<PAGE> 1
Preliminary Prospectus Supplement, Filed
Pursuant to Rule 424(b)(3).
Registration No. 333-2477.
***************************************************************************
* *
* INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. *
* THESE SECURITIES MAY NOT BE DELIVERED WITHOUT THE DELIVERY OF A FINAL *
* PROSPECTUS SUPPLEMENT AND ACCOMPANYING PROSPECTUS. THIS PROSPECTUS *
* SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS SHALL NOT CONSTITUTE AN *
* OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE *
* BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, *
* SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR *
* QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. *
* *
***************************************************************************
SUBJECT TO COMPLETION
MAY 10, 1996
PROSPECTUS SUPPLEMENT
(To Prospectus Dated May 10, 1996)
$125,000,000
NABORS INDUSTRIES, INC.
% CONVERTIBLE SUBORDINATED NOTES DUE 2006 [NABORS INDUSTRIES, INC. LOGO]
The % Convertible Subordinated Notes due 2006 (the "Notes") of Nabors
Industries, Inc. (the "Company" or "Nabors") offered hereby will mature on
, 2006. Interest on the Notes is payable on and
of each year commencing , 1996. The Notes are
convertible at the option of the holder at any time prior to the close of
business on the trading day prior to the maturity date, unless previously
redeemed, into shares of the Company's common stock, par value $0.10 per share
(the "Common Stock"), at a conversion price of $ per share (equivalent
to a conversion rate of shares per $1,000 principal amount of Notes),
subject to certain adjustments. The Company's Common Stock is listed on the
American Stock Exchange under the symbol "NBR". On May 10, 1996 the last
reported sale price of the Company's Common Stock on the American Stock Exchange
was $14.125 per share.
The Notes are redeemable at the option of the Company, in whole or in part, at
any time on or after , 1999 at the redemption prices set forth herein
together with accrued interest. The Notes do not provide for any sinking fund.
In the event of a Change in Control (as defined), each holder of the Notes may
require the Company to repurchase all or a portion of such holder's Notes at
101% of the principal amount thereof, together with accrued and unpaid interest,
if any, to the date of repurchase. See "Description of Notes."
The Notes will constitute subordinated obligations of the Company and will rank
pari passu in right of payment to the Company's other subordinated indebtedness.
The Notes and the Company's obligations with respect thereto (including the
Company's obligation to repurchase Notes upon a Change in Control) will be
subordinated in right of payment to all Senior Debt (as defined in the
accompanying Prospectus) of the Company. In addition, the Company is a holding
company and, accordingly, the Notes will be effectively subordinated to all
existing and future indebtedness of the Company's operating subsidiaries. See
"Description of Notes -- Subordination of Notes" and "Capitalization."
The Notes will not be listed on any securities exchange.
SEE "RISK FACTORS" COMMENCING ON PAGE S-7 OF THIS PROSPECTUS SUPPLEMENT AND PAGE
3 OF THE ACCOMPANYING PROSPECTUS FOR A DESCRIPTION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE NOTES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH IT
RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) DISCOUNT COMPANY(1)(2)
<S> <C> <C> <C>
Per Note............................... $ $ $
Total(3)............................... $ $ $
- --------------------------------------------------------------------------------------------------
</TABLE>
(1) Plus accrued interest, if any, from the date of issuance.
(2) Before deducting expenses payable by the Company estimated at $407,000. The
Underwriters will reimburse the Company for certain of the expenses.
(3) The Company has granted the Underwriters an option, exercisable within 30
days from the date of this Prospectus Supplement, to purchase up to an
additional $18,750,000 aggregate principal amount of Notes at the Price to
Public, less Underwriting Discount, to cover over-allotments, if any. If the
Underwriters exercise such option in full, the total Price to Public,
Underwriting Discount and Proceeds to Company will be $ , $
and $ , respectively. See "Underwriting."
The Notes are offered subject to receipt and acceptance by the Underwriters, to
prior sale and to the Underwriters' right to reject any order in whole or in
part and to withdraw, cancel or modify the offer without notice. It is expected
that delivery of the Notes will be made at the office of Salomon Brothers Inc,
Seven World Trade Center, New York, New York, or through the facilities of the
Depository Trust Company, on or about , 1996.
SALOMON BROTHERS INC
GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
SIMMONS & COMPANY
INTERNATIONAL
The date of this Prospectus Supplement is , 1996.
<PAGE> 2
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files periodic reports and other information with the Securities and
Exchange Commission (the "Commission").
The Company has filed with the Commission a Registration Statement on Form
S-3 (Registration No. 333-02477) (the "Registration Statement") under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
Securities offered hereby. This Prospectus Supplement and the accompanying
Prospectus, which are parts of the Registration Statement, do not contain all of
the information set forth in the Registration Statement. Certain portions of the
Registration Statement have been omitted as permitted by the rules and
regulations of the Commission. Statements made in this Prospectus Supplement and
the accompanying Prospectus as to the contents of any contract, agreement,
instrument or other document are not necessarily complete, and in each instance
reference is made to the copy of such contract, agreement, instrument or
document filed as an exhibit to the Registration Statement, each such statement
being qualified in all respects by such reference and the exhibits and schedules
thereto.
The Registration Statement, the exhibits and schedules thereto, and the
reports and other information filed by the Company with the Commission may be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549 and at the regional offices of the Commission located at Seven World
Trade Center, 13th floor, New York, New York 10048; and 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511. Copies of all or any part of such
materials also may be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates. Such reports, proxy or information statements, Registration Statement and
exhibits and other information concerning the Company should also be available
for inspection at the offices of the American Stock Exchange, Inc., 86 Trinity
Place, New York, New York 10006.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents have been filed with the Commission pursuant to the
Exchange Act and are incorporated by reference into this Prospectus Supplement
and the accompanying Prospectus and made a part hereof and thereof:
(1) The Company's Annual Report on Form 10-K for the fiscal year ended
September 30, 1995 (File No. 1-9245);
(2) The Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended December 31, 1995; and
(3) The description of the Common Stock and the Preferred Stock
contained in Amendment No. 1 to the Registration Statement on Form 8-A
(File No. 1-9245) filed with the Commission on May 20, 1992, and any
subsequent amendment thereto filed for the purposes of updating such
description.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus Supplement
and the accompanying Prospectus and prior to the termination of the offering of
the Securities shall be deemed to be incorporated by reference in this
Prospectus Supplement and the accompanying Prospectus and made a part hereof and
thereof from the date of filing of such documents. Any statement contained
herein or therein or in a document incorporated or deemed to be incorporated by
reference herein or therein shall be deemed to be modified or superseded for
purposes of this Prospectus Supplement and the accompanying Prospectus to the
extent that a statement contained herein or in any other document subsequently
filed with the Commission which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus Supplement and the accompanying
Prospectus.
THE COMPANY UNDERTAKES TO PROVIDE WITHOUT CHARGE TO EACH PERSON, INCLUDING
ANY BENEFICIAL OWNER, TO WHOM THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING
PROSPECTUS IS DELIVERED, UPON WRITTEN OR ORAL REQUEST, A COPY OF THE DOCUMENTS
THAT HAVE BEEN INCORPORATED BY REFERENCE INTO THIS PROSPECTUS SUPPLEMENT AND THE
ACCOMPANYING PROSPECTUS (NOT INCLUDING EXHIBITS TO SUCH DOCUMENTS OTHER THAN
EXHIBITS SPECIFICALLY INCORPORATED BY REFERENCE INTO SUCH DOCUMENTS). REQUESTS
FOR SUCH DOCUMENTS SHOULD BE DIRECTED TO DANIEL MCLACHLIN, CORPORATE SECRETARY,
NABORS INDUSTRIES, INC., 515 WEST GREENS ROAD, SUITE 1200, HOUSTON, TEXAS 77067.
---------------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES OR THE
COMMON STOCK OF THE COMPANY AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL
IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE AMERICAN STOCK
EXCHANGE OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT
ANY TIME.
S-2
<PAGE> 3
PROSPECTUS SUPPLEMENT SUMMARY
The following summary is qualified in its entirety by the more detailed
information and consolidated financial statements, including the notes thereto,
and other financial information, included or incorporated by reference in this
Prospectus Supplement and the accompanying Prospectus. Prospective investors
should carefully consider the factors set forth under the caption "Risk Factors"
below and in the accompanying Prospectus. Unless the context otherwise requires,
references in this Prospectus Supplement and the accompanying Prospectus to the
"Company" or "Nabors" refer to Nabors Industries, Inc. and its consolidated
subsidiaries. Unless otherwise indicated, all information in this Prospectus
Supplement assumes no exercise of the Underwriters' over-allotment option.
THE COMPANY
GENERAL
Nabors Industries, Inc. is the largest land drilling contractor in the
world. The Company, which was incorporated in Delaware in 1978, has principally
been engaged in oil, gas and geothermal land drilling operations in Alaska, the
lower 48 states of the United States, and Canada, and internationally in the
Middle East, the Far East, the CIS, North and West Africa and Central America.
The Company also provides offshore drilling services in the North Sea, the Gulf
of Mexico, Alaska's Cook Inlet and the Middle East, as well as drilling and
workover barge rigs on the Gulf Coast of the United States. A subsidiary of the
Company, Sundowner Offshore Services, Inc., provides offshore well servicing and
workover services in the Gulf of Mexico and several international markets. The
Company also provides oilfield management, engineering, transportation,
construction, maintenance and other support services in selected domestic and
international markets. A subsidiary of the Company, Canrig Drilling Technology
Ltd., sells top drives for a broad range of drilling rig applications.
Since the current management group began directing the Company in 1987, the
Company's primary business strategy has been to develop a group of profitable,
synergistic and growth-oriented business units in geographically diversified
areas. The Company has sought to implement this business strategy through
acquisitions and internal growth, by entering into strategic alliances with
customers and by providing integrated drilling and engineering services to its
customers.
Acquisitions and Internal Growth. The Company's primary business strategy
has been implemented through strategic acquisitions and internal growth in
existing and new markets. Since 1988, through acquisition of other drilling
companies, asset purchases and internal expansion, the Company has grown from a
business centered principally in Canada and Alaska to an international company
operating in many of the major oil, gas and geothermal markets in the world. In
1988, the Company's rig fleet consisted of 44 land drilling rigs. As of May 10,
1996, the active Company-owned rig fleet consisted of 307 land drilling rigs, 33
offshore rigs and 78 workover and well servicing rigs.
Strategic Alliances. The Company's primary business strategy has also been
advanced by entering into strategic alliances with customers. An increasing
number of customers have been seeking to benefit from exploration and
development drilling programs by establishing continuing relationships or
alliances with a smaller number of preferred drilling contractors. These
alliances can result in long-term work and increased profitability for drilling
contractors that are selected as partners in the alliance. The Company has been
selected by operators as alliance partners in Alaska, the lower 48 states of the
United States, Canada, the North Sea and West Africa.
Drilling and Engineering Services. The Company's primary business strategy
has also been advanced by providing additional drilling-related services and
management of drill site activities to its customers. As major oil and gas
companies reduce the number of service contractors at a drill site, they have
been requesting that the contractors provide additional drilling-related
services and management that had previously been provided by the customers
themselves, or by other contractors. The Company also seeks to provide
innovative quality engineering and technical support for its drilling and
oilfield
S-3
<PAGE> 4
support operations. The Company provides engineering services to all of its
subsidiaries and to its worldwide customers for its Houston-based engineering
groups. The Company also provides platform engineering and other integrated
services to its customers in the North Sea from its Aberdeen, Scotland-based
engineering group.
RECENT DEVELOPMENTS
On April 29, 1996, the Company announced its results of operations for the
second quarter (ended March 31, 1996) and first half of its 1996 fiscal year.
See "Selected Consolidated Financial Data." Results for the interim period are
not necessarily indicative of results to be expected for the full year.
North American results reflected stronger activity in the Gulf of Mexico
and in the Alaska business of Peak Oilfield Services, the Company's Alaskan
construction and logistics joint venture. The International sector recorded an
even larger improvement in operating results with increased contribution from
Sundowner's international operations. The second quarter's results also showed
significant improvement relative to the first quarter of fiscal 1996 in spite of
a lower domestic rig count and the startup of several international rigs later
than anticipated.
On April 30, 1996, the Company acquired all of the outstanding shares of
common stock of Exeter Drilling Company ("Exeter"), a former subsidiary of
Occidental Oil and Gas Corporation. Exeter's drilling fleet consists of 49
actively marketed rigs. In addition, Exeter has a substantial inventory of rig
components. The majority of Exeter's active fleet is composed of rigs operating
in the Rocky Mountains. A subsidiary of Exeter, J.W. Gibson Well Service
Company, currently operates 78 workover and well-servicing rigs in the Rocky
Mountains, the mid-continent region of North America and New Mexico. The
transaction was valued at approximately $22 million plus the amount of Exeter's
consolidated working capital at closing.
S-4
<PAGE> 5
THE OFFERING
The Notes.................. $125,000,000 aggregate principal amount of %
Convertible Subordinated Notes due 2006 (the
"Notes"), excluding $18,750,000 aggregate principal
amount of Notes subject to the Underwriters'
over-allotment option.
Maturity................... The Notes will mature on , 2006 unless
earlier redeemed or converted.
Payment of Interest........ Interest on the Notes at the rate of % per
annum is payable semi-annually on and
of each year commencing
, 1996.
Conversion Rights.......... The Notes are convertible into Common Stock of the
Company at the option of the holder at any time on
or before the close of business on the last trading
day prior to the maturity date, unless previously
redeemed, at a conversion price of $ per
share, subject to adjustment in certain events. See
"Description of Notes -- Conversion."
Redemption at the Option
of the Company........... On or after , 1999, the Company may,
upon at least 15 days' notice, redeem the Notes in
whole or in part at the redemption prices set forth
herein, together with accrued and unpaid interest
thereon. See "Description of Notes -- Optional
Redemption."
Repurchase Upon Change
in Control............... The Notes are required to be repurchased at 101% of
their principal amount together with accrued and
unpaid interest thereon, at the option of the
holder, upon the occurrence of a Change in Control
(as defined). See "Description of
Notes -- Repurchase at the Option of Holders" and
"Risk Factors -- Limitations on Repurchase of Notes
Upon Change In Control."
Any future credit agreements or other agreements
relating to indebtedness (including Senior Debt) to
which the Company becomes a party may contain
restrictions on the repurchase of Notes. In the
event a Change in Control occurs at a time when the
Company is prohibited from repurchasing Notes, the
Company could seek the consent of its lenders to
the repurchase of Notes or could attempt to
refinance the borrowings that contain such
prohibition. If the Company does not obtain such a
consent or repay such borrowings, the Company would
remain prohibited from repurchasing Notes. In such
case, the Company's failure to repurchase tendered
Notes would constitute an Event of Default under
the Subordinated Indenture, which would, in turn,
constitute a further default under existing debt
instruments and may constitute a default under the
terms of other indebtedness that the Company may
enter into from time to time. In such
circumstances, the subordination provisions in the
Subordinated Indenture would likely restrict
payments to the holders of Notes. See "Description
of Notes -- Repurchase at the Option of Holders"
and "Risk Factors -- Limitations on Repurchase of
Notes Upon Change in Control."
S-5
<PAGE> 6
Subordination.............. The Notes will be unsecured obligations of the
Company and will be subordinated in right of
payment to all existing and future Senior Debt of
the Company. In addition, the Company is a holding
company and, accordingly, the Notes will be
effectively subordinated to all existing and future
obligations of the Company's operating
subsidiaries. See "Description of
Notes -- Subordination of Notes."
Use of Proceeds............ Of estimated net proceeds of $121.8 million,
approximately $71.1 million will be used to repay
certain existing indebtedness and approximately
$50.7 million will be used for general corporate
purposes, including working capital. See "Use of
Proceeds."
S-6
<PAGE> 7
RISK FACTORS
In addition to the other information contained or incorporated by reference
in this Prospectus Supplement or the accompanying Prospectus (including the
section entitled "Risk Factors" contained therein), the following factors should
be considered carefully by prospective investors in evaluating the Company and
the Notes before purchasing any of the Notes offered hereby. Except for the
historical information contained or incorporated by reference in this Prospectus
Supplement or the accompanying Prospectus, the matters discussed or incorporated
by reference in this Prospectus Supplement and the accompanying Prospectus are
forward looking statements (as such term is used in Section 27A of the
Securities Act and Section 21E of the Exchange Act that involve risks and
uncertainties, including industry conditions and the variability of demand for
contract drilling and related oilfield services, intense competition, operating
risks inherent in a hazardous industry, the adequacy and availability of
insurance, risks associated with international operations (including currency
fluctuations), regulations pertaining to environmental matters and the other
matters detailed or referred to below and from time to time in the Company's
other reports filed with the Securities and Exchange Commission. The actual
results the Company achieves may vary materially from those set forth in or
implied by any forward looking statements due to such risks and uncertainties.
SUBORDINATION. The Notes are subordinated in right of payment to all
existing and future Senior Debt of the Company. "Senior Debt" is defined in the
accompanying Prospectus under the heading "Description of Debt
Securities -- Subordination of Subordinated Debt Securities." As a result of
such subordination, in the event of any insolvency, liquidation or
reorganization of the Company or upon acceleration of the Notes due to an Event
of Default, the assets of the Company will be available to pay obligations on
the Notes and any other subordinated indebtedness of the Company only after all
Senior Debt has been paid in full, and there may not be sufficient assets
remaining to pay amounts due on any or all of the Notes or any other
subordinated indebtedness of the Company then outstanding. The Notes are
effectively subordinated to the liabilities, including trade payables, of the
Company's operating subsidiaries. Neither Indenture prohibits or limits the
incurrence of Senior Debt or the incurrence of other indebtedness and other
liabilities by the Company or its subsidiaries. As of March 31, 1996, the
Company had approximately $122.0 million of indebtedness outstanding that would
have constituted Senior Debt and the subsidiaries of the Company had
approximately $105.0 million of other liabilities, including trade payables.
The Company is a holding company, substantially all of the operations of
which are conducted through subsidiaries. The Company will rely principally on
dividends or advances from its subsidiaries for the funds necessary for, among
other things, the payment of principal of and any interest or premium on the
Notes and the other indebtedness of the Company. The ability of such
subsidiaries to pay dividends is subject to applicable state law and certain
other contractual restrictions. Any right of the holders of the Notes to
participate in the assets of any of the subsidiaries upon such subsidiary's
liquidation or recapitalization will be effectively subordinated to the claims
of such subsidiary's creditors and preferred stockholders (if any), except to
the extent the Company is itself recognized as a creditor of such subsidiary.
The Company's ability to service its debt, including the Notes offered hereby,
is dependent upon the earnings from the businesses conducted by the Company
through its subsidiaries and the distribution of those earnings, or upon loans
or other payments of funds, by those subsidiaries to the Company, all of which
are contingent upon the subsidiaries' earnings and are subject to various
business considerations. See "Description of Notes -- Subordination of Notes"
and "Description of Debt Securities -- Subordination of Subordinated Debt
Securities" in the accompanying Prospectus.
