1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 9, 1999OCTOBER 11, 2002
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington,WASHINGTON, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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NABORS HOLDINGS 1, ULC
NABORS INDUSTRIES, INC.
NABORS INDUSTRIES LTD.
(Exact Namename of Registrantregistrant as Specifiedspecified in its Charter)charter)
NABORS HOLDINGS 1, ULC NABORS INDUSTRIES, INC. NABORS INDUSTRIES LTD.
NOVA SCOTIA, CANADA DELAWARE 1381 93-0711613BERMUDA
(State or Other Jurisdictionother jurisdiction of (State or other jurisdiction of (State or other jurisdiction of
organization of incorporation) organization of incorporation) organization of incorporation)
1381 1381 1381
(Primary Standard Industrial (Primary Standard Industrial (Primary Standard Industrial
Classification Code Number) Classification Code Number) Classification Code Number)
87-0385317 93-0711613 98-0363970
(I.R.S. Employer Identification Incorporation or Organization) ClassificationNo.) (I.R.S. Employer Identification No.) (I.R.S. Employer Identification No.)
3000, 500-4TH AVENUE, S.W. 515 WEST GREENS ROAD, 2ND FL. INTERNATIONAL TRADING CENTRE
CALGARY, ALBERTA SUITE 1200 WARRENS
T2P 2V6 CANADA HOUSTON, TEXAS 77067 ST. MICHAEL, BARBADOS
TELEPHONE: (403) 263-6777 TELEPHONE: (281) 874-0035 TELEPHONE: (246) 421-9471
(Address, Including Zip Code, Number) Number)and (Address, Including Zip Code, and (Address, Including Zip Code, and
Telephone Telephone Telephone
Number, Including Area Code, of Number, Including Area Code, of Number, Including Area Code, of
Registrant's Registrant's Registrant's
Principal Executive Offices) Principal Executive Offices) Principal Executive Offices)
---------------------
CHRISTOPHER P. PAPOURAS
VICE PRESIDENT AND SECRETARY
NABORS CORPORATE SERVICES, INC.
515 WEST GREENS ROAD, SUITE 1200
HOUSTON, TEXAS 77067
(281) 874-0035
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
---------------------
ANTHONY G. PETRELLO
PRESIDENT AND CHIEF OPERATING OFFICER
NABORS INDUSTRIES, INC.
515 WEST GREENS ROAD, SUITE 1200
HOUSTON, TEXAS 77067TELEPHONE: (281) 874-0035
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code of Agent for Service)
---------------------
With copies to:
MICHAEL P. ROGAN EDGAR J. MARSTON III
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP BRACEWELL & PATTERSON, L.L.P.
1440 NEW YORK AVENUE, NW SOUTH TOWER PENNZOIL PLACE
WASHINGTON, D.C. 20005 711 LOUISIANA STREET, SUITE 2900
HOUSTON, TEXAS 77002-2781WITH COPIES TO:
MICHAEL P. ROGAN, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
1440 NEW YORK AVENUE, N.W.
WASHINGTON, D.C. 20005-2111
(202) 371-7000 (713) 223-2900
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement and at
consummation of the merger contemplated by the Agreement and Plan of Merger
dated as of January 10, 1999, as amended, attached as Appendix A to the Proxy
Statement/Prospectus included in this Registration Statement.registration statement becomes effective.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this form is filed to register additional securities infor an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
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If this form is a post-effective amendment is filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
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CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM---------------------------------------------------------------------------------------------------------------------------------
PROPOSED MAXIMUM
TITLE OF EACH CLASS AMOUNT TO BEPROPOSED MAXIMUM AGGREGATE OFFERING PRICE AGGREGATE AMOUNT OF REGISTRATION
OF SECURITIES TO BE REGISTERED AMOUNT TO BE REGISTERED PER UNIT OFFERING PRICE REGISTRATIONPER SECURITY PRICE(1) FEE
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Common Stock, $.10 par value, of
Nabors Industries, Inc.......... 21,010,486(1) $21.164(2) $444,666,974(3) $123,618(4)4.875% Senior Notes due 2009... $225,000,000 100% $225,000,000 $20,700(2)
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Guarantees related to 4.875%
Senior Notes due 2009........ N/A N/A N/A N/A(3)
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(1) Represents the estimated maximum number of shares of Nabors common stock
issuable upon consummation of the merger described in the Proxy
Statement/Prospectus included in this Registration Statement, assuming
exercise of all options to purchase shares of common stock of Pool Energy
Services Co.
(2) Estimated solely for the purposes of computing the amount ofcalculating the registration fee
in accordance withpursuant to Rule 457(f)(1) promulgated under the Securities Act of 1933, on the basis of the average of the high and low prices per share of
the outstanding shares of Pool Energy Services Co. Common Stock on August 3,
1999 ($21.164 per share), as
reported on the Nasdaq National Market.
(3) Determinedamended.
(2) Calculated by multiplying the Proposed Maximum Offering Price Per Unit0.000092 by the 20,498,035 outstanding shares of common stock of Pool Energy Services
Co. (assuming exercise of all options to purchase shares of common stock of
Pool Energy Services Co.).
(4) Pursuant to Rule 457(b),proposed maximum aggregate
offering price.
(3) No separate consideration is received for the amount of the registrationguarantees, and therefore, no
additional fee has been reduced
by the $80,298 paid on May 27, 1999 and the $20,383 paid on July 14, 1999 in
connection with Pool's filing of a preliminary proxy statement/prospectus
pursuant to Rule 14a-6 under the Securities Exchange Act of 1934.
Accordingly, a registration fee of $22,937 has been paid in connection with
the filing of this Registration Statement.is required.
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THE REGISTRANTREGISTRANTS HEREBY AMENDSAMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTREGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A)8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO THE SAID SECTION 8(A)8(a), MAY DETERMINE.
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2
[Pool Energy POOL ENERGY SERVICES CO.
Services Co. Logo] 10375 RICHMOND AVENUE - HOUSTON, TEXAS - (713) 954-3000
August 9, 1999
Dear Shareholder:
You are cordially invited to attend a Special Meeting of Shareholders of
Pool Energy Services Co. to be held on September 28, 1999 at 10:00 a.m.THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION RELATING TO THESE SECURITIES IS EFFECTIVE.
THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IS NOT SEEKING AN
OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
SUBJECT TO COMPLETION, DATED OCTOBER 10, 2002
PROSPECTUS
[NABORS LOGO]
OFFER TO EXCHANGE $225,000,000 4.875% SENIOR NOTES DUE 2009
FOR $225,000,000 4.875% SENIOR NOTES DUE 2009
WHICH HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED,
FULLY AND UNCONDITIONALLY GUARANTEED BY
NABORS INDUSTRIES LTD.
AND NABORS INDUSTRIES, INC.
THE EXCHANGE OFFER WILL EXPIRE AT 5 P.M., local
time, at 10375 Richmond Avenue, Houston, Texas 77042.
At the Pool Special Meeting you will be considering and voting upon a
matter of great importance to Pool: the merger of Pool and a wholly-owned
subsidiary of Nabors Industries, Inc. If the transaction is approved by the Pool
shareholders, and is completed, each outstanding Pool share, other than shares
held by Nabors and an affiliate of Nabors, will be converted into 1.025 shares
of common stock of Nabors in a tax-free exchange. A cash payment will be made
instead of any fractional share.NEW YORK CITY TIME, ON
, 2002 (THE 21ST BUSINESS DAY FOLLOWING THE DATE OF THIS
PROSPECTUS), UNLESS WE EXTEND THE EXCHANGE OFFER IN OUR SOLE AND ABSOLUTE
DISCRETION.
The Pool Board believes that the larger, financially strong combined
company will benefit from significant synergies while affording investors
enhanced investment liquidity and diversification of risk.
The attached Joint Proxy Statement/Prospectus provides you with detailed
information regarding the transaction and I urge you to read it carefully. A
copyprincipal terms of the merger agreement is attached toexchange offer are as follows:
- We will exchange the new notes for all outstanding old notes that document as Appendix A.
Your Board of Directors has unanimously approved the mergerare
validly tendered and has
determined that it is in the best interest of, and fairnot withdrawn pursuant to the Pool
shareholders, and recommends that all Pool shareholders vote FOR the approvalexchange offer.
- You may withdraw tenders of the merger.
WHETHER OR NOT YOU ARE PERSONALLY ABLE TO ATTEND THE POOL SPECIAL MEETING,
PLEASE COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD AS SOON AS
POSSIBLE. IT IS IMPORTANT THAT YOUR POOL SHARES BE REPRESENTED AT THE SPECIAL
MEETING REGARDLESS OF THE NUMBER OF SHARES YOU HOLD BECAUSE THE HOLDERS OF
66 2/3% OF THE OUTSTANDING POOL SHARES MUST APPROVE THE MERGER. SHARES HELD BY
YOU AND NOT VOTED WILL HAVE THE EFFECT OF A VOTE AGAINST THE TRANSACTION.
Very truly yours,
/s/ J.T. JONGEBLOED
J.T. Jongebloed
Chairman, President and
Chief Executive Officer
3
POOL ENERGY SERVICES CO.
10375 RICHMOND AVENUE
HOUSTON, TEXAS 77042
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON SEPTEMBER 28, 1999
TO THE SHAREHOLDERS OF
POOL ENERGY SERVICES CO.: August 9, 1999
A Special Meeting of the Shareholders of Pool Energy Services Co. will be
heldold notes at 10375 Richmond Avenue, Houston, Texas 77042, on September 28, 1999, at
10:00 a.m., localany time for the following purposes:
1. To consider and vote upon a proposal to approve the Agreement and
Plan of Merger, dated as of January 10, 1999, as amended, among Pool,
Nabors Industries, Inc., a Delaware corporation, and a recently formed
wholly-owned subsidiary of Nabors, pursuant to which, among other things:
(i) the new Nabors subsidiary will be merged with and into Pool, resulting
in Pool becoming a subsidiary of Nabors, and (ii) each issued and
outstanding share of common stock of Pool (other than shares held by Pool
and its subsidiaries, which will be canceled, and shares held by Nabors and
an affiliate of Nabors which will remain outstanding as shares in the
surviving corporation) will be converted into the right to receive 1.025
fully paid, nonassessable shares of Nabors common stock (with a cash
payment in lieu of any fractional share); and
2. To transact such other business as may properly come before the
meeting.
Shareholders of record at the close of business on August 6, 1999 are
entitled to notice of and to vote at the meeting and any adjournment thereof.
All shareholders are cordially invited to attend the meeting.
YOUR VOTE IS IMPORTANT. PLEASE SIGN, DATE AND RETURN THE ACCOMPANYING PROXY
PROMPTLY. YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE TO
APPROVE THE MERGER PROPOSAL.
By Order of the Board of Directors,
/s/ GEOFFREY ARMS
Geoffrey Arms
Corporate Secretary
4
[Pool Energy Services Co.]
[Nabors Industries, Inc. Logo]
PROSPECTUS PROXY STATEMENT
---------------------
Nabors Industries, Inc. and Pool Energy Services Co. have entered into a
merger agreement which provides that Nabors will acquire Pool through a merger.
Before we can complete this merger, the agreement must be approved by Pool's
shareholders. We are sending you, the Pool shareholders, this document to ask
you to vote in favor of the merger at a special shareholder meeting to be held
for this purpose.
Upon completion of the merger, for each share of Pool common stock you own
just before the merger you will receive 1.025 shares of Nabors common stock,
with a cash payment instead of any fractional share. After the merger, Nabors
and its affiliate will own all the outstanding common stock of Pool. Former Pool
shareholders, other than Nabors and an affiliate of Nabors whose shares of Pool
common stock owned prior to the mergerexpiration
of the exchange offer.
- The terms of the new notes are substantially identical to those of the
outstanding old notes, except that the transfer restrictions and
registration rights relating to the old notes will remain outstanding as shares innot apply to the surviving corporation,new
notes.
- The exchange of old notes for new notes will own approximately 14% of Nabors' then outstanding
common stock. Nabors common stock trades onnot be a taxable transaction
for U.S. federal income tax purposes, but you should see the American Stock Exchangediscussion
under the symbol "NBR."
YOUR VOTE IS VERY IMPORTANT. Whether orcaption "Material Tax Considerations" beginning on page 40 for
more information, including information relating to Canadian federal tax
considerations.
- We will not you plan to attendreceive any cash proceeds from the shareholder meeting, please takeexchange offer.
- We issued the time to vote by completingold notes in a transaction not requiring registration under
the Securities Act, and mailing the
enclosed proxy card. If you sign, date and mail your proxy card without
indicating how you want to vote, we will vote your proxy in favoras a result, transfer of the merger.
If you do not returnold notes is
restricted. We are making the exchange offer to satisfy your card, the effect will beregistration
rights, as a vote against the merger.
The date, time and placeholder of the shareholder meeting is:
September 28, 1999
10:00 a.m., local time
10375 Richmond Avenue
Houston, Texas 77042
AFTER CAREFUL CONSIDERATION, THE BOARD OF DIRECTORS OF POOL HAS UNANIMOUSLY
DETERMINED THAT THE MERGER IS IN THE BEST INTERESTS OF, AND FAIR TO, THE POOL
SHAREHOLDERS, HAS UNANIMOUSLY ADOPTED THE MERGER AGREEMENT AND UNANIMOUSLY
RECOMMENDS THAT YOU VOTE FOR APPROVAL OF THE MERGER AT THE SPECIAL SHAREHOLDER
MEETING.
This document provides you with detailed information aboutold notes.
There is no established trading market for the proposed
merger. We encourage you to read it carefully. You can also get information
about Pool and Nabors from documents that have been filed withnew notes or the Securities
and Exchange Commission.
THIS TRANSACTION INVOLVES VARIOUS RISKS AND UNCERTAINTIES, INCLUDING THOSE
DISCUSSED UNDERold notes.
SEE "RISK FACTORS" BEGINNING ON PAGE 11.
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SHOULD CONSIDER PRIOR TO TENDERING YOUR OUTSTANDING OLD NOTES FOR EXCHANGE.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
SHARESADEQUACY OR ACCURACY OF NABORS
COMMON STOCK TO BE ISSUED IN THE MERGER OR DETERMINED IF THIS DOCUMENT IS
TRUTHFUL OR COMPLETE.PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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This document provides detailed information about Pool, Nabors and the
proposed merger. You should readThe date of this entire document carefully. This documentprospectus is dated August 9, 1999, and is first being mailed to Pool shareholders on or
about August 11, 1999., 2002
5
TABLE OF CONTENTS
PAGE
----
SUMMARY.....................................................Summary Information......................................... 1
The Companies............................................. 1
The Merger................................................ 2
The Special Meeting....................................... 6Forward-Looking Statements.................................. 11
Risk Factors.............................................. 6
ComparisonFactors................................................ 12
Use of RightsProceeds............................................. 16
Ratio of Pool Shareholders and Nabors
Stockholders........................................... 6
Other Recent Developments................................. 7
Forward-Looking Statements................................ 7
SummaryEarnings to Fixed Charges.......................... 16
Selected Historical and Unaudited Pro Forma
CombinedConsolidated Financial Data................................ 8
RISK FACTORS................................................ 11
Risks Relating to the Transaction......................... 11
Changes in the relationship between the Pool common
stock trading price and the Nabors common stock
trading price may cause the valueData............. 17
The Exchange Offer.......................................... 18
Description of the merger
consideration to decrease............................. 11
If Nabors breaches the merger agreement, its payments
to Pool may not cover Pool's losses................... 11
The termination fee may deter potentially more
favorable competing offers; if Pool must pay the
termination fee, the payment will reduce its cash and
could reduce the trading price for its common stock... 11
Risks Relating to Nabors and its Business................. 12
Decreased oil and gas prices could adversely affect
drilling and workover activity and Nabors' revenues,
cash flows and profitability.......................... 12
Nabors operates in a highly competitive industry with
excess capacity, which may adversely affect Nabors'
resultsNew Notes................................ 25
Book-Entry System........................................... 36
Material Tax Considerations................................. 39
Plan of operations................................. 12
The nature of Nabors' operations presents inherent
risks of loss that, if not insured or indemnified
against, could adversely affect its results of
operations............................................ 13
The profitability of Nabors' international operations
could be adversely affected by war, civil disturbance
or economic turmoil................................... 13
Exposure to environmental liabilities could adversely
affect Nabors' results of operations.................. 13
Nabors could be adversely affected if it loses the
services of Mr. Isenberg, Mr. Petrello or Mr.
Stratton.............................................. 14
Nabors, as a holding company, depends on its
subsidiaries to meet its financial obligations........ 14
Under existing dividend policy Nabors does not pay
dividends............................................. 14
As Nabors and its shareholders have a considerable
number of shares of common stock available for
issuance and resale, significant issuances or resales
in the future may adversely affect the market price of
Nabors common stock................................... 14
Provisions of Nabors' organizational documents may
deter a change of control transaction and decrease the
likelihood of a stockholder receiving a change of
control premium....................................... 14
Year 2000 issues present risks to Nabors' business
operations in several ways............................ 14
WHERE YOU CAN FIND MORE INFORMATION......................... 15
COMPARATIVE MARKET PRICE DATA............................... 17
THE SPECIAL MEETING......................................... 18
Notice of Meeting......................................... 18
Record Date; Shares Entitled to Vote...................... 18
Quorum.................................................... 18
Vote Required............................................. 18
Effect of Abstentions and Broker Non-Votes................ 18
Voting of Proxies......................................... 19
Revocation of Proxies..................................... 19
Solicitation of Proxies; Expenses......................... 19
Shares Held by Pool Management and Others................. 19
ii
6
THE MERGER................................................................................................... 20
General.................................................................................................... 20
Background of the Merger................................................................................... 20
Reasons for the Merger; Recommendation of the Pool Board................................................... 23
Opinion of Pool's Financial Advisor........................................................................ 25
Effective Time............................................................................................. 30
Exchange of Certificates................................................................................... 30
Federal Securities Laws Consequences....................................................................... 30
American Stock Exchange Listing of Nabors Common Stock..................................................... 31
Certain Effects of the Merger.............................................................................. 31
InterestsDistribution........................................ 41
Where You Can Find More Information......................... 42
Incorporation of Certain Persons in the Merger................................................................. 31
Regulatory Matters......................................................................................... 33
Source and Amount of Funds................................................................................. 33
Management of Nabors Following the Merger.................................................................. 34
Absence of Rights of Dissenting Shareholders............................................................... 34
Certain United States Federal Income Tax Consequences of the Merger........................................ 34
Accounting Treatment....................................................................................... 35
THE MERGER AGREEMENT......................................................................................... 36
The Merger................................................................................................. 36
Conversion of Securities................................................................................... 36
Representations and Warranties............................................................................. 38
Covenants.................................................................................................. 39
Closing Conditions......................................................................................... 42
Termination................................................................................................Documents by Reference............. 43
Fees, Expenses and Other Payments..........................................................................Legal Matters............................................... 44
Amendment; Waiver..........................................................................................Independent Accountants..................................... 44
Amendment of Pool Rights Agreement......................................................................... 44
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS.................................................. 46
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS......................................... 51
PRINCIPAL SHAREHOLDERS OF POOL............................................................................... 55
COMPARISON OF SECURITYHOLDER RIGHTS.......................................................................... 56
Pool Rights Agreement...................................................................................... 61
LEGAL OPINIONS............................................................................................... 62
EXPERTS...................................................................................................... 62
SHAREHOLDER PROPOSALS........................................................................................ 62
OTHER MATTERS................................................................................................ 63
APPENDIX A -- Agreement and Plan of Merger
APPENDIX B -- Opinion of Morgan Stanley & Co. Incorporated
iiiReferences in this prospectus to "Nabors Holdings," "we," "us," and "our"
refer to Nabors Holdings 1, ULC. References in this prospectus to "Nabors
Delaware" refer to Nabors Industries, Inc. and references to "Nabors" refer to
Nabors Industries Ltd.
The "old notes" consisting of the 4.875% Senior Notes due 2009 which were
issued on August 22, 2002 and the "new notes" consisting of the 4.875% Senior
Notes due 2009 offered pursuant to this prospectus are sometimes collectively
referred to in this prospectus as the "notes."
Rather than restate certain information in this prospectus that Nabors
Delaware and Nabors have already included in reports filed with the Securities
and Exchange Commission, we are incorporating this information by reference,
which means that we can disclose important business, financial and other
information to you by referring to those publicly filed documents that contain
the information. The information incorporated by reference is not included in or
delivered with this prospectus.
We will provide without charge to each person to whom this prospectus is
delivered, including each beneficial owner of old notes, upon request of such
person, a copy of any or all documents that are incorporated into this
prospectus by reference, other than exhibits to such documents, unless such
exhibits are specifically incorporated by reference into the documents that this
prospectus incorporates. You should direct such requests to: Nabors Corporate
Services, Inc., 515 West Greens Road, Suite 1200, Houston, Texas 77067,
Attention: Investor Relations, phone number (281) 874-0035.
IN ORDER TO OBTAIN TIMELY DELIVERY, YOU MUST REQUEST THIS INFORMATION NO
LATER THAN FIVE BUSINESS DAYS BEFORE YOU MUST MAKE YOUR INVESTMENT DECISION.
ACCORDINGLY, YOU MUST REQUEST THIS INFORMATION NO LATER THAN , 2002.
7
SUMMARY INFORMATION
This summary is qualified by, and should be read along with,highlights the more
detailed information contained elsewhere in the rest of this document, including the
attached appendices and the financial statements and related notes included or
incorporated by reference into this document. We urgeprospectus. Because this is only a summary,
it does not contain all of the information that may be important to you. For a
complete understanding of this offering, we encourage you to read allthis entire
prospectus and the documents to which we refer you. You should read the
following summary together with the more detailed information and consolidated
financial statements and the notes to those statements included elsewhere in or
incorporated by reference into this prospectus.
NABORS HOLDINGS 1, ULC
We are an unlimited liability company formed under the Companies Act of
these
materials carefully.
THE COMPANIES
POOL ENERGY SERVICES CO.
PoolNova Scotia on December 28, 2001. We are an indirect, wholly-owned finance
subsidiary of Nabors Delaware, which is an indirect, wholly-owned subsidiary of
Nabors, a diversified energy servicesBermuda exempted company principally engaged in
providing well-servicing, workover and drilling rig services and related
transportation services on land and offshore in the United States and selected
international markets. As of June 30, 1999, Pool's worldwide rig fleet included
783 land well-servicing/workover rigs, 29 land drilling rigs and 27 offshore
rigs (14 platform workover rigs, six platform drilling rigs and seven jack-up
rigs). In the United States, Pool operates in several oil and natural gas
producing states, with specific concentration onshore in Texas, California,
Alaska, Oklahoma, New Mexico and North Dakota, and offshore in the Gulf of
Mexico. As of June 30, 1999, Pool also owned or leased and operated 294 fluid
hauling trucks, 971 fluid storage tanks, 16 salt water disposal wells and other
auxiliary equipment used in its domestic onshore operations and 27 offshore
support vessels in the Gulf of Mexico. Internationally, Pool has a substantial
presence in Saudi Arabia, where it is onepublicly-traded parent company of the
largest providersNabors group of drillingcompanies. We are a holding company whose only business is to
access bank financing and workover servicescapital markets on behalf of the Canadian subsidiaries
of Nabors and has been providing such services for over 20 years.
Other international markets where Pool has an established presence include
Argentina, Australia, Ecuador, Guatemala, Malaysia, Oman and Pakistan. Pool'sto hold investments. Otherwise, we conduct no independent business
or operations.
Our registered office is located at 1959 Upper Water Street, Suite 900,
Halifax, Nova Scotia B35 2X2 Canada. Our principal executive offices are located
at 10375 Richmond3000, 500-4th Avenue, S.W., Calgary, Alberta T2P 2V6 Canada and our telephone
number at that address is 403-263-6777.
NABORS INDUSTRIES, INC.
Nabors Delaware is a Delaware corporation and an indirect, wholly-owned
subsidiary of Nabors. Prior to the corporate reorganization described below in
the section entitled "Recent Developments," Nabors Delaware was a
publicly-traded corporation. Nabors Delaware was incorporated in Delaware on May
3, 1978. Nabors Delaware's principal executive offices are located at 515 West
Greens Road, Suite 1200, Houston, Texas 77042,77067 and its telephone number at that
address is (713) 954-3000.(281) 874-0035.
NABORS INDUSTRIES INC.LTD.
Nabors became the publicly-traded parent company of the Nabors group of
companies, effective June 24, 2002, pursuant to the corporate reorganization
described below in the section entitled "Recent Developments." Nabors' common
shares are traded on the American Stock Exchange under the symbol "NBR."
Nabors, together with its subsidiaries, is the largest land drilling
contractor in the world, with over 470
actively marketedalmost 600 land drilling rigs as of JulyAugust 31,
1999.2002. Nabors conducts oil, gas and gasgeothermal land drilling operations in North America, including the
U.S. lower 48 United
States,states, Alaska and Canada, and internationally,elsewhere, primarily in South and
Central America, and the Middle East. Offshore,East and Africa. Nabors is also one of the largest
land well-servicing and workover contractors in the United States and in Canada.
Nabors owns approximately 745 land well-servicing and workover rigs in the
southwestern and western United States, and approximately 233 land
well-servicing and workover rigs in certain other markets, including
approximately 193 rigs in Canada. Nabors also is a leading provider of offshore
platform workover and drilling rigs. Nabors markets 2544 platform, six jack-up17 jackup and
twothree barge
drilling rigs in the Gulf of Mexico and several internationalother markets. These rigs provide
well-servicing, workover and drilling services.
To further supplement its primary businesses,business, Nabors offers a number of
ancillary well-site services, including oilfield management, engineering,
transportation, construction, maintenance, well logging and other support
services, in selected domestic and international markets. Nabors' land
transportation and hauling fleet includes approximately 240 rig and oilfield
equipment hauling tractor-trailers and a number of cranes, loaders and
light-duty vehicles. Nabors also maintains over 290 fluid hauling trucks,
approximately 700 fluid storage tanks, eight salt water disposal wells and other
auxiliary equipment used in domestic drilling and well-servicing operations. In
addition, Nabors markets a fleet of 30 marine transportation and support
vessels, primarily in the Gulf of Mexico, that provides transportation of
drilling materials, supplies
1
and crews for offshore rig operations and support for other offshore operations.
And Nabors manufactures and leases or sells top drives for a broad range of
drilling rig applications, and Nabors
manufactures and leases or sells rig instrumentation and data collection equipment,
and rig reporting software.
Nabors was formed as a Bermuda exempted company on December 11, 2001.
Nabors' principal executive offices are located at 515 West Greens
Road, Suite 1200, Houston, Texas 77067,2nd Fl. International Trading
Centre, Warrens, St. Michael, Barbados. Its phone number at its principal
executive offices is (246) 421-9471.
RECENT DEVELOPMENTS
RYAN ACQUISITION
On August 12, 2002, Nabors entered into an arrangement agreement to acquire
Ryan Energy Technologies Inc., a corporation incorporated under the laws of
Alberta, Canada (which we refer to as Ryan in this prospectus). Nabors'
acquisition of Ryan was completed on October 9, 2002, and its telephonebecame effective
pursuant to a plan of arrangement approved by the securityholders of Ryan and
the Court of Queen's Bench of Alberta. Nabors agreed to pay Cdn$1.85 per Ryan
common share. The purchase price is payable, at the election of each individual
Ryan shareholder, in cash, in exchangeable shares of Nabors Exchangeco (Canada)
Inc., a Canadian corporation and indirect subsidiary of Nabors (which we refer
to as Exchangeco in this prospectus), or in a combination of cash and such
exchangeable shares. The exchangeable shares will be exchangeable for Nabors
common shares on a 1:1 basis, plus the aggregate amount of dividends payable and
unpaid, if any, on each such exchangeable share.
Under the terms of the arrangement each holder of Ryan common shares who so
elected will receive 0.0362 of an exchangeable share for each Ryan common share.
Each registered shareholder will receive only a whole number is (281)
874-0035.
1
8
THE MERGER
GENERALof exchangeable
shares, and will be paid a cash amount by Exchangeco in lieu of any fractional
entitlement. Each exchangeable share will have economic and voting rights
effectively equivalent to one Nabors common share and will be exchangeable at
any time for one Nabors common share. Pursuant to the arrangement, Exchangeco
acquired all of the issued and outstanding common shares of Ryan in exchange for
approximately Cdn$22.6 million in cash and 380,264 exchangeable shares of
Exchangeco, of which 219,493 exchangeable shares were immediately exchanged for
common shares of Nabors in accordance with the instructions of the holders of
those shares.
As a result of the arrangement, all options to acquire PoolRyan common shares
that have not previously been exercised or surrendered for termination were
terminated and each holder of such options will be paid in cash, in respect of
each such option, the greater of: (i) the positive difference, if any, between
Cdn$1.85 and the exercise price of such option for each Ryan common share
issuable on exercise of such option, and (ii) Cdn$0.10 per common share issuable
on exercise of such option, subject to required withholdings.
CORPORATE REORGANIZATION
Effective June 24, 2002, Nabors became the successor to Nabors Delaware
following a corporate reorganization, which effectively changed the jurisdiction
of incorporation of Nabors from Delaware to Bermuda. The reorganization was
accomplished through a merger of an indirect, newly formed Delaware subsidiary
of Nabors with and into Nabors Delaware. Nabors Delaware was the surviving
company in the merger. Pool will continue in existence
immediately afterAs a result of the merger, asNabors Delaware became a
wholly-owned, indirect subsidiary of Nabors. TREATMENT OF POOL COMMON STOCK
InUpon consummation of the merger,
each issued andall outstanding shareshares of PoolNabors Delaware common stock (other than shares held by Pool and its subsidiaries which will be canceled, and
shares held by Nabors and an affiliate of Nabors which will remain outstanding
as shares in the surviving corporation) will beautomatically converted
into the right to receive 1.025 shares of Nabors common stock. See "The Merger
Agreement -- Conversion of Securities."
OPINION OF POOL'S FINANCIAL ADVISOR
In deciding to approveshares, with the merger, the Pool Board considered the opinion of
its financial advisor, Morgan Stanley & Co. Incorporated,result that as of the date
of the opinion, the exchange ratio of 1.025 shares of Nabors common stock for
each share of Pool common stock was fair to the
shareholders of Pool (other than
Nabors and its subsidiaries) from a financial point of view. We have attached as
Appendix B the written opinion of Morgan Stanley dated January 10, 1999. You
should read it carefully to understand the assumptions made, matters considered
and limitations of the review undertaken by Morgan Stanley in providing its
opinion. See "The Merger -- Opinion of Pool's Financial Advisor."
RECOMMENDATION OF THE POOL BOARD
The Pool Board unanimously approved the merger agreement, believes that the
merger is in the best interests of, and fair to, the Pool shareholders and
unanimously recommends that you vote to approve the merger agreement at the Pool
special shareholders meeting.
After weighing both the positive and negative aspects of the merger with
Nabors, the Pool Board based its determination and recommendation principallyDelaware on
the following grounds:
- the conclusion that, after exploring other alternatives, a merger with
Nabors on the terms set forth in the merger agreement offered Pool
shareholders value superior to the value expected to be generated through
the pursuit of Pool's own growth strategies;
- the conclusion that the increased size of the combined company could have
certain benefits, including:
- the potential for an enhanced ability to weather the current downturn in
the oil business and related oil service industries;
- the potential for enhanced purchasing economies;
- a financial and strategic position to pursue additional consolidation
opportunities;
- an enhanced credit standing;
- a higher profile with investors; and
- substantially greater liquidity for shareholders;
- the expectation that the merger will be a tax-free transaction to Pool
and its shareholders; and
- the fact that the 1.025 exchange ratio represents a significant premium
over the average exchange ratio of the Pool shares and the Nabors shares
during the three years preceding the date of the merger agreement.became the
shareholders of Nabors. Nabors and its subsidiaries continue to conduct the
businesses previously conducted by Nabors Delaware and its subsidiaries. The
reorganization has been accounted for as a reorganization of entities under
common control and accordingly, it did not result in any changes to the
consolidated amounts of assets, liabilities and stockholders' equity.
The Board of Nabors Delaware approved the expatriation transaction because
international activities are an important part of Nabors' current business and
they believe that international operations will
2
9
NO DISSENTERS' RIGHTS FOR SHAREHOLDERS
Under Texascontinue to grow in the future. Expansion of Nabors' international business is
an important part of its current business strategy and significant growth
opportunities exist in the international marketplace. Nabors believes that
reorganizing as a Bermuda company will allow Nabors to implement its business
strategy more effectively. In addition, Nabors believes that the reorganization
should increase its access to international capital markets and acquisition
opportunities, increase its attractiveness to non-U.S. investors, improve global
cash management, improve its global tax position and result in a more favorable
corporate structure for expansion of its current business.
Several members of the United States Congress have introduced legislation
that, if enacted, would have the effect of eliminating the tax benefits of the
reorganization. In particular, on June 18, 2002, the Senate Finance Committee
approved legislation introduced by Senator Charles Grassley, the Ranking
Minority Member of the Senate Finance Committee, along with Senator Max Baucus,
the Chairman of the Senate Finance Committee, (S. 2119) that, for United States
federal tax purposes, would treat a foreign corporation, such as Nabors, that
undertakes a corporate expatriation transaction, such as the reorganization, as
a domestic corporation and, thus, such foreign corporation would be subject to
United States federal income tax. S. 2119 is proposed to be effective for
corporate expatriation transactions completed after March 20, 2002. In addition,
on July 11, 2002, Representative Bill Thomas, Chairman of the House Committee on
Ways and Means, introduced legislation (H.R. 5095) that is substantially similar
to S. 2119 with respect to its treatment of corporations that undertake a
corporate expatriation transaction such as the reorganization, except that (i)
it is proposed to apply to transactions completed after March 20, 2002 and
before March 21, 2005 and (ii) it would not permit shareholders to qualify for
tax-free treatment with respect to a corporate expatriation transaction such as
the reorganization. If any of the proposed legislation, including S. 2119 or
H.R. 5095, were enacted with their proposed effective dates, the tax savings
would not be realized from the reorganization.
In addition, there has been significant, increased negative publicity and
criticism of corporate expatriation transactions from public pension funds and
other investors since the time Nabors completed its reorganization.
In light of such events and if and when any such legislation is enacted,
Nabors will consider the effects of such legislation and will evaluate all
strategic alternatives that may be necessary or prudent in response to such
legislation.
CONCURRENT EXCHANGE OFFER BY AFFILIATED ENTITY
On August 22, 2002, Nabors Delaware, an indirect wholly owned subsidiary of
Nabors, issued U.S.$275 million aggregate principal amount of 5.375% Senior
Notes due 2012, fully and unconditionally guaranteed by Nabors, to qualified
institutional buyers under Rule 144A of the Securities Act. Concurrent with this
exchange offer, Nabors Delaware is offering to exchange its 5.375% Senior Notes
due 2012 for 5.375% Senior Notes due 2012 which have been registered under the
Securities Act, and which are fully and unconditionally guaranteed by Nabors.
3
THE NABORS HOLDINGS 1, ULC EXCHANGE OFFER
Old Notes..................... 4.875% Senior Notes due 2009, which we issued
on August 22, 2002.
New Notes..................... 4.875% Senior Notes due 2009, the issuance of
which has been registered under the Securities
Act of 1933, as amended. The form and terms of
the new notes are identical in all material
respects to those of the old notes, except that
the transfer restrictions and registration
rights relating to the old notes do not apply
to the new notes.
Exchange Offer................ We are offering to issue up to $225,000,000
aggregate principal amount of the new notes in
exchange for a like principal amount of the old
notes to satisfy our obligations under the
registration rights agreement that we entered
into when the old notes were issued in
transactions in reliance upon the exemption
from registration provided by Rule 144A under
the Securities Act.
Expiration Date Tenders....... The exchange offer will expire at 5 p.m., New
York City time, on , 2002, unless
extended in our sole and absolute discretion.
By tendering your old notes, you represent to
us that:
- you are not our "affiliate," as defined in
Rule 405 under the Securities Act;
- any new notes you receive in the exchange
offer are being acquired by you in the
ordinary course of your business;
- at the time of commencement of the exchange
offer, neither you nor, to your knowledge,
anyone receiving new notes from you, has any
arrangement or understanding with any person
to participate in the distribution, as
defined in the Securities Act, of the new
notes in violation of the Securities Act;
- if you are not a participating broker-dealer,
you are not engaged in, and do not intend to
engage in, the distribution of the new notes,
as defined in the Securities Act; and
- if you are a broker-dealer, you will receive
the new notes for your own account in
exchange for old notes that were acquired by
you as a result of your market making or
other trading activities and that you will
deliver a prospectus in connection with any
resale of the new notes you receive. For
further information regarding resales of the
new notes by participating broker-dealers,
see the discussion under the caption "Plan of
Distribution" beginning on page 41.
Withdrawal; Non-Acceptance.... You may withdraw any old notes tendered in the
exchange offer at any time prior to 5 p.m., New
York City time, on , 2002, the 21st
business day following the date of this
prospectus. If we decide for any reason not to
accept any old notes tendered for exchange, the
old notes will be returned to the registered
holder at our expense promptly after the
expiration or termination of the exchange
offer. In the case of old notes tendered by
book-entry transfer into the exchange agents
account at The Depository Trust Company (which
we refer to as DTC in this prospectus), any
withdrawn or unaccepted old notes will be
4
credited to the tendering holder's account at
DTC. For further information regarding the
withdrawal of tendered old notes, see "The
Exchange Offer -- Terms of the Exchange Offer;
Period for Tendering Old Notes" on page 18 and
the "The Exchange Offer -- Withdrawal Rights"
on page 21.
Conditions to the Exchange
Offer......................... We are not required to accept for exchange, or
to issue new notes in exchange for any old
notes and we may terminate or amend the
exchange offer if any of the following events
occur prior to our acceptance of the old notes:
- the exchange offer violates any applicable
law shareholdersor applicable interpretation of Poolthe staff
of the SEC;
- an action or proceeding shall have been
instituted or threatened in any court or by
any governmental agency that might materially
impair our or Nabors' ability to proceed with
the exchange offer;
- we shall not have received all governmental
approvals that we deem necessary to
consummate the exchange offer; or
- there has been proposed, adopted, or enacted
any law, statute, rule or regulation that, in
our reasonable judgment, would materially
impair our ability to consummate the exchange
offer.
We may waive any of the above conditions in our
reasonable discretion. See the discussion below
under the caption "The Exchange
Offer -- Conditions to the Exchange Offer"
beginning on page 22 for more information
regarding the conditions to the exchange offer.
Procedures for Tendering Old
Notes......................... Unless you comply with the procedures described
below under the caption "The Exchange
Offer -- Guaranteed Delivery Procedures," (on
page 21) you must do one of the following on or
prior to the expiration or termination of the
exchange offer to participate in the exchange
offer:
- tender your old notes by sending the
certificates for your old notes, in proper
form for transfer, a properly completed and
duly executed letter of transmittal, with any
required signature guarantees, and all other
documents required by the letter of
transmittal, to Bank One, N.A., as exchange
agent, at the address listed below under the
caption "The Exchange Offer -- Exchange
Agent" beginning on page 23, or
- tender your old notes by using the book-entry
transfer procedures described below and
transmitting a properly completed and duly
executed letter of transmittal, with any
required signature guarantees, or an agent's
message instead of the letter of transmittal,
to the exchange agent. In order for a
book-entry transfer to constitute a valid
tender of your old notes in the exchange
offer, Bank One, N.A., as exchange agent,
must receive a confirmation of book-entry
transfer of your old notes into the exchange
agent's account at DTC prior to the
expiration or termination of the exchange
offer. For more information regarding the use
of book-entry transfer procedures, including
a description of the required agent's
message, see the discussion below under the
caption "The
5
Exchange Offer -- Book-Entry Transfers"
beginning on page 20.
Guaranteed Delivery
Procedures.................... If you are a registered holder of old notes and
wish to tender your old notes in the exchange
offer, but
- the old notes are not immediately available;
- time will not permit your old notes or other
required documents to reach the exchange
agent before the expiration or termination of
the exchange offer, or
- the procedure for book-entry transfer cannot
be completed prior to the expiration or
termination of the exchange offer,
then you may tender old notes by following the
procedures described below under the caption
"The Exchange Offer -- Guaranteed Delivery
Procedures" beginning on page 21.
Special Procedures for
Beneficial Owners............. If you are a beneficial owner whose old notes
are registered in the name of the broker,
dealer, commercial bank, trust company or other
nominee and you wish to tender your old notes
in the exchange offer, you should promptly
contact the person in whose name the old notes
are registered and instruct that person to
tender on your behalf. If you wish to tender in
the exchange offer on your behalf, prior to
completing and executing the letter of
transmittal and delivering your old notes, you
must either make appropriate arrangements to
register ownership of the old notes in your
name, or obtain a properly completed bond power
from the person in whose name the old notes are
registered.
Material Tax Considerations... The exchange of the old notes for new notes in
the exchange offer will not be entitled to exercise any
rights to dissent from the merger.
FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
It is a condition to the consummation of the merger that Pool receive an
opinion from its special tax counsel, Bracewell & Patterson, L.L.P., and that
Nabors receive an opinion from its special tax counsel, Skadden, Arps, Slate,
Meagher & Flom LLP, to the effect that, based upon certain facts,
representations and assumptions, the merger will qualify as a reorganization
within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended. The issuance of such opinions is conditioned on, among other things,
such tax counsel's receipt of representation letters from each of Pool, Nabors
and Nabors' acquisition subsidiary, in each case, in form and substance
reasonably satisfactory to each such tax counsel. No ruling has been (or will
be) sought from the Internal Revenue Service with respect to the merger.
Assuming the merger qualifies as a reorganization within the meaning of Section
368(a) of the Internal Revenue Code of 1986, as amended, no gain or loss will be
recognizedtaxable
transaction for United States federal income
tax purposespurposes. See the discussion below under
the caption "Material Tax Considerations"
beginning on page 39 for more information
regarding the tax consequences to you,
including Canadian federal tax considerations,
of the exchange offer.
Use of Proceeds............... We will not receive any cash proceeds from the
exchange offer.
