<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement / / Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
NABORS INDUSTRIES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
================================================================================
----------------------------------------
NOTICE
of
1996 ANNUAL MEETING
of
SHAREHOLDERS
and
PROXY STATEMENT
----------------------------------------
[LOGO] NABORS
INDUSTRIES
================================================================================
<PAGE> 3
NABORS INDUSTRIES, INC.
515 WEST GREENS ROAD, SUITE 1200
HOUSTON, TEXAS 77067
February 1, 1996
TO OUR SHAREHOLDERS:
You are cordially invited to attend the 1996 Annual Meeting of Shareholders
(the "Annual Meeting") of Nabors Industries, Inc., which will be held on
Tuesday, March 5, 1996, beginning at 11:00 a.m. Central Standard Time at the
Wyndham Greenspoint Hotel, 12400 Greenspoint Drive, Houston, Texas 77060.
Information about the Annual Meeting, including matters on which
shareholders will act, may be found in the Notice of Annual Meeting and Proxy
Statement included herewith. We look forward to greeting in person as many of
our shareholders as possible.
Whether or not you plan to attend the meeting in person, it is important
that your shares be represented and voted. Accordingly, after reading the
enclosed Notice of Annual Meeting and Proxy Statement, you are urged to sign,
date and return the enclosed Proxy in the stamped, addressed envelope provided.
Sincerely yours,
/s/ EUGENE M. ISENBERG
EUGENE M. ISENBERG
Chairman of the Board
<PAGE> 4
NABORS INDUSTRIES, INC.
515 WEST GREENS ROAD, SUITE 1200
HOUSTON, TEXAS 77067
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MARCH 5, 1996
------------------------
The 1996 Annual Meeting of Shareholders (the "Annual Meeting") of NABORS
INDUSTRIES, INC. will be held at the Wyndham Greenspoint Hotel, 12400
Greenspoint Drive, Houston, Texas 77060 on Tuesday, March 5, 1996 at 11:00 a.m.
to consider and act upon the following matters:
1. The election of three Class II directors for terms expiring in 1999;
2. Approval of the Incentive Compensation Plan;
3. Approval of the 1996 Employee Stock Plan;
4. Such other business as may properly come before the Annual Meeting.
The Board has fixed the close of business on January 12, 1996 as the record
date for determining the shareholders who are entitled to vote at the Annual
Meeting and any adjournment or postponement thereof.
By Order of the Board of Directors,
/s/ DANIEL MCLACHLIN
DANIEL MCLACHLIN
Secretary
Dated: February 1, 1996
Please date and sign the enclosed Proxy, and return it at your earliest
convenience in the enclosed stamped and addressed envelope, so that, if you are
unable to attend the Annual Meeting, your Shares may be voted.
<PAGE> 5
NABORS INDUSTRIES, INC.
------------------------
PROXY STATEMENT
------------------------
1996 ANNUAL MEETING OF SHAREHOLDERS
MARCH 5, 1996
This Proxy Statement has been prepared in connection with the solicitation
by the Board of Directors (the "Board") of Nabors Industries, Inc., a Delaware
corporation (the "Company" or "Nabors"), of proxies in the accompanying form to
be used at the 1996 Annual Meeting of Shareholders (the "Annual Meeting"), to be
held on Tuesday, March 5, 1996, or at any adjournment or postponement thereof.
The principal executive offices of the Company are located at 515 West
Greens Road, Suite 1200, Houston, Texas 77067. This Proxy Statement and
accompanying Notice of Annual Meeting and Proxy are first being mailed to
shareholders on or about February 1, 1996.
At the Annual Meeting, each share of Common Stock of the Company
(collectively, the "Shares" or "Nabors Shares") is entitled to one vote. Only
shareholders of record on the books of the Company at the close of business on
January 12, 1996 will be entitled to vote at the Annual Meeting. A quorum is
necessary to transact business at the Annual Meeting. The presence in person or
by proxy at the Annual Meeting of the holders of the majority of the Shares
outstanding on January 12, 1996, constitutes a quorum. On January 12, 1996,
there were 84,578,240 Shares outstanding and entitled to vote.
Proxies received will be voted in accordance with the shareholders'
directions given in the proxies. In the absence of directions, Shares will be
voted FOR the nominees for election as Directors named in this Proxy Statement,
for the Incentive Compensation Plan and for the 1996 Employee Stock Plan. Any
Proxy received by the Company may be subsequently revoked at any time before it
is actually voted. Proxies may be revoked by any of the following actions (i)
filing with the Secretary of the Company, at or before the Annual Meeting, but
in any event prior to the vote on the matter as to which revocation is sought, a
written notice of revocation bearing a date later than the proxy; (ii) duly
executing and submitting a subsequent proxy relating to the Annual Meeting; or
(iii) voting in person at the Annual Meeting (although attendance at the Annual
Meeting will not, in and of itself, constitute a revocation of a proxy). Any
written notice revoking a proxy should be sent to the Secretary of the Company
at the Company's executive offices, 515 West Greens Road, Suite 1200, Houston,
Texas 77067.
In accordance with the Company's Restated By-Laws and Restated Certificate
of Incorporation and the General Corporation Law of the State of Delaware (a) a
plurality of the votes cast at a meeting at which there exists a quorum is
required for the election of directors, and (b) the affirmative vote of the
holders of a majority of Shares present in person or represented by proxy and
entitled to vote thereon is required to approve the Incentive Compensation Plan
and the 1996 Employee Stock Plan. The election of directors, the approval of the
Incentive Compensation Plan and the approval of the 1996 Employee Stock Plan are
the only matters scheduled to be considered at the 1996 Annual Meeting.
A broker non-vote occurs when a nominee holding shares for a beneficial
owner does not vote on a particular proposal because the nominee does not have
discretionary voting power with respect to the particular item under
consideration and has not received instructions from the beneficial owner. Under
General Corporation Law of the State of Delaware and the Company's Restated
Certificate of Incorporation and Restated By-Laws, abstaining votes (votes
withheld by shareholders who are present and entitled to vote) and broker
non-votes are deemed to be present for purposes of determining whether a quorum
is present at a meeting and although abstentions and broker non-votes are not
deemed to be votes duly cast, abstaining votes
<PAGE> 6
are deemed to be entitled to vote while broker non-votes are not deemed to be
entitled to vote. Abstentions and broker non-votes (a) will not be included in
the tabulation of the voting results with respect to the election of directors
and therefore will not have any effect on such vote and (b) abstentions will be
treated as a vote against and broker non-votes will not be considered in the
tabulation of the voting results and will not have any effect on the proposals
concerning the Incentive Compensation Plan and the 1996 Employee Stock Plan.
The cost of solicitation of proxies will be borne by the Company. In
addition to the use of the mail, employees of the Company, who will not receive
any additional compensation for their activities, may solicit proxies personally
or by telephone or other means of communication. The Company has engaged
Georgeson & Company, Inc., Wall Street Plaza, New York, New York 10005 to assist
in the solicitation of proxies by such methods and for which such firm will be
paid a fee not to exceed $10,000 plus out-of-pocket expenses. Upon request, the
Company will reimburse brokers, dealers, bankers, and trustees, or their
nominees, for reasonable expenses incurred by them in forwarding proxy material
to beneficial owners of Shares.
ELECTION OF DIRECTORS
The Restated Certificate of Incorporation authorizes the Board to fix the
number of Directors from time to time, but at no less than five nor more than
eleven. The number of directors is currently established at eight. The Restated
Certificate of Incorporation also provides for three classes of directors,
designated Class I, Class II and Class III, having initial terms of office of
one, two and three years, respectively. Each class of directors is to consist
of, as nearly as possible, one-third of the total number of directors
constituting the entire Board of Directors. Except for directors elected to fill
vacancies on the Board of Directors (whether created by death, resignation,
removal or expansion of the Board), at the expiration of the initial term of
each class, the directors of that class will be elected for a term of three
years and until their successors have been elected and qualified. At the Annual
Meeting, three Class II directors, Mr. Anthony G. Petrello, Mr. Myron M.
Sheinfeld and Mr. Martin J. Whitman, are nominated for election to the Board to
serve for a three year term.
If the enclosed Proxy is signed and returned, it will be voted FOR the
election of Messrs. Petrello, Sheinfeld and Whitman as Class II directors to
serve until the 1999 Annual Meeting of Shareholders and until their successors
have been duly elected and qualified, unless contrary directions are given
therein. However, should any nominee become unavailable or prove unable to serve
for any reason, the Proxy will be voted for the election of such other person as
the Board may select to replace such nominee, unless the Board instead fixes the
number of Directors at less than eight. The Board has no reason to believe that
the nominees will not be available or prove unable to serve.
The following table sets forth certain information concerning each Class II
director nominee and the continuing Class I and Class III directors. The age of
each nominee and continuing director, his positions and offices with the
Company, the year in which he first became a Director of the Company, his
business experience during the past five years or more, and the other
directorships he holds are shown below. Similar information is provided
concerning Executive Officers who are neither Directors nor nominees for
election as Directors.
2
<PAGE> 7
CLASS II DIRECTOR NOMINEES -- TERMS EXPIRING IN 1999
<TABLE>
<CAPTION>
DIRECTOR
OF THE
POSITION WITH THE COMPANY COMPANY
NAME AGE AND PRIOR BUSINESS EXPERIENCE SINCE
- ----------------------- ---- --------------------------------------------------- -------
<S> <C> <C> <C>
Anthony G. Petrello.... 41 President and Chief Operating Officer of the 1991
Company since 1992 and has been a member of the
Executive Committee since 1991. Mr. Petrello was
formerly a partner with the law firm Baker &
McKenzie, which he had been with since 1979. In
1986, Mr. Petrello was named Managing Partner of
Baker & McKenzie's New York Office and served in
that capacity until 1991 when he resigned as a
partner in the Firm. He continues as of counsel
to the Firm.
Myron M. Sheinfeld..... 65 Chairman of the Audit Committee of the Board of 1988
Directors since 1988 and member of the Compensation
Committee since 1993. He is a senior shareholder
with the law firm of Sheinfeld, Maley & Kay, a
professional corporation, located in Houston,
Texas. Mr. Sheinfeld has been an adjunct
professor of law at the University of Texas,
School of Law, since 1975, a contributing author
to numerous legal publications, and a contributor
and co-author of Colliers On Bankruptcy and
Bankruptcy Tax for Matthew Bender & Co., Inc. He
is a consultant to the Phoenix law firm of Meyer,
Hendricks, Victor, Osborn & Maledon. He is also a
director of Third Avenue Value Fund, Inc.
Martin J. Whitman...... 71 Member of the Audit Committee since 1993. Managing 1991
Director of Whitman Heffernan Rhein & Co., Inc.
(an investment and investment advisory firm)
since 1987; Chairman of the Board and a Director
of Danielson Holding Corporation (a financial
services holding company) since 1990; General
Partner of WHR Management Company, L.P. (a firm
managing partnerships) since 1989; Chairman and a
Director of WHR Management Corporation (a firm
managing partnerships) since 1992; General
Partner of Carl Marks Strategic Investments, L.P.
(an investment partnership) since 1987; Chairman
of Third Avenue Value Fund, Inc. (a registered
investment company) since 1990; Chief Executive
Officer of M. J. Whitman, Inc., a broker-dealer
since 1994; Adjunct Lecturer and Adjunct
Professor in Finance, Yale University School of
Management from 1972 to 1984 and 1992 to present;
Member Advisory Board, Yale University School of
Management since 1994.
</TABLE>
3
<PAGE> 8
CLASS I DIRECTOR NOMINEES -- TERMS EXPIRING IN 1998
<TABLE>
<CAPTION>
DIRECTOR
OF THE
POSITION WITH THE COMPANY COMPANY
NAME AGE AND PRIOR BUSINESS EXPERIENCE SINCE
- ----------------------- ---- --------------------------------------------------- -------
<S> <C> <C> <C>
Hans W. Schmidt........ 66 From 1958 to 1992, Mr. Schmidt held a number of 1993
positions with C. Deilman A.G., a diversed energy
company located in Bad Bentheim, Germany,
including serving as a Director from 1982 to
1992. He also served from 1965 to 1992 as
Director of a subsidiary, Deutag Drilling, a
company with worldwide drilling operations. From
1988 to 1991, Mr. Schmidt served as President of
Transocean Drilling Company, a company of which
he was also a director from 1981 until 1991.
Richard A. Stratton.... 49 Vice Chairman of the Board of Directors since 1992 1986
and a member of the Executive Committee. Mr.
Stratton has served as President and Chief
Operating Officer from 1986 to 1992, as Vice
President of the Company from 1981 to 1986 and as
Corporate Controller from 1979 to 1981. From 1970
to 1979, Mr. Stratton, a CPA, was associated with
the accounting firm of Price Waterhouse.
</TABLE>
CLASS III CONTINUING DIRECTORS -- TERMS EXPIRING IN 1997
<TABLE>
<CAPTION>
DIRECTOR
OF THE
POSITION WITH THE COMPANY COMPANY
NAME AGE AND PRIOR BUSINESS EXPERIENCE SINCE
- ----------------------- ---- --------------------------------------------------- -------
<S> <C> <C> <C>
Gary T. Hurford........ 59 Member of the Compensation Committee of the Board 1991
of Directors since 1991. Mr. Hurford has been
President of Hunt Oil Company since 1986. He has
been employed by Hunt Oil Company since 1962 and
has held a number of positions including District
Engineer, Reservoir Engineer, Vice President of
Drilling and Production and Executive Vice
President of Energy. Previously he was employed
with Mobil Oil Company and Magnolia Petroleum
Company.
Eugene M. Isenberg..... 66 Chairman of the Board of Directors, Chairman of the 1987
Executive Committee of the Board of Directors,
Chief Executive Officer and Director of the
Company since 1987. He is also a director of
Danielson Holding Corporation (an insurance
holding company). He served as Co-Chief Executive
Officer of NorthStar Tubular Corp. (a trader in
oil country tubular goods) from 1983 to 1986.
From 1969 to 1982, Mr. Isenberg was Chairman of
the Board and principal shareholder of Genimar,
Inc. (a steel trading and building products
manufacturing company), which was sold in 1982.
From 1955 to 1968, Mr. Isenberg was employed in
various management capacities with the Exxon
Corporation.
