<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
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 Sec. 240.14a-11(c) or Sec. 240.14a-12
NABORS INDUSTRIES, INC.
________________________________________________________________________________
(Name of Registrant as Specified in its Charter)
________________________________________________________________________________
(Name of Person(s) Filing Proxy Statement, if other that Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6 (i) (1) and 0-11.
(1) Title of each class of securities to which transaction applies:
_______________________________________________________________________
(2) Aggregate number of securities to which transaction applies:
_______________________________________________________________________
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined):
_______________________________________________________________________
(4) Proposed maximum aggregate value of transaction:
_______________________________________________________________________
(5) Total fee paid:
_______________________________________________________________________
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a) (2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
_______________________________________________________________________
(2) Form, Schedule or Registration Statement No.:
_______________________________________________________________________
(3) Filing Party:
_______________________________________________________________________
(4) Date Filed:
_______________________________________________________________________
<PAGE> 2
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Notice
of
1998 Annual Meeting
of
Shareholders
and
Proxy Statement
- --------------------------------------------------------------------------------
NABORS INDUSTRIES LOGO
- --------------------------------------------------------------------------------
<PAGE> 3
NABORS INDUSTRIES, INC.
515 WEST GREENS ROAD, SUITE 1200
HOUSTON, TEXAS 77067
January 30, 1998
TO OUR SHAREHOLDERS:
You are cordially invited to attend the 1998 Annual Meeting of Shareholders
(the "Annual Meeting") of Nabors Industries, Inc., which will be held on
Tuesday, March 3, 1998, 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 3, 1998
------------------------
The 1998 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 3, 1998 at 11:00 a.m.
to consider and act upon the following matters:
1. The election of two Class I directors for terms expiring in 2001;
2. Such other business as may properly come before the Annual Meeting.
The Board has fixed the close of business on January 9, 1998 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
Corporate Secretary
Dated: January 30, 1998
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
------------------------
1998 ANNUAL MEETING OF SHAREHOLDERS
MARCH 3, 1998
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 1998 Annual Meeting of Shareholders (the "Annual Meeting"), to be
held at the Wyndham Greenspoint Hotel, 12400 Greenspoint Drive, Houston, Texas
77060 at 11:00 a.m., Central Standard Time, on Tuesday, March 3, 1998, or at any
adjournment or postponement thereof. This solicitation is made by mail. All
costs of this solicitation shall be borne by the Company.
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 January 30, 1998.
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 9, 1998 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 9, 1998, constitutes a quorum. On January 9, 1998, there
were 100,835,531 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.
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 Corporate 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, prior to the Annual Meeting, 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 Corporate 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 Certificate of Incorporation, a
plurality of the votes cast at a meeting at which there exists a quorum is
required for the election of directors. The election of directors is the only
matter scheduled to be considered at the Annual Meeting. If any other matter
should be presented at the Annual Meeting upon which a vote may be taken, it is
intended that Shares represented by Proxies in the accompanying form will be
voted with respect thereto in accordance with the judgment of the person or
persons voting such Shares. Eugene M. Isenberg and Anthony G. Petrello, or
either of them, each with full power of substitution, have been designated as
proxies to vote the Shares solicited hereby. Under Delaware law, there are no
rights of appraisal or similar rights of dissenters with respect to the matters
under consideration at this 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
Delaware law abstaining votes (votes withheld by shareholders who are present
and entitled to vote) and
<PAGE> 6
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 are deemed to be entitled to
vote while broker non-votes are not deemed to be entitled to vote. Abstentions
and broker non-votes 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.
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, each currently having three-year
terms of office. Each class of directors is to consist of, as nearly as
possible, one-third of the total number of directors constituting the entire
Board 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), the directors of each class will be elected for a term of three years
and until their successors have been elected and qualified. At the Annual
Meeting, two Class I directors, Mr. Hans W. Schmidt and Mr. Richard A. Stratton,
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. Schmidt and Stratton as Class I directors to serve until the
2001 Annual Meeting of Shareholders or 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 I
director nominee and the continuing Class II 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 I DIRECTOR NOMINEES -- TERMS EXPIRING IN 2001
<TABLE>
<CAPTION>
DIRECTOR
OF THE
POSITION WITH THE COMPANY COMPANY
NAME AGE AND PRIOR BUSINESS EXPERIENCE SINCE
---- --- ----------------------------- --------
<S> <C> <C> <C>
Hans W. Schmidt............. 68 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 of C. Deilman A.G.,
Deutag Drilling, a company with worldwide
drilling operations. From 1988 to 1991, Mr.
Schmidt served as President of Transocean
Drilling Company, a company of which he was also
a director from 1981 until 1991.
Richard A. Stratton......... 51 Vice Chairman of the Board of Directors, President, 1986
Nabors Drilling USA, Inc. and a member of the
Executive Committee since 1992. Mr. Stratton
served the Company as President and Chief
Operating Officer from 1986 to 1992, as Vice
President 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>
3
<PAGE> 8
CLASS II CONTINUING DIRECTORS -- 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......... 43 President and Chief Operating Officer of the 1991
Company since 1992 and a member of the Executive
Committee since 1991. He is also a Director of
Cendant Corporation since 1997 and of Danielson
Holding Corporation (a financial services holding
company) since 1996. From 1979 to 1991, Mr.
Petrello was with the law firm Baker & McKenzie,
where he had been Managing Partner of its New
York Office from 1986 until his resignation in
1991. He continues as Of Counsel to the firm and
the firm continues to provide legal services to
the Company. Mr. Petrello holds a J.D. degree
from Harvard Law School and B.S. and M.S. degrees
in Mathematics from Yale University.
