December 31, 2002.
(PERFORMANCE GRAPH)
1998 1999 2000 2001 2002
--------- --------- --------- --------- ---------
Nabors Industries Ltd. 43 98 187 109 112
S&P 500 Index 129 156 141 125 97
Dow Jones Oil Drilling, Equipment and
Services Index 48 74 109 75 69
36
SHAREHOLDER PROPOSALS
Shareholders who, in accordance with the SEC's Rule 14a-8, wish to present
proposals for inclusion in the proxy materials to be distributed by us in
connection with our 2004 Annual General Meeting of Shareholders must submit
their proposals and their proposals must be received at our executive offices no
later than January 6, 2004. As the rules of the SEC make clear, simply
submitting a proposal does not guarantee its inclusion.
In accordance with our Bye-Laws, in order to be properly brought before the
2004 annual general meeting, a shareholder notice of the matter the shareholder
wishes to present must be delivered to the Secretary of Nabors at Nabors
Industries Ltd., 2nd Floor, International Trading Center, Warrens, St. Michael,
Barbados, not less than sixty (60) nor more than ninety (90) days prior to the
first anniversary of this year's annual general meeting (provided, however, that
if the 2004 annual general meeting is called for a date that is not within
thirty (30) days before or after such anniversary date, notice must be received
not later than the close of business on the tenth (10th) day following the day
on which notice of the date of the annual general meeting is mailed or public
disclosure of the date of the annual general meeting is made, which ever first
occurs). As a result, any notice given by or on behalf of a shareholder pursuant
to these provisions of our Bye-Laws (and not pursuant to the SEC's Rule 14a-8)
generally must be received no earlier than March 5, 2004 and no later than April
4, 2004.
OTHER MATTERS
The Board knows of no other business to come before the annual general
meeting. However, if any other matters are properly brought before the annual
general meeting, the persons named in the accompanying form of proxy, or their
substitutes, will vote in their discretion on such matters.
NABORS INDUSTRIES LTD.
/s/ DANIEL MCLACHLIN
DANIEL MCLACHLIN
Dated: May 8, 2003 Secretary
37
SCHEDULE OF ANNEXES
Annex Document
Annex A Audit Committee Charter
Annex B Compensation Committee Charter
Annex C Governance and Nominating Committee Charter
Annex D 2003 Employee Stock Plan
38
ANNEX A
NABORS INDUSTRIES LTD.
AUDIT COMMITTEE CHARTER
ORGANIZATION AND PURPOSE
The Board of Directors of Nabors Industries, Ltd. (the "Company") has
established the Audit Committee of the Board to carry out the duties and
responsibilities assigned to the Audit Committee under applicable securities
laws and the rules and regulations of the American Stock Exchange LLC ("AMEX").
The Audit Committee shall assist the Board in monitoring (1) the quality and
integrity of the financial statements of the Company; (2) the independent
auditor's qualifications and independence; (3) the performance of the Company's
independent auditors and any internal audit function; and (4) the compliance by
the Company with legal and regulatory requirements. The Audit Committee shall
encourage free and open communication among the directors, the independent
auditors, the internal auditors, and the financial management of the corporation
to promote continuous improvement of and adherence to the corporation's
policies, procedures and practices.
The guiding principles to be considered by the Audit Committee in carrying out
its responsibilities in reviewing a particular matter shall include
consideration of (1) whether the financial statements fairly present the results
of operations of the Company in accordance with generally accepted accounting
principles; (2) whether the treatment of the matter is consistent with the
Company's practices in prior accounting periods; (3) whether the presentation of
the matter is reasonably comprehensive under the circumstances; (4) whether the
disclosure regarding the matter contains any material misstatement or fails to
disclosure a matter which reasonably would be considered material to the
Company's stakeholders; and (5) whether the presentation modifies principles of
convention or conservatism.
MEETINGS
The Audit Committee should meet at least quarterly and more frequently as
circumstances may require. The Audit Committee should meet at least annually
with management, independent auditors and any internal auditors, in separate
executive sessions. Agendas for Audit Committee meetings must be approved in
advance by a majority of the members of the Audit Committee. Special meetings of
the Audit Committee outside of those regularly scheduled may only be called with
the prior approval of a majority of the members of the Audit Committee.
DIRECTOR QUALIFICATIONS
The Audit Committee shall consist of at least three members of the Board of
Directors, who serve at the pleasure of the Board. The members of the Audit
Committee shall be appointed by the Board of Directors after considering the
recommendation of the Company's Governance and Nominating Committee. Audit
Committee members may be replaced by the Board.
The members of the Audit Committee shall meet the independence and experience
requirements of the AMEX, the Securities Exchange Act of 1934 (the "Exchange
Act"), and applicable SEC rules and regulations. At least one member of the
Audit Committee shall be an "audit committee financial expert" as defined by the
Commission. A director that serves on the audit committee of more than three
public companies (including the Company) may serve on the Audit Committee only
if the Board affirmatively determines that the director is able to effectively
serve on the Audit Committee.
A-1
RESPONSIBILITIES AND DUTIES
The Audit Committee shall have the following responsibilities and duties:
o The Audit Committee shall have the sole authority to ratify or
replace the independent auditor (subject, if applicable, to
shareholder ratification). The Audit Committee shall be
directly responsible for the compensation and oversight of the
work of the independent auditor (including resolution of
disagreements between management and the independent auditor
regarding financial reporting) for the purpose of preparing or
issuing an audit report or related work. The independent
auditor shall report directly to the Audit Committee.
o The Audit Committee shall preapprove all auditing services and
permitted nonaudit services (including the fees and terms
thereof) to be performed for the Company by its independent
auditor (subject to the de minimis exceptions for nonaudit
services described in Section 10A(i)(1)(B) of the Exchange
Act). In making its preapproval determination, the Audit
Committee shall consider whether providing the nonaudit
services are compatible with maintaining the auditors'
independence.
The Audit Committee may form and delegate authority to
subcommittees consisting of one or more of its members,
including the authority to grant preapprovals of audit and
permitted non-audit services, provided that decisions of such
subcommittee to grant preapprovals shall be presented to the
full Audit Committee at its next scheduled meeting.
o The Audit Committee shall have the authority, to the extent it
deems necessary or appropriate, to retain independent legal,
accounting, or other advisors. The Company shall provide for
appropriate funding, as determined by the Audit Committee, for
payment of compensation to the independent auditor for the
purpose of rendering or issuing an audit report and to any
advisors employed by the Audit Committee.
o The Audit Committee shall make regular reports to the Board.
o The Audit Committee shall prepare the report required by the
rules of the Securities and Exchange Commission (the "SEC") to
be included in the Company's annual proxy statement.
The Audit Committee, to the extent it deems necessary or appropriate,
shall:
Financial Statement and Disclosure Matters
o Review and discuss with management and the independent auditor
the annual financial statements, including disclosures made in
management's discussion and analysis ("MD&A"), and recommend
to the Board whether the audited financial statements should
be included in the Company's Form 10-K.
o Review and discuss with management and the independent auditor
the Company's quarterly financial statements prior to the
filing of its Form 10-Q, including the results of the
independent auditor's review of the quarterly financial
statements.
o Discuss with management and the independent auditor
significant financial reporting issues and judgments made in
connection with the preparation of the Company's financial
statements, including any significant changes in the Company's
selection or application of accounting principles, any major
issues relating to the adequacy of the Company's internal
controls, and any special steps adopted in light of any
material control deficiencies.