Exchange Agent and Trustee.... Bank One, N.A. is the exchange agent for the
exchange offer. You can find the address and
telephone number of Bank One, N.A. below under
the caption "The Exchange Offer -- Exchange
Agent" beginning on page 23.
Resales....................... Based on interpretations by the staff of the
SEC, as set forth in no-action letters issued
to third parties, we believe that the new notes
issued in the exchange offer may be offered for
resale, resold or otherwise transferred by you
without compliance with the registration and
prospectus delivery requirements of the
Securities Act as long as:
- you are acquiring the new notes in the
ordinary course of your business;
- you are not participating, do not intend to
participate and have no arrangement or
understanding with any person to participate,
in a distribution of the new notes; and
6
- you are not our affiliate.
If you are an affiliate of ours, are engaged in
or intend to engage in or have any arrangement
or understanding with any person to participate
in the distribution of the new notes:
- you cannot rely on the applicable
interpretations of the staff of the SEC; and
- you must comply with the registration
requirements of the Securities Act in
connection with any resale transaction.
Each broker or dealer that receives new notes
for its own account in exchange for old notes
that were acquired as a result of market-
making or other trading activities must
acknowledge that it will comply with the
registration and prospectus delivery
requirements of the Securities Act in
connection with any offer, resale, or other
transfer of the new notes issued in the
exchange offer, including information with
respect to any selling holder required by the
Securities Act in connection with any resale of
the new notes.
Furthermore, any broker-dealer that acquired
any of its old notes directly from us:
- may not rely on the applicable interpretation
of the staff of the SEC's position contained
in Exxon Capital Holdings Corp., SEC
no-action letter (April 13, 1988), Morgan,
Stanley & Co. Inc., SEC no-action letter
(June 5, 1991) and Shearman & Sterling, SEC
no-action letter (July 2, 1983); and
- must also be named as a selling noteholder in
connection with the registration and
prospectus delivery requirements of the
Securities Act relating to any resale
transaction.
Registration Rights
Agreement..................... When we issued the old notes in August 2002, we
entered into a registration rights agreement
with the initial purchaser of the old notes.
Under the terms of the registration rights
agreement, we agreed to use our reasonable best
efforts to file with the SEC and cause to
become effective, a registration statement
relating to an offer to exchange the old notes
for the new notes.
If we do not complete the exchange offer by
December 31, 2002, the interest rate borne by
the old notes will be increased 0.25% per annum
until the exchange offer is completed, or until
the old notes are freely transferable under
Rule 144 of the Securities Act. In addition, if
the exchange offer registration statement
ceases to be effective or usable in connection
with resales of the new notes during periods
specified in the registration rights agreement,
the interest rate borne by the old notes and
the new notes will be increased 0.25% per annum
until the registration defects are cured.
Under some circumstances set forth in the
registration rights agreement, holders of Pool
common stockold
notes, including holders who are not permitted
to participate in the exchange their common stockoffer or who may
not freely sell new notes received in the
exchange offer, may require
7
us to file and cause to become effective, a
shelf registration statement covering resales
of the old notes by these holders. If such
shelf registration statement ceases to be
effective or usable in connection with resales
of the new notes during periods specified in
the registration rights agreement, the interest
rate borne by the old notes and the new notes
will be increased 0.25% per annum until the
registration defects are cured.
A copy of the registration rights agreement is
included as an exhibit to the registration
statement of which this prospectus is a part.
Broker-Dealers................ Each broker-dealer that receives new notes for
Nabors common stockits own account pursuant to the merger (exceptexchange offer
must acknowledge that it will deliver a
prospectus in connection with any resale of new
notes. The letter of transmittal states that by
so acknowledging and delivering a prospectus, a
broker-dealer will not be deemed to admit that
it is an "underwriter" within the meaning of
the Securities Act. This prospectus, as it may
be amended or supplemented from time to time,
may be used by a broker-dealer in connection
with resales of new notes received in exchange
for old notes which were received by such
broker-dealer as a result of market making
activities or other trading activities. We have
agreed that for a period of up to 180 days
after the Expiration Date (as defined in this
prospectus) we will make this prospectus
available to any broker-dealer for use in
connection with any such resale. See "Plan of
Distribution" beginning on page 41 for more
information.
CONSEQUENCES OF NOT EXCHANGING YOUR OLD NOTES
If you do not exchange your old notes in the exchange offer, you will
continue to be subject to the restrictions on transfer described in the legend
on the certificate for your old notes. In general, you may offer or sell your
old notes only:
- if they are registered under the Securities Act and applicable state
securities laws;
- if they are offered or sold under an exemption from registration under
the Securities Act and applicable state securities laws; or
- if they are offered or sold in a transaction not subject to the
Securities Act and applicable state securities laws.
We do not currently intend to register the old notes under the Securities
Act. Under some circumstances, however, holders of the old notes, including
holders who are not permitted to participate in the exchange offer or who may
not freely sell new notes received in the exchange offer, may require us to
file, and to cause to become effective, a shelf registration statement covering
resales of the old notes by these holders. For more information regarding the
consequences of not tendering your old notes and our obligations to file a shelf
registration statement, see "The Exchange Offer -- Consequences of Exchanging or
Failing to Exchange Old Notes" beginning on page 23 and "Summary
Information -- Registration Rights Agreement" beginning on page 7.
8
SUMMARY DESCRIPTION OF THE NEW NOTES
Issuer........................ Nabors Holdings 1, ULC
Guarantors.................... Nabors Industries, Inc. and Nabors Industries
Ltd.
Securities.................... $225,000,000 aggregate principal amount of
4.875% Senior Notes due 2009.
Maturity...................... August 15, 2009.
Interest Payment Dates........ February 15 and August 15 of each year,
commencing on February 15, 2003.
Interest Rate................. 4.875% per annum from August 22, 2002.
Guarantees.................... Nabors Delaware and Nabors will fully and
unconditionally, jointly and severally,
guarantee the due and punctual payment of the
principal of, premium, if any, additional
amounts, if any, interest on the new notes and
any other obligations of ours under the new
notes when and as they become due and payable,
whether at maturity, upon redemption, by
acceleration or otherwise if we are unable to
satisfy these obligations. The guarantees
provide that, in the event of a default on the
new notes, the holders of the new notes may
institute legal proceedings directly against
Nabors Delaware or Nabors to enforce the
guarantees without first proceeding against us.
See "Description of the New
Notes -- Guarantees" beginning on page 26.
Additional Amounts............ In the event that either we or a guarantor is
required to withhold or deduct on account of
any Canadian or Bermudan taxes due from any
payment made under or with respect to cashthe new
notes or its guarantee, as the case may be, we
or the guarantor, as the case may be, will pay
additional amounts so that the net amount
received by holderseach holder of Pool common stock
insteadnew notes will equal
the amount that the holder would have received
if the Canadian or Bermudan taxes had not been
required to be withheld or deducted. See
"Description of fractional sharesthe New Notes -- Payment of
Additional Amounts" beginning on page 26.
Ranking....................... The new notes will:
- be unsecured,
- be effectively junior in right of payment to
any of our future secured debt,
- rank equally in right of payment with any of
our future unsubordinated debt, and
- be senior in right of payment to any of our
existing and future senior subordinated or
subordinated debt.
As of the date of this prospectus, we have no
other indebtedness.
Each guarantee of our obligations under the new
notes will be a direct, unsecured and
unsubordinated obligation of the guarantor and
will have the same ranking with respect to its
indebtedness as the new notes will have with
respect to our indebtedness. See
9
"Description of the New Notes -- Guarantees"
beginning on page 26.
Optional Redemption........... We may, at our option, redeem some or all of
the new notes, in whole or in part, at any
time, at "make-whole" prices described in this
prospectus, plus additional amounts, if any,
and accrued and unpaid interest to the
redemption date. See "Description of the New
Notes -- Optional Redemption" beginning on page
28.
We may elect to redeem all, but not part, of
the new notes at par at any time if particular
changes occur in the laws or regulations
governing Canadian withholding taxes. See
"Description of the New Notes -- Optional
Redemption for Changes in Canadian Withholding
Taxes" beginning on page 28.
Use of Proceeds............... We will not receive any cash proceeds from the
exchange offer. See "Use of Proceeds" beginning
on page 16.
Covenants..................... We will issue the new notes under the
indenture, dated August 22, 2002, among us, as
issuer, Nabors Delaware and Nabors, as
guarantors, and Bank One, N.A., as trustee. The
indenture limits the ability of Nabors common stock). See "The Merger -- Certain
United States Federal Income Tax Consequences ofand its
subsidiaries to incur liens and to enter into
sale and lease-back transactions. Additionally,
the Merger." Holders of Pool
common stock are urgedindenture limits both our and the
guarantors' ability to consult their tax advisors as to the specific tax
consequences to them of the merger.
PROHIBITION ON SOLICITATION OF COMPETING TRANSACTIONS
So long as the merger agreement is in effect, Pool is prohibited from
initiating, solicitingenter into mergers,
consolidations, or encouraging the submission of any proposal by, or
entering into any discussions or negotiations with, a third party relating to a
competing acquisition transaction. A competing acquisition transaction includes
any of the following:
- a merger or consolidation of Pool or its subsidiaries;
- the sale or other dispositiontransfers of all or
substantially all of our or their assets unless
the propertiessuccessor company assumes our or the
guarantors' obligations under the indenture.
These covenants are subject to a number of
important qualifications and assets of Pool or any other material properties and
assets; or
- a tender or exchange offer for more than 15%limitations. See
"Description of the outstanding sharesNew Notes -- Covenants"
beginning on page 28.
No Prior Market............... The new notes generally will be freely
transferable, but the new notes are a new issue
of Pool common stock.
Ifsecurities and there is currently no
established trading market for the Pool Board, after consulting with legal counsel, determines in good
faithnew notes.
Accordingly, there can be no assurance as to
the development or liquidity of any market for
the new notes. Lehman Brothers Inc., the
initial purchaser of the old notes, has advised
us that it must do so in order to comply with its fiduciary duties, then Pool
may, in response to an unsolicited competing acquisition proposal meeting
specified criteria, participate in discussions and negotiations regarding that
proposal. See "The Merger Agreement -- Covenants -- No Solicitation."
CONDITIONS TO THE MERGER
The conditions to the obligations of all parties to consummate the merger
include:
- the adoption of the merger agreement by the shareholders of Pool;
- the expiration or termination of the waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976; and
- the absence of any injunction or other legal restraint prohibiting the
merger.
The conditions to the obligations of each party to consummate the merger
include:
- that the other party not have suffered a material adverse effect in its
business or operations since the date of the merger agreement;
3
10
- that the representations and warranties of the other party in the merger
agreement be true, except where the failure to be true would not have a
material adverse effect on the other party; and
- that the other party has complied in all material respects with its
covenants in the merger agreement.
The conditions to the obligations of Nabors to consummate the merger
include:
- the amendment of the agreements governing Pool's activities in Saudi
Arabia in a manner satisfactory to Nabors so that the merger will not
adversely affect in a material way the operations of Pool and Nabors in
that country and that the merger will not result in a change of control
of Pool's subsidiary operating in Saudi Arabia; and
- the absence of (a) any required divestiture of assets by Pool or Nabors
as a condition to the expiration of the waiting period under the
Hart-Scott-Rodino Act that Nabors does not wish to accept or (b) any
other conditions, restrictions or limitations imposed by federal
antitrust authorities affecting Nabors' ownership of Pool's assets that
Nabors does not wish to accept.
See "The Merger Agreement -- Closing Conditions."
TERMINATION; FEES AND EXPENSES
The merger agreement may be terminated if any of the following occurs:
- the merger agreement is not adopted by Pool's shareholders;
- either Pool or Nabors breaches any of its covenants or agreements
contained in the merger agreement, unless the breaching party is
exercising its reasonable best efforts to cure the breach;
- the representations and warranties of Pool or Nabors contained in the
merger agreement are or become untrue, except where the failure to be
true and correct would not have a material adverse effect on the party
whose representations or warranties are or become untrue;
- the merger is not consummated on or before October 1, 1999 or within the
specified extension period;
- the Pool Board withdraws its recommendation of the merger agreement or
recommends that a competing acquisition proposal be adopted by the
shareholders of Pool;
- the Pool Board determines that proceeding with the merger would be
inconsistent with its fiduciary duties because of the existence of a
competing acquisition proposal; or
- federal antitrust authorities require divestiture of assets by Pool or
Nabors as a condition to permitting the waiting period under the
Hart-Scott-Rodino Act to expire or these authorities impose conditions,
restrictions or limitations on Nabors' ownership of Pool's assets and
Nabors does not wish to comply with such requirement, conditions,
restrictions or limitations.
If the merger agreement is terminated under specified circumstances, then
either Pool or Nabors may become obligatedcurrently intends to make a payment to the other party.
In particular, if the merger agreement is terminated because a party breaches a
covenant, agreement, representation or warranty, then the breaching party must
make a payment to the other partymarket
in the amount of $15 million in cash, plus all
actual, documented third party costs. If the merger agreementnew notes. However, it is terminated for
specified reasons involving a competing acquisition proposal, Pool must make a
paymentnot obligated
to Nabors in the amount of $15 million, plus all actual, documented
third party costs. See "The Merger Agreement -- Termination"do so, and "-- Fees,
Expenses and Other Payments."
4
11
CLOSING
Pool and Nabors expect to consummate the merger promptly after the
conditions to closing set forth in the merger agreement are fulfilled or waived.
It is anticipated that the last of the conditions to be fulfilled will be either
the amendment of the agreements governing Pool's activities in Saudi Arabia in a
manner satisfactory to Nabors or the adoption of the merger agreement by the
Pool shareholders. Pool and Nabors are working towards completing the merger as
quickly as possible and expect to consummate the transaction on October 1, 1999
or as soon thereafter as is practicable. See "The Merger -- Effective Time."
SURRENDER OF SHARE CERTIFICATES; PAYMENT FOR SHARES
Promptly after the merger is consummated, Nabors will mail a transmittal
form to each record holder of shares of Pool common stock, other than Nabors and
an affiliate of Nabors, describing the procedure for surrendering Pool share
certificates. SHAREHOLDERS SHOULD NOT SEND IN THEIR STOCK CERTIFICATES UNTIL
THEY RECEIVE A TRANSMITTAL FORM. Shareholders who submit their certificates and
a completed transmittal form will receive:
- certificates for the whole number of shares of Nabors common stock which
the holder has the right to receive; and
- cash instead of fractional shares of Nabors common stock.
No interest will be paid on any cash payable upon surrender of certificates. See
"The Merger -- Exchange of Certificates" and "The Merger Agreement -- Conversion
of Securities."
INTERESTS OF CERTAIN PERSONS IN THE MERGER THAT ARE DIFFERENT FROM YOURS
In considering the recommendation of the Pool Board regarding the merger,
you should be aware of the interests which certain executive officers and
directors of Pool have in the merger that are different from your interests and
their interests as shareholders.
J. T. Jongebloed, Chairman, President and Chief Executive Officer, E. J.
Spillard, Senior Vice President, Finance, R. G. Hale, Group Vice
President -- International Operations, G. G. Arms, Vice President and General
Counsel and Corporate Secretary, L. E. Dupre, Vice President -- Human Resources
and eleven other officers and employees have entered into change in control
agreements with Pool. These agreements provide for compensation to these persons
in order to ensure that management of Pool remains intact and focused on Pool's
business matters while the merger is pending. When the merger occurs, long-term
incentive plan awards and stock options held by these persons will become fully
vested. Upon termination of employment within three years after the merger, such
persons receive, among other things, a cash payment equal to three times their
base salary at the time of termination and target bonus for the preceding year
plus an additional cash payment sufficient to pay all applicable excise taxes.
If all holders of change in control agreements were terminated immediately
following the completion of the merger, Messrs. Jongebloed, Spillard, Hale,
Arms, Dupre and all others as a group would receive cash payments estimated at
$4,233,000, $1,713,000, $2,148,00, $1,053,000, $1,245,000 and $8,325,000,
respectively, assuming a market price of $23.00 per share of Nabors common stock
on the day before the merger.
Effective upon completion of the merger, stock options to purchase an
aggregate of 535,773 shares of Pool common stock will become vested, including
stock options to purchase 286,610 shares of Pool common stock held by directors
and executive officers of Pool. The equity appreciation in the options may be
converted into cash or the options exchanged for options of varying terms issued
by Nabors, all at the election of the holders. It is expected that the Pool
Board will vote to exempt from Section 16(b) of the Securities Exchange Act of
1934 the dispositions in connection with the merger of shares of Pool common
stock held by directors and executive officers of Pool.
5
12
At the closing of the merger, long-term incentive plan awards covering an
aggregate of 141,229 shares of Pool common stock will become payable, including
incentive awards covering 102,253 shares payable to executive officers of Pool.
Additionally, the forfeiture restrictions will be lifted on an aggregate of
88,468 shares of Pool common stock held by directors and executive officers that
have been paid previously as incentive awards.
Nabors has agreed to continue in effect indemnification provisions
applicable to the surviving corporation immediately following the merger for
Pool's directors and officers and to maintain directors' and officers' liability
insurance covering Pool's directors and officers for a period of six years.
See "The Merger -- Interests of Certain Persons in the Merger."
THE SPECIAL MEETING
At the special shareholder meeting, the holders of Pool common stock will
be asked to approve the merger agreement. You may vote at the special
shareholder meeting if you were the record owner of Pool common stock at the
close of business on August 6, 1999. You will have one vote for each share of
Pool common stock you own. On that date, there were 21,286,031 shares of Pool
common stock outstanding.
The vote of 66 2/3% of the outstanding shares of Pool common stock entitled
to vote is required to approve the merger agreement.
On the record date, Nabors and an affiliate of Nabors owned 2,209,500
shares of Pool common stock (approximately 10.4% of the shares then
outstanding), and the directors and executive officers of Pool owned an
additional 157,964 shares of Pool common stock (approximately 0.7% of the shares
then outstanding). We expect that all of these shares will be voted to approve
the merger agreement at the Pool special meeting. The Pool Board also has the
right to vote an additional 769,231 shares of Pool common stock (approximately
3.6% of the shares of Pool common stock outstanding on the record date) pursuant
to an agreement with the former owner of an acquired company. The merger
agreement provides that Pool, through the Pool Board, will vote all of these
shares in favor of approval of the merger agreement and the merger.
See "The Special Meeting."
RISK FACTORS
In determining whether to vote to adopt the merger agreement, shareholders
should carefully consider the matters set forth under "Risk Factors," among
others.
COMPARISON OF RIGHTS OF POOL SHAREHOLDERS AND NABORS STOCKHOLDERS
As a result of different governing laws and organizational documents, Pool
shareholders will have different rights as holders of Nabors common stock than
they currently have as holders of Pool common stock. See "Comparison of
Securityholders' Rights."
6
13
OTHER RECENT DEVELOPMENTS
On April 7, 1999, an acquisition subsidiary of Nabors merged with and into
Bayard Drilling Technologies Inc. As a result of that merger, Bayard became a
wholly-owned subsidiary of Nabors. Nabors issued approximately 6.2 million
shares of its common stock and paid $5.5 million in cash to the former
shareholders of Bayard in exchange for all of the outstanding capital stock of
Bayard. All obligations of Bayard prior to its merger with Nabors' acquisition
subsidiary, including its debt, remained the obligations of Bayard after the
merger.
Nabors held its annual meeting of stockholders on June 8, 1999. The sole
matter voted upon at the annual meeting was the election of three Class II
directors. At the annual meeting Anthony G. Petrello, Myron M. Sheinfeld and
Martin J. Whitman were re-elected to the Nabors Board to serve three-year terms
expiring in 2002.
On June 30, 1999, Nabors announced the redemption of all of its outstanding
5% convertible Subordinated Notes due 2006 on July 15, 1999. The 5% notes were
redeemable at $1,035 per $1,000 principal amount plus accrued interest from May
15, 1999 to the redemption date. Instead of redemption, holders of 5% notes
could elect to convert each $1,000 principal amount held into 55.172 shares of
Nabors common stock at a conversion price of $18.125 per share. Of the
$172,498,000 principal amount outstanding on July 15, 1999, $163,000 was
redeemed and the remainder was converted into 9,508,158 shares of Nabors common
stock.
On July 6, 1999, Nabors commenced a tender offer and consent solicitationmaking with respect to
the $100 million aggregate principal amount of 11% Senior Notes
due 2005 of Bayard. The offer expired on August 3, 1999, and Nabors purchased
all $100 million principal amountnew notes may be discontinued without
notice. We do not intend to apply for a listing
of the Bayardnew notes for aggregate
consideration of approximately $111.5 million.on any securities exchange or
an automated dealer quotation system.
10
FORWARD-LOOKING STATEMENTS
The statements in this documentThis prospectus and the documents incorporated in this prospectus by
reference that relate to matters that are not historical facts are "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. When used in this document,contain forward-looking statements. We typically use words such as
"anticipate," "believe," "expect,"plan," "plan,"expect," "intend," "estimate," "project,"
"will," "should," "could," "may," "predict" and similar expressions are
intended to identify
forward-looking statements. Future events andYou are cautioned that actual results maycould differ
materially from the results set forththose anticipated in or implied in the forward-looking statements. Factors that might cause such a difference includeAny
forward-looking statements, including statements regarding the following:intent, belief or
current expectations of us or our management, are not guarantees of future
performance and involve risks, uncertainties and assumptions about us and the
industry in which we, Nabors Delaware and Nabors operate, including, among other
things:
- fluctuations in worldwide prices and demand for oil and natural gas;
- fluctuations into levels of oil and natural gas exploration and development
activities;
- fluctuations in the demand for contract drilling and oilfieldworkover services;
- the existence of competitors, technological changes and developments in
the oilfield services industry;
- the existence of operating risks inherent in the contract drilling and
oilfield services
industries;industry;
- the existence of regulatory uncertainties,and legislative uncertainties;
- outcomes of pending and future litigation;
- the possibility of political instability, war or acts of terrorism in any
of the countries in which Pool andwe, Nabors or Nabors' subsidiaries do or will
do business;
- changes in capital needs;
- an inability to execute our business strategy; and
- year 2000 issues and general economic conditions,conditions.
All forward-looking statements in additionthis prospectus are based on information
available to us on the date of this prospectus. We do not intend to update or
revise any forward-looking statements that we may make in this prospectus or
other matters discussed under "Risk Factors."
In addition, actual benefits resulting from the merger may be less than
those anticipated by the two companiesdocuments, reports, filings or press releases, whether as a result of unanticipatednew
information, future events that
may occuror otherwise.
11
RISK FACTORS
You should consider carefully the following factors, as well as the other
information contained in or incorporated by reference into this prospectus,
before tendering your old notes in the integrationexchange offer. The risks and
uncertainties described below and incorporated by reference are not the only
risks we face. Additional risks and uncertainties not presently known to us or
that we currently deem immaterial may impair our future business operations.
HOLDERS WHO FAIL TO EXCHANGE THEIR OLD NOTES WILL CONTINUE TO BE SUBJECT TO
RESTRICTIONS ON TRANSFER.
If you do not exchange your old notes for new notes in the exchange offer,
you will continue to be subject to the restrictions on transfer of your old
notes described in the legend on the certificates for your old notes. The
restrictions on transfer of your old notes arise because we issued the old notes
under exemptions from, or in transactions not subject to, the registration
requirements of the Securities Act and applicable state securities laws. In
general, you may only offer or sell the old notes if they are registered under
the Securities Act and applicable state securities laws, or are offered and sold
under an exemption from these requirements. We do not plan to register the old
notes under the Securities Act. For further information regarding the
consequences of tendering your old notes in the exchange offer, see the
discussions below under the captions "The Exchange Offer -- Consequences of
Exchanging or Failing to Exchange Old Notes" beginning on page 23 and "Material
Tax Considerations" beginning on page 39.
YOU MUST COMPLY WITH THE EXCHANGE OFFER PROCEDURES IN ORDER TO RECEIVE NEW,
FREELY TRADABLE NOTES.
Delivery of new notes in exchange for old notes tendered and accepted for
exchange pursuant to the exchange offer will be made only after timely receipt
by the exchange agent of the following:
- certificates for old notes or a book-entry confirmation of a book-entry
transfer of old notes into the exchange agent's account at DTC, New York,
New York as a depository, including an agent's message (as defined below)
if the tendering holder does not deliver a letter of transmittal;
- a completed and signed letter of transmittal (or facsimile thereof), with
any required signature guarantees, or, in the case of a book-entry
transfer, an agent's message in lieu of the letter of transmittal; and
- any other documents required by the letter of transmittal.
Therefore, holders of old notes who would like to tender old notes in
exchange for new notes should be sure to allow enough time for the old notes to
be delivered on time. We are not required to notify you of defects or
irregularities in tenders of old notes for exchange. Old notes that are not
tendered or that are tendered but we do not accept for exchange will, following
consummation of the exchange offer, continue to be subject to the existing
transfer restrictions under the Securities Act and, upon consummation of the
exchange offer, certain registration and other rights under the registration
rights agreement will terminate. See "The Exchange Offer -- Procedures for
Tendering Old Notes" beginning on page 18 and "The Exchange
Offer -- Consequences of Exchanging or Failing to Exchange Old Notes" beginning
on page 23.
As used in this prospectus, the term "agent's message" means a message,
transmitted by DTC to and received by the exchange agent and forming a part of a
book-entry confirmation, which states that DTC has received an express
acknowledgment from the tendering participant stating that such participant has
received and agrees to be bound by the letter of transmittal and that we may
enforce such letter of transmittal against such participant.
SOME HOLDERS WHO EXCHANGE THEIR OLD NOTES MAY BE DEEMED TO BE UNDERWRITERS AND
THESE HOLDERS WILL BE REQUIRED TO COMPLY WITH THE REGISTRATION AND PROSPECTUS
DELIVERY REQUIREMENTS IN CONNECTION WITH ANY RESALE TRANSACTION.
If you exchange your old notes in the exchange offer for the purpose of
participating in a distribution of the new notes, you may be deemed to have
received restricted securities and, if so, will be required to
12
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale transaction.
ALTHOUGH THE NEW NOTES ARE REFERRED TO AS "SENIOR NOTES," YOUR RIGHT TO RECEIVE
PAYMENT ON THE NEW NOTES AND THE GUARANTEES IS UNSECURED AND WILL BE EFFECTIVELY
SUBORDINATED TO ANY EXISTING AND FUTURE SECURED DEBT TO THE EXTENT OF THE VALUE
OF THE COLLATERAL THEREFORE.
The new notes are general senior unsecured obligations and therefore will
be effectively subordinated in right of payment to our existing or future
secured indebtedness and Nabors Delaware's and Nabors' guarantee are effectively
subordinated in right of payment to the claims of existing and future secured
creditors of Nabors Delaware and Nabors, respectively, in each case, to the
extent of the collateral therefor. If we default on the new notes, become
bankrupt, liquidate or reorganize, any secured creditors could use their
collateral to satisfy their secured indebtedness before you would receive any
payment on the new notes. If the value of such collateral is not sufficient to
pay any secured indebtedness in full, our secured creditors would share the
value of our other assets, if any, with you and the holders of other claims
against us which rank equally with the new notes.
The respective guarantees of the new notes will have a similar ranking as
they relate to secured indebtedness of Nabors Delaware and Nabors as the new
notes do with respect to our secured indebtedness.
THERE IS NO ESTABLISHED TRADING MARKET FOR THE NEW NOTES AND YOU MAY FIND IT
DIFFICULT TO SELL YOUR NEW NOTES.
There is currently no established trading market for the new notes. We have
no plans to list the new notes on any securities exchange or an automated dealer
quotation system. Lehman Brothers Inc. advised us that it presently intends, but
it is not obligated, to make a market in the new notes. Any market making
activity, if initiated, may be discontinued at any time, for any reason, without
notice. If Lehman Brothers Inc. ceases to act as a market maker for the new
notes for any reason, we cannot assure you that another firm or person will make
a market in the new notes. The liquidity of any market for the new notes will
depend upon the number of holders of the new notes, our results of operations
and financial condition, the market for similar securities, the interest of
securities dealers in making a market in the new notes and other factors. An
active or liquid trading market may not develop for the new notes.
NABORS AND NABORS DELAWARE, AS HOLDING COMPANIES, DEPEND ON THEIR RESPECTIVE
SUBSIDIARIES TO MEET THEIR FINANCIAL OBLIGATIONS.
Nabors Delaware and Nabors are each holding companies and depend on the
business of Pooland distributions from their subsidiaries to satisfy their
obligations under the guarantees. Nabors Delaware and Nabors are each holding
companies with no significant assets other than the stock of their subsidiaries
and intercompany loans to their subsidiaries. In order to satisfy their
obligations under the guarantees of the notes, Nabors Delaware and Nabors each
rely exclusively on repayments of interest and principal on intercompany loans
made by Nabors Delaware and Nabors to their operating subsidiaries and income
from dividends and other cash flows from such subsidiaries. There can be no
assurance that these operating subsidiaries will generate sufficient net income
to pay upstream dividends or cash flows to make payments of interest and
principal to Nabors Delaware and Nabors in respect of these intercompany loans.
In addition, from time to time, these operating subsidiaries may enter into
the businessfinancing arrangements which may contractually restrict or prohibit such
upstream payments and interest and principal to Nabors Delaware or Nabors.
13
WE, AS AN INDIRECT, WHOLLY OWNED-FINANCE SUBSIDIARY OF NABORS DELAWARE, ARE
DEPENDING ON THE REPAYMENT OF INTERCOMPANY OBLIGATIONS AND FINANCIAL SUPPORT
FROM WITHIN THE NABORS DELAWARE GROUP TO MEET OUR FINANCIAL OBLIGATIONS
INCLUDING OUR OBLIGATIONS UNDER THE NOTES.
We are an indirect, wholly-owned finance subsidiary of Nabors Delaware,
which is an indirect, wholly-owned subsidiary of Nabors. 7
14
SUMMARY SELECTED HISTORICAL AND UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
The following tables present selected historical financial dataOur only business is to
access bank financing and capital markets on behalf of the Canadian subsidiaries
of Nabors BayardDelaware and Poolto hold investments. Otherwise, we conduct no independent
business or operations. In order to satisfy our obligations under the notes we
rely exclusively on repayment of interest and unaudited selected pro forma combined financial dataprincipal on intercompany loans,
if any, made by us to other Canadian subsidiaries of Nabors Delaware and
distributions from our 99.9% owned subsidiary, AH Finance Limited Partnership,
which in turn relies on the return on investments made by it in the Canadian
subsidiaries of Nabors Delaware. We can not assure you that these operating
subsidiaries will generate sufficient net income to meet their obligations to us
or to our subsidiary in respect of these intercompany investments. In addition,
from time to time, these operating subsidiaries may enter into financing
arrangements which may contractually restrict or prohibit them from making
payments to us or to our subsidiary.
NABORS' SIGNIFICANT LEVEL OF DEBT COULD ADVERSELY AFFECT ITS FINANCIAL CONDITION
AND PREVENT IT FROM FULFILLING ITS OBLIGATIONS UNDER ITS GUARANTEE.
As of August 31, 2002, Nabors' consolidated total indebtedness was
approximately $2.086 billion, its funded debt to capital ratio was 49.2%, and
its net funded debt to capital ratio was 26.6%, after giving effect to the
acquisitionexchange offer contemplated by this prospectus and the concurrent exchange offer
(which we refer to as the concurrent exchange offer in this prospectus) in which
Nabors Delaware, an indirect, wholly-owned subsidiary of Nabors, is offering to
exchange its 5.375% senior notes due 2012 for 5.375% senior notes due 2012 which
have been registered under the Securities Act, and which are fully and
unconditionally guaranteed by Nabors.
Funded debt to capital ratio is calculated by dividing funded debt by
funded debt plus capital. Funded debt is defined as the sum of (1) short-term
borrowings, (2) current portion of long-term obligations and (3) long-term
obligations. Capital is defined as stockholders' equity. The net funded debt to
capital ratio nets cash and cash equivalents, short-term marketable securities
and long-term marketable securities against funded debt. This ratio is
calculated by dividing net funded debt by net funded debt plus capital. Both of
these ratios are a method for calculating the amount of leverage a company has
in relation to its capital. Nabors' level of indebtedness could adversely affect
its financial condition and prevent Nabors or Nabors Delaware from fulfilling
their obligations under their respective guarantees.
Nabors and its subsidiaries may still be able to incur substantially more
debt. The terms of the indenture governing the new notes and the agreement
governing Nabors' other indebtedness (including the indenture governing the
notes offered by Nabors Delaware in the concurrent exchange offer) permit
additional borrowings and any such borrowings may be senior in right of payment
to the new notes and the related guarantees. Nabors' incurrence of additional
debt could further exacerbate the risks described in this prospectus.
NABORS DELAWARE'S AND NABORS' GUARANTEES COULD BE VOIDED OR SUBORDINATED BY
FEDERAL BANKRUPTCY LAW OR COMPARABLE FOREIGN AND STATE LAW PROVISIONS.
Our obligations under the new notes are guaranteed by Nabors Delaware and
Nabors. Under the federal bankruptcy law and comparable provisions of foreign
and state fraudulent transfer laws, one or more of the guarantees could be
voided, or claims in respect of a guarantee could be subordinated to all other
debts of that guarantor if, among other things, the guarantor, at the time it
incurred the indebtedness evidenced by its guarantees, received less than
reasonably equivalent value or fair consideration for the incurrence of such
guarantees and:
- was insolvent or rendered insolvent by reason of such incurrence;
14
- was engaged in a business or transaction for which the guarantor's
remaining assets constituted unreasonably small capital; or
- intended to incur, or believed that it would incur, debts beyond its
ability to pay such debts as they mature.
In addition, any payment by that guarantor pursuant to its guarantees could
be voided and required to be returned to the guarantor or to a fund for the
benefit of the creditors of the guarantor.
The measure of insolvency for purposes of these fraudulent transfer laws
will vary depending upon the law applied in any proceeding to determine whether
a fraudulent transfer has occurred. Generally, however, a guarantor would be
considered insolvent if:
- the sum of its debts, including contingent liabilities, was greater than
the fair saleable value of all of its assets;
- the outstanding capital stockpresent fair saleable value of Bayardits assets was less than the amount
that would be required to pay its probable liability on its existing
debts, including contingent liabilities, as they become absolute and
Pool by Naborsmature; or
- it could not pay its debts as they become due.
We cannot be sure as to the standards that a court would use to determine
whether or not the guarantors were solvent at the relevant time, or, regardless
of the standard that the court uses, that the issuance of the guarantees of the
new notes would not be voided or the guarantees of the new notes would not be
subordinated to that guarantor's other debt.
If the guarantees were legally challenged, any guarantees could also be
subject to the claim that, since the guarantees were incurred for our benefit,
and only indirectly for the benefit of the guarantor, the obligations of the
applicable guarantor were incurred for less than fair consideration.
A court could thus void the obligations under the purchase methodguarantees or subordinate
the guarantees to the applicable guarantor's other debt or take other action
detrimental to holders of accountingthe new notes.
15
USE OF PROCEEDS
We will not receive any cash proceeds from the exchange offer. Any old
notes that are properly tendered and exchanged pursuant to the exchange offer
will be retired and cancelled.
RATIO OF EARNINGS TO FIXED CHARGES
Nabors Holdings was formed in December 2001. Since its inception, Nabors
Holdings has not generated any earnings and has not incurred any debt or
liabilities other than debt and liabilities associated with the old notes and
the completion byexchange offer.
Nabors of three separate debt transactions. The data for Nabors
was derived for eachDelaware, prior to June 24, 2002, the effective date of the
four fiscal years ended September 30, 1997reorganization, and Nabors, after June 24, 2002, have calculated their ratio of
earnings to fixed charges by dividing earnings by fixed charges. For purposes of
computing the fiscal year endedratio of earnings to fixed charges, earnings consist of pretax
income from continuing operations less undistributed earnings from
unconsolidated affiliates (net of dividends) plus amortization of capitalized
interest and fixed charges (excluding capitalized interest). Fixed charges
consist of interest incurred (whether expensed or capitalized), amortization of
debt expense, and that portion of rental expense on operating leases deemed to
be the equivalent of interest.
SIX THREE
MONTHS FISCAL YEAR MONTHS
ENDED FISCAL YEAR ENDED ENDED ENDED
- -------- --------------------------------------------------------- ------------- ------------
JUNE 30, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, SEPTEMBER 30, DECEMBER 31,
2002 2001 2000 1999 1998 1997 1997
- -------- ------------ ------------ ------------ ------------ ------------- ------------
3.43x 9.11x 6.21x 2.48x 11.60x 10.97x 15.18x
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SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
The selected historical consolidated financial data of Nabors in the table
below were derived from Nabors' audited consolidated financial statements as of
December 31, 1998 from audited financial statements filed in
Nabors' Annual Reports on Form 10-K. The data for Bayard2001 and its predecessors2000 and for Pool was derived for each of the five years ended December 31, 1998 from
audited financial statements filed in each company's Annual Reports on Form
10-K. The data for the three months ended March 31, 1999 and 1998 was derived
from unaudited financial statements filed in the Quarterly Report on Form 10-Q
filed by each of Nabors, Bayard and Pool for the quarter ended March 31, 1999.
In the opinion of management of each of Nabors, Bayard and Pool, such unaudited
financial statements contain all adjustments, consisting only of normal
recurring adjustments, necessary to present fairly the financial position and
results of operations of such interim periods.
The historical financial data for Bayard for the year ended December 31,
1997 includes the results of Bayard's consolidated subsidiaries as follows:
Trend Drilling Co., beginning May 1, 1997; Ward Drilling Company, Inc.,
beginning May 30, 1997; and Bonray Drilling Corporation, beginning October 16,
1997. The historical financial data for Bayard for the three years ended December 31, 1996 relate to the operations2001,
which appears in Nabors' Current Report on Form 8-K dated as of Anadarko Drilling Company, the
predecessorOctober 10,
2002, and from Nabors Delaware's Annual Reports on Form 10-K as of Bayard, and generally include the financial results of the
operation of eight rigs. The historical financial data for Pool for the
yearyears ended December 31, 1999, 1998 includesand September 30, 1997, respectively, and a
transition period for the resultsthree months ended December 31, 1997 and Nabors'
unaudited interim condensed consolidated financial statements as of Sea Mar, Inc. beginning March
31, 1998. The selected historical financial dataand for each entity coincides with
its respective historical annual reporting period.the
six months ended June 30, 2002 and 2001. Nabors changed its fiscal year end from
September 30 to December 31, effective for the fiscal year beginning January 1,
1998. A three-month transition period from October 1, 1997 through December 31,
1997 preceded the start of Nabors' new fiscal year. Nabors has recast its
financial data to conform to the presentation of the twelve months ended
December 31, 1997 by adjusting its audited results for the year ended September
30, 1997 to exclude the unaudited results for the quarter ended December 31,
1996 and to include the audited results for the quarter ended December 31, 1997.
Upon consummation of the merger, the fiscal year of the
combined company will end on December 31.
The companies derived or preparedIn Nabors management's opinion, the unaudited selected pro forma combined
financial data consistently with the unaudited pro forma combinedinterim condensed consolidated
financial statements included in this document. The unaudited selected pro forma
combinedhave been prepared on the same basis as the audited
consolidated financial data does not indicate whatstatements and include all adjustments, consisting only
of normal recurring adjustments, necessary to present fairly the combined results of
operations and financial position of Nabors Bayard and Pool would have been hadfor the merger occurred as
of the dates indicated or the results of operation that the combined company may
obtain in the future. The unaudited selected pro forma combined financialperiods presented. This data
does not reflect the anticipated cost savings resulting from integration of the
operations of Nabors, Bayard and Pool.
Shareholders should be read the following selected historical and unaudited
pro forma combined financial data in conjunction with the historicalaudited and pro
forma combinedunaudited interim
consolidated financial statements andof Nabors, including the notes to the
financial statements, incorporated by reference or
includedinto this prospectus.
As previously reported in Nabors Delaware's Form 10-K for the year ended
December 31, 2001, as reclassified in Nabors' Form 8-K dated as of October 10,
2002, and the Forms 10-Q for the first and second quarters ended March 31, 2002
and June 30, 2002, as amended by Form 10-Q/A dated as of October 10, 2002,
respectively, Nabors adopted the following new accounting pronouncements during
the first six months of 2002. Effective April 1, 2002, Nabors adopted Statement
of Financial Accounting Standards (SFAS) No. 145, "Rescission of FASB Statements
No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections". As a result, Nabors no longer classifies gains and losses from
extinguishment of debt that are usual and frequent as extraordinary items and,
as required by SFAS No. 145, Nabors reclassified to other income any similar
debt extinguishment items that had been reported as extraordinary items in
comparative prior periods. Additionally, Nabors adopted Emerging Issues Task
Force (EITF) No. 01-14, "Income Statement Characterization of Reimbursements
Received for Out-of-Pocket Expenses Incurred", in the second quarter of 2002.
Previously, Nabors recognized reimbursements received as a reduction to the
related direct costs. EITF 01-14 requires that reimbursements received from its
customers be recorded in operating revenues and "out-of-pocket" expenses be
recorded in direct costs. The transition provisions of these accounting
pronouncements require comparative prior periods to reflect reclassifications
consistent with the pronouncements not later than the time of its next audited
financial statements. Nabors has elected to reflect these reclassifications in
its Form 8-K dated as of October 10, 2002 for its consolidated financial
statements for each of the three years in the period ended December 31, 2001.
In addition, as of January 1, 2002, Nabors adopted SFAS No. 142, "Goodwill
and Other Intangible Assets", and therefore no longer amortizes goodwill. The
effect of eliminating goodwill amortization is reflected for the six months
ended June 30, 2002 but for no other period presented in this document.
8
15
SUMMARYprospectus. The
effect of eliminating goodwill amortization on the three years in the period
ended December 31, 2001 is disclosed in Note 1 of Nabors' Current Report on Form
8-K dated as of October 10, 2002, as required by SFAS No. 142.
NABORS INDUSTRIES LTD.