</TABLE>
4
<PAGE> 9
<TABLE>
<CAPTION>
DIRECTOR
OF THE
POSITION WITH THE COMPANY COMPANY
NAME AGE AND PRIOR BUSINESS EXPERIENCE SINCE
- ----------------------- ---- --------------------------------------------------- -------
<S> <C> <C> <C>
Jack Wexler............ 70 Chairman of the Compensation Committee and a member 1987
of the Executive and Audit Committees of the Board
of Directors since 1987. He is an international
business consultant and has acted as a consultant
to exporting and petroleum service companies
since 1982. Prior to 1982, Mr. Wexler was
employed by the Exxon Corporation and its
affiliates, serving in senior staff and operating
management positions in the United States and the
Far East.
</TABLE>
EXECUTIVE OFFICERS (NOT DIRECTORS)
<TABLE>
<CAPTION>
POSITION WITH THE COMPANY
NAME AGE AND PRIOR BUSINESS EXPERIENCE
- ----------------------- ---- --------------------------------------------------------------
<S> <C> <C>
Michael W. Dundy....... 53 Vice President and General Counsel since January 1990. He had
been Vice President and General Counsel of Nabors Alaska
Drilling Inc., a subsidiary of the Company, from 1984 to
1986. He has practiced law in Washington and Alaska since
1972.
Bruce P. Koch.......... 36 Controller of the Company since March 1990. He had been
associated with the accounting firm of Coopers & Lybrand from
1983 to 1990 in a number of capacities including Audit
Manager. Mr. Koch has been a Certified Public Accountant
since 1982.
Daniel McLachlin....... 58 Vice President and Corporate Secretary of the Company since
1986. He had been Manager, Administration from 1984 to 1986.
From 1979 to 1984, he was the Vice President, Human
Resources of Nabors Drilling Limited, a subsidiary of the
Company.
</TABLE>
COMMITTEES OF THE BOARD
The Committees of the Board consist of an Executive Committee, Compensation
Committee and Audit Committee. The Company does not have a standing nominating
committee. A shareholder who wishes to nominate a candidate for election to the
Board should forward the candidate's name and detailed description of the
candidate's qualifications to the Secretary at the principal executive offices
at 515 West Greens Road, Suite 1200, Houston, Texas 77067. The Company requires
notice of nominations by shareholders of persons for election as directors at an
Annual Meeting to be delivered to the Company at least 90 days prior to such
meeting.
The Executive Committee is comprised of Messrs. Isenberg (Chairman),
Petrello, Stratton and Wexler. The Compensation Committee is comprised of
Messrs. Hurford, Sheinfeld and Wexler (Chairman). The Audit Committee is
comprised of Messrs. Sheinfeld (Chairman), Wexler and Whitman.
The Executive Committee met twenty-seven times during the fiscal year ended
September 30, 1995. The Executive Committee, as empowered by the Company's
By-Laws, has all of the powers, rights and authority of the Board of Directors
to the extent permitted by law, except with respect to certain actions as stated
in the By-Laws.
The Compensation Committee met four times during the fiscal year ended
September 30, 1995. The Compensation Committee is responsible for reviewing and
making recommendations with respect to the objectives, structure, cost and
administration of the Company's compensation programs and in that context
5
<PAGE> 10
reviews employment agreements, salaries, bonuses, stock options and employee
benefit plans for officers and key employees.
The Audit Committee met two times during the fiscal year ended September
30, 1995. The Audit Committee reviews and approves the scope of audit and
non-audit services, the results of the audit, the adequacy of internal controls
and fee estimates for audit and non-audit services.
The Board of Directors met three times during the fiscal year ended
September 30, 1995. No incumbent Director attended fewer than 75% of the of
meetings of the Board and 75% of the meetings of all committees on which he
served.
REMUNERATION OF DIRECTORS
Prior to January 1, 1996, Directors who are not employees of the Company
received a fee of $25,000 per annum. No additional fees were paid for attendance
at meetings of the Board or for attendance at each meeting of board committees.
Effective January 1, 1996, Directors who are not employees of the Company
receive $28,000 per annum and an additional $3,000 per annum for serving as
chairman of a committee. No additional fees are paid for attendance at meetings
of board committees except that Directors who are not employees of the Company
who serve on the Executive Committee are paid $2,000 per meeting for attendance
at the Executive Committee. Non-employee directors of the Executive Committee
are also entitled to the continuation of payment of their director fee for five
years following termination of their service as a director in an amount equal to
their last year's aggregate remuneration.
The Stock Option Plan for Non-Employee Directors (the "Plan"), approved by
shareholders at the 1994 Annual Meeting, is part of the standard arrangement for
which non-employee directors are compensated. In accordance to this Plan, on
March 7, 1995, each of Messrs. Hurford, Schmidt, Sheinfeld, Wexler and Whitman
were granted options to purchase 5,000 Shares at a per Share price of $7.00, the
market value of a Share on the date of the grant. These options, exercisable for
ten years become fully vested on March 5, 1996.
BUSINESS RELATIONSHIPS
Mr. Anthony Petrello was a partner of and is currently of counsel to Baker
& McKenzie, which provided legal services to the Company during the fiscal year
ending September 30, 1995 and will continue to render such services in the
future.
During the fiscal year ended September 30, 1995, Mr. Wexler was paid an
annual retainer of $50,000 for consulting services provided in areas such as
marketing, management compensation, safety and potential acquisitions. Effective
September 30, 1995, Mr. Wexler resigned his position as consultant to the
Company.
6
<PAGE> 11
SHARE OWNERSHIP OF MANAGEMENT AND PRINCIPAL SHAREHOLDERS
The following table sets forth, as of December 31, 1995, information with
respect to the beneficial ownership of the Company's outstanding Shares by (a)
each Director and nominee for election as a Director, (b) Executive Officers who
are not Directors or nominees for election as Directors, (c) all Directors and
Executive Officers as a group, (d) other person or entity known by the Company
to be the beneficial owner of more than 5% of the Company's outstanding voting
securities:
<TABLE>
<CAPTION>
COMMON STOCK BENEFICIALLY OWNED
---------------------------------------
BENEFICIAL OWNER(2) NUMBER OF SHARES PER CENT OF TOTAL(1)
- ------------------------------------------------------------ ---------------- --------------------
<S> <C> <C>
DIRECTORS
Gary T. Hurford(3).......................................... 2,091,000 2.47
Eugene M. Isenberg(4)....................................... 5,809,349 6.57
Anthony G. Petrello(5)...................................... 2,425,000 2.79
Hans W. Schmidt(6).......................................... 78,000 *
Myron M. Sheinfeld(7)....................................... 42,135 *
Richard A. Stratton(8)...................................... 898,746 1.05
Jack Wexler(9).............................................. 120,000 *
Martin J. Whitman(10)....................................... 3,517,770 4.16
EXECUTIVE OFFICERS (NOT DIRECTORS)
Michael W. Dundy(11)........................................ 52,500 *
Bruce P. Koch(12)........................................... 30,000 *
Daniel McLachlin(13)........................................ 9,466 *
All Directors/Executive Officers as a group (11
persons)(3)-(13).......................................... 15,073,966 16.38
OTHER
FMR Corp.(14)............................................... 8,662,900 10.24
</TABLE>
- ---------------
* Less than 1%
(1) As of December 31, 1995 the Company had outstanding and entitled to vote
84,566,240 Shares.
(2) The address of all persons, unless otherwise indicated in the footnotes, is
in care of 515 West Greens Road, Houston, Texas 77067.
(3) The Shares listed for Mr. Hurford include (i) 2,026,000 Shares owned
directly by Hunt Oil Company of which Mr. Hurford is President, and (ii)
65,000 Shares which may be acquired pursuant to the exercise of options
within 60 days of December 31, 1995. Mr. Hurford disclaims beneficial
ownership of all shares directly owned by Hunt.
(4) The Shares listed for Mr. Isenberg include 3,916,000 Shares which may be
acquired pursuant to the exercise of options within 60 days of December 31,
1995. Not included in the table are 372,595 Shares owned directly or held
in trust by members of Mr. Isenberg's family of which Mr. Isenberg
disclaims beneficial ownership.
(5) The Shares listed for Mr. Petrello include 2,275,000 Shares which may be
acquired pursuant to the exercise of options within 60 days of December 31,
1995.
(6) The Shares listed for Mr. Schmidt include 75,000 Shares which may be
acquired pursuant to the exercise of options within 60 days of December 31,
1995.
(7) The Shares listed for Mr. Sheinfeld include 25,000 Shares which may be
acquired pursuant to the exercise of options within 60 days of December 31,
1995.
(8) The Shares listed for Mr. Stratton include 875,000 Shares which may be
acquired pursuant to the exercise of options within 60 days of December 31,
1995.
(9) The Shares listed for Mr. Wexler include 120,000 Shares which may be
acquired pursuant to the exercise of options within 60 days of December 31,
1995.
(10) The Shares listed for Mr. Whitman include (i) 2,044,541 Shares owned by
Carl Marks Strategic Investments, L.P. ("CMSI") for itself or for the
benefit of third parties; (ii) 757,809 Shares owned by M. J. Whitman & Co.,
Inc. ("MJW&CO."); (iii) 166,519 Shares owned by Mr. Whitman's wife and
adult children; and (iv) 523,901 Shares owned directly by Mr. Whitman. Mr.
Whitman is a minority general partner of the general partner of CMSI; and a
majority stockholder in MJW&Co. As a result of his stock ownership of
MJW&Co., Mr. Whitman may be deemed to have beneficial ownership, and the
power to direct the vote, of the Shares owned by MJW&Co, and his wife and
family members. Mr. Whitman disclaims beneficial ownership of Shares not
directly owned by him. The Shares listed for Mr. Whitman also include
25,000 Shares which may be acquired pursuant to the exercise of options
within 60 days of December 31, 1995.
(11) The Shares listed for Mr. Dundy include 52,500 Shares which may be acquired
pursuant to the exercise of options within 60 days of December 31, 1995.
(12) The Shares listed for Mr. Koch include 30,000 Shares which may be acquired
pursuant to the exercise of options within 60 days of December 31, 1995.
7
<PAGE> 12
(13) The Shares listed for Mr. McLachlin include 9,375 Shares which may be
acquired pursuant to the exercise of options within 60 days of December 31,
1995.
(14) Based on the information contained in Schedule 13G of FMR Corp. filed with
the Securities and Exchange Commission on February 13, 1995, the Shares
listed for FMR Corp. include (i) 7,305,540 Shares beneficially owned by
Fidelity Management & Research Company ("Fidelity"), of which 41,300 Shares
are beneficially owned by Fidelity International Limited, and (ii)
1,357,360 Shares beneficially owned by Fidelity Management Trust Company.
FMR Corp. has sole voting power with respect to 1,398,660 Shares and sole
dispositive power with respect to 8,662,900 Shares. Fidelity International
Limited also has sole voting and dispositive power with respect to all the
Shares it beneficially owns. Edward C. Johnson 3d, Chairman of FMR Corp.,
and Abigail P. Johnson each own 24.9% of the outstanding voting stock of
FMR Corp. and have sole dispositive power with respect to 7,150,020 shares.
Neither FMR Corp. nor Edward C. Johnson 3d has sole power to vote or direct
the voting of Shares owned directly by the Fidelity Funds, which power
resides with the Funds' Board of Trustees. Fidelity carries out the voting
of Shares under written guidelines established by the Funds' Board of
Trustees. The address of such entity is 82 Devonshire Street, Boston,
Massachusetts.
REMUNERATION OF MANAGEMENT
SUMMARY COMPENSATION TABLE
The table below sets forth all reportable compensation awarded to, earned
by or paid to the named executive officers for services rendered in all
capacities to the Company and its subsidiaries by the Chief Executive Officer,
and the four next most highly compensated Executive Officers serving as of
September 30, 1995 ("Named Executive Officers") for each of the last three
fiscal years.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
LONG-TERM COMPENSATION
ANNUAL COMPENSATION
--------------------------------
PAYOUTS
AWARDS
------------------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
RESTRICTED SECURITIES
OTHER ANNUAL STOCK UNDERLYING LTIP ALL OTHER
SALARY BONUS COMPENSATION AWARD(S) OPTIONS/ PAYOUTS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($)(1) ($) SARS (#) ($) ($)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Eugene M. Isenberg 1995 325,000 1,300,000(2) 0 1,800,000 0 17,438(3)
Chairman of the Board, 1994 325,000 675,000 0 425,000 0 13,419
Director and Chief 1993 325,000 675,000 0 0 0 175,700
Executive Officer
- ------------------------------------------------------------------------------------------------------------------
Anthony G. Petrello 1995 275,000 300,000(4) 0 1,600,000 0 133,069(5)
Director, President and 1994 275,000 420,000 0 325,000 0 129,293
Chief Operating Officer 1993 275,000 420,000 0 0 0 111,960
- ------------------------------------------------------------------------------------------------------------------
Richard A. Stratton 1995 275,000 200,000 0 200,000 0 20,180(6)
Vice Chairman of the 1994 225,000 135,000 0 100,000 0 15,359
Board, Director and 1993 225,000 135,000 0 0 0 30,727
President, Nabors Drilling
USA, Inc.
- ------------------------------------------------------------------------------------------------------------------
Michael W. Dundy 1995 140,400 14,040 0 10,000 0 5,885(7)
Vice President and General 1994 140,400 14,040 0 10,000 0 5,185
Counsel 1993 140,400 18,252 0 10,000 0 6,318
- ------------------------------------------------------------------------------------------------------------------
Bruce P. Koch 1995 100,000 20,000 0 20,000 0 4,500(8)
Corporate Controller 1994 97,500 15,000 0 15,000 0 3,111
1993 87,500 18,000 0 10,000 0 5,483
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
- ---------------
(1) The aggregate amount of prerequisites and other personal benefits did not
exceed the lesser of $50,000 or 10% of the salary and bonus for each of the
Named Executive Officers.
(2) Effective December 4, 1995, in lieu of a portion of his cash bonus, Mr.
Isenberg was granted options to purchase 1,000,000 at a per Share exercise
price of $9.5625, the market value of a Share, on the date of grant. The
options vest in three equal annual installments commencing December 4,
1996.
(3) Mr. Isenberg's All Other Compensation amount for 1995 includes Company
matching contributions to a retirement savings plan and a non-qualified
deferred compensation plan of $6,750; and $10,688 that is the benefit to
Mr. Isenberg of the premiums paid by the Company, as projected on an
actuarial basis, for a split dollar life insurance arrangement.