A-2
o Review and discuss quarterly reports from the independent
auditors on:
o All critical accounting policies and practices used;
o All alternative treatments of financial information
with generally accepted accounting principles that
have been discussed with management, ramifications of
the use of such alternative disclosures and
treatments, and the treatment preferred by the
independent auditor; and
o Other material written communications between the
independent auditor and management, such as any
management letter or schedule of unadjusted
differences.
o Discuss with management the Company's earnings press releases,
including the use of "pro forma" or "adjusted" non-GAAP
information, as well as financial information and earnings
guidance provided to analysts and rating agencies.
o Review with the independent auditor, the corporation's
internal auditor, and management, the integrity, adequacy and
effectiveness of the disclosure controls and procedures of the
Company and receive and review any recommendations for
improvements.
o Discuss with management the Company's major financial risk
exposures and the steps management has taken to monitor and
control such exposures, including the Company's risk
assessment and risk management policies.
o Discuss with management and the independent auditor the effect
of regulatory and accounting initiatives as well as
off-balance sheet structures on the Company's financial
statements.
o Discuss with the independent auditor the matters required to
be discussed by Statement on Auditing Standards No. 61
relating to the conduct of the audit, including any
difficulties encountered in the course of the audit work, any
restrictions on the scope of activities or access to requested
information, and any significant disagreements with
management.
o Review disclosures made to the Audit Committee by the
Company's CEO and CFO during their certification process for
the Form 10-K and Form 10-Q about any significant deficiencies
in the design or operation of internal controls or material
weaknesses therein and any fraud involving management or other
employees who have a significant role in the Company's
internal controls.
Oversight of the Company's Relationship with the Independent Auditor
o Review and evaluate the lead partner of the independent
auditor team.
o Obtain and review a report from the independent auditor at
least annually regarding (a) the independent auditor's
internal quality-control procedures, (b) any material issues
raised by the most recent internal quality-control review, or
peer review, of the firm, or by any inquiry or investigation
by governmental or professional authorities within the
preceding five years respecting one or more independent audits
carried out by the firm, (c) any steps taken to deal with any
such issues, and (d) all relationships between the independent
auditor and the Company. Evaluate the qualifications,
performance and independence of the independent auditor,
including considering whether the auditor's quality controls
are adequate and the provision of permitted non-audit services
is compatible with maintaining the auditor's independence, and
taking into account the opinions of management and internal
auditors. The Audit Committee shall present its conclusions
with respect to the independent auditor to the Board.
A-3
o Ensure the rotation of the lead (or coordinating) audit
partner having primary responsibility for the audit and the
audit partner responsible for reviewing the audit as required
by law. Consider whether to adopt other policies that may help
ensure the independence of the Company's auditors.
o Recommend to the Board policies for the Company's hiring of
employees or former employees of the independent auditor who
participated in any capacity in the audit of the Company.
o Discuss with the national office of the independent auditor
issues on which they were consulted by the Company's audit
team and matters of audit quality and consistency.
o Meet with the independent auditor prior to the audit to
discuss the scope, planning, staffing, and procedures to be
used in conducting the audit.
Oversight of the Company's Internal Audit Function (Once Established)
o Review the appointment, performance, and replacement (when
necessary) of the senior internal auditing executive.
o Confirm the independence of the individuals or firm
responsible for the Company's internal audit function.
o Review the effectiveness and performance of the internal
auditors.
o Review with management and the director of internal auditing
the Company's process for the internal control structure and
procedures for financial reporting and the internal audit
department's compliance with the Institute of Internal
Auditors' Standards for the Professional Practice of Internal
Auditing.
o Review the significant reports to management prepared by the
internal auditing department and management's responses.
o Discuss with the independent auditor and management the
internal audit department responsibilities, budget, and
staffing and any recommended changes in the planned scope of
the internal audit.
o Receive and review any summaries of findings from completed
internal audits.
o Meet in executive session with the senior internal auditing
executive from time to time to discuss matters which the Audit
Committee or the senior internal auditing executive believes
are appropriate.
Compliance Oversight Responsibilities
o Establish procedures for the receipt, retention and treatment
of complaints received by the Company regarding accounting,
internal accounting controls or auditing matters, and the
confidential, anonymous submission by employees of concerns
regarding questionable accounting or auditing matters.
o Obtain from the independent auditor assurance that Section
10A(b) of the Exchange Act (which requires the independent
auditor to inform the Audit Committee if it detects or becomes
aware of an illegal act) has not been implicated.
A-4
o Obtain reports from management, the Company's senior internal
auditing executive, and the independent auditor that the
Company and its affiliates are in conformity with applicable
legal requirements and the Company's Code of Business Conduct.
o Review reports and disclosures of insider and affiliated party
transactions.
o Advise the Board with respect to the Company's policies and
procedures regarding compliance with applicable laws and
regulations and with the Company's Code of Business Ethics.
o Discuss with management and the independent auditor any
correspondence with regulators or governmental agencies which
raise material issues regarding the Company's financial
statements or accounting policies.
o Discuss with the Company's chief legal officer legal matters
that may have a material impact on the financial statements or
the Company's compliance policies.
Other Matters
o Perform any other activities consistent with this Charter, the
Company's by-laws and governing law, as the Audit Committee or
the Board of Directors deems necessary or appropriate.
o Review this Charter periodically and recommend any changes to
the Board.
LIMITATION OF AUDIT COMMITTEE'S ROLE
Although the Audit Committee has the responsibilities and powers set
forth in this Charter, it is not the duty of the Audit Committee to
prepare financial statements, plan or conduct audits or to determine
that the Company's financial statements and disclosures are complete
and accurate and are in accordance with generally accepted accounting
principles and applicable rules and regulations. These are the
responsibilities of management and the independent auditor.
The members of the Audit Committee are not professionally engaged in
the practice of auditing or accounting. Members of the committee rely
without independent verification on the information provided to them
and on the representations made by management and the independent
auditors. Accordingly, the Audit Committee oversight, although an
important part of the process, does not provide an independent basis to
determine that management has maintained appropriate accounting and
financial reporting principles or appropriate internal controls and
procedures designed to assure compliance with accounting standards and
applicable laws and regulations. Furthermore, the Audit Committee's
oversight function does not assure that the audit of the Company's
financial statements has been carried out in accordance with generally
accepted auditing standards or that the financial statements are
presented in accordance with generally accepted accounting principles.
A-5
ANNEX B
NABORS INDUSTRIES LTD.
COMPENSATION COMMITTEE CHARTER
COMPOSITION AND TERM OF OFFICE
The Compensation Committee shall be composed of not less than two
independent Directors. The members of the Committee shall be elected at the
first meeting of the Board following the shareholders meeting or as necessary to
fill vacancies in the interim. A person may serve on the Executive Compensation
Committee only if he or she (i) is a "non-employee Director" for the purposes of
Rule 16b-3 under the Securities Exchange Act of 1934, as amended, satisfies the
requirements of an "outside director" for the purposes of Section 162(m) of the
Internal Revenue Code and (ii) meets the independence requirements of the
American Stock Exchange Inc.
MEETINGS
Committee meetings are normally scheduled four times a year with additional
meetings held as necessary.
PURPOSE AND ROLE
The Purpose of the Committee is to assist the Board in establishing and
maintaining a system/policy in which the Company's Senior executives are
compensated in a manner that is consistent with Nabors' overall business and
management strategy. The Committee will consider the following practices basic
to the system and its primary Role is to assist the Board in ensuring adherence
to them:
o Executives are to be rewarded fairly for performance benefiting
shareholders on a long range basis. Thus compensation philosophy and
practices are to be linked to achievement of business objectives and
overall organizational performance.
o Overall compensation should provide competitive opportunities that
attract and retain the executive resources necessary to successfully
lead and mange the Company.
o Specific expertise which Nabors executives are expected to employ in
their duties which would normally be handled by outside consultants
and specialists will be taken into account in overall compensation.
DUTIES AND RESPONSIBILITIES
The general responsibilities of the Committee are oversight of compensation
(Salary, Bonuses, Stock related awards - Options etc. and any other incentives)
for the Executive Officers (The Chairman, (the CEO) the President (the COO) and
the Vice Chairman. This embraces review of and recommendation to the Board of
proposed changes in compensation under existing or new employment contracts for
the CEO developed by the Board as well that for the other designated Officers as
set forth by the Chairman.