Myron M. Sheinfeld.......... 67 Chairman of the Audit Committee of the Board of 1988
Directors since 1988 and a member of the
Compensation Committee since 1993. He is counsel
to the law firm of Sheinfeld, Maley & Kay, a
professional corporation located in Houston,
Texas. Mr. Sheinfeld was an adjunct professor of
law at the University of Texas, School of Law
from 1975 to 1991, and has been a contributing
author to numerous legal publications, and a
contributor, co-editor and co-author of Collier
On Bankruptcy, and a co-author of Collier On
Bankruptcy Tax for Matthew Bender & Co., Inc. He
is a member of the Board of Editors of "The
Practical Lawyer", and is a member of the Board
of Trustees of Third Avenue Trust.
Martin J. Whitman........... 73 Member of the Audit Committee since 1993. Chairman 1991
of the Board and a Director of Danielson Holding
Corporation (a financial services holding
company) since 1990; Chairman, Chief Executive
Officer and Director of Third Avenue Trust and
its predecessor (a registered investment company)
since 1990; Chief Executive Officer of M. J.
Whitman, Inc., a broker-dealer, since 1995;
Adjunct Lecturer, Adjunct Professor, and
Distinguished Fellow in Finance, Yale University
School of Management from 1972 to 1984 and 1992
to present.
</TABLE>
4
<PAGE> 9
CLASS III CONTINUING DIRECTORS -- TERMS EXPIRING IN 2000
<TABLE>
<CAPTION>
DIRECTOR
OF THE
POSITION WITH THE COMPANY COMPANY
NAME AGE AND PRIOR BUSINESS EXPERIENCE SINCE
---- --- ----------------------------- --------
<S> <C> <C> <C>
Gary T. Hurford............. 61 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.......... 68 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 (a financial
services holding company) since 1990, and a
Governor of the American Stock Exchange since
1996. 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.
Jack Wexler................. 72 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 1983. Prior to 1983, 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>
Bruce P. Koch............... 38 Vice President, Finance, since January 1996, and Controller
of the Company since March 1990. He was 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............ 60 Vice President, Administration, and Corporate Secretary of
the Company since 1986. He was Manager, Administration of
the Company 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>
5
<PAGE> 10
COMMITTEES OF THE BOARD
The Committees of the Board consist of an Executive Committee, a
Compensation Committee and an 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 Corporate 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 the 1999 Annual Meeting of Shareholders to be held on
June 1, 1999 to be delivered to the Company on or prior to January 1, 1999.
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-five times during the fiscal year ended
September 30, 1997. The Executive Committee, as empowered by the Restated
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 three times during the fiscal year ended
September 30, 1997. 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
reviews employment agreements, salaries, bonuses, stock options and employee
benefit plans for officers and key employees.
The Audit Committee met three times during the fiscal year ended September
30, 1997. 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 four times during the fiscal year ended
September 30, 1997. Except for Mr. Whitman, no incumbent Director attended fewer
than 75% of the aggregate of the (i) meetings of the Board and (ii) meetings of
all committees on which he served.
REMUNERATION OF DIRECTORS
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 of the
Board. No additional fees are paid for attendance at meetings of committees of
the Board 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.
The issuance of stock options under 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 with this Plan, each non-employee director in office
at each annual meeting date receives a grant to purchase 5,000 shares at the
market price on the date of grant. On March 4, 1997, each of Messrs. Hurford,
Schmidt, Sheinfeld, Wexler and Whitman was granted options to purchase 5,000
Shares at a per Share price of $16.25. These options, exercisable for ten years,
become fully vested on March 3, 1998.
CERTAIN RELATIONSHIPS
Mr. Anthony Petrello was a partner of, and is currently Of Counsel to,
Baker & McKenzie, which firm provided legal services to the Company during the
fiscal year ending September 30, 1997 and is expected to continue to render such
services in the future. Mr. Petrello does not receive remuneration from Baker &
McKenzie for work performed by the firm in connection with the Company.
During 1997, certain of the Company's customers offered the Company
opportunities to invest in two oil and gas properties. The Company determined
that it was not interested in making such investments at the
6
<PAGE> 11
time. In the interest of maintaining good customer relations, the Chairman
offered to assist (receiving no remuneration whatsoever) the customers in
finding third party investors. As an accommodation to the customers, the Company
made the initial investments until third-party investors were identified, at
which time the Company recouped all its initial investments plus interest of 6%
per annum from the date of the applicable investment. A family member of the
Chairman was a minority third-party investor.
For additional disclosure regarding relationships between members of the
Board of Directors and the Company see ("Compensation Committee Interlocks &
Insider Participation").
SHARE OWNERSHIP OF MANAGEMENT AND PRINCIPAL SHAREHOLDERS
The following table sets forth, as of December 31, 1997, 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) any other person or entity known by the
Company to be the beneficial owner of more than 5% of the Shares, which is the
Company's only outstanding class of voting securities:
<TABLE>
<CAPTION>
COMMON STOCK BENEFICIALLY OWNED
--------------------------------------
BENEFICIAL OWNER(2) NUMBER OF SHARES PERCENT OF TOTAL(1)
------------------- ---------------- -------------------
<S> <C> <C>
DIRECTORS
Gary T. Hurford(3).......................................... 75,000 *
Eugene M. Isenberg(4)....................................... 8,406,349 7.81
Anthony G. Petrello(5)...................................... 3,771,500 3.61
Hans W. Schmidt(6).......................................... 88,000 *
Myron M. Sheinfeld(7)....................................... 47,135 *
Richard A. Stratton(8)...................................... 1,468,745 1.44
Jack Wexler(9).............................................. 55,000 *
Martin J. Whitman(10)....................................... 388,265 *
EXECUTIVE OFFICERS (NOT DIRECTORS)
Bruce P. Koch(11)........................................... 33,750 *
Daniel McLachlin(12)........................................ 9,966 *
All Directors/Executive Officers as a group (10 persons)
(3)-(12).................................................. 14,343,710 12.69
OTHER
FMR Corp. (13).............................................. 7,401,400 7.34
Merrill Lynch & Co. (14).................................... 5,046,404 5.00
</TABLE>
- ---------------
* Less than 1%
(1) As of December 31, 1997 the Company had outstanding and entitled to vote
100,835,531 Shares.