8
<PAGE> 13
(4) Effective December 4, 1995, in lieu of a portion of his cash bonus, Mr.
Petrello was granted options to purchase 303,000 at a per Share exercise
price of $9.5625, the market value of a Share, on the date of grant The
options vest in three equal annual installments commencing December 4, 1996.
(5) Mr. Petrello's All Other Compensation amount for 1995 includes Company
matching contributions to a retirement savings plan and a non-qualified
deferred compensation plan of $6,750; and $2,076 which is the benefit to Mr.
Petrello of the premiums paid by the Company, as projected on an actuarial
basis, for a split dollar life insurance arrangement; a Company paid premium
for term life insurance of $29,391; and the Company's reimbursement of
certain traveling and other expenses of $94,852.
(6) Mr. Stratton's All Other Compensation amount for 1995 includes Company
matching contributions to a retirement savings plan and non-qualified
deferred compensation plan of $6,750; a Company paid premium for life
insurance of $7,070; and imputed interest of $6,360 on a loan from the
Company to finance the purchase of a home following his relocation to
Houston.
(7) Mr. Dundy's All Other Compensation amount for 1995 includes Company matching
contributions to a retirement savings plan of $3,534, and imputed interest
of $2,351 on a loan from the Company to finance the purchase of a home
following his relocation to Houston.
(8) Mr. Koch's All Other Compensation amount for 1995 includes Company matching
contributions to a retirement savings plan and a non-qualified deferred
compensation plan of $4,500.
STOCK OPTION/SAR GRANT TABLE
The following table provides information with respect to stock options
granted during the fiscal year ended September 30, 1995 to the Named Executive
Officers:
OPTION/SAR GRANTS IN THE LAST FISCAL YEAR
<TABLE>
<CAPTION>
========================================================================================================
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES
OF STOCK PRICE
APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM(8)
- --------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g)
% OF TOTAL
OPTIONS/SAR EXERCISE
OPTIONS/SARS GRANTED TO OR
GRANTED EMPLOYEES IN BASE PRICE EXPIRATION
NAME (#) FISCAL YEAR ($/SH) DATE 5% ($) 10% ($)
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Eugene M. Isenberg 1,800,000(1) 40.42% $6.375 12/28/04 $7,216,566(4) 18,288,195(6)
- --------------------------------------------------------------------------------------------------------
Anthony G. Petrello 1,600,000(1) 35.93% 6.375 12/28/04 6,414,725(4) 16,256,173(6)
- --------------------------------------------------------------------------------------------------------
Richard Stratton 200,000(2) 4.49% 6.375 12/28/04 801,841(4) 2,032,022(6)
- --------------------------------------------------------------------------------------------------------
Michael W. Dundy 10,000(3) 0.22% 6.250 01/13/05 39,306(5) 99,609(7)
- --------------------------------------------------------------------------------------------------------
Bruce P. Koch 20,000(3) 0.45% 6.250 01/13/05 78,612(5) 199,218(7)
- --------------------------------------------------------------------------------------------------------
</TABLE>
(1) The options were granted on December 28, 1994 and vest in four equal annual
installments beginning October 1, 1995. The exercise price was equal to the
per Share market price on the date of the grant. In the event that the
Shares trade for twenty (20) consecutive days at an average price that is 15
percent per annum or greater than the price on the date of grant, the first
installment will vest early; if it trades at more than 32.3 percent, the
second installment will vest; if it trades at 52.1 percent the third
installment will vest; and if it trades at 74.9 percent the fourth
installment will vest. As of December 31, 1995, three of the installments
had vested. In the event these options or any other options held by the
Executive become vested and are exercised, new options will be granted to
the Executive in a number equal to the number of such options exercised.
Such new options will have an exercise price equal to the market value of a
Share on the date of the new grant. The number of new options granted cannot
exceed the total number of options granted on December 28, 1994. The options
were granted in connection with the extension of each executive's employment
contract. See "Employment Contracts".
9
<PAGE> 14
(2) The options were granted on December 28, 1994 and vest in two equal annual
installments beginning December 28, 1995. The exercise price was equal to
the per Share market price on the date of the grant. In the event that the
Shares trade for twenty (20) consecutive days at an average price that is 15
percent per annum or greater than the price on the date of grant, the first
installment will vest early and if it trades at more than 32.3 percent, the
second installment will vest early. As of December 31, 1995, both of the
installments had vested. In the event these options or any other options
held by the Executive become vested and are exercised, new options will be
granted to the Executive in a number equal to the number of such options
exercised. Such new options will have an exercise price equal to the market
value of a Share on the date of the new grant. The number of new options
granted cannot exceed the total number of options granted on December 28,
1994. The options were granted in connection with the extension of each
executive's employment contract. See "Employment Contracts".
(3) The options were granted on January 13, 1995 and vest in four annual
installments beginning January 13, 1996. The exercise price was equal to
the current market price of the underlying stock on the date of the grant.
(4) Represents an assumed market price per Share of $10.38.
(5) Represents an assumed market price per Share of $10.18.
(6) Represents an assumed market price per Share of $16.54.
(7) Represents an assumed market price per Share of $16.21.
(8) As required by rules of the Securities and Exchange Commission, the dollar
amounts under columns (f) and (g) represent the hypothetical gain or
"option spread" that would exist for the options based on assumed 5% and
10% annual compounded rates of Share price appreciation over the full
option term. These assumed rates, for a 5% hypothetical gain would result
in a price per Share on December 28, 2004 and January 13, 2005 of $10.38
and $10.18, respectively, and for a 10% hypothetical gain would result in a
price per Share on December 28, 2004 and January 13, 2005 of $16.54 and
$16.21, respectively. If these price appreciation assumptions are applied
to all of the Company's outstanding Shares on the grant date of December
28, 1994, such Shares would appreciate in the aggregate by approximately
$335.9 million and $851.3 million, respectively, over the ten-year period
ending on December 28, 2004. If these price appreciation assumptions are
applied to all of the Company's outstanding Shares on the grant date of
January 13, 1995 such Shares would appreciate in the aggregate by
approximately $329.4 million and $834.8 million, respectively, over the
ten-year period ending on January 13, 2005. These prescribed rates are not
intended to forecast possible future appreciation, if any, of the Shares.
10
<PAGE> 15
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
The following table provides information with respect to the stock options
exercised during fiscal year ended September 30, 1995 and the value as of
September 30, 1995 of unexercised in-the-money options held by the Named
Executive Officers. The value realized on the exercise of options is calculated
using the difference between the per Share option exercise price and the market
value of a Share on the date of the exercise. The value of unexercised
in-the-money options at fiscal year end is calculated using the difference
between the per Share option exercise price and the market value of a Share at
fiscal year end, September 30, 1995.
<TABLE>
<CAPTION>
========================================================================================================
(A) (B) (C) (D) (E)
SHARES NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
ACQUIRED OPTIONS/SARS IN-THE-MONEY
ON VALUE AT FY-END OPTIONS AT FY-END
EXERCISE REALIZED (#) ($)
NAME (#) ($) EXERCISABLE / UNEXERCISABLE EXERCISABLE / UNEXERCISABLE
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Eugene M. Isenberg 0 0 3,466,000 / 900,000 $14,194,375 / $2,531,250
- --------------------------------------------------------------------------------------------------------
Anthony G. Petrello 0 0 1,875,000 / 800,000 6,157,812 / 2,250,000
- --------------------------------------------------------------------------------------------------------
Richard A. Stratton 0 0 875,000 / 0 3,924,062 / 0
- --------------------------------------------------------------------------------------------------------
Michael W. Dundy 0 0 46,250 / 18,750 179,984 / 51,953
- --------------------------------------------------------------------------------------------------------
Bruce P. Koch 13,750 53,500 13,750 / 41,250 39,140 / 119,921
========================================================================================================
</TABLE>
EMPLOYMENT CONTRACTS
Mr. Isenberg's 1987 employment contract and Mr. Petrello's 1992 employment
contract were amended and restated effective October 1, 1994 and both contracts
are scheduled to expire September 30, 1999. Under Mr. Isenberg's restated
contract, Mr. Isenberg's salary remained at $325,000 per year and the formula
for the calculation of his cash bonus remained as it had been under his previous
shareholder approved contract, which provided that Mr. Isenberg is entitled to
receive an annual cash bonus equal to 7% of the Company's net cash flow (as
defined in the employment contract) in excess of 15% of the average
stockholder's equity for such fiscal year. Under Mr. Petrello's restated
contract, Mr. Petrello's salary remained at $275,000 per year and his annual
bonus remained as it had been at the greater of $700,000 or 2% of the net cash
flow (as defined in the employment contract) in excess of 15% of the average
stockholders equity in such year. Mr. Isenberg and Mr. Petrello were also
granted 1,800,000 and 1,600,000 options respectively (see "Option Grants in the
last Fiscal Year" above).
In the event that either Mr. Isenberg's or Mr. Petrello's employment
contract is terminated by the Company by reason of death, disability, or any
reason other than for cause or is terminated by either individual for
constructive termination without cause, the terminated individual will be
entitled to receive (i) all base salary which would have been payable through
September 30, 1999 or three times the then current base salary, whichever is
greater, (ii) all annual cash bonus which would have been payable through
September 30, 1999, or three times the highest "cash bonus" paid during the last
three fiscal years prior to termination, whichever is greater, (iii) any
restricted stock outstanding which shall become immediately and fully vested,
(iv) any outstanding stock options (including any reload rights contained
therein) which shall become immediately and fully vested. In the event that
either Mr. Isenberg's or Mr. Petrello's termination is related to a Change in
Control, then, in addition to the items listed in (i) through (iv) above, the
terminated individual shall be entitled, upon his election to terminate because
of a Change in Control, to receive in lieu of any such number of outstanding
options, as selected by the individual, an amount of cash in exchange therefor
in an amount equal to (x) the excess of the Change in Control Price over the
exercise price of the options per share of Common Stock multiplied by (y) the
number of options selected by the individual. In the event that either Mr.
Isenberg's or Mr. Petrello's employment contract is terminated for cause or as a
result of resignation, the terminated individual will be entitled to receive (i)
base salary through the date of termination, (ii) all annual cash bonus which
would have been payable through the date of termination, (iii) all restricted
stock that has
11
<PAGE> 16
vested on or prior to the date of termination, and (iv) any outstanding stock
options (including any reload rights contained therein) vested on or prior to
the date of termination.
Mr. Stratton's employment contract that was scheduled to expire on December
31, 1995 was extended to December 31, 1998. Pursuant to his employment contract
extension, Mr. Stratton received a salary of $275,000. Mr. Stratton's term of
employment continues until the earliest of December 31, 1998, his death,
permanent and total disability, temporary partial or permanent disability,
voluntary resignation or discharge for cause as defined in the employment
agreement. In the event Mr. Stratton is terminated by reason of death,
disability, or by discharge without cause in breach of his employment agreement,
Mr. Stratton shall be entitled to the greater of his salary through the
termination of his employment contract or one year's salary and all outstanding
options which shall become immediately vested. In the event Mr. Stratton is
terminated for cause or voluntarily resigns, he shall be entitled to receive
only those outstanding options which have then vested. Mr. Stratton may elect to
treat any breach of his employment contract by the Company or its successor, in
the event of a merger, consolidation or sale of substantially all of the assets
of the Company, as a discharge without cause.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee is currently comprised, and for fiscal 1995 was
comprised, of three non-employee directors, Mr. Wexler (Chairman), Mr. Hurford
and Mr. Sheinfeld. The Company provided drilling and logistical services to Hunt
Oil Company ("Hunt") of which, Mr. Gary Hurford, serves as a President. The
drilling and logistical services were provided by the Company to Hunt at
prevailing market rates and represented approximately 2% of the Company's
consolidated gross revenue.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
COMPOSITION AND ROLE OF THE COMPENSATION COMMITTEE
The Compensation Committee (the "Committee") meets periodically to review
and recommend to the Board of Directors for its approval policies and procedures
relating to employment agreements, salaries, bonuses, stock grants, stock
options and employee benefit plans for officers and employees. In particular,
the Committee is responsible for recommendations with regard to:
(1) Salary, cash bonuses, stock awards and stock option grants to
management and other key employees.
(2) Policies and practices in regards to employment agreements.
(3) Stock-based compensation plan, other benefit programs including
shareholder-approved stock option plans and defined contribution
plans.
The Committee conducts periodic meetings throughout the year, culminating
in meetings, generally in December following the close of the fiscal year, to
consider salary adjustments, incentive compensation and related issues.
COMPENSATION POLICIES
The Committee's goal is to establish compensation policies and programs
designed to attract and retain a qualified executive staff for the purpose of
enhancing shareholder value. The Committee is mindful that, over the past
decade, the oil field services industry, particularly drilling contractors, have
undergone severe contractions in activity forcing many companies to withdraw or
be eliminated from the market place. The ability of companies to compete in this
new marketplace depends in part on the need to attract and retain executives
with the necessary industry knowledge and management and financial skills to
preserve and enhance the Company's position, notwithstanding the industry's
characteristics. For this reason, the Commit-
12
<PAGE> 17
tee also is of the view that attracting executive talent from both inside and
outside the industry is important to the continued enhancement of the Company.
Consistent with these goals, the Committee seeks to:
(1) Attract and retain high quality executives needed to manage the
Company and maintain its competitive position.
(2) Reward effective ongoing management performance that achieve the
Company's operating, financial and strategic goals established each
year.
(3) Focus executive attention on enhancing long-term shareholder value
through stock-based compensation programs.
(4) Reward key employees for exceptional performance with regard to the
Company's success.
The Company's executive compensation program includes base salary and
incentive bonuses:
Base Salary: The Committee reviews the performance of each senior executive
officer individually with the Chief Executive Officer and determines an
appropriate salary level for each senior executive officer based primarily on
individual performance and competitive factors. These competitive factors
include as a reference the base salary of other top executives of drilling
contractors and the oil service sector generally, and also the compensation
levels needed to attract and retain highly talented executives from outside the
industry. For fiscal 1995, the Committee noted that generally the salaries of
the Chief Executive Officer and the next four most highly compensated executive
officers were, in the majority of cases, below the mean of the salaries for the
same categories of the Company's competitors, as reported in the latest
available proxy statements of the five companies other than Nabors, that
comprise the Dow Jones Oil Drilling Index. The salaries of the Chief Executive
Officer and the President have remained the same since 1987 and 1992,
respectively, and were not increased for fiscal 1995. As a result of the
significant growth in the company and the resulting growth in responsibilities,
the salary of the President, Nabors Drilling USA, Inc. was increased for fiscal
1995.