LIMITATION ON REPURCHASE OF NOTES UPON CHANGE IN CONTROL. Upon the
occurrence of a Change in Control, each holder of Notes may require the Company
to repurchase all or a portion of such holder's Notes. If a Change in Control
were to occur, there can be no assurance that the Company would have sufficient
financial resources, or would be able to arrange financing, to pay the
repurchase price for all Notes tendered by the holders thereof. Any future
credit agreements or other agreements relating to
S-7
<PAGE> 8
indebtedness (including Senior Debt) to which the Company becomes a party may
contain restrictions on the repurchase of Notes. In the event a Change in
Control occurs at a time when the Company is prohibited from repurchasing the
Notes, the Company could seek the consent of its lenders to the repurchase of
the Notes or could attempt to refinance the borrowings that contain such
prohibition. If the Company does not obtain such consent or repay such
borrowings, the Company would remain prohibited from repurchasing Notes. In such
case, the Company's failure to repurchase tendered Notes would constitute an
event of default under the Subordinated Indenture which would, in turn,
constitute a further default under certain of the Company's existing debt
instruments and may constitute a default under the terms of other indebtedness
that the Company may enter into from time to time. In such circumstances, the
subordination provisions in the Subordinated Indenture would prohibit payments
to the holders of Notes. See "Description of Notes -- Repurchase at the Option
of Holders."
BUSINESS-RELATED RISKS. The information set forth under the captions
"Industry Conditions, Competition and Seasonality," "Operating Risks and
Insurance" and "Governmental Matters" in Part I of the Company's Annual Report
on Form 10-K for the fiscal year ended September 30, 1995 (the "1995 Form
10-K"), in addition to the other information included in the 1995 Form 10-K, is
hereby specifically incorporated by reference herein.
INTERNATIONAL OPERATIONS. A significant portion of the Company's business
is derived from international markets, including major operations in the Middle
East, the North Sea, and South and Central America, as well as other operations
in the CIS, the Far East, and Africa. Such operations may be subject to various
risks including risk of war and civil disturbances and governmental activities
that may limit or disrupt markets, restrict the movement of funds or result in
the deprivation of contract rights or the taking of property without fair
compensation. In certain countries, such operations may be subject to the
additional risk of fluctuating currency values and exchange controls. In the
international markets in which the Company operates, it is subject to various
laws and regulations with respect to the operation and taxation of its business
and the import and export of its equipment from country to country, the
imposition, application and interpretation of which can prove to be uncertain.
DIVIDEND POLICIES; RESTRICTIONS ON PAYMENT OF DIVIDENDS. The Company does
not anticipate that it will pay any dividends on the Common Stock in the
foreseeable future. Certain of the Company's debt instruments include covenants
restricting the Company's ability to pay dividends or to make certain other
distributions to stockholders.
ABSENCE OF PUBLIC MARKET FOR NOTES. The Notes will be a new issue of
securities with no established trading market. The Underwriters may make a
market in the Notes, but the Underwriters will not be obligated to do so and may
discontinue any market making at any time without notice. No assurance can be
given as to the liquidity of the secondary market for the Notes.
MARKET RISK WITH RESPECT TO COMMON STOCK; CERTAIN INVESTMENT LIMITATIONS.
The Common Stock is listed for trading on the American Stock Exchange. The
prices at which shares of Common Stock trade may depend upon many factors,
including prevailing interest rates, markets for similar securities, industry
conditions, and the performance of, and investor expectations for, the Company.
No assurance can be given that a holder of shares of Common Stock will be able
to sell such shares at any particular price. Certain institutional investors may
invest only in dividend-paying equity securities or may operate under other
restrictions that may prohibit or limit their ability to invest in the Common
Stock.
S-8
<PAGE> 9
USE OF PROCEEDS
The net proceeds to be received by the Company from the sale of the Notes
are estimated to be approximately $121.8 million ($140.1 million if the
Underwriters exercise their over-allotment option in full) after deduction of
the underwriting discount and expenses of the public offering of the Notes. The
Company anticipates that it will use $71.1 million of estimated net proceeds to
repay existing indebtedness, as follows: (i) approximately $52.4 million to
repay short term borrowings from commercial banks incurred for working capital
purposes and currently bearing interest at annual rates ranging from 5.94% to
6.15%; (ii) approximately $2.2 million to repay Venezuela bolivar denominated
short term borrowings from commercial banks in Venezuela incurred for working
capital and hedging purposes, maturing during May 1996 and currently bearing
interest at annual rates ranging from 63.0% to 70.0%; and (iii) approximately
$16.5 million to repay long term borrowings from financial institutions incurred
for rig and rig equipment financing, with periodic maturities in the years 1996
through 2000, currently bearing interest at an annual rate of 6.25%. The Company
anticipates that it will use the remaining $50.7 million of such estimated net
proceeds for general corporate purposes, including working capital, investment
in subsidiaries, possible future business acquisitions and the repurchase of
shares of Common Stock. See "Use of Proceeds" in the accompanying Prospectus.
MARKET PRICES OF COMMON STOCK AND DIVIDENDS
The Company's Common Stock is traded on the American Stock Exchange under
the symbol "NBR". As of May 9, 1996 the number of stockholders of record was
1,676. The following table sets forth for the periods indicated the high and low
sale prices per share for the Common Stock on the American Stock Exchange.
<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
1993
Fourth Quarter............................................................... 10 6 1/8
1994
First Quarter................................................................ 7 7/8 6 1/4
Second Quarter............................................................... 7 1/2 6 1/8
Third Quarter................................................................ 7 3/8 5 3/4
Fourth Quarter............................................................... 7 7/8 6
1995
First Quarter................................................................ 7 1/2 6 1/8
Second Quarter............................................................... 9 11/16 7 3/8
Third Quarter................................................................ 10 7 15/16
Fourth Quarter............................................................... 11 3/8 8 1/16
1996
First Quarter................................................................ 15 1/4 10 1/4
Second Quarter (through May 10, 1996)........................................ 16 1/4 14
</TABLE>
The Company has neither declared nor paid any cash dividends on its Common
Stock since 1982, and the Company does not intend to pay any cash dividends on
its Common Stock for the foreseeable future. See "Description of Capital Stock
and Depositary Shares -- Common Stock -- Dividends" in the accompanying
Prospectus. The Company expects to retain any earnings for the development and
expansion of its business and the repayment of indebtedness. In addition,
certain of the Company's debt instruments impose restrictions on the payment of
dividends by the Company. As of March 31, 1996, retained earnings available for
dividends totaled approximately $158.0 million.
S-9
<PAGE> 10
CAPITALIZATION
The following table sets forth: (a) the historical consolidated
capitalization of the Company as of March 31, 1996; and (b) such historical
capitalization as adjusted to give effect to (i) the acquisition of Exeter (the
"Exeter Acquisition"), (ii) the incurrence of additional indebtedness after
March 31, 1996, primarily in connection with the Exeter Acquisition, (iii) the
issuance and sale by the Company of the Notes offered hereby, and (iv) the
application of the net proceeds therefrom to repay certain existing
indebtedness. See "Use of Proceeds."
<TABLE>
<CAPTION>
AS OF MARCH 31, 1996
------------------------
HISTORICAL AS ADJUSTED
---------- -----------
(IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
------------------------
<S> <C> <C>
Cash and cash equivalents and short-term marketable securities........ $ 12,922 $ 61,700
========= ==========
Short-term borrowings and current portion of long-term obligations:
Short-term borrowings............................................... $ 34,900 $ --
Current portion of long-term obligations............................ 11,245 7,702
---------- -----------
Total short-term obligations................................ $ 46,145 $ 7,702
========= ==========
Long-term obligations:
Senior Secured Notes................................................ $ 42,782 $ 42,782
% Convertible Subordinated Notes due 2006......................... -- 125,000
Other long-term obligations......................................... 17,786 4,867
---------- -----------
Total long-term obligations, net of current maturities...... 60,568 172,649
---------- -----------
Stockholders' equity:
Preferred Stock, par value $.10 per share, 10,000 shares authorized;
none issued or outstanding....................................... -- --
Capital stock, par value $.10 per share, 200,000 shares authorized;
issued and outstanding 85,805.................................... 8,581 8,581
Capital in excess of par value...................................... 236,210 236,210
Cumulative translation adjustment................................... (3,073) (3,073)
Net unrealized gain on marketable securities........................ 2,440 2,440
Retained earnings since May 1, 1988................................. 165,475 165,475
Less treasury stock at cost, 755 and 489 common shares.............. (4,794) (3,104)
---------- -----------
Total stockholders' equity.................................. 404,839 406,529
---------- -----------
Total capitalization........................................ $ 465,407 $ 579,178
========= ==========
</TABLE>
S-10
<PAGE> 11
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data of the Company should be
read in conjunction with the consolidated financial statements and the notes
thereto incorporated by reference in this Prospectus Supplement. Results for the
interim period are not necessarily indicative of results to be expected for the
full year.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED MARCH 31, YEAR ENDED SEPTEMBER 30,
------------------- ----------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
-------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:(1)
Revenues................................. $327,657 $269,337 $572,788 $484,268 $419,406 $312,407 $264,239
Operating expenses:
Direct costs........................... 244,479 202,570 434,097 369,677 313,458 215,939 187,873
General and administrative expenses.... 26,655 24,613 49,094 49,365 45,257 45,237 35,923
Depreciation and amortization.......... 21,002 14,336 31,042 26,241 22,434 16,526 10,119
Provision for reduction in carrying
value of assets(2)................... -- -- -- 29,686 -- -- --
Operating expenses................... 292,136 241,519 514,233 474,969 381,149 277,702 233,915
Operating Income......................... 35,521 27,818 58,555 9,299 38,257 34,705 30,324
Other income (expense):
Interest expense....................... (4,114) (4,094) (7,611) (8,237) (8,924) (5,742) (4,378)
Interest income........................ 441 850 1,694 2,459 1,191 1,393 4,929
Other income, net...................... 4,747 3,424 5,990 2,718 11,593 5,559 2,395
Other income (expense), net.......... 1,074 180 73 (3,060) 3,860 1,210 2,946
Income before income taxes............... 36,595 27,998 58,628 6,239 42,117 35,915 33,270
Income taxes............................. 4,511 4,641 7,524 4,889 3,559 2,175 3,546
Net income............................... $ 32,084 $ 23,357 $ 51,104 $ 1,350 $ 38,558 $ 33,740 $ 29,724
Earnings per share:
Primary................................ $ .35 $ .27 $ .58 $ .02 $ .50 $ .46 $ .42
Fully diluted.......................... $ .34 $ .27 $ .57 $ .02 $ .49 $ .45 $ .42
Weighted average number of shares
outstanding:
Primary................................ 91,460 86,673 88,018 85,620 77,806 74,037 70,395
Fully diluted.......................... 93,465 87,841 90,237 85,743 78,288 74,821 70,728
OTHER FINANCIAL DATA:
EBITDA(3)................................ $ 56,523 $ 42,154 $ 89,597 $ 65,226 $ 60,691 $ 51,231 $ 40,443
Capital expenditures..................... 54,013 40,822 109,321 62,907 53,669 57,525 78,958
Ratio of earnings to fixed charges:(4)
Historical............................. 7.55 6.85 6.90 1.55 4.66 5.95 6.30
Pro forma(5)........................... 9.03 7.69
BALANCE SHEET DATA:
Cash and short-term marketable
securities............................. $ 12,922 $ 15,965 $ 15,334 $ 45,232 $ 70,458 $ 14,783 $ 15,139
Working capital.......................... 42,179 51,930 33,892 77,248 113,653 33,831 15,650
Long-term marketable securities.......... 10,551 11,508 9,645 20,266 -- -- --
Property, plant and equipment, net....... 422,784 342,795 393,464 283,141 270,865 220,761 185,543
Total assets............................. 633,397 536,482 593,272 490,273 493,927 339,930 285,615
Long-term obligations.................... 60,568 54,567 51,478 61,879 73,109 49,294 37,489
Stockholders' equity..................... 404,839 338,145 368,750 317,424 307,583 201,058 157,302
</TABLE>
- ---------------
(1) The results of operations and financial position, for all years presented,
have been retroactively restated to include the results of operations and
financial position of Sundowner Offshore Services, Inc. The results of
operations and financial position of other acquisitions have been included
beginning on the respective dates of such acquisitions, and include Delta
Drilling Company (January 1995), and Grace Drilling Company (June 1993).
(2) Represents reduction in carrying value of the Company's Yemen logistical
assets and inventory as well as facility closure costs in certain
international areas, including Yemen, totaling $.35 per share.
(3) EBITDA (defined to mean operating income plus depreciation and amortization
and provision for reduction in carrying value of assets for purposes of this
table) is a supplemental financial measure used by the Company in evaluating
its business and should be read in conjunction with all of the information
in the Selected Consolidated Financial Data, as well as the Consolidated
Financial Statements (including the Notes thereto) prepared in accordance
with generally accepted accounting principles. EBITDA should not be
considered as an alternative to operating income or cash flow from
operations or as an indication of the Company's performance or as a measure
of liquidity.
(4) For the purpose of computing the ratio of earnings to fixed charges,
"earnings" consist of pretax income from continuing operations plus fixed
charges (excluding capitalized interest). Fixed charges represent interest
incurred (whether expensed or capitalized), amortization of debt expense,
and that portion of rental expense on operating leases deemed to be the
equivalent of interest. No Preferred Stock was outstanding during any of the
periods presented and, as a result, the ratio of earnings to combined fixed
charges and Preferred Stock dividends was the same as the ratio of earnings
to fixed charges.
(5) Pro forma for the Offering and for the application of a portion of the net
proceeds of the Offering to repay $71.1 million of existing indebtedness.
See "Use of Proceeds."
S-11
<PAGE> 12
DESCRIPTION OF NOTES
GENERAL
The Notes are a series of Subordinated Debt Securities described in the
accompanying Prospectus that will be issued under an indenture, to be dated as
of , 1996 (the "Subordinated Indenture"), between the Company and
Marine Midland Bank, as trustee (the "Note Trustee"), as supplemented by a
Supplemental Indenture, to be dated as of , 1996 (the
"Supplemental Indenture"), between the Company and the Note Trustee. The
following description of the particular terms of the Notes offered hereby
supplements, and to the extent inconsistent therewith replaces, the description
of the general terms and provisions of the Subordinated Debt Securities set
forth in the accompanying Prospectus, to which reference is hereby made.
Capitalized terms used but not defined herein or in the accompanying Prospectus
have the meanings given to them in the Subordinated Indenture or the
Supplemental Indenture. As used in this section, the "Company" means Nabors
Industries, Inc., but not any of its subsidiaries, unless the context otherwise
requires.
The Notes are convertible at the option of the holder into Common Stock of
the Company. See "-- Conversion". The Notes will constitute subordinated
obligations of the Company and will rank pari passu in right of payment to the
Company's other subordinated indebtedness. The Notes and the Company's
obligations with respect thereto (including the Company's obligations to
repurchase Notes upon a Change in Control) will be subordinated in right of
payment to all Senior Debt (as defined in the accompanying Prospectus) of the
Company. In addition, the Company is a holding company and, accordingly, the
Notes will be effectively subordinated to all existing and future obligations of
the Company's operating subsidiaries. As of March 31, 1996, the Company had
approximately $122.0 million of indebtedness outstanding that would have
constituted Senior Debt and the subsidiaries of the Company had approximately
$105.0 million of other liabilities, including trade payables.
PRINCIPAL, MATURITY AND INTEREST
The Notes offered by this Prospectus Supplement will be limited to
$125,000,000 aggregate principal amount, plus such additional amount not in
excess of $18,750,000 as may be purchased by the Underwriters upon exercise of
the over-allotment option. See "Underwriting". The Notes will mature on
, 2006. The Notes will bear interest at the rate set forth on the
cover page of this Prospectus Supplement from , 1996 or from the
most recent interest payment date to which interest has been paid or provided
for, payable semiannually on and of each year,
commencing , 1996, to the person in whose name such Note is
registered at the close of business on the or next
preceding such interest payment date. Interest will be computed on the basis of
a 360 day year comprised of twelve 30-day months.
The Notes will be issuable and transferable in fully registered form and
will be issued in denominations of $1,000 and integral multiples thereof
Interest on the Notes may, at the option of the Company, be paid either (i)
by check mailed to the address of the person entitled thereto as it appears in
the security register or (ii) by transfer to an account maintained by the payee
located in the United States.
OPTIONAL REDEMPTION
The Notes may be redeemed at the option of the Company, in whole or in
part, at any time on or after , 1999, on not less than 30 nor
more than 60 days' prior notice at the redemption prices (expressed as
percentages of principal amount) set forth below, together with accrued and
unpaid interest, if any, to the date of redemption, if redeemed during the
12-month period beginning on
S-12
<PAGE> 13
of the years indicated below (subject to the right of holders of
record on relevant record dates to receive interest due on an interest payment
date):
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
------------------------------------------------------------------------- ----------
<S> <C>
1999..................................................................... %
2000..................................................................... %
2001..................................................................... %
2002..................................................................... %
2003..................................................................... %
2004..................................................................... %
2005..................................................................... %
</TABLE>
If less than all of the Notes are to be redeemed, the Note Trustee shall
select the Notes or portions thereof to be redeemed either pro rata or by lot or
by any other method the Note Trustee deems fair and appropriate.
MANDATORY REDEMPTION
The Company is not required to make mandatory redemption or sinking fund
payments with respect to the Notes.
REPURCHASE AT THE OPTION OF HOLDERS
In the event of any Change in Control (as defined below) of the Company
occurring prior to the maturity of the Notes, each holder of Notes will have the
right, at the holder's option, subject to the terms and conditions of the
Supplemental Indenture, to require the Company to repurchase all or any part
(provided that the principal amount is $1,000 or an integral multiple thereof)
of the holder's Notes for cash at a price equal to 101% of the principal amount
thereof, together with accrued and unpaid interest thereon to the date of
repurchase (the "Change in Control Repurchase Price").
Within 30 days after the Change in Control, the Company is obligated to
mail to the Note Trustee and to all holders of Notes a notice regarding the
Change in Control, which notice shall state, among other things: (i) that an
offer to repurchase Notes is being made pursuant to the covenant described in
this paragraph and that all Notes validly tendered will be accepted for payment;
(ii) the Change in Control Repurchase Price and the repurchase date (the "Change
in Control Repurchase Date"), (iii) that any Notes not tendered will continue to
accrue interest; (iv) that, unless the Company defaults in the payment of the
Change in Control Repurchase Price, all Notes tendered for payment following a
Change in Control shall cease to accrue interest after the Change in Control
Repurchase Date; and (v) the procedures that holders of Notes must follow to
exercise these rights.
To exercise this right, the holder must deliver written notice (a "Change
in Control Repurchase Notice") to the Note Trustee or to any other office or
agency maintained for such purpose, of the exercise of such right prior to the
close of business on the Change in Control Repurchase Date. The Change in
Control Repurchase Notice must state: (i) the certificate numbers of the Notes
to be delivered by the holder thereof for repurchase by the Company, (ii) the
portion of the principal amount of Notes to be repurchased, which portion must
be $1,000 or an integral multiple thereof; and (iii) that such Notes are to be
repurchased by the Company on the Change in Control Repurchase Date pursuant to
the applicable provisions of the Notes.