(2) The address of each of the persons listed, unless otherwise indicated in
the applicable footnote, is in care of the Company, 515 West Greens Road,
Suite 1200, Houston, Texas 77067.
(3) The Shares listed for Mr. Hurford include 75,000 Shares which may be
acquired pursuant to the exercise of options within 60 days of December 31,
1997. The Shares listed for Mr. Hurford exclude 2,026,000 Shares (2.01%)
owned directly by Hunt Oil Company (of which Mr. Hurford is President) as
to which Mr. Hurford disclaims beneficial ownership.
(4) The Shares listed for Mr. Isenberg include 6,813,000 Shares which may be
acquired pursuant to the exercise of options within 60 days of December 31,
1997. The Shares listed for Mr. Isenberg are held directly or indirectly
through certain trusts, defined benefit plans and Individual Retirement
Accounts of which Mr. Isenberg is a grantor, trustee, or beneficiary. Not
included in the table are 372,596 Shares owned directly or held in trust by
Mr. Isenberg's spouse of which Mr. Isenberg disclaims beneficial ownership.
(5) The Shares listed for Mr. Petrello include 3,621,500 Shares which may be
acquired pursuant to the exercise of options within 60 days of December 31,
1997.
7
<PAGE> 12
(6) The Shares listed for Mr. Schmidt include 85,000 Shares which may be
acquired pursuant to the exercise of options within 60 days of December 31,
1997.
(7) The Shares listed for Mr. Sheinfeld include 30,000 Shares which may be
acquired pursuant to the exercise of options within 60 days of December 31,
1997.
(8) The Shares listed for Mr. Stratton include 1,450,000 Shares which may be
acquired pursuant to the exercise of options within 60 days of December 31,
1997.
(9) The Shares listed for Mr. Wexler include 55,000 Shares which may be
acquired pursuant to the exercise of options within 60 days of December 31,
1997.
(10) The Shares listed for Mr. Whitman include 35,000 Shares which may be
acquired pursuant to the exercise of options within 60 days of December 31,
1997. The Shares listed for Mr. Whitman exclude 474,808 Shares owned by
M.J. Whitman & Co., Inc. ("MJW&CO.") and 2,805 Shares owned directly by Mr.
Whitman's spouse. Mr. Whitman disclaims beneficial ownership of the Shares
owned by MJW&CO. and his spouse. Mr. Whitman is a majority stockholder in
MJW&CO. and as a result of his stock ownership of MJW&CO., Mr. Whitman may
be deemed to have beneficial ownership of the Shares owned by MJW&CO.
(11) The Shares listed for Mr. Koch include 33,750 Shares which may be acquired
pursuant to the exercise of options within 60 days of December 31, 1997.
(12) The Shares listed for Mr. McLachlin include 9,875 Shares which may be
acquired pursuant to the exercise of options within 60 days of December 31,
1997.
(13) Based on the information contained in Schedule 13G of FMR Corp., Edward C.
Johnson III and Abigail Johnson, (collectively, "FMR Corp.") filed with the
Securities and Exchange Commission on June 10, 1997, the Shares listed for
FMR Corp. include (i) 6,706,100 Shares of Common Stock of the Company
beneficially owned by Fidelity Management & Research Company ("Fidelity"),
and (ii) 695,300 Shares of Common Stock of the Company beneficially owned
by Fidelity Management Trust Company (with Fidelity, the "Fidelity Funds").
FMR Corp. has sole voting power with respect to 695,300 Shares and sole
dispositive power with respect to 7,401,400 Shares. FMR Corp. does not have
sole power to vote or direct the voting of Shares owned directly by the
Fidelity Funds, which power resides with each Fund Board of Trustees.
Fidelity carries out the voting of Shares under written guidelines
established by each Fund Board of Trustees. The address of FMR Corp. is 82
Devonshire Street, Boston, Massachusetts 02109.
(14) Based on the information contained in Schedule 13G of Merrill Lynch & Co.
filed with the Securities and Exchange Commission on February 14, 1997, the
Shares listed for Merrill Lynch & Co. include 5,046,404 Shares of Common
Stock of the Company beneficially owned by Merrill Lynch & Co. Inc.,
Merrill Lynch Group, Inc., Princeton Services, Inc., Merrill Lynch Asset
Management, L.P. and Merrill Lynch Growth Fund for Investment and
Retirement (collectively, "Merrill Lynch"). Merrill Lynch has shared voting
and shared dispositive power with respect to such Shares. The address of
Merrill Lynch & Co., Inc. and Merrill Lynch Group, Inc. is World Financial
Center, North Tower, 250 Vesey Street, New York, NY 10281 and the address
of Princeton Services, Inc., Merrill Lynch Asset Management L.P. and
Merrill Lynch Growth Fund for Investment and Retirement is 800 Scudders
Mill Road, Plainsboro, NJ 08536.