Incentive Bonus Program: The Committee administers annual review programs
to determine to what extent to reward senior executive officers and key
employees based upon the Company's performance in relation to Performance Goals.
Financial Performance Goals are set forth in the contractual bonus formula for
the Chief Executive Officer and President as described above. With respect to
other senior executive officers, the Performance Goals include both financial
and non-financial objectives, including achieving certain financial targets in
relation to internal budgets, developing internal infra-structure and enhancing
positions in certain markets. The financial criteria include, among other
things, increasing revenues, controlling direct and overhead expenses and
increasing cash flow from operations. The non-financial criteria include
maintaining the Company's share in its principal geographic markets, enhancing
the Company's technical capabilities and developing operations in identified
strategic markets. Based on these reviews, annual incentive rewards are
recommended by the Committee to the Board. Annual incentive awards include cash,
options or Shares, or a combination thereof. Share awards or stock option grants
typically have been issued on a four-year vesting schedule, but the Committee
reserves the right to modify the vesting schedule in its discretion. Annual
incentive bonus awards are not guaranteed except for those subject to
contractual arrangements. The Committee believes that stock option grants and
Share awards are critical in motivating and rewarding the creation of long-term
shareholder value, and the Committee has established a policy of awarding stock
options from time to time based on continuing progress of the Company and on
individual performance. All option grants that are shown in the Summary
Compensation Table for the past three years were made at market value of the
underlying Shares at the time of grant so that holders will benefit from such
options only when, and to the extent, the Share price increases after the option
grant. For fiscal 1995, the bonus and stock options granted to the Chief
Executive Officer and the next two most highly compensated executive officers
were higher than those for the same categories of the Company's competitors, as
reported in the latest available proxy statement of the five companies other
than Nabors, that comprise the Dow Jones Oil Drilling Index. Messrs. Isenberg's
and Petrello's cash bonuses are determined under a contractual formula based
upon financial results. However, for fiscal 1995, the Committee, with the
concurrence of Messrs. Isenberg and Petrello, reduced the cash bonus awards that
they were entitled to under the formula arrangements. In lieu thereof, in
December, 1995, the Committee granted to Messrs. Isenberg and Petrello 1,000,000
and 303,000
13
<PAGE> 18
stock options, respectively, with a per Share exercise price of $9.5625, the
market value of an underlying Share on the date of the grant. The Committee
determined that the value of option awards was reasonable in relation of the
cash bonus replaced, and its determination was confirmed by an opinion from an
outside compensation consultant, William M. Mercer, Inc. The Committee believes
that replacing a portion of a cash bonus with stock options aligns executive
interests with shareholders and is a widespread accepted practice. The Committee
also noted that for fiscal 1995, the Company's financial performance was
generally superior to the five other companies that comprise the Dow Jones Oil
Drilling Index as measured by the performance ratios -- Economic Value Added,
Return of Capital Employed, Return on Assets, Return on Equity. These ratios,
provided by Simmons & Company, were based on the last four quarters available
results.
In 1993, the Internal Revenue Code of 1986, as amended (the "IRC"), was
amended to add Section 162(m). Section 162(m) limits to $1,000,000 the amount of
compensation that may be deducted by the Company in any year with respect to
certain of the Company's highest paid executives. Certain performance-based
compensation that has been approved by shareholders is not subject to the
$1,000,000 limit, as well as compensation paid pursuant to employment contracts
in existence prior to the adoption of Section 162(m). Section 162(m) applied to
the Company for the first time in fiscal 1995 year. Although the contractual
bonus arrangements remained the same from their previous contracts, certain
bonus compensation, as well as the Share options granted to the Chief Executive
Officer and the President pursuant to the new employment contracts entered into
in 1994, may not be exempt from Section 162(m) and, therefore, the Company may
not be able to deduct that portion of such compensation that exceeds $1,000,000
(see "Options/SAR Grant in the last Fiscal Year" and "Employment Contracts").
The cash compensation paid to Mr. Isenberg in excess of $1,000,000 for fiscal
1995 is not deductible. In reviewing its policies with respect to Section
162(m), the Committee noted that the Company may have available substantial net
operating losses. While the Committee intends to take reasonable steps to obtain
deductibility of compensation, it reserves the right not to do so in its
judgment, particularly with respect to retaining the service of its principal
executive officers. In this regard, the Committee in particular notes that it is
placing before shareholders in this proxy a proposal for an Incentive
Compensation Plan that will comply with Section 162(m).
CHIEF EXECUTIVE OFFICER
The Committee believes its arrangements with its Chief Executive Officer
have been designed from the outset to align compensation to enhancing
shareholder value. Mr. Isenberg's compensation is made pursuant to a contractual
formula that originated with several of the Company's major shareholders in 1987
following the Company's bankruptcy proceedings. These arrangements were
subsequently approved by the various constituencies in the Company's bankruptcy
proceedings, including equity and debt holders, and confirmed by the United
States Bankruptcy Court. Mr. Isenberg's base salary has remained constant since
1987. The major portion of his cash compensation is the performance based bonus
compensation. He receives a cash bonus according to a formula based on cash flow
in excess of a 15 percent return on shareholders' average book equity. The
Committee believes that tying the cash bonus to cash flow in excess of a 15
percent return on shareholders' average equity aligns Mr. Isenberg's bonus to
achieving superior financial results that should enhance shareholder value. In
order to ensure that Mr. Isenberg and Mr. Petrello would continue to be
available to the Company, the Committee amended and restated their employment
contracts for additional five year terms (see "Employment Contracts" above). Mr.
Isenberg's contractual bonus (as well as Mr. Petrello's) provides for the
mandatory application of a bonus formula. However, as indicated above, for
fiscal 1995, the Committee, with the concurrence of Messrs. Isenberg and
Petrello, reduced the cash bonus awards that they were entitled to under the
formula arrangements and, in lieu thereof, were granted stock options as
described above.
14
<PAGE> 19
In reviewing Mr. Isenberg's compensation, the Committee took into account
the long-term shareholder value which he had helped create since becoming the
Company's Chief Executive Officer in 1987. The Committee also took note of the
Company's expansion of its U.S. operations, which has enhanced the Company's
operating leverage in the U.S. domestic market. The result of this effort is
reflected in the chart below.
FINANCIAL HIGHLIGHTS
NABORS INDUSTRIES, INC. AND SUBSIDIARIES
(In millions, except per share amounts)
<TABLE>
<CAPTION>
==================================================================================================
1995 VERSUS 1994 1995 VERSUS 1990
----------------------------------------
FISCAL YEAR INCREASE INCREASE
- --------------------------------------------------------------------------------------------------
FINANCIAL DATA 1995 1994(1) 1990(1) $ % $ %
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues............... $572.8 $484.3 $153.9 $ 88.5 18% $418.9 272%
- --------------------------------------------------------------------------------------------------
Net income............. 51.1 1.4 16.4 49.7 3550% 34.7 212%
- --------------------------------------------------------------------------------------------------
Net income per share... 0.58 0.02 0.27 0.56 2800% 0.31 115%
- --------------------------------------------------------------------------------------------------
Stockholders' equity... 368.8 317.4 117.3 51.4 16% 251.5 214%
- --------------------------------------------------------------------------------------------------
Year end market value
of shares
outstanding......... $774.2 513.7 388.0 $260.5 51% $386.2 100%
==================================================================================================
</TABLE>
- ------------
(1) The financial data for 1994 and 1990 was restated to include Sundowner
Offshore Services, Inc., which was acquired on October 27, 1994.
THE COMPENSATION COMMITTEE
Jack Wexler, Chairman
Gary T. Hurford
Myron M. Sheinfeld
15
<PAGE> 20
STOCK PERFORMANCE GRAPH
The following graph illustrates comparisons of five year cumulative total
returns(1) among Nabors Industries, Inc., the S&P Midcap Index, and the Dow
Jones Oil Drilling Index.
<TABLE>
<CAPTION>
Nabors In- Dow Jones Oil
Measurement Period dustries, S&P Midcap Drilling
(Fiscal Year Covered) Inc. Index Index
<S> <C> <C> <C>
1990 100 100 100
1991 81 150 67
1992 119 169 64
1993 144 210 92
1994 94 213 76
1995 145 268 95
</TABLE>
(1) Total returns assumes $100 invested on September 30, 1990 in shares of
Nabors Industries, Inc., the S&P Midcap Index, and the Dow Jones Oil
Drilling Index. It also assumes reinvestment of dividends and is calculated
at the end of each fiscal year, September 30, 1990 to September 30, 1995.
APPROVAL OF THE
INCENTIVE COMPENSATION PLAN
Upon the recommendation of the Compensation Committee, the Board of
Directors unanimously adopted the Incentive Compensation Plan (the "Incentive
Plan") and the Performance Goals included therein effective as of October 1,
1995, subject to approval by the shareholders at the 1996 Annual Meeting. The
Incentive Plan is a performance-based plan for officers and other management
that provides annual incentive opportunities linked directly to specific
performance measures.
Purpose. The Incentive Plan is intended to allow the Compensation Committee
to make awards that qualify as performance-based compensation within the meaning
of IRC Section 162(m). This provision limits to $1 million the allowable
deduction for compensation paid by a publicly held company to the chief
executive officer and to each of the other four most highly compensated
employees for taxable years beginning on or after January 1, 1994. This
limitation, however, does not apply to performance-based compensation that is
tied to objective performance standards that have been established by a
compensation committee of the board consisting solely of outside directors and
the material terms of which have been approved by the shareholders. The
Incentive Plan has been designed by the Compensation Committee to meet these
criteria. The Compensation Committee in its discretion may seek to amend the
current contractual bonus formulas for the Chief Executive Officer and President
to substitute bonus arrangements under this Incentive Plan. Accordingly, the
Company is seeking shareholder approval of the Incentive Plan.
The Board of Directors believes that the Incentive Plan will advance the
interests of the Company by providing Participants annual incentive
opportunities linked directly to specific results.
16
<PAGE> 21
The following is a summary description of the Incentive Plan, which is
qualified in its entirety by reference to the Incentive Plan, a copy of which is
attached to this Proxy Statement as Annex A.
Eligibility. All officers and corporate and operating management employees
of the Company and its subsidiaries are eligible for selection to participate in
the Incentive Plan. There are approximately 120 officers and employees of the
Company currently eligible to participate in the Incentive Plan.
Awards. Under the Incentive Plan, for each fiscal year ("Award Year"), the
Compensation Committee (the "Committee") will set a Target Award dollar amount
for each Participant designated by the Committee. The Committee will also
establish performance measures ("Performance Goals") in accordance with the
Incentive Plan for each Participant. The Performance Goals may relate to a
particular area of the business for which the Participant is responsible, to one
or more business units or to the Corporation as a whole, or to a combination of
the foregoing. The Committee will establish the objective criteria that will
determine the percentage (which may not exceed 100%) of the Target Award that
will be paid out based upon the level of achievement of the predetermined
Performance Goals. The Performance Goals may include one or more of the
following for a calendar year: (a) income before federal taxes and net interest
expense; (b) achievement of specific and measurable operational objectives in
the areas of rig operating costs, accident records, and employee turnover; (c)
working capital, generally defined to include receivables, inventories and
controllable current liabilities, measured either in absolute dollars or
relative to sales; (d) earnings growth, revenues, expenses, stock price, net
operating profit after taxes, market share, return on assets, equity, capital
employed or investment, regulatory compliance, satisfactory internal or external
audits, improvement of financial ratings, or achievement of balance sheet,
income statement or cash flow objectives, and/or (e) Performance Goals based
upon a percentage of cash flow in excess of a percentage of stockholders'
equity.
After the end of the fiscal year, the Committee will certify whether the
Performance Goals have been attained. The Committee may reduce or eliminate any
payout, but it may not increase a payout under the Incentive Plan. Payments
under the Incentive Plan will be made in cash, provided that the Committee may,
in its discretion, make any payment earned under the Incentive Plan in (i)
Shares or (ii) stock options issued under any stock plan of the Company that has
been shareholder approved. If all or a portion of a Participant's incentive
payments are to be made in Shares or stock options, the Committee may also
provide that, if any of such Shares or stock options are forfeited because such
Participant's employment terminates before the restrictions on such Shares
lapse, or vesting of the stock options occurs, such Participant shall be
entitled to a cash payment from the Company for such forfeited Shares or
unvested options. In the case of share awards, the cash payment shall be equal
to the lesser of (i) the dollar amount of the incentive payment that was paid in
the forfeited Shares in lieu of cash and (ii) the market value of the forfeited
shares at the time of such employment termination. In the case of stock options,
the cash payment shall be the difference between (i) the exercise price of the
stock options and (ii) the market value of the Company's Common Stock at the
time of such termination.
In no event may the sum of the dollar value of incentive payments paid in
cash, Shares and stock options to any Participant under the Incentive Plan for
any Award Year exceed $3,000,000. The Committee must certify the level of
achievement of the Performance Goals before any payments may be made under the
Incentive Plan. The Board may terminate the Incentive Plan with respect to any
specific year or in entirety at any time.
Participants in the Incentive Plan may receive other annual bonus
compensation outside the Incentive Plan whether or not bonus payments are made
to Participants under the Incentive Plan for the same years. The payment of such
additional bonus compensation will be at the discretion of the Committee and
need not be based upon the achievement of objective Performance Goals.
Stockholder Approval. The affirmative vote of the holders of a majority of
the outstanding shares of Common Stock present in person or represented by proxy
and entitled to vote on the proposal is required to ratify the adoption of the
Incentive Plan. If approved, the Incentive Plan will become effective as of
October 1, 1995.
THE BOARD RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE INCENTIVE COMPENSATION PLAN.
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APPROVAL OF THE
1996 EMPLOYEE STOCK PLAN
Upon the recommendation of the Compensation Committee, the Board of
Directors unanimously
adopted the 1996 Employee Stock Plan (the "Plan") and the Performance Goal
included therein, to be effective January 18, 1996 (the "Effective Date"),
subject to the approval of shareholders at the 1996 Annual Meeting. The Plan is
designed to be the successor equity incentive program to all of the Company's
existing shareholder approved employee stock option and stock incentive plans.