Any Change in Control Repurchase Notice may be withdrawn by the holder by a
written notice of withdrawal delivered to the Note Trustee or to any other
office or agency maintained for such purpose on or prior to the Change in
Control Repurchase Date. The notice of withdrawal shall state the principal
amount at maturity and the certificate numbers of the Notes as to which the
withdrawal notice relates and the principal amount at maturity, if any, which
remains subject to the original Change in Control Repurchase Notice.
S-13
<PAGE> 14
Payment of the Change in Control Repurchase Price for a Note for which a
Change in Control Repurchase Notice has been delivered and not withdrawn is
conditioned upon delivery of such Note (together with necessary endorsements) to
the Note Trustee or to any other office or agency maintained for such purpose,
at any time (whether prior to, on or after the Change in Control Repurchase
Date) after delivery of such Change in Control Repurchase Notice. Payment of the
Change in Control Repurchase Price for such Note will be made promptly following
the later of the Change in Control Repurchase Date or the time of delivery of
such Note.
On the Change in Control Repurchase Date, the Company will, to the extent
lawful, (1) accept for payment all Notes or portions thereof properly tendered
pursuant to its repurchase offer, (2) deposit with the paying agent an amount
equal to the Change in Control Repurchase Price in respect of all Notes or
portions thereof so tendered and (3) deliver or cause to be delivered to the
Note Trustee the Notes so accepted together with an Officers' Certificate
stating the aggregate principal amount of Notes or portions thereof being
repurchased by the Company. The paying agent will promptly mail to each holder
of Notes so accepted the Change in Control Repurchase Price for such Notes, and
the Note Trustee will promptly authenticate and mail (or cause to be transferred
by book entry) to each holder a new Note equal in principal amount to any
unpurchased portion of the Notes surrendered, if any; provided that each such
new Note will be in a principal amount of $1,000 or an integral multiple
thereof.
The foregoing provisions would not necessarily afford holders of the Notes
protection in the event of highly leveraged or other transactions involving the
Company that may adversely affect holders.
The right to require the Company to repurchase Notes as a result of a
Change in Control could have the effect of delaying, deferring or preventing a
Change in Control or other attempts to acquire control of the Company unless
arrangements have been made to enable the Company to repurchase all the Notes at
the Change in Control Repurchase Date. Consequently, this right may render more
difficult or discourage a merger, consolidation or tender offer (even if such
transaction is supported by the Company's Board of Directors or is favorable to
the stockholders), the assumption of control by a holder of a large block of the
Company's shares and the removal of incumbent management.
Any future credit agreements or other agreements relating to indebtedness
(including Senior Debt) to which the Company becomes a party may contain
restrictions on the repurchase of Notes. In the event a Change in Control occurs
at a time when the Company is prohibited from repurchasing Notes, the Company
could seek the consent of its lenders to the repurchase of Notes or could
attempt to refinance the borrowings that contain such prohibition. If the
Company does not obtain such a consent or repay such borrowings, the Company
would remain prohibited from repurchasing Notes. In such case, the Company's
failure to repurchase tendered Notes would constitute an Event of Default under
the Subordinated Indenture, which would, in turn, constitute a further default
under certain of the Company's existing debt instruments and may constitute a
default under the terms of other indebtedness that the Company may enter into
from time to time. In such circumstances, the subordination provisions in the
Subordinated Indenture could prohibit payments to the holders of Notes.
Under the Supplemental Indenture, a "Change in Control" of the Company is
deemed to have occurred at such time as: (i) any person, including its
Affiliates and Associates, other than the Company, its subsidiaries or their
employee benefit plans, files a Schedule 13D or 14D-1 (or any successor
schedule, form or report under the Exchange Act) disclosing that such person has
become the beneficial owner of 50% or more of the voting power of the Company's
Voting Stock (as defined below) or (ii) there shall be consummated any
consolidation by the Company with, or merger of the Company into, any other
corporation, or any conveyance, transfer or lease by the Company of all or
substantially all of its assets to any person, or any merger by any corporation
into the Company (other than to one or more wholly-owned Subsidiaries of the
Company), unless, in any case, stockholders of the Company immediately prior to
such transaction own, directly or indirectly, immediately following such
transaction at least a majority of the combined voting power of the outstanding
Voting Stock of the corporation resulting from such transaction in substantially
the same proportion as their ownership of the Company's Voting Stock immediately
before such transaction; provided that a Change in Control shall not be deemed
to
S-14
<PAGE> 15
have occurred in any case if either (x) the last sale price of the Common Stock
for any five trading days during the ten trading days immediately preceeding the
Change in Control is at least equal to 105% of the Conversion Price in effect on
the date of such Change in Control or (y) at least 90% of the consideration
(excluding cash payments for fractional shares) in the transaction or
transactions constituting the Change in Control consists of shares of common
stock that are, or upon issuance will be, traded on a United States national
securities exchange or approved for trading on an established automated
over-the-counter trading market in the United States and as a result of such
transaction or transactions the Notes become convertible solely into such common
stock. "Voting Stock" means, with respect to any person, capital stock of such
person having general voting power under ordinary circumstances to elect at
least a majority of the board of directors, managers or trustees of such person
(irrespective of whether or not at the time capital stock of any other class or
classes shall have or might have voting power by reason of the happening of any
contingency).
The Company will comply with the provisions of Rule 13e-4 and any other
tender offer rules under the Exchange Act which may then be applicable and will
file a Schedule 13E-4 or any other schedule required thereunder in connection
with any offer by the Company to repurchase Notes at the option of holders upon
a Change in Control. The Change in Control purchase feature of the Notes may in
certain circumstances make more difficult or discourage a takeover of the
Company and, thus, the removal of incumbent management.
The Company could, in the future, enter into certain transactions,
including certain recapitalizations of the Company, that would not constitute a
Change in Control for purposes of the Change in Control repurchase feature of
the Notes, but that would increase the amount of Senior Debt (or other
indebtedness) outstanding at such time. There are no restrictions in the Senior
Indenture on the creation of additional Senior Debt (or any other indebtedness),
and under certain circumstances the incurrence of significant amounts of
additional indebtedness could have an adverse effect on the Company's ability to
service its indebtedness, including the Notes. If a Change in Control were to
occur, there can be no assurance that the Company would have sufficient funds to
pay the Change in Control Repurchase Price for all Notes tendered by the holders
thereof. A default by the Company on its obligations to pay the Change in
Control Repurchase Price could result in acceleration of the payment of other
indebtedness of the Company at the time outstanding pursuant to cross-default
provisions.
CONVERSION
The Notes, or any portion thereof which is an integral multiple of $1,000,
are convertible at any time prior to the close of business on ,
2006, subject to prior redemption at the option of the Company or repurchase at
the option of the holder, into shares of the Company's Common Stock, at the
conversion price set forth on the cover of this Prospectus Supplement, subject
to adjustment as set forth below (the "Conversion Price"). The Company will not
be required to issue fractional shares of Common Stock but will pay a cash
adjustment in lieu thereof. In the case of any Note or portion thereof called
for redemption, conversion rights expire at the close of business on the
business day immediately preceding redemption. In the event any holder exercises
its repurchase right upon a Change in Control, such holder's conversion right
will terminate. See "-- Repurchase at the Option of Holders." Except as
described below, no adjustment will be made on conversion of any Notes for
interest accrued thereon or for dividends on any Common Stock issued.
Accrued interest will not be paid on the Notes that are converted. If any
Note is converted between a record date for the payment of interest and the next
succeeding interest payment date, such Note upon surrender must be accompanied
by funds equal to the interest payable on such interest payment date on the
principal amount so converted (unless such Note shall have been called for
redemption, in which case no such payment shall be required).
The Conversion Price is subject to adjustment in certain events, including
(i) the subdivision, combination or reclassification of the outstanding Common
Stock of the Company; (ii) the issuance by the Company of Common Stock as a
dividend or distribution on the Common Stock; (iii) the issuance of
S-15
<PAGE> 16
rights and warrants (expiring within 45 days after the record date for the
determination of stockholders entitled to receive such rights and warrants) to
all holders of Common Stock entitling them to purchase shares of Common Stock or
securities convertible into or exchangeable for Common Stock at a price per
share (or having a conversion or exercise price per share) less than the current
market price (as defined in the Supplemental Indenture) of the Common Stock on
the record date; (iv) the distribution by the Company to all holders of Common
Stock of shares of capital stock other than Common Stock, debt securities or
assets (excluding any cash dividends or distributions that do not constitute
Extraordinary Cash Dividends, as defined in the Supplemental Indenture) or
rights or warrants to purchase assets or securities of the Company (other than
the rights and warrants referred to in clause (iii)); and (v) the issuance of
Common Stock or securities convertible into, or exchangeable for, Common Stock
at a price per share (or having a conversion or exchange price per share) that
is less than the then current market price of the Common Stock (but excluding,
among other things, issuances: (a) pursuant to any bona fide plan for the
benefit of employees, directors or consultants of the Company now or hereafter
in effect; (b) to acquire all or any portion of a business in an arm's-length
transaction between the Company and an unaffiliated third party including, if
applicable, issuances upon exercise of options or warrants assumed in connection
with such an acquisition; (c) in a bona fide public offering pursuant to a firm
commitment underwriting or sales at the market pursuant to a continuous offering
stock program; (d) pursuant to the exercise of warrants, rights (including,
without limitation, earnout rights) or options, or upon the conversion of
convertible securities, which are issued and outstanding on the date hereof, or
which may be issued in the future for fair value and with an exercise price or
conversion price at least equal to the current market price of the Common Stock
at the time of issuance of such warrant, right, option or convertible security;
and (e) pursuant to a dividend reinvestment plan or other plan hereafter adopted
for the reinvestment of dividends or interest provided that such Common Stock is
issued at a price at least equal to 95% of the market price of the Common Stock
at the time of such issuance). The Company is not required to make any
adjustment in the Conversion Price of less than 1%, but instead such adjustment
will be carried forward and taken into account in the computation of any
subsequent adjustment.
In case of any merger or consolidation of the Company or the sale or
conveyance by the Company of all or substantially all the assets of the Company
(other than to one or more wholly-owned subsidiaries of the Company), the holder
of each outstanding Note shall have the right to convert such Note only into the
kind and amount of shares of stock and other securities and property (including
cash) received in such transaction by a holder of the number of shares of Common
Stock into which such Note was convertible immediately prior to the effective
date of such transaction. The meaning of the phrase "sale or conveyance by the
Company of all or substantially all of the assets of the Company" will be
determined under New York law, which governs the Subordinated Indenture and the
Supplemental Indenture. Application of the phrase to a particular sale of assets
will depend on the interpretation given to the phrase by courts construing New
York law at the time, and by the specific facts and circumstances of such sale.
The Company may from time to time reduce the Conversion Price by any amount
for any period of at least 20 days, in which case the Company shall give at
least 15 days' notice of such reduction, if the Board of Directors of the
Company has made a determination that such reduction would be in the best
interests of the Company, which determination shall be conclusive. In addition,
and without limiting the foregoing, the Board of Directors may also make such
reductions in the Conversion Price as it deems advisable to avoid or diminish
any income tax to holders of Common Stock resulting from any dividend or
distribution of stock (or rights to acquire stock) or from any event treated as
such for income tax purposes. See "Certain Federal Income Tax Considerations."
Certain adjustments in the Conversion Price in accordance with the
foregoing provisions (other than to take account of a dividend of the Company's
own stock or a stock split) could be taxable pursuant to Section 305 of the
Internal Revenue Code of 1986, as amended, as a constructive distribution to
holders of the Notes at the time of such adjustments in the Conversion Price.
S-16
<PAGE> 17
SUBORDINATION OF NOTES
The Notes will be subordinate in right of payment to all existing and
future Senior Debt. Neither Indenture restricts the amount of Senior Debt or
other indebtedness of the Company or any subsidiary of the Company. In addition,
the Notes will be effectively subordinated to all indebtedness and other
liabilities of the Company's subsidiaries.
The payment of the principal of, interest on or any other amounts due on
the Notes will be subordinated in right of payment to the prior payment in full
of all Senior Debt of the Company. No payment on account of principal of,
redemption of, interest on or any other amounts due on the Notes, including,
without limitation, any payments with respect to a Change in Control Repurchase
Notice, and no redemption, purchase or other acquisition of the Notes may be
made unless (i) full payment of amounts then due on all Senior Debt have been
made or duly provided for pursuant to the terms of the instrument governing such
Senior Debt, and (ii) at the time for, or immediately after giving effect to,
any such payment, redemption, purchase or other acquisition, there shall not
exist under any Senior Debt or any agreement pursuant to which any Senior Debt
has been issued, any default which shall not have been cured or waived and which
shall have resulted in the full amount of such Senior Debt being declared due
and payable. In addition, the Supplemental Indenture will provide that if any of
the holders of any issue of Designated Senior Debt notifies (the "Payment
Blockage Notice") the Company and the Note Trustee that a default has occurred
giving the holders of such Designated Senior Debt the right to accelerate the
maturity thereof, no payment on account of principal, redemption, interest or
any other amounts due on the Notes and no purchase, redemption or other
acquisition of the Notes will be made for the period (the "Payment Blockage
Period") commencing on the date the Payment Blockage Notice is received and
ending on the earlier of (A) the date on which such event of default shall have
been cured or waived or (B) 90 days from the date of Payment Blockage Notice is
received. Notwithstanding the foregoing (but subject to the provisions contained
in the first sentence of this Section), unless the holders of such Designated
Senior Debt or the representative of such holders shall have accelerated the
maturity of such Designated Senior Debt, the Company may resume payments on the
Notes after the end of such Payment Blockage Period. Not more than one Payment
Blockage Notice may be given in any consecutive 360-day period, irrespective of
the number of defaults with respect to Senior Debt during such period.
The provisions of the Subordinated Indenture which are described in the
accompanying Prospectus under "Description of Debt Securities -- Subordination
of Subordinated Debt Securities" will also apply to the Notes.
BOOK-ENTRY; DELIVERY AND FORM
The certificates representing the Notes will be issued in fully registered
form, without coupons. Except as described in the next paragraph, the Notes will
be deposited with, or on behalf of, The Depository Trust Company, New York, New
York ("DTC"), and registered in the name of Cede & Co., as DTC's nominee in the
form of a global Note certificate (the "Global Certificate) or will remain in
the custody of the Trustee pursuant to a FAST Balance Certificate Agreement
between DTC and the Trustee.
GLOBAL CERTIFICATES
Upon the issuance of the Global Certificate, DTC or its custodian will
credit, on its internal system, the respective principal amount of the
individual beneficial interests represented by such Global Certificate to the
accounts of persons who have accounts with such depositary. Such accounts
initially will be designated by or on behalf of the Underwriters. Ownership of
beneficial interests in a Global Certificate will be limited to persons who have
accounts with DTC ("participants") or persons who hold interests through
participants. Ownership of beneficial interests in a Global Certificate will be
shown on, and the transfer of that ownership will be effected only through,
records maintained by DTC or its nominee (with respect to interests of
participants) and the records of participants (with respect to interests of
persons other than participants).
S-17
<PAGE> 18
So long as DTC, or its nominee, is the registered owner or holder of a
Global Certificate, DTC or such nominee, as the case may be, will be considered
the sole owner or holder of the Notes represented by such Global Certificate for
all purposes under the Subordinated Indenture and the Notes. No beneficial owner
of an interest in a Global Certificate will be able to transfer the interest
except in accordance with DTC's applicable procedures, in addition to those
provided for under the Subordinated Indenture.
Payments of the principal of, and interest on, a Global Certificate will be
made to DTC or its nominee, as the case may be, as the registered owner thereof.
Neither the Company, the Trustee nor any Paying Agent will have any
responsibility or liability for any aspect of the records relating to or
payments made on accounts of beneficial ownership interests in a Global
Certificate of for maintaining, supervising or reviewing any records relating to
such beneficial ownership interests.
The Company expects that DTC or its nominee, upon receipt of any payment of
principal or interest in respect of a Global Certificate, will credit
participant's accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of such Global
Certificate as shown on the records of DTC or its nominee. The Company also
expects that payments by participants to owners of beneficial interests in such
Global Certificate held through such participants will be governed by standing
instructions and customary practices, as is now the case with securities held
for the accounts of customers registered in the names of nominees for such
customers. Such payments will be the responsibility of such participants.
Transfers between participants in DTC will be effected in the ordinary way
in accordance with DTC rules. If a holder requires physical delivery of a
certificated note for any reason, including to sell Notes to persons in
jurisdictions which require such delivery of such Notes or to pledge such Notes,
such holder must transfer its interest in a Global Certificate in accordance
with the normal procedures of DTC and the procedures set forth in the
Subordinated Indenture. Once an interest in a Global Certificate is delivered as
a certificated note, such certificated note may not be exchanged for an interest
in a Global Certificate.
The Company expects that DTC will take any action permitted to be taken by
a holder of Notes (including the presentation of Notes for exchange as described
below) only at the direction of one or more participants to whose account the
DTC interests in a Global Certificate is credited and only in respect of such
portion of the aggregate principal amount of the Notes as to which such
participant or participants has or have given such direction. However, if there
is an Event of Default (as defined) under the Notes, DTC will exchange a Global
Certificate for certificated notes, which it will distribute to its
participants.
DTC has advised the Company as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code and a "Clearing Agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities for its participants and facilitate the clearance and settlement of
securities transactions between participants through electronic book-entry
changes in accounts of its participants, thereby eliminating the need for
physical movement of certificates. Participants include securities brokers and
dealers, banks, trust companies and clearing corporations and may include
certain other organizations. Indirect access to the DTC system is available to
others such as banks, brokers, dealers and trust companies that clear through or
maintain a custodial relationship with a participant, either directly or
indirectly ("indirect participants").
Although the Company expects that DTC will agree to the foregoing
procedures in order to facilitate transfers of interests in a Global Certificate
among participants of DTC, DTC is under no obligation to perform or continue to
perform such procedures, and such procedures may be discontinued at any time.
Neither the Company nor the Trustee will have any responsibility for the
performance by DTC or its participants or indirect participants of their
respective obligations under the rules and procedures governing their
operations.
S-18
<PAGE> 19
If DTC is at any time unwilling or unable to continue as a depositary for a
Global Certificate and a successor depositary is not appointed by the Company
within 90 days, the Company will issue certificated notes in exchange for a
Global Certificate.
TRANSFER AND EXCHANGE
A holder may transfer or exchange Notes in accordance with the Subordinated
Indenture. The Registrar and the Trustee may require a holder, among other
things, to furnish appropriate endorsements and transfer documents and the
Company may require a holder to pay any taxes and fees required by law or
permitted by the Indenture. The Company is not required to exchange or register
the transfer of any Note selected for redemption. Also, the Company is not
required to exchange or register the transfer of any Note for a period of 15
days before a selection of Notes to be redeemed.
The registered holder of a Note will be treated as the owner of it for all
purposes.