8
<PAGE> 13
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 whose compensation for the year
exceed $100,000 ("Named Executive Officers") for each of the last three fiscal
years.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
ANNUAL COMPENSATION LONG-TERM COMPENSATION
----------------------------------
AWARDS PAYOUTS
- --------------------------------------------------------------------------------------------------------------------------------
(A) (B) (C) (D) (E) (F) (G) (H) (I)
RESTRICTED SECURITIES
OTHER ANNUAL STOCK UNDERLYING LTIP ALL OTHER
SALARY BONUS COMPENSATION AWARD(S) OPTIONS/ PAYOUTS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($)(1) ($) SARS (#) ($) ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
Eugene M. Isenberg 1997 325,000 1,350,000(2) 0 6,012,500 0 141,453(3)
Chairman of the Board, 1996 325,000 1,350,000 0 1,000,000 0 36,755
Director 1995 325,000 1,300,000 0 1,800,000 0 17,438
and Chief Executive Officer
- --------------------------------------------------------------------------------------------------------------------------------
Anthony G. Petrello 1997 275,000 300,000(4) 0 3,437,000 0 409,943(5)
Director, President and Chief 1996 275,000 300,000 0 303,000 0 447,238
Operating Officer 1995 275,000 300,000 0 1,600,000 0 133,069
- --------------------------------------------------------------------------------------------------------------------------------
Richard A. Stratton 1997 275,000 300,000 0 1,287,500 0 19,315(6)
Vice Chairman of the Board, 1996 275,000 300,000 0 75,000 0 18,774
Director and President, 1995 275,000 200,000 0 200,000 0 20,180
Nabors Drilling USA, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
Bruce P. Koch 1997 126,250 26,000 0 15,000 0 5,681(7)
Vice President of Finance and 1996 111,250 23,000 0 20,000 0 5,006
Controller 1995 97,500 20,000 0 20,000 0 4,388
- --------------------------------------------------------------------------------------------------------------------------------
Michael W. Dundy 1997 45,602 0 0 0 0 1,974(8)
Vice President and General 1996 147,900 0 0 10,000 0 7,283
Counsel 1995 140,400 14,040 0 10,000 0 5,885
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The aggregate amount of perquisites 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) Mr. Isenberg is entitled to receive an annual bonus as described under
("Employment Contracts"). In addition to the bonus noted above, on January
9, 1998, in lieu of the remainder of his bonus for fiscal 1997, Mr. Isenberg
was granted options to purchase 2,052,992 Shares at a per Share exercise
price of $24.4375, the market value of a Share on the date of grant. The
options vested immediately and will be reflected in the executive's fiscal
1998 Long Term Compensation.
(3) Mr. Isenberg's All Other Compensation amount for 1997 includes Company
matching contributions to a retirement savings plan and a non-qualified
deferred compensation plan of $7,200; and $134,253 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.
(4) Mr. Petrello is entitled to receive an annual bonus as described under
("Employment Contracts"). In addition to the bonus noted above, on January
9, 1998, in lieu of the remainder of his bonus for fiscal 1997, Mr. Petrello
was granted options to purchase 570,230 Shares at a per Share exercise price
of $24.4375, the market value of a Share on the date of grant. The options
vested immediately and will be reflected in the executive's fiscal 1998 Long
Term Compensation.
(5) Mr. Petrello's All Other Compensation amount for 1997 includes (i) Company
matching contributions to a retirement savings plan and a non-qualified
deferred compensation plan of $7,200; (ii) $5,683, 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; (iii)
imputed interest of $278,989 on a loan from the Company in the maximum
amount of $2,881,915 pursuant to his Employment Agreement in connection with
his relocation to Houston, the balance of which was $2,881,915 as of
December 31, 1997 and no interest has
9
<PAGE> 14
been paid or charged thereon; and (iv) the Company's reimbursement of
certain traveling and other expenses of $118,071.
(6) Mr. Stratton's All Other Compensation amount for 1997 includes (i) Company
matching contributions to a retirement savings plan and non-qualified
deferred compensation plan of $7,200; (ii) $2,011 which is the benefit to
Mr. Stratton of the premiums paid by the Company, as projected on an
actuarial basis, for a split dollar life insurance arrangement; and (iii)
imputed interest of $10,104 on a loan from the Company in the maximum amount
of $104,375 in connection with his relocation to Houston, the balance of
which was $104,375 as of December 31, 1997 and no interest has been paid or
charged thereon.
(7) Mr. Koch's All Other Compensation amount for 1997 includes Company matching
contributions to a retirement savings plan and a non-qualified deferred
compensation plan of $5,681.
(8) Mr. Dundy's All Other Compensation amount for 1997 includes Company matching
contributions to a retirement savings plan of $1,974. Mr. Dundy resigned
from the Company effective January 15, 1997. He subsequently served as a
Consultant to the Company, and received $80,009 for such services during
fiscal year 1997.