Over the years, the Company has adopted a number of stock option and stock
incentive plans intended to provide a vehicle to attract and motivate employees
who were expected to make a significant contribution to the financial success of
the Company. In some instances, these stock option plans have only a small
number of shares reserved for options outstanding and options available for
grant. It is necessary to keep separate records for each one of these plans and
then to combine them for reporting purposes. By consolidating most of these
plans into the Plan, the Company will save the administrative and legal costs
associated with maintaining separate stock option programs.
The Plan is designed to promote the long-term profitability of the Company
and its shareholders by aligning an increasing amount of key employee's total
compensation to the performance of the Company's stock. The key element of the
Plan is to motivate and reward key employees for the creation of long-term
shareholder value. All of the options granted under this Plan will be at the
market value of the underlying Shares on the date of the grant so that key
employees will benefit only if the Shares price increases. It is the Company's
policy that a substantial amount of a key employee's compensation be placed at
risk to the performance of the Shares. The Plan also provides for stock
appreciation rights and the issuance of a limited number of Shares of restricted
stock, which will enable the Company to attract and retain qualified executives
in this competitive environment without having to draw on its cash reserves.
Subject to shareholder approval of the Plan, on January 18, 1996, the
Compensation Committee granted options in respect of 597,000 Shares to
Non-Executive Officer Employees. The options were issued at an exercise price of
$10.375 per share, based upon the closing per Share market price on the date of
grant. The options, exercisable through January 18, 2006, vest in four equal
annual installments beginning January 18, 1997. Assuming that the Shares
appreciate at an assumed annual compounded rate of 5% and 10% over the full
option term, as required by the Securities and Exchange Commission, the
hypothetical gain or "option spread" that would exist for the options at the end
of ten years would be $3,895,295 and $9,871,442, respectively. These assumed
rates would result in a per Share price on January 18, 2006 of $16.90 and
$26.91, respectively. If these price appreciation assumptions are applied to all
of the Shares outstanding on the grant date, the Shares would appreciate in the
aggregate by approximately $551.9 million and $1,398.5 million, respectively,
over the ten-year period ending on January 18, 2006. These prescribed rates are
not intended to forecast possible future appreciation, if any, of the Shares. It
is important to note that options have value to its recipients only if the stock
price advances beyond the grant date price during the effective option period.
The principal characteristics of the Plan are summarized below. The
information contained herein is qualified in its entirety by reference to the
complete text of the Plan.
Purpose. The purpose of the Plan is to provide incentives for approximately
120 key officers and management employees ("Covered Persons") of the Company and
its affiliates (collectively, "Nabors") by encouraging their ownership of the
Company's Common Stock, and to aid the Company in retaining such employees upon
whose efforts the Company's success and future growth depends and in attracting
other highly qualified officers, and managerial employees.
Effective Date. The Plan shall be effective on January 18, 1996, but shall
be subject to approval of shareholders at the Company's 1996 Annual Meeting.
Consolidation of Plans. The Plan will become the successor plan to the
following shareholder-approved stock plans of the Company: 1978 Incentive Stock
Option Plan, 1978 Participation Stock Option Plan, 1981 Participation Stock
Option Plan, 1988 Incentive Stock Option Plan, 1988 Stock Option Plan at $1.10,
1988 Stock Option Plan at $.75, 1990 Stock Option Plan, 1991 Stock Option Plan,
1992 Incentive Stock Plan,
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1993 Key Employee Stock Plan. These stock option plans will be collectively
referred to in this summary as the "Predecessor Plans". If the Plan is approved,
the Company will have two plans that have been approved by shareholders, the
Plan and the 1993 Stock Option Plan for Non-Employee Directors.
If the Plan is approved, all outstanding options under the Predecessor
Plans, and all unvested share awards thereunder, will be incorporated into the
Plan. The Predecessor Plans will thereupon terminate, and no further option
grants or share awards will be made under the Predecessor Plans. However, all
such options and share awards will continue to be governed by the terms and
conditions of the instruments evidencing those grants and awards.
Administration. The Plan shall be administered by an independent committee
(the "Committee") appointed by the Company's Board of Directors (the "Board").
No member of the Committee shall be eligible to participate in the Plan while
serving as a member of the Committee. The Committee shall be comprised of
members who qualify as "disinterested persons" under Rule 16 b-3 of the
Securities Act of 1934, as amended ("Rule 16 b-3"), and as "outside directors"
under IRC Section 162(m).
The Committee will, among other things, determine which Covered Persons
will receive Share awards ("Awards"), option grants or stock appreciation rights
("SARs") ("Grants"); the size, timing and duration of such Awards and Grants;
the exercise price of the option grants; whether an option shall be an incentive
stock option ("ISO") as described in IRC Section 422(b), or a non-qualified
stock option ("NQSO"); and the terms upon which options may be exercised or
stock award may vest, all subject to express requirements and limitations of the
Plan.
Stock Subject to the Plan. Shares awarded or options or SARs granted under
the Plan may be either authorized and unissued Shares or previously issued
Shares held in the treasury of the Company, or both. Shares reserved that do not
vest or options which have terminated or expired prior to exercise shall be
available for further awards or grants hereunder, subject to the per employee
limitations described below. The number of Shares initially reserved for
issuance under the Plan shall be comprised of (i) the number of Shares which
remain available for grant under the Predecessor Plans (1,196,839 as of January
17, 1996) and (ii) the Shares subject to outstanding unvested Share awards and
unexercised options under the Predecessor Plans (8,280,620 as of January 17,
1996), and (iii) 1,000,000 additional Shares for a total initial reserve not to
exceed 10,477,459 Shares ("Initial Reserve") as of January 17, 1996.
The number of Shares available for issuance under the Plan shall
automatically increase on the first trading day of each fiscal year during the
term of the Plan, beginning with the 1996 fiscal year, by an amount equal to
1 1/2% of the Shares outstanding on September 30 of the immediately preceding
fiscal year. However, each such annual increase shall be subject to reduction to
the extent necessary so that the maximum number of Shares for options granted
and available for grant, SARs granted and available for grant and, Shares
awarded and available for award under the Plan shall not exceed 10% of the
shares outstanding as of September 30 of the immediately preceding fiscal year,
subject to adjustment for certain changes in the Company's capital structure
(the "10% Limitation"). For the purpose of calculating the 10% Limitation (a)
options that are 50% or more in-the-money (the current market price of a
underlying share exceeds the per share exercise price by 50% or more on average
for twenty (20) consecutive trading days on or prior to the determination date)
shall not be deemed to be outstanding under the Plan ("Qualified Options") and
(b) the Shares underlying such Qualified Option shall be deemed to be
outstanding Shares. This determination shall be made on and as of September 30
of the immediately preceding fiscal year.
If any Shares that have been awarded or granted cease to be subject to an
award or grant, if any Shares that are subject to any award or grant are
forfeited, or if any award or grant otherwise terminates without issuance of
Shares being made to the Awardee or Optionee, such Shares may again be available
for distribution in connection with stock awards or option grants under the
Plan.
After the Plan becomes effective, in no event will any one individual
participating in the Plan be awarded any combination of Shares, options or SARs
exceeding an amount equal to 50% of the Initial Reserve (as
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<PAGE> 24
defined share) subject to periodic adjustment for certain changes in the
Company's capital structure. Awards and Grants that are outstanding as of the
Effective Date shall not be subject to this limitation.
After the Plan becomes effective, in no event will more than 10% of the
Initial Reserve (as defined above) be issued as stock awards, subject to
periodic adjustments for certain changes in the Company's capital structure.
Eligibility. Share awards, option grants, or SAR grants under the Plan will
be made to Covered Persons as selected by the Committee. In selecting
Participants, the Committee may take into consideration any factors it may deem
relevant, including its estimate of the individual's present and potential
contributions to the success of the Company.
Option Grants. In the case of NQSOs, the option exercise price shall be set
by the Committee, but shall be no less than the Fair Market Value per Share on
the date of the grant of the option. As determined by the Committee, on the date
of the grant, an Optionee may reduce the option exercise price by paying the
Company in cash, shares, options, or the equivalent, an amount equal to the
difference between the exercise price and the reduced exercise price of the
option. The option price is to be paid, upon exercise, in cash or, in the
discretion of the Committee, in options or shares of the Company to be valued at
fair market value at the time of exercise. The Committee may specify a period
for exercise of an option (the "Option Period") which period shall in no event
be more than ten years from the date of grant. Options may, in the discretion of
the Committee, be exercisable in installments during the Option Period.
The maximum amount of compensation that any employee could receive as a
stock option grant can be determined under the following formula: (a) difference
between the Fair Market Value of the Shares at the time of exercise and the
option price (unadjusted for any consideration paid by the employee at the time
of the issuance of the option), (b) multiplied by the maximum number of the
Shares under the Plan available for issuance to any individual, which is equal
to 50% of the Initial Reserve (as defined above).
Share Awards. The Committee shall establish Performance Goals for Share
awards in writing and the vesting of such Shares shall be contingent upon the
attainment of such Performance Goals. Such Performance Goals shall be based upon
the following business criteria: (a) income before federal taxes and net
interest expense; (b) achievement of specific and measurable operational
objectives in the areas of rig operating costs, accident records, and employee
turnover; (c) working capital, generally defined to include receivables,
inventories and controllable current liabilities, measured either in absolute
dollars or relative to sales; (d) earnings growth, revenues, expenses, stock
price, net operating profit after taxes, market share, return on assets, equity,
capital employed or investment, regulatory compliance, satisfactory internal or
external audits, improvement of financial ratings, or achievement of balance
sheet, income statement or cash flow objectives, and/or (e) Performance Goals
based upon a percentage of cash flow in excess of a percentage of stockholders'
equity. The Committee shall designate in writing (a) those individuals from
among the class of Covered Persons who are eligible to receive stock awards upon
the attainment of the Performance Goals, and (b) the number of shares available
for Share awards to any Participant. The maximum number of Shares in the Plan
available for the making of Share awards to any individual is equal to 10% of
the 1,000,000 additional Shares and each annual increase.
The maximum amount of compensation that any employee can receive as a Share
award is determined by the following formula: (a) the fair market value of the
shares at the time of vesting for such shares, (b) multiplied by the maximum
number of Shares under the Plan available for Share awards to any one
individual, which is equal to 10% of the Initial Reserve (as defined above).
Stock Appreciation Rights. A Stock Appreciation Right ("SAR") shall entitle
a Participant to receive cash, Common Stock, or a combination thereof. If
granted in conjunction with an option, the exercise of an SAR shall require the
cancellation of the corresponding portion of the option, and the exercise of the
option shall require the cancellation of the corresponding portion of the SAR.
SARs may be granted on or after the corresponding grant of NQSOs, but only at
the same time as the corresponding grant of ISOs. The Committee in its
discretion shall determine the number of SARs awarded to a Covered Person in any
calendar year, subject to the maximum per Participant limitation described
above. The Committee shall determine the terms
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<PAGE> 25
and conditions of any SAR. The terms and conditions shall be confirmed in and be
subject to an agreement between the Company and the Participant. If granted in
conjunction with options, the SAR shall be exercisable for and during the same
period as the corresponding options. Upon exercise of an SAR, a Covered Person
shall receive an amount in cash, shares of Common Stock or both equal to (i) the
excess of the Fair Market Value of the Common Stock over the option price per
share (if the SAR is granted in conjunction with an option), multiplied by (ii)
the number of shares of Common Stock subject to the SAR. The transferability and
termination provisions of an SAR are the same as set forth above with respect to
stock options.
SARs may only be awarded with an exercise price equal to or in excess of
the fair market value of the Common Stock on the grant date. The maximum number
of SARs that may be granted to any individual is the same as that for stock
options as described above. The maximum amount of compensation that any employee
could receive pursuant to SAR grants is the same as that for stock options, as
described above.
Change in Control/Extraordinary Transaction. The Committee, in its
discretion, shall have the authority to make provisions in its award and grant
agreements to address vesting and other issues arising in connection with a
change in control. In the event that the Company shall consummate an
Extraordinary Transaction (as defined below) the Share reserve under the Plan
shall be increased by a number of Shares equal to 5% of the Shares issued in the
Extraordinary Transaction, provided that in no event shall the number of Shares
available under the Plan exceed the 10% Limitation. An Extraordinary Transaction
is a transaction pursuant to which the Company acquires a business, whether
through a merger with and into the Company or any of its subsidiaries or other
combination, the acquisition of stock or assets or otherwise, and in connection
therewith the Company issues or sells, directly or indirectly, Shares in an
amount equal to or greater than 10% of the Shares outstanding immediately prior
to the consummation of such Extraordinary Transaction. An increase in the share
reserve under this paragraph shall not affect the maximum number of options,
SARs, or stock grants that any individual can receive under the Plan, nor the
maximum amount of compensation (as previously described) that any individual can
receive under the Plan.
Federal Income Tax Consequences. In the case of options and SARs, the
Company has been advised that an employee will not realize taxable income upon
the grant of an option under the Plan.
With respect to NQSO's granted, an employee will realize ordinary income
upon the exercise of such option to the extent that, on the date of exercise,
the fair market value of the shares purchased under the option exceeds the
exercise price. The Company will be allowed a deduction against income at the
same time and in the same amount. The employee's basis of the shares for
computing gain or loss on their subsequent disposition will be the fair market
value on the date of exercise. To the extent that the aggregate fair market
value of stock with respect to which ISOs are exercisable for the first time by
the Optionee during any calendar year (under all of the Company's plans) exceeds
$100,000, such options shall be treated as NQSOs.
With respect to ISOs granted, if the Optionee disposes of the shares
acquired pursuant to the exercise of an ISO more than two years after the date
of grant and more than one year after the transfer of shares to the employee,
the Optionee will recognize long-term capital gain or loss and the Company will
not be entitled to a deduction. The employee's basis in the shares for computing
gain or loss on their subsequent disposition will be the exercise price of the
ISO related to the shares. If an employee makes a disqualifying disposition of
shares acquired pursuant to an ISO (i.e., sells or otherwise disposes of such
shares within two years of the date the ISO was granted or within one year of
the date the shares were transferred to the employee), the employee will realize
ordinary income in the difference between the fair market value of the stock on
the date the ISO was exercised and the option price, and the Company will be
allowed a deduction at the same time and in the same amount provided it
withholds income tax on such amount. Any balance received by an employee making
a disqualifying disposition of shares received pursuant to the exercise of an
ISO will be considered short-term capital gain.