COVENANTS, EVENTS OF DEFAULT AND DEFEASANCE
The provisions of the Subordinated Indenture which are described in the
accompanying Prospectus under "Description of Debt Securities -- Certain
Covenants," "Consolidation, Merger or Sale of Assets," "Events of Default and
Notice Thereof," "Defeasance or Covenant Defeasance," "Modification and Waiver"
and "Global Securities" will apply to the Notes. In addition to the events of
default specified in "Events of Default and Notice Thereof," failure of the
Company to repurchase tendered Notes upon a Change in Control, in the manner
contemplated by "-- Repurchase at the Option of Holders," shall constitute an
Event of Default with respect to the Notes.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of certain United States federal income tax
considerations relating to the purchase, ownership and disposition of the Notes
and the Common Stock into which Notes may be converted, but does not purport to
be a complete analysis of all the potential tax considerations relating thereto.
This summary is based on laws, regulations, ruling and decisions now in effect,
all of which are subject to change. This summary deals only with initial
investors who are "United States Holders" and who will hold Notes and Common
Stock as capital assets and does not address tax considerations applicable to
investors that may be subject to special tax rules, such as banks, tax-exempt
organizations, insurance companies, dealers in securities or currencies, persons
that will hold the Notes or Common Stock as part of a position in a "straddle"
for tax purposes, persons other than United States Holders or holders of Notes
that did not acquire the Notes in the initial distribution thereof. As used
herein, the term "United States Holder" means a holder of a Note that is a
citizen or resident of the United States, or that is a corporation, partnership
or other entity created or organized in or under the laws of the United States
or any political subdivision thereof or an estate or trust the income of which
is subject to United States federal income taxation regardless of its source,
and the term "United States" means the United States of America (including the
States and District of Columbia).
INVESTORS CONSIDERING THE PURCHASE OF NOTES SHOULD CONSULT WITH THEIR OWN
TAX ADVISORS REGARDING THE APPLICATION OF THE UNITED STATES FEDERAL INCOME TAX
AND ESTATE TAX LAWS TO THEIR PARTICULAR SITUATIONS AS WELL AS ANY TAX
CONSEQUENCES ARISING UNDER THE LAWS OF ANY STATE, LOCAL, OR FOREIGN TAXING
JURISDICTION.
PAYMENT OF INTEREST
Interest on a Note generally will be includible in the income of a United
States Holder as ordinary income at the time such interest is received or
accrued, in accordance with such Holder's method of accounting for United States
federal income tax purposes.
S-19
<PAGE> 20
SALE, EXCHANGE OR REDEMPTION OF THE NOTES
Upon the sale, exchange or redemption of a Note, a United States Holder
generally will recognize capital gain or loss equal to the difference between
(i) the amount of cash proceeds and the fair market value of any property
received on the sale, exchange or redemption (except to the extent such amount
is attributable to accrued interest income, which is taxable as ordinary income)
and (ii) such Holder's adjusted basis in the Note. A United States Holder's
adjusted basis in a Note generally will equal the cost of the Note to such
holder. Such capital gain or loss will be long-term capital gain or loss if the
Note was held for more than one year at the time of sale, exchange or
redemption.
CONVERSION OF THE NOTES
A United States Holder generally will not recognize any income, gain, or
loss upon conversion of a Note into Common Stock except with respect to cash
received in lieu of a fractional share of Common Stock. Such United States
Holder's basis in the Common Stock received on conversion of a Note will be the
same as such United States Holder's adjusted basis in the Note at the time of
conversion (reduced by any basis allocable to a fractional share interest), and
the holding period for the Common Stock received on conversion will generally
include the holding period of the Note converted.
Cash received in lieu of a fractional share of Common Stock upon conversion
will be treated as a payment in exchange for the fractional share of Common
Stock. Accordingly, the receipt of cash in lieu of a fractional share of Common
Stock generally will result in capital gain or loss (measured by the difference
between the cash received for the fractional share and the United States
Holder's adjusted basis in the fractional share).
ADJUSTMENT OF CONVERSION PRICE
The conversion price of the Notes is subject to adjustment in certain
circumstances. Under Section 305(c) of the United States Internal Revenue Code
of 1986 (the "Code"), adjustments that have the effect of increasing the
proportionate interest of holders of the Notes in the assets or earnings of the
Company (for example, an adjustment following a distribution of property by the
Company to its stockholders) may in some circumstances give rise to deemed
dividend income to United States Holders; similarly, a failure to adjust the
conversion price of the Notes to reflect a stock dividend or other event
increasing the proportionate interest of the holders of outstanding Company
Common Stock can in some circumstances give rise to deemed dividend income to
United States Holders of such Common Stock.
DIVIDENDS ON THE COMMON STOCK
Dividends paid on the Common Stock will be taxable as ordinary income to
the extent of the Company's current or accumulated earnings and profits for
federal income tax purposes. To the extent that the amount of the distributions
paid on the Common Stock exceeds the Company's current or accumulated earnings
and profits for federal income tax purposes, such distributions will be treated
first as a return of capital and will be applied against and reduce the adjusted
tax basis of the Common Stock in the hands of a stockholder. Any remaining
amount after the holder's basis has been reduced to zero will be taxed as
capital gain and will be long-term capital gain if the holder's holding period
for the Common Stock exceeds one year. For purposes of the remainder of this
discussion, the term "dividend" refers to a distribution taxed as ordinary
income as described above unless the context indicates otherwise.
Dividends received by corporate stockholders will be eligible for the 70%
dividends-received deduction under Section 243 of the Code, subject to the
limitations contained in Sections 246 and 246A of the Code.
A corporate stockholder's liability for alternative minimum tax may be
affected by the portion of the dividends received which such corporate
stockholder deducts in computing taxable income.
S-20
<PAGE> 21
Proposed legislation would reduce the dividends-received deduction from 70%
to 50% and increase the holding period required to take such a deduction. It is
not clear whether such proposed legislation will ultimately be enacted or, if
enacted, will be enacted as currently proposed.
Section 1059 of the Code requires a corporate stockholder to reduce its
basis (but not below zero) in the Common Stock by the "nontaxed portion" of any
"extraordinary dividend" if the holder has not held its Common Stock for more
than two years as of the date the amount or payment of such dividend is agreed
to, announced or declared. Generally, the nontaxed portion of an extraordinary
dividend is the amount excluded from income under Section 243 of the Code
(relating to the dividends-received deduction). If any part of the nontaxed
portion of an extraordinary dividend has not been applied to reduce basis as a
result of the limitation on reducing basis below zero, the amount thereof will
be treated as gain from the sale or exchange of stock when such stock is
disposed of or sold.
Proposed legislation would require immediate recognition of gain under
Section 1059 to the extent a corporate holder's tax basis would have been
reduced below zero, instead of deferring such gain until the ultimate sale or
exchange of such stock. It is not clear whether such proposed legislation will
ultimately be enacted or, if enacted, will be enacted as currently proposed.
SALE OR OTHER DISPOSITION OF COMMON STOCK
Upon the sale or other disposition of shares of Common Stock, a United
States Holder generally will recognize capital gain or loss equal to the
difference between the amount realized on the sale and such holder's tax basis
in the Common Stock. Gain or loss upon the disposition of the Common Stock will
be long-term if, at the time of the disposition, the Common Stock has been held
for more than one year (which, in the case of Common Stock acquired upon
conversion of a Note, would include the period during which the converted Note
was held). The deduction of capital losses is subject to limitations for U.S.
federal income tax purposes.
INFORMATION REPORTING AND BACKUP WITHHOLDING TAX
In general, information reporting requirements will apply to payments of
principal, premium, if any, and interest on a Note, payments of dividends on
Common Stock, and payments of the proceeds of the sale of a Note or Common Stock
to certain non-corporate United States Holders, and a 31% backup withholding tax
may apply to such payments if the United States Holder (i) fails to furnish or
certify his correct taxpayer identification number to the payor in the manner
required, (ii) is notified by the Internal Revenue Service (the "IRS") that he
has failed to report payments of interest and dividends properly, or (iii) under
certain circumstances, fails to certify that he has not been notified by the IRS
that he is subject to backup withholding for failure to report interest and
dividend payments. Any amounts withheld under the backup withholding rules from
a payment to a United States Holder will be allowed as a credit against such
holder's United States federal income tax liability and may entitle the holder
to a refund.
S-21
<PAGE> 22
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement
(the "Underwriting Agreement") among the Company and the Underwriters, the
Company has agreed to sell to the Underwriters, and the Underwriters have
severally agreed to purchase from the Company the principal amounts of the Notes
set forth opposite their names below.
<TABLE>
<CAPTION>
PRINCIPAL
UNDERWRITER AMOUNT
- ----------------------------------------------------------------------------- ------------
<S> <C>
Salomon Brothers Inc.........................................................
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.....................................................
Goldman, Sachs & Co..........................................................
Simmons & Company International..............................................
------------
Total.............................................................. $125,000,000
=============
</TABLE>
In the Underwriting Agreement, the Underwriters have agreed, subject to the
terms and conditions set forth therein, that the obligations of the Underwriters
are subject to certain conditions precedent and that the Underwriters will be
obligated to purchase the entire principal amount of the Notes offered hereby if
any Notes are purchased.
The Company has been advised by the Underwriters that they propose to offer
the Notes directly to the public initially at the public offering price set
forth on the cover of this Prospectus Supplement, and to certain dealers at such
price less a concession not in excess of % of the principal amount of the
Notes. The Underwriters may allow, and such dealers may reallow, a discount not
in excess of % of the principal amount of the Notes to certain other dealers.
After the initial public offering of the Notes, the public offering price,
concession and discount may be changed.
The Company has granted the Underwriters an option, exercisable during the
30-day period after the date of this Prospectus Supplement to purchase up to an
additional $18,750,000 principal amount of Notes at the initial public offering
price less the underwriting discount, solely to cover over-allotments.
The Notes will not be listed on any securities exchange. The Company has
been advised by the Underwriters that the Underwriters presently intend to make
a market in the Notes offered hereby; however, they are not obligated to do so.
Any market making may be discontinued at any time, and there can be no assurance
that an active public market for the Notes will develop.
Except for certain exceptions pertaining to employee benefit plans,
outstanding options and warrants to purchase Common Stock and the issuance of
Common Stock as consideration in an acquisition of the stock or assets of
another entity (provided that in connection with such acquisitions the number of
shares so issued shall not exceed 5% of the currently outstanding shares of
Common Stock), the Company, its five most highly compensated executive officers
and Martin J. Whitman, a director of the Company, have agreed that they will
not, without the prior written consent of Salomon Brothers Inc, for a period of
90 days after the date of this Prospectus Supplement, directly or indirectly,
offer to sell, sell, grant any option for the sale of or otherwise dispose of
any shares of Common Stock or any securities convertible into or exchangeable or
exercisable for any shares of Common Stock, or any right or option to acquire
any such shares or securities. Sales by the Company to the Underwriters are
exempt from such restriction.
The Company has agreed to indemnify the several Underwriters against
certain liabilities, including civil liabilities under the Securities Act of
1933, as amended. The Underwriters have agreed to reimburse the Company for
certain offering expenses.
From time to time, Simmons & Company International has been engaged by the
Company to provide advisory and investment banking services in return for a
customary fee. M. J. Whitman, Inc., a broker-dealer whose chief executive
officer is Martin J. Whitman, will be offered the opportunity to purchase up
S-22
<PAGE> 23
to $10,000,000 of Notes from the Underwriters on the same terms as those
described above for other dealers purchasing Notes.
LEGAL MATTERS
The validity of the Notes being offered hereby is being passed upon for the
Company by Baker & McKenzie, New York, New York, and for the Underwriters by
Vinson & Elkins L.L.P., Houston, Texas. Vinson & Elkins L.L.P. has represented
the Company in various legal matters from time to time. Mr. Anthony Petrello,
President and Chief Operating Officer of the Company, was a partner of and is
currently of counsel to Baker & McKenzie.
S-23
<PAGE> 24
PROSPECTUS
$250,000,000
NABORS INDUSTRIES, INC.
DEBT SECURITIES, PREFERRED STOCK, COMMON STOCK,
DEPOSITARY SHARES AND WARRANTS
[NABORS INDUSTRIES, INC. LOGO]
Nabors Industries, Inc. (the "Company") may from time to time offer,
together or separately, its (i) debt securities (the "Debt Securities") which
may be either senior debt securities (the "Senior Debt Securities") or
subordinated debt securities (the "Subordinated Debt Securities"), (ii) shares
of its preferred stock, $.10 par value per share (the "Preferred Stock"), which
may be issued in the form of Depositary Shares (as defined herein) evidenced by
Depositary Receipts (as defined herein), (iii) shares of its common stock, $.10
par value per share (the "Common Stock"), and (iv) warrants to purchase Debt
Securities, Preferred Stock or Common Stock of the Company as shall be
designated by the Company at the time of the offering (the "Warrants"), in
amounts, at prices and on terms to be determined at the time of the offering.
(The Debt Securities, Preferred Stock, Depositary Shares, Common Stock and
Warrants are collectively called the "Securities"). Securities may be sold for
U.S. dollars or one or more foreign currencies, currency units or composite
currencies -- in each case, as the Company specifically designates.
The Securities offered pursuant to this Prospectus may be issued in one or
more series or issuances and will be limited to $250,000,000 aggregate initial
public offering price or the equivalent in one or more foreign currencies,
currency units or composite currencies. Certain specific terms of the particular
Securities in respect of which this Prospectus is being delivered will be set
forth in an accompanying Prospectus Supplement (the "Prospectus Supplement"),
including, where applicable, (i) in the case of Debt Securities, the specific
title, aggregate principal amount, the denomination, whether such Debt
Securities are secured or unsecured obligations, maturity, premium, if any, the
interest, if any (which may be fixed, floating or adjustable rate), the time and
method of calculating payment of interest, if any, the place or places where
principal of (and premium, if any) and interest, if any, on such Debt Securities
will be payable, the currency, currency unit or composite currency in which
principal of (and premium, if any) and interest, if any, on such Debt Securities
will be payable, any terms of redemption at the option of the Company or the
holder, any sinking fund provisions, terms for any conversion or exchange into
Securities or other securities of the Company (provided, however, that any such
other securities issuable upon conversion or exchange of Debt Securities will be
subject to registration under the Securities Act or an applicable exemption
therefrom), the initial public offering price, listing (if any) on a securities
exchange and other terms, (ii) in the case of Preferred Stock, the specific
title, the aggregate number of shares offered, any dividend (including the
method of calculating payment of dividends), liquidation, redemption, voting and
other rights, any terms for any conversion or exchange into Securities or other
securities of the Company (provided, however, that any such other securities
issuable upon conversion or exchange of Preferred Stock will be subject to
registration under the Securities Act or an applicable exemption therefrom), the
initial public offering price, listing (if any) on a securities exchange and
other terms, (iii) in the case of Warrants, the duration, purchase price,
exercise price and detachability of such Warrants, any listing of the Warrants
or underlying Securities on a securities exchange, a description of the
securities for which each Warrant is exercisable and other terms, and (iv) in
the case of Depositary Shares, the fractional share of Preferred Stock
represented by each such Depositary Share. If so specified in the applicable
Prospectus Supplement, Debt Securities of a series may be issued in whole or in
part in the form of one or more temporary or permanent global securities
("Global Securities").
The Common Stock is listed on the American Stock Exchange under the trading
symbol "NBR." Any Common Stock sold pursuant to a Prospectus Supplement will be
listed on such exchange, subject to official notice of issuance.
Unless otherwise specified in a Prospectus Supplement, the Senior Debt
Securities, when issued, will be unsecured and will rank equally with all other
unsecured and unsubordinated indebtedness of the Company. The Subordinated Debt
Securities, when issued, will be subordinated in right of payment to all Senior
Debt (as defined herein) of the Company.
The Prospectus Supplement will contain information concerning certain United
States federal income tax considerations, if applicable to the Securities
offered.
This Prospectus may not be used to consummate sales of Securities unless
accompanied by a Prospectus Supplement. Any statement contained in this
Prospectus will be deemed to be modified or superseded by any inconsistent
statement contained in an accompanying Prospectus Supplement.
SEE "RISK FACTORS" ON PAGE 3 HEREOF FOR A DESCRIPTION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE SECURITIES.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The Securities will be sold directly, through agents, underwriters or
dealers as designated from time to time, or through a combination of such
methods. If agents of the Company or any dealers or underwriters are involved in
the sale of the Securities in respect of which this Prospectus is being
delivered, the names of such agents, dealers or underwriters and any applicable
commissions or discounts are set forth in or may be calculated from the
Prospectus Supplement with respect to such Securities. See "Plan of
Distribution" for possible indemnification arrangements with agents, dealers and
underwriters.
THE DATE OF THIS PROSPECTUS IS MAY 10, 1996.
<PAGE> 25
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files periodic reports and other information with the Securities and
Exchange Commission (the "Commission").
The Company has filed with the Commission a Registration Statement on Form
S-3 (the "Registration Statement") under the Securities Act of 1933, as amended
(the "Securities Act"), with respect to the Securities offered hereby. This
Prospectus, which is a part of the Registration Statement, does not contain all
of the information set forth in the Registration Statement. Certain portions of
the Registration Statement have been omitted as permitted by the rules and
regulations of the Commission. Statements made in this Prospectus as to the
contents of any contract, agreement, instrument or other document are not
necessarily complete, and in each instance reference is made to the copy of such
contract, agreement, instrument or document filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects by
such reference and the exhibits and schedules thereto.
The Registration Statement, the exhibits and schedules thereto, and the
reports and other information filed by the Company with the Commission may be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549 and at the regional offices of the Commission located at Seven World
Trade Center, 13th floor, New York, New York 10048; and 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511. Copies of all or any part of such
materials also may be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates. Such reports, proxy or information statements, Registration Statement and
exhibits and other information concerning the Company should also be available
for inspection at the offices of the American Stock Exchange, Inc., 86 Trinity
Place, New York, New York 10006.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents have been filed with the Commission pursuant to the
Exchange Act and are incorporated by reference into this Prospectus and made a
part hereof:
(1) The Company's Annual Report on Form 10-K for the fiscal year ended
September 30, 1995 (File No. 1-9245);
(2) The Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended December 31, 1995; and
(3) The description of the Common Stock and the Preferred Stock
contained in Amendment No. 1 to the Registration Statement on Form 8-A
(File No. 1-9245) filed with the Commission on May 20, 1992, and any
subsequent amendment thereto filed for the purposes of updating such
description.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering of the Securities shall be deemed to be
incorporated by reference in this Prospectus and made a part hereof from the
date of filing of such documents. Any statement contained herein or in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other document subsequently
filed with the Commission which also is or is deemed to be incorporated by
reference herein or in any Prospectus Supplement modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
THE COMPANY UNDERTAKES TO PROVIDE WITHOUT CHARGE TO EACH PERSON, INCLUDING
ANY BENEFICIAL OWNER, TO WHOM THIS PROSPECTUS IS DELIVERED, UPON WRITTEN OR ORAL
REQUEST, A COPY OF THE DOCUMENTS THAT HAVE BEEN INCORPORATED BY REFERENCE INTO
THIS PROSPECTUS (NOT INCLUDING EXHIBITS TO SUCH DOCUMENTS OTHER THAN EXHIBITS
SPECIFICALLY INCORPORATED BY REFERENCE INTO SUCH DOCUMENTS). REQUESTS FOR SUCH
DOCUMENTS SHOULD BE DIRECTED TO DANIEL MCLACHLIN, CORPORATE SECRETARY, NABORS
INDUSTRIES, INC., 515 WEST GREENS ROAD, SUITE 1200, HOUSTON, TEXAS 77067.