Specifically the Committee shall:
1. Along with the Nominating and Governance Committee periodically
review and approve Corporate Goals and Objectives as established
by the Board relevant to the Chief Executive and Chief Operating
Officers performance and compensation level.
2. Participate in the establishment of the total Cash Bonus and the
total Stock Option Pools to be awarded each year and the
recommended allocation related to performance category.
The Nabors employee performance appraisal system is a basic tool in the
execution of its salary and incentive program and overall compensation
structure. The Committee or its delegated member will be consulted on
the elements to be included in evaluation forms used in the system and
will participate in the annual review
B-1
of the overall statistical results particularly as they pertain to high
potential employees who are candidates for the Management Development
Program and inclusion in Bonus and stock option plans.
3. Assist and advise the Board and Management in establishing and
maintaining the composition of total compensation for the Senior
Executives (CEO and COO) and the other Senior Management
positions. The mix of Salary, Cash Bonus, Option Awards, Perks
and other elements should be continuously examined to take into
account the competitive situation, individual employee potential
and performance.
4. Prepare an annual report on Executive Compensation for inclusion
in the Corporation's proxy statement, in accordance with
applicable rules and regulations.
5. Participate in the preparation, review, and approval process of
any disclosure, press release, or other Company communication
related to Executive compensation including those required in the
Company's proxy statement.
6. Monitor compliance with (1) legal prohibition of loans to
Directors and Executive officers and (2) with the Company's
program of required stock ownership by Senior Management and
Directors.
The Committee will have access to consultants to assist in the
execution of its duties and responsibilities.
PARTICIPATION IN OTHER MATTERS RELATED TO EMPLOYEE COMPENSATION
The Committee through its Chairman or a designated member will insure that
it is informed and knowledgeable as to the Company's Benefit and Pension plans
including the 401-K plan. It will, as necessary, attend periodic reviews of the
performance of the Investment Plans and will diligently review, keep involved
and comment on proposed significant changes in the Plans and in the
Administration of the entire Program. Although the Committee cannot assume a
line authority role its comments and suggestions are part of its responsibility
related to (1) oversight of Senior Management's performance in judiciously
controlling costs (in this case of indirect compensation and emoluments) against
the need to provide total competitive compensation to retain and recruit high
caliber personnel and (2) Monitoring Managements adherence to principals of
Fiduciary Responsibilities in respect to employee funds.
The Committee, through its Chairman or a designated member will review
proposed Stock Option awards included in employment offers in recruiting efforts
to employ senior executives or specialists.
B-2
ANNEX C
NABORS INDUSTRIES LTD.
GOVERNANCE AND NOMINATING COMMITTEE CHARTER
PURPOSE OF THE GOVERNANCE AND NOMINATING COMMITTEE
The Board of Directors has established the Governance and Nominating
Committee of the Board to identify and recommend candidates to serve on the
Company's Board of Directors; to recommend directors to serve on the various
committees of the Board; and to take a leadership role in shaping the corporate
governance of the Company.
MEMBERS OF THE GOVERNANCE AND NOMINATING COMMITTEE
The Committee must be comprised of at least three members of the Board. The
Committee must be comprised solely of independent directors, determined in
accordance with the Company's Guidelines on Significant Corporate Governance
Issues.
No Committee member may participate in any discussion with respect to, or
vote on, any matter in which he or she is not independent. If there is any basis
for believing a Committee member is not independent, the facts and circumstances
should be reported to the Board, and no action should be taken until the Board,
or a committee of independent directors, has determined that the Committee
member is independent.
The members of the Committee shall be appointed annually by the Board upon
the recommendation of the Governance and Nominating Committee in consultation
with the Chief Executive Officer. Each member of the Committee shall serve until
such member's successor is elected and qualified or until such director's
earlier resignation or removal. Any member may resign his or her position as a
member of the Committee upon notice given in writing or by electronic
transmission to the Board. A member may be removed from the Committee upon the
majority vote of the Board.
RESPONSIBILITIES OF THE GOVERNANCE AND NOMINATING COMMITTEE
The responsibilities of a member of the Committee are in addition to those
responsibilities set out for a member of the Board. Each member of the Committee
may be compensated separately for his or her service, in accordance with the
Company's policies regarding director compensation. The Company's General
Counsel will prepare a memorandum on a regular basis setting forth the standards
applicable to the members of the Committee under applicable laws and
regulations.
In addition to the matters set forth herein, the Committee will perform
such other functions as required by law, the listing requirements of any stock
exchange on which the Company's securities are listed, the Company's Certificate
of Incorporation or Bye Laws, and Board resolutions.
The Committee is responsible to the Board for the following activities:
o To recommend directors' compensation and benefit arrangements to the
full Board in consultation with the Compensation Committee;
o To determine the skills and qualifications of directors most needed to
strengthen the Board;
o To work together with the Chairman of the Board and the Chief
Executive Officer to identify suitably qualified board candidates and,
following investigation and interviews, make recommendations to the
Board for approval;
C-1
o To monitor individual director performance and full Board performance,
counsel directors whose performance requires improvement and, when
necessary, steer low-performing directors away from standing for
reelection (or, if not standing for reelection that year, to encourage
them to retire prior to the end of their term.) To recommend
termination of board membership of directors when appropriate. Members
of the Committee who will stand for re-election in the next Committee
year will recuse themselves from discussions concerning the evaluation
of those directors standing for reelection;
o To recommend, in consultation with the Chief Executive Officer, the
Committees of the Board, their responsibilities, membership (including
filling vacancies) and Chairpersons to the full Board for
consideration and appointment;
o To the extent appropriate, review potential conflicts of interests of
directors which might interfere with Board service and to review the
fairness of any transactions between the Company and any director;
o To make determinations, with the advice of legal counsel, concerning
the "independence" of Board members for corporate governance purposes
and to make other determinations as required under the Company's
governance programs;
o To initially develop and recommend to the Board appropriate corporate
governance policies and, once developed, to review and make
recommendations to the Board for changes as appropriate. To monitor
compliance with corporate governance policies and the Company's Code
of Business Conduct (and approve waivers to the Code where
appropriate);
o To consult with directors regarding acceptance of board positions with
non-Nabors, for-profit companies, and consider any conflict of
interest;
o To oversee the training and orientation of directors; and
o To review the appropriateness of continued Board membership of a
member who experiences a change in employment, board membership of
another company, or other relevant matter.
MEETINGS
The Committee shall meet as frequently and at such times as necessary to
carry out its responsibilities; however, the committee shall normally meet at
least two times each year. The Chair of the Committee will preside at each
meeting of the Committee and shall set the length of each meeting and the agenda
of items to be addressed at each meeting.
SUBCOMMITTEES
The Committee may, by resolution passed by a majority of the Committee,
designate one or more subcommittees, each subcommittee to consist of one or more
of the members of the Committee. The Committee may delegate such authority to a
subcommittee as the Committee deems appropriate.
REPORTING
The Committee shall maintain written minutes of all meetings and consent
actions, which shall be recorded or filed with the books and records of the
Company and made available to the Board. The Committee will make regular reports
to the Board with respect to its activities.
C-2
ASSISTANCE FROM OTHERS
The Committee may engage external advisors and consultants, to the extent
determined appropriate by the Committee, to facilitate the performance of the
functions of the Committee. All external advisors engaged by the Committee shall
report directly to the members of the Committee. Specifically, the Committee
shall have the sole authority to retain and terminate any consultant to be used
to assist in the search and evaluation of potential directors and members of
Board committees and shall have the sole authority to approve the consultant's
fees and other retention terms. The Committee has the same authority to retain
other experts to advise or assist it, including independent counsel or others.
The Committee may also request reports from the executive officers or any other
officer of the Company.