In addition to the federal income tax consequences described above, an ISO
Optionee may be subject to the alternative minimum tax, which is payable to the
extent it exceeds the Optionee's regular tax. For this purpose, upon the
exercise of an ISO, the excess of the fair market value of the shares over the
exercise price therefor is a tax preference item. In addition, the Optionee's
basis in such shares is increased by such amount
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<PAGE> 26
for purposes of computing the gain or loss on the disposition of the shares for
alternative minimum tax purposes. If an Optionee is required to pay an
alternative minimum tax, the amount of such tax which is attributable to the ISO
preference (and other tax deferral preferences) is allowed as credit against the
Optionee's regular tax liability in subsequent years. To the extent the credit
is not used, it is carried forward.
In the case of stock grants, taxable income will generally be realized upon
vesting of the grant except that if the employee is an insider the taxable
income will not be realized until the expiration of any applicable insider
trading restriction.
The Company intends that compensation paid under the Plan will constitute
"qualified performance-based compensation" under IRC Section 162(m) and the
applicable regulations, which disallows tax deductions for certain non-qualified
employee remuneration in excess of $1 million. IRC Section 162(m) requires that
the material terms of the Performance Goal under which compensation is to be
paid must be disclosed to and approved by the shareholders. The material terms
include the employees eligible to receive compensation, a description of the
business criteria on which the Performance Goal is based, and either the maximum
amount of compensation that could be paid to any employee or the formula used to
calculate the amount of compensation to be paid to the employee if the
Performance Goal is attained. These items of disclosure are set forth above with
the descriptions of the separate equity incentive programs comprising the 1996
Plan.
Stockholder Approval. The affirmative vote of a majority of the shares of
Common Stock of the Company present in person or represented by proxy and
entitled to vote on the proposal is required for the approval of the Plan. If
such approval is obtained, the Plan will become effective as of January 18, 1996
and the grants made subject to the Plan being approved by shareholder shall be
incorporated into the Plan. Should such shareholder approval not be obtained,
the Predecessor Plans, which have been previously approved by shareholders, will
continue to remain in effect, and stock awards and option grants may continue to
be made pursuant to the provisions of such plans until the available reserve of
Common Stock under such plans is exhausted. A copy of the Plan is attached as
Annex B to this Proxy Statement.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE 1996 EMPLOYEE
STOCK PLAN.
ACCOUNTANTS
Coopers & Lybrand L.L.P., independent accountants, have been selected by
the Company to serve as its accountants for the current fiscal year. Coopers &
Lybrand L.L.P. have been the Company's accountants since May of 1987.
A representative from Coopers & Lybrand L.L.P. is expected to be present at
the Annual Meeting. This representative will have an opportunity to make a
statement, if such representative desires to do so, and will be available to
respond to appropriate questions.
OTHER MATTERS
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file with the Securities
and Exchange Commission and the American Stock Exchange initial reports of
ownership and reports of changes in ownership of Common Stock and other equity
securities of the Company. Officers, directors and greater than ten-percent
shareholders are required by SEC regulation to furnish the Company with all
Section 16(a) forms which they file.
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company and written representation that no other
reports were required during the two fiscal years ended September 30, 1995, all
Section 16(a) filing requirements applicable to its officers, directors and
greater than ten-percent beneficial owners were complied with.
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The Board of Directors knows of no other business to come before the Annual
Meeting. However, if any other matters are properly brought before the Annual
Meeting, the persons named in the accompanying form of Proxy or their
substitutes will vote in their discretion on such matters.
SHAREHOLDERS' PROPOSALS FOR PRESENTATION
AT 1997 ANNUAL MEETING
If a shareholder of the Company wishes to present a proposal for
consideration at the next Annual Meeting of Shareholders, the proposal must be
received at the executive offices of the Company no later than October 2, 1996
to be considered for inclusion in the Company's Proxy Statement and form of
Proxy for that Annual Meeting.
NABORS INDUSTRIES, INC.
/s/ DANIEL MCLACHLIN
DANIEL MCLACHLIN
Secretary
Dated: February 1, 1996
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ANNEX A
NABORS INDUSTRIES, INC.
INCENTIVE COMPENSATION PLAN
1. Purpose.
(a) General. The purpose of the Incentive Compensation Plan (the "Incentive
Plan") is to advance the interests of Nabors Industries, Inc. (the "Company") by
providing Participants in the Incentive Plan with annual incentive opportunities
linked directly to specific results. It is intended that the Incentive Plan
will: (a) reinforce the Corporation's goal-setting and strategic planning
process; (b) recognize the efforts of management in achieving objectives; and
(c) aid in attracting and retaining competent management, thus ensuring the
long-range success of the Company.
(b) Effective Date. The Incentive Plan shall be effective as of October 1,
1995, subject to approval by the shareholders of the Company at the Annual
Meeting of the Company's Shareholders to be held on March 5, 1996. The Plan
shall remain effective until September 30, 2005 or such earlier date as the
Board shall determine.
2. Administration.
(a) General. The Incentive Plan shall be administered by an independent
committee (the "Committee") appointed by the Company's Board of Directors (the
"Board"), as hereinafter provided.
(b) Committee Structure and Authority. The Committee shall be appointed
from time to time by the Board and shall consist of not fewer than two members.
No member of the Committee shall be eligible to participate in the Incentive
Plan while serving as a member of the Committee. All members of the Committee
shall be "disinterested persons" as defined by Rule 16b-3 of the Securities
Exchange Act of 1934, as amended (the "34 Act") or any successor thereto and
"outside directors" as defined in Section 162(m) of the Internal Revenue Code of
1986, as amended ("IRC") and the regulations issued thereunder. The Board shall
designate one of the members of the Committee as the Committee Chairman. The
Committee shall hold its meetings at such times and places as it may determine.
A majority of its members shall constitute a quorum. All determinations of the
Committee shall be made by a majority of its members. Any decision or
determination reduced to writing and signed by all members shall be effective as
if made by a majority vote at a meeting duly called and held. The Committee may
appoint a secretary (who need not be a member of the Committee). Service on the
Committee shall constitute service as a director of Nabors for all purposes.
(c) Committee Discretion. For purposes of administration, the Committee,
subject to the terms of the Incentive Plan, shall have final authority to
establish such rules and regulations, and take such other administrative actions
as it deems necessary or advisable. All determinations and interpretations made
by the Committee shall be final, conclusive and binding on all persons,
including Covered Persons, Participants and their legal representatives and
beneficiaries.
(d) Committee Liability. No member of the Committee shall be liable for any
act or omission with respect to his services on the Committee, if he acts in
good faith and in a manner he reasonably believes to be in or not opposed to the
best interests of the Company.
3. Eligibility.
The persons who shall be eligible to participate in the Incentive Plan
shall be those persons who are officers, key employees and consultants of the
Company or any subsidiary ("Covered Persons") who are in a position, in the
opinion of the Committee, to make contributions to the growth and financial
success of the Company and its subsidiaries. From the Covered Persons eligible
to participate in the Plan, the Committee may, from time to time, select persons
("Participant") to participate for the Award Year and shall determine the terms
and conditions, Target Awards and Performance Goals with respect thereto.
Non-Employee Directors of the Company will not be eligible to participate in the
Incentive Plan.
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<PAGE> 29
4. Awards.
(a) Award Year. The Committee may, subject to the terms hereof, make Awards
in each fiscal year with respect to the preceding fiscal year hereunder ("Award
Year"), beginning with an award made in 1997 with respect to Award Year 1996, to
Participants eligible for awards under the Incentive Plan. Awards shall be paid
as soon as reasonably practicable after the Committee's certification of the
achievement of applicable Performance Goals in the fiscal year following the
Award Year, except to the extent that a Participant has made an election to
defer the receipt of such Award pursuant to any deferred compensation plan of
the Company.
(b) Pre-Established Targets. The Committee shall establish a Target Award
and Performance Goals for each Participant selected by the Committee to
participate in the Incentive Plan during the Award Year. Target Awards and
Performance Goals shall be established not later than the date required for
compliance under IRC Section 162(m) for the Award Year and the payment of any
Awards shall be contingent upon the attainment of such Performance Goals.
(c) Performance Goals. The Performance Goals shall be based upon one or
more of the following objective performance measures in the area of: (a) income
before federal taxes and net interest expense; (b) achievement of specific and
measurable operational objectives in the areas of rig operating costs, accident
records, and employee turnover; (c) working capital, generally defined to
include receivables, inventories and controllable current liabilities, measured
either in absolute dollars or relative to sales; (d) earnings growth, revenues,
expenses, stock price, net operating profit after taxes, market share, return on
assets, equity, capital employed or investment, regulatory compliance,
satisfactory internal or external audits, improvement of financial ratings, or
achievement of balance sheet, income statement or cash flow objectives and/or
(e) performance goals based upon a percentage of cash flow in excess of a
percentage of stockholders' equity. The Performance Goals may relate to a
particular area of the business for which the Participant is responsible, to one
or more business units or to the Company as a whole, or a combination of the
foregoing. The Committee shall certify the level of achievement of Performance
Goals before payment of any Award.
(d) Reduction of Award. The Award made to an individual Participant may be
less (including no Award) than the percentage of the Target Award determined
based on the level of achievement of applicable Performance Goals. The Committee
shall be precluded from increasing the Target Award but may apply its discretion
to reduce or eliminate such Award without the consent of the Participant.
(e) Pro-Rated Award. If a Participant's active employment with the Company
or a subsidiary of the Company, as the case may be, ceases during any Award Year
because of retirement, disability or death, the Performance Goals shall be
scaled down based upon the number of days the Participant was an employee during
the Award Year and the Participant shall be eligible to receive a similarly
prorated share of the Award for that Award Year. Such prorated payment shall be
made at the same time payments for that Award Year are made to other
Participants. If employment is terminated during an Award Year for any reason
other than retirement, disability or death, the Participant will forfeit all
right to receive an Award for that Award Year.
(f) Payments. Awards shall be paid in cash, provided that the Committee may
determine, in lieu of cash, to make any payment earned under the Incentive Plan
(i) in shares of the Company's Common Stock or (ii) stock options issued under
any stock plan of the Company that has been shareholder approved. If all or a
portion of a Participant's incentive payments are to be made in shares or stock
options, the Committee may also provide that, if any of such shares or stock
options are forfeited because such Participant's employment terminates before
the restrictions on such shares lapse, or vesting of the stock options occurs,
such Participant shall be entitled to a cash payment from the Company for such
forfeited shares or unvested options. In the case of shares, the cash payment
shall be equal to the lesser of (i) the dollar amount of the incentive payment
that was paid in the forfeited shares in lieu of cash and (ii) the market value
of the forfeited shares at the time of such employment termination. In the case
of stock options the cash payment shall be the difference between (i) the
exercise of the stock options and (ii) the market value of the Company's Common
Stock at the time of such termination. Such amount shall be payable by the
Corporation within 30 days after the Participant's termination of employment.
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(g) Per Participant Limitation. In no event may the sum of the dollar value
of incentive payments paid in cash, Shares and stock options (the value of stock
options to be determined by the Committee) to any Participant under the
Incentive Plan for any Award Year exceed $3,000,000. The Committee must certify
the level of achievement of the Performance Goals before any payments may be
made under the Incentive Plan.
5. Designation of Beneficiaries.
A Participant may designate a beneficiary or beneficiaries to receive in
case of the Participant's death all or part of the Awards which may be made to
the Participant under the Plan under the Incentive Plan. A designation of
beneficiary may be replaced by a new designation or may be revoked by the
Participant at any time. A designation or revocation shall be on a form to be
provided for the purpose and shall become effective only when filed with the
Company during the Participant's lifetime with written acknowledgment of receipt
from the Company. In case of the Participant's death, an Award made under the
Incentive Plan with respect to which a designation of beneficiary has been made
(to the extent it is valid and enforceable under applicable law) shall be paid
to the designated beneficiary or beneficiaries.
6. Amendments and Termination.
Either the Board or the Committee may amend or terminate the Plan at any
time, provided that no such amendment or termination shall be made that would
impair the rights of a Participant, without their consent, with respect to any
Award that has been made prior to the amendment or termination of the Incentive
Plan. An amendment may affect present and future Participants. Any amendment
made by the Committee shall be subject to approval or rejection of the Board.
Neither the Board nor the Committee shall, without approval of a majority of the
votes cast by the stockholders of Nabors at a meeting of stockholders at which a
proposal to amend the Incentive Plan is voted upon (i) increase the maximum
amount of compensation which may be awarded under the Plan to any individual,
(ii) amend the class of Covered Persons eligible to receive Awards, (iii) alter
the Performance Goals, or (iv) extend the term of the Incentive Plan. Subject to
the above provisions, the Board and the Committee shall have authority to amend
the Incentive Plan to make changes that are consistent with the purpose of the
Incentive Plan or to take into account changes in law and tax and accounting
rules, as well as other developments and to make Awards which qualify for
beneficial treatment under such rules without shareholder approval.
7. Miscellaneous.
(a) Other Actions. Nothing contained in the Incentive Plan shall be
construed to limit the authority of the Company to exercise its corporate rights
and powers, including but not limited to, the right of the Company to award
incentive compensation for proper corporate purposes other than under the
Incentive Plan to any officer, director, employee or other person, firm,
corporation or association.
(b) Governing Laws. The Incentive Plan and all rights and obligations
thereunder shall be construed in accordance with and governed by the laws of the
State of Delaware.
(c) Approval. The Incentive Plan shall become effective on October 1, 1995,
but shall be subject to approval by vote of the stockholders of the Company at
the 1996 Annual Meeting of Shareholders.
(d) Withholding of Taxes. Awards shall be made unless the Participant has
paid, or has made provision, satisfactory to the Committee for payment of
federal, state and local income taxes, or any other taxes (other than stock
transfer taxes), which the Company may be obligated to collect as a result of
the payment of an Award. The Committee may authorize that shares of Common Stock
or options be applied toward the payment of withholding taxes.