2
<PAGE> 26
RISK FACTORS
In addition to the other information contained or incorporated by reference
in this Prospectus or any Prospectus Supplement, the following factors should be
considered carefully by prospective investors in evaluating the Company before
purchasing any of the securities offered hereby. Except for the historical
information contained or incorporated by reference in this Prospectus or any
Prospectus Supplement, the matters discussed in this Prospectus or any
Prospectus Supplement are forward looking statements (as such term is used in
the Private Securities Litigation Reform Act of 1995) that involve risks and
uncertainties, including industry conditions and the variability of demand for
contract drilling and related oilfield services, intense competition, operating
risks inherent in a hazardous industry, the adequacy and availability of
insurance, risks associated with international operations, regulations
pertaining to environmental matters and the other matters detailed or referred
to below and from time to time in the Company's other reports filed with the
Commission. The actual results that the Company achieves may vary materially
from those set forth in or implied by any forward looking statements due to such
risks and uncertainties.
Business-Related Risks. The information set forth under the captions
"Industry Conditions, Competition and Seasonality," "Operating Risks and
Insurance," "International Operations" and "Governmental Matters" in Part I of
the Company's Annual Report on Form 10-K for the fiscal year ended September 30,
1995 (the "1995 Form 10-K"), in addition to the other information included in
the 1995 Form 10-K, is hereby specifically incorporated by reference herein.
Dividend Policies; Restrictions on Payment of Dividends. The Company does
not anticipate that it will pay any dividends on the Common Stock in the
foreseeable future. Certain of the Company's debt instruments include covenants
restricting the Company's ability to pay dividends or to make certain other
distributions to stockholders. In connection with the offering of any
dividend-paying Preferred Stock hereby, the applicable Prospectus Supplement
will set forth the amount available for distribution as of the end of the most
recent fiscal period under the Company's debt instruments.
Holding Company Structure. The Company is a holding company, substantially
all of the operations of which are conducted through subsidiaries. Consequently,
the Company will rely principally on dividends or advances from its subsidiaries
for the funds necessary for, among other things, the payment of principal of and
any interest or premium on the Debt Securities and the other indebtedness of the
Company. The ability of such subsidiaries to pay dividends is subject to
applicable state law and certain other restrictions. Any right of the holders of
the Debt Securities to participate in the assets of any of the subsidiaries upon
such subsidiary's liquidation or recapitalization will be effectively
subordinated to the claims of such subsidiary's creditors and preferred
stockholders (if any), except to the extent the Company is itself recognized as
a creditor of such subsidiary.
Absence of Public Market for Certain of the Securities. All Debt
Securities, Preferred Stock, Depositary Shares and Warrants will be a new issue
of securities with no established trading market. Any underwriters to whom Debt
Securities, Preferred Stock, Depositary Shares or Warrants are sold by the
Company for public offering and sale may make a market in such Securities, but
such underwriters will not be obligated to do so and may discontinue any market
making at any time without notice. No assurance can be given as to the liquidity
of the secondary market for any Debt Securities, Preferred Stock, Depositary
Shares or Warrants.
Market Risk with respect to Common Stock; Certain Investment Limitations.
The Common Stock is listed for trading on the American Stock Exchange. However,
the prices at which shares of Common Stock trade may depend upon many factors,
including prevailing interest rates, markets for similar securities, industry
conditions, and the performance of, and investor expectations for, the Company.
No assurance can be given that a holder of shares of Common Stock will be able
to sell such shares at any particular price. Certain institutional investors may
invest only in dividend-paying equity securities or may operate under other
restrictions that may prohibit or limit their ability to invest in the Common
Stock.
3
<PAGE> 27
THE COMPANY
GENERAL
Nabors Industries, Inc. (collectively with its subsidiaries (unless the
context otherwise requires), the "Company") is the largest land drilling
contractor in the world. The Company, which was incorporated in Delaware in
1978, has principally been engaged in oil, gas and geothermal land drilling
operations in Alaska, the lower 48 states of the United States, and Canada, and
internationally in the Middle East, the Far East, the CIS, North and West Africa
and South and Central America. The Company also provides offshore drilling
services in the North Sea, the Gulf of Mexico, Alaska's Cook Inlet and the
Middle East, as well as drilling and workover barge rigs on the Gulf Coast of
the United States. A subsidiary of the Company, Sundowner Offshore Services,
Inc., provides offshore well servicing and workover services in the Gulf of
Mexico and several international markets. The Company also provides oilfield
management, engineering, transportation, construction, maintenance and other
support services in selected domestic and international markets. A subsidiary of
the Company, Canrig Drilling Technology Ltd., sells top drives for a broad range
of drilling rig applications.
Since the current management group began directing the Company in 1987, the
Company's primary business strategy has been to develop a group of profitable,
synergistic and growth-oriented business units in geographically diversified
areas. The Company has sought to implement this business strategy through
acquisitions and internal growth, by entering into strategic alliances with
customers and by providing integrated drilling and engineering services to its
customers.
Acquisitions and Internal Growth. The Company's primary business strategy
has been implemented through strategic acquisitions and internal growth in
existing and new markets. Since 1988, through acquisition of other drilling
companies, asset purchases and internal expansion, the Company has grown from a
business centered principally in Canada and Alaska to an international company
operating in many of the major oil, gas and geothermal markets in the world. In
1988, the Company's rig fleet consisted of 44 land drilling rigs. As of December
31, 1995, the active Company-owned rig fleet consisted of 258 land drilling rigs
and 32 offshore rigs.
Strategic Alliances. The Company's primary business strategy has also been
advanced by entering into strategic alliances with customers. An increasing
number of customers have been seeking to benefit from exploration and
development drilling programs by establishing continuing relationships or
alliances with a smaller number of preferred drilling contractors. These
alliances can result in long term work and increased profitability for drilling
contractors that are selected as partners in the alliance. The Company has been
selected by operators as alliance partners in Alaska, the lower 48 states of the
United States, Canada, the North Sea and West Africa.
Drilling and Engineering Services. The Company's primary business strategy
has also been advanced by providing additional drilling-related services and
management of drill site activities to its customers. As major oil and gas
companies reduce the number of service contractors at a drill site, they have
been requesting that the contractors provide additional drilling-related
services and management that had previously been provided by the customers
themselves, or by other contractors. The Company also seeks to provide
innovative quality engineering and technical support for its drilling and
oilfield support operations. The Company provides engineering services to all of
its subsidiaries and to its worldwide customers for its Houston-based
engineering groups. The Company also provides platform engineering and other
integrated services to its customers in the North Sea from its Aberdeen,
Scotland-based engineering group.
RECENT DEVELOPMENTS
On March 8, 1996, the Company and Occidental Oil and Gas Corporation
("Occidental") entered into a stock purchase agreement pursuant to which the
Company has agreed to acquire all of the outstanding shares of common stock of
Exeter Drilling Company ("Exeter"), a subsidiary of Occidental. Exeter's
drilling fleet consists of 49 actively marketed rigs. In addition, Exeter has a
substantial inventory of rig components. The majority of its active fleet is
composed of rigs operating in the Rocky Mountains. A subsidiary of Exeter,
4
<PAGE> 28
J.W. Gibson Well Service Company, currently operates 78 workover and
well-servicing rigs in the Rocky Mountains, the mid-continent region of North
America and New Mexico. The transaction is valued at approximately $22 million
plus the amount of Exeter's consolidated working capital at closing. The
transaction was consummated on April 30, 1996.
USE OF PROCEEDS
Except as otherwise set forth in a Prospectus Supplement, the net proceeds
from the sale of the Securities will be used for general corporate purposes,
including working capital, investment in subsidiaries, the repayment of existing
debt, possible future business acquisitions and/or the repurchase of shares of
Common Stock. The precise amounts and timing of the application of such net
proceeds for such corporate purposes will depend upon a variety of factors,
including the Company's funding requirements and the availability of alternative
sources of funding. The Company routinely reviews acquisition opportunities. Any
proposal to use proceeds from any offering of Securities in connection with an
acquisition will be disclosed in the Prospectus Supplement relating to such
offering.
RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges for each of the periods set forth
below has been computed on a consolidated basis and should be read in
conjunction with the Company's consolidated financial statements (including the
notes thereto) set forth or incorporated by reference in the Company's annual
report on Form 10-K for the fiscal year ended September 30, 1995 and the
Company's quarterly report on Form 10-Q for the fiscal quarter ended December
31, 1995.
<TABLE>
<CAPTION>
THREE MONTHS ENDED FISCAL YEARS ENDED SEPTEMBER 30,
DECEMBER 31, ------------------------------------
1995 1995 1994 1993 1992 1991
------------------ ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed
Charges......................... 7.50 6.90 1.55 4.66 5.95 6.30
</TABLE>
For purposes of computing the ratio of earnings to fixed charges,
"earnings" consist of pretax income from continuing operations plus fixed
charges (excluding capitalized interest). Fixed charges represent interest
incurred (whether expensed or capitalized), amortization of debt expense, and
that portion of rental expense on operating leases deemed to be the equivalent
of interest. No Preferred Stock was outstanding during any of the periods
presented and, as a result, the ratio of earnings to combined fixed charges and
Preferred Stock dividends was the same as the ratio of earnings to fixed
charges.
5
<PAGE> 29
DESCRIPTION OF DEBT SECURITIES
The following description sets forth certain general terms and provisions
of the Debt Securities to which any Prospectus Supplement may relate. The
particular terms of the Debt Securities offered by any Prospectus Supplement and
the extent, if any, to which such general provisions may not apply to the Debt
Securities so offered will be described in the Prospectus Supplement relating to
such Debt Securities.
The Senior Debt Securities are to be issued under an Indenture (the "Senior
Indenture") to be entered into between the Company and Marine Midland Bank (the
"Trustee"), as trustee. The Subordinated Debt Securities are to be issued under
a separate Indenture (the "Subordinated Indenture"), to be entered into between
the Company and the Trustee, as trustee. The Senior Indenture and the
Subordinated Indenture are sometimes referred to collectively herein as the
"Indentures." The following summaries of certain provisions of the Senior Debt
Securities, the Subordinated Debt Securities and the Indentures do not purport
to be complete and are subject to, and are qualified in their entirety by
reference to, all the provisions of the Indentures applicable to a particular
series of Debt Securities, including the definitions therein of certain terms.
Copies of the forms of the Indentures are filed as exhibits to the Registration
Statement of which this Prospectus is a part, and the following summary is
qualified in its entirety by reference to such exhibits. See "Available
Information." Wherever particular Sections, Articles or defined terms of the
Indentures are referred to, it is intended that such Sections, Articles or
defined terms shall be incorporated herein by reference. Article and Section
references used herein are references to the applicable Indenture. Capitalized
terms not otherwise defined herein shall have the meaning given in the
Indentures.
GENERAL
The Indentures do not limit the aggregate principal amount of Debt
Securities which may be issued thereunder and each Indenture provides that Debt
Securities may be issued thereunder from time to time in one or more series.
Unless otherwise specified in the applicable Prospectus Supplement, the Senior
Debt Securities, when issued, will be unsecured and unsubordinated obligations
of the Company and will rank equally and ratably with all other unsecured and
unsubordinated indebtedness of the Company. The Subordinated Debt Securities,
when issued, will be subordinated in right of payment to the prior payment in
full of all Senior Debt (as defined below) of the Company, as described under
"Description of Debt Securities -- Subordination of Subordinated Debt
Securities" and in the Prospectus Supplement applicable to an offering of
Subordinated Debt Securities. The Debt Securities will be payable in currency of
the United States or in such other foreign currency, currency unit or composite
currency as may be specified in the applicable Prospectus Supplement.
Reference is made to the Prospectus Supplement relating to the particular
Debt Securities offered thereby (the "Offered Debt Securities"), which shall set
forth whether the Offered Debt Securities shall be Senior Debt Securities or
Subordinated Debt Securities, and shall further set forth (to the extent
applicable) the following terms of the Offered Debt Securities: (1) the title of
the Offered Debt Securities; (2) any limit on the aggregate principal amount of
the Offered Debt Securities; (3) the Person to whom any interest on the Offered
Debt Securities will be payable, if other than the Person in whose name such
Offered Debt Securities are registered on any Regular Record Date; (4) the date
or dates, or the method or methods (and related procedures) by which such date
or dates will be determined or extended, on which the principal of the Offered
Debt Securities will be payable; (5) the rate or rates per annum (which may be
fixed, floating or adjustable) at which the Offered Debt Securities will bear
interest, if any, or the formula pursuant to which such rate or rates shall be
determined, the date or dates from which such interest will accrue and the dates
on which such interest, if any, will be payable and the Regular Record Dates for
such interest payment dates; (6) whether the Offered Debt Securities will be
secured; (7) the place or places where principal of (and premium, if any) and
interest, if any, on the Offered Debt Securities will be payable; (8) if
applicable, the price at which, the periods within which and the terms and
conditions upon which the Offered Debt Securities may be redeemed in whole or in
part at the option of the Company; (9) if applicable, any obligation of the
Company to redeem or purchase Offered Debt Securities pursuant to any sinking
fund or analogous provision or at the option of a Holder thereof, and the period
or periods within which, the price or prices at which and the terms and
conditions upon which the Offered Debt Securities will be redeemed or purchased,
in whole or in part; (10) if
6
<PAGE> 30
applicable, the terms of any right to convert or exchange the Offered Debt
Securities into Securities or other securities of the Company (provided,
however, that any such other securities issuable upon conversion or exchange of
Debt Securities will be subject to registration under the Securities Act or an
applicable exemption therefrom); (11) if other than denominations of $1,000 and
any integral multiple thereof (or the equivalent thereof in one or more foreign
currencies, currency units or composite currencies), the denominations in which
the Offered Debt Securities will be issuable; (12) if the amount of payments of
principal of (or premium, if any) or interest, if any, on the Offered Debt
Securities may be determined with reference to one or more indices, the manner
in which such amounts will be determined; (13) if other than currency of the
United States, one or more foreign currencies, currency units or composite
currencies in which the Offered Debt Securities are to be denominated; (14) if
other than the coin or currency in which the Offered Debt Securities are to be
denominated, the coin or currency in which payment of the principal of or
interest on the Offered Debt Securities shall be payable; (15) the portion of
the principal amount of the Offered Debt Securities, if other than the principal
amount thereof, payable upon acceleration of maturity thereof; (16) whether all
or any part of the Offered Debt Securities will be issued in the form of a
Global Security or Securities and, if so, the depositary for, and other terms
relating to, such Global Security or Securities; (17) any event or events of
default applicable with respect to the Offered Debt Securities in addition to
those provided in the Indentures; (18) any other covenant or warranty included
for the benefit of the Offered Debt Securities in addition to (and not
inconsistent with) those included in the Indentures for the benefit of Debt
Securities of all series, or any other covenant or warranty included for the
benefit of the Offered Debt Securities in lieu of any covenant or warranty
included in the Indentures for the benefit of Debt Securities of all series, or
any provision that any covenant or warranty included in the Indentures for the
benefit of Debt Securities of all series shall not be for the benefit of the
Offered Debt Securities, or any combination of such covenants, warranties or
provisions; (19) any restriction or condition on the transferability of the
Offered Debt Securities; (20) any authenticating or paying agents, registrars,
conversion agents or any other agents with respect to the Offered Debt
Securities; and (21) any other terms of the Offered Debt Securities.
(Indentures, Section 301.) Debt Securities may also be issued under the
Indentures upon the exercise of Warrants. See "Description of Warrants."
Debt Securities may be issued at a discount from their stated principal
amount. Certain United States federal income tax considerations applicable to
any Debt Security issued with original issue discount (an "Original Issue
Discount Security") may be described in an applicable Prospectus Supplement.
If the purchase price of any of the Debt Securities is denominated in a
foreign currency, currency unit or composite currency or if the principal of
(and premium, if any) and interest on any series of Debt Securities is payable
in one or more foreign currencies, currency units or composite currencies, the
restrictions, elections, general tax considerations, specific terms and other
information with respect to such issue of Debt Securities and such foreign
currencies, currency units or composite currencies will be set forth in an
applicable Prospectus Supplement.
Unless otherwise indicated in the Prospectus Supplement relating thereto,
the Offered Debt Securities are to be issued as registered securities without
coupons in denominations of $1,000 or any integral multiple of $1,000 (or the
equivalent thereof in one or more foreign currencies, currency units or
composite currencies). (Indentures, Section 302.) No service charge will be made
for any transfer or exchange of such Offered Debt Securities, but the Company or
the Trustee may require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection therewith. (Indentures, Section 305.)
Since the Company is a holding company, the rights of the Company, and
hence the rights of creditors of the Company (including the Holders of the Debt
Securities), to participate in any distribution of the assets of any subsidiary
upon its liquidation or reorganization or otherwise is necessarily subject to
the prior claims of creditors of such subsidiary, except to the extent that
claims of the Company itself as a creditor of such subsidiary may be recognized.
Generally, the Debt Securities will be effectively subordinated to all existing
and future indebtedness of the Company's operating subsidiaries.
7
<PAGE> 31
The Indentures do not contain any provisions that limit the ability of the
Company or any subsidiary to incur indebtedness or that afford Holders of the
Debt Securities protection in the event of a highly leveraged or similar
transaction involving the Company or any subsidiary.
Other Indebtedness. Certain of the Company's existing debt instruments
impose, and future debt instruments may impose, certain restrictions on the
Company, including restrictions on the payment of dividends and certain business
combinations, and require the Company to maintain certain financial ratios. The
Company is a party to note purchase agreements (the "Note Purchase Agreements")
with John Hancock Mutual Life Insurance Company (together with John Hancock
Variable Life Insurance Company, "Hancock") relating to the Company's 9.18%
Senior Secured Notes due July 31, 2006 (the "9.18% Notes") and its 10.25% Senior
Secured Notes due January 31, 1997 (the "10.25% Notes" and, together with the
9.18% Notes, the "Notes"). At March 31, 1996, there were outstanding $40.0
million and $9.0 million of 9.18% and 10.25% Notes, respectively. The Note
Purchase Agreements limit additional borrowings, liens, dividends and other
payments in respect of capital stock, and transactions with affiliates by the
Company. In particular, the Company may not: (1) fail to maintain Hancock's
senior position in all of the assets or property of the Company or any
subsidiary that are subject to the security interest of Hancock (which assets
and property are principally located in the United Kingdom), or (2) pay
dividends, except that the Company may pay dividends if its cumulative dividends
plus certain other payments since March 31, 1989 do not exceed 50% of its
cumulative net income since March 31, 1989 plus the proceeds of any offering of
equity securities that are not redeemable at the option of the holder.
The Note Purchase Agreements require that the Company comply with certain
financial covenants on a consolidated basis, the most restrictive of which
requires that consolidated working capital be in excess of $5.0 million.
Proceeds from the sale of certain assets must be used to prepay the Notes to the
extent that an amount equal to such proceeds are not invested by the Company
during a two-year period. The Notes are collateralized by the pledge of all the
shares and assets of the Company's subsidiaries operating in the North Sea and
of all the shares of one of the Company's subsidiaries operating in the Gulf of
Mexico and are guaranteed by the Company and one of its subsidiaries.