10
<PAGE> 15
STOCK OPTION/SAR GRANT TABLE
The following table provides information with respect to stock options
granted during the fiscal year ended September 30, 1997 to the Named Executive
Officers:
OPTION/SAR GRANTS IN THE LAST FISCAL YEAR
<TABLE>
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------
INDIVIDUAL GRANTS
- -----------------------------------------------------------------------------------------------------------------
(A) (B) (C) (D) (E) (F)
NUMBER OF
SECURITIES
UNDERLYING % OF TOTAL
OPTIONS/ SARS OPTIONS/SAR GRANT DATE
GRANTED GRANTED TO EXERCISE OR PRESENT
NAME (#) EMPLOYEES IN BASE PRICE EXPIRATION VALUE($)(7)
FISCAL YEAR ($/SH) DATE
=================================================================================================================
Eugene M. Isenberg 720,000(1) 6.28% 16.750 10/18/06 2,686,124
- -----------------------------------------------------------------------------------------------------------------
Eugene M. Isenberg 297,000(1) 2.59% 16.000 10/23/06 1,060,872
- -----------------------------------------------------------------------------------------------------------------
Eugene M. Isenberg 124,560(1) 1.09% 17.000 11/11/06 468,869
- -----------------------------------------------------------------------------------------------------------------
Eugene M. Isenberg 175,440(1) 1.53% 17.000 11/12/06 659,613
- -----------------------------------------------------------------------------------------------------------------
Eugene M. Isenberg 300,000(1) 2.62% 17.000 11/13/06 1,127,485
- -----------------------------------------------------------------------------------------------------------------
Eugene M. Isenberg 150,000(1) 1.31% 18.125 11/14/06 600,103
- -----------------------------------------------------------------------------------------------------------------
Eugene M. Isenberg 150,000(1) 1.31% 20.000 11/20/06 662,443
- -----------------------------------------------------------------------------------------------------------------
Eugene M. Isenberg 330,000(1) 2.88% 21.000 11/22/06 1,530,244
- -----------------------------------------------------------------------------------------------------------------
Eugene M. Isenberg 1,450,000(2) 12.66% 17.500 12/12/06 5,629,323
- -----------------------------------------------------------------------------------------------------------------
Eugene M. Isenberg 2,315,500(1) 20.21% 29.550 07/22/07 15,228,420
- -----------------------------------------------------------------------------------------------------------------
Anthony G. Petrello 480,000(1) 4.19% 16.750 10/18/06 1,790,749
- -----------------------------------------------------------------------------------------------------------------
Anthony G. Petrello 197,000(1) 1.72% 16.000 10/23/06 703,718
- -----------------------------------------------------------------------------------------------------------------
Anthony G. Petrello 83,040(1) .72% 17.000 11/11/06 312,579
- -----------------------------------------------------------------------------------------------------------------
Anthony G. Petrello 116,960(1) 1.02% 17.000 11/12/06 439,742
- -----------------------------------------------------------------------------------------------------------------
Anthony G. Petrello 200,000(1) 1.75% 17.000 11/13/06 751,657
- -----------------------------------------------------------------------------------------------------------------
Anthony G. Petrello 100,000(1) .87% 18.125 11/14/06 400,068
- -----------------------------------------------------------------------------------------------------------------
Anthony G. Petrello 100,000(1) .87% 20.000 11/20/06 441,629
- -----------------------------------------------------------------------------------------------------------------
Anthony G. Petrello 220,000(1) 1.92% 21.000 11/22/06 1,020,162
- -----------------------------------------------------------------------------------------------------------------
Anthony G. Petrello 650,000(3) 5.67% 17.500 12/12/06 2,523,588
- -----------------------------------------------------------------------------------------------------------------
Anthony G. Petrello 1,290,000(1) 11.26% 29.550 07/22/07 8,482,254
- -----------------------------------------------------------------------------------------------------------------
Richard A. Stratton 40,800(1) .36% 15.500 10/11/06 141,130
- -----------------------------------------------------------------------------------------------------------------
Richard A. Stratton 40,500(1) .35% 15.500 10/14/06 140,256
- -----------------------------------------------------------------------------------------------------------------
Richard A. Stratton 18,700(1) .16% 15.875 10/15/06 66,301
- -----------------------------------------------------------------------------------------------------------------
Richard A. Stratton 50,000(1) .44% 16.375 10/22/06 182,860
- -----------------------------------------------------------------------------------------------------------------
Richard A. Stratton 225,000(1) 1.96% 16.000 10/30/06 798,692
- -----------------------------------------------------------------------------------------------------------------
Richard A. Stratton 350,000(4) 3.06% 17.500 12/12/06 1,359,294
- -----------------------------------------------------------------------------------------------------------------
Richard A. Stratton 150,000(5) 1.31% 22.500 06/12/07 757,597
- -----------------------------------------------------------------------------------------------------------------
Richard A. Stratton 412,500(1) 3.60% 29.550 07/22/07 2,713,793
- -----------------------------------------------------------------------------------------------------------------
Bruce P. Koch 15,000(6) 0.13% 17.000 02/12/07 79,601
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE> 16
(1) These options were granted to the Executive in a number equal to the number
of options exercised pursuant to the terms of previous option agreements.
The options vested immediately.
(2) The options were granted on December 12, 1996. 1,000,000 of the options were
granted in lieu of a portion of Mr. Isenberg's cash bonus for fiscal year
1996 and vested immediately. 450,000 of the options were granted for
extending Mr. Isenberg's employment contract and were scheduled to vest in
four equal annual installments beginning December 12, 1997, subject to
accelerated vesting as set forth below. 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 20 consecutive days at an average price that is 15% per
annum or greater than the price on the date of grant, the first installment
will vest; if it trades at more than 32.3% the second installment will vest;
if it trades at 52.1% the third installment will vest; and if it trades at
74.9%, the fourth installment will vest. As of September 30, 1997, all of
the installments had vested pursuant to the terms of the related option
agreement. Mr. Isenberg currently is entitled to receive a new option grant
to acquire up to 112,500 Shares upon exercise of a like number of his
outstanding options, at an exercise price equal to the market price on the
date of the new grant.