PERFORMANCE EVALUATION
Periodically, at such time deemed appropriate by the Committee or the
Board, the Committee shall review and assess the adequacy and appropriateness of
this charter and the Committee's own performance. The results of such evaluation
and any proposed changes shall be presented to the full Board.
C-3
ANNEX D
NABORS INDUSTRIES LTD.
2003 EMPLOYEE STOCK PLAN
SECTION 1. PURPOSE OF PLAN.
The name of this plan is the Nabors Industries Ltd. 2003
Employee Stock Plan (the "Plan"). The purpose of the Plan is to provide
additional incentive to those officers and employees of the Company and its
Subsidiaries and Affiliates whose contributions are essential to the growth and
success of the Company's business, in order to strengthen the commitment of such
persons to the Company and its Subsidiaries and Affiliates, motivate such
persons to faithfully and diligently perform their responsibilities and attract
and retain competent and dedicated persons whose efforts will result in the
long-term growth and profitability of the Company and its Subsidiaries and
Affiliates. To accomplish such purposes, the Plan provides that the Company may
grant Incentive Stock Options, Nonqualified Stock Options, Stock Appreciation
Rights, Restricted Stock, Restricted Stock Units, and Stock Bonuses. The Plan is
intended to permit awards that satisfy the requirements of section 162(m) of the
Code and shall be interpreted in a manner consistent with the requirements
thereof.
SECTION 2. DEFINITIONS.
For purposes of the Plan, in addition to terms defined
elsewhere in the Plan, the following terms shall be defined as set forth below:
(a) "Administrator" means the Board, or if and to the extent
the Board does not administer the Plan, the Committee, in accordance with
Section 3 hereof.
(b) "Affiliate" means any corporation or other entity, more
than 50% of the voting power of the outstanding voting securities of which is
owned by the Company, its Subsidiaries, or any other Affiliate.
(c) "Award" means an award of Incentive Stock Options,
Nonqualified Stock Options, Stock Appreciation Rights, Restricted Stock,
Restricted Stock Units, or Stock Bonus under the Plan.
(d) "Award Agreement" means, with respect to any Award, the
written agreement between the Company and the Participant setting forth the
terms and conditions of the Award.
(e) "Board" means the Board of Directors of the Company.
(f) "Change in Capitalization" means any increase, reduction,
or change or exchange of Shares for a different number or kind of shares or
other securities or property by reason of a reclassification, recapitalization,
merger, amalgamation, consolidation, reorganization, issuance of warrants or
rights, stock dividend, stock split or reverse stock split, combination or
exchange of shares, repurchase of shares, change in corporate structure or
otherwise; or any other corporate action, such as declaration of a special
dividend, that affects the capitalization of the Company.
(g) "Code" means the Internal Revenue Code of 1986, as amended
from time to time, or any successor thereto.
(h) "Committee" means any committee or subcommittee the Board
may appoint to administer the Plan. If at any time or to any extent the Board
shall not administer the Plan, then the functions of the Administrator specified
in the Plan shall be exercised by the Committee. Unless otherwise determined by
the Board, the composition of the Committee shall at all times consist solely of
persons who are (i) "Nonemployee Directors" as defined in Rule 16b-3 issued
under the Exchange Act, and (ii) "outside directors" as defined in section
162(m) of the Code.
(i) "Common Shares" means the common shares, par value $0.001
per share, of the Company.
D-1
(j) "Company" means Nabors Industries Ltd., a Bermuda exempt
company (or any successor corporation).
(k) "Disability" means (1) any physical or mental condition
that would qualify a Participant for a disability benefit under any long-term
disability plan maintained by the Company (or by the Subsidiary or Affiliate by
which he is employed); (2) when used in connection with the exercise of an
Incentive Stock Option following termination of employment, disability within
the meaning of section 22(e)(3) of the Code; or (3) such other condition as may
be determined in the sole discretion of the Administrator to constitute
Disability.
(l) "Eligible Recipient" means an employee or officer of the
Company or of any Subsidiary or Affiliate.
(m) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended from time to time.
(n) "Exercise Price" means the per share price at which a
holder of an Option may purchase the Shares issuable upon exercise of the
Option.
(o) "Fair Market Value" of a Common Share as of a particular
date shall mean (1) the closing sale price reported for such share on the
national securities exchange or national market system on which such share is
principally traded on such date (or, if there were no trades on such date, on
the most recently preceding day on which there was a sale), or (2) if the Common
Shares are not then listed on a national securities exchange or national market
system, or the value of such shares is not otherwise determinable, such value as
determined by the Administrator in good faith in its sole discretion.
(p) "Freestanding SAR" means an SAR that is granted
independently of any Options, as described Section 11 hereof.
(q) "Immediate Family" means any child, stepchild, grandchild,
parent, stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law,
son-in-law, daughter-in-law, brother-in-law or sister-in-law, including adoptive
relationships of the Participant; trusts for the benefit of such immediate
family members; or partnerships in which such immediate family members are the
only partners.
(r) "Incentive Stock Option" shall mean an Option that is an
"incentive stock option" within the meaning of section 422 of the Code, or any
successor provision, and that is designated by the Administrator as an Incentive
Stock Option.
(s) "Nonqualified Stock Option" means any Option that is not
an Incentive Stock Option, including any Option that provides (as of the time
such Option is granted) that it will not be treated as an Incentive Stock
Option.
(t) "Option" means an Incentive Stock Option, a Nonqualified
Stock Option, or either or both of them, as the context requires.
(u) "Participant" means any Eligible Recipient selected by the
Administrator, pursuant to the Administrator's authority in Section 3 hereof, to
receive grants of Options or Stock Appreciation Rights or awards of Restricted
Stock, Restricted Stock Units, or Stock Bonus. A Participant who receives the
grant of an Option is sometimes referred to herein as "Optionee."
(v) "Performance Goal" shall mean one or more of the following
business criteria applied to a Participant and/or a business unit or the Company
and/or a Subsidiary: (i) income before federal taxes and net interest expense;
(ii) achievement of specific and measurable operational objectives in the areas
of rig operating costs, accident records, and employee turnover; (iii) working
capital, generally defined to include receivables, inventories
D-2
and controllable current liabilities, measured either in absolute dollars or
relative to sales; (iv) earnings growth, revenues, expenses, share price, market
share, return on assets, return on capital, equity or investment, regulatory
compliance, satisfactory internal or external audits, improvement of financial
ratings, or achievement of balance sheet, income statement or cash flow
objectives; (v) adjusted cash flows or adjusted income derived from operating
activities; and/or (vi) a percentage of cash flow in excess of a percentage of
shareholders' average book equity.
(w) "Restricted Stock Unit" means the right to receive a Share
or the Fair Market Value of a Share in cash granted pursuant to Section 9
hereof.
(x) "Restricted Stock" means Shares subject to certain
restrictions granted pursuant to Section 8 hereof.
(y) "Shares" means Common Shares and the common equity of any
successor security.
(z) "Stock Appreciation Right" or "SAR" means an Award,
granted alone or in connection with a related Option, designated as an SAR,
pursuant to Section 11 hereof.
(aa) "Stock Bonus" means the right to receive a Share granted
pursuant to Section 10 hereof.
(bb) "Subsidiary" means any corporation (other than the
Company) in an unbroken chain of corporations beginning with the Company, if
each of the corporations (other than the last corporation) in the unbroken chain
owns stock possessing more than 50% of the total combined voting power of all
classes of stock in one of the other corporations in the chain.
(cc) "Tandem SAR" means an SAR that is granted in connection
with a related Option pursuant to Section 11 hereof, the exercise of which shall
require forfeiture of the right to purchase a Share under the related Option
(and when a Share is purchased under the Option, the Tandem SAR shall similarly
be canceled).
SECTION 3. ADMINISTRATION.