During 1995, a subsidiary of the Company entered into a revolving loan
agreement with a financial institution whereby it can borrow up to $20.0 million
for the construction of certain drilling equipment. The loan is guaranteed by
the Company and bears interest at 90-day LIBOR plus .75%. As of March 31, 1996,
the amount outstanding under this loan was approximately $8.8 million.
During 1993, 1991 and 1990, subsidiaries of the Company entered into three
separate loan agreements with a financial institution, under which it borrowed
$4.9 million, $5.1 million and $8.3 million, respectively, to finance the
construction of three new rigs. The loans bear interest at 90-day LIBOR plus
.75%. As of March 31, 1996, the aggregate amount outstanding under these loans
was approximately $6.1 million.
The Company has available lines of credit with a number of banks that
permit borrowings of up to $65.8 million at interest rates generally not to
exceed, at the option of the Company, each bank's prime rate or LIBOR plus .75%.
Under these lines of credit, there were short-term borrowings of $35.0 million
outstanding and letters of credit outstanding of $14.7 million, in each case as
of March 31, 1996.
The information included in item 8 (entitled "Financial Statements and
Supplementary Data") in Part II of the Company's Annual Report on Form 10-K for
the fiscal year ended September 30, 1995 is hereby specifically incorporated by
reference herein.
EVENTS OF DEFAULT AND NOTICE THEREOF
Unless otherwise specified in the Prospectus Supplement, the following
events are defined in the Indentures as "Events of Default" with respect to Debt
Securities of any series: (a) failure to pay principal (including any sinking
fund payment) of, or premium (if any) on, any Debt Security of that series when
due (in the case of the Subordinated Indenture, whether or not payment is
prohibited by the subordination provisions) and such failure continues for a
period of 10 days; (b) failure to pay interest, if any, on any Debt Security of
that series when due and such failure continues for a period of 30 days; (c)
failure by the Company
8
<PAGE> 32
to perform any other covenant in the Indentures (other than a covenant included
in the Indentures solely for the benefit of a series of Debt Securities other
than that series) which continues for a period of 90 days after written notice
to the Company; (d) due acceleration of any indebtedness for borrowed money in a
principal amount in excess of $25.0 million for which the Company or any
Principal Subsidiary is liable, including Debt Securities of another series, or
a default by the Company or any Principal Subsidiary in the payment at final
maturity of outstanding indebtedness for borrowed money in a principal amount in
excess of $25.0 million, and such acceleration and default at maturity shall not
be waived, rescinded or annulled within 30 days after written notice to the
Company thereof, unless such acceleration or default at maturity shall be
remedied or cured by the Company or such Principal Subsidiary or rescinded,
annulled or waived by the holders of such indebtedness, in which case such
acceleration or default at maturity shall not constitute an Event of Default
under this provision; and (e) certain events of insolvency, reorganization,
receivership or liquidation of the Company. (Indentures, Section 501.)
No Event of Default with respect to Debt Securities of a particular series
shall necessarily constitute an Event of Default with respect to Debt Securities
of any other series. If an Event of Default with respect to Debt Securities of
any series at the time Outstanding shall occur and be continuing, either the
Trustee or the Holders of at least 25% in principal amount of the outstanding
Debt Securities of that series may declare the principal amount (or, if the Debt
Securities of that series are Original Issue Debt Securities, such portion of
the principal amount as may be specified in the terms of that series) of all
Debt Securities of that series to be due and payable immediately; provided,
however, that under certain circumstances the Holders of a majority in aggregate
principal amount of outstanding Debt Securities of that series may rescind or
annul such declaration and its consequences. (Indentures, Section 502.)
Reference is made to the Prospectus Supplement relating to any series of
Offered Debt Securities which are Original Issue Discount Securities for the
particular provisions relating to the principal amount of such Original Issue
Discount Securities due on acceleration upon the occurrence of an Event of
Default and the continuation thereof.
The Trustee is not charged with knowledge of any Event of Default unless
written notice thereof shall have been given to the Trustee by the Company, the
Paying Agent or Holders of at least 25% in principal amount of the outstanding
Debt Securities of that series. (Indentures, Section 501.) Each Indenture
provides that the Trustee may withhold notice to the Holders of the Debt
Securities of any default (except in payment of principal (or premium, if any)
or interest, if any) if it considers it in the interest of the Holders of the
Debt Securities to do so. (Indentures, Section 602.) The Company will be
required to furnish to the Trustee annually a statement by one of certain
specified officers of the Company as to the compliance with all conditions and
covenants of the Indentures. (Indentures, Section 1004.)
The Holders of a majority in principal amount of the outstanding Debt
Securities of any series will have the right, subject to certain limitations, to
direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee or exercising any trust or power conferred on the
Trustee with respect to the Debt Securities of such series, and to waive certain
defaults. (Indentures, Sections 512 and 513.)
The Indentures provide that, in case an Event of Default shall occur and be
continuing, the Trustee shall exercise such of its rights and powers under the
Indentures, and use the same degree of care and skill in its exercise, as a
prudent person would exercise or use under the circumstances in the conduct of
his or her own affairs. (Indentures, Section 601.) Subject to such provisions,
the Trustee will be under no obligation to exercise any of its rights or powers
under the Indentures at the request of any of the Holders of Debt Securities
unless they shall have offered to the Trustee security or indemnity in form and
substance reasonably satisfactory to the Trustee against the costs, expenses and
liabilities which might be incurred by it in compliance with such request.
(Indentures, Section 603.)
No Holder of a Debt Security of any series will have any right to institute
any proceeding with respect to the Indentures or for any remedy thereunder,
unless (a) such Holder shall have previously given to the Trustee written notice
of a continuing Event of Default, (b) the Holders of at least 25% in principal
amount of the outstanding Debt Securities of the same series shall have made
written request, and offered indemnity to the Trustee in form and substance
reasonably satisfactory to such Trustee, to institute such proceeding as
Trustee, (c) the Trustee shall not have received from the Holders of a majority
in principal amount of the
9
<PAGE> 33
outstanding Debt Securities of the same series a direction inconsistent with
such request, and (d) the Trustee shall have failed to institute such proceeding
within 60 days of the written request therefor. (Indentures, Section 507.)
However, such limitations do not apply to a suit instituted by a Holder of a
Debt Security for enforcement of payment of the principal of (or premium, if
any) or interest, if any, on such Debt Security on or after the respective due
dates expressed in such Debt Security, or of the right to convert such Debt
Security in accordance with the Indentures (if applicable). (Indentures, Section
508.)
MODIFICATION AND WAIVER
Each Indenture provides that, from time to time, the Company and the
Trustee, without the consent of the Holders of any series of Debt Securities,
may amend the Indenture or such series of Debt Securities for certain specified
purposes, including curing ambiguities or inconsistencies and making any such
change that does not adversely affect the rights of any Holder of such series of
Debt Securities. (Indentures, Section 901.) Modifications and amendments of the
Indentures may also be made by the Company and the Trustee, with the consent of
the Holders of not less than a majority of principal amount of each series of
the outstanding Debt Securities issued under the Indentures which is affected by
the modification or amendment; provided, however, that no such modification or
amendment may, without the consent of each Holder of such Debt Security affected
thereby: (1) change the Stated Maturity of the principal of or any installment
of principal or interest, if any, on any such Debt Security; provided, however,
that with the consent of the Holders of not less than 75% of the outstanding
Debt Securities of any series, the Company may postpone any interest payment in
respect of such series for a period not to exceed three years; (2) reduce the
principal amount of (or premium, if any) or the interest rate, if any, on any
such Debt Security or the principal amount due upon acceleration of any Original
Issue Discount Security; (3) change the place or currency of payment of
principal of (or premium, if any) or the interest, if any, on any such Debt
Security; (4) impair the right to institute suit for the enforcement of any such
payment on or with respect to any such Debt Security; (5) reduce the percentage
in principal amount of Debt Securities necessary to modify or amend the
Indentures; (6) in the case of the Subordinated Indenture, modify the
subordination provisions in a manner adverse to the holders of the Subordinated
Debt Securities; or (7) modify the foregoing requirements or reduce the
percentage of outstanding Debt Securities necessary to waive compliance with
certain provisions of the Indentures or to waive certain defaults. (Indentures,
Section 902.)
The holders of at least a majority of the aggregate principal amount of the
outstanding Debt Securities of any series may, on behalf of all Holders of that
series, waive compliance by the Company with any of the provisions of the
Indentures and waive any past default under the applicable Indenture, except a
default in the payment of principal (and premium, if any), or interest (if any)
or in the performance of certain covenants. (Indentures, Sections 908 and 513.)
DEFEASANCE AND COVENANT DEFEASANCE
The Indentures provide that the Company may elect either (a) to defease and
be discharged from any and all obligations with respect to any series of Debt
Securities (including, in the case of Subordinated Debt Securities, the
provisions described under "Description of Debt Securities -- Subordination of
Subordinated Debt Securities" herein and except for the obligations to exchange
or register the transfer of such Debt Securities, to replace temporary or
mutilated, destroyed, lost or stolen Debt Securities, to maintain an office or
agency in respect of such Debt Securities, and to hold monies for payments in
trust) ("defeasance"), or (b) to be released from its obligations with respect
to any series of Debt Securities concerning the restrictions described under
"Description of Debt Securities -- Consolidation, Merger or Sale of Assets"
herein and any other covenants applicable to such Debt Securities (including, in
the case of Subordinated Debt Securities, the provisions described under
"Description of Debt Securities -- Subordination of Subordinated Debt
Securities" herein) which are subject to covenant defeasance ("covenant
defeasance"), and the occurrence of an event described and notice thereof in
clauses (c) and (d) under "Description of Debt Securities -- Events of Default
and Notice Thereof" (with respect to covenants subject to covenant defeasance)
shall no longer be an Event of Default, in each case, upon the irrevocable
deposit with the Trustee (or other qualifying trustee), in trust for such
purpose, of money and U.S. Government Obligations which through the payment of
principal
10
<PAGE> 34
and interest in accordance with their terms will provide money in an amount
sufficient to pay the principal of (and premium, if any) and interest, if any,
on such Debt Securities on the scheduled due dates therefor. Such a trust may
only be established if, among other things, (i) the Company has delivered to the
Trustee (A) in the case of defeasance, an Opinion of Counsel stating that (1)
the Company has received from, or there has been published by, the Internal
Revenue Service a ruling, or (2) since the date of the Indenture, there has been
a change in the applicable United States federal income tax law, in case of
either (1) or (2) to the effect that the Holders of such Securities will not
recognize gain or loss for United States federal income tax purposes as a result
of the deposit, Defeasance and discharge to be effected with respect to such
Securities and will be subject to United States federal income tax on the same
amount, in the same manner and at the same times as would be the case if such
deposit, Defeasance and discharge were not to occur or (B) in the case of
covenant defeasance, an Opinion of Counsel to the effect that the Holders of
such Debt Securities will not recognize gain or loss for United States federal
income tax purposes as a result of such deposit and covenant defeasance and will
be subject to United States federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such deposit and
covenant defeasance had not occurred, (ii) no Event of Default or event which
with the giving of notice or lapse of time, or both, would become an Event of
Default under the applicable Indenture shall have occurred and be continuing on
the date of such deposit and (iii) in the case of Subordinated Debt Securities,
(x) no default in the payment of principal of (or premium, if any) or interest,
if any, on any Senior Debt beyond any applicable grace period shall have
occurred and be continuing, or (y) no other default with respect to any Senior
Debt shall have occurred and be continuing and shall have resulted in the
acceleration of such Senior Debt. The Company may exercise its defeasance option
with respect to such Debt Securities notwithstanding its prior exercise of its
covenant defeasance option. If the Company exercises its defeasance option,
payment of such Debt Securities may not be accelerated because of an Event of
Default. If the Company exercises its covenant defeasance option, payment of
such Debt Securities may not be accelerated by reference to the covenants noted
under clause (b) above. In the event the Company omits to comply with its
remaining obligations with respect to such Debt Securities under the applicable
Indenture after exercising its covenant defeasance option and such Debt
Securities are declared due and payable because of the occurrence of any Event
of Default, the amount of money and U.S. Government Obligations on deposit with
the Trustee may, in certain circumstances, be insufficient to pay amounts due on
the Debt Securities of such series at the time of the acceleration resulting
from such Event of Default; however, the Company will remain liable in respect
of such payments. (Indentures, Article Thirteen.)
CERTAIN COVENANTS
Maintenance of Office or Agency. The Company will be required to maintain
an office or agency in each Place of Payment for each series of Debt Securities
for notice and demand purposes and for the purposes of presenting or
surrendering Debt Securities for payment or registration of transfer or
exchange. (Indentures, Section 1002.)
Paying Agents, Etc. If the Company acts as its own Paying Agent with
respect to any series of Debt Securities, on or before each due date of the
principal of or interest on any Debt Securities of that series, it will be
required to segregate and hold in trust for the benefit of the persons entitled
thereto a sum sufficient to pay such amount due and to notify the Trustee
promptly of its action or failure so to act. If the Company has one or more
Paying Agents for any series of Debt Securities, prior to each due date of the
principal of or interest on any Debt Securities of that series, it will deposit
with a Paying Agent a sum sufficient to pay such amount, and the Company will
promptly notify the Trustee of its action or failure so to act (unless such
Paying Agent is the Trustee). All moneys paid by the Company to a Paying Agent
for the payment of principal of and interest on any Debt Securities that remain
unclaimed for two years after such principal of and interest on any Debt
Securities has become due and payable may be repaid to the Company, and
thereafter the holder of such Debt Securities may look only to the Company for
payment thereof. (Indentures, Section 1003.)
Restrictive Covenants. Any restrictive covenants applicable to any series
of Debt Securities will be described in an applicable Prospectus Supplement.
11
<PAGE> 35
CONSOLIDATION, MERGER OR SALE OF ASSETS
The Company may not consolidate with or merge into any other Person or sell
its property and assets as, or substantially as, an entirety to any Person and
may not permit any Person to merge into or consolidate with the Company unless
(i) either the Company will be the resulting or surviving entity or any
successor or purchaser is a corporation, partnership or trust organized under
the law of the United States of America, any State or the District of Columbia,
and any such successor or purchaser expressly assumes the Company's obligations
under the Debt Securities in a supplemental indenture, (ii) immediately after
giving effect to the transaction no Event of Default shall have occurred and be
continuing, and (iii) certain other conditions are met. (Indentures, Section
801.)
CONVERSION RIGHTS
The terms on which Debt Securities of any series may be convertible or
exchangeable into Securities or other securities of the Company will be set
forth in the Prospectus Supplement relating thereto (provided, however, that any
such other securities issuable upon conversion or exchange of Debt Securities
will be subject to registration under the Securities Act or an applicable
exemption therefrom). Such terms shall include provisions as to whether
conversion or exchange is mandatory, at the option of the holder or at the
option of the Company, and may include provisions pursuant to which the number
of Securities or other securities of the Company, as the case may be, to be
received by the holders of Debt Securities would be calculated according to the
market price of such securities as of a time stated in the Prospectus
Supplement. (Indentures, Section 301 and Article Twelve.)
SUBORDINATION OF SUBORDINATED DEBT SECURITIES
Unless otherwise indicated in the Prospectus Supplement, the following
provisions will apply to the Subordinated Debt Securities.
The Subordinated Debt Securities will, to the extent set forth in the
Subordinated Indenture, be subordinate in right of payment to the prior payment
in full of all Senior Debt, including the Senior Debt Securities. (Subordinated
Indenture, Section 1501.) Upon any liquidation, dissolution, winding up,
reorganization, assignment for the benefit of creditors, marshaling of assets or
any bankruptcy, insolvency, debt restructuring or similar proceedings in
connection with any insolvency or bankruptcy proceeding of the Company, the
holders of Senior Debt will first be entitled to receive payment in full of
principal of (and premium, if any) and interest, if any, on such Senior Debt
before the holders of the Subordinated Debt Securities will be entitled to
receive or retain any payment in respect of the principal of (and premium, if
any) or interest, if any, on the Subordinated Debt Securities. (Subordinated
Indenture, Section 1502.)
By reason of such subordination, in the event of liquidation or insolvency,
creditors of the Company who are not Holders of Senior Debt may recover less,
ratably, than Holders of Senior Debt and may recover more, ratably, than the
Holders of the Subordinated Debt Securities.
In the event of the acceleration of the maturity of any Subordinated Debt
Securities, the holders of all Senior Debt outstanding at the time of such
acceleration will first be entitled to receive payment in full of all amounts
due thereon (including any amounts due upon acceleration) before the Holders of
the Subordinated Debt Securities will be entitled to receive any payment upon
the principal of (or premium, if any) or interest, if any, on the Subordinated
Debt Securities. (Subordinated Indenture, Section 1503.)
No payments on account of principal (or premium, if any) or interest, if
any, in respect of the Subordinated Debt Securities may be made if there shall
have occurred and be continuing a default in any payment with respect to Senior
Debt, or an event of default with respect to any Senior Debt resulting in the
acceleration of the maturity thereof, or if any judicial proceeding shall be
pending with respect to any such default. (Subordinated Indenture, Section
1504.) For purposes of the subordination provisions, the payment, issuance and
delivery of cash, property or securities (other than stock and certain
subordinated securities of the Company) upon conversion of a Subordinated Debt
Security will be deemed to constitute payment on account of the principal of
such Subordinated Debt Security. (Subordinated Indenture, Section 1516.)
12
<PAGE> 36
"Debt" means (without duplication and without regard to any portion of
principal amount that has not accrued and to any interest component thereof
(whether accrued or imputed) that is not due and payable) with respect to any
Person, whether recourse is to all or a portion of the assets of such Person and
whether or not contingent, (i) every obligation of such Person for money
borrowed; (ii) every obligation of such Person evidenced by bonds, debentures,
notes or other similar instruments, including obligations incurred in connection
with the acquisition of property, assets or businesses; (iii) every
reimbursement obligation of such Person with respect to letters of credit,
bankers' acceptances or similar facilities issued for the account of such
Person; (iv) every obligation of such Person issued or assumed as the deferred
purchase price of property or services (but excluding trade accounts payable or
accrued liabilities arising in the ordinary course of business); (v) every
capital lease obligation of such Person; (vi) the maximum fixed redemption or
repurchase price of redeemable stock of such Person at the time of
determination; and (vii) every obligation of the type referred to in clauses (i)
through (vi) of another Person and all dividends of another Person the payment
of which, in either case, such Person has guaranteed or is responsible or
liable, directly or indirectly, as obligor or otherwise.
"Senior Debt" means the principal of (and premium, if any) and interest, if
any (including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to the Company to the extent that such
claim for post-petition interest is allowed in such proceeding), on Debt,
whether incurred on or prior to the date of the Subordinated Indenture or
thereafter incurred, unless, in the instrument creating or evidencing the same
or pursuant to which the same is outstanding, it is provided that such
obligations are not superior in right of payment to the Subordinated Debt
Securities or to other Debt which is pari passu with, or subordinated to, the
Subordinated Debt Securities; provided, however, that Senior Debt shall not be
deemed to include (i) the Subordinated Debt Securities or (ii) the Debt referred
to in clause (vi) of the definition of Debt.