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
SIX MONTHS ENDED TWELVE MONTHS
JUNE 30, YEAR ENDED DECEMBER 31, ENDED
----------------------- ------------------------------------------------- DECEMBER 31,
2002 2001 2001 2000 1999 1998 1997
---------- ---------- ---------- ---------- ---------- ---------- -------------
UNAUDITED UNAUDITED
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
UNAUDITED
TWELVE
THREE MONTHS MONTHS
YEAR ENDED SEPTEMBER 30, ENDED ENDED YEAR ENDED
------------------------------------------- DECEMBER 31, DECEMBER 31, DECEMBER 31,
1994 1995 1996 1997 1997 1997 1998
-------- -------- -------- ---------- ------------ ------------ ------------
NABORS -- HISTORICAL
Revenues................ $484,268 $572,788 $719,743 $1,029,303Operating revenues......... $ 302,806 $1,115,032721,959 $1,132,404 $2,191,183 $1,377,453 $ 968,463666,429 $ 968,462 $1,114,758
Net income................. 67,362 187,153 357,450 137,356 27,704 124,988 136,020
Net income from
continuing
operations............. 1,350 51,104 70,500 114,808 41,327 136,020 124,988
Comprehensive income.... -- 50,191 73,852 130,542 31,227 138,242 107,335
Earnings per diluted
share from continuing
operations............. .02 .57 .75 1.08 .37share.................... $ .45 $ 1.14 $ 2.24 $ .90 $ .23 $ 1.16 $ 1.24 1.16
Dividends per common
share..................share.................... -- -- -- -- -- -- --
Book value per common
share at end of
period................. -- -- -- -- -- -- 8.61
Total assets............ 490,273 593,272 871,274 1,234,232assets............... 4,432,778 4,180,581 4,151,915 3,136,868 2,398,003 1,465,907 1,281,306
1,281,306 1,450,242
Long-term obligations... 61,879 51,478 229,504 229,507obligations...... 1,099,096 1,707,390 1,567,616 854,777 482,600 217,034 226,299
226,299 217,034
Stockholders' equity.... 317,424 368,750 457,822 727,843equity....... $2,163,843 $1,864,912 $1,857,866 $1,806,468 $1,470,074 $ 867,469 $ 767,340
767,340 867,469
UNAUDITED
THREE MONTHS
ENDED
MARCH 31,
-----------------------
1998 1999
---------- ----------
NABORS -- HISTORICAL
Revenues................ $ 286,880 $ 149,692
Net income from
continuing
operations............. 39,692 11,964
Comprehensive income.... 39,941 18,172
Earnings per diluted
share from continuing
operations............. .36 .12
Dividends per common
share.................. -- --
Book value per common
share at end of
period................. -- 8.79
Total assets............ 1,309,718 1,700,096
Long-term obligations... 222,268 537,967
Stockholders' equity.... 818,114 885,922
YEAR ENDED
DECEMBER 31, YEAR ENDED
------------------------------------------- DECEMBER 31,
1994 1995 1996SEPTEMBER 30,
1997 1998
-------- -------- -------- ----------1997
------------ -------------
(IN THOUSANDS, EXCEPT PER S
BAYARD -- HISTORICAL
Revenues................ $ 9,910 $ 7,708 $ 9,853 $ 55,747 $ 79,072Operating revenues......... $302,831 $1,028,853
Net (loss)income................. 41,327 114,808
Net income from
continuing
operations............. (657) (222) 267 1,916 (5,244)
Earnings (loss) per diluted
share from
continuing
operations............. -- -- -- .17 (.29)share.................... $ .37 $ 1.08
Dividends per common
share..................share.................... -- --
-- -- --
Book value per common
share at end of
period................. -- -- -- -- 9.51
Total assets............ 6,149 8,054 34,673 240,488 319,340assets............... 1,234,232
Long-term obligations... -- -- 6,053 25,160 111,683obligations...... 229,507
Stockholders' (deficit)
equity................. (54) (276) 26,251 178,462 173,005
UNAUDITED
THREE MONTHS ENDED
MARCH 31,
-----------------------
1998 1999
---------- ----------
BAYARD -- HISTORICAL
Revenues................equity....... $ 23,962 $ 10,976
Net (loss) income from
continuing
operations............. 1,757 (7,258)
Earnings (loss) per
diluted share from
continuing
operations............. .10 (.40)
Dividends per common
share.................. -- --
Book value per common
share at end of
period................. -- 9.09
Total assets............ 246,594 305,834
Long-term obligations... 23,248 110,166
Stockholders' (deficit)
equity................. 180,232 165,976727,843
YEAR ENDED DECEMBER 31, YEAR ENDED
------------------------------------------- DECEMBER 31,
1994 1995 1996 1997 1998
-------- -------- -------- ---------- ------------
POOL -- HISTORICAL
Revenues................ $229,175 $277,305 $348,558 $ 451,922 $ 455,741
Net (loss) income from
continuing
operations............. (12,729) 3,132 9,640 26,678 21,808
(Loss) earnings per
diluted share from
continuing
operations............. (.94) .23 .58 1.36 1.05
Dividends per common
share.................. -- -- -- -- --
Book value per common
share at end of
period................. -- -- -- -- 13.85
Total assets............ 209,818 248,443 341,217 479,195 664,139
Long-term obligations... 369 15,784 23,068 79,322 172,847
Stockholders' equity.... 128,639 136,027 197,123 233,738 291,448
UNAUDITED
THREE MONTHS ENDED
MARCH 31,
-----------------------
1998 1999
---------- ----------
POOL -- HISTORICAL
Revenues................ $ 117,712 $ 81,027
Net (loss) income from
continuing
operations............. 7,453 535
(Loss) earnings per
diluted share from
continuing
operations............. .38 .03
Dividends per common
share.................. -- --
Book value per common
share at end of
period................. -- 13.86
Total assets............ 675,597 662,207
Long-term obligations... 168,522 187,847
Stockholders' equity.... 276,314 294,061
917
16
UNAUDITED SUMMARY SELECTED PRO FORMA COMBINED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
UNAUDITED UNAUDITED
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, MARCH 31,
1998 1999
------------ ------------------
PRO FORMA COMBINED
Revenues.................................................. $1,516,809 $ 241,695
Net income from continuing operations..................... 156,047 8,255
Earnings per diluted share from continuing operations..... 1.13 .06
Dividends per common share................................ -- --
Book value per common share at end of period.............. 10.32 10.43
Total assets.............................................. 2,386,097
Long-term obligations..................................... 523,482
Stockholders' equity...................................... 1,418,925
Pool equivalents:
Earnings per diluted share from continuing operations..... 1.16 .06
Dividends per common share................................ -- --
Book value per common share at end of period.............. 10.58 10.69
10
17
RISK FACTORSTHE EXCHANGE OFFER
TERMS OF THE EXCHANGE OFFER; PERIOD FOR TENDERING OLD NOTES
Subject to terms and conditions, we will accept for exchange old notes
which are properly tendered on or prior to the Expiration Date and not withdrawn
as permitted below. As used herein, the term "Expiration Date" means the later
of 5 p.m., New York City time, , 2002, the 21st business day following
the date of this prospectus, and the latest time and date by which we, in our
sole and absolute discretion, extend the exchange offer.
As of the date of this prospectus, $225 million principal amount of old
notes are outstanding. This prospectus, together with the letter of transmittal,
is being sent to all holders of old notes known to us. Our obligation to accept
old notes for exchange pursuant to the exchange offer is subject to certain
obligations as set forth under "-- Conditions to the Exchange Offer."
We expressly reserve the right, at any time, to extend the period of time
during which the exchange offer is open, and delay acceptance for exchange of
any old notes, by giving oral or written notice of such extension to the holders
thereof as described below. During any such extension, all old notes previously
tendered will remain subject to the exchange offer and may be accepted for
exchange by us. Any old notes not accepted for exchange for any reason will be
returned without expense to the tendering holder as promptly as practicable
after the expiration or termination of the exchange offer.
Old notes tendered in the exchange offer must be in denominations of
principal amount of $1,000 and any integral multiple thereof.
We expressly reserve the right to amend or terminate the exchange offer,
and not to accept for exchange any old notes, upon the occurrence of any of the
conditions of the exchange offer specified under "-- Conditions to the Exchange
Offer." We will give oral or written notice of any extension, amendment,
non-acceptance or termination to the holders of the old notes as promptly as
practicable. Such notice, in the case of any extension, will be issued by means
of a press release or other public announcement no later than 9:00 a.m., New
York City time, on the next business day after the previously scheduled
Expiration Date.
PROCEDURES FOR TENDERING OLD NOTES
The tender to us of old notes by you as set forth below and our acceptance
of the old notes will constitute a binding agreement between us and you upon the
terms and subject to the conditions set forth in this prospectus and in the
accompanying letter of transmittal. Except as set forth below, to tender old
notes for exchange pursuant to the exchange offer, you must transmit a properly
completed and duly executed letter of transmittal, including all other documents
required by such letter of transmittal or, in the case of a book-entry transfer,
an agent's message in lieu of such letter of transmittal, to Bank One, N.A., as
exchange agent, at the address set forth below under "-- Exchange Agent" on or
prior to the Expiration Date. In addition, either:
- certificates for such old notes must be received by the exchange agent
along with the letter of transmittal, or
- a timely confirmation of a book-entry transfer (a "book-entry
confirmation") of such old notes, if such procedure is available, into
the exchange agent's account at DTC pursuant to other information containedthe procedure for
book-entry transfer described beginning on page 20 must be received by
the exchange agent, prior to the Expiration Date, with the letter of
transmittal or incorporated by referencean agent's message in lieu of such letter of transmittal,
or the holder must comply with the guaranteed delivery procedures
described below.
As used in this document, shareholdersprospectus, the term "agent's message" means a message,
transmitted by DTC to and received by the exchange agent and forming a part of a
book-entry confirmation, which states that DTC has received an express
acknowledgment from the tendering participant stating that such participant has
18
received and agrees to be bound by the letter of transmittal and that we may
enforce such letter of transmittal against such participant.
The method of delivery of old notes, letters of transmittal and all other
required documents is at your election and risk. If such delivery is by mail, it
is recommended that you use registered mail, properly insured, with return
receipt requested. In all cases, you should carefully consider these risk factorsallow sufficient time to assure
timely delivery. No letter of transmittal or old notes should be sent to us.
Signatures on a letter of transmittal or a notice of withdrawal, as the
case may be, must be guaranteed unless the old notes surrendered for exchange
are tendered:
- by a holder of the old notes who has not completed the box entitled
"Special Issuance Instructions" or "Special Delivery Instructions" on the
letter of transmittal, or
- for the account of an Eligible Institution (as defined below).
In the event that signatures on a letter of transmittal or a notice of
withdrawal are required to be guaranteed, such guarantees must be by a firm
which is a member of the Securities Transfer Agent Medallion Program, the Stock
Exchanges Medallion Program or the New York Stock Exchange Medallion Program (we
refer to each such entity as an Eligible Institution in this prospectus). If old
notes are registered in the name of a person other than the signer of the letter
of transmittal, the old notes surrendered for exchange must be endorsed by, or
be accompanied by a written instrument or instruments of transfer or exchange,
in satisfactory form as we or the exchange agent determine in our sole
discretion, duly executed by the registered holders with the signature thereon
guaranteed by an Eligible Institution.
We or the exchange agent in our sole discretion will make a final and
binding determination on all questions as to the validity, form, eligibility
(including time of receipt) and acceptance of old notes tendered for exchange.
We reserve the absolute right to reject any and all tenders of any particular
old note not properly tendered or to not accept any particular old note which
acceptance might, in our judgment or our counsel's, be unlawful. We also reserve
the absolute right to waive any defects or irregularities or conditions of the
exchange offer as to any particular old note either before submittingor after the
Expiration Date (including the right to waive the ineligibility of any holder
who seeks to tender old notes in the exchange offer). Our or the exchange
agent's interpretation of the terms and conditions of the exchange offer as to
any particular old note either before or after the Expiration Date (including
the letter of transmittal and the instructions thereto) will be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of old notes for exchange must be cured within a
proxy cardreasonable period of time, as we determine. We are not, nor is the exchange
agent or votingany other person, under any duty to notify you of any defect or
irregularity with respect to your tender of old notes for exchange, and no one
will be liable for failing to provide such notification.
If the letter of transmittal is signed by a person or persons other than
the registered holder or holders of old notes, such old notes must be endorsed
or accompanied by powers of attorney signed exactly as the name(s) of the
registered holder(s) that appear on the old notes.
If the letter of transmittal or any old notes or powers of attorneys are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing. Unless waived by us or
the exchange agent, proper evidence satisfactory to us of their authority to so
act must be submitted with the letter of transmittal.
By tendering old notes, you represent to us that, among other things:
- the new notes acquired pursuant to the exchange offer are being obtained
in the ordinary course of business of the person receiving such new
notes, whether or not such person is the holder; and
- neither the holder nor such other person has any arrangement or
understanding with any person, to participate in the distribution of the
new notes.
19
In the case of a holder that is not a broker-dealer, that holder, by
tendering, will also represent to us that the holder is not engaged in or does
not intend to engage in a distribution of the new notes.
If you are our "affiliate," as defined under Rule 405 under the Securities
Act, and engage in or intend to engage in or have an arrangement or
understanding with any person to participate in a distribution of such new notes
to be acquired pursuant to the exchange offer, you or any such other person:
- could not rely on the applicable interpretations of the staff of the SEC;
and
- must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with any resale transaction.
Each broker-dealer that receives new notes for its own account in exchange
for old notes, where such old notes were acquired by such broker-dealer as a
result of market-making activities or other trading activities, must acknowledge
that it will deliver a prospectus in connection with any resale of such new
notes. See "Plan of Distribution" beginning on page 41. The letter of
transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.
ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF NEW NOTES
Upon satisfaction or waiver of all of the conditions to the exchange offer,
we will accept, promptly after the Expiration Date, all old notes properly
tendered and will issue the new notes promptly after acceptance of the old
notes. See "-- Conditions to the Exchange Offer." For purposes of the exchange
offer, we will be deemed to have accepted properly tendered old notes for
exchange if and when we give oral (confirmed in writing) or written notice to
the exchange agent.
The holder of each old note accepted for exchange will receive a new note
in the amount equal to the surrendered old note. Accordingly, registered holders
of new notes on the relevant record date for the first interest payment date
following the consummation of the exchange offer will receive interest accruing
from the most recent date to which interest has been paid on the old notes.
Holders of new notes will not receive any payment in respect of accrued interest
on old notes otherwise payable on any interest payment date, the record date for
which occurs on or after the consummation of the exchange offer.
In all cases, issuance of new notes for old notes that are accepted for
exchange will be made only after timely receipt by the exchange agent of:
- certificates for such old notes or a timely book-entry confirmation of
such old notes into the exchange agent's account at DTC,
- a properly completed and duly executed letter of transmittal or an
agent's message in lieu thereof, and
- all other required documents.
If any tendered old notes are not accepted for any reason set forth in the
terms and conditions of the exchange offer or if old notes are submitted for a
greater principal amount than the holder desires to exchange, such unaccepted or
non-exchanged old notes will be returned without expense to the tendering holder
(or, in the case of old notes tendered by book-entry transfer into the exchange
agent's account at DTC pursuant to the book-entry procedures described below,
such non-exchanged old notes will be credited to an account maintained with DTC)
as promptly as practicable after the expiration or termination of the exchange
offer.
BOOK-ENTRY TRANSFERS
For purposes of the exchange offer, the exchange agent will request that an
account be established with respect to the old notes at DTC within two business
days after the date of this prospectus, unless the exchange agent already has
established an account with DTC suitable for the exchange offer. Any financial
institution that is a participant in DTC may make book-entry delivery of old
notes by causing DTC to
20
transfer such old notes into the exchange agent's account at DTC in accordance
with DTC's procedures for transfer. Although delivery of old notes may be
effected through book-entry transfer at DTC, the letter of transmittal or
facsimile thereof or an agent's message in lieu thereof, with any required
signature guarantees and any other required documents, must, in any case, be
transmitted to and received by the exchange agent at the special meeting.
RISKS RELATINGaddress set forth under
"-- Exchange Agent" on or prior to the Expiration Date or the guaranteed
delivery procedures described below must be complied with.
GUARANTEED DELIVERY PROCEDURES
If you desire to tender your old notes and your old notes are not
immediately available, or time will not permit your old notes or other required
documents to reach the exchange agent before the Expiration Date, a tender may
be effected if:
- prior to the Expiration Date, the exchange agent received from such
Eligible Institution a notice of guaranteed delivery, substantially in
the form we provide (by telegram, telex, facsimile transmission, mail or
hand delivery), setting forth your name and address, the amount of old
notes tendered, stating that the tender is being made thereby and
guaranteeing that within three American Stock Exchange (which we refer to
as the AMEX in this prospectus) trading days after the date of execution
of the notice of guaranteed delivery, the certificates for all physically
tendered old notes, in proper form for transfer, or a book-entry
confirmation, as the case may be, together with a properly completed and
duly executed appropriate letter of transmittal or facsimile thereof or
agent's message in lieu thereof, with any required signature guarantees
and any other documents required by the letter of transmittal will be
deposited by such Eligible Institution with the exchange agent, and
- the certificates for all physically tendered old notes, in proper form
for transfer, or a book-entry confirmation, as the case may be, together
with a properly completed and duly executed appropriate letter of
transmittal or facsimile thereof or agent's message in lieu thereof, with
any required signature guarantees and all other documents required by the
letter of transmittal, are received by the exchange agent within three
AMEX trading days after the date of execution of the notice of guaranteed
delivery.
WITHDRAWAL RIGHTS
You may withdraw your tender of old notes at any time prior to the
Expiration Date. To be effective, a written notice of withdrawal must be
received by the exchange agent at one of the addresses set forth under
"-- Exchange Agent." This notice must specify:
- the name of the person having tendered the old notes to be withdrawn,
- the old notes to be withdrawn (including the principal amount of such old
notes), and
- where certificates for old notes have been transmitted, the name in which
such old notes are registered, if different from that of the withdrawing
holder.
If certificates for old notes have been delivered or otherwise identified
to the exchange agent, then, prior to the release of such certificates, the
withdrawing holder must also submit the serial numbers of the particular
certificates to be withdrawn and a signed notice of withdrawal with signatures
guaranteed by an Eligible Institution, unless such holder is an Eligible
Institution. If old notes have been tendered pursuant to the procedure for
book-entry transfer described above, any notice of withdrawal must specify the
name and number of the account at DTC to be credited with the withdrawn old
notes and otherwise comply with the procedures of DTC.
We or the exchange agent will make a final and binding determination on all
questions as to the validity, form and eligibility (including time of receipt)
of such notices. Any old notes so withdrawn will be deemed not to have been
validly tendered for exchange for purposes of the exchange offer. Any old notes
tendered for exchange but not exchanged for any reason will be returned to the
holder without cost
21
to such holder (or, in the case of old notes tendered by book-entry transfer
into the exchange agent's account at DTC pursuant to the book-entry transfer
procedures described above, such old notes will be credited to an account
maintained with DTC for the old notes) as soon as practicable after withdrawal,
rejection of tender or termination of the exchange offer. Properly withdrawn old
notes may be re-tendered by following one of the procedures described under
"-- Procedures for Tendering Old Notes" above at any time on or prior to the
Expiration Date.
CONDITIONS TO THE TRANSACTION
Changes in the relationship between the Pool common stock trading price and
the Nabors common stock trading price may cause the valueEXCHANGE OFFER
Notwithstanding any other provision of the merger
considerationexchange offer, we are not
required to decrease.accept for exchange, or to issue new notes in exchange for, any old
notes and may terminate or amend the exchange offer, if any of the following
events occur prior to acceptance of such old notes:
- the exchange offer violates any applicable law or applicable
interpretation of the staff of the SEC;
- an action or proceeding shall have been instituted or threatened in any
court or by any governmental agency that might materially impair our or
Nabors' ability to proceed with the exchange offer;
- we shall not have received all governmental approvals that we deem
necessary to consummate the exchange offer; or
- there has been proposed, adopted, or enacted any law, statute, rule or
regulation that, in our reasonable judgment, would materially impair our
ability to consummate the exchange offer.
The merger agreement doesconditions stated above are for our sole benefit and may be asserted by
us regardless of the circumstances giving rise to any condition or may be waived
by us in whole or in part at any time in our reasonable discretion. Our failure
at any time to exercise any of the foregoing rights will not provide Pool
shareholders withbe deemed a waiver
of any protection against adverse changes in the relative prices
of Nabors common stocksuch right and Pool common stock. The merger consideration of 1.025
shares of Nabors common stock per share of Pool common stock is fixed by the
merger agreement. As a result, the number of shares of Nabors common stock toeach such right will be deemed an ongoing right which may
be asserted at any time.
In addition, we will not accept for exchange any old notes tendered, and no
new notes will be issued in exchange for each shareany such old notes, if at such time any
stop order by the Securities and Exchange Commission is threatened or in effect
with respect to the Registration Statement, of Pool common stockwhich this prospectus constitutes
a part, or the qualification of the indenture under the Trust Indenture Act.
22
EXCHANGE AGENT
Bank One, N.A. has been appointed as the exchange agent for the exchange
offer. All executed letters of transmittal should be directed to the exchange
agent at the address set forth below. Questions and requests for assistance,
requests for additional copies of this prospectus or of the letter of
transmittal and requests for notices of guaranteed delivery should be directed
to the exchange agent addressed as follows:
BANK ONE, N.A., EXCHANGE AGENT
By Hand, Overnight Delivery or by Mail:
1111 Polaris Parkway, Suite N1-OH1-0184
Columbus, Ohio 43240
Attention: Exchanges
By Facsimile Transmission
(for Eligible Institutions only):
(614) 248-9987
Confirm by Telephone:
(800) 346-5153
DELIVERY OF THE LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF SUCH LETTER OF TRANSMITTAL VIA FACSIMILE OTHER THAN AS
SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY OF THE LETTER OF
TRANSMITTAL.
FEES AND EXPENSES
The principal solicitation is being made by mail by Bank One, N.A., as
exchange agent. We will pay the exchange agent customary fees for its services,
reimburse the exchange agent for its reasonable out-of-pocket expenses incurred
in connection with the provision of these services and pay other registration
expenses, including fees and expenses of the trustee under the indenture
relating to the new notes, filing fees, blue sky fees and printing and
distribution expenses. We estimate these expenses in the aggregate to be
approximately $145,000. We will not make any payment to brokers, dealers or
others soliciting acceptances of the exchange offer.
Additional solicitation may be adjusted. The
trading prices of Nabors common stockmade by telephone, facsimile or in person by
our and Pool common stockour affiliates' officers and regular employees and by persons so engaged
by the exchange agent.
ACCOUNTING TREATMENT
We will record the new notes at the time thatsame carrying value as the merger is consummated may vary from their prices atold notes,
as reflected in our accounting records on the date of this document.
If the trading priceexchange. Accordingly,
we will not recognize any gain or loss for accounting purposes. The expenses of
the Nabors common stock decreases relative toexchange offer will be amortized over the trading priceterm of the Pool common stock or the trading price of the Pool common
stock increases relative to the trading price of the Nabors common stock, the
value of the merger consideration may be less than would be expected based on
current prices. Nevertheless, therenew notes.
TRANSFER TAXES
You will be no adjustment to the merger
consideration in either circumstance. We encourage you to obtain current market
quotations for shares of Pool common stock and Nabors common stock.
If Nabors breaches the merger agreement, its payments to Pool may not cover
Pool's losses. The merger agreement provides Pool with limited monetary remedies
in the event that the merger agreement is terminated because of a breach by
Nabors. Under certain circumstances, the limited monetary remedies could be
significantly less than Pool's actual damages arising out of the breach.
Furthermore, if the merger agreement is terminated, Pool may be unable to
procure another bidder that will offer Pool's shareholders consideration of
equivalent value to the merger consideration. The merger agreement provides that
if the agreement is terminated by Pool because:
- Nabors breaches any covenant or agreement set forth in the merger
agreement, unless Nabors is exercising its reasonable best efforts to
cure the breach; or
- any representation or warranty of Nabors in the merger agreement is or
becomes untrue, unless there is no material adverse effect on Nabors;
then Pool's sole remedy will be to receive payment in the amount of $15 million
plus all actual, documented third party costs. See "The Merger
Agreement -- Termination" and "-- Fees, Expenses and Other Payments."
The termination fee may deter potentially more favorable competing offers;
if Pool must pay the termination fee, the payment will reduce its cash and could
reduce the trading price for its common stock. If the merger agreement is
terminated under certain specified circumstances, Pool will be obligated to pay Nabors a termination feeany transfer taxes in connection with the
tender of $15 million, plus all of Nabors' actual, documented
third party expenses. The requirement that this fee be paid may deter third
parties from making offers to acquire Pool in a competing acquisition
transaction. Furthermore, the payment of such a fee would reduce Pool's cash and
could result in a lower trading price for the Pool common stock. The principal
circumstances under which Pool would be required to pay the termination fee
include if:
- Pool's shareholders fail to adopt the merger agreement at the special
meeting and within 18 months Pool enters into an agreement concerning a
competing acquisition proposal;
- Pool breaches any covenant or agreement set forthold notes in the merger
agreement,exchange offer unless Pool is exercising its reasonable best effortsyou instruct us to cure
the breach;
- any material representation or warranty of Poolregister new
notes in the merger agreement
isname of, or becomes untrue, unless there is no material adverse effect on Pool;
11
18
-request that old notes not tendered or not accepted in
the Pool Board withdraws or adversely amends its recommendation that the
Pool shareholders voteexchange offer be returned to, adopt the merger agreement;
- the Pool Board recommends that the shareholders vote for, fails to
recommend that the shareholders vote against, or takes no position with
respect to, a competing acquisition proposal; or
- Pool takes action under its shareholder rights plan to allow a person other than Nabors to acquire beneficial ownershipthe registered tendering
holder. In those cases, you will be responsible for the payment of at least 15% of
Pool's common stock without triggering the provisions of such plan.
See "The Merger Agreement -- Termination" and "-- Fees, Expenses and Other
Payments."
RISKS RELATINGany
potentially applicable transfer tax.
CONSEQUENCES OF EXCHANGING OR FAILING TO NABORS AND ITS BUSINESSEXCHANGE OLD NOTES
If the merger agreement is adopted by the shareholders of Pool and the
merger is consummated, the shareholders of Pool, other than Nabors and an
affiliate of Nabors, will receive shares of Nabors common stock. Ownership of
Nabors common stock involves risks and uncertainties. In determining whether to
adopt the merger agreement, Pool shareholders should consider the following
risks associated with an investment in Nabors common stock. The existence of
these risks may materially and adversely affect Nabors' business, results of
operations and financial condition.
Decreased oil and gas prices could adversely affect drilling and workover
activity and Nabors' revenues, cash flows and profitability. Nabors' operations
are materially dependent upon the level of activity in oil and gas exploration
and production. Both short-term and long-term trends in oil and gas prices
affect the level of such activity. Oil and gas prices and, therefore, the level
of drilling, exploration and production activity can be volatile. Worldwide
military, political and economic events, including initiatives by the
Organization of Petroleum Exporting Countries, affect both the demandyou do not exchange your old notes for and
the supply of, oil and gas. Fluctuations during the last yearnew notes in the demand and
supply of oil and gas have contributed to, and are likely to continue to
contribute to, price volatility. Nabors believes that any prolonged reduction in
oil and gas prices would depress the level of exploration and production
activity. This would likely result in a corresponding decline in the demand for
Nabors' services and could have a material adverse effect on Nabors' revenues,
cash flows and profitability. There can be no assurances as to the future level
of demand for Nabors' services or future conditions in the drilling industry.
Beginning in early 1998, domestic land drillers, including Nabors, experienced a
significant downturn in demand for their drilling rigs. The downturn has since
impacted offshore and international drilling and workover activity. Nabors
believes the downturn is attributable in large part to sharp drops in oil prices
that began in late 1997 and continued through 1998 and into 1999. The decline in
crude oil prices negatively impacted the revenues of oil companies, who have
responded by reducing exploration and development activity. Decreased demand has
adversely affected Nabors by lowering utilization of Nabors' rigs and reducing
the dayrates Nabors can charge for its rigs. Although oil and gas prices have
improved recently, drilling activity continues to lag behind. There can be no
assurance as to when rig use will increase or when dayrates for rigs will
improve.
Nabors operates in a highly competitive industry with excess capacity,
which may adversely affect Nabors' results of operations. The drilling and
workover industry in which Nabors operates is very competitive. Contract
drilling companies compete primarily on a regional basis, and competition may
vary significantly from region to region at any particular time. Many drilling
rigs can be readily moved from one region to another in response to changes in
levels of activity, which may result in an oversupply of rigs in such area. In
many markets in which Nabors operates, the number of rigs available for use
exceeds the demand for rigs, resulting in price competition. Most drilling and
workover contracts are awarded on the basis of competitive bids, which also
results in price competition. The land drilling market generally is more
competitive than the offshore drilling market because there are a larger number
of rigs and competitors.
In all of the markets in which Nabors operates, price and the availability
and condition of equipment are the most significant factors in determining which
drilling contractor is awarded a job. Other factors
12
19
include the availability of trained personnel possessing the required
specialized skills, the overall quality of service and safety record and the
ability toexchange offer,
ancillary services. In international markets, experience in
operating in certain environments and customer alliances also have been factors
in the selection of Nabors.
Certain competitors are present in more than one of Nabors' regions,
although no one competitor operates in all of these areas. In the U.S. Lower 48
there are several hundred competitors with smaller national, regional or local
rig operations. In the Alaska market, Nabors has five major competitors. In
Canada and offshore, Nabors competes with several firms of varying size, many of
which have more significant operations in those areas than Nabors.
Internationally, Nabors competes directly with various competitors at each
location where it operates. Nabors believes that the market for land drilling
contractsyour old notes will continue to be competitive for the foreseeable future. Although
Nabors believes it has a strong competitive position in the domestic land
market, certain of its competitors internationally and offshore may be better
positioned in these markets and have newer and more desirable equipment,
allowing them to compete more effectively.
The nature of Nabors' operations presents inherent risks of loss that, if
not insured or indemnified against, could adversely affect its results of
operations. Nabors' operations are subject to many hazards inherent in the
drilling, workover and well-servicing industries, including blowouts, cratering,
explosions, fires, loss of well control, loss of hole, damaged or lost drilling
equipment and damage or loss from inclement weather, any of which could result
in personal injury or death, damage to or destruction of equipment and
facilities, suspension of operations, environmental damage and damage to the
property of others. Nabors' offshore operations are also subject to the hazardsprovisions of marine operations including capsizing, grounding, collision, damagethe indenture
relating to the notes regarding transfer and exchange of the old notes and the
restrictions on transfer of the old notes described in the legend on your
certificates. These transfer restrictions are required because the old notes
were issued under an exemption
23
from, heavy weather or sea conditions and unsound bottom conditions. In addition,
Nabors' international operations arein transactions not subject to, risksthe registration requirements of war, civil disturbancesthe
Securities Act and applicable state securities laws. In general, the old notes
may not be offered or other political events. Generally, drilling contracts providesold unless registered under the Securities Act, except
under an exemption from, or in a transaction not subject to, the Securities Act
and applicable state securities laws. We do not plan to register the old notes
under the Securities Act.
Under existing interpretations of the Securities Act by the SEC's staff
contained in several no-action letters to third parties, and subject to the
immediately following sentence, we believe that the new notes would generally be
freely transferable by holders after the exchange offer without further
registration under the Securities Act, subject to certain representations
required to be made by each holder of new notes, as set forth below. However,
any purchaser of new notes who is one of our "affiliates" (as defined in Rule
405 under the Securities Act) or who intends to participate in the exchange
offer for the divisionpurpose of responsibilities between a drilling company and its customer, and
Nabors seeksdistributing the new notes:
- will not be able to obtain indemnification from its customers by contract for
certain of these risks. Torely on the extent that Nabors is unable to transfer such
risks to customers by contract or indemnification agreements, Nabors seeks
protection through insurance which its management considers to be adequate.
However, there is no assurance that such insurance or indemnification agreements
will adequately protect Nabors against liability from allinterpretation of the consequencesSEC's staff;
- will not be able to tender its old notes in the exchange offer; and
- must comply with the registration and prospectus delivery requirements of
the hazards described above. The occurrenceSecurities Act in connection with any sale or transfer of the new
notes unless such sale or transfer is made pursuant to an eventexemption from
such requirements. See "Plan of Distribution" beginning on page 41.
We do not fully insured or
indemnified against, orintend to seek our own interpretation regarding the failure of a customer to meet its indemnification
obligations, could result in substantial losses to Nabors. In addition,exchange
offer and there can be no assurance that insurancethe SEC's staff would make a similar
determination with respect to the new notes as it has in other interpretations
to other parties, although we have no reason to believe otherwise.
Each broker-dealer that receives new notes for its own account in exchange
for old notes, where the old notes were acquired by it as a result of
market-making activities or other trading activities, must acknowledge that it
will deliver a prospectus that meets the requirements of the Securities Act in
connection with any resale of the new notes. The letter of transmittal states
that by so acknowledging and by delivering a prospectus, a broker-dealer will
not be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act.
24
DESCRIPTION OF THE NEW NOTES
The form and terms of the new notes and the old notes are identical in all
material respects, except that transfer restrictions and registration rights
applicable to the old notes do not apply to the new notes. The new notes will be
issued under the indenture, dated as of August 22, 2002, among us, Nabors
Delaware, Nabors and Bank One, N.A., as trustee (which we refer to as the
indenture in this prospectus). This is the same indenture under which the old
notes were issued.
The terms of the new notes include those expressly set forth in the
indenture and those made part of the indenture by reference to the Trust
Indenture Act of 1939, as amended (which we refer to as the Trust Indenture Act
in this prospectus). The indenture is unlimited in aggregate principal amount,
although the issuance of new notes in this prospectus will be limited to $225
million and will mature on August 15, 2009. We may issue an unlimited principal
amount of additional notes having identical terms and conditions as the new
notes (which we refer to as the additional notes in this prospectus). Any
additional notes will be part of the same issue as the new notes that we are
currently offering and will vote on all matters with the holders of the new
notes.
This description of the new notes is intended to be a useful overview of
the material provisions of the new notes, the guarantees and the indenture.
Since this description is only a summary, you should refer to the indenture for
a complete description of our obligations, the obligations of the guarantors and
your rights.
The new notes will:
- be unsecured,
- be effectively junior in right of payment to any of our future secured
debt,
- rank equally in right of payment with all of our existing and future
unsubordinated debt, and
- be senior in right of payment to any of our existing and future senior
subordinated or subordinated debt.
Our obligations under the new notes will be fully and unconditionally
guaranteed by Nabors Delaware and Nabors. The indenture does not contain any
restrictions on the amount of additional indebtedness that we, Nabors Delaware
or Nabors may issue or guarantee in the future.
INTEREST
Interest on each new note will accrue from the last interest payment date
on which interest was paid on the old note surrendered in exchange for the new
note or, if no interest has been paid on such old note, from the date of the old
note's original issue, August 22, 2002, at a rate of 4.875% per annum.
Interest will be payable semiannually on February 15 and August 15 of each
year, beginning February 15, 2003, to the persons in whose names the new notes
are registered at the close of business on the preceding February 1 and August
1, respectively. Interest on the new notes will be computed on the basis of a
360-day year comprised of twelve 30-day months.
PAYMENTS ON THE NEW NOTES; PAYING AGENT AND REGISTRAR
We will pay principal of, premium, if any, additional amounts (as defined
below), if any, and interest on the new notes at the office or agency we
designate in the Borough of Manhattan, The City of New York, except that we may,
at our option, pay interest on any new notes in physical, certificated form
either at the corporate trust office of the trustee or by check mailed to
holders of the new notes at their registered addresses as they appear in the
registrar's books. We have initially designated the corporate trust office of
Bank One, N.A. in New York, New York to act as our paying agent and registrar.
We may, however, change the paying agent or registrar without prior notice to
the holders of the new notes, and Nabors or any of its subsidiaries may act as
paying agent or registrar.
25
We will pay principal of, premium, if any, additional amounts, if any, and
interest on any new note in global form registered in the name of or held by The
Depository Trust Company or its nominee in immediately available funds to The
Depository Trust Company or its nominee, as the case may be, as the registered
holder of such global note.
TRANSFER AND EXCHANGE
A holder of new notes may transfer or exchange the new notes at the office
of the registrar in accordance with the indenture. The registrar and the trustee
may require a holder, among other things, to furnish appropriate endorsements
and transfer documents. No service charge will be imposed by us, the trustee or
the registrar for any registration of transfer or exchange of new notes, but we
may require a holder to pay a sum sufficient to cover any transfer tax or allother
similar governmental charge required by law or permitted by the indenture. We
are not required to transfer or exchange any new note selected for redemption.
Also, we are not required to transfer or exchange any note for a period of these risks, or, even if available, that it15
days before a mailing of notice of redemption.
The registered holder of a new note will be adequatetreated as the owner of it for
all purposes.
GUARANTEES
Nabors Delaware and Nabors will fully and unconditionally, jointly and
severally, guarantee the due and punctual payment of the principal of, premium,
if any, additional amounts, if any, and interest on the new notes and any other
obligations of ours under the new notes when and as they become due and payable,
whether at maturity, upon redemption, by acceleration or otherwise, if we are
unable to satisfy these obligations. Each guarantor's guarantee of our
obligations under the new notes will be its unsecured and unsubordinated
obligation and will have the same ranking with respect to Nabors' indebtedness
as the new notes will have with respect to our indebtedness. The guarantees will
provide that, insurance
premiumsin the event of a default in payment by us on the new notes, the
holders of the new notes may institute legal proceedings directly against either
Nabors Delaware or Nabors to enforce its guarantee without first proceeding
against us.
PAYMENT OF ADDITIONAL AMOUNTS
Unless otherwise required by Canadian or Bermudan law, neither we, Nabors
Delaware nor Nabors will deduct or withhold from payments made with respect to
the new notes and the guarantees on account of any present or future taxes,
duties, levies, imposts, assessments or governmental charges of whatever nature
imposed or levied by or on behalf of any political subdivisions or taxing
authorities in Canada or Bermuda having the power to tax. In the event that
either we or either guarantor is required to withhold or deduct on account of
any Canadian or Bermudan taxes due from any payment made under or with respect
to the new notes or the guarantees, as the case may be, we, Nabors Delaware or
Nabors, as the case may be, will pay additional amounts so that the net amount
received by each holder of notes will equal the amount that the holder would
have received if the Canadian or Bermudan taxes had not been required to be
withheld or deducted. The amounts that we, Nabors Delaware or Nabors are
required to pay to preserve the net amount receivable by the holders of the new
notes are referred to as "additional amounts."
Additional amounts will not be payable with respect to a payment made to a
holder of the new notes who does not deal at arm's length (within the meaning of
the Income Tax Act (Canada)) with us, Nabors or Nabors Delaware.
Also, additional amounts will not be payable with respect to a payment made
to a holder of the new notes to the extent:
- that any Canadian or Bermudan taxes would not have been so imposed but
for the existence of any present or former connection between the holder
and Canada or Bermuda or a province or territory of Canada, other than
the mere receipt of the payment, the acquisition, ownership or
disposition of
26
such notes or the exercise or enforcement of rights under the new notes,
the guarantees or the indenture;
- of any estate, inheritance, gift, sales, transfer or personal property
taxes imposed with respect to the new notes, except as described below or
as otherwise provided in the indenture;
- that any such Canadian or Bermudan taxes would not have been imposed but
for the presentation of the new notes, where presentation is required,
for payment on a date more than 30 days after the date on which the
payment became due and payable or the date on which payment thereof is
duly provided for, whichever is later, except to the extent that the
beneficiary or holder thereof would have been entitled to additional
amounts had the new notes been presented for payment on any date during
such 30-day period; or
- that the holder would not be liable or subject to such withholding or
deduction of Canadian or Bermudan taxes but for the failure to make a
valid declaration of non-residence or other costs will not rise significantlysimilar claim for exemption,
if:
- the making of the declaration or claim is required or imposed by
statute, treaty, regulation, ruling or administrative practice of the
relevant taxing authority as a precondition to an exemption from, or
reduction in, the future, sorelevant taxes; and
- at least 60 days prior to the first payment date with respect to which
we, Nabors Delaware or Nabors shall apply this clause, we, Nabors
Delaware or Nabors shall have notified all holders of the new notes in
writing that they shall be required to provide this declaration or
claim.
We, Nabors Delaware and Nabors will also:
- withhold or deduct such Canadian or Bermudan taxes as required;
- remit the full amount of taxes deducted or withheld to the relevant
taxing authority in accordance with all applicable laws;
- use reasonable efforts to obtain from each relevant taxing authority
imposing the taxes certified copies of tax receipts evidencing the
payment of any taxes deducted or withheld; and
- upon request, make available to the holders of the new notes, within 60
days after the date the payment of any taxes deducted or withheld is due
pursuant to applicable law, certified copies of tax receipts evidencing
such insurance prohibitive.
The profitabilitypayment by us, Nabors Delaware or Nabors and, notwithstanding our or
such guarantor's efforts to obtain the receipts, if the same are not
obtainable, other evidence of Nabors' international operations could be adversely
affected by war, civil disturbancesuch payments.
In addition, we, Nabors Delaware or economic turmoil. Nabors derives a
significant portion of its business from international markets,will pay any stamp, issue,
registration, documentary or other similar taxes and duties, including major
operationsinterest,
penalties and additional amounts with respect thereto, payable in Canada,
Bermuda or the Middle East, the CommonwealthUnited States or any political subdivision or taxing authority of
Independent States
and South America. These operations are subject to various risks, including the
risk of war, civil disturbances and governmental activities, that may limit or
disrupt markets, restrict the movement of funds or result in the deprivationforegoing with respect to the creation, issue, offering, enforcement,
redemption or retirement of contract rightsthe new notes or guarantees.