(a) The Plan shall be administered by the Board or, at the
Board's sole discretion, by the Committee, which shall serve at the pleasure of
the Board. Pursuant to the terms of the Plan, the Administrator shall have the
power and authority, without limitation:
(i) to select those Eligible Recipients who shall be
Participants;
(ii) to determine in an Award Agreement whether and
to what extent Options or Stock Appreciation Rights or awards of
Restricted Stock, Restricted Stock Units, or Stock Bonus are to be
granted hereunder to Participants;
(iii) to determine in an Award Agreement the number
of Shares to be covered by each Award granted hereunder;
(iv) to determine in an Award Agreement the terms and
conditions, not inconsistent with the terms of the Plan, of each Award
granted hereunder;
(v) to determine the terms and conditions, not
inconsistent with the terms of the Plan, which shall govern all written
instruments evidencing Options or Stock Appreciation Rights or awards
of Restricted Stock, Restricted Stock Units, or Stock Bonus granted
hereunder;
(vi) to adopt, alter and repeal such administrative
rules, guidelines and practices governing the Plan as it shall from
time to time deem advisable; and
D-3
(vii) to interpret the terms and provisions of the
Plan and any Award issued under the Plan (and any Award Agreement
relating thereto), and to otherwise supervise the administration of the
Plan.
(b) All decisions made by the Administrator pursuant to the
provisions of the Plan shall be final, conclusive and binding on all persons,
including the Company and the Participants. No member of the Board or the
Committee, nor any officer or employee of the Company acting on behalf of the
Board or the Committee, shall be personally liable for any action,
determination, or interpretation taken or made in good faith with respect to the
Plan, and all members of the Board or the Committee and each and any officer or
employee of the Company acting on their behalf shall, to the extent permitted by
law, be fully indemnified and protected by the Company in respect of any such
action, determination or interpretation.
(c) The Administrator in its discretion may condition
entitlement to an Award in whole or in part on the attainment of one or more
Performance Goals. The Administrator shall establish any such Performance Goal
not later than 90 days after the commencement of the period of service to which
the Award relates if the period equals or exceeds one year (or if the period is
shorter, 25% of such period of service), and once granted, the Administrator
shall not have discretion to increase the amount payable under such Award,
provided, however, that whether or not an Award is intended to constitute
qualified performance based compensation within the meaning of section 162(m) of
the Code, the Administrator shall have the authority to make appropriate
adjustments in Performance Goals under an Award to reflect the impact of
extraordinary items not reflected in such Performance Goals. For purposes of the
Plan, extraordinary items shall be defined as (1) any profit or loss
attributable to acquisitions or dispositions of stock or assets, (2) any changes
in accounting standards that may be required or permitted by the Financial
Accounting Standards Board or adopted by the Company after the goal is
established, (3) all items of gain, loss or expense for the year related to
restructuring charges for the Company, (4) all items of gain, loss or expense
for the year determined to be extraordinary or unusual in nature or infrequent
in occurrence or related to the disposal of a segment of a business, (5) all
items of gain, loss or expense for the year related to discontinued operations
as defined in APB Opinion No. 30 or FAS No. 144, and (6) such other items as may
be prescribed by section 162(m) of the Code and the Treasury Regulations
thereunder as may be in effect from time to time, and any amendments, revisions
or successor provisions and any changes thereto.
(d) Subject to section 162(m) of the Code and except as
required by Rule 16b-3 under the Exchange Act with respect to grants of Awards
to individuals who are subject to section 16 of the Exchange Act, or as
otherwise required for compliance with Rule 16b-3 under the Exchange Act or
other applicable law, the Administrator may delegate all or any part of its
authority under the Plan to an employee, employees or committee of employees of
the Company or any Subsidiary.
(e) If at any time (whether before or after termination of
employment) a majority of either the Board or the Committee determines that a
Participant has engaged in fraud, embezzlement, theft, commission of a felony,
dishonesty, or any other conduct inimical to the Company, either the Board or
the Committee (as the case may be) may provide for the immediate forfeiture of
any Award held by the Participant, whether or not then vested. Any determination
by the Board or Committee (as the case may be) under this subsection (e) shall
be final, conclusive and binding on all persons.
SECTION 4. SHARES RESERVED FOR ISSUANCE UNDER THE PLAN.
(a) There shall be reserved and available for issuance under
the Plan 3,500,000 Common Shares. The grant of any Restricted Stock Units or
SARs that may be settled only in cash shall not reduce the number of Common
Shares with respect to which Awards may be granted pursuant to the Plan.
(b) To the extent that (i) an Option expires or is otherwise
cancelled or terminated without being exercised as to the underlying Shares,
(ii) any Shares subject to any award of Stock Appreciation Rights, Restricted
Stock, Restricted Stock Unit, or Stock Bonus are forfeited, (iii) payment for an
Option upon exercise is made with
D-4
Shares owned by the Optionee for at least six months on the date of surrender or
(iv) Shares are withheld from payment of an Award in satisfaction of any
federal, state or local tax withholding requirements, such Shares shall again be
available for issuance in connection with future Awards granted under the Plan.
(c) The aggregate number of Shares with respect to which
Awards (including Awards payable in cash but denominated in Common Shares, i.e.,
cash-settled Restricted Stock Units or SARs) may be granted to any individual
Participant during any calendar year shall not exceed 1,500,000.
SECTION 5. EQUITABLE ADJUSTMENTS.
In the event of any Change in Capitalization, an equitable
substitution or proportionate adjustment shall be made in (i) the aggregate
number and/or kind of common shares or other property reserved for issuance
under the Plan, (ii) the kind, number and/or option price of shares or other
property subject to outstanding Options and Stock Appreciation Rights granted
under the Plan, and (iii) the kind, number and/or purchase price of shares or
other property subject to outstanding awards of Restricted Stock, and Restricted
Stock Units granted under the Plan, in each case as may be determined by the
Administrator, in its sole discretion. Such other equitable substitutions or
adjustments shall be made as may be determined by the Administrator, in its sole
discretion. Without limiting the generality of the foregoing, in connection with
a Change in Capitalization, the Administrator may provide, in its sole
discretion, for the cancellation of any outstanding Awards in exchange for
payment in cash or other property of the Fair Market Value of the Shares covered
by such Awards reduced, in the case of Options, by the Exercise Price thereof,
and in the case of Stock Appreciation Rights, by the grant price thereof, or by
any other applicable purchase price.
SECTION 6. ELIGIBILITY.
The Participants under the Plan shall be selected from time to
time by the Administrator, in its sole discretion, from among Eligible
Recipients. The Administrator shall have the authority to grant to any Eligible
Recipient Incentive Stock Options, Nonqualified Stock Options, Stock
Appreciation Rights, Restricted Stock, Restricted Stock Units, or a Stock Bonus.
SECTION 7. OPTIONS.
(a) General. Options may be granted alone or in addition to
other Awards granted under the Plan. Any Option granted under the Plan shall be
evidenced by an Award Agreement in such form as the Administrator may from time
to time approve. The provisions of each Option need not be the same with respect
to each Participant. Participants who are granted Options shall enter into an
Award Agreement with the Company, in such form as the Administrator shall
determine, which Award Agreement shall set forth, among other things, the
Exercise Price of the Option, the term of the Option and provisions regarding
exercisability of the Option granted thereunder. The Options granted under the
Plan may be of two types: (i) Incentive Stock Options and (ii) Nonqualified
Stock Options. To the extent that any Option does not qualify as an Incentive
Stock Option, it shall constitute a separate Nonqualified Stock Option. More
than one Option may be granted to the same Participant and be outstanding
concurrently hereunder. Options granted under the Plan shall be subject to the
terms and conditions set forth in paragraphs (b)-(i) of this Section 7 and shall
contain such additional terms and conditions, not inconsistent with the terms of
the Plan, as the Administrator shall deem desirable.
(b) Exercise Price. The per share Exercise Price of Shares
purchasable under an Option shall be determined by the Administrator in its sole
discretion at the time of grant but shall not be less than 100% of the Fair
Market Value per Share on such date (or, in the case of Incentive Stock Options,
110% of the Fair Market Value per Share on such date if, on such date, the
Eligible Recipient owns (or is deemed to own under the Code) stock possessing
more than 10% (a "Ten Percent Owner") of the total combined voting power of all
classes of shares of the Company or its Subsidiaries).