The Subordinated Indenture does not limit or prohibit the incurrence of
additional Senior Debt, which may include indebtedness that is senior to the
Subordinated Debt Securities, but subordinate to other obligations of the
Company. The Senior Debt Securities, when issued, will constitute Senior Debt.
The indebtedness represented by the Notes, and all borrowings under revolving
credit and other credit facilities maintained by the Company or its
subsidiaries, will also constitute Senior Debt. At March 31, 1996, Senior Debt
outstanding aggregated approximately $122.0 million. See "Description of Debt
Securities -- General -- Other Indebtedness."
The Prospectus Supplement may further describe the provisions, if any,
applicable to the subordination of the Subordinated Debt Securities of a
particular series.
GLOBAL SECURITIES
The Debt Securities of a series may be issued in the form of one or more
Global Securities that will be deposited with a depositary or its nominee. In
such a case, one or more Global Securities will be issued in a denomination or
aggregate denominations equal to the portion of the aggregate principal amount
of Outstanding Debt Securities of the series to be represented by such Global
Security or Securities. Unless and until it is exchanged in whole or in part for
Debt Securities in definitive registered form, a Global Security may not be
registered for transfer or exchange except as a whole by the depositary for such
Global Security to a nominee for such depositary and except in the circumstances
described in the applicable Prospectus Supplement. (Indentures, Sections 204 and
305.)
The specific terms of the depositary arrangement with respect to any
portion of a series of Debt Securities to be represented by a Global Security
will be described in an applicable Prospectus Supplement. The Company expects
that the following provisions will apply to depositary arrangements.
Unless otherwise specified in an applicable Prospectus Supplement, Debt
Securities which are to be represented by a Global Security to be deposited with
or on behalf of a depositary will be represented by a Global Security registered
in the name of such depositary or its nominee. Upon the issuance of such Global
Security, and the deposit of such Global Security with or on behalf of the
depositary for such Global Security, the depositary will credit, on its
book-entry registration and transfer system, the respective principal amounts
13
<PAGE> 37
of the Debt Securities represented by such Global Security to the accounts of
institutions that have accounts with such depositary or its nominee
("Participants"). The accounts to be credited will be designated by the
underwriters or agents of such Debt Securities or by the Company, if such Debt
Securities are offered and sold directly by the Company. Ownership of beneficial
interests in such Global Securities will be limited to Participants or Persons
that may hold interests through Participants. Ownership of beneficial interests
by Participants in such Global Security will be shown on, and the transfer of
that ownership interest will be effected only through, records maintained by the
depositary or its nominee for such Global Security. Ownership of beneficial
interests in such Global Security by Persons that hold through Participants will
be shown on, and the transfer of that ownership interest within such Participant
will be effected only through, records maintained by such Participants. The laws
of some jurisdictions require that certain purchasers of securities take
physical delivery of such securities in definitive form. Such laws may impair
the ability to transfer beneficial interests in a Global Security.
So long as the depositary for a Global Security, or its nominee, is the
registered owner of such Global Security, such depositary or such nominee, as
the case may be, will be considered the sole owner or Holder of the Debt
Securities represented by such Global Security for all purposes under the
applicable Indenture. Unless otherwise specified in an applicable Prospectus
Supplement, owners of beneficial interests in such Global Securities will not be
entitled to have Debt Securities of the series represented by such Global
Security registered in their names, will not receive or be entitled to receive
physical delivery of Debt Securities of such series in certificated form, and
will not be considered the owners or Holders thereof for any purpose under the
applicable Indenture. Accordingly, each Person owning a beneficial interest in
such Global Security must rely on the procedures of the depositary and, if such
Person is not a Participant, on the procedures of the Participant through which
such Person owns its interest, to exercise any rights of a Holder under the
applicable Indenture. The Company understands that, under existing industry
practices, if the Company requests any action of Holders or an owner of a
beneficial interest in such Global Security desires to give any notice or take
any action a Holder is entitled to give or take under the applicable Indenture,
the depositary would authorize the Participants to give such notice or take such
action, and Participants would authorize beneficial owners owning through such
Participants to give such notice or take such action or would otherwise act upon
the instructions of beneficial owners owning through them.
Principal of and any premium and interest on a Global Security will be
payable in the manner described in an applicable Prospectus Supplement. Payment
of principal of, and any premium or interest on, Debt Securities registered in
the name of or held by a depository or its nominee will be made to the
depository or its nominee, as the case may be, as the registered owner or the
holder of the Global Security representing such Debt Securities. None of the
Company, the Trustee, any Paying Agent, or the Registrar for such Debt
Securities will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests in a Global Security for such Debt Securities or for maintaining,
supervising, or reviewing any records relating to such beneficial ownership
interests.
THE TRUSTEE
Each Indenture contains certain limitations on the right of the Trustee,
should it become a creditor of the Company within three months of, or subsequent
to, a default by the Company to make payment in full of principal of or interest
on any series of Debt Securities when and as the same becomes due and payable,
to obtain payment of claims, or to realize for its own account on property
received in respect of any such claim as security or otherwise, unless and until
such default is cured. (Indentures, Section 613.)
The Trustee or its affiliates may act as depositary for funds of, make
loans to and perform other services for, or may be a customer of, the Company in
the ordinary course of business. The Trustee and Hong Kong and Shanghai Banking
Corporation Limited, an affiliate of the Trustee, are lenders under two
short-term borrowing facilities and two letter of credit agreements. As of March
31, 1996, the amount outstanding thereunder aggregated approximately $25.8
million.
14
<PAGE> 38
GOVERNING LAW
The Indentures are governed by and shall be construed in accordance with
the laws of the State of New York, but without regard to principles of conflicts
of laws. (Indenture, Section 112.)
DESCRIPTION OF CAPITAL STOCK AND DEPOSITARY SHARES
AUTHORIZED CAPITAL STOCK
Pursuant to the Company's Restated Certificate of Incorporation (the
"Certificate of Incorporation"), the authorized capital stock of the Company
consists of 200,000,000 shares of Common Stock, par value $.10 per share (the
"Common Stock"), 8,000,000 shares of Class B Stock, par value $.10 per share
(the "Class B Stock"), none of which are outstanding, and 10,000,000 shares of
Preferred Stock, par value $.10 per share (the "Preferred Stock"), none of which
are outstanding.
As of March 31, 1996, there were: (a) 85,049,440 shares of Common Stock
outstanding, (b) 20,549,320 shares of Common Stock reserved for issuance
pursuant to option and employee benefit plans and (c) 2,600,000 shares of Common
Stock reserved for issuance upon exercise of outstanding warrants.
PREFERRED STOCK
The following description sets forth certain general terms and provisions
of the Preferred Stock to which any Prospectus Supplement may relate. Certain
other terms and the particular terms of a specific series of Preferred Stock
will be described in the Prospectus Supplement relating to that series. If so
indicated in the applicable Prospectus Supplement, the terms of any such series
may differ from the terms set forth below. The summary description of certain
provisions of the Preferred Stock set forth below and in any Prospectus
Supplement does not purport to be complete and is subject to and qualified in
its entirety by reference to the Certificate of Incorporation (as it may be
amended from time to time) and the certificate of designation relating to each
such series of Preferred Stock (the "Certificate of Designation"), which will be
filed as an exhibit to or incorporated by reference in the Registration
Statement of which this Prospectus forms a part at or prior to the time of
issuance of such series of the Preferred Stock.
General. Under the Certificate of Incorporation, the Board of Directors of
the Company is authorized without further stockholder action to issue from time
to time up to 10,000,000 shares of Preferred Stock and to fix and determine the
voting powers, designations, preferences and relative, participating, optional
or other special rights and qualifications, limitations or restrictions of any
series of such Preferred Stock, including, without limitation, any voting rights
thereof, the dividends payable in respect of such series and the right of the
shares of such series to convert into or be exchanged for Securities or other
securities of the Company (provided, however, that any such other securities
issuable upon conversion or exchange of Preferred Stock will be subject to
registration under the Securities Act or an applicable exemption therefrom).
Thus, the Board of Directors of the Company, without stockholder approval, could
authorize the issuance of Preferred Stock with voting, conversion and other
rights that could adversely affect the voting power (if any) and other rights of
other series of the Preferred Stock. As of the date of this Prospectus, the
Company has no Preferred Stock outstanding.
The Preferred Stock shall have the dividend, liquidation, redemption and
voting rights set forth below unless otherwise provided in the Prospectus
Supplement relating to a particular series of Preferred Stock offered thereby.
The Prospectus Supplement will set forth with specificity: (1) the designation
and the number of shares offered; (2) the amount of liquidation preference per
share; (3) the price at which such Preferred Stock will be issued; (4) the
dividend rate (or method of calculation), if any, the dates on which such
dividends will be payable, whether such dividends will be cumulative or
noncumulative and, if cumulative, the dates from which dividends will commence
to cumulate; (5) any redemption or sinking fund provisions; (6) the terms of any
rights to convert or exchange the Preferred Stock into Securities or other
securities of the Company; (7) whether the Company has elected to offer
Depositary Shares (as defined below); and (8) any additional voting, dividend,
liquidation, redemption, sinking fund and other rights, preferences, privileges,
limitations and restrictions.
15
<PAGE> 39
As indicated elsewhere herein (see "Description of Debt
Securities -- General"), because the Company is a holding company, its rights
and the rights of holders of its securities, including the holders of Preferred
Stock, to participate in the distribution of assets of any subsidiary of the
Company upon the latter's liquidation or recapitalization will be subject to the
prior claims of such subsidiary's creditors and preferred stockholders, except
to the extent the Company may itself be a creditor with recognized claims
against such subsidiary or a holder of preferred stock of such subsidiary. The
Preferred Stock shall, with respect to dividend rights and rights upon winding
up and dissolution of the Company, rank prior to the Common Stock and the Class
B Stock.
The Preferred Stock offered hereby will be issued in one or more series.
The holders of Preferred Stock will have no preemptive rights. Preferred Stock
will be fully paid and nonassessable upon issuance against full payment of the
purchase price therefor. Unless otherwise specified in the Prospectus Supplement
relating to a particular series of Preferred Stock, each series of Preferred
Stock offered hereby will rank on a parity as to dividends and liquidation
rights in all respects with each other series of Preferred Stock. The Prospectus
Supplement will contain, if applicable, a description of material United States
federal income tax consequences relating to the purchase and ownership of the
series of Preferred Stock offered by such Prospectus Supplement.
Dividend Rights. Unless otherwise set forth in an applicable Prospectus
Supplement, holders of the Preferred Stock of each series will be entitled to
receive when, as and if declared by the Board of Directors of the Company, out
of funds legally available therefor, cash dividends at such rates and on such
dates as are set forth in the Prospectus Supplement relating to such series of
Preferred Stock. Different series of the Preferred Stock may be entitled to
dividends at different rates or based upon different methods of determination.
Such rate may be fixed or variable or both. Each such dividend will be payable
to the holders of record as they appear on the stock books of the Company on
such record dates as will be fixed by the Board of Directors of the Company or a
duly authorized committee thereof. Dividends on any series of the Preferred
Stock may be cumulative or noncumulative, as provided in the Prospectus
Supplement relating thereto.
Rights Upon Liquidation. In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Company, the holders of each
series of Preferred Stock will be entitled to receive out of assets of the
Company available for distribution to stockholders, before any distribution of
assets is made to holders of Common Stock or the Class B Stock or any other
class of stock ranking junior to such series of the Preferred Stock upon
liquidation, liquidating distributions in the amount set forth in the Prospectus
Supplement relating to such series of Preferred Stock.
Redemption. One or more series of the Preferred Stock may be redeemable, in
whole or in part, at the option of the Company, and may be subject to mandatory
redemption pursuant to a sinking fund or otherwise, in each case upon terms, at
the times and at the redemption prices set forth in the Prospectus Supplement
relating to each such series.
Conversion and Exchange. The terms, if any, on which shares of any series
of Preferred Stock are convertible into or exchangeable for Securities or other
securities of the Company will be set forth in the Prospectus Supplement
relating thereto (provided, however, that any such other securities issuable
upon conversion or exchange of Preferred Stock will be subject to registration
under the Securities Act or an applicable exemption therefrom). Such terms may
include provisions for conversion or exchange, either mandatory, at the option
of the holder, or at the option of the Company, in which case the number of
Securities or other securities of the Company to be received by the holders of
Preferred Stock would be calculated as of a time and in the manner stated in the
Prospectus Supplement.
Transfer Agent and Registrar. The transfer agent, registrar and dividend
disbursement agent for the Preferred Stock will be designated in the applicable
Prospectus Supplement. The registrar for shares of Preferred Stock will send
notices to stockholders of any meetings at which holders of the Preferred Stock
have the right to elect directors of the Company or to vote on any other matter.
16
<PAGE> 40
Voting Rights. The holders of Preferred Stock of a series offered hereby
will not have any voting rights except as indicated in the Prospectus Supplement
relating to such series of Preferred Stock or as required by applicable law.
DEPOSITARY SHARES
General. The Company may, at its option, elect to offer receipts for
fractional interests ("Depositary Shares") in Preferred Stock, rather than full
shares of Preferred Stock. In such event, receipts ("Depositary Receipts") for
Depositary Shares, each of which will represent a fraction (to be set forth in
the Prospectus Supplement relating to a particular series of Preferred Stock) of
a share of a particular series of Preferred Stock, will be issued as described
below.
The shares of any series of Preferred Stock represented by Depositary
Shares will be deposited under a Deposit Agreement (the "Deposit Agreement")
between the Company and a depositary to be named by the Company in a Prospectus
Supplement (the "Depositary"). Subject to the terms of the Deposit Agreement,
each owner of a Depositary Share will be entitled, in proportion to the
applicable fraction of a share of Preferred Stock represented by such Depositary
Share, to all the rights and preferences of the Preferred Stock represented
thereby (including dividend, voting, redemption, subscription and liquidation
rights). The following summary of certain provisions of the Deposit Agreement
does not purport to be complete and is subject to, and is qualified in its
entirety by reference to, all the provisions of the Deposit Agreement, including
the definitions therein of certain terms. Whenever particular sections of the
Deposit Agreement are referred to, it is intended that such sections shall be
incorporated herein by reference. Copies of the forms of Deposit Agreement and
Depositary Receipt are filed as exhibits to the Registration Statement of which
this Prospectus is a part, and the following summary is qualified in its
entirety by reference to such exhibits.
Dividends and Other Distributions. The Depositary will distribute all cash
dividends or other cash distributions received in respect of the Preferred Stock
to the record holders of Depositary Shares relating to such Preferred Stock in
proportion to the numbers of such Depositary Shares owned by such holders.
In the event of a distribution other than in cash, the Depositary will
distribute property received by it to the record holders of Depositary Shares in
an equitable manner, unless the Company, after consultation with the Depositary,
determines that it is not feasible to make such distribution, in which case the
Depositary may sell such property and distribute the net proceeds from such sale
to such holders.
Redemption of Depositary Shares. If a series of Preferred Stock represented
by Depositary Shares is subject to redemption, the Depositary Shares will be
redeemed from the proceeds received by the Depositary resulting from the
redemption, in whole or in part, of such series of Preferred Stock held by the
Depositary. The redemption price per Depositary Share will be equal to the
applicable fraction of the redemption price per share payable with respect to
such series of the Preferred Stock. Whenever the Company redeems shares of
Preferred Stock held by the Depositary, the Depositary will redeem as of the
same redemption date the number of Depositary Shares representing shares of
Preferred Stock so redeemed. If fewer than all the Depositary Shares are to be
redeemed, the Depositary Shares to be redeemed will be selected by lot, pro rata
or another equitable method.
Withdrawal of Preferred Stock. Any holder of Depositary Shares may, upon
surrender of the Depositary Receipts therefor to the Depositary, receive the
number of whole shares of the related series of Preferred Stock and any money or
other property represented by such Depositary Receipts. Holders of Depositary
Shares making such withdrawals will be entitled to receive whole shares of
Preferred Stock on the basis set forth in the related Prospectus Supplement for
such series of Preferred Stock, but holders of such whole shares of Preferred
Stock will not thereafter be entitled to deposit such Preferred Stock under the
Deposit Agreement or to receive Depositary Receipts therefor. If the Depositary
Shares surrendered by the holder in connection with such withdrawal exceed the
number of Depositary Shares that represent the number of whole shares of
Preferred Stock to be withdrawn, the Depositary will deliver to such holder at
the same time a new Depositary Receipt evidencing such excess number of
Depositary Shares.
17
<PAGE> 41
Voting the Preferred Stock. Upon receipt of notice of any meeting at which
the holders of the Preferred Stock are entitled to vote, the Depositary will
mail the information contained in such notice of meeting to the record holders
of the Depositary Shares relating to such Preferred Stock. Each record holder of
such Depositary Shares on the record date (which will be the same date as the
record date for the Preferred Stock) will be entitled to instruct the Depositary
as to the exercise of the voting rights pertaining to the amount of the
Preferred Stock represented by such holder's Depositary Shares. The Depositary
will endeavor, insofar as practicable, to vote the amount of the Preferred Stock
represented by such Depositary Shares in accordance with such instructions, and
the Company will agree to take all reasonable action which may be deemed
necessary by the Depositary in order to enable the Depositary to do so. The
Depositary will abstain from voting shares of the Preferred Stock to the extent
it does not receive specific instructions from the holder of Depositary Shares
representing such Preferred Stock.
Amendment and Termination of Deposit Agreement. The form of Depositary
Receipt evidencing the Depositary Shares and any provision of the Deposit
Agreement may at any time be amended by agreement between the Company and the
Depositary. However, any amendment that imposes any fees, taxes or other charges
payable by holders of Depositary Receipts (other than taxes and other
governmental charges, fees and other expenses payable by such holders as stated
under "Charges of Depositary"), or that otherwise prejudices any substantial
existing right of holders of Depositary Receipts, will not take effect as to
outstanding Depositary Receipts until the expiration of 90 days after notice of
such amendment has been mailed to the record holders of outstanding Depositary
Receipts. Every holder of Depositary Receipts at the time any such amendment
becomes effective shall be deemed to consent and agree to such amendment and to
be bound by the Deposit Agreement, as so amended. In no event may any amendment
impair the right of any owner of Depositary Shares, subject to the conditions
specified in the Deposit Agreement, upon surrender of the Depositary Receipts
evidencing such Depositary Shares to receive shares of the Preferred Stock and
any money or other property represented thereby, except in order to comply with
mandatory provisions of applicable law.
Whenever so directed by the Company, the Depositary will terminate the
Deposit Agreement by mailing notice of such termination to the record holders of
all Depositary Receipts then outstanding at least 30 days prior to the date
fixed in such notice for such termination. The Depositary may likewise terminate
the Deposit Agreement if at any time 45 days shall have expired after the
Depositary shall have delivered to the Company a written notice of its election
to resign and a successor depositary shall not have been appointed and accepted
its appointment. If any Depositary Receipts remain outstanding after the date of
termination, the Depositary thereafter will discontinue the transfer of
Depositary Receipts, will suspend the distribution of dividends to the holders
thereof, and will not give any further notices (other than notice of such
termination) or perform any further acts under the Deposit Agreement except that
the Depositary will continue (i) to collect dividends on the Preferred Stock and
any other distributions with respect thereto and (ii) to deliver the Preferred
Stock together with such dividends and distributions and the net proceeds of any
sales of rights, preferences, privileges or other property, without liability
for interest thereon, in exchange for Depositary Receipts surrendered. At any
time after the expiration of two years from the date of termination, the
Depositary may sell the Preferred Stock then held by it at public or private
sales, at such place or places and upon such terms as it deems proper and may
thereafter hold the net proceeds of any such sale, together with any money and
other property then held by it, without liability for interest thereon, for the
pro rata benefit of the holders of Depositary Receipts which have not been
surrendered.