If payments with respect of the new notes or the takingguarantees become subject
generally to the taxing jurisdiction of property without fair compensation. In certain
countries, Nabors' operationsany Territory or any political
subdivision or taxing authority having power to tax, other than or in addition
to any political subdivision or taxing authority in Canada or Bermuda having the
power to tax, immediately upon becoming aware thereof we will notify the trustee
of such event, and we or the guarantors, as the case may be, will pay additional
amounts in respect thereof on terms corresponding to the terms of the foregoing
provisions of this "Payment of Additional Amounts" section with the substitution
for (or, as the case may be, in addition to) the references herein to any
political subdivisions or taxing authority in Canada or Bermuda having the power
to tax with references to that other or additional Territory or any political
subdivision or taxing authority having the power to tax to whose taxing
jurisdiction such payments shall have become subject as aforesaid. The term
"Territory" means for this purpose any jurisdiction in which we or a guarantor,
as the case may be, is incorporated or in which we or it has our or its place of
central management or central control.
27
OPTIONAL REDEMPTION
The new notes will be subject to redemption by us, in whole or in part, at
any time at a redemption price equal to the greater of:
- 100% of the principal amount of the new notes then outstanding to be
redeemed; or
- the sum of the present values of the remaining scheduled payments of
principal and interest thereon (exclusive of the interest accrued to the
date of redemption) computed by discounting such payments to the
redemption date on a semiannual basis, assuming a 360-day year consisting
of twelve 30-day months, at a rate equal to the sum of 25 basis points
plus the adjusted treasury rate, as that term is generally used in the
industry, on the third business day prior to the redemption date, as
calculated by an independent investment banker.
We will mail notice of redemption at least 20 days but not more than 75
days before the applicable redemption date to each holder of the new notes to be
redeemed. If we elect to redeem the new notes in part, the trustee will select
the new notes to be redeemed in a fair and appropriate manner.
Upon the payment of the redemption price, premium, if any, additional
amounts, if any, plus accrued and unpaid interest, if any, to the date of
redemption, interest will cease to accrue on and after the applicable redemption
date on the new notes or portions thereof called for redemption.
OPTIONAL REDEMPTION FOR CHANGES IN CANADIAN WITHHOLDING TAXES
The new notes will be subject to redemption by us in whole, but not in
part, at our option and at any time, on not fewer than 30 nor more than 60 days'
prior written notice, at 100% of their principal amount, plus accrued and unpaid
interest, if any, to the redemption date, in the event that either we, Nabors
Delaware, Nabors or any other obligor under the new notes, as the case may be,
has become or would become, obligated to pay, on the next date on which any
amount would be payable with respect to the new notes, any additional amounts
relating to any present or future tax, duty, levy, impost, assessment or other
governmental charge imposed or levied by or on behalf of Canada or any of its
provinces or territories or by any authority or agency therein having power to
tax, and provided that the obligation to pay additional amounts results from a
change in the taxing laws and/or regulations of Canada that is announced or
becomes effective on or after the date of initial issuance of the new notes.
Provided, however:
- no notice of redemption will be given earlier than 60 days prior to the
earliest date on which we, Nabors Delaware, Nabors or any other obligor
under the new notes, as the case may be, would be obligated to pay any of
these additional amounts if a payment with respect to the new notes were
then due;
- at the time any redemption notice is given, the obligation to pay these
additional amounts must remain in effect through the redemption date; and
- we cannot avoid paying the additional riskamounts by taking reasonable
measures available to us that we determine would not have an adverse
impact on us.
Prior to any redemption of fluctuatingthe new notes under these provisions, we will
deliver to the trustee or any paying agent an officers' certificate stating that
we are entitled to effect the redemption and setting forth a statement of facts
showing that the conditions precedent to the right of redemption have occurred.
COVENANTS
LIMITATIONS ON LIENS
So long as any new notes are outstanding, Nabors will not, nor will it
permit any Nabors subsidiary (as defined below) to, issue, assume, guarantee or
suffer to exist any debt for money borrowed (which we refer to as debt in this
prospectus) if such debt is secured by a mortgage, pledge, security interest or
lien
28
(which we refer to as a mortgage or mortgages in this prospectus) upon any
properties of Nabors or any Nabors subsidiary or upon any securities or
indebtedness of any Nabors subsidiary (whether such properties, securities or
indebtedness is now owned or hereafter acquired) without in any such case
effectively providing that the new notes shall be secured equally and ratably
with (or prior to) such debt, except that the foregoing restrictions shall not
apply to:
(a) mortgages on any property acquired, constructed or improved by
Nabors or any Nabors subsidiary (or mortgages on the securities of a
special purpose Nabors subsidiary which holds no material assets other than
the property being acquired, constructed or improved) after the date of the
indenture which are created within 180 days after such acquisition (or in
the case of property constructed or improved, after the completion and
commencement of commercial operation of such property, whichever is later)
to secure or provide for the payment of the purchase price or cost thereof;
provided that in the case of such construction or improvement the mortgages
shall not apply to any property owned by Nabors or any Nabors subsidiary
before such construction or improvement other than (1) unimproved real
property on which the property so constructed, or the improvement, is
located or (2) personal property which is so improved;
(b) mortgages existing on the date of issuance of the old notes,
existing mortgages on property acquired (including mortgages on any
property acquired from a person which is consolidated with or merged with
or into Nabors or a Nabors subsidiary) or mortgages outstanding at the time
any corporation, partnership or other entity becomes a Nabors subsidiary;
provided that such mortgages shall only apply to property owned by such
corporation, partnership or other entity at the time it becomes a Nabors
subsidiary or that is acquired thereafter other than from Nabors or another
Nabors subsidiary;
(c) mortgages in favor of Nabors or any Nabors subsidiary;
(d) mortgages in favor of domestic or foreign governmental bodies to
secure advances or other payments pursuant to any contract or statute or to
secure indebtedness incurred to finance the purchase price or cost of
constructing or improving the property subject to such mortgages, including
mortgages to secure debt of the pollution control or industrial revenue
bond type;
(e) mortgages consisting of pledges or deposits by Nabors or any
Nabors subsidiary under worker's compensation laws, unemployment insurance
laws or similar legislation, or good faith deposits in connection with
bids, tenders, contracts (other than for the payment of debt) or leases to
which Nabors or any Nabors subsidiary is a party, or deposits to secure
public or statutory obligations of Nabors or any Nabors subsidiary or
deposits or cash or United States government bonds to secure surety or
appeal bonds to which it is a party, or deposits as security for contested
taxes or import or customs duties or for the payment of rent, in each case
incurred in the ordinary course of business;
(f) mortgages imposed by law, including carriers', warehousemen's,
repairman's, landlords' and mechanics' liens, in each case for sums not yet
due or being contested in good faith by appropriate proceedings if a
reserve or other appropriate provisions, if any, as shall be required by
generally accepted accounting principles shall have been made in respect
thereof;
(g) mortgages for taxes, assessments or other governmental charges
that are not yet delinquent or which are being contested in good faith by
appropriate proceedings provided appropriate reserves required pursuant to
generally accepted accounting principles have been made in respect thereof;
(h) mortgages in favor of issuers of surety or performance bonds or
letters of credit or bankers' acceptances issued pursuant to the request of
and for the account of Nabors or any Nabors subsidiary in the ordinary
course of its business;
(i) mortgages consisting of encumbrances, easements or reservations
of, or rights of others for, licenses, rights of way, sewers, electric
lines, telegraph and telephone lines and other similar purposes, or
mortgages consisting of zoning or other restrictions as to the use of real
properties or mortgages incidental to the conduct of the business of Nabors
or a Nabors subsidiary or to the ownership of its
29
properties which do not materially adversely affect the value of said
properties or materially impair their use in the operation of the business
of Nabors or a Nabors subsidiary;
(j) mortgages arising by virtue of any statutory or common law
provisions relating to bankers' liens, rights of set-off or similar rights
and remedies as to deposit accounts or other funds maintained with a
depositary institution; provided that:
(x) such deposit account is not a dedicated cash collateral account
and is not subject to restrictions against access by us in excess of
those set forth by regulations promulgated by the Federal Reserve Board;
and
(y) such deposit account is not intended by Nabors or any Nabors
subsidiary to provide collateral to the depository institution;
(k) mortgages arising from Uniform Commercial Code financing statement
filings regarding operating leases Nabors and its Nabors subsidiaries enter
into in the ordinary course of business;
(l) any mortgage over goods (or any documents relating thereto)
arising either in favor of a bank issuing a form of documentary credit in
connection with the purchase of such goods or by way of retention of title
by the supplier of such goods where such goods are supplied on credit,
subject to such retention of title, and in both cases where such goods are
acquired in the ordinary course of business;
(m) any mortgage pursuant to any order of attachment, execution,
enforcement, distraint or similar legal process arising in connection with
court proceedings; provided that such process is effectively stayed,
discharged or otherwise set aside within 30 days;
(n) any lease, sublease and sublicense granted to any third party
constituting a mortgage and any mortgage pursuant to farm-in and farm-out
agreements, operating agreements, development agreements and any other
similar arrangements, which are customary in the oil and gas industry or in
the ordinary course of business of Nabors or any Nabors subsidiary; or
(o) any extension, renewal or replacement (or successive extensions,
renewals or replacements), in whole or in part, of any mortgage referred to
in the foregoing clauses (a) through (n), inclusive; provided that the
principal amount of debt secured thereby shall not exceed the principal
amount of debt so secured at the time of such extension, renewal or
replacement, and that such extension, renewal or replacement shall be
limited to all or a part of the property which secured the mortgage so
extended, renewed or replaced (plus improvements in such property).
As used in this prospectus "Nabors subsidiary" means a corporation,
partnership or other entity more than 50% of the outstanding voting securities
of which is owned, directly or indirectly, by Nabors or one or more other
subsidiaries, or by Nabors and one or more other subsidiaries. For purposes of
this definition, "voting securities" means securities which ordinarily have
voting power for the election of a governing board, whether at all times or only
so long as no senior class of securities has such voting power by reason of any
contingency.
In addition to the foregoing, Nabors and any Nabors subsidiary may, without
securing the new notes, issue, assume or guarantee secured debt that, with
certain other debt described in the following sentence, does not exceed 15% of
the amount of total stockholders' equity shown in the most recent consolidated
statement of financial position of Nabors, as filed with the SEC (which we refer
to as consolidated net worth in this prospectus), as shown on a consolidated
balance sheet of Nabors as of a date not more than 90 days prior to the proposed
transaction, prepared by Nabors in accordance with generally accepted accounting
principles in the United States. The other debt to be aggregated for purpose of
this exception is all attributable debt (as used in this prospectus,
attributable debt means, with respect to any sale and lease-back transaction as
of any particular time, the present value discounted at the rate of interest
implicit in the terms of the lease of the obligations of the lessee under such
lease for net rental payments during the remaining term of the lease) in respect
of sale and lease-back transactions of Nabors and any Nabors subsidiary under
the exception in clause (e)(2) below existing at such time. Sale and lease-back
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transaction as used in this prospectus means any arrangement with any person
providing for the leasing by Nabors or any Nabors subsidiary of any property,
whereby such property had been sold or transferred by Nabors or any Nabors
subsidiary to such person.
LIMITATIONS ON SALE AND LEASE-BACK TRANSACTIONS
So long as any new notes are outstanding, Nabors will not, nor will it
permit any Nabors subsidiary to, enter into any sale and lease-back transaction,
other than any sale and lease-back transaction:
(a) entered into within 180 days of the later of the acquisition or
placing into service of the property subject thereto by Nabors or the
Nabors subsidiary;
(b) involving a lease of less than five years;
(c) entered into in connection with an industrial revenue bond or
pollution control financing;
(d) between Nabors and/or one or more Nabors subsidiaries;
(e) as to which Nabors or such Nabors subsidiary would be entitled to
incur debt secured by a mortgage on the property to be leased in an amount
equal to the attributable debt with respect to such sale and lease-back
transaction without equally and ratably securing the new notes (1) under
clauses (a) through (o) in "-- Limitations on Liens" above or (2) under the
last paragraph of that covenant; or
(f) as to which Nabors will apply an amount equal to the net proceeds
from the sale of the property so leased to (1) the retirement (other than
any mandatory retirement), within 180 days of the effective date of any
such sale and lease-back transaction, of new notes or of funded debt (as
defined below) of Nabors or a Nabors subsidiary or (2) the purchase or
construction of other property, provided that such property is owned by
Nabors or a Nabors subsidiary free and clear of all mortgages.
As used in this prospectus, funded debt means indebtedness for money
borrowed which by its terms matures at, or is extendible or renewable at the
option of the obligor to, a date more than twelve months after the date of the
creation of such indebtedness.
CONSOLIDATION, MERGER, CONVEYANCE OF ASSETS
The indenture provides, in general, that neither we, Nabors Delaware nor
Nabors will consolidate with or merge into any other entity or convey, transfer
or lease our or its assets substantially as an entirety to any person, unless:
- the entity formed by the consolidation or into which we, Nabors Delaware
or Nabors is merged, or the person who acquires the assets, (a) shall be
organized (1), in the case of ourself or Nabors Delaware, under the laws
of the United States, any state thereof, or the District of Columbia or
(2), in our case, under the laws of Bermuda, Barbados or Canada or any
province or territory thereof, and (b), in any case, expressly assumes
our or the relevant guarantor's obligations under the indenture, the new
notes and the guarantees; and
- immediately after giving effect to that type of transaction, no event of
default, and no event that, after notice or lapse of time or both, would
become an event of default, shall have happened and be continuing.
In addition, we may assign our obligations under the new notes and the
indenture to Nabors Delaware or any other wholly-owned subsidiary of Nabors
organized under the laws of the United States, any state thereof, the District
of Columbia, Canada or any province or territory thereof, at any time, provided
that the assignee agrees to be bound by the terms of the new notes and the
indenture and that the full and unconditional guarantee of Nabors Delaware
remains in full force and effect if the assignee is not Nabors Delaware.
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EVENT RISK
Except for the limitations described above under the subsections
"-- Limitations on Liens" and "-- Limitations on Sale and Lease-Back
Transactions," neither the indenture, the guarantees nor the new notes will
afford holders of the new notes protection in the event of a highly leveraged
transaction involving us or either guarantor or will contain any restrictions on
the amount of additional indebtedness that we or either guarantor may incur.
MANDATORY REDEMPTION; SINKING FUND
We are not required to make either mandatory redemption or sinking fund
payments with respect to the new notes.
BOOK-ENTRY; DELIVERY AND FORM
The new notes will initially be issued only in registered, book-entry form,
in denominations of $1,000 and any integral multiples of $1,000 as described
under "-- Book-Entry System." We will issue one or more global notes in
denominations that together equal the total principal amount of the outstanding
new notes.
MODIFICATION OF THE INDENTURE
Amendments of the indenture may be made by us, Nabors Delaware, Nabors and
Bank One, N.A. with the consent of the holders of a majority in principal amount
of the outstanding new notes; provided, however, that no such amendment may,
without the consent of the holder of each outstanding new note affected thereby:
- extend the final maturity of the principal of any of the new notes;
- reduce the principal amount of any of the new notes;
- reduce the rate or extend the time of payment of interest or additional
amounts, if any, on any of the new notes;
- reduce any amount payable on redemption of any of the new notes;
- change the currency values and exchange controls. In the international markets in which the principal of or interest or additional
amounts, if any, on any of the new notes is payable;
- impair the right to institute suit for the enforcement of any payment on
any of the new notes when due; or
- make any change in the percentage in principal amount of the new notes,
the consent of the holders of which is required for any such amendment.
Without the consent of any holder of outstanding new notes, we may amend
the indenture and the new notes to:
- cure any ambiguity or inconsistency;
- provide for the assumption by a successor to the obligations of Nabors operates, itor
ourselves under the indenture;
- provide for uncertificated new notes in addition to or in place of
certificated new notes (provided that the uncertificated new notes are
issued in registered form for purposes of Section 163(f) of the Code, or
in a manner such that the uncertificated new notes are described in
Section 163(f)(2)(B) of the Code);
- secure all or any of the new notes;
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- add to the covenants of Nabors or ourselves or events of default for the
benefit of the holders or surrender any right or power conferred upon us
or Nabors;
- comply with any requirement of the SEC in connection with the
qualification of the indenture under the Trust Indenture Act; or
- make other provisions that do not adversely affect the rights of any
holder of outstanding new notes.
The holders of a majority in principal amount of the outstanding notes may,
on behalf of the holders of all notes, waive any past default under the
indenture, except a default in the payment of the principal of, premium, if any,
additional amounts, if any, or interest on any new note or in respect of a
provision which under the indenture cannot be amended without the consent of the
holder of each outstanding new note affected.
It is not necessary for the consent of the holders under the indenture to
approve the particular form of any proposed amendment or waiver. It is
sufficient if such consent approves the substance of the proposed amendment or
waiver. A consent to any amendment or waiver under the indenture by any holder
of new notes given in connection with a tender of such holder's new notes will
not be rendered invalid by such tender. After an amendment or waiver under the
indenture becomes effective, we are required to mail to the holders a notice
briefly describing such amendment or waiver. However, the failure to mail such
notice, or any defect in the notice, will not impair or affect the validity of
the amendment or waiver.
EVENTS OF DEFAULT
In general, the indenture defines an event of default as being:
- a default for 10 days in payment of any principal or premium, if any, on
the new notes, either at maturity, upon any redemption, by declaration or
otherwise;
- a default for 30 days in payment of any interest or additional amounts,
if any, on the new notes;
- a default for 90 days after written notice from the trustee or holders of
at least 25% in principal amount of the outstanding new notes in the
observance or performance of any covenant in the new notes or the
indenture;
- an event of our, Nabors Delaware's or Nabors' bankruptcy, insolvency or
reorganization; or
- the failure to keep Nabors Delaware's or Nabors' full and unconditional
guarantee in place.
If an event of default shall occur and be continuing, either Bank One, N.A.
or the holders of at least 25% in principal amount of the outstanding new notes
may declare the principal amount of all new notes to be due and payable
immediately. However, any time after a declaration of acceleration with respect
to the new notes has been made, but before a judgment or decree based on such
acceleration has been obtained, the holders of a majority in principal amount of
outstanding new notes may, under some circumstances, rescind and annul such
acceleration. The majority holders, however, may not annul or waive a continuing
default in payment of principal of, premium, if any, additional amounts, if any,
or interest on the new notes.
The indenture provides that the holders of the new notes will indemnify
Bank One, N.A. before Bank One, N.A. exercises any of its rights or powers under
the indenture. This indemnification is subject to various lawsthe Bank One, N.A.'s duty, as
trustee, to act with the required standard of care during a default.
The holders of a majority in principal amount of the outstanding new notes
may direct the time, method and regulationsplace of:
- the conduct of any proceeding for any remedy available to the trustee; or
- the exercise of any trust or power conferred on the trustee.
This right of the holders of the new notes is, however, subject to the
provisions in the indenture providing for the indemnification of the trustee and
other specified limitations.
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In general, the indenture provides that governholders of new notes may institute
an action against us, Nabors Delaware, Nabors or any other obligor under the operation and taxationnew
notes only if the following four conditions are fulfilled:
- the holder previously has given to the trustee written notice of its businessdefault
and the importdefault continues;
- the holders of at least 25% in principal amount of the new notes then
outstanding have both requested the trustee to institute such action and
exportoffered the trustee reasonable indemnity;
- the trustee has not instituted this action within 60 days of its equipment from countryreceipt of
such request; and
- the trustee has not received a direction inconsistent with such written
request by the holders of a majority in principal amount of the new notes
then outstanding.
The above four conditions do not apply to country,actions by holders of the imposition, applicationnew
notes against us, Nabors Delaware, Nabors or any other obligor under the new
notes for payment of principal of, premium, if any, additional amounts, if any,
or interest on or after the due date.
The indenture contains a covenant that we, Nabors Delaware, Nabors and interpretationany
other obligor under the new notes will file annually with the trustee a
certificate of which can proveno default or a certificate specifying any default that exists.
DISCHARGE, LEGAL DEFEASANCE AND COVENANT DEFEASANCE
We may discharge or defease our obligations under the indenture as set
forth below.
Under terms satisfactory to the trustee, we may discharge certain
obligations to holders of the new notes that have not already been delivered to
the trustee for cancellation. The new notes must also:
- have become due and payable;
- be due and payable by their terms within one year; or
- be scheduled for redemption by their terms within one year.
We may discharge the new notes by irrevocably depositing an amount
certified to be uncertain.
Exposuresufficient to environmental liabilities could adversely affect Nabors'
resultspay at maturity, or upon redemption, the
principal, premium, if any, additional amounts, if any, and interest on the new
notes. We may make the deposit in cash or U.S. Government Obligations, as
defined in the indenture.
We may terminate all our obligations under the new notes and the indenture
at any time, except for certain obligations, including those respecting the
defeasance trust and obligations to register the transfer or exchange of operations. The drillingthe new
notes, to replace mutilated, destroyed, lost or stolen new notes and to maintain
a registrar and paying agent in respect of oilthe new notes. This is referred to as
"legal defeasance." If we exercise our legal defeasance option, the guarantees
in effect at such time will terminate.
Under terms satisfactory to the trustee, we, Nabors Delaware and gas wells is subject to various
federal, state, local and foreign laws, rules and regulations. The cost to
Nabors of compliance with these laws and regulations may
be substantial. For
example, federal law imposes specific designreleased with respect to any outstanding new notes from the obligations
imposed by the sections of the indenture that contain the covenants described
above limiting liens, sale and operational standards on rigslease-back transactions and platforms. Failureconsolidations,
mergers and conveyances of assets. Also under terms satisfactory to the trustee,
we may no longer be required to comply with these requirements couldsections without the creation
of an event of default. This is typically referred to as "covenant defeasance."
If we exercise our covenant defeasance option, the guarantees in effect at such
time will terminate. We may exercise our legal defeasance option notwithstanding
our prior exercise of our covenant defeasance option.
Legal defeasance or covenant defeasance may be effected by us only if,
among other things:
- we irrevocably deposit with the trustee cash or U.S. Government
Obligations as trust funds in an amount certified to be sufficient to pay
at maturity or upon redemption the principal of, premium, if any,
additional amounts, if any, and interest on all outstanding new notes;
and
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- we deliver to the trustee opinions of counsel to the effect that the
holders of the new notes will not recognize income, gain or loss for
United States or Canadian federal income tax purposes as a result of our
legal defeasance or covenant defeasance. These opinions must further
state that these holders will be subject to United States and Canadian
federal income tax on the same amounts, in the same manner and at the
same times as would have been the case if our legal defeasance or
covenant defeasance had not occurred. In the case of a legal defeasance,
these opinions, insofar as they relate to U.S. taxes, must be based on a
ruling of the Internal Revenue Service or a change in United States
federal income tax law occurring after the date of the indenture, since
this result would not occur under current United States tax law.
CONCERNING THE TRUSTEE
The trustee, Bank One, N.A., is one of a number of banks with which Nabors
and its subsidiaries maintain ordinary banking relationships and is the trustee
with respect to substantial civilNabors Delaware's Zero Coupon Convertible Senior Debentures due
2021 and criminal penaltiesZero Coupon Convertible Senior Debentures due 2020. We have appointed
the trustee as registrar and paying agent under the indenture.
GOVERNING LAW
The indenture, the new notes and the guarantees will be governed by, and
construed in accordance with, the laws of the State of New York.
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BOOK-ENTRY SYSTEM
GENERAL
The old notes are, and the new notes will be, issued in the form of one or
more global certificates, know as "global notes." Except as described below, the
new notes will be initially represented by one or more global notes in fully
registered form without interest coupons. The global notes will be deposited
with, or on behalf of DTC, and registered in the name of Cede & Co., as nominee
of DTC, or will remain in the custody of the trustee pursuant to the FAST
Balance Certificate Agreement between DTC and the trustee.
Ownership of beneficial interests in each global note will be limited to
persons who have accounts with DTC ("DTC participants") or persons who hold
interests through DTC participants. We expect that under procedures established
by DTC, ownership of beneficial interests in each global note will be shown on,
and transfer of ownership of those interests will be effected only through,
records maintained by DTC (with respect to interests of DTC participants) and
the records of DTC participants (with respect to other owners of beneficial
interests in the global note).
DEPOSITARY PROCEDURES
The descriptions of the operations and procedures of DTC set forth below
are controlled by that settlement system and may be changed at any time. We
undertake no obligation to update you regarding changes in these operations and
procedures and urge investors to contact DTC or its participants directly to
discuss these matters.
DTC has advised us that it is a:
- limited purpose trust company organized under the laws of the State of
New York;
- banking organization within the meaning of the laws of the State of New
York;
- member of the Federal Reserve System;
- clearing corporation within the meaning of the New York Uniform
Commercial Code; and
- clearing agency registered pursuant to the provisions of Section 17A of
the Exchange Act.
DTC was created to hold securities of its participants and to facilitate
the clearance and settlement of securities transactions among its participants
through electronic book-entry changes in their accounts, thereby eliminating the
need for physical movement of securities represented by physical certificates.
DTC's participants include securities brokers and dealers, banks, trust
companies, clearing corporations and other organizations. Banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a participant, referred to as "indirect participants," also
have access to DTC's book-entry system. Investors who are not DTC participants
may beneficially own notes held by or on behalf of DTC only through DTC
participants or indirect participants in DTC.
Upon deposit of the global notes with DTC, it will credit, on its
book-entry registration and transfer system, the accounts of those participants
designated by the initial purchaser with the principal amounts of the global
notes held by or through the participants. The records of DTC will show
ownership and effect the transfer of ownership of the global notes by its
participants. The records of the participants will show ownership and effect the
transfer of ownership of the global notes by persons holding beneficial
interests in the global notes through them.
36
So long as DTC or its nominee is the registered owner of the global notes,
DTC or such nominee will be considered the sole owner and holder of the notes
for all purposes under the indenture. Except as set forth below, if you own a
beneficial interest in the global notes, you will not:
- be entitled to have the notes registered in your name;
- receive or be entitled to receive physical delivery of a certificate in
definitive form representing the notes; or
- be considered the owner or holder of the notes under the indenture for
any purpose, including with respect to the giving of any directions,
approvals or instructions to the trustee.
Therefore, if you are required by state law to take physical delivery of
the new notes in definitive form, you may not be able to own, transfer or pledge
beneficial interests in the global notes. In addition, the lack of a physical
certificate evidencing your beneficial interests in the global notes may limit
your ability to pledge the interests to a person that is not a participant in
DTC.
If you own beneficial interests in a global note, you will have to rely on
the procedures of DTC and, if you are not a participant in DTC, the procedures
of the participant through which you hold your beneficial interests, to exercise
your rights as a holder of new notes under the indenture. DTC has advised us
that it will take any action permitted to be taken by a holder of beneficial
interests in the global notes only at the direction of one or more of the
participants to whose accounts the interests are credited. We understand that,
under existing industry practice, when a beneficial owner of a global note wants
to give any notice or take any action that a registered holder is entitled to
take, at our request or under the indenture, DTC will authorize the participant
to give the notice or take the action, and the participant will authorize its
beneficial owners to give the notice or take the action. Accordingly, we, the
guarantors, the trustee and the paying agent will treat as a holder of
beneficial interests in the global notes anyone designated as such in writing by
DTC for purposes of obtaining any consents or directions required under the
indenture.
We will make all payments on the notes through the trustee or paying agent
to DTC or its nominee, as the registered holder of the global notes, in
immediately available funds. We expect DTC or its nominee, upon receipt of any
payments, to immediately credit each participant's account with payments in
amounts proportionate to that participant's beneficial interest as shown on the
records of DTC or its nominee. We also expect each participant to pay each owner
of beneficial interests in the global notes held through that participant in
accordance with standing customer instructions and customary practices. These
payments will be the sole responsibility of the participants.
Neither we, Nabors Delaware, Nabors, the trustee nor the paying agent will
assume any responsibility or liability for any aspect of the records relating
to, payments made on account of or actions taken with respect to the beneficial
ownership interests in the global notes, or for any other aspect of the
relationship between DTC and its participants, or between the participants and
the owners of beneficial interests. We, Nabors Delaware, Nabors, the trustee and
the paying agent may conclusively rely on instructions from DTC for all
purposes.
We have obtained the above information about DTC and its book-entry system
from sources we believe are reliable, but we take no responsibility for the
accuracy of the information.
SETTLEMENT PROCEDURES
Initial settlement of the notes will be made in immediately available
funds. Secondary market trading between DTC participants will occur in the
ordinary way in accordance with DTC's rules and procedures and will be settled
in immediately available funds.
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EXCHANGE OF GLOBAL NOTES FOR CERTIFICATED NOTES
We will exchange beneficial interests in global notes for certificated
notes only if:
- DTC notifies the trustee that it is unwilling or unable to continue as a
depositary for the global notes or DTC ceases to be a clearing agency
registered under the Exchange Act, and, in either case, we fail to
appoint a successor depositary within 90 days; or
- we decide at any time not to have the securities represented by global
notes and so notify the trustee.
If there is an exchange, upon the surrender by DTC of the global notes, we
will issue certificated notes in authorized denominations and registered in the
names that DTC directs.
Neither we, Nabors Delaware, Nabors nor the trustee shall be liable for any
delay by DTC or any participant or indirect participant in identifying the
beneficial owners of the related notes and each such person may conclusively
rely on, and shall be protected in relying on, instructions from DTC for all
purposes, including with respect to the registration and delivery, and the
respective principal amounts, of the notes to be issued.
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MATERIAL TAX CONSIDERATIONS
CERTAIN UNITED STATES FEDERAL TAX CONSIDERATIONS
The following is a general discussion of certain United States federal
income tax consequences associated with the exchange of the old notes by an
investor who exchanges the old notes for the new notes pursuant to the exchange
offer. This discussion does not purport to discuss all aspects of United States
federal taxation that may be important to a particular holder in light of his,
her or its particular investment or tax circumstances, or to certain types of
holders subject to special tax rules including, insurance companies, tax exempt
organizations, financial institutions, broker-dealers, certain expatriates,
holders whose functional currency is not the United States dollar, or holders
who hold the old notes as a hedge against currency risks or as part of a
straddle or a synthetic security. In addition, this discussion does not discuss
any foreign, state, local or other taxing jurisdiction tax considerations. If a
partnership, or other entity treated as a partnership for United States federal
income tax purposes, holds old notes, the tax treatment of a partner generally
will depend upon the status of the partner and the activities of the
partnership. A holder that is a partnership and partners in such partnership are
urged to consult their tax advisors about the United States federal tax
consequences associated with the exchange of the old notes for the new notes
pursuant to the exchange offer. This discussion is based upon the Internal
Revenue Code of 1986, as amended, United States Treasury regulations promulgated
thereunder, published rulings and court decisions, all as in effect on the date
hereof, which are subject to change, possibly retroactively. Prospective
investors are urged to consult their tax advisors regarding the United States
federal tax consequences associated with the exchange of the old notes for the
new notes pursuant to the exchange offer, as well as potential court injunctions.any tax consequences that
may arise under the laws of any relevant foreign, state, local or other taxing
jurisdiction.
For United States federal income tax purposes, we, Nabors Holdings 1, ULC,
will not be treated as an entity separate from Oak Leaf Investments, Inc., an
indirect wholly-owned subsidiary of Nabors Industries, Inc.
The exchange of the old notes for the new notes issued in the exchange
offer should not be treated as an "exchange" for United States federal income
tax purposes because the new notes issued in the exchange offer should not be
considered to differ materially in kind or extent from the old notes. Rather,
the new notes issued in the exchange offer received by a holder should be
treated as a continuation of the old notes in the hands of such holder. As a
result there should be no United States federal income tax consequences to
holders exchanging the outstanding old notes for the new notes issued in the
exchange offer, and any exchanging holder of old notes should have the same tax
basis and holding period in the new notes issued in the exchange offer as such
holder had in the old notes immediately prior to the exchange.
Prospective holders of the new notes issued in the exchange offer are urged
to consult their tax advisors concerning the particular tax consequences of
exchanging such holders' old notes for the new notes issued in the exchange
offer, including the applicability and effect of any state, local or foreign
income and other tax laws.
MATERIAL CANADIAN FEDERAL TAX CONSIDERATIONS
The following is a summary of the principal Canadian federal income tax
consequences generally applicable to the exchange of old notes for new notes
pursuant to the exchange offer by a holder who at all relevant times, for the
purposes of the Income Tax Act (Canada) (the "Act"), is not and is not deemed to
be resident in Canada, deals with us at arm's length, holds the old notes and
new notes as capital property and does not use or hold and is not deemed to use
or hold the old notes or new notes in carrying on a business in Canada (a
"Holder"). For the purposes of the Act, related persons (as therein defined) are
deemed not to deal at arm's length. It is a question of fact whether persons not
related to each other deal at arm's length.
39
This summary does not address the special tax consequences which may apply
to a Holder who is an insurer carrying on business in Canada and elsewhere for
the purposes of the Act. This summary is based on the current provisions of the
Act and the regulations thereunder, our understanding of the current published
administrative and assessing practices of the Canada Customs and Revenue Agency,
and all specific proposals to amend the Act and the regulations publicly
announced by the Minister of Finance (Canada) prior to the date hereof. This
summary is not exhaustive of all possible Canadian federal income tax
considerations and does not otherwise take into account or anticipate changes in
the law, whether by judicial, governmental or legislative decisions or action,
nor does it take into account tax legislation or considerations of any province
or territory of Canada or any jurisdiction other than Canada.
A Holder who exchanges old notes for new notes in the exchange offer will
not be subject to tax under the Act in respect of such exchange. The payment by
us or the guarantors of interest, principal or premium, if any, to a Holder of
new notes will be exempt from Canadian withholding tax. No other tax on income
or capital gains will be payable under the Act in respect of the holding,
redemption or disposition of new notes by a Holder.
This summary is of a general nature only and does not constitute legal or
tax advice to any particular Holder. No representation is made with respect to
the tax consequences to any particular Holder. Consequently, Holders should
consult their own tax advisors with respect to their particular circumstances.
40
PLAN OF DISTRIBUTION
Each broker-dealer that receives new notes for its own account pursuant to
the exchange offer must acknowledge that it will deliver a prospectus in
connection with any resale of these new notes. This prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of new notes received in exchange for old notes where
such old notes were acquired as a result of market-making activities or other
trading activities. We have agreed that, for a period of 180 days after the
expiration of the exchange offer, we will make this prospectus, as amended or
supplemented, available to any broker-dealer for use in connection with any such
resale. In addition, federal law imposesuntil , 2002, all dealers effecting transactions
in the new notes may be required to deliver a varietyprospectus.
We will not receive any proceeds from any sale of regulationsnew notes by
broker-dealers. New notes received by broker-dealers for their own account
pursuant to the exchange offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on "responsible
parties"the new notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or at negotiated prices. Any resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the preventionform of oil spillscommissions or concessions from any such
broker-dealer or the purchasers of any such new notes. Any broker-dealer that
resells new notes that were received by it for its own account pursuant to the
exchange offer and liability for damages from
such spills. Nabors, as an owner and operatorany broker or dealer that participates in a distribution of
13
20
onshore and offshore rigs,new notes may be deemed to be a responsible party under federal
law. Federal law assigns liability to a responsible party for oil removal costs
and subjects a responsible party to a variety of public and private damages. In
some circumstances, federal law imposes liability without regard to negligence
or fault, resulting in substantial costs toan "underwriter" within the party upon whom such liability
is imposed. Nabors generally tries to require its customers to contractually
assume responsibility for compliance with environmental regulations. However,
Nabors is not always successful in shifting all of these risks.
Nabors could be adversely affected if it loses the services of Mr.
Isenberg, Mr. Petrello or Mr. Stratton. Nabors' business is dependent to a
significant extent upon the performance of certain key individuals, including
Eugene M. Isenberg, Anthony G. Petrello and Richard A. Stratton. Each of these
individuals has entered into an employment agreement with Nabors. The lossmeaning of the
servicesSecurities Act and any profit of Mr. Isenberg, Mr. Petrelloany such resale of new notes and any commission
or Mr. Stratton could have a material
adverse effect on Nabors.
Nabors, as a holding company, depends on its subsidiaries to meet its
financial obligations. Nabors is a holding company with no significant assets
other than the stock of our subsidiaries. In order to meet its financial needs,
Nabors relies exclusively on repayments of interest and principal on
intercompany loans madeconcessions received by Nabors to its operating subsidiaries and income from
dividends and other cash flow fromany such subsidiaries. There canpersons may be no assurance
that Nabors' operating subsidiaries will generate sufficient net income to pay
upstream dividends or cash flow to make payments of interest and principal to
Nabors in respect of its intercompany loans.
Under existing dividend policy, Nabors does not pay dividends. As part of
Nabors' policy, Nabors has not paid any dividends on any common stock since
1982. Nabors does not anticipate that it will pay any dividends on the Nabors
common stock in the foreseeable future.
As Nabors and its shareholders have a considerable number of shares of
common stock available for issuance and resale, significant issuances or resales
in the future may adversely affect the market price of Nabors common stock. As
of July 31, 1999, there were 116,594,367 shares of Nabors common stock
outstanding, 31,686,705 shares of Nabors common stock were reserved for issuance
pursuant to option and employee benefit plans and 333,998 shares of Nabors
common stock were reserved for issuance upon the exercise of outstanding
warrants. The exercise price of many of these options is substantially lower
than the trading prices of Nabors common stock on that date. In addition, the
exercise of these options may cause Nabors to issue to the exercising holders
additional options to purchase shares of common stock at an exercise price equal
to the fair market value of Nabors common stock on the date of issuance and
Nabors may issue additional options in the future under stock option plans or
otherwise. Certain of the sharesdeemed to be issued pursuant to the exercise of
options may be "restricted securities," as that term is defined in Rule 144
promulgatedunderwriting
compensation under the Securities Act. The sale, or availabilityAny broker-dealer that resells new notes
that were received by it for sale, of
substantial amounts of Nabors common stockits own account in the public market dueexchange offer and any
broker-dealer that participates in a distribution of those new notes may be
deemed to be an underwriter within the meaning of the Securities Act and must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale transaction, including the delivery
of a prospectus that contains information with respect to any selling holder
required by the Securities Act in connection with any resale of the new notes.
The letter of transmittal states that, by acknowledging that it will deliver and
by delivering a prospectus, a broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act.
Furthermore, any broker-dealer that acquired any of the old notes directly
from us:
- may not rely on the applicable interpretation of the staff of the SEC's
position contained in Exxon Capital Holdings Corp., SEC no-action letter
(April 13, 1988), Morgan, Stanley & Co. Inc., SEC no-action letter (June
5, 1991) and Shearman & Sterling, SEC no-action letter (July 2, 1983);
and
- must also be named as a selling noteholder in connection with the
registration and prospectus delivery requirements of the Securities Act
relating to any resale transaction.
For a period of 180 days after the expiration of the exchange offer, we
will promptly send additional copies of this prospectus and any amendment or
supplement to this prospectus to any broker-dealer that requests such documents
in the letter of transmittal. We have agreed to pay all expenses incident to the
exerciseexchange offer other than commissions or concessions of options (and, where applicable, sales pursuant to Rule 144) could
adversely affect the prevailing market price of Nabors common stockany broker-dealer and
could
impair our ability to raise additional capital through the sale of equity
securities.
Provisions of Nabors' organizational documents may deter a change of
control transaction and decrease the likelihood of a stockholder receiving a
change of control premium. Nabors' board of directors is divided into three
classes of directors, with each class serving a staggered three-year term. In
addition, our board of directors has the authority to issue up to 10,000,000
shares of preferred stock and to determine the price, rights (including voting
rights), conversion ratios, preferences and privileges of that stock without
further vote or action bywill indemnify the holders of the common stock. Although Nabors has
no present plans to issue shares of preferred stock,old notes (including any broker-dealers)
against certain liabilities, including liabilities under the classified board and
the Nabors Board's ability to issue additional shares of preferred stock may
discourage, delay or prevent changes in control of Nabors that are not approved
by the Nabors Board, thereby possibly preventing certain Nabors' stockholders
from realizing a possible premium on their shares.
Year 2000 issues present risks to Nabors' business operations in several
ways. The year 2000 issue refers to the potential inability of computer systems
and technologies to properly recognize and process dates beyond December 31,
1999. In such case Nabors' computer systems and those of its customers and
suppliers may not work properly and adversely affect Nabors' business. For
information on these issues and
14Securities Act.
41
21
Nabors plans to respond to these risks, please see Nabors Form 10-Q for the
quarter ended March 31, 1999 under "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Other Matters -- Year 2000
Issue and Compliance Program" which is specifically incorporated into this
document by reference. See "Where You Can Find More Information."
WHERE YOU CAN FIND MORE INFORMATION
Nabors and Pool filefiles annual, quarterly and specialcurrent reports, proxy and information
statements and other information with the Securities and Exchange Commission.
Nabors Delaware previously filed such reports and materials but is no longer
required to do so following the corporate reorganization on June 24, 2002
described above in the section entitled "Summary Information -- Recent
Developments" beginning on page 2. Nabors Holdings is not expected to be
required to file such reports and material with the Securities and Exchange
Commission. You may readinspect and copy anysuch reports, proxy and information
statements, orand other information that the
companies filefiled with the Commission at the Commission's public reference rooms inSEC's Public
Reference Room at 450 Fifth Street, N.W., Washington, D.C., 20549 and at the
SEC's regional offices at Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661, and at 233 Broadway, New York, New York 10279. You may
also obtain copies of such material from the Securities and Chicago, Illinois. Please call theExchange Commission
at 1-800-SEC-0330 for further information on the public reference
rooms. These Commission filings are also availableprescribed rates by writing to the public from commercial
document retrieval servicesPublic Reference Section of the Securities
and at the Internet world wide web site maintained
by theExchange Commission, at "http://www.sec.gov." Reports,450 Fifth Street, N.W., Washington, D.C. 20549. In
addition, reports, proxy and information statements and other information
filed byconcerning Nabors should alsocan be available for inspectioninspected at the
offices of the American Stock Exchange, 86 Trinity
Place, New York, New York 10006.
Nabors has filed a registration statement on Form S-4 with the Commission
relating to the10006, where Nabors' common shares of Nabors common stock that Nabors will issue in the
merger. This document does not contain all the information appearing in Nabors'
registration statement.are listed.
You may obtain information on the additionaloperation of the Public Reference Room by
calling the Securities and Exchange Commission at 1-800-SEC-0330. Copies of
reports, proxy and information statements and other information regarding
registrants that file electronically (including Nabors and prior to July 23,
2002, Nabors Delaware) are available on the Commission's website at
http://www.sec.gov. Nabors' website address is http://www.nabors.com. Nabors'
website materials are not part of this prospectus.