D-5
(c) Option Term. The term of each Option shall be fixed by the
Administrator, but no Option shall be exercisable more than ten years after the
date such Option is granted. If the Eligible Participant is a Ten Percent Owner,
an Incentive Stock Option may not be exercisable after the expiration of five
years from the date such Incentive Stock Option is granted.
(d) Exercisability. Options shall be exercisable at such time
or times and subject to such terms and conditions, including the attainment of
preestablished Performance Goals or other corporate or individual performance
goals, as shall be determined by the Administrator in its sole discretion. The
Administrator may also provide that any Option shall be exercisable only in
installments.
(e) Method of Exercise. Options may be exercised in whole or
in part by giving written notice of exercise to the Company specifying the
number of Shares to be purchased, accompanied by payment in full of the
aggregate Exercise Price of the Shares so purchased in cash or its equivalent,
as determined by the Administrator. As determined by the Administrator, in its
sole discretion, payment in whole or in part may also be made (i) by means of
any properly executed broker-assisted exercise procedure, subject to approval by
the Administrator, (ii) in the form of unrestricted Shares already owned by the
Optionee for at least six months on the date of surrender to the extent the
Shares have a Fair Market Value on the date of surrender equal to the aggregate
option price of the Shares as to which such Option shall be exercised, provided
that, in the case of an Incentive Stock Option, the right to make payment in the
form of already owned Shares may be authorized only at the time of grant, or
(iii) any combination of the foregoing.
(f) Rights as Shareholder. An Optionee shall have no rights to
dividends or any other rights of a shareholder with respect to the Shares
subject to the Option until the Optionee has given written notice of exercise,
has paid in full for such Shares, and has satisfied the requirements of Section
15 hereof.
(g) Nontransferability of Options. The Optionee shall not be
permitted to sell, transfer, pledge or assign any Option other than by will and
the laws of descent and distribution and all Options shall be exercisable during
the Participant's lifetime only by the Participant, in each case, except as set
forth in the following two sentences. During an Optionee's lifetime, the
Administrator may, in its discretion, permit the transfer, assignment or other
encumbrance of an outstanding Option if such Option is a Nonqualified Stock
Option or an Incentive Stock Option that the Administrator and the Participant
intend to change to a Nonqualified Stock Option. Subject to the approval of the
Administrator and to any conditions that the Administrator may prescribe, an
Optionee may, upon providing written notice to the Company, elect to transfer
any or all Options described in the preceding sentence (i) to members of his or
her Immediate Family, provided that no such transfer by any Participant may be
made in exchange for consideration, or (ii) by instrument to an inter vivos or
testamentary trust in which the Options are to be passed to beneficiaries upon
the death of the Participant.
(h) Termination of Employment or Service. Except as otherwise
provided in an Award Agreement, if a Participant's employment with the Company
or any Subsidiary or Affiliate terminates for any reason, all outstanding
Options granted to such Participant shall expire on the date of such termination
(whether or not then vested or exercisable). Notwithstanding the foregoing, no
Option shall be exercisable after the expiration of its term.
(i) Limitation on Incentive Stock Options. To the extent that
the aggregate Fair Market Value of Shares with respect to which Incentive Stock
Options are exercisable for the first time by an Optionee during any calendar
year under the Plan and any other stock option plan of the Company or any
Subsidiary or Affiliate shall exceed $100,000, such Options shall be treated as
Nonqualified Stock Options. Such Fair Market Value shall be determined as of the
date on which each such Incentive Stock Option is granted.
SECTION 8. RESTRICTED STOCK.
(a) General. Awards of Restricted Stock may be issued either
alone or in addition to other Awards granted under the Plan and shall be
evidenced by an Award Agreement. The Administrator shall determine the
D-6
Eligible Recipients to whom, and the time or times at which, Awards of
Restricted Stock shall be made; the number of Shares to be awarded; the price,
if any, to be paid by the Participant for the acquisition of Restricted Stock;
and the Restricted Period (as defined in Section 8(d)) applicable to awards of
Restricted Stock. The provisions of the awards of Restricted Stock need not be
the same with respect to each Participant.
(b) Purchase Price. The price per Share, if any, that a
Recipient must pay for Shares purchasable under an award of Restricted Stock
shall be determined by the Administrator in its sole discretion at the time of
grant.
(c) Awards and Certificates. The prospective recipient of an
Award of Restricted Stock shall not have any rights with respect to any such
Award, unless and until such recipient has executed an Award Agreement
evidencing the Award and delivered a fully executed copy thereof to the Company,
within such period as the Administrator may specify after the award date. Each
Participant who is granted an award of Restricted Stock shall be issued a share
certificate in respect of such shares of Restricted Stock, which certificate
shall be registered in the name of the Participant and shall bear an appropriate
legend referring to the terms, conditions, and restrictions applicable to any
such Award, provided that the Company may require that the share certificates
evidencing Restricted Stock granted hereunder be held in the custody of the
Company until the restrictions thereon shall have lapsed, and that, as a
condition of any award of Restricted Stock, the Participant shall have delivered
a stock power, endorsed in blank, relating to the Shares covered by such Award.
(d) Nontransferability. Any Award of Restricted Stock granted
pursuant to this Section 8 shall be subject to the restrictions on
transferability set forth in this paragraph (d). During such period as may be
set by the Administrator in the Award Agreement (the "Restricted Period"), the
Participant shall not be permitted to sell, transfer, pledge, hypothecate or
assign Shares of Restricted Stock awarded under the Plan except by will or the
laws of descent and distribution. The Administrator may also impose such other
restrictions and conditions, including the attainment of preestablished
Performance Goals or other corporate or individual performance goals, on
Restricted Stock as it determines in its sole discretion. The Restricted Period
shall be not less than three years, provided that the Restricted Period may be
shorter (but not less than one year) if vesting of the Restricted Stock is
conditioned upon the attainment of preestablished Performance Goals or other
corporate or individual performance goals. However, in no event shall the
Restricted Period end with respect to a Restricted Stock Award prior to the
satisfaction by the Participant of any liability arising under Section 15
hereof. Any attempt to dispose of any Restricted Stock in contravention of any
such restrictions shall be null and void and without effect.
(e) Rights as a Shareholder. Except as provided in Section
8(c) and (d), the Participant shall possess all incidents of ownership with
respect to Shares of Restricted Stock during the Restricted Period, including
the right to receive or reinvest dividends with respect to such Shares (except
that the Administrator may provide in its discretion that any dividends paid in
property other than cash shall be subject to the same restrictions as those that
apply to the underlying Restricted Stock) and to vote such Shares. Certificates
for unrestricted Shares shall be delivered to the Participant promptly after,
and only after, the Restricted Period shall expire without forfeiture in respect
of such awards of Restricted Stock except as the Administrator, in its sole
discretion, shall otherwise determine.
(f) Termination of Employment. The rights of Participants
granted an Award of Restricted Stock upon termination of employment with the
Company or any Subsidiary or Affiliate for any reason during the Restricted
Period shall be set forth in the Award Agreement governing such Award.
SECTION 9. RESTRICTED STOCK UNITS
(a) Vesting. At the time of the grant of Restricted Stock
Units, the Administrator may impose such restrictions or conditions to the
vesting of such Restricted Stock Units as it, in its sole discretion, deems
appropriate, to be contained in the Award Agreement, including the attainment of
preestablished Performance Goals or other corporate or individual performance
goals. The Administrator may divide such Restricted Stock Units into classes and
assign different vesting conditions for each class. Provided that all conditions
to the vesting of a Restricted Stock Unit are satisfied, and except as provided
in Section 9(c), upon the satisfaction of all vesting conditions with respect
D-7
to a Restricted Stock Unit, such Restricted Stock Unit shall vest. The
provisions of the awards of Restricted Stock Units need not be the same with
respect to each Participant.