(3) The options were granted on December 12, 1996. 300,000 of the options were
granted in lieu of a portion of Mr. Petrello's cash bonus for fiscal year
1996 and vested immediately. 350,000 of the options were granted for
extending Mr. Petrello's employment contract and were scheduled to vest in
four equal annual installments beginning December 12, 1997, subject to
accelerated vesting as set forth below. 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 20 consecutive days at an average price that is 15% per
annum or greater than the price on the date of grant, the first installment
will vest; if it trades at more than 32.3% the second installment will vest;
if it trades at 52.1% the third installment will vest; and if it trades at
74.9%, the fourth installment will vest. As of September 30, 1997, all of
the installments had vested pursuant to the terms of the related option
agreement. Mr. Petrello currently is entitled to receive a new option grant
to acquire up to 91,000 Shares upon exercise of a like number of his
outstanding options, at an exercise price equal to the market price on the
date of the new grant.
(4) The options were granted on December 12, 1996 and were scheduled to vest in
four equal annual installments beginning December 12, 1997, subject to
accelerated vesting as set forth below. 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 20 consecutive days at an average price that is 15% per
annum or greater than the price on the date of grant, the first installment
will vest; if it trades at more than 32.3% the second installment will vest;
if it trades at 52.1% the third installment will vest; and if it trades at
74.9%, the fourth installment will vest. As of September 30, 1997, all of
the installments had vested pursuant to the terms of the related option
agreement. Mr. Stratton currently is entitled to receive a new option grant
to acquire up to 87,500 Shares upon exercise of a like number of his
outstanding options, at an exercise price equal to the market price on the
date of the new grant.
(5) The options were granted on June 12, 1997 and vested immediately. The
exercise price was equal to the per Share market price on the date of the
grant.
(6) The options were granted on February 12, 1997 and vest in four annual
installments beginning February 12, 1998. The exercise price was equal to
the per Share market price on the date of the grant.
(7) All options are granted at an exercise price equal to the market value of
the Shares on the date of grant. Therefore, if there is no appreciation in
that market value, no value will be realizable. In accordance with
Securities and Exchange Commission rules, the Black-Scholes option pricing
model was chosen to estimate the grant date present value of the options set
forth in this table. The Company's use of this model should not be construed
as an endorsement of its accuracy at valuing options. All stock option
valuation models, including the Black-Scholes model, require a prediction
about the future movement of the stock price. The following assumptions were
made for purposes of calculation the grant date present value: (a) for
options that vested immediately, the expected term is assumed to be two
years, volatility at 30.9%, dividend of $0 per share and risk free rates of
return of 5.61% to 5.92% and (b) for all other options, the expected term is
assumed to be three and one-half years, volatility at 30.9%, dividend of $0
per share and a risk free rate of return of 6.08%. The real value of the
options in this table depends solely upon the actual performance of the
Company's stock during the applicable period.
12
<PAGE> 17
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 the fiscal year ended September 30, 1997 and the value as of
September 30, 1997 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 $39.0625 per
Share at fiscal year end, September 30, 1997.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
(A) (B) (C) (D) (E)
NUMBER OF SECURITIES
SHARES UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
ACQUIRED OPTIONS/SARS IN-THE-MONEY
ON VALUE AT FY-END OPTIONS AT FY-END
EXERCISE REALIZED (#) ($)
NAME (#) ($) EXERCISABLE / UNEXERCISABLE EXERCISABLE / UNEXERCISABLE
<S> <C> <C> <C> <C>
=================================================================================================================
Eugene M. Isenberg 4,562,500 $82,871,946 6,813,000 / 0 $125,019,256 / $ 0
- -----------------------------------------------------------------------------------------------------------------
Anthony G. Petrello 2,787,000 47,325,166 3,621,500 / 0 63,781,563 / 0
- -----------------------------------------------------------------------------------------------------------------
Richard A. Stratton 787,500 14,609,525 1,450,000 / 0 27,700,488 / 0
- -----------------------------------------------------------------------------------------------------------------
Bruce P. Koch 20,000 462,525 16,250 / 43,750 512,578 / 1,212,422
- -----------------------------------------------------------------------------------------------------------------
Michael W. Dundy 0 0 7,500 / 3,750 235,000 / 123,047
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
EMPLOYMENT CONTRACTS
Mr. Isenberg's and Mr. Petrello's employment contracts were amended and
restated effective October 1, 1996 and both contracts had an expiration date of
September 30, 2001. The expiration date automatically extends for an additional
one year term on each anniversary date, unless the Company provides notice to
the contrary ten days prior to such anniversary. Mr. Isenberg's salary is
subject to annual review for increase at the discretion of the Board and its
Compensation Committee. The formula for the calculation of his cash bonus
remained as it had been under the prior version, a shareholder approved contract
which provided that Mr. Isenberg is entitled to receive an annual cash bonus
equal to 7% (6% for fiscal years commencing on or after October 1, 1999) 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. Mr. Petrello's salary
is subject to annual review for increase at the discretion of the Board and its
Compensation Committee. His annual bonus remained as it had been at the greater
of $700,000 or 2% of the net cash flow (as defined in the employment contract)
in excess of 15% of the average stockholders equity in such year. Messrs.
Isenberg and Petrello are eligible for stock options and grants, may participate
in annual long-term incentive programs, and pension and welfare plans, on the
same basis as other executives and may receive special bonuses from time to time
as determined by the Company.
In addition to salary and bonus, Messrs. Isenberg and Petrello are entitled
to group life insurance at an amount at least equal to three times base salary;
various split-dollar life insurance policies, reimbursement of expenses, various
perquisites and a personal umbrella policy in the amount of $5 million. Further,
if Mr. Isenberg or Mr. Petrello is subject to the tax imposed by Section 4999 of
the Internal Revenue Code, the Company has agreed to reimburse them for such tax
on an after-tax basis.