42
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
Rather than restate certain information in this prospectus that Nabors
Delaware and Nabors have already included in reports filed with the registration statement from theSecurities
and Exchange Commission, in any of the ways noted in the first
paragraph. Descriptions of the contents of contracts or other documents found inwe are incorporating this document are not necessarily complete and such descriptions are qualifiedinformation by reference, to the copy of the contract or other document filed as an exhibit
to Nabors' registration statement. If you would like more information, please
read the copies of the contracts and documents filed as exhibits to the
registration statement.
You should rely only on the information contained or incorporated by
reference into this document. Pool has supplied the information relating to it
and Nabors has supplied the information relating to it. Neither Pool nor Nabors
has authorized anyone to provide you with information that is different from
what is contained in this document. You should not assume that the information
contained in this document is accurate as of any date other than such date as
this document indicates.
The Commission allows Nabors and Pool to "incorporate by reference"
information into this document
which means that Nabors and Poolwe can disclose important business, financial and other
information to you by referring you to another documentthose publicly filed separatelydocuments that contain
the information. The information incorporated by reference is not included in or
delivered with the Commission.this prospectus. The information incorporated by reference is
considered to be part of this document except for anyprospectus, and information superseded bythat Nabors files
later with the Securities and Exchange Commission will automatically update and
supersede the information contained directly in this document or in later filed documents
incorporated by reference into this document.
This document incorporatesprospectus. Accordingly, we incorporate by
reference the documents set forth below that
Nabors and Pool have previously filed with the Commission. These documents
contain important information about Nabors and Pool and their finances and
should be reviewed carefully and fully.
15
22
NABORS
PERIOD OR
COMMISSION FILINGS (FILE NO. 001-9245) DATE FILED
- -------------------------------------- ----------
Annual Report on Form 10-K.................................. Year ended December 31, 1998
Quarterly Report on Form 10-Q............................... Quarter ended March 31, 1999
Current Report on Form 8-K.................................. January 11, 1999
Current Report on Form 8-K.................................. February 3, 1999
Current Report on Form 8-K.................................. March 1, 1999
Current Report on Form 8-K.................................. April 22, 1999
Amendment to Current Report on Form 8-K/A................... June 21, 1999
Current Report on Form 8-K.................................. June 30, 1999
Current Report on Form 8-K.................................. July 6, 1999
Amendment No. 1 to Registration Statement on Form 8-A
containing a description of Nabors common stock........... May 20, 1992
POOL
PERIOD OR
COMMISSION FILINGS (FILE NO. 0-18437) DATE FILED
- ------------------------------------- ----------
Annual Report on Form 10-K.................................. Year ended December 31, 1998
Quarterly Report on Form 10-Q............................... Quarter ended March 31, 1999
Current Report on Form 8-K.................................. January 11, 1999
Allfollowing documents filed by Nabors Delaware and Pool under SectionNabors:
- Nabors Delaware's Annual Report on Form 10-K for the fiscal year ended
December 31, 2001 (File No. 001-09245), as amended by Form 10-K/A filed
by Nabors on June 26, 2002 (File No. 000-49887);
- Nabors Delaware's Quarterly Report on Form 10-Q for the quarter ended
March 31, 2002 (File No. 001-09245);
- Nabors Delaware's Current Reports on Form 8-K filed on January 3, 2002,
January 25, 2002, April 18, 2002, June 14, 2002, and June 25, 2002 (File
No. 001-09245);
- Nabors' Quarterly Report on Form 10-Q for the quarter ended June 30,
2002, as amended by Form 10-Q/A filed by Nabors on October 11, 2002 (File
No. 000-49887);
- Nabors' Current Reports on Form 8-K filed on June 25, 2002 (File No.
333-76198), June 26, 2002, July 18, 2002, August 14, 2002, August 16,
2002, August 21, 2002, October 1, 2002, and October 11, 2002 (File No.
000-49887); and
- Nabors' Registration Statement on Form S-4 (Registration No. 333-76198).
In addition, all reports and other documents Nabors subsequently files
pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of
1934, as amended (which we refer to in this prospectus as the Exchange Act)
after the date of this documentprospectus and before the datetermination of the special meeting of Pool shareholders willthis offering
shall be deemed to be incorporated by reference intoin this document.
THE DOCUMENTS OF NABORS THAT ARE INCORPORATED BY REFERENCE ARE AVAILABLE,
WITHOUT CHARGE, UPON ORAL OR WRITTEN REQUEST TO DANIEL MCLACHLIN, CORPORATE
SECRETARY, NABORS INDUSTRIES, INC., 515 WEST GREENS ROAD, SUITE 1200, HOUSTON,
TEXAS 77067-4525; TELEPHONE NUMBER (281) 874-0035. EXHIBITS TO SUCH DOCUMENTS
ARE NOT AVAILABLE UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY
REFERENCE INTO THIS DOCUMENT. IN ORDER TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS BEFORE THE POOL SPECIAL MEETING, YOU SHOULD MAKE A REQUEST BY
SEPTEMBER 15, 1999.
THE DOCUMENTS OF POOL THAT ARE INCORPORATED BY REFERENCE ARE AVAILABLE,
WITHOUT CHARGE, UPON ORAL OR WRITTEN REQUEST TO GEOFFREY ARMS, CORPORATE
SECRETARY, POOL ENERGY SERVICES CO., 10375 RICHMOND AVENUE, HOUSTON, TEXAS
77042; TELEPHONE NUMBER (713) 954-3000. EXHIBITS TO SUCH DOCUMENTS ARE NOT
AVAILABLE UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE INTO
THIS DOCUMENT. IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS BEFORE THE
POOL SPECIAL MEETING, YOU SHOULD MAKE A REQUEST BY SEPTEMBER 15, 1999.
16
23
COMPARATIVE MARKET PRICE DATA
The following table sets forth the range of highprospectus and low sales prices for
Nabors common stock and Pool common stock for the periods indicated, as reported
on the AMEX for Nabors and the Nasdaq National Market for Pool. Pool common
stock trades on the Nasdaq National Market under the symbol "PESC."
NABORS POOL
-------------------------- --------------------------
HIGH LOW HIGH LOW
---- --- ---- ---
TWELVE MONTHS ENDED DECEMBER 31, 1996
Quarter ended March 31, 1996.............................. $15 1/4 $10 1/4 $11 5/8 $ 8 5/8
Quarter ended June 30, 1996............................... 16 5/8 13 7/8 14 5/8 11
Quarter ended September 30, 1996.......................... 17 3/8 13 13 1/2 10 1/8
Quarter ended December 31, 1996........................... 21 1/2 13 3/8 16 5/8 12 1/2
TWELVE MONTHS ENDED DECEMBER 31, 1997
Quarter ended March 31, 1997.............................. $22 $14 3/4 $18 3/4 $12 5/8
Quarter ended June 30, 1997............................... 25 1/16 17 3/4 18 1/2 12
Quarter ended September 30, 1997.......................... 40 7/8 24 7/8 39 1/8 18 1/4
Quarter ended December 31, 1997........................... 46 13/16 26 41 1/2 19 1/2
TWELVE MONTHS ENDED DECEMBER 31, 1998
Quarter ended March 31, 1998.............................. $31 9/16 $19 15/16 $25 1/2 $15
Quarter ended June 30, 1998............................... 27 3/8 19 3/4 28 5/16 13 7/8
Quarter ended September 30, 1998.......................... 21 7/16 11 3/4 15 1/2 6 3/4
Quarter ended December 31, 1998........................... 20 11/16 12 1/16 14 7/8 6 3/16
QUARTER ENDED MARCH 31, 1999................................ $19 $10 3/4 $16 5/8 $ 9 1/2
QUARTER ENDED JUNE 30, 1999................................. $25 5/16 $15 1/2 $21 5/16 $13 3/8
QUARTER ENDING SEPTEMBER 30, 1999 (THROUGH AUGUST 6,
1999)..................................................... $25 1/2 $21 9/16 $24 3/8 $18 7/16
The following table sets forth the closing sales prices for Nabors common
stock and Pool common stock as of (a) October 9, 1998, the last trading day
before Nabors' initial proposal to acquire Pool, (b) January 8, 1999, the last
day of trading prior to the public announcement of the merger and (c) August 6,
1999, the last trading day before the datebe
part of this document.
NABORS POOL
------ ----
October 9, 1998............................................. $13 1/4 $ 7 1/16
January 8, 1999............................................. 16 1/16 13 5/8
August 6, 1999.............................................. 25 1/8 23 7/8
17
24
THE SPECIAL MEETING
This document is being furnished to shareholders of Pool in connection with
the solicitation of proxies on behalf of the Pool Board for use at the special
meeting of Pool shareholders to be held on September 28, 1999 at the time and
place specified in the following section, and at any reconvened meeting after
any adjournment or postponement of the special meeting.
NOTICE OF MEETING
The special meeting will be held on September 28, 1999 at 10:00 a.m., local
time, at the offices of Pool, located at 10375 Richmond Avenue, Houston, Texas
77042, to consider and vote upon:
- a proposal to approve the Agreement and Plan of Merger, dated as of
January 10, 1999, as amended, by and among Nabors, Starry Acquisition
Corp., a wholly-owned subsidiary of Nabors formed for purposes of the
acquisition, and Pool, which provides for the merger of Starry
Acquisition Corp. with and into Pool; and
- such other business as may properly come before the special meeting or
any adjournment or postponement of such meeting.
The notice is being given to holders of record of Pool common stock at the
close of business on the record date. A complete list of such shareholders will
be available for examination by any shareholder for any purpose germane to the
special meeting at Pool's principal place of business, located at 10375 Richmond
Avenue, Houston, Texas 77042, for a period of at least ten days before the
meeting.
THE POOL BOARD HAS UNANIMOUSLY DETERMINED THAT THE MERGER AGREEMENT AND THE
MERGER ARE IN THE BEST INTERESTS OF, AND ARE FAIR TO, THE SHAREHOLDERS OF POOL
AND HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT. ACCORDINGLY, THE POOL BOARD
UNANIMOUSLY RECOMMENDS THAT ALL POOL SHAREHOLDERS VOTE FOR THE APPROVAL OF THE
MERGER AGREEMENT.
RECORD DATE; SHARES ENTITLED TO VOTE
The Pool Board has fixed the close of business on August 6, 1999 as the
record date for determining the Pool shareholders entitled to receive notice of
and to vote at the special meeting. As of the record date, 21,286,031 shares of
Pool common stock were outstanding and held of record by approximately 2,052
holders. Each outstanding share of Pool common stock is entitled to one vote on
all matters coming before the special meeting. Pool also has outstanding stock
options, but the holders of these options have no voting rights with respect to
the merger agreement.
QUORUM
A quorum is necessary in order for a vote to be taken on the proposals
presented at the special meeting. The presence, either in person or by proxy, of
the holders of 10,643,016 shares, representing a majority of the issued and
outstanding shares of Pool common stock on the record date, is necessary to
constitute a quorum for the transaction of business at the special meeting.
VOTE REQUIRED
Under Texas law, the affirmative vote of the holders of at least 14,190,687
shares, representing two-thirds of the outstanding shares of Pool common stock,
is required to adopt the merger agreement. This requirement makes the vote of
every Pool shareholder important.
EFFECT OF ABSTENTIONS AND BROKER NON-VOTES
Shares of Pool common stock represented by properly executed proxies that
reflect abstentions will be counted as shares that are present and entitled to
vote for purposes of determining the presence of a quorum at the special meeting
and for purposes of determining the outcome of any question submitted to
18
25
shareholders for a vote. "Broker non-votes" will be counted as shares that are
present and entitled to vote for purposes of establishing a quorum. "Broker
non-votes" are shares held by brokers that are represented at a meeting but with
respect to which the broker has not received instructionsprospectus from the customer or
otherwise does not have discretionary authority to vote. For purposes of
determining the outcome of any question as to which the broker has physically
indicated on the proxy that it does not have discretionary authority to vote,
these shares will be treated as not present and not entitled to vote with
respect to that question, even though those shares are considered entitled to
vote for quorum purposes and may be entitled to vote on other questions.
Abstentions and broker non-votes will have the same effect as votes against the
approval of the merger agreement.
VOTING OF PROXIES
Shares of Pool common stock represented by properly executed proxies
received at or before the special meeting, and which have not been revoked, will
be voted at the special meeting, or any reconvened meeting after any adjournment
or postponement of the special meeting, in accordance with the instructions of
such proxies. If a proxy is properly executed and returned by a shareholder of
Pool without indicating any voting instructions, the shares of Pool common stock
represented by such proxy will be voted at the special meeting FOR the approval
of the merger agreement.
If any other matters are properly presented for consideration at the
special meeting, including, among other things, consideration of a motion to
adjourn or postpone the special meeting to another time or place, then James T.
Jongebloed, Joseph R. Musolino and James L. Payne, the persons named on the
enclosed proxy card as the proxies for Pool common stock, will have discretion
to vote on these matters in accordance with their best judgment.
REVOCATION OF PROXIES
A shareholder executing and returning a proxy has the power to revoke it at
any time before it is exercised either by executing and delivering a later-dated
proxy to the Corporate Secretary of Pool, by delivering a duly executed written
revocation of such proxy to the Corporate Secretary of Pool, or by voting in
person at the special meeting. Attendance at the special meeting will not in and
of itself revoke a proxy.
SOLICITATION OF PROXIES; EXPENSES
In connection with the special meeting, proxies are being solicited by, and
on behalf of, the Pool Board. Pool will bear the cost of the solicitation of
proxies from its shareholders; however, Nabors has agreed in the merger
agreement to bear one-half of the costs of filing, printing and mailing this
document. In addition to the solicitation of proxies by use of mail, the
directors, officers and employees of Pool and Nabors may solicit proxies from
shareholders personally or by telephone, facsimile or other means of
communication. Such directors, officers and employees will not receive extra
compensation for such solicitation but may be reimbursed for out-of-pocket
expenses related to the solicitation. In addition, Pool has engaged MacKenzie
Partners, Inc. for a fee of $7,500, plus expenses, to aid in the solicitation of
proxies and to verify certain records related to the solicitation. Arrangements
will also be made with brokerage houses, banks, fiduciaries and other custodians
for the forwarding of solicitation material to the beneficial owners of stock
held of record by such persons, and Pool will reimburse such persons for their
reasonable out-of-pocket expenses in connection with the solicitation.
SHAREHOLDERS SHOULD NOT SEND IN THEIR STOCK CERTIFICATES WITH THEIR PROXY
CARD.
SHARES HELD BY POOL MANAGEMENT AND OTHERS
As of the record date, the directors and executive officers of Pool as a
group owned beneficially an aggregate of 157,964 outstanding shares of Pool
common stock. This amount excludes shares purchasable upon the exercise of
outstanding options and represents approximately 0.7% of the total shares
outstanding
19
26
as of the record date. The directors and executive officers of Pool have
indicated that they intend to vote shares beneficially owned by them in favor of
the proposal to approve the merger agreement.
Pursuant to an escrow agreement with A. A. Gonsoulin, Jr., the Pool Board
has the power to vote 769,231 shares of Pool common stock owned by Mr. Gonsoulin
(representing approximately 3.6% of the total shares outstanding as of the
record date) at the special meeting. The Pool Board has agreed to vote all such
shares in favor of the proposal to approve the merger agreement.
Nabors has indicated that it intends to vote the 2,209,500 shares of Pool
common stock owned by its affiliate (representing approximately 10.4% of the
total shares outstanding as of the record date) in favor of the proposal to
approve the merger agreement.
THE MERGER
GENERAL
Pool, Nabors and Nabors' acquisition subsidiary have entered into the
merger agreement, which provides that Nabors will acquire Pool, and each
outstanding share of Pool common stock, other than shares held by Pool and its
subsidiaries which will be canceled and shares held by Nabors and an affiliate
of Nabors which will remain outstanding as shares in the surviving corporation,
will be converted into the right to receive 1.025 shares of Nabors common stock.
Pool will be the surviving corporation in the merger and will become a
subsidiary of Nabors.
BACKGROUND OF THE MERGER
In late 1993, Nabors began acquiring shares of Pool common stock. In
September 1993, Eugene M. Isenberg, Chairman and Chief Executive Officer of
Nabors, and two other directors of Nabors had dinner with James T. Jongebloed
and Ernest J. Spillard, both executive officers of Pool. Nabors' representatives
expressed an interest in pursuing joint purchasing or other arrangements that
could be of mutual benefit. No specific proposals were discussed and no specific
further actions resulted from that meeting.
In early 1994, Pool developed a strategic plan designed to further
strengthen its competitive position and market share in the oilfield services
industry in order to achieve growth in revenues, earnings and EBITDA. Key
components of the plan included:
- pursuing expansion opportunities in existing core market areas through
acquisitions that result in consolidation cost savings;
- upgrading and enhancing the capabilities of Pool's existing fleet and
certain specialized rig equipment to operate in markets with high levels
of activity and strong pricing fundamentals;
- entering new foreign markets that offer significant development and
production activity; and
- offering additional services and equipment that complemented Pool's
businesses in its existing locations.
During April 1994, Mr. Isenberg telephoned Mr. Jongebloed to inquire
whether he had any interest in another dinner meeting to examine alternatives of
working together for the mutual benefit of each company's shareholders, but no
further discussions took place at that time. On May 26, 1994, Nabors reported
that it had acquired 867,500 shares of Pool common stock (then constituting
approximately 6.4% of the outstanding shares). On June 8, 1994, Pool announced
that it had adopted a shareholder rights agreement. Later in the summer of 1994,
Mr. Isenberg and two other representatives of Nabors met with Mr. Jongebloed and
Pool's investment advisors to discuss whether Pool had any interest in pursuing
a merger, joint venture or other combination. Mr. Jongebloed indicated that Pool
was of the opinion that its shareholders would be better served by the
implementation of its strategic plan.
20
27
Following the adoption of its strategic plan, Pool implemented a number of
initiatives. These included acquiring additional well-servicing operations,
principally in California, West Texas, and the Rocky Mountains; acquiring full
ownership of the operation in Alaska in which Pool had previously been a
minority partner; increasing Pool's participation in foreign markets; and
acquiring a company that operates a fleet of offshore support vessels in the
Gulf of Mexico. Pool also enhanced its rig fleet primarily through the
construction of new rigs and the major upgrading of others.
In the summer of 1998, Nabors approached an investment banker regarding a
possible combination of Pool and Nabors. Nabors was told that Pool's management
was not open to pursuing discussions at that time, particularly in view of the
then low market price for the Pool common stock.
On October 12, 1998, Mr. Isenberg sent a letter to the Pool Board in which
Nabors presented a merger proposal under which Nabors would acquire all of the
outstanding Pool common stock at a price of $12.50 per share. The letter stated
that the consideration in the merger would be payable at least 51% in stock in
order to preserve tax free treatment and the remainder in cash. The letter also
stated that Nabors' proposal was based on public information and if Pool was
able to demonstrate additional value, Nabors would consider offering a higher
price. The letter noted that Nabors' Board had unanimously approved the merger
proposal, that financing would be available to meet all transaction requirements
and that Nabors was prepared to immediately commence negotiating a definitive
acquisition agreement.
On October 12, 1998, Mr. Jongebloed shared Nabors' October 12th letter with
other members of management, as well as with Pool's legal and financial
advisors. A meeting of the Pool Board was held on October 19, 1998 to consider
Nabors' October 12th letter. At that meeting, the Pool Board reviewed the
letter, heard presentations as to fiduciary responsibilities of the Pool Board
in considering acquisition proposals, such as the one set forth in Nabors'
letter, and were advised as to the work that would need to be performed by
Pool's advisors to assist the Pool Board in its consideration of the proposal
made by Nabors and the various alternatives available to Pool.
At that time, the Pool Board concluded that, given the values inherent in
Pool's business and the long-term strategies being implemented to improve
shareholder value, the Nabors proposal was not in the best interests of Pool and
its shareholders. In particular, the Pool Board determined that Pool's strategic
initiatives as well as the long-term interests of Pool and its shareholders
would be best served by the continued independence of Pool. Mr. Jongebloed sent
a letter dated October 26, 1998 to Mr. Isenberg informing him that it was the
unanimous and unequivocal decision of the Pool Board not to pursue discussions
regarding Nabors' merger proposal.
On October 28, 1998, Nabors sent a letter to Pool, in which, among other
things, Nabors expressed its surprise and disappointment that the Pool Board had
concluded unanimously and unequivocally not to discuss the merger proposal. In
the letter, Nabors stated it continued to believe that a combination of Nabors
and Pool would maximize the long-term value to be realized by Pool shareholders
and, accordingly, submitted a second merger proposal in which Nabors would
acquire all of the outstanding shares of Pool common stock for consideration
equal to 0.481 shares of Nabors common stock and $6.125 in cash for each
outstanding Pool share. Nabors again stated that the proposal was based on
public information and, if Pool could demonstrate additional value, Nabors would
consider offering a higher price.
Mr. Isenberg called Mr. Jongebloed on October 29, 1998, but Mr. Jongebloed
was unable to return the call that day. The next morning, October 30, 1998,
Nabors issued a press release setting forth, among other things, the text of all
prior correspondence and announcing the merger proposal set forth in the October
28th letter.
On October 30, 1998, Pool sent a letter to Nabors stating, among other
things, that the decision of the Pool Board not to pursue merger discussions had
been unanimous and unequivocal and that Pool was not interested in pursuing such
discussions.
On November 13, 1998, Nabors filed a Schedule 13D with the Securities and
Exchange Commission disclosing that Nabors, together with two of its
subsidiaries, beneficially owned 10.03% of the then outstanding Pool common
stock.
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On November 16, 1998, Pool engaged Morgan Stanley as its financial advisor
to assist Pool in the evaluation and further implementation of its growth
strategies with the intent of maximizing long-term shareholder value.
On November 23, 1998, Nabors filed preliminary proxy materials with the
Commission relating to its request for a special meeting of Pool shareholders to
consider and vote on a non-binding resolution of shareholders recommending that
the Pool Board arrange for the sale of Pool and take all necessary steps to
effect such sale, including, without limitation, certain specified actions under
Pool's rights agreement and Texas law.
Also on November 23, 1998, Nabors, together with one of its subsidiaries,
directed the record holder of their shares to request that Pool provide, among
other things, copies of Pool's shareholder lists and other books and records of
Pool. On December 10, 1998, counsel for Pool and Nabors agreed that Pool would
promptly deliver a list of Pool's shareholders as of the close of business on
December 9, 1998 to Nabors pursuant to a mutually acceptable confidentiality and
cost reimbursement agreement.
On November 23, 1998, after Nabors' filing and a concurrent press release,
Pool issued a press release acknowledging receipt of Nabors' notice calling for
the special meeting. In that press release, Mr. Jongebloed expressed his opinion
of the calling of the special meeting in the context of Nabors' specific
acquisition proposal that Pool had previously rejected. In the press release,
Pool stated it was committed to the implementation of its own growth strategies
and the maximization of shareholder value.
On November 24, 1998, Nabors and a subsidiary filed with the Commission a
Schedule 13D disclosing that they now owned 2,209,500 shares, or 10.5%, of the
outstanding Pool common stock.
On December 2, 1998, the Pool Board fixed December 9, 1998 as the record
date for shareholders entitled to vote at the special meeting called by Nabors
for January 12, 1999.
Notice of the January 12, 1999 special meeting was issued at the direction
of Nabors and one of its subsidiaries on December 10, 1998. Nabors' definitive
proxy soliciting materials were first furnished to Pool's shareholders on or
about December 10, 1998.
The Pool Board distributed its definitive proxy materials in opposition to
the Nabors solicitation to Pool's shareholders on December 15, 1998. Both Nabors
and Pool then actively solicited proxies in support of their respective
positions and filed soliciting materials with the Commission.
In response to a suggested overture from a representative of Nabors'
financial advisor, Merrill Lynch, Pierce, Fenner & Smith Incorporated, to a
director of Pool, representatives of Morgan Stanley contacted representatives of
Merrill Lynch during the week of December 28, 1998 and suggested that
discussions could commence if Nabors was prepared to embrace an all stock
transaction at a higher price. Merrill Lynch initially indicated that Nabors was
prepared to do so upon receipt of certain forward-looking information. Morgan
Stanley indicated that such information would be forthcoming upon the execution
of mutually acceptable confidentiality agreements and an exchange of comparable
data. Nabors ultimately concluded that it would commence discussions without the
forward-looking data because it did not wish to be bound by the restrictions of
the proposed confidentiality agreement and advised Pool of its decision.
Discussions concerning the exchange ratio for a merger transaction ensued over
the New Year's Day weekend.
Prior to the opening of the trading markets on January 4, 1999, Pool
announced that it had commenced merger discussions with Nabors, but that there
was no assurance that a definitive agreement would be reached. Later that day,
Nabors acknowledged that discussions between the parties' financial advisors had
been held, but that no additional talks were scheduled. In their respective
press releases, both Nabors and Pool indicated that they did not intend to
comment further on the discussions.
Representatives of Morgan Stanley contacted representatives of Merrill
Lynch after the market closed on January 4, 1999 to further discuss a potential
merger transaction, including potential exchange ratios. On January 6, 1999,
Nabors sent drafts of the merger documentation to Pool and its legal counsel.
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29
A special telephonic meeting of the Pool Board was held on January 6, 1999
to discuss possible exchange ratios and other matters. Representatives of Morgan
Stanley summarized the status of the negotiations, and the management of Pool
and representatives of Morgan Stanley and Pool's legal counsel answered
questions from members of the Pool Board. Later that day, two directors of Pool,
James L. Payne and John F. Lauletta, discussed certain aspects of a merger
transaction by telephone with Eugene M. Isenberg of Nabors.
On the evening of January 7, 1999, representatives of Nabors and Pool began
face-to-face negotiations. The terms of the merger agreement were negotiated
from that time until late in the evening on January 10, 1999.
A special telephonic meeting of the Pool Board was held on January 10,
1999. Legal counsel for Pool described the present status of the negotiations
and the proposed definitive merger agreement. Legal counsel also described the
treatment of the employees and senior officers of Pool and discussed a number of
positive and negative aspects of the proposed merger transaction with Nabors.
Representatives of Morgan Stanley then provided their formal analysis regarding
the proposed transaction. After discussion, Morgan Stanley gave its oral opinion
that the proposed exchange ratio of 1.025 was fair to the shareholders of Pool
(other than Nabors and its subsidiaries) from a financial point of view. Morgan
Stanley then indicated that it would deliver a formal written opinion to that
effect in due course. The Pool Board unanimously determined that the proposed
transaction with Nabors was in the best interests of, and fair to, the Pool
shareholders and approved the merger agreement and authorized its execution and
delivery. The Pool Board also unanimously determined to recommend to the Pool
shareholders that they approve the merger agreement.
Late in the evening on January 10, 1999, Nabors and Pool executed and
delivered the merger agreement. Prior to the opening of the trading markets on
January 11, 1999, Nabors and Pool jointly issued a press release announcing that
the merger agreement had been signed and that the special meeting of Pool
shareholders scheduled for January 12, 1999 had been canceled. Also on January
11, 1999, each of Pool and Nabors filed with the Commission a Current Report on
Form 8-K setting forth the texts of the press release and the merger agreement.
On February 19, 1999, Pool and Nabors filed their respective Premerger
Notification and Report forms as required under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976. On March 19, 1999, Nabors and Pool each received a
second request for information and documentary material from the Department of
Justice asking for additional information regarding their respective businesses
and customers. On July 2, 1999, Nabors filed its response to the Department of
Justice's second request. On July 8, 1999, Pool filed its response. The waiting
period expired on July 29, 1999.
On August 6, 1999, Nabors, Nabors' acquisition subsidiary and Pool amended
the merger agreement to provide that shares of Pool common stock held by Nabors
and an affiliate of Nabors would remain outstanding as shares in the surviving
corporation following the effective time of the merger.
REASONS FOR THE MERGER; RECOMMENDATION OF THE POOL BOARD
The Pool Board unanimously approved the merger agreement, believes that the
merger is in the best interests of, and fair to, the Pool shareholders and
unanimously recommends approval of the merger agreement by the holders of Pool
common stock at the special meeting.
In determining to approve the merger, the Pool Board considered the
following favorable factors:
- the conclusion that, after exploring other alternatives, a merger with
Nabors on the terms set forth in the merger agreement offered Pool
shareholders value superior to the value expected to be generated through
the pursuit of Pool's growth strategies;
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30
- the conclusion that the increased size of the combined company could have
certain benefits, including:
- the potential for an enhanced ability to weather the current downturn in
the oil business and related oil service industries;
- the potential for enhanced purchasing economies;
- a financial and strategic position to pursue additional consolidation
opportunities;
- an enhanced credit standing;
- a higher profile with investors; and
- substantially greater liquidity for shareholders;
- the conclusion that the combined company will have a strong diversified
market presence in the onshore U.S. Lower 48, the offshore Gulf of
Mexico, Alaska and selected foreign markets;
- the strong balance sheet and increased credit strength of the combined
company that could generate substantial cash flow once oil prices
recover;
- the expectation that the merger will be a tax-free transaction to Pool
and its shareholders;
- the conversion of Nabors' initial part cash-part stock proposal into an
all stock transaction offered the Pool shareholders an opportunity to
participate fully in the combined enterprise on an ongoing basis;
- the oral opinion of Morgan Stanley, subsequently confirmed in writing,
that, as of January 10, 1999, the exchange ratio of 1.025 was fair to the
Pool shareholders (other than Nabors and its subsidiaries) from a
financial point of view; and
- the fact that the 1.025 exchange ratio represented a significant premium
over the average exchange ratio of the Pool shares and the Nabors shares
during the three years preceding the date of the merger agreement.
The Pool Board also considered the following adverse factors associated
with the merger:
- The conclusion that the current market valuefiling of the shares of Nabors
common stock issuablesuch reports and
documents. Any statement contained in the merger for each share of Pool common stock
reflectsthis prospectus or in a fraction of the replacement value of Pool's assets. Such risk,
however, was mitigated by the fact that the market value of both the
Nabors common stock and the Pool common stock are currently depressed and
that, following the closing of the merger, the former shareholders of
Pool will have an opportunity to participate in any recovery in the
prices of stocks of companies in the oilfield services industry through
the ownership of a larger combined company.
- The fact that Pool's senior management and directors will have minimal
representation in the combined company. However, the Pool Board also
considered that, pursuant to the merger agreement, one of its current
directors would be appointed to the board of the combined company
immediately following the closing of the merger to serve until the next
annual meeting of stockholders of Nabors.
- The fact that Nabors can terminate the merger agreement if either (a) the
federal antitrust authorities require any divestiture of assets by Pooldocument
incorporated or Nabors as a condition to permitting the waiting period under
Hart-Scott-Rodino to expire or (b) arrangements are not made that are
satisfactory to Nabors providing for the continuation of both Pool's and
Nabors' operations in Saudi Arabia. If either of these conditions cannot
be satisfied, Nabors may try to renegotiate the terms of the merger
agreement rather than terminate it. The Pool Board is opposed to any
renegotiation that would reduce the considerationdeemed to be receivedincorporated herein by the
Pool shareholders in the merger. While the
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Pool Board objectedreference shall be deemed to
including these conditions in the merger
agreement, it ultimately acquiesced.
In view of the variety of factors considered, the Pool Board did not find
it practicable to, and did not, quantifybe modified or otherwise attempt to assign specific
or relative weights to the factors considered in making its determination. In
addition, individual members of the Pool Board may have given different weights
to different factors.
OPINION OF POOL'S FINANCIAL ADVISOR
Morgan Stanley was retained by Pool to act as its financial advisor in
connection with the merger. Morgan Stanley is an internationally recognized
investment banking firm and was selected by Pool based on Morgan Stanley's
qualifications, experience and expertise in the oilfield services industry. On
January 10, 1999, Morgan Stanley delivered to the Pool Board an oral opinion,
subsequently confirmed in writing, to the effect that, as of January 10, 1999,
and based on and subject to certain matters stated therein, the exchange ratio
in the merger agreement was fair from a financial point of view to the holders
of the Pool common stock, other than Nabors and its subsidiaries.
THE FULL TEXT OF MORGAN STANLEY'S WRITTEN OPINION DATED JANUARY 10, 1999,
WHICH SETS FORTH THE ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS ON THE
REVIEW UNDERTAKEN, IS ATTACHED AS ANNEX B TO THIS DOCUMENT AND IS INCORPORATED
BY REFERENCE. HOLDERS OF POOL COMMON STOCK SHOULD READ THIS ENTIRE OPINION
CAREFULLY. MORGAN STANLEY'S OPINION ADDRESSES ONLY THE FAIRNESS OF THE EXCHANGE
RATIO FROM A FINANCIAL POINT OF VIEW TO THE HOLDERS OF POOL COMMON STOCK, OTHER
THAN NABORS AND ITS SUBSIDIARIES, AND IT DOES NOT ADDRESS ANY OTHER ASPECTS OF
THE MERGER NOR DOES IT CONSTITUTE A RECOMMENDATION TO ANY SHAREHOLDER AS TO HOW
SUCH SHAREHOLDER SHOULD VOTE AT THE POOL SPECIAL MEETING. THE SUMMARY OF THE
OPINION OF MORGAN STANLEY SET FORTH IN THIS DOCUMENT IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO THE FULL TEXT OF MORGAN STANLEY'S OPINION.
In arriving at its opinion, Morgan Stanley:
- reviewed certain publicly available financial statements and other
information of Pool;
- reviewed certain internal financial statements and other financial and
operating data concerning Pool prepared by management of Pool;
- discussed the past and current operations and financial condition and the
prospects of Pool with senior executives of Pool;
- reviewed the reported prices and trading activity for the Pool common
stock;
- compared the financial performance of Pool and the prices and trading
activity of the Pool common stock with that of certain other comparable
publicly-traded companies and their securities;
- reviewed the financial terms, to the extent publicly available, of
certain comparable acquisition transactions;
- reviewed certain publicly available financial statements and other
information of Nabors;
- reviewed the reported prices and trading activity for the Nabors common
stock;
- compared the financial performance of Nabors and the prices and trading
activity of the Nabors common stock with that of certain other comparable
publicly-traded companies and their securities;
- reviewed the pro forma impact of the merger on Nabors' earnings per
share, cash flow, capitalization and financial ratios;
- reviewed the drafts of the merger agreement and certain related
documents;
- participated in discussions and negotiations among representatives of
Pool and Nabors and their respective financial and legal advisors; and
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- performed such other analyses and considered such other factors as Morgan
Stanley deemed appropriate.
In rendering its opinion, Morgan Stanley assumed and relied upon (without
independent verification) the accuracy and completeness of the information
reviewed by Morgan Stanleysuperseded for the purposes of its opinion. Morgan Stanley
assumed that the merger agreement, when executed and delivered, did not contain
terms or conditions that differ materially from the drafts it had received and
that the merger will be consummated in accordance with the terms set forth in
the merger agreement without any waiver of any material term or condition
thereof. In addition, Morgan Stanley assumed that the merger will be treated as
a tax-free reorganization and/or exchange, pursuantthis prospectus to the Internal Revenue
Code. Morgan Stanley did not makeextent that
a statement contained in any independent valuationsubsequently filed document which is or appraisal of the
assets or liabilities of Pool or Nabors, nor was it furnished with any such
appraisals. Morgan Stanley's opinion is necessarily based on financial,
economic, market and other conditions as in effect on, and the information made
available to it as of, the date of its opinion.
The following is a brief summary of certain analyses performed by Morgan
Stanley and reviewed with the Pool Board on January 10, 1999 in connection with
Morgan Stanley's presentation and opinion to the Pool Board on such date.
Certain of these summaries of financial analyses include information presented
in tabular format. In order fully to understand the financial analyses used by
Morgan Stanley, the tables must be read together with the text of each summary.
The tables alone do not constitute a complete description of the financial
analyses. In the summaries below, unless otherwise specifically noted,
references to forecasted financial information were derived from research
analyst estimates.
Common Stock Performance. Morgan Stanley's analysis of the Pool common
stock and Nabors common stock performance consisted of an historical analysis of
the indexed closing prices from May 5, 1994 to January 6, 1999, and compared
such performance to that of certain publicly-traded companies including:
- Key Energy Services, Inc.;
- Pride International, Inc.; and
- the S&P Oil Well Equipment and Services Index (consisting of Baker Hughes
Incorporated, Halliburton Company, Helmerich & Payne, Inc., Rowan
Companies, Inc. and Schlumberger N.V.).
The following table depicts the percentage increases in the indexed prices
of the referenced securities and indices for the periods from May 5, 1994 to the
indicated dates:
% INCREASE/(DECREASE)
SINCE MAY 5, 1994
---------------------------
PERIOD ENDED PERIOD ENDED
10/29/98 1/6/99
------------ ------------
Pool........................................................ 62.9% 86.2%
Nabors...................................................... 163.2% 133.0%
Key Energy.................................................. 76.1% 1.2%
Pride International......................................... 104.5% 47.7%
S&P Oil Well Equipment & Services Index..................... 84.9% 76.8%
Comparable Publicly-Traded Company Analysis. As part of its analysis,
Morgan Stanley compared certain financial information of Pool with that of a
group of publicly-traded oil well equipment and servicing companies as set forth
in the table below. Such financial information included aggregate value to
forecasted 1998 and 1999 EBITDA multiples, price to forecasted 1998 and 1999
earnings per share ("EPS") multiples and price to forecasted 1998 and 1999 cash
flow per share ("CFPS") multiples. The following table presents, as of January
6, 1999, the range of multiples for the comparable companies of
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33
each of aggregate value to projected 1998 and 1999 EBITDA, price to projected
1998 and 1999 EPS and price to projected 1998 and 1999 CFPS:
AGGREGATE VALUE
PRICE TO EPS PRICE TO CFPS TO EBITDA
------------- ------------- ---------------
COMPARABLE COMPANIES 1998E 1999E 1998E 1999E 1998E 1999E
- -------------------- ----- ----- ----- ----- ------ ------
Patterson Energy, Inc. .......................... 38.2x NM 4.6x 6.9x 5.2x 10.0x
UTI Energy Corp.................................. 13.5 37.8x 4.7 5.7 4.4 5.7
Key Energy....................................... 7.5 14.1 1.8 1.7 9.6 9.5
Parker Drilling Company.......................... 13.1 19.8 2.9 3.0 5.9 6.1
Pride International.............................. 5.4 8.4 2.7 3.0 5.3 6.2
Bonus Services Corporation....................... 22.1 10.3 4.6 3.7 4.3 3.3
Precision Drilling Corporation................... 7.1 6.2 4.3 4.0 4.1 3.7
Ensign Resource Service Group.................... 6.9 8.2 4.9 5.5 3.7 4.2
- ---------------
NM: Not meaningful.
No company utilized in Morgan Stanley's publicly-traded comparable company
analysis is identical to either Pool or Nabors. Accordingly, an analysis of the
above results necessarily involves complex considerations and judgments
concerning differences in financial and operating characteristics of the
companies and other factors that could affect the public trading value of
companies to which they are being compared. Morgan Stanley made judgments and
assumptions with regard to industry performance, general business, economic,
market and financial conditions and other matters, many of which are beyond the
control of either Pool or Nabors, such as industry growth, the impact of
competition on Pool and Nabors and the industry generally and the absence of any
material adverse change in the respective financial conditions and prospects of
Pool and Nabors or the industry or in the financial markets in general.
Mathematical analysis (such as determining the mean or median) is not, in
itself, a meaningful method of using publicly-traded comparable company data.
Historical Exchange Ratio Analysis. Morgan Stanley also reviewed the ratio
of Pool common stock to Nabors common stock trading prices and the premium or
discount represented by the exchange ratio to such average historical exchange
ratios over varying intervals of time over the last five years. Morgan Stanley
observed that the average of the ratios of the closing prices of Pool common
stock to Nabors common stock for the one year periods during 1994 to 1998 were
as follows:
PREMIUM/(DISCOUNT)
AVERAGE IMPLIED REPRESENTED BY THE
ONE YEAR ENDING HISTORICAL EXCHANGE RATIO EXCHANGE RATIO
- --------------- ------------------------- ------------------
December 31, 1994.............................. 1.185x (13.5%)
December 31, 1995.............................. 1.016 0.9%
December 31, 1996.............................. 0.801 28.0%
December 31, 1997.............................. 0.798 28.4%
December 31, 1998.............................. 0.772 32.8%
Morgan Stanley further observed the following averages of the ratios of
closing stock prices of Nabors common stock and Pool common stock for various
periods ended October 29, 1998 (the last trading day prior to Nabors'
announcement of its proposal to acquire Pool), and for the year ended on
December 31, 1998:
PREMIUM
AVERAGE IMPLIED REPRESENTED BY
PERIOD ENDED OCTOBER 29, 1998 EXCHANGE RATIO THE EXCHANGE RATIO
- ----------------------------- --------------- ------------------
Prior 180 Days........................................ 0.674x 52.0%
Prior 90 Days......................................... 0.556x 84.4%
Prior 60 Days......................................... 0.555x 84.7%
Prior 30 Days......................................... 0.540x 89.8%
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Morgan Stanley also observed that (1) the implied exchange ratio based on
the closing price of Pool common stock and Nabors common stock on October 29,
1998, of $11.81 and $17.44, respectively, was approximately 0.677x and (2) the
exchange ratio represented a premium of 51.4% to this implied exchange ratio.
Analysis of Selected Precedent Transactions. Using publicly available
information, Morgan Stanley reviewed the following proposed or completed public
and private acquisitions in the oil field services industry as listed below:
PUBLIC PRECEDENT TRANSACTIONS
ANNOUNCEMENT PERIOD ACQUIROR ACQUIREE
- ----------------------------- -------- --------
October 1998..................... Parker Drilling Superior Energy Services, Inc.
October 1998..................... Nabors Bayard Drilling Technologies, Inc.
September 1998................... Schlumberger N.V. Camco International Inc.
August 1998...................... R&B Falcon Corporation Cliffs Drilling Company
June 1998........................ Key Energy Dawson Production Services, Inc.
February 1997.................... Camco International Production Operators Corp.