(e) Continuance of Employment. Nothing in the Incentive Plan or in any
Award shall confer on any Covered Person or Participant any right to continue in
the employ of the Company or interfere in any way with the right of the Company
to terminate his employment at any time.
(f) Loans or Installment Payments. The Committee may, in its discretion,
assist any Participant including satisfaction of any federal, state and local
income and employment tax obligations arising therefrom,
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by authorizing the extension of a loan from the Company to such Participant. The
terms of any loan and the method of payment (including the interest rate and
terms of repayment) shall be upon such terms as the Committee deems appropriate
under the circumstances. Loans may be authorized with or without security or
collateral.
(g) Headings. The headings are for reference purposes only and shall not
affect the meaning or interpretation of this Incentive Plan.
(h) Severability. If any provision of this Incentive Plan shall for any
reason be held to be invalid or unenforceable, such invalidity or
unenforceability shall not effect any other provision hereby, and this Incentive
Plan shall be construed as if such invalid or unenforceable provision were
omitted.
(i) Successors and Assigns. This Incentive Plan shall inure to the benefit
of and be binding upon each successor and assign of the Company. All obligations
imposed upon a Participant, and all rights granted to the Company hereunder,
shall be binding upon the Participant's heirs, legal representatives and
successors.
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ANNEX B
NABORS INDUSTRIES, INC.
1996 EMPLOYEE STOCK PLAN
1. Purpose.
(a) General. The purposes of the 1996 Employee Stock Plan (the "Plan") are
(i) to provide incentives for key officers and salaried employees of Nabors
Industries, Inc. ("Nabors" or the "Company") and its affiliates (collectively,
the "Company") by encouraging their ownership of the Company's Common Stock,
$.10 par value, (the "Common Stock"), and (ii) to aid the Company in (A)
retaining such officers and employees upon whose efforts the Company's success
and future growth depends and (B) attracting other such officers and employees.
(b) Effective Date. The Plan shall be effective on January 18, 1996 but
shall be subject to approval by a vote of shareholders of the Company at the
1996 Annual Meeting. The Plan shall remain effective until January 17, 2006, or
such earlier date as the Board shall determine.
(c) Consolidation of Plans. This Plan shall serve as the successor to the
following shareholder approved stock plans of the Company: 1978 Incentive Stock
Option Plan, 1978 Participation Stock Option Plan, 1981 Participation Stock
Option Plan, 1988 Incentive Stock Option Plan, 1988 Stock Option Plan at $1.10,
1988 Stock Option Plan at $.75, 1990 Stock Option Plan, 1991 Stock Option Plan,
1992 Incentive Stock Plan, 1993 Key Employee Stock Plan, (collectively the
"Predecessor Plans"), and no further stock awards or option grants shall be made
under the Predecessor Plans after the Effective Date. All stock and options
outstanding under the Predecessor Plans, as of the Effective Date, shall
immediately be incorporated into this Plan and be treated as outstanding options
and shares under this Plan. However, each outstanding share and option so
incorporated shall continue to be governed solely by the express terms and
conditions of the instrument evidencing such stock award or option grant, and no
provision of this Plan shall be deemed to affect or otherwise modify the rights
or obligations of the holders of such incorporated stock or options with respect
to their acquisition of shares of the Company's Common Stock, par value of
$0.10.
2. Administration.
(a) General. The Plan shall be administered by an independent committee
(the "Committee") appointed by the Company's Board of Directors (the "Board"),
as hereinafter provided.
(b) Committee Structure and Authority. The Committee shall be appointed
from time to time by the Board and shall consist of not fewer than two members.
No member of the Committee shall be eligible to participate in the Plan while
serving as a member of the Committee. All members of the Committee shall be
"disinterested persons" as defined by Rule 16b-3 of the Securities Exchange Act
of 1934, as amended (the "34 Act") or any successor thereto and "outside
directors" as defined in Section 162(m) of the Internal Revenue Code of 1986, as
amended ("IRC") and the regulations issued thereunder. The Board shall designate
one of the members of the Committee as the Committee Chairman. The Committee
shall hold its meetings at such times and places as it may determine. A majority
of its members shall constitute a quorum. All determinations of the Committee
shall be made by a majority of its members. Any decision or determination
reduced to writing and signed by all members shall be effective as if made by a
majority vote at a meeting duly called and held. The Committee may appoint a
secretary (who need not be a member of the Committee). Service on the Committee
shall constitute service as a director of Nabors for all purposes.
(c) Committee Discretion. For purposes of administration, the Committee,
subject to the terms of the Plan, shall have final authority to establish such
rules and regulations, and take such other administrative actions as it deems
necessary or advisable. All determinations and interpretations made by the
Committee shall be final, conclusive and binding on all persons, including
persons awarded shares of stock hereunder ("Awardees"), options ("Optionees") or
stock appreciation rights ("SARs") ("SAR Holders") hereunder and their legal
representatives and beneficiaries.
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(d) Committee Liability. No member of the Committee shall be liable for any
act or omission with respect to his services on the Committee, if he acts in
good faith and in a manner he reasonably believes to be in or not opposed to the
best interests of the Company.
3. Eligibility.
The persons who shall be eligible to participate in the Plan shall be those
persons who are officers, key employees and consultants of the Company or any
subsidiary ("Covered Persons") who are in a position, in the opinion of the
Committee, to make contributions to the growth and financial success of the
Company and its subsidiaries. From the Covered Person eligible to participate in
the Plan, the Committee may, from time to time, select persons to be granted
options and shares ("Participants") and shall determine the terms and conditions
with respect thereto. Non-Employee Directors of the Company will not be eligible
to participate in the Plan other than if such Non-Employee Director had received
a stock award or option grant that was outstanding on the Effective Date of the
Plan.
4. Stock Subject to the Plan.
(a) Stock Authorized. Shares of Common Stock with respect to which stock is
awarded or options or SARs granted under the Plan may be either authorized and
unissued shares of Common Stock, or previously issued shares of Common Stock
held in the treasury of the Company, or both. Shares of Common Stock reserved
for stock that does not vest or options which have terminated or expired prior
to exercise shall be available for further awards or grants hereunder, subject
to the per employee limitations of this Section 4. The number of shares of
Common Stock initially reserved for issuance under the Plan shall be comprised
of (i) the number of shares of Common Stock which remain available for grant
under the Predecessor Plans (1,196,839 as of January 17, 1996) and (ii) the
shares of Common Stock subject to outstanding unvested awards and unexercised
options under the Predecessor Plans (8,280,620 as of January 17, 1996), and
(iii) 1,000,000 additional shares for a total initial reserve not to exceed
10,477,459 shares (the "Initial Reserve") of Common Stock as of January 17,
1996.
(b) Annual Increase. The number of shares of Common Stock available for
issuance under the Plan shall automatically increase on the first trading day of
each fiscal year during the term of the Plan, beginning with the 1996 fiscal
year, by an amount equal to 1 1/2% of the shares of Common Stock outstanding on
September 30 of the immediately preceding fiscal year. However, each such annual
increase shall be subject to reduction to the extent necessary so that the
maximum number of shares of Common Stock for options granted and available for
grant, SARs granted and available for grant, and stock awarded and available for
award under the Plan shall not exceed 10% of the Common Stock outstanding as of
September 30 of the immediately preceding fiscal year, subject to adjustment for
certain charges in the Company's capital structure (the "10% Limitation"). For
the purpose of calculating the 10% Limitation (i) options that are 50% or more
in-the-money (the current market price of a share of underlying Common Stock
exceeds the per share exercise price by 50% or more on average for twenty (20)
consecutive trading days on or prior to the determination date) shall not be
deemed to be outstanding under the Plan ("Qualified Options") and (ii) the
Shares underlying such Qualified Option shall be deemed to be outstanding
Shares. This determination shall be made on and as of September 30 of the
immediately preceding fiscal year.
(c) Per Participant Limitation. No Participant shall be awarded any
combination of stock, options, or SARs exceeding the number of Shares equal to
50% of the Initial Reserve, subject to periodic adjustment under paragraph (e)
below. Awards and grants that are outstanding as of the Effective Date shall not
be subject to this limitation.
(d) Stock Award Limitation.
(i) Aggregate Limitation. No more than 10% of the additional shares
as specified in Section 4 (a) (iii) above and the annual increase
of shares as specified in Section 4 (b) above shall be issued as
Stock Awards.
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(ii) Per Participant Limitation. No Participant shall be awarded stock
exceeding the number of Shares equal to 10% of the Initial
Reserve, subject to periodic adjustment under paragraph (e)
below.
(e) Adjustment of Shares. The amount of shares that are subject to option
or SAR grants and share awards are subject to the following adjustments.
(i) If any change is made in the Common Stock whether through merger,
consolidation, reorganization, recapitalization, stock dividend,
stock split, combination of shares, rights offerings, change in
corporate structure of the Company, or otherwise, appropriate
adjustments will be made (A) to the number or type of securities
subject to and reserved for issuance under the Plan; and (B) in
order to prevent dilution or enlargement of the rights of Awardees
or Optionees, to the number or type of stock awards, option or SAR
grants and the exercise price subject to outstanding options or
SARs.
(ii) The provisions of this paragraph (e) shall apply to stock,
options, or SARs authorized but not awarded or granted under the
Plan as well as any unvested stock awarded or unexercised options.
(f) Registration, Listing and Qualification of Shares of Common Stock. Each
stock award or option grant shall be subject to the requirements that if at any
time the Common Stock covered thereby is not registered, listed or qualified
with or by any securities exchange or under any federal or state law, and (i) if
the Committee shall determine that such registration, listing, qualification,
consent or approval, of any governmental regulatory body is necessary or
desirable as a condition of, or in connection with, the stock award or option
grant or the purchase of shares of Common Stock thereunder, no such share shall
vest or option may be exercised, unless and, until such registration, listing,
qualification, consent or approval shall have been obtained or (ii) if the Board
shall determine that such registration, listing, qualification, consent or
approval of any governmental regulatory body is not necessary and/or not
desirable as a condition of, or in connection with, the vesting of such stock
award or option grant or the purchase of shares of Common Stock thereunder, the
Board may impose any conditions upon the vesting of such stock awards and the
exercise of such options, as it shall deem necessary or desirable in view of
such determination and no such award may vest or option may be exercised, unless
and until such conditions have been satisfied. Without limiting the foregoing,
the Company may require that any person receiving a stock award or exercising an
option grant, shall make such representations and agreements and furnished such
information as it deems appropriate to assure compliance with the foregoing or
any other applicable legal requirement.
(g) Release of Shares. If any shares of Common Stock that have been awarded
or granted cease to be subject to an award or grant, if any shares of Common
Stock that are subject to any award or grant are forfeited, if any award or
grant otherwise terminates without issuance of shares of Common Stock being made
to the Awardee or Optionee, or if any shares of Common Stock that were
previously issued under the Plan are received in connection with the vesting of
a stock award or the exercise of an option, such shares may again be available
for distribution in connection with stock awards or option grants under the
Plan.
(h) Stockholders Rights. Neither an Awardee or an Optionee nor their
respective legal representatives, legatees or distributees, as the case may be,
shall have any of the rights or privileges of a stockholder of the Company by
virtue of an award of stock, or grant of an option or SAR, except with respect
to any shares of Common Stock actually issued or transferred of record and
delivered to one of the aforementioned persons.
5. Stock Awards and Option Grants.
(a) General. The Committee shall have the authority to award stock and
grant options under the Plan.
(b) Terms and Conditions of Stock or Options. Awards of stock and grants of
options under this Plan shall be evidenced by an Agreement, which shall embody
the terms and conditions of such Awards and Grants and which shall be subject to
the terms and conditions set forth in the Plan. The Committee shall, in its
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discretion, prescribe the terms and conditions of the Awards and Grants
hereunder, which terms and conditions need not be the same in each case, subject
to the following:
(i) Number of Shares. Each Share Award and option Grant shall state
the number of shares of Common Stock to which it pertains. Option
Grants may include the grant of additional options that are
contingent upon the exercise of previously granted options.
(ii) Option Exercise Price. The option exercise price shall be set by
the Committee, but in the case of nonqualified stock options
("NQSOs") shall be no less than 100% of the Fair Market Value per
Share of Common Stock on the date of the grant of the option. As
determined by the Committee, on the date of the grant, an
Optionee may reduce the option exercise price by paying the
Company in cash, shares, options, or the equivalent, an amount
equal to the difference between the exercise price and the
reduced exercise price of the option. The option price is to be
paid, upon exercise, in cash or, in the discretion of the
Committee, in options or shares of the Company to be valued at
fair market value at the time of exercise.
(iii) Fair Market Value. For purposes of the Plan, the Fair Market
Value per share of Common Stock shall be the last sale on the
date of reference, or, in the case no sale takes place on such
date, the average of the closing high bid and low asked prices,
in either case on the principal national securities exchange on
which the Common Stock is listed or admitted to trading or, if
the Common Stock is not listed or admitted to trading on any
national securities exchange, the last sale price reported on the
National Market System of the National Association of Securities
Dealers Automated Quotation System ("NASDAQ") on such date, or
the average of the closing high bid and low asked prices of the
Common Stock in the over-the-counter market reported on NASDAQ on
such date, whichever is applicable or, if there are not such
prices reported on NASDAQ on such date, then as furnished to the
Committee by any New York Stock Exchange member selected from
time to time by the Committee for such purpose. If there is no
bid or asked price reported on any such date, the market value
shall be determined by any other appropriate method selected by
the Committee.
(iv) Option Period. The Committee may specify a period for exercise of
an option (the "Option Period") which period shall in no event be
more than ten years from the date of grant. Options may, in the
discretion of the Committee, be exercisable in installments
during the Option Period. Any shares of Common Stock not
purchased on any applicable installment date may be purchased
thereafter at any time before the expiration date of the Option
Period.
(v) Exercise of Options. In order to exercise an option, the Optionee
shall deliver to Nabors written notice specifying the number of
shares of Common Stock to be purchased, together with a certified
or bank cashier's check payable to the order of Nabors in the
full amount of the purchase price therefor; provided, however,
that the Committee may, in its discretion, allow such payments to
be made in whole or in part in Common Stock delivered, or options
surrendered, by the Optionee valued at the fair market value of
such Common Stock.