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 (as defined in the agreements) or is
terminated as a result of or following a Change of Control (as defined in the
agreements), the terminated individual will be entitled to receive (i) all base
salary which would have been payable through the expiration date of the contract
(currently, September 30, 2002) or three times the then current base salary,
whichever is greater; (ii) all annual cash bonus which would have been payable
through the expiration date, or three times the highest bonus, (including the
imputed value of grants of stock awards and stock options), paid or payable
13
<PAGE> 18
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, which shall become immediately and
fully vested; (v) any amounts earned, accrued or owing to the executive but not
yet paid (including executive benefits, life insurance, disability benefits and
reimbursement of expenses and perquisites) shall be continued through the later
of the expiration date or three years after the termination date; (vi) continued
participation in medical, dental and life insurance coverage until the executive
receives equivalent benefits or coverage through a subsequent employer or until
the death of the executive or his spouse, whichever is later; and (vii) any
other or additional benefits in accordance with applicable plans and programs of
the Company. In the event that either Mr. Isenberg's or Mr. Petrello's
termination is related to a Change in Control, the terminated individual at his
election shall be entitled to receive a cash amount equal to one dollar less
than the amount that would constitute an "excess parachute payment" as defined
in Section 280G of the Internal Revenue Code, in lieu of the salary and bonus
referred to in (i) and (ii) above. In addition, the terminated individual shall
be entitled, upon his election to terminate because of such 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 equal to (x) the excess of
the Change in Control Price (as defined in the agreements) over the exercise
price of the options per share of Common Stock multiplied by (y) the number of
options selected by the individual. In addition, they shall be entitled to be
granted additional options immediately exercisable for five years, at a price
equal to the average closing price per Share during the 20 days prior to the
Change of Control in an amount equal to the highest number of options granted
during any fiscal year during the period comprising the then current fiscal year
and the three fiscal years preceding the Change in Control. In the event that
either Mr. Isenberg's or Mr. Petrello's employment contract is terminated for
cause or as a result of resignation (other than as described above), the
terminated individual will be entitled to receive (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 vested on
or prior to the date of termination; (iv) any outstanding stock options vested
on or prior to the date of termination; (v) any amounts earned, accrued or owing
to the executive but not yet paid (including executive benefits, life insurance,
disability benefits and reimbursement of expenses and perquisites if to be
performed following termination); and (vi) other or additional benefits in
accordance with applicable plans and programs of the Company. If Mr. Petrello's
employment is terminated for any reason, he is entitled to certain relocation
benefits as set forth in his agreement.
Mr. Stratton entered into a new employment contract effective October 1,
1996, with an expiration date of September 30, 2001. The expiration date
automatically extends for an additional one year term on each anniversary date,
unless the Company provides notice to the executive to the contrary ten days
prior to such anniversary. Mr. Stratton's salary is subject to annual review for
increase at the discretion of the Board and its Compensation Committee. Mr.
Stratton is also entitled to vacation, reimbursement of expenses, comprehensive
medical, disability and life insurance protection, a split-dollar life insurance
agreement in an amount of not less that $2 million, other perquisites and a
personal umbrella policy in the amount of $5 million. Mr. Stratton's term of
employment continues until the earliest of the expiration date of the contract
(currently September 30, 2002), 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's
employment is terminated by the Company for any reason other than cause or by
Mr. Stratton's voluntary resignation or is terminated by Mr. Stratton following
a Change of Control (as defined in the agreement), Mr. Stratton shall be
entitled to (i) all base salary which would have been payable for the period
from the termination date until the expiration date; (ii) all deemed bonus which
would have been payable for the period from the termination date until the
expiration date (for this purpose, deemed bonus for each fiscal year shall equal
the highest cash bonus paid to Mr. Stratton during the last three fiscal years
prior to the termination date); (iii) any restricted stock outstanding, which
shall become immediately and fully vested; (iv) any outstanding stock options,
which shall become immediately and fully vested; (v) any amounts then earned,
accrued or owing to Mr. Stratton but not yet paid (including obligations to be
performed following termination); and (vi) certain other benefits including
vacation, life insurance and medical benefits will be continued through the
later of the expiration date or three years following the date of termination.
In the event Mr. Stratton is terminated for cause or voluntarily resigns, he
shall be entitled to receive only those
14
<PAGE> 19
outstanding stock 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 1997 was
comprised, of three non-employee directors, Mr. Wexler (Chairman), Mr. Hurford
and Mr. Sheinfeld. During fiscal 1997 the Company provided drilling and
logistical services to Hunt Oil Company ("Hunt"), of which Mr. Gary Hurford,
serves as the President. The drilling and logistical services were provided by
the Company to Hunt, at prevailing market rates. Amounts received for such
services represented approximately 1% 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; and
(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 an extended session, 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 Committee 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 achieved 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; and
(4) Reward key employees for exceptional performance with regard to the
Company's success.
15
<PAGE> 20
The Company's executive compensation program includes base salary and
incentive bonuses as follows:
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 1997, 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.
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 under
("Remuneration of Management-Employment Contracts"). With respect to other
senior executive officers, the performance goals include both financial and
non-financial objectives, including achieving certain financial targets in
relation to internal budgets, developing internal 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,
particularly where options are given in lieu of cash bonuses. 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
1997, 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 statements 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 (See
"Remuneration of Management and Employment Contracts"). However, for fiscal
1997, 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, on January 9, 1998, the Committee granted to
Messrs. Isenberg and Petrello 2,052,992 and 570,230, stock options,
respectively, with a per Share exercise price of $24.4375, the market value of
an underlying Share on the date of the grant. 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 1997, the Company's financial performance as measured
by the financial indicators as Economic Value Added, Return of Capital Employed,
Return on Assets and Return on Equity were all improved over 1996.