April 1996....................... BJ Services Company NowscoWell Service Ltd.
June 1998........................ Bonus Alberta Gold
January 1998..................... Dawson Petrostar
October 1997..................... Key Energy Coleman
September 1997................... Key Energy Ram and Rowland
June 1997........................ Key Energy Well-Co
February 1997.................... Dawson Pride International's U.S. Land
Well Servicing and Workover Fleet
July 1996........................ Dawson Taylor
March 1996....................... Key Energy Welltech
June 1995........................ Pool Golden Pacific
Morgan Stanley compared certain financial and market statistics of the
public precedent transactions and the private precedent transactions. The
aggregate value to latest twelve months EBITDA multiple ranged from 4.8 to 14.0
times for the public precedent transactions and 3.9 to 11.5 times for the
private precedent transactions. The aggregate value to the estimated one year
forward EBITDA multiple ranged from 4.7 to 11.4 times for the public precedent
transactions and was not available for the private precedent transactions.
No transaction utilized in the precedent transaction analysis is identical
to the merger in both timing and size, and, accordingly, an analysis of the
results of the foregoing necessarily involves complex considerations and
judgments concerning differences in financial and operating characteristics of
Pool and other factors that would affect the acquisition value of the companies
to which it is being compared. In evaluating the precedent transactions, Morgan
Stanley made judgments and assumptions with regard to industry performance,
general business, economic, market and financial conditions and other matters,
many of which are beyond the control of Pool, such as industry growth, the
impact of competition on Pool and the industry generally and the absence of any
material adverse change in the financial conditions and prospects of Pool or the
industry or in the financial markets in general.
Premium Analysis. Morgan Stanley analyzed the movements in the share prices
of Nabors, the S&P Oil Well Services Index and a peer index of companies
consisting of Nabors, Key Energy, Pride International, Parker Drilling, UTI
Energy and Patterson Energy from October 9, 1998 to January 6, 1999 and from
October 29, 1998 to January 6, 1999. Morgan Stanley developed a "normalized"
share price for Pool based on the percentage increase or decrease of these three
groups of securities for the indicated periods and then compared the $15.82 per
share in merger consideration implied by the exchange ratio as
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of January 6, 1999 to such normalized prices. The actual share prices,
normalized prices for Pool common stock and the premiums represented by the
merger consideration to such normalized prices are as follows:
PRICE IMPLIED BY THE
SHARE PRICE FOR POOL EXCHANGE RATIO AS A
-------------------- "NORMALIZED" PREMIUM TO "NORMALIZED"
10/9/98 1/6/99 % CHANGE SHARE PRICE FOR POOL SHARE PRICE
--------- -------- -------- -------------------- -------------------------
Nabors.................... $ 13.25 $15.44 16.5% $8.23 92.3%
S&P Oil Well Services
Index................... 100.00 116.5 16.5% 8.22 92.5%
Peer Index................ 100.00 109.4 9.4% 7.73 104.7%
PRICE IMPLIED BY THE
SHARE PRICE FOR POOL EXCHANGE RATIO AS A
-------------------- "NORMALIZED" PREMIUM TO "NORMALIZED"
10/29/98 1/6/99 % CHANGE SHARE PRICE FOR POOL SHARE PRICE
--------- -------- -------- -------------------- -------------------------
Nabors.................... $ 17.44 $15.44 (11.5%) $10.46 51.3%
S&P Oil Well Services
Index................... 100.00 95.60 (4.4%) 11.30 40.0%
Peer Index................ 100.00 81.40 (18.6%) 9.61 64.7%
Pro Forma Analysis of the Merger. Morgan Stanley analyzed the pro forma
impact of the merger on Nabors' earnings per share for the fiscal years ending
1999 through 2001. The analysis was performed utilizing stand-alone earnings
estimated for the fiscal years ending 1999 through 2001 for Pool and Nabors. The
earnings estimates were based on certain financial projections based on research
analyst projected views on Pool and Nabors earnings for those periods, with 1999
having been adjusted to reflect current expectations of the operating
environment, taking into account a range of synergies and cost savings which
could be derived from the merger based on research analyst estimates. Based on
such analysis, on an earnings per share basis, (1) the merger would cause
dilution to Nabors' stockholders of 5.9% in 1999, 2.8% in 2000 and 3.5% in 2001,
assuming no synergies, and (2) the merger would cause accretion to Nabors'
stockholders of 4.6% in 1999, 2.6% in 2000 and 0.9% in 2001, assuming $15
million in synergies.
Pro Forma Ownership. Morgan Stanley compared the aggregate percentage share
ownership of the combined company assuming the merger was completed on January
6, 1999 at the proposed exchange ratio. Based on this analysis, the holders of
Pool common stock would own approximately 15.1% of the combined company and the
holders of Nabors common stock would own approximately 84.9% of the combined
company.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to a partial analysis or summary description. In
arriving at its opinion, Morgan Stanley considered the results of its analyses
as a whole and did not attribute any particular weight to any analysis or factor
considered by it. Morgan Stanley believes that its analyses must be considered
as a whole and that selecting portions of its analyses, without considering all
analyses, would create an incomplete view of the process underlying its opinion.
In addition, Morgan Stanley may have deemed various assumptions more or less
probable than other assumptions, so that the ranges of valuations resulting for
any particular analysis described above should not be taken to be Morgan
Stanley's view of the actual value of Pool or Nabors.
In performing its analyses, Morgan Stanley made numerous assumptions with
respect to industry performance, general business and economic conditions and
other matters, many of which are beyond the control of Pool and Nabors. The
analyses performed by Morgan Stanley do not necessarily indicate actual value.
Actual value may be significantly more or less favorable than suggested by such
analyses. Such analyses were prepared solely as part of Morgan Stanley's
analysis of the fairness of the exchange ratio, from a financial point of view,
to the holders of Pool common stock, other than Nabors and its subsidiaries, and
were provided to the Pool Board in connection with the delivery of Morgan
Stanley's written opinion dated January 10, 1999. The analyses do not purport to
be appraisals or to reflect the prices at which Pool and Nabors might actually
be sold. The exchange ratio and the other terms of the merger agreement were
determined through arm's-length negotiations between Pool and Nabors and were
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36
approved by the Pool Board. In addition, as described above, Morgan Stanley's
opinion and presentation to the Pool Board was one of many factors taken into
consideration by the Pool Board in making its determination to approve the
merger. Consequently, the Morgan Stanley analyses described above should not be
viewed as determinative of the opinion of the Pool Board or the view of the
Nabors Board with respect to the value of Nabors and Pool or of whether the Pool
Board or the Nabors Board would have been willing to agree to a different
exchange ratio.
Morgan Stanley is an internationally recognized investment banking advisory
firm. Morgan Stanley, as part of its investment banking business, is regularly
engaged in the valuation of businesses and securities in connection with mergers
and acquisitions, negotiated underwriting, competitive bidding, secondary
distributions of listed and unlisted securities, private placements and
valuation for corporate and other purposes. In the ordinary course of its
business, Morgan Stanley and its affiliates may actively trade the securities of
Pool and Nabors, for Morgan Stanley's account and for the account of customers.
In the past, Morgan Stanley and its affiliates have provided financial advisory
and financing services for Pool and Nabors and have received fees for the
rendering of these services and may have other business relationships with Pool
and Nabors and their affiliates in the future.
Pursuant to a letter agreement dated November 24, 1998, Pool has agreed to
pay Morgan Stanley, upon the closing of the merger, a fee of 0.7% of the
aggregate value of the transaction. Of such fee, $250,000 was paid upon
execution of the letter. Pool has also agreed to reimburse Morgan Stanley for
its expenses incurred in performing its services. In addition, Pool has agreed
to reimburse and to indemnify Morgan Stanley and its affiliates, their
respective directors, officers, agents, and employees and each person, if any,
controlling Morgan Stanley or any of its affiliates against any liabilities and
expenses arising out of the engagement and any related transactions, including
liabilities under federal securities laws.
EFFECTIVE TIME
Subject to the terms and conditions of the merger agreement, the closing of
the merger will occur on the first business day immediately following the day on
which the conditions to closing set forth in the merger agreement are fulfilled
or waived, unless Pool and Nabors agree otherwise. It is anticipated that the
last of the conditions to the closing to be fulfilled will be either the
expiration or termination of the waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, or the approval of the merger
agreement by the Pool shareholders. Promptly after such conditions are
fulfilled, articles of merger relating to the merger will be filed with the
Texas Secretary of State. The time when the Texas Secretary of State issues a
certificate of merger in response to the filing of the articles of merger, or
such later time as is specified in the articles of merger, is referred to as the
"effective time" of the merger.
EXCHANGE OF CERTIFICATES
As of the effective time, Nabors will deposit with an exchange agent
certificates representing the aggregate whole number of shares of Nabors common
stock to be issued in the merger plus the estimated amount of cash to be paid
instead of fractional shares of Nabors common stock. As soon as reasonably
practicable after the effective time, Nabors will instruct the exchange agent to
mail to each holder of record of certificates formerly representing Pool common
stock transmittal materials for use in exchanging such Pool certificates for
certificates representing shares of Nabors common stock and, if applicable, cash
instead of a fractional share of Nabors common stock.
SHAREHOLDERS SHOULD NOT SEND IN THEIR STOCK CERTIFICATES UNTIL THEY RECEIVE
A TRANSMITTAL FORM.
FEDERAL SECURITIES LAWS CONSEQUENCES
The shares of Nabors common stock to be issued to the shareholders of Pool
in the merger have been registered under the Securities Act of 1933.
Accordingly, all such shares of Nabors common stock will be freely transferable
under the Securities Act of 1933, except that shares of Nabors common stock
received by persons who are deemed
to be "affiliates,"incorporated by reference modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this prospectus.
We will provide without charge to each person to whom this prospectus is
delivered, including each beneficial owner of old notes, upon request of such
term is defined
underperson, a copy of any or all documents that are incorporated into this
prospectus by reference, other than exhibits to such documents, unless such
exhibits are specifically incorporated by reference into the Securities Act of 1933, of
30documents that this
prospectus incorporates. You should direct such requests to: Nabors Corporate
Services, Inc., 515 West Greens Road, Suite 1200, Houston, Texas 77067,
Attention: Investor Relations, phone number (281) 874-0035.
IN ORDER TO OBTAIN TIMELY DELIVERY, YOU MUST REQUEST THIS INFORMATION NO
LATER THAN FIVE BUSINESS DAYS BEFORE YOU MUST MAKE YOUR INVESTMENT DECISION.
ACCORDINGLY, YOU MUST REQUEST THIS INFORMATION NO LATER THAN , 2002.
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Pool before the merger or who become "affiliates" of Nabors after the merger may
be resold by them only in transactions permitted by the resale provisions of
Rule 145 promulgated under the Securities Act of 1933 or as otherwise permitted
under the Securities Act of 1933. Rule 145 generally provides that "affiliates"
of an acquired company may not sell securitiesLEGAL MATTERS
The validity and enforceability of the issuer unless the
securities are sold:
- in accordance with the volume, manner of sale and public information
requirements of Rule 144; or
- without regard to the volume or manner of sale requirements of Rule 144,
but subject to its public information requirements, if the persons do not
become "affiliates" of Nabors after the merger and have held the shares
acquired in the merger for at least one year.
Rule 144 generally requires that the quantity of shares sold in any
three-month period not exceed the greater of 1% of the outstanding shares of the
issuer or the average weekly reported volume of trading in such shares for the
four weeks preceding the notice of sale. Rule 144 also requires that such sales
be made in unsolicited, open market "brokers' transactions." Persons who may be
deemed to be "affiliates" of Nabors or Pool generally include individuals or
entities that control, are controllednew notes offered by or are under common control with, such
party and may include certain officers and directors of such party as well as
principal shareholders of such party. The merger agreement requires Pool to use
its best efforts to obtain from each of its "affiliates" a written agreement to
the effect that such person will not sell, transfer or otherwise dispose of any
of the shares of Nabors common stock issued to such person in the merger in
violation of the Securities Act of 1933 or the rules and regulations promulgated
by the Commission.
AMERICAN STOCK EXCHANGE LISTING OF NABORS COMMON STOCK
In the merger agreement, Nabors has agreed to use its best efforts to cause
the shares of Nabors common stock to be issued in the merger to be approved for
listing on the AMEX before the merger. The obligations of Pool, Nabors and
Nabors' acquisition subsidiary to close the merger are conditioned upon, among
other things, such shares of Nabors common stock being listed on the AMEX.
CERTAIN EFFECTS OF THE MERGER
If the merger is consummated, Pool will become a wholly-owned subsidiary of
Nabors. As a result, public trading of the shares of Pool common stock will
cease, the shares of Pool common stock will cease to be listed and traded on the
Nasdaq National Market and the registration of the shares of Pool common stock
under the Securities Exchange Act of 1934this prospectus
will be terminated.
For information concerning the federal income tax consequences of the
merger, see "Certain United States Federal Income Tax Consequences of the
Merger."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the Pool Board regarding the merger,
you should be aware of the interests which certain executive officers and
directors of Pool have in the merger that are different from your interests and
their interests as shareholders. In this regard, you should consider, among
other things, the following:
Change in Control Agreements. J. T. Jongebloed, Chairman, President and
Chief Executive Officer, E. J. Spillard, Senior Vice President, Finance, R. G.
Hale, Group Vice President -- International Operations, G. G. Arms, Vice
President and General Counsel and Corporate Secretary, L. E. Dupre, Vice
President -- Human Resources, and eleven other officers and employees have
entered into change in control agreements with Pool. These agreements providepassed on for compensation to these persons in order to ensure that management of Pool
remains intact and focused on Pool's business matters while the merger is
pending. When the merger occurs, long-term incentive plan awards and stock
options become fully vested. Upon termination of employment within three years
after the merger, such persons receive, among other things, a cash payment equal
to three times base salary at the time of such termination and target bonus
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38
for the preceding year plus an additional cash payment sufficient to pay all
applicable excise taxes. If all holders of change in control agreements were
terminated immediately following the completion of the merger, Messrs.
Jongebloed, Spillard, Hale, Arms, Dupre and all others as a group would receive
cash payments estimated at $4,233,000, $1,713,000, $2,148,000, $1,053,000,
$1,245,000 and $8,325,000, respectively, assuming a market price of $23.00 per
share of Nabors common stock on the day before the merger.
Options and Incentive Awards. At July 31, 1999, Pool had issued options to
purchase an aggregate of 1,421,504 shares of Pool common stock to its officers,
directors and employees. As shown in the following table, of this amount,
directors and executive officers of Pool held options to purchase a total of
840,754 shares of Pool common stock, of which 546,144 were exercisable as of
that date.
CURRENT VALUE OF IN-THE-MONEY
OPTIONS BASED ON THE $20.8125
OPTIONS HELD AS OF CLOSING PRICE OF POOL COMMON
JULY 31, 1999 STOCK ON JULY 30, 1999
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---- ------------------------- -----------------------------
J.T. Jongebloed................................ 249,640 / 141,029 $2,644,460 /1,043,486
R.G. Hale...................................... 37,814 / 37,145 343,547 / 266,714
E.J. Spillard.................................. 119,154 / 45,866 1,300,723 / 335,607
G.G. Arms...................................... 61,618 / 23,234 667,542 / 158,269
L.E. Dupre..................................... 23,918 / 20,336 229,630 / 145,431
W.H. Mobley.................................... 20,000 / 4,000 170,125 / 13,750
J.R. Musolino.................................. 14,000 / 4,000 93,750 / 13,750
J.L. Payne..................................... 12,000 / 4,000 68,500 / 13,750
D.R. Hendrix................................... 0 / 12,000 0 / 115,750
J.F. Lauletta.................................. 8,000 / 4,000 53,500 / 26,750
Prior to the closing of the merger, holders of outstanding Pool stock
options can elect to receive a cash payment equal to the net value of their
options or new Nabors options in exchange for their Pool options. When Pool
completes the merger, each outstanding option to purchase Pool common stock that
has not been cashed out will be substituted with a Nabors stock option that will
be fully vested and will be exercisable for Nabors common stock at option
exercise prices and in amounts adjusted to reflect the applicable terms of the
merger. The new Nabors option will be exercisable for a term equal to the
remaining term of the original Pool option, unless the holder is eligible to
retire at the time of the closing of the merger under the terms of Pool's 1993
employee stock incentive plan. In this event, the holder can elect to shorten
the term of any substituted Nabors options to five years. All substituted Nabors
options can be exercised at any time during their term even though the holder
ceases to be a director, officer or employee of Pool. Except as noted in this
paragraph, the substituted Nabors options will be subject to the same terms and
conditions as set forth in the Nabors 1998 stock option plan and related stock
option agreement in effect immediately prior to the merger.
Long-term incentive plan awards to Messrs. Jongebloed, Hale, Spillard,
Arms, Dupre and five other officers and employees of Pool covering 54,726
shares, 16,039 shares, 17,140 shares, 7,857 shares, 6,491 shares, and 28,150
shares, respectively, of Pool common stock will become payable upon the closing
of the merger. Additionally, the forfeiture restrictions will be lifted on an
aggregate of 88,468 shares of Pool common stock heldus by directors and executive
officers that have been paid previously as incentive awards.
Indemnification and Insurance. Nabors has agreed that the charter and
bylaws of the surviving corporation in the merger will contain the
indemnification provisions currently set forth in exhibits to the merger
agreement. These provisions will not be amended, repealed or otherwise modified
for a period of six years after the merger in any manner that would adversely
affect the rights of individuals under such provisions who at any time before
the merger were directors or officers of Pool in respect of actions or omissions
occurring at or before the merger, including, without limitation, the
transactions contemplated by the merger agreement, unless such modification is
required by law.
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39
In addition, for a period of six years after the merger, Nabors has agreed
that it and the surviving corporation will jointly and severally indemnify,
defend and hold harmless the present and former officers and directors of Pool
or any of its subsidiaries against all losses, expenses, claims, damages or
amounts paid in settlement of, or otherwise in connection with, any threatened
or actual claim, action, suit, proceeding or investigation, based in whole or in
part on the fact that such person is or was a director or officer of Pool or any
of its subsidiaries. This indemnification covers claims arising out of actions
or omissions occurring at or before the merger and includes, but is not limited
to, the transactions contemplated by the merger agreement. In each case, the
indemnification will apply to the full extent permitted under Texas law, and
Nabors will pay expenses, including fees and disbursements of counsel, as
incurred, in advance of the final disposition of any such action or proceeding
to each indemnified party upon receipt from the indemnified party to whom
expenses are advanced of an undertaking to repay such advances, as contemplated
by Texas law.
Under the terms of the merger agreement, commencing at the merger, the
directors and officers of the surviving corporation will be insured under the
policies of directors' and officers' liability insurance currently maintained by
Nabors or maintained by Nabors after the merger. In addition, for a period of
six years after the merger, Nabors will use commercially reasonable efforts to
maintain in effect the current policies of directors' and officers' liability
insurance maintained by Pool and its subsidiaries, or equivalent policies, with
respect to claims arising from facts or events which occurred before the merger;
provided that Nabors will not be required to pay an annual premium for such
insurance in excess of two times the last annual premium paid by Pool before the
date of the merger agreement, but in such case shall purchase as much coverage
as possible for such amount.
REGULATORY MATTERS
Transactions such as the merger are reviewed by the Antitrust Division of
the Department of Justice and by the Federal Trade Commission to ensure
compliance with antitrust laws. The Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended, and its interpretive rules, govern this review. Under the
Hart-Scott-Rodino Act, Pool and Nabors may not consummate the merger until they
have filed a notice with the Antitrust Division and the FTC and the applicable
waiting period expires or is terminated.
On February 19, 1999, Pool and Nabors filed their respective Premerger
Notification and Report Forms as required by the Hart-Scott-Rodino Act. On March
19, 1999, Nabors and Pool each received a second request for information and
documentary material from the Department of Justice asking for additional
information regarding their respective businesses and customers. On July 2,
1999, Nabors filed its response to the Department of Justice's second request.
On July 8, 1999, Pool filed its response. The waiting period expired on July 29,
1999.
At any time before or after the merger, the Antitrust Division or the FTC
could take action to enjoin the merger or to force divestiture of substantial
assets of Pool or Nabors or their subsidiaries. Private parties and state
attorneys general could also bring an action under the antitrust laws in certain
circumstances. Pool and Nabors cannot guarantee that the Antitrust Division, the
FTC or others will not challenge the merger and cannot predict the result should
such a challenge occur. If the Antitrust Division or the FTC requires the
divestiture of assets of Pool or Nabors as a condition to the expiration or
termination of the applicable waiting period under the Hart-Scott-Rodino Act, or
imposes any other conditions, restrictions or limitations on Nabors' ownership
of Pool's or any of its subsidiaries' assets, Nabors is not required to accept
any such conditions, restrictions or limitations and the merger agreement can be
terminated.
SOURCE AND AMOUNT OF FUNDS
Nabors intends to pay cash instead of fractional shares with its working
capital. The total cash cost to Nabors of the merger will be approximately $10.7
million, exclusive of any repayment of debt and assuming that all options to
purchase shares of Pool common stock are converted into shares of Nabors common
stock as provided in the merger agreement.
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MANAGEMENT OF NABORS FOLLOWING THE MERGER
Under the merger agreement, at the effective time, the Nabors Board will be
expanded to add one additional member, who shall be designated by mutual
agreement of Pool and Nabors and who shall be selected from the current
independent members of the Pool Board. Although five Pool officers will be
offered transitional employment with the surviving corporation, it is not
anticipated that any officers of Pool will become officers of Nabors after the
merger.
ABSENCE OF RIGHTS OF DISSENTING SHAREHOLDERS
Under Article 5.11(B) of the Texas Business Corporation Act, shareholders
of Pool will not be entitled to exercise any rights to dissent from the merger.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The following discussion sets forth certain of the United States federal
income tax consequences of the merger to holders of Pool common stock who
exchange such stock for Nabors common stock pursuant to the merger. The
following discussion addresses only such shareholders who hold their Pool common
stock as a capital asset and does not address all of the United States federal
income tax consequences that may be relevant to particular shareholders in light
of their individual circumstances or to shareholders who are subject to special
rules (including, without limitation, financial institutions, tax-exempt
organizations, insurance companies, dealers in securities or foreign currencies,
foreign holders, persons who hold such shares as a hedge against currency risk,
or a constructive sale or conversion transaction, or holders who acquired their
shares pursuant to the exercise of employee stock options or otherwise as
compensation). The following discussion is not binding on the Internal Revenue
Service. It is based upon the Internal Revenue Code of 1986, as amended, laws,
regulations, rulings and decisions in effect as of the date hereof, all of which
are subject to change, possibly with retroactive effect. Tax consequences under
state, local, and other foreign laws are not addressed herein. HOLDERS OF POOL
COMMON STOCK ARE STRONGLY URGED TO CONSULT THEIR TAX ADVISORS AS TO THE SPECIFIC
TAX CONSEQUENCES TO THEM OF THE MERGER, INCLUDING THE APPLICABILITY AND EFFECT
OF FEDERAL, STATE, LOCAL AND FOREIGN INCOME AND OTHER TAX LAWS IN THEIR
PARTICULAR CIRCUMSTANCES.
No ruling has been (or will be) sought from the Internal Revenue Service as
to the United States federal income tax consequences of the merger. It is a
condition to the consummation of the merger that Pool receive an opinion from
its special tax counsel, Bracewell & Patterson, L.L.P., and that Nabors receive
an opinion from its special tax counsel, Skadden, Arps, Slate, Meagher & Flom LLP, to the effect that, based upon certain facts, representationsNew York,
New York. The validity and assumptions, the merger will qualify as a reorganization within the meaning of
Section 368(a)enforceability of the Internal Revenue Code of 1986, as amended. The issuance of
such opinions is conditioned on, among other things, such tax counsels' receipt
of representation letters from each of Nabors, Nabors' acquisition subsidiary
and Pool, in each case, in form and substance reasonably satisfactory to each
such tax counsel. The following discussion assumes that the merger qualifies as
a reorganization within the meaning of Section 368(a)guarantees of the Internal Revenue
Code of 1986, as amended.
Based on the above assumptions and qualifications, holders of Pool common
stock who exchange their Pool common stock for Nabors common stock pursuant to
the merger will not recognize gain or loss for United States federal income tax
purposes, except with respect to cash, if any, that they receive instead of
fractional shares of Nabors common stock. Holders of Pool common stock who
receive cash instead of fractional shares of Nabors common stock in the merger
generally will recognize gain or loss equal to the difference between the amount
of cash received and his or her tax basis in the Nabors common stock that is
allocable to the fractional share. Such gain or loss generally will constitute
capital gain or loss. In the case of an individual shareholder, any such capital
gain will be subject to a maximum United States federal income tax rate of 20%
if the individual held his or her Pool common stock for more
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41
than 12 months at the effective time of the merger. The deductibility of capital
losses is subject to limitations for both individuals and corporations.
Each holder's aggregate tax basis in the Nabors common stock received in
the merger will be the same as his or her aggregate tax basis in the Pool common
stock exchanged therefor, decreased by the amount of any tax basis allocable to
any fractional share interest for which cash is received. The holding period of
the Nabors common stock received by a Pool shareholder pursuant to the merger
agreement will include the holding period of the Pool common stock surrendered
in exchange therefor.
ACCOUNTING TREATMENT
The merger will be treated by Nabors as a "purchase," as that term is used
under United States generally accepted accounting principles, for accounting and
financial reporting purposes. Under this method of accounting, the purchase
price of Pool, including direct costs of the merger, will be allocated to assets
and liabilities of Pool based upon their estimated fair values, with the excess
purchase consideration, if any, allocated to goodwill. The results of Nabors'
operations will include the results of operations of Pool commencing at the time
of the merger. The Unaudited Pro Forma Financial Statements appearing elsewhere
in this document are based upon certain assumptions and allocate the purchase
price to assets and liabilities based upon a preliminary allocation of the
purchase price. The unaudited pro forma adjustments and consolidated amounts are
included for informational purposes only.
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THE MERGER AGREEMENT
The following is a summary of the material provisions of the merger
agreement, a copy of which is attached as Appendix A to this document. This
summary is qualified in its entirety by reference to the full text of the merger
agreement.
THE MERGER
Upon the terms and conditions of the merger agreement, and in accordance
with the Texas Business Corporation Act, at the effective time, Nabors'
acquisition subsidiary will be merged with and into Pool and Pool will continue
as the surviving corporation in the merger. As a result of the merger, Pool will
become a wholly-owned subsidiary of Nabors.
CONVERSION OF SECURITIES
The Merger Consideration. Upon the consummation of the merger, each issued
and outstanding share of Pool common stock will be converted into the right to
receive 1.025 shares of Nabors common stock. The share exchange ratio will be
adjusted to reflect any changes in Pool common stock or Nabors common stock from
any stock dividend, subdivision, reclassification, recapitalization, split,
combination or exchange of shares, or if certain events described in the Pool
rights agreement occur. Treasury shares held by Pool and its subsidiaries will
be canceled in the merger and shares of Pool common stock held by Nabors and an
affiliate of Nabors will remain outstanding as shares in the surviving
corporation.
Exchange of Certificates. Promptly after the merger, transmittal forms will
be mailed to each holder of record of shares of Pool common stock to be used in
forwarding his or her certificates evidencing such shares for surrender and
exchange for the merger consideration. After receipt of such transmittal form,
each holder of Pool certificates should surrender the holder's Pool share
certificates to the exchange agent, and each holder will receive in exchange
certificates representing the whole number of shares of Nabors common stock to
which such holder is entitled, together with any cash which may be payable
instead of a fractional share of Nabors common stock. Such transmittal forms
will be accompanied by instructions specifying other details of the exchange.
SHAREHOLDERS SHOULD NOT SEND IN THEIR SHARE CERTIFICATES UNTIL THEY RECEIVE
A TRANSMITTAL FORM.
Fractional Shares. No shares of Pool common stock will be converted into
fractional shares of Nabors common stock. Each holder of Pool certificates which
would otherwise represent the right to receive a fractional share of Nabors
common stock shall, at the time of surrender, be paid by the exchange agent an
amount in cash equal to the value of such fractional share based on the average
closing price per share of Nabors common stock as reported by the Northeast
edition of The Wall Street Journal for the ten consecutive trading days ending
on and including the fifth trading day before the closing of the merger. All the
fractional shares to which a single holder of Pool common stock would be
entitled will be aggregated.
Rights with Respect to Unexchanged Shares. After the merger, each Pool
certificate (other than Pool certificates held by Nabors and an affiliate of
Nabors), until properly surrendered and exchanged, will, for all purposes,
represent only the right to receive the number of shares of Nabors common stock
which the holder of the Pool certificate is entitled to receive, together with
any cash payment instead of a fractional share of Nabors common stock. The
holder of an unexchanged Pool certificate will not be entitled to receive
dividends or other distributions, if any, by Nabors with a record date after the
effective time until the certificate is surrendered, at which time such
dividends and distributions, together with any cash payment instead of a
fractional share of Nabors common stock, will be paid to the holder without
interest.
Dissenting Shares. Under Article 5.11(B) of the Texas Business Corporation
Act, shareholders of Pool will not be entitled to exercise any rights to dissent
from the merger.
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Stock Options. Each holder of an outstanding Pool stock option will have
the right exercisable prior to the closing of the merger to elect one of the
following alternatives with respect to his or her options:
(A) by virtue of the merger and without any further action, to have all of his
or her Pool stock options converted into options to purchase Nabors common
stock:
- exercisable for that number of whole shares of Nabors common stock equal
to (1) the number of shares of Pool common stock covered by the Pool
stock option, multiplied by (2) the share exchange ratio, rounded up to
the nearest whole number of shares; and
- with a per share exercise price for the shares of Nabors common stock
issuable upon the exercise of each converted stock option determined by
dividing (1) the exercise price per share of Pool common stock specified
for the Pool stock option under the applicable stock option plan or
agreement in effect, by (2) the share exchange ratio, rounding the
resulting exercise price up to the nearest whole cent;
(B) to be paid in cash immediately after the effective date of the merger in
full cancellation of all of such holder's Pool stock options in an amount
equal to the product of:
- the number of shares of Pool common stock for which the Pool stock
options are exercisable, multiplied by
- the difference between the per share option exercise price and the value
of 1.025 shares of Nabors common stock based on the average closing price
per share of Nabors common stock as reported by the Northeast edition of
The Wall Street Journal for the ten consecutive trading days ending on
and including the fifth trading day prior to the closing date,
appropriately adjusted for any stock splits, reverse stock splits, stock
dividends, recapitalizations or similar transactions;
or
(C) if the holder of Pool stock options is eligible to retire in accordance with
Pool's 1993 employee stock incentive plan as of the closing date, to have
all of his or her Pool stock options converted into Nabors stock options on
the same basis as (A) above, provided that the Nabors stock options received
pursuant to such an election shall have a term equal to the lesser of five
years or the remaining term of the Pool stock options as to which this
alternative is elected.
Nabors has agreed to reserve for issuance the number of shares of Nabors
common stock that will become issuable upon the exercise of the converted Pool
stock options. Nabors has agreed to file a registration statement with the
Commission with respect to the shares of Nabors common stock subject to the
converted options, and to use its best efforts to keep the registration
statement effective for so long as the converted options remain outstanding.
Where the merger agreement does not state otherwise, the converted Pool
stock options will be subject to the terms and conditions of Nabors' 1998
employee stock option plan, and the form of stock option agreement will be
Nabors' standard form as is in effect on the date of the merger agreement.
Incentive Awards. By virtue of the merger and without any further action,
each share of Pool common stock to be awarded by Pool pursuant to a long-term
incentive plan will be converted into the right to receive the number of whole
shares of Nabors common stock equal to the product of (1) the number of shares
of Pool common stock covered by an incentive award immediately prior to the
effective time, multiplied by (2) the exchange ratio, rounded up to the nearest
whole number of shares of Nabors common stock.
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REPRESENTATIONS AND WARRANTIES
The merger agreement contains various representations and warranties by
Nabors, Nabors' acquisition subsidiary and Pool with respect to, among other
things:
- organization, qualification and corporate power;
- capitalization;
- corporate authority relative to the merger agreement;
- Commission reports and financial statements;
- absence of undisclosed liabilities;
- absence of violations of law;
- environmental laws and regulations;
- employee benefit matters;
- absence of certain changes or events;
- litigation;
- ownership of the other party's stock;
- tax matters;
- required vote of shareholders to approve the merger;
- insurance;
- intellectual property;
- material contracts;
- brokers' fees;
- property;
- equipment; and
- necessary permits.
In addition, Pool has also made certain representations and warranties with
respect to the Pool rights agreement, the opinion of its financial advisor, its
vessels and its financial condition. Nabors and Nabors' acquisition subsidiary
have also made certain representations and warranties with respect to the
ownership of Nabors' acquisition subsidiary and its activities.
A number of the representations and warranties made by Pool and Nabors in
the merger agreement contain qualifications which limit the scope of the
representations and warranties to matters which would have a material adverse
effect on the applicable company and its subsidiaries, taken as a whole. In
general, the merger agreement provides that a material adverse effect will be
deemed to have occurred if there is a change or effect which has caused, or may
be reasonably likely to cause, actual monetary loss not covered by insurance
which exceeds $30.0 million, in the case of Nabors, or $10.0 million, in the
case of Pool. Furthermore, effects on general economic conditions or the oil and
gas, contract drilling, workover service or oilfield service industries in
general will not be considered material adverse effects for purposes of the
merger agreement.
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COVENANTS
Covenants of Pool. Pool has agreed that until the merger, except as
contemplated in the merger agreement or with the consent of Nabors, it will,
among other things:
- operate its business only in the usual and ordinary course consistent
with past practice and in compliance in all material respects with
applicable laws and regulations;
- use its commercially reasonable efforts to preserve substantially intact
its business organizations, maintain its rights and franchises, retain
the services of its officers and key employees and maintain its material
relationships with its customers, suppliers, creditors and joint venture
or other business partners;
- use its commercially reasonable efforts to maintain and keep its
properties and assets in good repair and condition in all material
respects, allowing for ordinary wear and tear; and
- use its commercially reasonable efforts to keep in full force and effect
insurance and bonds comparable in amount and scope of coverage to that
maintained when the merger agreement was signed.
In addition, Pool has agreed that, except as contemplated by the merger
agreement (including the disclosure schedules delivered by Pool to Nabors) or
with the consent of Nabors, it will not take any of the following actions:
- increase the compensation payable to any director, executive officer or
employee, grant or agree to grant any severance or termination pay, other
than in accordance with the terms of the severance agreements in effect
on the date of the merger agreement, or adopt or amend any employee
benefit plan;
- declare or pay any dividend or other distribution in respect of
outstanding shares of capital stock, subject to certain exceptions;
- redeem, purchase or otherwise acquire its shares or options, warrants or
other rights to acquire securities of Pool or any of its subsidiaries,
subject to certain exceptions, or effect any recapitalization, or split,
combination or reclassification of any of the stock of Pool or any of its
subsidiaries;
- issue any shares or any security that are convertible into or exercisable
for Pool's stock or that of any of its subsidiaries, subject to certain
exceptions, or amend or otherwise modify the terms of any option, warrant
or other security so as to create terms more favorable for the holder, or
accelerate the vesting of any Pool stock options;
- acquire any equity interest in excess of $1.0 million or acquire any
assets which are material, except in accordance with ordinary business
operations;
- dispose of any material assets, subject to certain exceptions;
- amend its Articles of Incorporation or Bylaws;
- change any of its methods of accounting or tax reporting, subject to
certain exceptions;
- make or rescind any election relating to taxes, or settle or compromise
any matter relating to taxes over $500,000;
- spend more than $2.0 million in the aggregate on the purchase of
equipment or supplies, subject to certain exceptions;
- enter into any contract, agreement or arrangement that would be material
to the business, financial condition or results of operations of Pool or
its subsidiaries, taken as a whole;
- pay, discharge or satisfy any claims, liabilities or obligations, subject
to certain exceptions;
39
46
- incur or assume any debt, subject to certain exceptions;
- make any loans, advances or capital contributions to, or investments in,
any other person, subject to certain exceptions, or enter into any
material commitment or transaction; or
- take any action that would, or is reasonably likely to, result in any of
its representations or warranties being untrue or in any of the
conditions to the merger not being satisfied.
Covenants of Nabors. Nabors has agreed that, until the merger, except as
contemplated in the merger agreement or with the consent of Pool, it will not,
and will cause Nabors' acquisition subsidiary not to, among other things:
- amend any of the material terms or provisions of Nabors common stock;
- knowingly take any action which would result in Nabors common stock not
being traded on AMEX;
- declare or pay any dividends or distributions on outstanding shares of
stock; or
- take any action that would, or is reasonably likely to, result in any of
Nabors' or Nabors' acquisition subsidiary's representations or warranties
being untrue or in any of the conditions to the merger not being
satisfied.
No Solicitation. The merger agreement prohibits Pool and its subsidiaries,
and their respective directors, officers, employees, representatives and agents,
from, directly or indirectly:
- initiating, soliciting or encouraging, including by way of furnishing
information or assistance, or taking any other action to facilitate, the
types of acquisition proposals described below and referred to in this
document as "company acquisition proposals;"
- entering into discussions or negotiating with any person or entity in
furtherance of a company acquisition proposal;
- entering into an agreement with respect to the types of acquisition
transactions described below and referred to in this document as "company
acquisition transactions" or agreeing to or endorsing any company
acquisition proposal; or
- authorizing or permitting any of the officers, directors or employees of
Pool or any of its subsidiaries or any investment banker, financial
advisor, attorney, accountant or other representative retained by Pool or
any of its subsidiaries to take any such action.
The merger agreement requires Pool to advise Nabors of any company
acquisition proposal within two days of receiving such proposal, and to deliver
a copy of any written proposal to Nabors.
However, the merger agreement does not prohibit the Pool Board from:
- complying with Rule 14e-2 promulgated under the Securities Exchange Act
of 1934 with regard to a company acquisition proposal; or
- furnishing information to, or entering into discussions or negotiations
with, any person or entity in connection with an unsolicited, bona fide,
written company acquisition proposal obtained before shareholder approval
of the merger and recommending the same to Pool's shareholders or
otherwise communicating with Pool's shareholders regarding such proposal
in a manner permitted by law, if, and only to the extent that:
- the Pool Board, after consultation with legal counsel, determines in good
faith that such action is required for the Pool Board to comply with its
fiduciary duties to shareholders imposed by the Texas Business
Corporation Act and other applicable Texas law;
40
47
- before furnishing such information to, or entering into discussions or
negotiations with, such person or entity, Pool:
(a) provides two business days' written notice to Nabors of such action;
and
(b) obtains from such person or entity a customary confidentiality
agreement; and
- the Pool Board determines in good faith and after consultation with its
financial advisor that, in light of the information furnished to it
relating to such company acquisition proposal, the company acquisition
transaction contemplated would, if consummated, result in a more
favorable transaction than the transaction contemplated by the merger
agreement, taking into account such factors as the Pool Board deems
relevant, for which financing, to the extent required, is committed or,
in the reasonable good faith judgment of the Pool Board, after receiving
advice from its financial advisor, is reasonably likely to be obtained
from a third party.
A "company acquisition proposal" is any inquiry or proposal which relates
to or contemplates a company acquisition transaction.
A "company acquisition transaction" means any of the following
transactions:
- any merger, consolidation, share exchange or other business combination
involving Pool or any of its subsidiaries, subject to certain exceptions;
- any sale, exchange, transfer or other disposition to any person other
than Nabors or any of its subsidiaries of properties or assets of Pool or
any of its subsidiaries which constitute:
- all or substantially all of the properties and assets of Pool;
- all or substantially all of the properties and assets of any significant
subsidiary, or a material division or other business unit of Pool or any
significant subsidiary; or
- properties and assets which are material to the business or operations
of Pool and its subsidiaries, taken as a whole;
- any tender offer or exchange offer by any person other than Nabors or any
of its subsidiaries for 15% or more of the outstanding shares of Pool
common stock; or
- any acquisition of shares of Pool common stock by any person or group
other than Nabors or any of its subsidiaries which would require an
amendment, waiver, termination or alteration of the Pool rights agreement
so that such acquisition would not result in such person becoming an
"acquiring person" under the terms of the Pool rights agreement.
Access and Information. Both Nabors and Pool have agreed, subject to
certain limitations, to allow one another reasonable access to information
concerning its business, properties, contracts, records and personnel. In
addition, Pool has agreed to permit Nabors and its representatives to confirm,
on reasonable notice and through agreed-upon methods, with Pool's and its
subsidiaries' principal vendors, customers and trade affiliates that the
acquisition of Pool by Nabors will be acceptable to, and will not affect Pool's
or its subsidiaries' relationships with, such vendors, customers and trade
affiliates.
Confidentiality. Between the date of the merger agreement and the effective
time, Pool and Nabors have agreed to maintain in confidence, and to cause their
representatives to maintain in confidence, and not to use to the detriment of a
party to the merger agreement, any information obtained from a party to the
merger agreement or its subsidiaries in connection with the merger agreement or
any related transactions, with certain exceptions. Upon any termination of the
merger agreement, Pool and Nabors will return or destroy all confidential
information provided by the other.
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CLOSING CONDITIONS
Conditions Applicable to All Parties. The following conditions, among
others, must be satisfied before the merger, unless waived by the parties to the
merger agreement:
- no stop order or proceeding shall have been initiated which suspends or
seeks to suspend the effectiveness of the registration statement of which
this document is a part;
- the merger agreement shall have been approved and adopted by the holders
of two-thirds of the outstanding shares of Pool common stock;
- there shall be no order, injunction, or other legal restraint or
prohibition making illegal or prohibiting the consummation of the merger;
- Pool and Nabors shall have received certain opinions as to tax matters
from their counsel;
- the applicable waiting period under the Hart-Scott-Rodino Act shall have
expired or have been terminated; and
- the shares of Nabors common stock to be issued in the merger shall have
been approved for listing on AMEX, subject to notice of issuance.