(b) Benefit Upon Vesting. Upon the vesting of a Restricted
Stock Unit, the Participant shall be entitled to receive, within 30 days of the
date on which such Restricted Stock Unit vests, an amount in cash or, in the
Company's sole discretion, in Common Shares with a Fair Market Value equal to
the sum of (1) the Fair Market Value of a Common Share on the date on which such
Restricted Stock Unit vests and (2) the aggregate amount of cash dividends paid
with respect to a Common Share during the period commencing on the date on which
the Restricted Stock Unit was granted and terminating on the date on which such
Share vests. Notwithstanding the foregoing provisions of this Section 9, if a
Restricted Stock Unit is to be settled in Common Shares, the Restricted Stock
Unit shall vest not earlier than three years from the date of grant, provided
that the Restricted Stock Unit may vest earlier (but not less than one year from
the date of grant) if vesting of the Restricted Stock Unit is conditioned upon
the attainment of preestablished Performance Goals or other corporate or
individual performance goals.
(c) Termination of Employment. The rights of Participants
granted a Restricted Stock Unit upon termination of employment with the Company
or any Subsidiary or Affiliate for any reason before the Restricted Stock Unit
vests shall be set forth in the Award Agreement governing such Award.
SECTION 10. STOCK BONUS AWARDS
In the event that the Administrator grants a Stock Bonus, a
certificate for the Common Shares constituting such Stock Bonus shall be issued
in the name of the Participant to whom such grant was made and delivered to such
Participant as soon as practicable after the date on which such Stock Bonus is
payable. The Fair Market Value of the Shares subject to a Stock Bonus shall not
exceed the salary or cash bonus otherwise payable to the Participant on the date
of grant, and the Stock Bonus shall be in lieu of an amount of the Participant's
salary or cash bonus equal to such Fair Market Value.
SECTION 11. STOCK APPRECIATION RIGHTS.
(a) Grant of SARs. Subject to the terms and conditions of the
Plan, SARs may be granted to Participants at any time and from time to time as
shall be determined by the Administrator in its sole discretion. The
Administrator may grant Freestanding SARs, Tandem SARs, or any combination of
these forms of SAR. The Administrator in its sole discretion shall determine the
number of SARs granted to each Participant (subject to Section 4 hereof) and,
consistent with the provisions of the Plan, the terms and conditions pertaining
to such SARs, including any conditions relating to the attainment of
preestablished Performance Goals or other corporate or individual performance
goals as may be determined by the Administrator in its sole discretion. The
provisions of the awards of SARs need not be the same with respect to each
Participant.
(b) Grant Price. The grant price of a Freestanding SAR shall
be not less than the Fair Market Value of a Share on the date of grant of the
SAR. The grant price of Tandem SARs shall equal the Exercise Price of the
related Option.
(c) Exercise of Tandem SARs. Tandem SARs may be exercised for
all or part of the Shares subject to the related Option upon the surrender of
the right to exercise the equivalent portion of the related Option. A Tandem SAR
may be exercised only with respect to the Shares for which its related Option is
then exercisable. Notwithstanding any other provision of this Plan to the
contrary, with respect to a Tandem SAR granted in connection with an Incentive
Stock Option: (i) the Tandem SAR shall expire no later than the expiration of
the underlying Incentive Stock Option; (ii) the value of the payout with respect
to the Tandem SAR may be for no more than one hundred percent (100%) of the
difference between the Exercise Price of the underlying Incentive Stock Option
and the Fair Market Value of the Shares subject to the underlying Incentive
Stock Option at the time the Tandem SAR is exercised; and (iii) the Tandem SAR
may be exercised only when the Fair Market Value of the Shares subject to the
Incentive Stock Option exceeds the Exercise Price of the Incentive Stock Option.
D-8
(d) Exercise of Freestanding SARs. Freestanding SARs may be
exercised upon whatever terms and conditions the Administrator, in its sole
discretion, imposes upon them.
(e) SAR Agreement. Each SAR grant shall be evidenced by an
Award Agreement that shall specify the grant price, the term of the SAR, and
such other provisions as the Administrator shall determine.
(f) Term of SARs. The term of an SAR granted under the Plan
shall be determined by the Administrator, in its sole discretion; provided,
however, that such term shall not exceed ten (10) years.
(g) Payment of SAR Amount. Upon exercise of an SAR, a
Participant shall be entitled to receive payment from the Company in an amount
determined by multiplying:
(i) the difference between the Fair Market Value of a
Share on the date of exercise over the grant price; by
(ii) the number of Shares with respect to which the
SAR is exercised.
At the discretion of the Administrator, the payment upon SAR exercise may be in
cash, in Shares of equivalent value, or in some combination thereof. The
Administrator's determination regarding the form of SAR payout shall be set
forth in the Award Agreement pertaining to the grant of the SAR.
SECTION 12. EFFECT OF CHANGE IN CONTROL.
The Administrator in its discretion may provide that, upon the
occurrence of a change in control (as such term may be defined in an Award
Agreement) or upon termination of employment under specified circumstances
during a specified period following such a change in control, all as specified
in the applicable Award Agreement, all outstanding Shares of Restricted Stock,
and Restricted Stock Units granted to a Participant which have not theretofore
vested shall immediately vest and all restrictions on such Shares and Units
shall immediately lapse, and each Option and Stock Appreciation Right granted to
a Participant and outstanding at such time shall become fully and immediately
exercisable.
SECTION 13. AMENDMENT AND TERMINATION.
(a) The Board may amend, alter or discontinue the Plan, but
(i) no amendment, alteration, or discontinuation shall be made that would impair
the rights of a Participant under any Award theretofore granted without such
Participant's consent, and (ii) any amendment shall be subject to approval of
shareholders if it (A) materially increases the benefits accruing to
Participants under the Plan, (B) materially increases the number of Shares that
may be issued under the Plan, or (C) materially modifies the requirements for
participation in the Plan. Unless the Board determines otherwise, the Board
shall obtain approval of shareholders of the Company for any amendment that
would require such approval in order to satisfy the requirements of section
162(m) of the Code, section 422 of the Code, stock exchange rules or other
applicable law.
(b) The Administrator may amend the terms of any Award
theretofore granted, prospectively or retroactively, but (i) unless approved by
the shareholders of the Company, no such amendment shall (A) accelerate the date
on which any Option or SAR granted under the Plan becomes exercisable or (B)
accelerate the lapse of restrictions, or waive any condition imposed hereunder,
with respect to any Restricted Stock, Restricted Stock Units, or Stock Bonus,
and (ii) subject to Section 4 of Plan, no such amendment shall impair the rights
of any Participant without his or her consent.
(c) Notwithstanding the foregoing provisions of this Section
13, any decrease in the Exercise Price of any outstanding Option (whether
effected by amendment to the Plan or an Award Agreement) shall be subject to the
approval of the shareholders of the Company.
D-9
SECTION 14. UNFUNDED STATUS OF PLAN.
The Plan is intended to constitute an "unfunded" plan for
incentive compensation. With respect to any payments not yet made to a
Participant by the Company, nothing contained herein shall give any such
Participant any rights that are greater than those of a general creditor of the
Company.
SECTION 15. WITHHOLDING TAXES.
(a) Whenever cash is to be paid pursuant to an Award, the
Company (or Subsidiary or Affiliate, as the case may be) shall have the right to
deduct therefrom an amount sufficient to satisfy any federal, state and local
tax withholding requirements related thereto. Whenever Shares are to be
delivered pursuant to an Award, the Company (or Subsidiary or Affiliate, as the
case may be) shall have the right to require the Participant to remit to the
Company (or Subsidiary or Affiliate, as the case may be) in cash an amount
sufficient to satisfy any federal, state and local tax withholding requirements
related thereto. With the approval of the Administrator, a Participant may
satisfy the foregoing requirement by electing to have the Company withhold from
delivery Shares or by delivering Shares already owned by the Participant for at
least six months, in each case, having a value equal to the minimum amount of
tax required to be withheld. Such shares shall be valued at their Fair Market
Value on the date of which the amount of tax to be withheld is determined.