Resignation and Removal of Depositary. The Depositary may resign at any
time by delivering to the Company notice of its election to do so, and the
Company may at any time remove the Depositary, any such resignation or removal
to take effect upon the appointment of a successor Depositary and its acceptance
of such appointment. Such successor Depositary must be appointed within 45 days
after delivery of the notice of resignation or removal and must be a bank or
trust company, or an affiliate thereof, having its principal office in the
United States and having a combined capital and surplus of at least $50,000,000.
Charges of Depositary. The Company will pay charges of the Depositary in
connection with the initial deposit of the Preferred Stock and issuance of
Depositary Receipts, all withdrawals of shares of Preferred Stock by owners of
Depositary Shares, any redemption of the Preferred Stock and the distribution of
18
<PAGE> 42
information to holders of the Depositary Receipts. Holders of Depositary
Receipts will pay other transfer and other taxes and governmental charges and
such other charges as are expressly provided in the Deposit Agreement to be at
their expense.
Miscellaneous. The Depositary will forward all reports and communications
from the Company which are delivered to the Depositary and which the Company is
required or otherwise determines to furnish to the holders of the Preferred
Stock.
Neither the Depositary nor the Company will be liable if it is prevented or
delayed by law or any circumstance beyond its control in performing its
obligations under the Deposit Agreement. The obligations of the Depositary under
the Deposit Agreement are limited to performing its duties thereunder without
negligence or bad faith. The obligations of the Company under the Deposit
Agreement are limited to performing its duties thereunder in good faith. Neither
the Company nor the Depositary will be obligated to prosecute or defend any
legal proceeding in respect of any Depositary Shares or Preferred Stock unless
satisfactory indemnity is furnished. The Company and the Depositary may rely
upon the advice of counsel or accountants, or upon information provided by
persons presenting Preferred Stock for deposit, holders of Depositary Receipts
or other persons believed to be competent and on documents believed to be
genuine.
COMMON STOCK
General. Holders of shares of Common Stock are entitled to participate
equally on a per share basis in such dividends as the Board of Directors of the
Company may from time to time declare out of funds of the Company legally
available for the payment of dividends.
Holders of shares of Common Stock are entitled to one vote per share.
Holders of shares of Common Stock do not have the right to cumulate votes in the
election of directors. A special meeting of stockholders may be called by the
Board of Directors of the Company and shall be called upon the written request
of the holders of not less than 50% of the Company's stock then outstanding and
entitled to vote. Any action required or permitted to be taken at any annual or
special meeting of stockholders may be taken without prior notice by written
consent only if such consent is signed by each stockholder entitled to vote on
the matter.
Stockholders of the Company do not have preemptive rights to subscribe for
shares of any class of its capital stock.
Dividends. The Company has neither declared nor paid any cash dividends on
its Common Stock since 1982. Certain debt instruments (see "Description of Debt
Securities -- Other Indebtedness") restrict, and the terms of any series of Debt
Securities issued pursuant to this Prospectus may restrict, the Company's
ability to pay dividends. Under the terms of existing instruments, the Company
may pay dividends to the extent that cumulative dividends plus certain other
payments since March 31, 1989 do not exceed 50% of the Company's cumulative net
income since March 31, 1989 plus the proceeds of any offering of equity
securities of the Company that are not redeemable at the option of the holder of
the securities. As of December 31, 1995 retained earnings available for
dividends totaled approximately $150.0 million. The Company does not intend to
pay any cash dividends on its Common Stock for the foreseeable future.
Transfer Agent and Registrar. The transfer agent and registrar for the
Common Stock is First Chicago Trust Company of New York.
The foregoing descriptions of the Preferred Stock and Common Stock are
summaries, and reference is herein made to the detailed provisions of the
Certificate of Incorporation (including, without limitation, the Certificate of
Designation relating to any series of Preferred Stock, filed hereafter and
incorporated by reference herein) and the Company's Amended and Restated By-Laws
(the "By-Laws"), copies of which are filed as exhibits to the Registration
Statement.
CERTAIN CERTIFICATE OF INCORPORATION AND BY-LAW PROVISIONS
Under Delaware law, a corporation may include provisions in its certificate
of incorporation which relieve its directors of monetary liability for breach of
their fiduciary duty, except under certain circumstances which
19
<PAGE> 43
include a breach of a director's duty of loyalty, acts or omissions not in good
faith or involving intentional misconduct and a knowing violation of law, or any
transaction from which the director derived an improper personal benefit. The
Certificate of Incorporation provides that the Company's directors are not
liable to the Company or its stockholders for monetary damages for breach of
their fiduciary duties, subject to the exceptions specified by Delaware law.
Delaware law also provides that when an officer, director, employee or
agent of a corporation is a party to, or its threatened to be made a party to,
any action, the corporation may indemnify such persons against expenses
(including attorneys' fees) and judgments, fines and amounts paid in settlement,
if that person acted in good faith and he or she reasonably believed such
actions were in or not opposed to the best interests of the corporation, and
were not unlawful. Delaware law also provides that a person to be indemnified
has the right to be advanced any expenses incurred in his defense against any
action prior to the final disposition thereof and upon such terms as the board
of directors may determine. The Certificate of Incorporation provides these
rights to the Company's officers, directors, employees or agents. Certain
directors and officers of the Company are also parties to employment agreements
which provide for these and other indemnification rights in accordance with
Delaware law.
Under Delaware law, the power to adopt, amend and repeal by-laws is
conferred solely on the stockholders unless the corporation's certificate of
incorporation also confers this power upon its board of directors. Under the
Certificate of Incorporation the Board of Directors of the Company has been
granted this power. The Certificate of Incorporation and By-laws also provide
that the number of directors shall be fixed by resolution of the Board of
Directors of the Company from time to time, but shall not be less than five nor
more than eleven. These provisions, in addition to the staggered Board of
Directors discussed below and the existence of authorized but unissued capital
stock, may have the effect, either alone or in combination with each other, of
making more difficult or discouraging an acquisition of the Company deemed
undesirable by the Board of Directors of the Company.
Section 203 of the Delaware General Corporation Law ("Section 203")
prohibits Delaware corporations from engaging in a wide range of specified
transactions with any interested stockholder, defined to generally include,
among others, any person or entity who in the last three years obtain 15% or
more of any class or series of stock entitled to vote generally in the election
of directors, unless, among other exceptions, the transaction is approved by (i)
the board of directors prior to the date the interested stockholder obtained
such status or (ii) the holders of two-thirds of the outstanding shares of each
class or series of stock entitled to vote generally in the election of
directors, not including those shares owned by the interested stockholder. In
its By-laws, the Company has chosen to opt out of Section 203's provisions, and
therefore Section 203 does not apply to the Company.
The Certificate of Incorporation provides that the board of directors of
the Company shall be divided into three classes of directors. Each class of
directors serve staggered three-year terms. The classified board may make it
more difficult for any stockholder who is attempting to acquire the Company,
including a stockholder holding a majority of shares, to succeed. Such a
stockholder will be unable to force immediate changes in the composition of a
majority of the Board of Directors of the Company since the terms of
approximately one-third of the incumbent directors would expire each year and it
would require at least two annual meetings for stockholders to change a majority
of the Board of Directors.
DESCRIPTION OF WARRANTS
The Company may issue Warrants to purchase Debt Securities, Common Stock or
Preferred Stock. Warrants may be issued independently or together with any such
Securities and may be attached to or separate from such Securities. Warrants
will be issued under warrant agreements (each a "Warrant Agreement") to be
entered into between the Company and a warrant agent ("Warrant Agent") specified
in the applicable Prospectus Supplement. The Warrant Agent will act solely as an
agent of the Company in connection with the Warrants of a particular series and
will not assume any obligation or relationship of agency for or with holders or
beneficial owners of Warrants. The following sets forth certain general terms
and provisions of the Warrants offered hereby. Copies of the forms of Warrant
Agreements are filed as exhibits to
20
<PAGE> 44
the Registration Statement of which this Prospectus is a part and the following
summary is qualified in it entirety by reference to such exhibits. Further terms
of the Warrants and the applicable Warrant Agreement will be set forth in the
applicable Prospectus Supplement. If so indicated in the applicable Prospectus
Supplement, the terms of any Warrants may differ from the terms set forth below.
The Warrants will be denominated in U.S. dollars or in such foreign currency,
currency unit or composite currency as may be specified in the applicable
Prospectus Supplement.
Debt Warrant certificates will be exchanged for new Debt Warrant
certificates of different denominations and Debt Warrants may be exercised at
the corporate trust office of the Warrant Agent or any other office indicated in
the Prospectus Supplement. Prior to the exercise of their Debt Warrants, holders
of Debt Warrants exercisable for Debt Securities will not have any of the rights
of holders of the Debt Securities purchasable upon such exercise and will not be
entitled to payments of principal (or premium, if any) or interest, if any, on
the Debt Securities purchasable upon such exercise. Prior to the exercise of
their Warrants to purchase Common Stock or Preferred Stock, holders of such
Warrants will not have any rights of holders of the Common Stock or Preferred
Stock purchasable upon such exercise and will not be entitled to dividend
payments, if any, or to exercise the voting rights of the Common Stock or
Preferred Stock purchasable upon such purchase.
The applicable Prospectus Supplement will describe the terms of any
Warrants in respect of which this Prospectus is being delivered, including,
where applicable, the following: (i) the title of such Warrants; (ii) the
aggregate number of such Warrants; (iii) the price or prices for which such
Warrants will be issued; (iv) the currency, currency unit or composite currency
in which the price for such Warrants will be payable; (v) the designation,
number and terms of the Debt Securities, Common Stock or Preferred Stock
purchasable upon exercise of such Warrants, and procedures pursuant to which
such numbers may be adjusted; (vi) the designation and terms of the Debt
Securities, Common Stock or Preferred Stock, if any, with which such Warrants
are issued and the number of such Warrants issued with each such Security; (vii)
the date, if any, on and after which such Warrants and the related underlying
Security will be separately transferable; (viii) the exercise price or prices at
which the Debt Securities, Common Stock or Preferred Stock purchasable upon
exercise of such Warrants may be purchased, or provisions for determining such
price or prices, procedures pursuant to which such exercise price or prices may
be adjusted, and (if not U.S. dollars) the foreign currency, currency unit or
composite currency in which such exercise price or prices are denominated; (ix)
the date on which the right of exercise such Warrants shall commence and the
date on which such right shall expire; (x) whether such Warrants will be issued
in bearer form; (xi) the minimum or maximum amount of such Warrants which may be
exercised at any one time; (xii) information with respect to book-entry
procedures, if any; (xiii) a discussion of certain United States federal income
tax considerations; and (xiv) any other terms of such Warrants, including terms,
procedures and limitations relating to the transferability, exchange and
exercise of such Warrants.
EXERCISE OF WARRANTS
Unless otherwise indicated in the Prospectus Supplement relating thereto,
the Warrants will be issued in registered form. Each Warrant will entitle the
holder thereof to purchase for cash such principal amount or such number of
securities of the Company at such exercise price as shall in each case be set
forth in, or be determinable as set forth in, the Prospectus Supplement relating
to the Warrants offered thereby. Warrants may be exercised as set forth in the
Prospectus Supplement relating to the Warrants offered thereby at any time up to
the close of business on the expiration date set forth in such Prospectus
Supplement. After the close of business on the expiration date (or such later
expiration date as may be extended by the Company), unexercised Warrants will
become void.
Upon receipt of payment and the Warrant Certificate properly completed and
duly executed at the corporate trust office of the Warrant Agent or any other
office indicated in the Prospectus Supplement, the Company will, as soon as
practicable, forward the securities purchasable upon such exercise. If less than
all of the Warrants represented by such Warrant Certificate are exercised, a new
Warrant Certificate will be issued for the remaining Warrants.
21
<PAGE> 45
MODIFICATIONS
The Warrant Agreements and the terms of the Warrants may be amended by the
Company and the Warrant Agent, without the consent of the holders thereof, for
the purpose of curing any ambiguity, or of curing, correcting or supplementing
any defective or inconsistent provision contain therein, or in any other manner
which the Company may deem necessary or desirable and which will not materially
and adversely affect the interests of holders of outstanding Warrants.
The Company and the Warrant Agent also may modify or amend certain other
terms of the Warrant Agreements and the Warrants with the consent of the holders
of not less than a majority in number of the then outstanding unexercised
Warrants affected. However, no such modification or amendment may be made
without the consent of the holders affected thereby if such proposed amendment
would (i) shorten the period of time during which the Warrants may be exercised;
(ii) otherwise materially and adversely affect the exercise rights of the
holders of the Warrants; or (iii) reduce the number of outstanding Warrants.
MERGER, CONSOLIDATION OR SALE OF ASSETS
If at any time there shall be a merger, consolidation or sale of
substantially all of the assets of the Company, as a result of which securities
underlying Warrants shall be converted into the right to receive stock,
securities or other property, each outstanding Warrant shall thereafter only be
exercisable for the kind and amount of stock, securities or other property
receivable upon the consummation of such transaction by a holder of that number
of securities underlying the Warrant.
ENFORCEABILITY OF RIGHTS BY HOLDERS
The Warrant Agent will act solely as an agent of the Company in connection
with the issuance and exercise of any Warrants. The Warrant Agent shall have no
duty or responsibility in case of any default by the Company in the performance
of its obligations under the Warrant Agreements or the Warrant Certificates.
Each holder of Warrants may, without the consent of the Warrant Agent, enforce
by appropriate legal action, on its own behalf, its right to exercise such
Warrants.
PLAN OF DISTRIBUTION
The Company may sell Securities to one or more underwriters for public
offering and sale by them, and also may sell Securities directly to investors or
to other purchasers or through dealers or agents. Any such underwriter, dealer
or agent involved in the offer and sale of the Securities will be named in an
applicable Prospectus Supplement.
The distribution of the Securities may be effected from time to time in one
or more transactions at a fixed price or prices, which may be changed, or at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices. Sales of Common Stock offered
hereby may be effected from time to time in one or more transactions on the
American Stock Exchange or in negotiated transactions or a combination of such
methods of sale.
In connection with distributions of Common Stock or otherwise, the Company
may enter into hedging transactions with broker-dealers in connection with which
such broker-dealers may sell Common Stock registered hereunder in the course of
hedging through short sales the positions they assume with the Company.
In connection with the sale of Securities, underwriters, dealers or agents
may receive compensation from the Company or from purchasers of Securities for
whom they may act as agents in the form of discounts, concessions or
commissions. Underwriters may sell Securities to or through dealers, and such
dealers may receive compensation in the form of discounts, concessions or
commissions from the underwriters and/or commissions from the purchasers for
whom they may act as agents. Underwriters, dealers and agents that participate
in the distribution of Securities may be deemed to be underwriters, and any
discounts or commissions received by them from the Company and any profit on the
resale of Securities by them may be deemed to be underwriting discounts and
commissions under the Securities Act. Any such underwriter, dealer
22
<PAGE> 46
or agent will be identified, and any such compensation received from the Company
will be described, in the Prospectus Supplement. Unless otherwise indicated in a
Prospectus Supplement, an agent will be acting on a best effort basis and a
dealer will purchase Securities as a principal, and may then resell such
Securities at varying prices to be determined by the dealer.
Under agreements which may be entered into by the Company, underwriters,
dealers and agents who participate in the distribution of Securities may be
entitled to indemnification by the Company against and contribution toward
certain civil liabilities, including liabilities under the Securities Act, and
to reimbursement by the Company for certain expenses.
If so indicated in a Prospectus Supplement, the Company will authorize
agents and underwriters or dealers to solicit offers by certain purchasers to
purchase Offered Securities from the Company at the public offering price set
forth in the Prospectus Supplement pursuant to delayed delivery contracts
providing for payment and delivery on a specified date in the future. Such
contracts will be subject to only those conditions set forth in the Prospectus
Supplement, and the Prospectus Supplement will set forth the commission payable
for solicitation of such offers.
Certain of the underwriters, dealers or agents and their associates may
engage in transactions with and perform services for the Company in the ordinary
course of business.
The Securities may or may not be listed on a national securities exchange
or a foreign securities exchange (other than the Common Stock, which is listed
on the American Stock Exchange). Any Common Stock sold pursuant to a Prospectus
Supplement will be listed on the American Stock Exchange, subject to official
notice of issuance. Any underwriters to whom Securities are sold by the Company
for public offering and sale may make a market in such Securities, but such
underwriters will not be obligated to do so and may discontinue any market
making activities at any time without notice. No assurances can be given that
there will be an active trading market for the Securities.
VALIDITY OF SECURITIES
The legal validity of the Securities offered hereby will be passed upon for
the Company by Baker & McKenzie, New York, New York, and for any underwriters or
agents by counsel to be named in the appropriate Prospectus Supplement.
EXPERTS
The consolidated financial statements and the related financial statement
schedule incorporated in this Prospectus by reference from the Company's Annual
Report on Form 10-K have been audited by Coopers & Lybrand L.L.P., independent
accountants, as stated in their reports, which are incorporated herein by
reference, and have been so incorporated in reliance upon the reports of such
firm given upon their authority as experts in accounting and auditing.
23
<PAGE> 47
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION, OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS, IN
CONNECTION WITH THE OFFER CONTAINED IN THIS PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER.
NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS NOR ANY
SALE MADE HEREUNDER AND THEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE
THE DATE HEREOF. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS ARE NOT AN OFFER
TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITY IN ANY JURISDICTION TO
ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT
Prospectus Supplement Summary......... S-3
Risk Factors.......................... S-7
Use of Proceeds....................... S-9
Market Prices of Common Stock and
Dividends........................... S-9
Capitalization........................ S-10
Selected Consolidated Financial
Data................................ S-11
Description of Notes.................. S-12
Certain Federal Income
Tax Considerations.................. S-19
Underwriting.......................... S-22
Legal Matters......................... S-23
PROSPECTUS
Available Information................. 2
Incorporation of Certain Documents by
Reference........................... 2
Risk Factors.......................... 3
The Company........................... 4
Use of Proceeds....................... 5
Ratio of Earnings to Fixed Charges.... 5
Description of Debt Securities........ 6
Description of Capital Stock and
Depositary Shares................... 15
Description of Warrants............... 20
Plan of Distribution.................. 22
Validity of Securities................ 23
Experts............................... 23
</TABLE>
$125,000,000
NABORS INDUSTRIES, INC.
% CONVERTIBLE SUBORDINATED
NOTES DUE 2006
[NABORS INDUSTRIES, INC. LOGO]
SALOMON BROTHERS INC
GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
SIMMONS & COMPANY
INTERNATIONAL
PROSPECTUS SUPPLEMENT
DATED MAY , 1996