Conditions Applicable to Nabors. Nabors' obligations to effect the merger
and the other transactions contemplated by the merger agreement are subject to
the satisfaction or waiver of certain additional conditions, including:
- the accuracy of Pool's representations and warranties, with such
exceptions as would not have a material adverse effect on Pool;
- Pool's performance in all material respects of its obligations under the
merger agreement;
- the effectiveness of certain agreements with affiliates of Pool relating
to resales of Nabors common stock as provided by Rule 145 under the
Securities Act of 1933;
- the absence of (a) any required divestiture of assets by Pool or Nabors
as a condition to the expiration of the waiting period under the
Hart-Scott-Rodino Act that Nabors does not wish to accept or (b) any
other conditions, restrictions or limitations imposed by federal
antitrust authorities affecting Nabors' ownership of Pool's assets that
Nabors does not wish to accept;
- the lack of, since the date of the merger agreement, an event having a
material adverse effect on Pool and of a combination of state of facts,
events, changes or effects that has had, or would reasonably be expected
to have, a material adverse effect on Pool; and
- the amendment of, or other arrangement relating to, Pool's Saudi joint
venture agreement so that Nabors is reasonably satisfied in its good
faith judgment that the merger will not materially adversely affect the
operations of Pool Arabia Ltd. or Nadrico Saudi Company Limited and will
not result in a change of control of Pool Arabia Ltd.
Conditions Applicable to Pool. Pool's obligations to effect the merger and
the other transactions contemplated by the merger agreement are subject to the
satisfaction or waiver of certain additional conditions, including:
- the accuracy of Nabors' and Nabors' acquisition subsidiary's
representations and warranties, with such exceptions as would not have a
material adverse effect on Nabors;
- Nabors' performance in all material respects of its obligations under the
merger agreement; and
- the lack of, since the date of the merger agreement, an event having a
material adverse effect on Nabors and of a combination of state of facts,
events, changes or effects that has had, or would reasonably be expected
to have, a material adverse effect on Nabors.
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TERMINATION
The merger agreement may be terminated at any time before the merger, only
in the following ways:
(1) by mutual written consent of Nabors and Pool;
(2) by Nabors, upon a breach by Pool of any of its covenants or
agreements, or if any representation or warranty of Pool is untrue, in
either case causing certain conditions not to be satisfied, except that
Pool shall have an opportunity to cure the breach by exercising its
reasonable best efforts;
(3) by Pool, upon a breach by Nabors of any of its covenants or
agreements, or if any representation or warranty of Nabors is untrue, in
either case causing certain conditions not to be satisfied, except that
Nabors shall have an opportunity to cure the breach by exercising its
reasonable best efforts;
(4) by either Nabors or Pool, if certain final, nonappealable orders,
decrees or rulings prevent the consummation of the merger;
(5) by either Nabors or Pool, if the merger does not occur on or
before October 1, 1999, subject to a six-month extension if the applicable
waiting period under the Hart-Scott-Rodino Act has not yet expired or been
terminated by such date, unless the failure to consummate the merger by
such date results from the action or failure to act of the party seeking to
terminate the merger agreement;
(6) by either Nabors or Pool, if Pool holds the special meeting but
the merger agreement does not receive the required shareholder approval;
(7) by Nabors, if:
(A) the Pool Board withdraws, or materially modifies or materially
changes, its recommendation of the merger agreement or the merger in a
manner adverse to Nabors or Nabors' acquisition subsidiary, or resolves
to do so;
(B) the Pool Board recommends a company acquisition proposal or,
after ten business days following the commencement of any company
acquisition proposal that is a tender offer, has not recommended against
accepting such company acquisition proposal or has taken no position
with respect to such company acquisition proposal; or
(C) Pool changes the provisions of the Pool rights agreement in
such a manner that any person other than Nabors or Nabors' acquisition
subsidiary has been permitted to acquire beneficial ownership of, or the
right to acquire beneficial ownership of, or any group has been formed
that beneficially owns, or has the right to acquire beneficial ownership
of, more than 15% of the then outstanding shares of capital stock of
Pool, in each case without triggering the Pool rights agreement;
(8) by Pool, if the Pool Board has withdrawn, or modified or changed
in a manner adverse to Nabors or Nabors' acquisition subsidiary its
approval or recommendation of the merger agreement or the merger in order
to approve and permit Pool to execute a definitive agreement providing for
a company acquisition transaction that, if consummated, would result, in
the Pool Board's good faith judgment, in a more favorable transaction than
the merger with Nabors; provided that Pool must:
(A) give Nabors five days' advance notice of its intention to
terminate and must specify the material terms and conditions of, and the
identity of the person making, the company acquisition proposal;
(B) negotiate in good faith with Nabors to make such adjustments in
the terms and conditions of the merger agreement that would enable Pool
to proceed with the transactions contemplated by the merger agreement on
such adjusted terms; and
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50
(C) pay to Nabors the sum of $15.0 million, plus all actual
documented third party costs referred to below under "-- Fees, Expenses
and Other Payments;" or
(9) by Pool, if Nabors shall have delivered to Pool a notice
indicating its decision to not take certain action or actions upon which
approval, under the Hart-Scott-Rodino Act, of the merger and the merger
agreement are conditioned.
FEES, EXPENSES AND OTHER PAYMENTS
Nabors and Pool will bear their own costs and expenses in connection with
the merger agreement and the related transactions, except as follows:
- Nabors and Pool will share equally the costs and expenses related to
printing, filing and mailing all Commission and other regulatory filings
related to these transactions;
- upon completion of the merger, all costs incurred by Nabors and Pool will
be borne by the surviving corporation;
- Pool must pay Nabors a fee of $15.0 million, plus all actual, documented
third party costs incurred by Nabors, if the merger agreement is
terminated as described in item (2), (7) or (8) under "-- Termination;"
- Nabors must pay Pool a fee of $15.0 million, plus all actual, documented
third party costs incurred by Pool, if the merger agreement is terminated
as described in item (3) under "-- Termination;" and
- Pool must pay Nabors a fee of $1.0 million, plus all actual, documented
third party costs incurred by Nabors, if the merger agreement is
terminated as described in item (6) under "-- Termination," provided,
however, that if at or prior to the time that the shareholders' meeting
has been held there had been announced, whether or not rejected or
withdrawn, any company acquisition proposal and within 18 months of such
an announcement Pool enters into any agreement with respect to a company
acquisition proposal, then Pool shall pay Nabors an additional fee of
$14.0 million.
AMENDMENT; WAIVER
The merger agreement may be amended by Nabors or Pool by action of their
respective Boards of Directors at any time before the merger. However, after the
approval of the merger agreement by the shareholders of Pool, no amendment may
be made which, under the Texas Business Corporation Act, requires the further
approval of shareholders.
At any time before the merger, Nabors and Pool may extend the time for the
performance of any of the obligations or other acts of the other party, waive
any inaccuracies in the representations and warranties of the other party, or
waive compliance by the other parties with any of the agreements or conditions,
other than those required to be complied with by applicable law.
AMENDMENT OF POOL RIGHTS AGREEMENT
Under the terms of the Pool rights agreement, upon the occurrence of
certain events, including transactions of the type contemplated by the merger
agreement, the holder of a Right issued under the Pool rights agreement, other
than an "acquiring person" as defined in the Pool rights agreement, is entitled
to receive, upon exercise of such Right, a number of shares of Pool common stock
having a current market price equal to two times the exercise price of the
Right. For additional information regarding the Pool rights agreement, see
"Comparison of Securityholder Rights -- Pool Rights Agreement."
Prior to the execution of the merger agreement, Pool signed an amendment to
the Pool rights agreement so that the distribution and exercise of the Rights
would not be triggered by Nabors solely as a
44
51
result of entering into and consummating the transactions contemplated by the
merger agreement. Specifically, the amendment to the Pool rights agreement
provides, among other things, that:
(a) the Expiration Date, as defined in the Pool rights agreement,
shall occur immediately before the effective time of the merger; and
(b) the execution and delivery of the merger agreement and the
consummation of the transactions contemplated by the merger agreement,
including the merger, will not:
- result in a Distribution Date, Share Acquisition Date, Triggering
Event, Flip-In Event or Flip-Over Event, as such terms are defined
in the Pool rights agreement, being deemed to occur;
- cause Nabors, Nabors' acquisition subsidiary or any of their
respective affiliates to be deemed an Acquiring Person, as defined
in the Pool rights agreement; or
- cause the Rights provided for in the Pool rights agreement to be
exercisable.
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52
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
The following unaudited pro forma combined condensed financial statements
give effect to the acquisition of all of the outstanding capital stock of Bayard
and Pool by Nabors and the completion by Nabors of three separate debt
transactions. The pro forma combination of Nabors, Bayard and Pool has been
accounted for under the purchase method of accounting.
The Unaudited Pro Forma Combined Condensed Balance Sheets are derived from
the unaudited condensed consolidated balance sheets of Nabors, Bayard and Pool
and are presented as if the merger was consummated on the balance sheet date.
The Unaudited Pro Forma Combined Condensed Statements of Operations for the
three months ended March 31, 1999 and the year ended December 31, 1998 are
presented as if the merger was consummated on January 1, 1998. The Pro Forma
Combined Condensed Statements of Operations for the year ended December 31, 1998
also give effect to the results of operations for Sea Mar, Inc. as if it was
acquired by Pool on January 1, 1998.
The unaudited pro forma combined condensed financial statements do not
purport to indicate what the combined results of operations of Nabors, Bayard
and Pool would have been had the merger occurred as of the dates indicated or
the results of operations that may be obtained in the future. The Unaudited Pro
Forma Combined Condensed Statements of Operations do not reflect the anticipated
cost savings resulting from integration of the operations of Nabors, Bayard and
Pool. The pro forma adjustments described in the accompanyingnew notes are based on
estimates derived from information currently available.
The unaudited pro forma financial information should be read in conjunction
with the consolidated financial statements and related notes of Nabors, Bayard
and Pool contained in each company's Annual Reports on Form 10-K for the year
ended December 31, 1998 and each company's Quarterly Report on Form 10-Q for the
three months ended March 31, 1999, all of which are incorporated by reference
into this document.
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53
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEETS
AS OF MARCH 31, 1999
(IN THOUSANDS)
ASSETS
PRO FORMA
HISTORICAL -------------------------- PRO FORMA
--------------------- NABORS AND HISTORICAL -----------
NABORS BAYARD ADJUSTMENTS BAYARD POOL ADJUSTMENTS
---------- -------- ----------- ---------- ---------- -----------
Current assets:
Cash and cash equivalents..................... $ 300,080 $ 2,379 $ (5,481)(a) $ 296,978 $ 27,116 $
Marketable securities......................... 13,782 (4,599)(a) 9,183
Accounts receivable, net...................... 123,671 6,722 130,393 69,984
Inventory and supplies........................ 25,972 25,972 15,704
Prepaid expenses and other current assets..... 37,795 549 38,344 21,175 (1,346)(d)
---------- -------- --------- ---------- -------- ---------
Total current assets.................... 501,300 9,650 (10,080) 500,870 133,979 (1,346)
Property, plant and equipment, net.............. 1,099,170 280,422 (153,719)(b) 1,225,873 410,021
Marketable securities........................... 33,833 33,833 (33,833)(c)
Goodwill, net................................... 7,845 11,615 22,407(b) 41,867 60,309 55,271(d)
Other long-term assets.......................... 57,948 4,147 (4,071)(b) 58,024 57,898 (4,294)(d)
---------- -------- --------- ---------- -------- ---------
Total assets............................ $1,700,096 $305,834 $(145,463) $1,860,467 $662,207 $ 15,798
---------- -------- --------- ---------- -------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term obligations...... $ 7,002 $ 6,070 $ $ 13,072 $ 625 $
Short-term borrowings......................... 4,640 4,640
Trade accounts payable and accrued
liabilities................................. 123,487 14,416 4,000(a) 141,903 78,043 29,000(c)
(4,656)(d)
Income taxes payable.......................... 14,068 14,068
---------- -------- --------- ---------- -------- ---------
Total current liabilities............... 149,197 20,486 4,000 173,683 78,668 24,344
Long-term obligations........................... 537,967 110,166 (4,200)(b) 643,933 187,847
Other long-term liabilities..................... 46,750 3,207 10,327(b) 60,284 41,171 (12,897)(d)
14,000(d)
Deferred income taxes........................... 80,260 5,999 (64,446)(b) 21,813 60,460 (2,727)(c)
1,722(d)
---------- -------- --------- ---------- -------- ---------
Total liabilities....................... 814,174 139,858 (54,319) 899,713 368,146 24,442
---------- -------- --------- ---------- -------- ---------
Commitments and contingencies
Stockholders' equity:
Capital stock................................. 10,141 183 617(a) 10,758 234,015 1,961(c)
(183)(b) (234,015)(d)
Capital in excess of par value................ 394,840 180,753 74,215(a) 469,055 288,099(c)
(180,753)(b)
Accumulated other comprehensive loss.......... (4,775) (4,775) (526) 526(d)
(4,643)(c)
Retained earnings (accumulated deficit)....... 490,533 (14,960) 14,960(b) 490,533 60,572 (60,572)(d)
Less treasury stock, at cost.................. (4,817) (4,817)
---------- -------- --------- ---------- -------- ---------
Total stockholders' equity.............. 885,922 165,976 (91,144) 960,754 294,061 (8,644)
---------- -------- --------- ---------- -------- ---------
Total liabilities and stockholders'
equity................................ $1,700,096 $305,834 $(145,463) $1,860,467 $662,207 $ 15,798
---------- -------- --------- ---------- -------- ---------
PRO FORMA
----------------------------------------
COMBINED ADJUSTMENTS(E) COMBINED
---------- -------------- ----------
Current assets:
Cash and cash equivalents..................... $ 324,094 $(149,761) $ 174,333
Marketable securities......................... 9,183 9,183
Accounts receivable, net...................... 200,377 200,377
Inventory and supplies........................ 41,676 41,676
Prepaid expenses and other current assets..... 58,173 58,173
---------- --------- ----------
Total current assets.................... 633,503 (149,761) 483,742
Property, plant and equipment, net.............. 1,635,894 1,635,894
Marketable securities........................... -- --
Goodwill, net................................... 157,447 157,447
Other long-term assets.......................... 111,628 (2,614) 109,014
---------- --------- ----------
Total assets............................ $2,538,472 $(152,375) $2,386,097
---------- --------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term obligations...... $ 13,697 $ $ 13,697
Short-term borrowings......................... 4,640 4,640
Trade accounts payable and accrued
liabilities................................. 244,290 (6,504) 237,786
Income taxes payable.......................... 14,068 14,068
---------- --------- ----------
Total current liabilities............... 276,695 (6,504) 270,191
Long-term obligations........................... 831,780 (308,298) 523,482
Other long-term liabilities..................... 102,558 (10,327) 92,231
Deferred income taxes........................... 81,268 81,268
---------- --------- ----------
Total liabilities....................... 1,292,301 (325,129) 967,172
---------- --------- ----------
Commitments and contingencies
Stockholders' equity:
Capital stock................................. 12,719 952 13,671
Capital in excess of par value................ 757,154 171,466 928,620
Accumulated other comprehensive loss.......... (9,418) (9,418)
Retained earnings (accumulated deficit)....... 490,533 336 490,869
Less treasury stock, at cost.................. (4,817) (4,817)
---------- --------- ----------
Total stockholders' equity.............. 1,246,171 172,754 1,418,925
---------- --------- ----------
Total liabilities and stockholders'
equity................................ $2,538,472 $(152,375) $2,386,097
---------- --------- ----------
The accompanying notes are an integral part of these pro forma combined
condensed financial statements.
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UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1999
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
PRO FORMA
HISTORICAL ------------------------ PRO FORMA
------------------- NABORS AND HISTORICAL ----------------------
NABORS BAYARD ADJUSTMENTS BAYARD POOL ADJUSTMENTS COMBINED
-------- -------- ----------- ---------- ---------- ----------- --------
Revenues........................... $149,692 $ 10,976 $ $160,668 $81,027 $ $241,695
Earnings from unconsolidated
affiliates....................... 3,295 -- 3,295 3,668 6,963
-------- -------- ------- -------- ------- ------- --------
Total revenues................. 152,987 10,976 -- 163,963 84,695 -- 248,658
-------- -------- ------- -------- ------- ------- --------
Operating expenses:
Direct costs..................... 93,300 12,688 105,988 56,125 162,113
General and administrative
expenses....................... 16,299 2,341 (560)(f) 18,080 14,135 (481)(f) 31,734
Depreciation and amortization.... 21,422 3,388 (1,709)(g) 23,101 11,326 325(g) 34,752
-------- -------- ------- -------- ------- ------- --------
Operating expenses............. 131,021 18,417 (2,269) 147,169 81,586 (156) 228,599
-------- -------- ------- -------- ------- ------- --------
Operating income (loss)............ 21,966 (7,441) 2,269 16,794 3,109 156 20,059
-------- -------- ------- -------- ------- ------- --------
Other (expense) income:
Interest expense................. (5,405) (3,225) 542(h) (8,088) (4,210) 306(h) (11,992)
Interest income.................. 1,200 40 1,240 1,240
Other income, net................ 1,852 (1,081) 771 709 1,480
-------- -------- ------- -------- ------- ------- --------
Other (expense) income......... (2,353) (4,266) 542 (6,077) (3,501) 306 (9,272)
-------- -------- ------- -------- ------- ------- --------
Income (loss) from continuing
operations before income taxes
(benefit)........................ 19,613 (11,707) 2,811 10,717 (392) 462 10,787
Income taxes (benefit)............. 7,649 (4,449) 1,090(i) 4,290 (927) 1,330(i) 4,693
-------- -------- ------- -------- ------- ------- --------
Net income (loss).................. $ 11,964 $ (7,258) $ 1,721 $ 6,427 $ 535 $ (868) $ 6,094
======== ======== ======= ======== ======= ======= ========
Earnings per share from continuing
operations:
Basic............................ $ .12 $ .06 $ .05
-------- -------- --------
Diluted.......................... $ .12 $ .06 $ .05
-------- -------- --------
Weighted average number of shares
outstanding:
Basic............................ 100,803 6,166(j) 106,969 19,612(j) 126,581
-------- ------- -------- ------- --------
Diluted.......................... 101,649 6,166(j) 107,815 19,859(j) 127,674
-------- ------- -------- ------- --------
PRO FORMA
----------------------
ADJUSTMENTS COMBINED
----------- --------
Revenues........................... $ $241,695
Earnings from unconsolidated
affiliates....................... 6,963
------ --------
Total revenues................. -- 248,658
------ --------
Operating expenses:
Direct costs..................... 162,113
General and administrative
expenses....................... 31,734
Depreciation and amortization.... 34,752
------ --------
Operating expenses............. -- 228,599
------ --------
Operating income (loss)............ -- 20,059
------ --------
Other (expense) income:
Interest expense................. 3,543(k) (8,449)
Interest income.................. 1,240
Other income, net................ 1,480
------ --------
Other (expense) income......... 3,543 (5,729)
------ --------
Income (loss) from continuing
operations before income taxes
(benefit)........................ 3,543 14,330
Income taxes (benefit)............. 1,382(i) 6,075
------ --------
Net income (loss).................. $2,161 $ 8,255
====== ========
Earnings per share from continuing
operations:
Basic............................ $ .06
--------
Diluted.......................... $ .06
--------
Weighted average number of shares
outstanding:
Basic............................ 9,517(e) 136,098
------ --------
Diluted.......................... 9,517(e) 137,191
------ --------
The accompanying notes are an integral part of these pro forma combined
condensed financial statements.
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UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
PRO FORMA
HISTORICAL ------------------------- PRO FORMA PRO FORMA
------------------- NABORS AND POOL AND -------------------------
NABORS BAYARD ADJUSTMENTS BAYARD SEA MAR ADJUSTMENTS COMBINED
-------- ------- ----------- ---------- --------- ----------- ----------
Revenues......................... $968,463 $79,072 $ $1,047,535 $469,274 $ $1,516,809
Earnings from unconsolidated
affiliates..................... (306) -- (306) 4,335 4,029
-------- ------- ------- ---------- -------- ------- ----------
Total revenues............... 968,157 79,072 -- 1,047,229 473,609 -- 1,520,838
-------- ------- ------- ---------- -------- ------- ----------
Operating expenses:
Direct costs................... 623,844 64,249 688,093 321,062 1,009,155
General and administrative
expenses..................... 77,026 4,312 (723)(f) 80,615 56,296 (1,064)(f) 135,847
Depreciation and
amortization................. 84,949 14,362 (7,517)(g) 91,794 42,134 1,612(g) 135,540
-------- ------- ------- ---------- -------- ------- ----------
Operating expenses........... 785,819 82,923 (8,240) 860,502 419,492 548 1,280,542
-------- ------- ------- ---------- -------- ------- ----------
Operating income (loss).......... 182,338 (3,851) 8,240 186,727 54,117 (548) 240,296
-------- ------- ------- ---------- -------- ------- ----------
Other income (expense):
Interest expense............... (15,463) (6,371) 1,086(h) (20,748) (16,981) 1,064(h) (36,665)
Interest income................ 1,480 1,404 2,884 1,012 3,896
Other income, net.............. 31,626 694 32,320 654 32,974
-------- ------- ------- ---------- -------- ------- ----------
Other income (expense)....... 17,643 (4,273) 1,086 14,456 (15,315) 1,064 205
-------- ------- ------- ---------- -------- ------- ----------
Income (loss) from continuing
operations before income taxes
(benefit)...................... 199,981 (8,124) 9,326 201,183 38,802 516 240,501
Income taxes (benefit)........... 74,993 (2,880) 3,756(i) 75,869 14,802 1,387(i) 92,058
-------- ------- ------- ---------- -------- ------- ----------
Net income (loss) from continuing
operations..................... $124,988 $(5,244) $ 5,570 $ 125,314 $ 24,000 $ (871) $ 148,443
======== ======= ======= ========== ======== ======= ==========
Earnings per share from
continuing operations:
Basic.......................... $ 1.24 $ 1.17 $ 1.17
-------- ---------- ----------
Diluted........................ $ 1.16(l) $ 1.10(l) $ 1.11(l)
-------- ---------- ----------
Weighted average number of shares
outstanding:
Basic.......................... 100,807 6,166(j) 106,973 19,612(j) 126,585
-------- ------- ---------- ------- ----------
Diluted........................ 112,555(l) 6,166(j) 118,721(l) 19,859(j) 138,580(l)
-------- ------- ---------- ------- ----------
PRO FORMA
------------------------
ADJUSTMENTS COMBINED
----------- ----------
Revenues......................... $ $1,516,809
Earnings from unconsolidated
affiliates..................... 4,029
------- ----------
Total revenues............... -- 1,520,838
------- ----------
Operating expenses:
Direct costs................... 1,009,155
General and administrative
expenses..................... 135,847
Depreciation and
amortization................. 135,540
------- ----------
Operating expenses........... -- 1,280,542
------- ----------
Operating income (loss).......... -- 240,296
------- ----------
Other income (expense):
Interest expense............... 12,167(k) (24,498)
Interest income................ 3,896
Other income, net.............. 32,974
------- ----------
Other income (expense)....... 12,167 12,372
------- ----------
Income (loss) from continuing
operations before income taxes
(benefit)...................... 12,167 252,668
Income taxes (benefit)........... 4,563(i) 96,621
------- ----------
Net income (loss) from continuing
operations..................... $ 7,604 $ 156,047
======= ==========
Earnings per share from
continuing operations:
Basic.......................... $ 1.15
----------
Diluted........................ $ 1.13
----------
Weighted average number of shares
outstanding:
Basic.......................... 9,517(e) 136,102
------- ----------
Diluted........................ 138,580
------- ----------
The accompanying notes are an integral part of these pro forma combined
condensed financial statements.
49
56
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS)
HISTORICAL PRO FORMA
----------------------------- ------------------------
POOL AND
POOL SEA MAR COMBINED ADJUSTMENTS SEA MAR
-------- ------- -------- ----------- --------
Revenues.............................. $455,741 $13,533 $469,274 $ $469,274
Earnings from unconsolidated
affiliates.......................... 4,335 -- 4,335 4,335
-------- ------- -------- ------- --------
Total revenues................... 460,076 13,533 473,609 -- 473,609
-------- ------- -------- ------- --------
Operating expenses:
Direct costs........................ 316,558 4,504 321,062 321,062
General and administrative
expenses......................... 55,355 941 56,296 56,296
Depreciation and amortization....... 39,766 609 40,375 1,759(m) 42,134
-------- ------- -------- ------- --------
Operating expenses............... 411,679 6,054 417,733 1,759 419,492
-------- ------- -------- ------- --------
Operating income...................... 48,397 7,479 55,876 (1,759) 54,117
-------- ------- -------- ------- --------
Other income (expense):
Interest expense.................... (14,672) (323) (14,995) (1,986)(n) (16,981)
Interest income..................... 954 58 1,012 1,012
Other income, net................... 654 904 1,558 (904)(o) 654
-------- ------- -------- ------- --------
Other income (expense)........... (13,064) 639 (12,425) (2,890) (15,315)
-------- ------- -------- ------- --------
Income from continuing operations
before income taxes................. 35,333 8,118 43,451 (4,649) 38,802
Income taxes.......................... 13,525 2,841 16,366 (1,564)(i) 14,802
-------- ------- -------- ------- --------
Net income from continuing
operations.......................... $ 21,808 $ 5,277 $ 27,085 $(3,085) $ 24,000
======== ======= ======== ======= ========
The accompanying notes are an integral part of these pro forma combined
condensed financial statements.
50
57
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
The following is a summary of the significant assumptions and adjustments
used in preparing the Unaudited Pro Forma Combined Condensed Balance Sheets as
of March 31, 1999 and the Unaudited Pro Forma Combined Condensed Statements of
Operations for the three months ended March 31, 1999 and the year ended December
31, 1998.
(a) To reflect the purchase of Bayard for $5.48 million in cash and
the issuance of 6,165,749 shares of Nabors common stock in exchange for
100% of the issued and outstanding shares of Bayard. These amounts
represent the conversion of each Bayard share into .3375 shares of Nabors
common stock and $.30 in cash. Nabors common stock was valued at $12.0625
per share, which represents the average market price of Nabors common stock
for the two day period prior to the agreement as to the final merger terms.
A Nabors affiliate owned $4.2 million face amount of the Bayard $100
million, 11%, Senior Notes due 2005 (the "Bayard 11% Notes") prior to the
merger. As of March 31, 1999, these notes had a carrying value to Nabors of
$4.6 million. Additionally, the purchase price reflects the issuance by
Nabors of 298,664 options and 133,988 warrants to purchase Nabors common
stock, which were valued at their estimated fair market value using the
Black-Scholes option pricing model, in exchange for the outstanding options
and warrants of Bayard. The purchase price has been calculated as follows:
(IN THOUSANDS)
Cash........................................................ $ 5,481
Nabors common stock, valued at $12.0625 per share........... 74,374
Bayard 11% Notes previously owned by Nabors (at cost)....... 4,599
Nabors options and warrants................................. 458
Estimated acquisition costs................................. 4,000
-------
Purchase price, including acquisition costs................. $88,912
=======
(b) The purchase price including estimated acquisition costs has been
allocated to assets acquired and liabilities assumed based upon their
estimated fair values. The preliminary allocation of the purchase price of
Bayard is as follows:
DEBIT (CREDIT)
-----------------------------------------
HISTORICAL PURCHASE PRICE PRO FORMA
AMOUNT ALLOCATION ADJUSTMENTS
---------- -------------- -----------
(IN THOUSANDS)
Current assets.......................... $ 9,650 $ 9,650 $ --
Property, plant and equipment, net...... 280,422 126,703 (153,719)(i)
Goodwill, net........................... 11,615 34,022 22,407(ii)
Other long-term assets.................. 4,147 76 (4,071)(iii)
Current liabilities..................... (20,486) (20,486) --
Long-term obligations, excluding current
maturities............................ (110,166) (105,966) 4,200(iv)
Other long-term liabilities............. (3,207) (13,534) (10,327)(v)
Deferred income taxes................... (5,999) 58,447 64,446(vi)
Capital stock........................... (183) -- 183(vii)
Capital in excess of par value.......... (180,753) -- 180,753(vii)
Accumulated deficit..................... 14,960 -- (14,960)(vii)
--------- --------- ---------
$ -- $ 88,912 $ 88,912
========= ========= =========
(i) To reduce the carrying value of property, plant and equipment
to fair value pursuant to an appraisal by an independent certified
appraiser.
(ii) The excess of the purchase price over the estimated fair value
of the identifiable assets acquired and liabilities assumed has been
accounted for as goodwill.
51
58
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL
STATEMENTS -- (CONTINUED)
(iii) To eliminate Bayard's deferred financing costs associated
with the Bayard 11% Notes.
(iv) To eliminate the $4.2 million face amount of the Bayard 11%
Notes owned by a Nabors affiliate prior to the merger.
(v) To record debt premium based upon the estimated fair value of
the Bayard 11% Notes. The fair value was determined using the quoted
market price of the Bayard 11% Notes on the merger closing date.
(vi) To adjust deferred tax obligations for differences between the
financial statement basis (which has been decreased as described in
(b)(i) above) and the tax basis (which will not be decreased because of
the merger) of the identifiable assets acquired and liabilities assumed.
(vii) To eliminate the historical stockholders' equity of Bayard.
(c) To reflect the purchase of Pool by the issuance of 19,612,019
shares of Nabors common stock in exchange for 100% of the issued and
outstanding shares of Pool not owned by Nabors prior to the merger and
certain Pool shares issuable in connection with a long-term incentive plan.
These amounts represent the conversion of each Pool share into 1.025 shares
of Nabors common stock. Nabors common stock was valued at $14.3875 per
share, which represents the average market price of Nabors common stock for
the five day period beginning one day prior to the merger announcement
date. The Pool common stock owned by Nabors prior to the merger was valued
at historical cost. As of March 31, 1999, these shares had a carrying value
to Nabors of $33.83 million, which included unrealized gains of $4.64
million, net of deferred taxes totaling $2.73 million. Additionally, the
purchase price reflects the issuance by Nabors of 1,459,478 options to
purchase Nabors common stock, which were valued at their estimated fair
market value using the Black-Scholes option pricing model, in exchange for
the outstanding options of Pool. The preliminary purchase price has been
calculated as follows:
(IN THOUSANDS)
Nabors common stock, valued at $14.3875 per share........... $282,168
Pool common stock previously owned by Nabors (at cost)...... 26,463
Nabors options.............................................. 7,892
Estimated acquisition costs (including change of control
payments, severance and other costs)...................... 29,000
--------
Purchase price, including acquisition costs................. $345,523
========
52
59
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL
STATEMENTS -- (CONTINUED)
(d) The purchase price including estimated acquisition costs has been
allocated to assets acquired and liabilities assumed based upon their
estimated fair values. The preliminary allocation of the purchase price of
Pool is as follows:
DEBIT (CREDIT)
-----------------------------------------
HISTORICAL PURCHASE PRICE PRO FORMA
AMOUNT ALLOCATION ADJUSTMENTS
---------- -------------- -----------
(IN THOUSANDS)
Current assets.......................... $ 133,979 $ 132,633 $ (1,346)(i)
Property, plant and equipment, net...... 410,021 410,021 --
Goodwill, net........................... 60,309 115,580 55,271(ii)
Other long-term assets.................. 57,898 53,604 (4,294)(i)
Current liabilities..................... (78,668) (74,012) 4,656(iii)
Long-term obligations, excluding current
maturities............................ (187,847) (187,847) --
Other long-term liabilities............. (41,171) (42,274) 12,897(iii)
(14,000)(iv)
Deferred income taxes................... (60,460) (62,182) (1,722)(v)
Capital stock........................... (234,015) -- 234,015(vi)
Accumulated other comprehensive
income................................ 526 -- (526)(vi)
Retained earnings....................... (60,572) -- 60,572(vi)
--------- --------- --------
$ -- $ 345,523 $345,523
========= ========= ========
(i) To eliminate Pool's deferred financing costs associated with
the Pool $150 million, 8.625%, Senior Subordinated Notes due 2008 (the
"Pool 8.625% Notes").
(ii) The excess of the purchase price over the estimated fair value
of the identifiable assets acquired and liabilities assumed has been
accounted for as goodwill.
(iii) To eliminate certain current and long-term deferred gains.
(iv) To record an additional liability resulting from the current
funded status of Pool's pension plans and other post retirement benefit
plans, as well as to record additional estimated workers' compensation
liabilities.
(v) To adjust deferred tax obligations for differences between the
financial statement basis and the tax basis of the identifiable assets
acquired and liabilities assumed.
(vi) To eliminate the historical stockholders' equity of Pool.
(e) To reflect three separate debt transactions that are expected to
take place subsequent to March 31, 1999 that include: (i) the assumed
tender of $100.0 million aggregate principal amount of the Bayard 11% Notes
at 111%, excluding the $4.2 million owned by a Nabors affiliate, with the
associated debt premium, (ii) the pre-payment of Nabors $40.0 million,
9.18%, Senior Secured Notes, together with accrued interest and the
associated pre-payment premium and (iii) the conversion of all of Nabors
$172.5 million, 5% Convertible Subordinated Notes due 2006 (the "5% Notes")
into 9,517,060 shares of Nabors common stock, plus related fees and
deferred financing costs. The cash used in connection with these
transactions represents a portion of the remaining net proceeds from the
March 9, 1999 issuance of Nabors $325.0 million, 6.8% Notes due 2004.
(f) To eliminate nonrecurring merger related costs.
(g) Depreciation and amortization is adjusted to reflect Nabors
depreciation policy, as well as to reflect the reduction in the value
assigned to property, plant and equipment for Bayard. Depreciation
53
60
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL
STATEMENTS -- (CONTINUED)
and amortization is increased to reflect the amortization of goodwill
recorded in both transactions over a thirty-year period.
(h) Interest expense is adjusted to reflect the amortization of the
fair value premium recorded for the Bayard 11% Notes and the elimination of
historical amortization of deferred financing costs associated with the
Bayard 11% Notes and the Pool 8.625% Notes.
(i) Income tax expense is adjusted to reflect the tax effect of the
pro forma adjustments, as well as to reflect the combined tax position of
the pro forma combined companies.
(j) Assumes that 6,165,749 Nabors shares were exchanged for 100% of
the Bayard shares and that 19,612,019 Nabors shares were exchanged for 100%
of the Pool shares at the beginning of the periods presented. The diluted
amount also includes the dilutive effect of stock options.
(k) To reduce interest expense to reflect the three debt transactions
(as described in (e) above).
(l) For the calculation of diluted earnings per share, net income is
adjusted to add back $5.39 million of after tax interest expense on the 5%
Notes.
(m) Depreciation and amortization is adjusted to reflect Pool's
depreciation policy, as well as to reflect the amortization of goodwill and
other intangible assets associated with acquisition.
(n) Interest expense is adjusted to reflect the issuance of the Pool
8.625% Notes, repayment of Sea Mar debt and repayment of the outstanding
balance on Pool's revolving credit facility.
(o) To eliminate historical nonrecurring gains on the sales of fixed
assets.
54
61
PRINCIPAL SHAREHOLDERS OF POOL
The following table sets forth certain information concerning the number of
shares of Pool common stock owned beneficially, as of July 31, 1999 by each
person known to Pool to own more than five percent of the outstanding shares of
Pool common stock, and as of July 31, 1999 by (i) each director of Pool, (ii)
each of the five most highly compensated executive officers of Pool, and (iii)
all directors and executive officers of Pool as a group. No shares of any other
class of equity securities are outstanding.
BENEFICIAL OWNERSHIP
---------------------------------
PERCENT
NAME OF BENEFICIAL OWNER SHARES OF TOTAL
- ------------------------ --------- ----------------
Nabors Industries, Inc. .................................... 2,209,500(1) 10.4%
Alton Anthony Gonsoulin, Jr. ............................... 2,000,000(2) 9.4%
J. T. Jongebloed............................................ 306,390(3)(4) 1.4%
Dennis R. Hendrix........................................... 19,000(3)(5) *
John F. Lauletta............................................ 9,000(3)(5)
William H. Mobley........................................... 25,200(3)(6) *
Joseph R. Musolino.......................................... 19,000(3)(7) *
James L. Payne.............................................. 18,000(3)(8) *
R. G. Hale.................................................. 64,640(3)(9) *
E. J. Spillard.............................................. 142,302(3)(10)
G.G. Arms................................................... 76,504(3)(11) *
L. E. Dupre................................................. 32,072(3)(12) *
All directors and executive officers as a group (10
persons).................................................. 712,108(3)(13) 3.3%
- ---------------
* Less than 1%
(1) Based upon an amended Schedule 13D filed on November 20, 1998; power to
dispose and vote are shared with a wholly-owned subsidiary.
(2) Based upon an amended Schedule 13D filed on September 18, 1998; 461,539 of
such shares are owned by a wholly-owned corporate affiliate; 769,231 of
such shares are held in escrow to fund indemnity obligations to Pool
through March 31, 2000; the escrowed shares must be voted as directed by
the Pool Board through March 31, 2000 unless sooner converted into cash in
accordance with the terms of the escrow agreement.
(3) Sole voting and dispositive power when acquired.
(4) Includes 249,640 shares which may be acquired through the exercise of stock
options that are currently exercisable or will become exercisable within 60
days after July 31, 1999.
(5) Includes 8,000 shares which may be acquired through the exercise of stock
options that are currently exercisable or will become exercisable within 60
days after July 31, 1999.
(6) Includes 20,000 shares which may be acquired through the exercise of stock
options that are currently exercisable or will become exercisable within 60
days after July 31, 1999.
(7) Includes 14,000 shares which may be acquired through the exercise of stock
options that are currently exercisable or will become exercisable within 60
days after July 31, 1999.
(8) Includes 12,000 shares which may be acquired through the exercise of stock
options that are currently exercisable or will become exercisable within 60
days after July 31, 1999.
(9) Includes 37,814 shares which may be acquired through the exercise of stock
options that are currently exercisable or will become exercisable within 60
days after July 31, 1999.
(10) Includes 119,154 shares which may be acquired through the exercise of stock
options that are currently exercisable or will become exercisable within 60
days after July 31, 1999.
(11) Includes 61,618 shares which may be acquired through the exercise of stock
options that are currently exercisable or will become exercisable within 60
days after July 31, 1999.
(12) Includes 23,918 shares which may be acquired through the exercise of stock
options that are currently exercisable or will become exercisable within 60
days after July 31, 1999.
(13) Includes 554,144 shares which may be acquired through the exercise of stock
options that are currently exercisable or will become exercisable within 60
days after July 31, 1999.
55
62
COMPARISON OF SECURITYHOLDER RIGHTS
Upon conversion of your shares of Pool common stock into shares of Nabors
common stock, shareholders of Pool, a Texas corporation, will become
stockholders of Nabors, a Delaware corporation. The following table summarizes
the material differences between the rights of holders of shares of Nabors
common stock and the holders of shares of Pool common stock. After the merger,
Nabors' Restated Certificate of Incorporation and Restated By-Laws will govern
the rights of the former shareholders of Pool who receive shares of Nabors
common stock.
NABORS POOL
------ ----
(1) Amendment of Any amendment to Nabors' Restated The affirmative vote of
Charter and By-Laws Certificate of Incorporation two-thirds of the shares entitled
would require the affirmative to vote on an amendment, or, if
vote of a majority of the shares any class of shares is entitled
of voting stock. to vote separately, the
Directors and stockholders affirmative vote of two-thirds of
possess the power to adopt, amend such class and two-thirds of the
or repeal the By-Laws upon the total shares entitled to vote on
affirmative vote of a majority of the amendment is required to
the board or upon the affirmative amend Pool's Restated Articles of
vote of the holders of a majority Incorporation.
of the voting stock. Pool's By-Laws may be altered,
amended, or repealed only by a
majority vote of the Pool Board.
(2) Number of Directors The number of directors on the The number of directors on the
Nabors Board shall be no more Pool Board shall be no more than
than 11 nor fewer than five, and 10 nor fewer than two, and the
the Nabors Board shall be divided Pool Board shall be divided as
as evenly as possible into three evenly as possible into three
staggered classes, with directors staggered classes, with directors
in each class to be elected every in each class to be elected every
three years. three years.
(3) Removal of Under the Delaware General Under the Texas Business
Directors Corporation Law, directors Corporation Act and the Pool
sitting on a classified board may By-Laws, directors sitting on a
be removed only with cause and on classified board may be removed
an affirmative vote by the only with cause and on an
holders of a majority of shares affirmative vote by the holders
entitled to vote at an election of two-thirds of shares entitled
of directors. to vote at an election of
directors.
(4) Newly Created The Nabors charter provides that Under Texas law and the Pool
Directorships and any vacancy on the Nabors Board By-Laws, any vacancy occurring on
Vacancies resulting from any increase in the Pool Board shall be filled by
the number of directors and any the affirmative vote of the
other vacancy occurring in the remaining members of the Pool
Nabors Board may be filled by the Board then in office, even though
Nabors Board acting by a majority less than a quorum, provided that
of the directors then in office, any director so elected shall
although less than a quorum, for hold office only for the
a term that shall coincide with remainder of the term of the
the term of the class to which director whose departure caused
such director was elected. the vacancy. Under Texas law and
the Pool By-Laws, a directorship
created by reason of an increase
in the number of directors may be
filled by the Pool
56
63
NABORS POOL
------ ----
Board for a term of office
continuing only until the next
election of directors (whether at
an annual or special shareholders
meeting). Texas law provides that
the Pool Board may not fill more
than two such directorships
during the period between two
successive annual meetings of
shareholders.
(5) Special Meeting of Must be held upon written demand May only be called by the board
Stockholders of holders of at least 50% of all of directors, the chairman of the
votes entitled to vote on any board, the president, or by
issue to be considered at the shareholders holding at least 10%
proposed special meeting. of the shares entitled to vote.
(6) Inspection of Books Under Delaware law, any Under Texas law, any stockholder
and Records stockholder of a Delaware who holds at least 5% of all of
corporation may examine the list the outstanding shares of a
of stockholders and any corporation or that has held his
stockholder making a written shares for at least six months
demand may inspect any other will have the right upon written
corporate books and records for demand to examine at any
any purpose reasonably related to reasonable time, for any proper
the stockholder's interest as a purpose, the relevant books and
stockholder. records of account, minutes and
share transfer records of the
corporation.