Section 162(m) of the Internal Revenue Code of 1986, as amended, limits to
$1,000,000 the amount of compensation that may be deducted by 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) in
1993. Section 162(m) applied to the Company for the first time in fiscal 1995.
Although the contractual bonus arrangements remained the same from their
previous
16
<PAGE> 21
contracts, certain bonus compensation, as well as the Share options granted to
Mr. Isenberg, Mr. Petrello and Mr. Stratton pursuant to the new and amended
employment contracts entered into in 1996, 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 "Remuneration of Management-Option/SAR
Grants in the Last Fiscal Year and Employment Contracts"). The cash compensation
paid to Mr. Isenberg in excess of $1,000,000 for fiscal 1997 is not deductible.
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.
CHIEF EXECUTIVE OFFICER AND PRESIDENT
The Committee's arrangements with its Chief Executive Officer and President
have been designed from the outset to align compensation to enhancing
shareholder value. Mr. Isenberg's compensation is made pursuant to a contractual
formula that 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 remained constant since
1987, and Mr. Petrello's since his employment date in 1991. The major portion of
their cash compensation is the performance based bonus compensation. Mr.
Isenberg and Mr. Petrello receive a cash bonus according to a formula based on a
percentage (Isenberg-7%, Petrello-2%) of cash flow in excess of a 15% return on
shareholders' average book equity. The Committee believes that tying the cash
bonus to cash flow in excess of a return on shareholders' average equity aligns
Mr. Isenberg's and Mr. Petrello'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 effective October 1, 1996 for
additional five-year terms that renew annually absent notice to the contrary
(see "Remuneration of Management 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 1996 and
1997, the Committee, with the concurrence of Messrs. Isenberg and Petrello,
reduced the cash bonus awards to which they were entitled under the formula
arrangements and in lieu of a portion thereof, granted stock options as
described above.
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>
- ----------------------------------------------------------------------------------------------------
1997 VERSUS 1996 1997 VERSUS 1992
----------------------------------------
FISCAL YEAR INCREASE INCREASE
- ----------------------------------------------------------------------------------------------------
FINANCIAL DATA 1997 1996 1992(1) $ % $ %
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues............... $1,029.3 $ 719.7 $312.4 $ 309.6 43% $ 716.9 229%
- ----------------------------------------------------------------------------------------------------
Net income............. 114.8 70.5 33.7 44.3 63% 81.1 241%
- ----------------------------------------------------------------------------------------------------
Net income per share... 1.06 0.75 0.45 0.31 41% 0.61 136%
- ----------------------------------------------------------------------------------------------------
Stockholders' equity... 727.8 457.8 201.1 270.0 59% 526.7 262%
- ----------------------------------------------------------------------------------------------------
Year end market value
of shares
outstanding......... $3,935.6 $1,174.2 $527.8 $2,761.4 235% $3,407.8 646%
- ----------------------------------------------------------------------------------------------------
</TABLE>
17
<PAGE> 22
(1) The financial data for 1992 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
STOCK PERFORMANCE GRAPH
The following graph illustrates comparisons of five-year cumulative total
returns among Nabors Industries, Inc., the S&P Midcap Index and the Dow Jones
Oil Drilling Index. Total returns assumes $100 invested on September 30, 1992 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, 1992 to September 30, 1997.
[STOCK PERFORMANCE GRAPH]
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.
18
<PAGE> 23
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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 fiscal year ended September 30, 1997, all
Section 16(a) filing requirements applicable to its officers, directors and
greater than ten-percent beneficial owners were complied with on a timely basis.
OTHER MATTERS
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.
At a meeting held on December 4, 1997, the Board of Directors approved a
change in the By-Laws regarding the Company's fiscal year and Annual Meeting
date. For the fiscal year ended September 30, 1997 and prior fiscal years, the
fiscal year was the twelve-month period beginning October 1 and ending September
30 in the next succeeding year. Following the fiscal year ended September 30,
1997, the fiscal year of the Company shall be a twelve-month period beginning
January 1 and ending December 31 in the same year. For all fiscal years
following the fiscal year ended September 30, 1997, the Annual Meeting of
Shareholders of the Company shall be held on the first Tuesday of June in each
year if not a legal holiday, and if a legal holiday, then on the next succeeding
day which is not a legal holiday. The 1999 Annual Meeting will be held on June
1, 1999.
SHAREHOLDERS' PROPOSALS FOR PRESENTATION
AT 1999 ANNUAL MEETING
If a shareholder of the Company wishes to present a proposal for
consideration at the 1999 Annual Meeting of Shareholders, the proposal must be
received at the executive offices of the Company no later than January 1, 1999
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
Corporate Secretary
Dated: January 30, 1998
19
<PAGE> 24
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.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF EACH NOMINEE FOR
DIRECTOR.
FOR [ ] WITHHELD [ ]
1. Election of Directors. (see reverse)
For, except vote withheld from the following nominee(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.
_________________________________________
_________________________________________
Signature Date
<PAGE> 25
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 9, 1998 at the Annual Meeting
of Shareholders of the Company to be held on March 3, 1998 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.
ELECTION OF DIRECTORS: Election of two directors of the Company to serve
until the 2001 Annual Meeting of Shareholders or until their successors are
elected and qualified.
Nominees: Hans W. Schmidt and Richard A. Stratton
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
2