Fractional share amounts shall be settled in cash. Such an election may be made
with respect to all or any portion of the shares to be delivered pursuant to an
Award.
(b) If the Participant makes a disposition, within the meaning
of section 424(c) of the Code and regulations promulgated thereunder, of any
Share or Shares issued to such Participant pursuant to such Participant's
exercise of an Incentive Stock Option, and such disposition occurs within the
two-year period commencing on the day after the date of grant or within the
one-year period commencing on the day after the date of exercise, such
Participant shall, within ten (10) days of such disposition, notify the Company
(or Subsidiary or Affiliate, as the case may be) thereof and thereafter
immediately deliver to the Company (or Subsidiary or Affiliate, as the case may
be) any amount of federal, state or local income taxes and other amounts which
the Company (or Subsidiary or Affiliate, as the case may be) informs the
Participant the Company (or Subsidiary or Affiliate, as the case may be) is
required to withhold.
SECTION 16. GENERAL PROVISIONS.
(a) Shares shall not be issued pursuant to the exercise of any
Award granted hereunder unless the exercise of such Award and the issuance and
delivery of such Shares pursuant thereto shall comply with all relevant
provisions of law, including, without limitation, the Securities Act of 1933, as
amended, the Exchange Act and the requirements of any stock exchange upon which
the Common Shares may then be listed, and shall be further subject to the
approval of counsel for the Company with respect to such compliance. The Company
shall be under no obligation to effect the registration pursuant to the
Securities Act of 1933, as amended, of any interests in the Plan or any Common
Shares to be issued hereunder or to effect similar compliance under any state
laws.
(b) All certificates for Shares delivered under the Plan shall
be subject to such stock-transfer orders and other restrictions as the
Administrator may deem advisable under the rules, regulations, and other
requirements of the Securities and Exchange Commission, any stock exchange upon
which the Common Shares may then be listed, and any applicable federal or state
securities law, and the Administrator may cause a legend or legends to be placed
on any such certificates to make appropriate reference to such restrictions. The
Administrator may require, as a condition of the issuance and delivery of
certificates evidencing Shares pursuant to the terms hereof, that the recipient
of such Shares make such agreements and representations as the Administrator, in
its sole discretion, deems necessary or desirable.
(c) Nothing contained in the Plan shall prevent the Board from
adopting other or additional compensation arrangements, subject to shareholder
approval, if such approval is required; and such arrangements may be either
generally applicable or applicable only in specific cases. The adoption of the
Plan shall not confer
D-10
upon any Eligible Recipient any right to continued employment or service with
the Company or any Subsidiary or Affiliate, as the case may be, nor shall it
interfere in any way with the right of the Company or any Subsidiary or
Affiliate to terminate the employment or service of an Eligible Recipient at any
time.
(d) No fractional Common Shares shall be issued or delivered
pursuant to the Plan. The Administrator shall determine whether cash, other
Awards, or other property shall be issued or paid in lieu of such fractional
shares or whether such fractional shares or any rights thereto shall be
forfeited or otherwise eliminated.
(e) If any provision of the Plan is held to be invalid or
unenforceable, the other provisions of the Plan shall not be affected but shall
be applied as if the invalid or unenforceable provision had not been included in
the Plan.
(f) The Plan and all Awards shall be governed by the laws of
the State of Delaware without regard to its principles of conflict of laws.
(g) Awards may be granted under the Plan from time to time in
substitution for awards held by employees, directors or service providers of
other corporations who are about to become employees of the Company or a
Subsidiary or Affiliate as the result of a merger or consolidation of the
employing corporation with the Company or Subsidiary or Affiliate, or the
acquisition by the Company or a Subsidiary or Affiliate of the assets of the
employing corporation, or the acquisition by the Company or a Subsidiary or
Affiliate of the shares of the employing corporation, as the result of which it
becomes a Subsidiary or Affiliate under the Plan. The terms and conditions of
the Awards so granted may vary from the terms and conditions set forth in this
Plan at the time of such grant as the Administrator may deem appropriate to
conform, in whole or in part, to the provisions of the awards in substitution
for which they are made.
SECTION 17. SHAREHOLDER APPROVAL; EFFECTIVE DATE OF PLAN.
The Plan shall be effective as of the date of its approval by
the Company's shareholders.
SECTION 18. TERM OF PLAN.
No Award shall be granted pursuant to the Plan on or after the
tenth anniversary of the date the Plan is approved by the Company's
shareholders, but Awards theretofore granted may extend beyond that date.
D-11
[X] Please mark your votes as in this example.
THIS PROXY, WHEN PROPERLY SIGNED, WILL BE VOTED IN THE MANNER DIRECTED BY THE
UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR
THE ELECTION OF EACH NOMINEE FOR DIRECTOR, FOR THE APPOINTMENT OF
PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT AUDITORS AND FOR THE APPROVAL OF THE
2003 EMPLOYEE STOCK PLAN.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEM 1, ITEM 2 AND ITEM 3.
--------------------------------------------------------------------------------
FOR [ ] WITHHELD [ ]
1. Election of Directors. (see reverse)
For, except vote withheld from the following nominee(s):
----------------------------------------------
--------------------------------------------------------------------------------
FOR [ ] AGAINST [ ] ABSTAIN [ ]
2. Appointment of PricewaterhouseCoopers LLP as independent auditors and
to authorize the Audit Committee of the Board of Directors to set
auditors' remuneration.
--------------------------------------------------------------------------------
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. Approval of the 2003 Employee Stock Plan.
--------------------------------------------------------------------------------
In their discretion the proxies are authorized to vote upon such other business
as may properly come before the meeting (including a motion to adjourn the
meeting) and at any adjournment of the meeting.
NOTE: Please mark the proxy, sign exactly as your name appears below, and return
it promptly in the enclosed addressed envelope. When shares are held by joint
tenants, both parties should sign. When signing as an attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by the President or other
authorized person. If a partnership, please sign in full partnership name by an
authorized person.
--------------------------------------------
Signature Date
--------------------------------------------
Signature Date
PROXY
NABORS INDUSTRIES LTD.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The person signing on the reverse by this proxy appoints Eugene M. Isenberg and
Anthony G. Petrello, and each of them (with full power to designate
substitutes), proxies to represent, vote and act with respect to all common
shares of Nabors Industries Ltd. held of record by the undersigned at the close
of business on April 10, 2003 at Nabors' annual general meeting of shareholders
to be held on June 3, 2003 and at any adjournments or postponements thereof. The
proxies may vote and act upon the matters designated below and upon such other
matters as may properly come before the meeting (including a motion to adjourn
the meeting), according to the number of votes the undersigned might cast and
with all powers the undersigned would possess if personally present.
1. ELECTION OF DIRECTORS: Election of two Class III directors of Nabors to
serve until the 2006 annual general meeting of shareholders or until
their respective successors are elected and qualified.
Nominees: Eugene Isenberg and Jack Wexler
2. APPOINTMENT OF AUDITORS: Appointment of PricewaterhouseCoopers LLP as
independent auditors and to authorize the Audit Committee of the Board
of Directors to set auditors' remuneration
3. APPROVAL OF THE 2003 EMPLOYEE STOCK PLAN.
You are encouraged to specify your choice by marking the appropriate box on the
reverse side. If you do not mark any box, your shares will be voted FOR the
election of the above-named directors, FOR the appointment of
PricewaterhouseCoopers LLP as auditors, and FOR the approval of the 2003
Employee Stock Plan in accordance with the Board of Directors' recommendations.
SEE REVERSE
SIDE