If the Optionee so requests, shares of Common Stock purchased
upon exercise of an option may be issued in the name of the
Optionee or another person. An Optionee shall not have any of the
rights of a stockholder until the shares of Common Stock are
issued to him. An option may not be exercised for less than the
lesser of (A) ten shares of Common Stock, or (B) the number of
shares of Common Stock remaining subject to such option.
(vi) Performance Goal for Stock Awards. The Committee shall establish
Performance Goals for stock awards in writing not later than the
date required for compliance under IRC Section 162(m) and the
vesting of such stock shall be contingent upon the attainment of
such Performance Goals. Such Performance Goals shall be based
upon the following business criteria: (a) income before federal
taxes and net interest expense; (b) achievement of specific and
measurable operational objectives in the areas of rig operating
costs, accident records, and employee turnover; (c) working
capital, generally defined to include receivables,
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inventories and controllable current liabilities, measured either
in absolute dollars or relative to sales; (d) earnings growth,
revenues, expenses, stock price, market share, return on assets,
equity or investment, regulatory compliance, satisfactory
internal or external audits, improvement of financial ratings, or
achievement of balance sheet, income statement or cash flow
objectives, and/or (e) Performance Goals based upon a percentage
of cash flow in excess of a percentage of stockholders' equity.
The Committee shall designate in writing (A) those individuals
from among the class of Covered Persons who are eligible to
receive stock awards upon the attainment of the Performance Goals
(i.e., the Participants), and (B) the maximum number of shares
available for stock awards to any Participant, subject to the
limitations described in Section 4(d) above. Stock awards shall
vest over a period determined by the Committee which period shall
expire no later than January 18, 2006.
(vii) Effect of Termination of Employment. Unless otherwise determined
by the Committee in its discretion, an option may not be
exercised after the Optionee has ceased to be in the employ of
the Company whether such Optionee's employment is terminated by
action of the Company with cause, without cause, or by reason of
death or disability. Unless otherwise determined by the
Committee, awards of Common Stock which have not vested on and as
of the date of termination shall be forfeited. The Committee, in
its discretion, however, may in all cases extend the period of
vesting, but not beyond the Option Period.
(viii) Nontransferability of Stock or Options. Except as otherwise
determined by the Committee in its discretion, (A) options shall
be exercisable only by the Optionee and (B) no option shall be
transferable other than by will or the laws of descent and
distribution or pursuant to a qualified domestic relations order
as defined by the IRC or Title I of the Employee Retirement
Income Security Act, or the rules thereunder. The designation of
a beneficiary by an officer or director shall not constitute a
transfer.
(ix) Other Terms and Conditions. The Committee may impose such other
terms and conditions, not inconsistent with the terms hereof, on
the grant or exercise of options, or on the award of stock, as it
deems advisable.
(c) Provisions Applicable to Incentive Stock Options. The Committee may, in
its discretion, grant options under the Plan which constitute incentive stock
options ("ISOs") within the meaning of Section 422A(b) of the IRC, provided,
however, that the price at which each share of Common Stock subject to an option
issued pursuant to this paragraph (c) may be purchased shall, subject to any
adjustments which may be made pursuant to Section 4(e) hereof, in no event be
less than 100% of the fair market value per share of Common Stock on the date of
grant; and provided further that in the event the Optionee owns on the date of
grant, securities possessing more than 10% of the total combined voting power of
all classes of securities of the Company or of any subsidiary of the Company,
the price per share shall not be less than 110% of the fair market value per
share of Common Stock on the date of the grant and such option shall not be
exercisable after the expiration of five (5) years from the date such option is
granted.
6. Stock Appreciation Rights.
(a) General. The Committee shall have authority to grant SAR under the
Plan. A SAR shall entitle the SAR Holder to surrender to the Company the SAR and
to be paid therefor in shares of the Common Stock, cash or a combination thereof
as herein provided, the amount described in this Section 6.
(b) Grant. SAR's may be granted in conjunction with all or part of any
option granted under the Plan in which case the exercise of the SAR shall
require the cancellation of a corresponding portion of the option and the
exercise of the option will result in the cancellation of a corresponding
portion of the SAR. In the case of a NQSO, such rights may be granted either at
or after the time of grant of such option. In the case of an ISO, such rights
may be granted only at the time of grant of such option. A SAR may also be
granted on a stand alone basis. The grant of a SAR shall occur as of the date
the Committee determines. Each SAR
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granted under this Plan shall be evidenced by an Agreement, which shall embody
the terms and conditions of such SAR and which shall be subject to the terms and
conditions set forth in the Plan.
(c) Terms and Conditions. SAR shall be subject to such terms and conditions
as shall be determined by the Committee, including the following:
(ii) Exercise Price. The exercise price of a SAR shall in no event be
less than 100% of the Fair Market Value per share of Common Stock
on the date of grant.
(iii) Amount. Upon the exercise of a SAR, the SAR Holder shall be
entitled to receive an amount in cash, shares of Common Stock or
both as determined by the Committee or as otherwise permitted in
an Agreement equal in value to the excess of the Fair Market
Value per Share of Common Stock over the Option Price per Share
of Common Stock specified in the related Agreement multiplied by
the number of shares in respect of which the SAR is exercised. In
the case of a SAR granted on a stand alone basis, the Agreement
shall specify the value to be used in lieu of the Option Price
per Share of Common Stock. The aggregate Fair Market Value per
Share of the Common Stock shall be determined as of the date of
exercise of such SAR.
(iv) Non-transferability of Stock Appreciation Rights. SAR shall be
transferable only when and to the extent that a stock option
would be transferable under the Plan unless otherwise provided in
an Agreement.
(v) Termination. A SAR shall terminate at such time as an option
would terminate under the Plan, unless otherwise provided in an
Agreement.
(vi) Incentive Stock Option. A SAR granted in tandem with an ISO shall
not be exercisable unless the fair market value of the Common
Stock on the date of exercise exceeds the Option Price. In no
event shall any amount paid pursuant to the SAR exceed the
difference between the Fair Market Value on the date of exercise
and the Option Price.
(vii) Limitation on SARs. No Participant shall be granted SARs
exceeding the limitation provided in Section 4(c), subject to the
adjustment provided in Section 4(e).
7. Change in Control/Extraordinary Transaction. The Committee, in its
discretion, shall have the authority to make provisions in its award and grant
agreements to address vesting and other issues arising in connection with a
change in control. In the event that the Company shall consummate an
Extraordinary Transaction (as defined below) the share reserve under the Plan
shall be increased by a number of shares equal to 5% of the shares issued in the
Extraordinary Transaction, provided that in no event shall the number of shares
available under the Plan exceed the 10% Limitation in Section 4(b) applied as of
the date of the Extraordinary Transaction. An Extraordinary Transaction is a
transaction pursuant to which the Company acquires a business, whether through a
merger with and into the Company or any of its subsidiaries or other
combination, the acquisition of stock or assets or otherwise, and in connection
therewith the Company issues or sells, directly or indirectly, shares of stock
in an amount equal to or greater than 10% of the shares outstanding immediately
prior to the consummation of such Extraordinary Transaction. An increase in the
share reserve under this Section shall not affect the maximum number of options,
SARs, or stock grants that any individual can receive under the Plan, nor the
maximum amount of compensation that any individual can receive under the Plan.
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8. Amendments and Termination. Either the Board or the Committee may amend
or terminate the Plan at any time, but no amendment or termination shall be made
which would impair the rights of the Optionee, Awardee, or SAR Holder without
their consent. Any amendment made by the Committee shall be subject to approval
or rejection of the Board. The Committee may amend the terms of any Grant or
Award, prospectively or retroactively, except that no such amendment shall
impair the rights of the Optionee, Awardee, or SAR Holder. The Committee may
also substitute new stock options or SARs for previously granted stock options
or SARs, including previously granted stock options or SARs having higher option
prices, but no such substitution shall be made which would impair the rights of
the Optionee or SAR Holder under such stock option or SAR theretofore granted
without the Optionee's or SAR Holder's consent. Neither the Board nor the
Committee shall, without approval of a majority of the votes cast by the
stockholders of Nabors at a meeting of stockholders at which a proposal to amend
the Plan is voted upon (i) increase the maximum number of shares of Common Stock
which may be awarded or granted under the Plan in the aggregate or to any
individual, (ii) extend the period during which stock, options, or SARs may be
granted or options or SARs may be exercised, (iii) amend the class of Covered
Persons eligible to receive stock awards, option or SAR grants, or (iv) alter
the Performance Goals. Subject to the above provisions, the Board shall have
authority to amend the Plan to make changes that are consistent with the purpose
of the Plan or to take into account changes in law and tax and accounting rules,
as well as other developments and to make Awards and Grants which qualify for
beneficial treatment under such rules without shareholder approval.
9. Miscellaneous.
(a) Other Actions. Nothing contained in the Plan shall be construed to
limit the authority of the Company to exercise its corporate rights and powers,
including but not limited to, the right of the Company to award stock or grant
options for proper corporate purposes other than under the Plan to any officer,
director, employee or other person, firm, corporation or association.
(b) Governing Laws. The Plan and all rights and obligations thereunder
shall be construed in accordance with and governed by the laws of the State of
Delaware.
(c) Approval. The Plan shall become effective on January 18, 1996, but
shall be subject to approval by vote of the stockholders of the Company at the
1996 Annual Meeting of Shareholders.
(d) Withholding of Taxes. No stock may be awarded or option or SAR may be
exercised, unless the Awardee, Optionee or SAR Holder has paid, or has made
provision, satisfactory to the Committee for payment of federal, state and local
income taxes, or any other taxes (other than stock transfer taxes), which the
Company may be obligated to withhold. The Committee may authorize that shares of
Common Stock or options be applied toward the payment of withholding taxes.
(e) Awards and Grants in Substitution for Awards Granted by Other
Corporations. Awards may be granted under the Plan from time to time in
substitution for awards held by employees, directors or service providers of
other corporations who are about to become officers, directors or employees of
the Company or an affiliate as the result of a merger or consolidation of the
employing corporation with the Company or an affiliate, or the acquisition by
the Company or an affiliate of the assets of the employing corporation, or the
acquisition by the Company or affiliate of the stock of the employing
corporation, as the result of which it becomes a designated employer under the
Plan. The terms and conditions of the stock awards and option grants so granted
may vary from the terms and conditions set forth in this Plan at the time of
such grant as the majority of the members of the Committee may deem appropriate
to conform, in whole or in part, to the provisions of the stock awards and
option grants in substitution for which they are made.
(f) Continuance of Employment. Nothing in the Plan or in any Award or Grant
pursuant to the Plan shall confer on any Covered Person any right to continue in
the employ of the Company or interfere in any way with the right of the Company
to terminate his employment at any time.
(g) Loans or Installment Payments. The Committee may, in its discretion,
assist any Awardee or Optionee in the award of stock or exercise of options
including satisfaction of any federal, state and local income and employment tax
obligations arising therefrom, by authorizing the extension of a loan from the
B-7
<PAGE> 39
Company to such Awardee or Optionee. The terms of any loan and the method of
payment (including the interest rate and terms of repayment) shall be upon such
terms as the Committee deems appropriate under the circumstances. Loans may be
authorized with or without security or collateral.
(h) Headings. The headings contained in this Plan are for reference
purposes only and shall not affect the meaning or interpretation of this Plan.
(i) Severability. If any provision of this Plan shall for any reason be
held to be invalid or unenforceable, such invalidity or unenforceability shall
not affect any other provision hereby, and this Plan shall be construed as if
such invalid or unenforceable provision were omitted.
(j) Successors and Assigns. This Plan shall inure to the benefit of and be
binding upon each successor and assign of the Company. All obligations imposed
upon a Participant, and all rights granted to the Company hereunder, shall be
binding upon the Participant's heirs, legal representatives and successors.
(k) Entire Agreement. This Plan and any Agreement entered into with an
Awardee, Optionee, or SAR Holder shall constitute the entire agreement with
respect to the subject matter thereof, provided that in the event of any
inconsistency between the Plan and the Agreement, the terms and conditions of
the Agreement shall control.
B-8
<PAGE> 40
PROXY
NABORS INDUSTRIES, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Messrs. Eugene M. Isenberg and Anthony G.
Petrello, and each of them (with full power to designate substitutes), proxies
for the undersigned to represent, vote and act with respect to all Shares of
Common Stock of Nabors Industries, Inc. (the "Company") held of record by the
undersigned at the close of business on January 12, 1996 at the Annual Meeting
of Shareholders of the Company to be held on March 5, 1996 and any adjournments
or postponements thereof, upon the matters designated below and upon such other
matters as may properly come before the meeting, according to the number of
votes the undersigned might cast and with all powers the undersigned would
possess if personally present.
1. ELECTION OF DIRECTORS: Election of three directors of the Company to
serve until the 1999 Annual Meeting of Shareholders or until their
successors are elected and qualified.
Nominees: Anthony G. Petrello, Myron M. Sheinfeld and Martin J. Whitman
2. APPROVAL OF THE INCENTIVE COMPENSATION PLAN.
3. APPROVAL OF THE 1996 EMPLOYEE STOCK PLAN.
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICE BY MARKING THE APPROPRIATE BOX, SEE
REVERSE SIDE, BUT YOU NEED NOT MARK ANY BOX IF YOU WISH TO VOTE IN ACCORDANCE
WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS.
----------------
SEE REVERSE SIDE
----------------
<PAGE> 41
[X] PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE THIS PROXY WILL
BE VOTED FOR ELECTION OF EACH NOMINEE FOR DIRECTOR AND FOR ITEMS 2 AND 3.
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1, 2 AND 3.
- --------------------------------------------------------------------------------
1. Election of Directors. FOR WITHHELD
(see reverse)
2. Approval of the incentive FOR AGAINST ABSTAIN
Compensation Plan
3. Approval of the 1996 Employee FOR AGAINST ABSTAIN
Stock Plan
For, except vote withheld from the following nomine(s)
In their discretion the Proxies are authorized to vote upon such
other business as may properly come before the Meeting.
- --------------------------------------------------------------------------------
NOTE: Please mark the proxy, sign exactly
as your name appears below, and return
it promptly in the enclosed addressed
envelope. When shares are held by joint
tenants, both parties should sign. When
signing as an attorney, executor,
administrator, trustee or guardian,
please give full title as such. If a
corporation, please sign in full
corporate name by the President or other
authorized person. If a partnership,
please sign in full partnership name by
an authorized person.
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Signature Date