(7) Vote Required for a Delaware law requires approval of Texas law requires approval of
Merger the board of directors and the the board of directors and the
affirmative vote of a majority of affirmative vote of the holders
the outstanding stock entitled to of at least two- thirds of the
vote thereon in order to effect a shares entitled to vote to
merger. The Nabors charter and approve a merger (unless a
bylaws do not contain any corporation's articles of
provisions relating to incorporation provide for a lower
stockholder approval of mergers. percentage but not less than a
majority of such shares), or if
any class of shares is entitled
to vote as a class on the
approval of a merger, the
affirmative vote of the holders
of at least two-thirds of the
shares in each such class must
also be secured. Similar voting
requirements apply for share
exchanges or conversions. Pool's
charter and bylaws do not contain
any specific provision reducing
the percentage vote required to
approve a merger or otherwise
relating to shareholder approval
of mergers.
(8) Vote Required for Unless the certificate of Texas law generally required the
Sales of Assets incorporation or the board of affirmative vote of the holders
directors requires a greater of at least two-thirds of the
vote, Delaware law generally shares entitled to vote to
requires that the holders of a approve the sale, lease, exchange
majority of the corporation's or other disposition of all or
outstanding stock
57
64
NABORS POOL
------ ----
adopt a resolution authorizing substantially all the
the sale, lease or exchange of corporation's assets if other
all or substantially all of the than in the usual and regular
corporation's property or assets. course of business, or if any
The Nabors charter and bylaws do class of shares is entitled to
not contain any provisions vote as a class on the approval
relating to stockholder approval of a sale, lease, exchange or
of mergers. other disposition of all or
substantially all the
corporation's assets, the vote
required for approval of such
transaction is the affirmative
vote of the holders of at least
two-thirds of the shares
otherwise entitled to vote. Texas
law does not require shareholder
approval of a sale of assets in
the usual and regular course of
business unless otherwise
specified in the articles of
incorporation. Under Texas law, a
sale of assets shall be deemed to
be in the usual and regular
course of business if the
corporation shall, directly or
indirectly, either continue to
engage in one or more businesses
or apply a portion of the
consideration received in
connection with the transaction
to the conduct of a business in
which it engages following the
transactions. The Pool charter
and bylaws do not contain any
specific provisions relating to
shareholder approval of such
transactions.
(9) Special Provisions Nabors has elected not to be Pool is subject to the Texas
Applicable to governed by the anti-takeover Business Combination Law which
Business provisions of Section 203 of the became effective September 1,
Combination with Delaware General Corporation Law, 1997. In general, this law
Substantial entitled "Business Combinations provides that an "issuing public
Stockholders with Interested Stockholders." corporation" such as Pool shall
not, directly or indirectly,
enter into or engage in a merger,
consolidation or disposition of
10% or more of the value of its
assets or other covered "business
combination" with an "affiliated
shareholder" that owns directly
or indirectly 20% or more of its
outstanding voting stock, during
the three-year period immediately
following the date on which the
affiliated shareholder first
became an affiliated shareholder,
unless (a) before the date such
person became an affiliated
shareholder, the board of
directors of the issuing public
corporation
58
65
NABORS POOL
------ ----
approved the business combination
or the acquisition of shares that
caused the affiliated shareholder
to become an affiliated
shareholder, or (b) not less than
six months after the date such
person became an affiliated
shareholder, the business
combination was approved by the
affirmative vote of holders of at
least two-thirds of the issuing
public corporation's outstanding
voting shares not beneficially
owned by the affiliated
shareholder or its affiliates at
a meeting of shareholders and not
by written consent. The Pool
Board's approval of the merger
exempted the pending merger
transaction with Nabors from this
law.
(10) Rights Agreement Nabors has not adopted a Pool adopted a shareholder rights
stockholder rights plan. plan in June 1994. Under certain
circumstances, the Pool rights
agreement will entitle the holder
of Rights to purchase either Pool
common stock or the stock of a
potential acquiror at a
substantially reduced price. The
Pool rights agreement is
described in more detail below.
(11) Dissenters' Rights Section 262 of the applicable Under Texas law, generally a
Delaware law provides shareholder has (A) a right to
stockholders with appraisal dissent from any plan of merger
rights for certain mergers and or consolidation or disposition
consolidations. Appraisal rights to which such corporation is a
are not available to holders of party if the Texas Business
shares listed on a national Corporation Act requires a
securities exchange, quoted on shareholder vote and (B)
Nasdaq National Market System or appraisal rights upon compliance
held of record by more than 2,000 with the statutory procedures.
stockholders or to holders of Under the Texas Business
shares of the surviving Corporation Act, a shareholder of
corporation of the merger if the a corporation does not have the
merger did not require the right to dissent or to assert
approval of the stockholders of appraisal rights if (A) the
such corporation, unless in shares held by such shareholder
either case, the holders of such are part of a class or series of
stock are required pursuant to shares that are listed on a
the merger to accept anything national securities exchange, or
other than (A) shares of stock of held of record by not less than
the surviving corporation, (B) 2,000 holders, on the record date
shares of stock of another fixed to determine the
corporation which are also listed shareholders entitled to vote on
on a national securities the plan of merger or
exchange, Nasdaq National Market consolidation or disposition and
System or held by more than 2,000 (B) the shareholder is not
required by
59
66
NABORS POOL
------ ----
holders, or (C) cash instead of the terms of the plan of merger
fractional shares of such stock. or consolidation or disposition
to accept for his shares any
consideration other than:
(x) shares of a corporation that,
immediately after the effective
date of the merger, will be part
of a class the shares of which
are listed or authorized for
listing upon official notice of
issuance, on a national
securities exchange, or held of
record by not less than 2,000
holders;
or
(y) cash instead of fractional
shares that such shareholder is
otherwise entitled to receive.
(12) Dividends Under Delaware law, a corporation Under Texas law, the board of
may, subject to restrictions in directors of a corporation may
its certificate of incorporation, authorize and the corporation may
pay dividends out of surplus or make distributions; provided,
out of net profits for the fiscal that a distribution may not be
year in which the dividend is made if (A) after giving effect
declared and/or for the preceding to the distribution, the
fiscal year. Dividends out of net corporation would be insolvent or
profits may not be paid when the (B) the distribution exceeds the
capital of the corporation surplus of the corporation.
amounts to less than the However, a corporation may make a
aggregate amount of capital distribution involving a purchase
represented by the issued and or redemption of any of its own
outstanding stock of all classes shares if the purchase or
having a preference upon the redemption is made by the
distribution of assets. corporation to: (A) eliminate
fractional shares, (B) collect or
compromise indebtedness owed by
or to the corporation, (C) pay
dissenting shareholders entitled
to payment for their shares under
applicable Texas law or (D)
effect the purchase or redemption
of redeemable shares in
accordance with applicable Texas
law.
60
67
POOL RIGHTS AGREEMENT
On June 7, 1994, Pool executed the Pool rights agreement and declared a
dividend of one right to purchase preferred stock for each outstanding share of
Pool common stock to shareholders of record at the close of business on June 23,
1994. Each right entitles the registered holder to purchase Pool common stock at
a 50% discount and rights owned by an acquiring person become void.
The rights will separate from Pool common stock and a "distribution date"
will occur, with certain exceptions, upon the earlier of:
- ten business days following a public announcement that a person or group
of affiliated or associated persons (an "acquiring person") has acquired,
or obtained the right to acquire, beneficial ownership of 15% or more of
the outstanding shares of Pool common stock; or
- ten business days following the commencement of a tender offer or
exchange offer that would result in a person's becoming an acquiring
person.
The rights are not exercisable until the distribution date and will expire
at the close of business on June 6, 2004, unless earlier redeemed or exchanged
by Pool.
If a person becomes an acquiring person, each holder of a right, other than
the acquiring person, will have the right to receive, upon exercise of such
right, a number of shares of Pool common stock having a current market price
equal to two times the exercise price of the right. If Pool is acquired in a
merger or other business combination transaction, or 50% or more of Pool's
assets or earning power is sold or transferred, each holder of a right, other
than an acquiring person, shall have the right to receive, upon exercise, a
number of shares of common stock of the acquiring company having a current
market price equal to two times the exercise price of the right.
At any time until ten days following the first date of public announcement
of a person becoming an acquiring person, Pool may redeem the rights in whole,
but not in part, at a price of $0.01 per right, payable, at Pool's option, in
cash, shares of Pool common stock or other consideration. Under certain
circumstances set forth in the Pool rights agreement, redemption may only be
made if a majority of the Pool Board is composed of directors that are
independent of any acquiring person. Immediately upon the effectiveness of the
action of the Pool Board ordering redemption of the rights, the rights will
terminate and the only right of the holders of rights will be to receive the
$0.01 redemption price.
Effective as of January 10, 1999, Pool amended its rights agreement to
except the merger agreement and the merger from the operation of the rights
agreement and to provide that the rights will expire immediately prior to the
closing of the merger.
61
68
LEGAL OPINIONS
The legality of the Nabors common stock to be issued in connection with the
merger will be passed upon by Katherine P. Ellis, Senior Counsel, Nabors
Corporate Services, Inc. Certain United States federal income tax consequences
of the merger
will be passed upon for Naborsus by its special tax counsel, Skadden, Arps, Slate, Meagher & Flom LLP and by
Appleby Spurling & Kempe, Hamilton, Bermuda. Certain matters of Canadian law
will be passed on for Poolus by its special tax
counsel, Bracewell & Patterson, L.L.P. As of July 31, 1999, Ms. Ellis had the
right to acquire 23,250 shares of Nabors common stock through the exercise of
options of Nabors, none of which are vested currently.
EXPERTSStikeman Elliot, Calgary, Canada and Stewart
McKelvey Stirling Scales, Halifax, Canada.
INDEPENDENT ACCOUNTANTS
The consolidatedhistorical financial statements of Pool atNabors as of December 31, 19982001 and
1997,2000 and for each of the three years in the period ended December 31, 1998,2001
incorporated in this prospectus by reference to the Current Report on Form 8-K
of Nabors dated as of October 10, 2002 and the related financial statement schedule
incorporated in this documentprospectus by reference to the Company's Annual Report on Form 10-K
of Nabors Delaware for the year ended December 31, 1998, have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report, which is incorporated herein by reference,
and have been incorporated in reliance upon that report of such firm given upon
their authority as experts in accounting and auditing.
The consolidated financial statements of Nabors at December 31, 1998 and
1997, and for the year ended December 31, 1998, the three months in the period
ended December 31, 1997 and for each of the two years in the period ended
September 30, 1997 incorporated in this document by reference to the Nabors'
Annual Report on Form 10-K for the year ended December 31, 1998,2001 have been so
incorporated in reliance on the reportreports of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of thesaid firm as experts in
auditing and accounting.
RepresentativesWith respect to the unaudited financial information of Deloitte & Touche LLP are expected to be present at the
special meeting. Such representatives will have the opportunity to make a
statement if they desire to do so and are expected to be available to respond to
appropriate questions.
The financial statements of Bayard as of December 31, 1996 and for each of
the two years in the period ended December 31, 1996 incorporated in this
document by reference to Nabors' Current Report on Form 8-K filed on March 1,
1999, have been audited by Grant Thornton LLP, independent public accountants,
as stated in their report, and have been so incorporated in reliance upon that
report of such firm given upon their authority as experts in auditing and
accounting. The consolidated financial statements of Bayard as of December 31,
1997 andNabors Delaware for
the fiscal year thenthree-month periods ended the financial statementsMarch 31, 2002 and 2001 and of Ward
Drilling Company, Inc. as of December 31, 1996 and for the fiscal year then
ended and the financial statements of Trend Drilling Company, Inc. as of
December 31, 1995 and 1996 and for the three fiscal years ended December 31,
1996, 1995, and 1994, incorporated in this document by reference to Nabors'
Current Report on Form 8-K filed on March 1, 1999, have been so incorporated in
reliance on the report of PricewaterhouseCoopers LLP, independent accountants
given the authority of the firm as experts in accounting and auditing. The
financial statements of Bonray Drilling Corporation as of December 31, 1996 and
June 30, 1996 andNabors for the
six-month period ended December 31, 1996 and yearsperiods ended June 30, 19962002 and 19952001, incorporated by reference in
this document by reference to
Nabors' Current Report on Form 8-K filed on March 1, 1999prospectus, PricewaterhouseCoopers LLP reported that they have been audited by
Ernst & Young LLP, independent auditors, and have been so incorporated in
reliance on the report of such firm given upon the authority of such firm as
experts in accounting and auditing.
SHAREHOLDER PROPOSALS
Pool held its most recent annual meeting of shareholders on May 6, 1999. If
the merger is completed, Pool will not convene another annual meeting pursuant
to which proxies are solicited from its shareholders. In the event that a 2000
annual meeting of Pool shareholders is held, however, any proposal that a Pool
share holder intends to present at the 2000 annual shareholders' meeting must be
received by the Corporate Secretary of Pool no later than December 8, 1999 in
order to be considered for inclusion in the Pool proxy materials for that
meeting.
62
69
OTHER MATTERS
As of the date of this document, the Pool Board knows of no matters that
will be presented for consideration at the special meeting other than as
described in this document. If any other matters shall properly come before
either the special meeting or any adjournments or postponements thereof and be
voted upon, the enclosed proxies will be deemed to confer discretionary
authority on the individuals named as proxies therein to vote the shares
represented by such proxies as to any such matters. The persons named as proxies
intend to vote or not to voteapplied
limited procedures in accordance with the recommendation of the Pool
Board.
BY ORDER OF THE BOARD OF DIRECTORS
OF POOL ENERGY SERVICES CO.
/s/ GEOFFREY ARMS
Geoffrey Arms
Corporate Secretary
August 9, 1999
63
70
APPENDIX A
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
NABORS INDUSTRIES, INC.,
STARRY ACQUISITION CORP.
AND
POOL ENERGY SERVICES CO.
DATED AS OF JANUARY 10, 1999
AS AMENDED ON
AUGUST 6, 1999
(COMPOSITE VERSION)
71
TABLE OF CONTENTS
ARTICLE I
THE MERGER
1.1 The Merger............................................ A-1
1.2 Closing/Effective Time................................ A-1
1.3 Effect of the Merger.................................. A-1
1.4 Articles of Incorporation; Bylaws..................... A-2
1.5 Directors and Officers of Merger Sub.................. A-2
ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
2.1 Conversion of Securities.............................. A-2
2.2 Exchange of Certificates.............................. A-3
2.3 Stock Transfer Books.................................. A-5
2.4 Absence of Dissenters' Rights......................... A-5
2.5 Company Stock Options................................. A-5
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
3.1 Organization, Qualification, Etc...................... A-6
3.2 Capital Stock......................................... A-7
3.3 Corporate Authority Relative to this Agreement; No
Violation............................................. A-7
3.4 Reports and Financial Statements...................... A-8
3.5 No Undisclosed Liabilities............................ A-9
3.6 No Violation of Law................................... A-9
3.7 Environmental Laws and Regulations.................... A-9
3.8 No Undisclosed Employee Benefit Plan Liabilities or
Severance Arrangements................................ A-9
3.9 Absence of Certain Changes or Events.................. A-9
3.10 Litigation........................................... A-10
3.11 Ownership of Company Common Stock.................... A-10
3.12 Tax Matters.......................................... A-10
3.13 Required Vote........................................ A-11
3.14 Insurance............................................ A-11
3.15 Intellectual Property................................ A-11
3.16 Material Contracts................................... A-11
3.17 Ownership of Merger Sub; No Prior Activities......... A-12
3.18 Brokers.............................................. A-12
3.19 Property............................................. A-12
3.20 Parent Equipment..................................... A-13
3.21 Permits.............................................. A-13
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
4.1 Organization, Qualification, Etc...................... A-13
4.2 Capital Stock......................................... A-13
4.3 Corporate Authority Relative to this Agreement; No
Violation............................................. A-14
4.4 Reports and Financial Statements...................... A-15
4.5 No Undisclosed Liabilities............................ A-15
4.6 No Violation of Law................................... A-15
4.7 Environmental Laws and Regulations.................... A-15
4.8 Employee Benefit Matters.............................. A-16
4.9 Absence of Certain Changes or Events.................. A-18
4.10 Litigation........................................... A-19
4.11 Company Rights Plan.................................. A-19
A-i
72
4.12 Lack of Ownership of Parent Common Stock.......................................................... A-19
4.13 Tax Matters....................................................................................... A-19
4.14 Required Vote..................................................................................... A-20
4.15 Insurance......................................................................................... A-20
4.16 Intellectual Property............................................................................. A-20
4.17 Material Contracts................................................................................ A-21
4.18 Vessels........................................................................................... A-21
4.19 Brokers........................................................................................... A-22
4.20 Opinion of Financial Advisor...................................................................... A-22
4.21 Property.......................................................................................... A-22
4.22 Company Equipment................................................................................. A-22
4.23 Permits........................................................................................... A-22
4.24 Financial Condition............................................................................... A-22
ARTICLE V
COVENANTS
5.1 Affirmative Covenants of the Company............................................................... A-22
5.2 Negative Covenants of the Company.................................................................. A-23
5.3 Negative Covenants of Parent....................................................................... A-25
5.4 Access and Information............................................................................. A-25
5.5 No Solicitation.................................................................................... A-26
5.6 Confidentiality.................................................................................... A-27
5.7 Inspection of Vessels.............................................................................. A-27
5.8 Company Rights Plan................................................................................ A-28
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 Meetings of Shareholders........................................................................... A-28
6.2 Registration Statement; Proxy Statement............................................................ A-28
6.3 Appropriate Action; Consents; Filings.............................................................. A-29
6.4 Tax Treatment; Affiliates.......................................................................... A-31
6.5 Public Announcements............................................................................... A-31
6.6 AMEX Listing....................................................................................... A-31
6.7 Indemnification of Directors and Officers.......................................................... A-31
6.8 Agreement to Defend................................................................................ A-32
6.9 Obligations of Merger Sub.......................................................................... A-33
6.10 Accountingprofessional standards for Merger............................................................................. A-33
6.11 Takeover Statutes................................................................................. A-33
6.12 Board of Directors of Parent...................................................................... A-33
6.13 Transition Employment............................................................................. A-33
6.14 Additional Agreements............................................................................. A-33
6.15 Notification of Certain Matters................................................................... A-33
6.16 Post-Closing Employee Benefits.................................................................... A-33
ARTICLE VII
CLOSING CONDITIONS
7.1 Conditions to Obligations of Each Party Under this Agreement....................................... A-34
7.2 Additional Conditions to Obligations of Parent and Merger Sub...................................... A-35
7.3 Additional Conditions to Obligations of the Company................................................ A-35
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.1 Termination........................................................................................ A-36
8.2 Effect of Termination.............................................................................. A-37
8.3 Amendment.......................................................................................... A-37
8.4 Waiver............................................................................................. A-37
A-ii
73
8.5 Fees; Expenses and Other Payments.................................................................. A-38
ARTICLE IX
GENERAL PROVISIONS
9.1 Effectiveness of Representations, Warranties and Agreements........................................ A-38
9.2 Notices............................................................................................ A-39
9.3 Certain Definitions................................................................................ A-39
9.4 Headings........................................................................................... A-40
9.5 Severability....................................................................................... A-40
9.6 Entire Agreement................................................................................... A-40
9.7 Assignment......................................................................................... A-40
9.8 Parties in Interest................................................................................ A-40
9.9 Failure or Indulgence Not Waiver; Remedies Cumulative.............................................. A-40
9.10 Governing Law..................................................................................... A-40
9.11 Jurisdiction...................................................................................... A-41
9.12 Counterparts...................................................................................... A-41
A-iii
74
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER dated as of January 10, 1999, as amended
on August 6, 1999, (this "Agreement"), is entered into among NABORS INDUSTRIES,
INC., a Delaware corporation ("Parent"), STARRY ACQUISITION CORP., a Texas
corporation ("Merger Sub") and a wholly owned subsidiary of Parent, and POOL
ENERGY SERVICES CO., a Texas corporation (the "Company").
WHEREAS, upon the terms and subject to the conditions of this Agreement and
in accordance with the Texas Business Corporation Act ("TBCA"), Merger Sub will
merge with and into the Company (the "Merger");
WHEREAS, the respective Boards of Directors of Parent, Merger Sub and the
Company have determined the Merger to be advisable and in the best interests of
their respective corporations and shareholders and to be consistent with, and in
furtherance of, their respective business strategies and goals, and, by
resolutions duly adopted, have approved and adopted this Agreement; and
WHEREAS, for Federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization under the provisions of Section 368(a) of the
United States Internal Revenue Code of 1986, as amended (the "Code"), and that
this Agreement shall constitute a "plan of reorganization" for the purposes of
Section 368 of the Code.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement, the parties hereto agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. Upon the terms and subject to the conditions set forth in
this Agreement, and in accordance with the TBCA, at the Effective Time (as
defined in Section 1.2), Merger Sub shall be merged with and into the Company.
As a result of the Merger, the separate corporate existence of Merger Sub shall
cease and the Company shall continue as the surviving corporation in the Merger
(the "Surviving Corporation").
1.2 Closing/Effective Time. Subject to the terms and conditions of this
Agreement, the closing of the Merger (the "Closing") shall take place (a) at the
offices of Skadden, Arps, Slate, Meagher & Flom LLP, 1600 Smith Street, Houston,
Texas 77002, at 9:00 a.m., local time, on the first business day immediately
following the day on which the last to be fulfilled or waived of the conditions
set forth in Article VII shall be fulfilled or waived in accordance with this
Agreement or (b) at such other time, date or place as Parent and the Company may
agree. The date on which the Closing occurs is referred to in this Agreement as
the "Closing Date". As promptly as practicable after the satisfaction or, if
permissible, waiver of the conditions set forth in Article VII, the parties
hereto shall cause the Merger to be consummated by filing of articles of merger
(the "Articles of Merger") with the Secretary of State of the State of Texas, in
such form as required by, and executed in accordance with the relevant
provisions of, the TBCA. The Merger shall become effective at the time of the
issuance of a certificate of merger by the Secretary of State of the State of
Texas in response to the filing of the Articles of Merger and in accordance with
the TBCA, or at such later time that the parties hereto shall have agreed upon
and designated in the Articles of Merger as the effective time of the Merger
(the "Effective Time").
1.3 Effect of the Merger. At the Effective Time, the effect of the Merger
shall be as provided in the applicable provisions of the TBCA. Without limiting
the generality of the foregoing, and subject thereto, at the Effective Time,
except as otherwise provided herein, all rights, title and interests to all real
property and other property of Merger Sub and the Company shall vest in the
Surviving Corporation, and all liabilities and obligations of Merger Sub and the
Company shall become the liabilities and obligations of the Surviving
Corporation.
A-1
75
1.4 Articles of Incorporation; Bylaws. At the Effective Time, each of the
Articles of Incorporation, as amended, and the Bylaws, as amended, of the
Company shall be amended and restated in its entirety to read as set forth in
Exhibit 1.4A and Exhibit 1.4B, respectively, and as so amended shall be the
Restated Articles of Incorporation and Bylaws of the Surviving Corporation until
further amended in accordance with applicable law.
1.5 Directors and Officers of Merger Sub. The directors of Merger Sub
immediately prior to the Effective Time shall be the directors of the Surviving
Corporation, each to hold office in accordance with the Restated Articles of
Incorporation and Bylaws of the Surviving Corporation, and the officers of the
Company immediately prior to the Effective Time shall be the officers of the
Surviving Corporation, in each case until their respective successors are duly
elected or appointed and qualified.
ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
2.1 Conversion of Securities. At the Effective Time, by virtue of the
Merger and without any action on the part of Parent, Merger Sub, the Company or
any holders of any securities of the foregoing corporations:
(a) Each share of common stock, without par value, of the Company
("Company Common Stock") issued and outstanding immediately prior to the
Effective Time (excluding any treasury shares held by the Company or any of
its Subsidiaries (as defined in Section 9.3(g)), such shares being governed
by Section 2.1(d) of this Agreement, and excluding any shares held by
Parent or any of its Subsidiaries, such shares being governed by Section
2.1(f) of this Agreement), including the associated Company Rights, if any,
outstanding at the Effective Time pursuant to the Company Rights Plan (as
such terms are defined in Section 4.2), shall be converted into the right
to receive 1.025 fully paid, nonassessable shares of common stock (the
"Exchange Ratio"), par value $.10 per share, of Parent ("Parent Common
Stock").
(b) If between the date of this Agreement and the Effective Time the
outstanding shares of Parent Common Stock or Company Common Stock shall
have been changed into a different number of shares or a different class,
by reason of any stock dividend, subdivision, reclassification,
recapitalization, split, combination or exchange of shares or if a "Flip-In
Event" or "Flip-Over Event" (each as defined under the Company Rights Plan
(as defined in Section 4.2)) shall have occurred under the Company Rights
Plan, the Exchange Ratio shall be correspondingly adjusted to reflect such
stock dividend, subdivision, reclassification, recapitalization, split,
combination or exchange of shares or event.
(c) All such shares of Company Common Stock shall no longer be
outstanding, shall automatically be canceled and retired and shall cease to
exist, and each certificate previously evidencing any such shares shall
thereafter represent the right to receive the Merger Consideration (as
defined in Section 2.2(b)). The holdersreview of
such certificates previously
evidencing such shares of Company Common Stock outstanding immediately
prior to the Effective Time shall cease to have any rights with respect to
such shares of Company Common Stock,information. However, their separate reports dated April 17, 2002, except
as otherwise provided herein or
by law. Such certificates previously evidencing shares of Company Common
Stock shall be exchanged for certificates evidencing whole shares of Parent
Common Stock upon the surrender of such certificates in accordance with the
provisions of Section 2.2, without interest. No fractional shares of Parent
Common Stock shall be issued,Notes 1 and in lieu thereof, a cash payment shall be
made pursuant to Section 2.2(e).
(d) Each share of Company Common Stock held in the treasury of the
Company and each share of Company Common Stock owned by any Subsidiary of
the Company immediately prior to the Effective Time shall be canceled and
extinguished without any conversion thereof and no payment shall be made
with respect thereto.
A-2
76
(e) Each share of common stock, par value $.10 per share, of Merger
Sub issued and outstanding immediately prior to the Effective Time (such
number of shares, the "Merger Sub Number") shall be converted into a number
of fully paid, nonassessable shares of common stock of the Surviving
Corporation as is equal to the result obtained by dividing (i) the
aggregate number of shares of Company Common Stock converted into Parent
Common Stock pursuant to Section 2.1(a) of this Agreement by (ii) the
Merger Sub Number.
(f) Each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time and owned by Parent or any
Subsidiary of Parent shall be unaffected by the Merger and shall remain
outstanding following the Effective Time as one fully paid, nonassessable
share of common stock of the Surviving Corporation.
2.2 Exchange of Certificates.
(a) Exchange Agent. As of the Effective Time, Parent shall deposit, or
shall cause to be deposited, with First Chicago Trust Company of New York
or such other bank or trust company designated by Parent and reasonably
acceptable to the Company (the "Exchange Agent"), for the benefit of the
holders of shares of Company Common Stock, for exchange in accordance with
this Article II through the Exchange Agent (i) certificates evidencing such
number of whole shares of Parent Common Stock equal to the Exchange Ratio
multiplied by the number of shares of Company Common Stock outstanding
(other than shares described in Section 2.1(d)) and (ii) additional cash in
consideration of fractional shares as provided in Section 2.2(e) (such
Parent Common Stock and cash being hereinafter referred to as the "Exchange
Fund"). The Exchange Agent shall, pursuant to irrevocable instructions,
deliver the Parent Common Stock and cash out of the Exchange Fund. Except
as contemplated by Sections 2.2(e) and (f), the Exchange Fund shall not be
used for any other purpose.
(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time, Parent will instruct the Exchange Agent to mail to each
holder of record of a certificate or certificates which immediately prior
to the Effective Time evidenced outstanding shares of Company Common Stock
(the "Certificates"), (i) a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates
shall pass, only upon proper delivery of the Certificates to the Exchange
Agent and shall be in such form and have such other provisions as Parent
may reasonably specify) and (ii) instructions for use in effecting the
surrender of the Certificates in exchange for certificates evidencing
shares of Parent Common Stock. Upon surrender of a Certificate for
cancellation to the Exchange Agent together with such letter of
transmittal, duly executed, and such other customary documents as may be
required pursuant to such instructions, the holder of such Certificate
shall be entitled to receive in exchange (A) certificates evidencing that
number of whole shares of Parent Common Stock which such holder has the
right to receive in respect of the shares of Company Common Stock formerly
evidenced by such Certificate in accordance with Section 2.1 and (B) cash
in lieu of fractional shares of Parent Common Stock to which such holder is
entitled pursuant to Section 2.2(e) (such shares of Parent Common Stock and
cash being collectively, the "Merger Consideration"), and the Certificate
so surrendered shall be canceled. In the event of a transfer of ownership
of shares of Company Common Stock which is not registered in the transfer
records of the Company, a certificate evidencing the proper number of
shares of Parent Common Stock may be issued in accordance with this Article
II to a transferee if the Certificate evidencing such shares of Company
Common Stock is presented to the Exchange Agent, accompanied by all
documents required to evidence and effect such transfer and by evidence
that any applicable stock transfer taxes have been paid. Until surrendered
as contemplated by this Section 2.2, each Certificate shall be deemed at
any time after the Effective Time to evidence only the right to receive,
upon such surrender, the Merger Consideration. The Exchange Agent shall not
be entitled to vote or exercise any rights of ownership with respect to the
Parent Common Stock held by it from time to time hereunder, except that it
shall receive and hold all dividends or other distributions paid or
distributed with respect thereto for the account of the persons entitled
thereto.
A-3
77
(c) Distributions with Respect to Unexchanged Shares. No dividends or
other distributions declared or made after the Effective Time with respect
to Parent Common Stock with a record date after the Effective Time shall be
paid to the holder of any unsurrendered Certificate with respect to the
shares of Parent Common Stock evidenced thereby, and no other part of the
Merger Consideration shall be paid to any such holder, until the holder of
such Certificate shall surrender such Certificate, at which time, subject
to the effect of applicable laws, there shall be issued to the holder (i)
certificates evidencing whole shares of Parent Common Stock issued in
exchange therefor and the amount of any cash payable with respect to a
fractional share of Parent Common Stock to which such holder is entitled
pursuant to Section 2.2(e) and the amount of dividends or other
distributions with a record date after the Effective Time then paid with
respect to such whole shares of Parent Common Stock, and (ii) at the
appropriate payment date, the amount of dividends or other distributions
(without interest thereon), with a record date after the Effective Time but
prior to surrender and a payment date occurring after surrender, payable
with respect to such whole shares of Parent Common Stock. No interest shall
be paid on any such amounts.
(d) No Further Rights in Company Common Stock. All shares of Parent
Common Stock issued and cash paid in lieu of fractional shares upon
conversion of the shares of Company Common Stock in accordance with the
terms of this Agreement shall be deemed to have been issued or paid in full
satisfaction of all rights pertaining to such shares of Company Common
Stock.
(e) No Fractional Shares.
(i) No certificates or scrip evidencing fractional shares of Parent
Common Stock shall be issued upon the surrender for exchange of
Certificates, and such fractional share interests will not entitle the
owner thereof to vote or to any rights of a stockholder of Parent.
(ii) Each holder of a Certificate having a fractional interest
arising upon the conversion of such Certificate shall, at the time of
surrender of the Certificate, be paid by the Exchange Agent an amount in
cash equal to the value of such fractional interest based on the average
closing price per share of Parent Common Stock as reported by The Wall
Street Journal (Northeast edition) for the ten consecutive trading days
ending on and including the fifth trading day prior to the Closing Date,
appropriately adjusted for any stock splits, reverse stock splits, stock
dividends, recapitalizations or other similar transactions. No interest
shall be paid on any such amounts. All fractional shares to which a
single record holder would be entitled shall be aggregated.
(f) Termination of Exchange Fund. Any portion of the Exchange Fund
which remains undistributed to the holders of Company Common Stock for one
year after the Effective Time shall be delivered to Parent, upon demand,
and any holders of Company Common Stock who have not then complied with
this Article II shall thereafter look only to Parent for the Merger
Consideration to which they are entitled.
(g) No Liability. Neither Parent nor the Surviving Corporation shall
be liable to any holder of shares of Company Common Stock for any shares of
Parent Common Stock or cash in lieu of fractional shares (or dividends or
distributions with respect thereto) delivered to a public official pursuant
to any applicable abandoned property, escheat or similar law.
(h) Lost Certificates. In the event any Certificate shall have been
lost, stolen or destroyed, upon the making of an affidavit of that fact by
the person claiming such Certificate to be lost, stolen or destroyed and,
if required by the Surviving Corporation, the posting by such person of a
bond in such reasonable amount as the Surviving Corporation may direct as
indemnity against any claim that may be made against it with respect to
such Certificate, the Exchange Agent will issue in exchange for such lost,
stolen or destroyed Certificate the shares of Parent Common Stock and cash
in lieu of fractional shares, and unpaid dividends and distributions on
shares of Parent Common Stock as provided above, deliverable in respect
thereof pursuant to this Agreement.
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2.3 Stock Transfer Books. At the Effective Time, the stock transfer books
of the Company shall be closed, and there shall be no further registration of
transfers of shares of Company Common Stock thereafter on the records of the
Company. On or after the Effective Time, any Certificates presented to the
Exchange Agent or Parent for any reason shall be canceled and exchanged for the
Merger Consideration.
2.4 Absence of Dissenters' Rights. Pursuant to the provisions of Article
5.11(B) of the TBCA, shareholders of the Company are not entitled to exercise
any rights to dissent from the Merger.
2.5 Company Stock Options.
(a) Each holder of an outstanding Company Stock Option (as defined in
Section 4.2) to purchase shares of Company Common Stock shall have the
right exercisable no later than the third business day prior to the Closing
Date to elect either (i) by virtue of the Merger and without further action
on the part of the Company or the holder of such Company Stock Option to
have all (but not part) of such holder's Company Stock Options converted
into options to purchase Parent Common Stock ("Parent Stock Option")
exercisable for that number of whole shares of Parent Common Stock equal to
the product of the number of shares of Company Common Stock covered by a
Company Stock Option immediately prior to the Effective Time multiplied by
the Exchange Ratio rounded up to the nearest whole number of shares of
Parent Common Stock, and the per share exercise price for the shares of
Parent Common Stock issuable upon the exercise of such Parent Stock Options
shall be equal to the quotient determined by dividing (A) the exercise
price per share of Company Common Stock specified for such Company Stock
Option under the applicable Company Stock Option plan or agreement
immediately prior to the Effective Time, by (B) the Exchange Ratio
(rounding the resulting exercise price up to the nearest whole cent) (the
alternative in this clause (i) being the "Roll-Over Alternative"); or (ii)
to be paid in cash immediately after the Effective Time in full
cancellation of all (but not part) of such holder's Company Stock Options
in an amount equal to the product of (x) the number of shares of Company
Common Stock for which the Company Stock Options are exercisable multiplied
by (y) the difference between the per share option exercise price and the
value of 1.025 shares of Parent Common Stock based on the average closing
price per share of Parent Common Stock as reported by the Wall Street
Journal (northeast edition) for the ten consecutive trading days ending on
and including the fifth trading day prior to the Closing Date,
appropriately adjusted for any stock splits, reverse-stock splits, stock
dividends, recapitalizations or similar transactions (the alternative in
this clause (ii) being the "Cash-Out Alternative"). With respect to those
holders of Company Stock Options electing the Roll-Over Alternative, the
date of grant of the Parent Stock Option shall be the date on which the
applicable Company Stock Option originally was granted and the Parent Stock
Option received pursuant to the Roll-Over Alternative shall expire on the
expiration date of the Company Stock Option which it replaces, shall be
fully vested, and may be exercised by the holder thereof at any time on or
before its stated expiration date notwithstanding the earlier termination
of such holder's employment with the Surviving Corporation or one of its
Subsidiaries, or, in the case of non-employee directors' Company Stock
Options, the cessation of the holder's service as a director. As to those
holders who elect the Roll-Over Alternative, such election shall include as
a condition thereto the holder's agreement relieving the Company, Parent
and the Surviving Corporation of (A) any and all obligations to pay or to
reimburse such holder for any excise tax under Section 4999 of the Code or
any gross-up for taxes with respect to such excise tax that arises in
connection with, or is otherwise related to, any incremental value for
purposes of Section 280G of the Code with respect to the Company Stock
Option or the Parent Stock Option for which it is exchanged attributable to
the extension of the term during which the Parent Stock Option is
exercisable beyond that of the Company Stock Option that it replaces, as
contemplated pursuant to the Roll-Over Alternative and (B) all other
liabilities, if any, relating to such incremental value. In addition to the
Roll-Over Alternative and the Cash-Out Alternative, those holders of
Company Options whole are eligible to retire in accordance with the
Company's 1993 Employee Stock Incentive Plan and the agreements thereunder
as of the Closing Date may also elect in lieu of the Roll-Over Alternative
or the Cash-Out Alternative, to have all (but not part) of their
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Company Stock Options converted into Parent Stock Options on the same basis
as set forth above with respect to the Roll-Over Alternative (the
"Retirement Roll-Over Alternative"), provided, however, the Parent Stock
Options received pursuant to such election, shall have a term equal to the
lesser of five years or the remaining term of the Company Stock Options2, as to which the Retirement Roll-Over Alternativedate is elected. Any holderApril 29, 2002, and July 17, 2002,
except for Note 11, as to which the date is August 13, 2002, and Notes 4 and 10,
as to which the date is October 10, 2002, incorporated by reference herein,
state that they did not audit and they do not express an opinion on that
unaudited financial information. Accordingly, the degree of a
Company Stock Option who does not elect anyreliance on their
report on such information should be restricted in light of the Roll-Over Alternative,
the Cash-Out Alternative or the Retirement Roll-Over Alternative shall be
deemed to have elected the Cash-Out Alternative.
(b) By virtuelimited nature
of the Merger and without further action on the part of
the Company or the holder of an Incentive Award, such holder's Incentive
Award shall be converted into the right to receive the number of whole
shares of Parent Common Stock equal to the product of the number of shares
of Company Common Stock covered by an Incentive Award immediately prior to
the Effective Time multiplied by the Exchange Ratio rounded up to the
nearest whole number of shares of Parent Common Stock.
(c) Parent shall reserve for issuance the number of shares of Parent
Common Stock that will become issuable upon the exercise of Parent Stock
Options pursuant to this Section 2.5. As soon as practicable after the
Effective Time, Parent shall file a registration statement on Form S-8 (or
any successor form), or another appropriate form with respect to the shares
of Parent Common Stock subject to Parent Stock Options and shall use its
best efforts to maintain the effectiveness of such registration statement
or registration statements for so long as such options remain outstanding.
Except as otherwise expressly provided herein, the Parent Stock Options
shall bereview procedures applied. PricewaterhouseCoopers LLP is not subject to
the terms and conditions of Parent's 1998 Employee
Stock Option Plan, and except as otherwise contemplated by Parent and
consistent with this Section 2.5(a), the form of stock option agreement
shall be Parent's standard form as in effect on the date hereof.
(d) The Company (i) shall take all necessary action pursuant to the
Company's stock option plans or otherwise and (ii) to the extent necessary
under the terms of the applicable stock option plans and agreements, shall
use its best reasonable efforts to cause the holders of Company Stock
Options to execute any documents necessary, in each case, to effectuate theliability provisions of this Section 2.5.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Except as set forth on the Disclosure Schedule delivered by Parent to the
Company prior to the execution11 of this Agreement (the "Parent Disclosure
Schedule"), each of Parent and Merger Sub jointly and severally represents and
warrants to the Company that:
3.1 Organization, Qualification, Etc. Parent is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and Merger Sub is a corporation duly organized, validly existing and
in good standing under the laws of the State of Texas. Each of Parent and Merger
Sub has the requisite corporate power and authority to own its properties and
assets and to carry on its business as it is now being conducted and is duly
qualified to do business and is in good standing in each jurisdiction in which
the ownership of its properties or the conduct of its business requires such
qualification, except for jurisdictions in which the failure to be so qualified
or in good standing would not, individually or in the aggregate, have a Material
Adverse Effect (as defined below) on Parent. As used in this Agreement, any
reference to any state of facts, event, change or effect having a "Material
Adverse Effect" on or with respect to Parent or the Company, as the case may be,
means such state of facts, event, change or effect that has had, or would
reasonably be expected to have, a material adverse effect on the business,
results of operations or financial condition of the applicable entity and its
Subsidiaries, taken as a whole, exclusive of such effects on general economic
conditions or the oil and gas, contract drilling, workover service or oilfield
service industries in general. A Material Adverse Effect shall be deemed to
exist if there shall occur any event which causes or may reasonably be expected
to cause or result in actual
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monetary loss not covered by insurance which exceeds $30 million, in the case of
Parent, or $10 million, in the case of the Company. The copies of Parent's
Restated Certificate of Incorporation and By-laws which have been delivered to
the Company are complete and correct and in full force and effect on the date of
this Agreement. Each of Parent's Significant Subsidiaries (as defined in Section
9.3(f)) is a corporation duly organized, validly existing and (if applicable) in
good standing under the laws of its jurisdiction of incorporation or
organization, has the requisite power and authority to own its properties and to
carry on its business as it is now being conducted, and is duly qualified to do
business and is (if applicable) in good standing in each jurisdiction in which
the ownership of its property or the conduct of its business requires such
qualification, except for jurisdictions in which the failure to be so qualified
or (if applicable) in good standing would not, individually or in the aggregate,
have a Material Adverse Effect on Parent. All the outstanding shares of capital
stock of, or other ownership interests in, Parent's Significant Subsidiaries are
validly issued, fully paid and non-assessable and are owned by Parent, directly
or indirectly, free and clear of all liens, claims, charges or encumbrances,
except for restrictions contained in credit agreements and similar instruments
to which Parent is a party under which no event of default has occurred or
arisen. There are no existing options, rights of first refusal, preemptive
rights, calls or commitments of any character relating to the issued or unissued
capital stock or other securities of, or other ownership interests in, any
Significant Subsidiary of Parent.
3.2 Capital Stock. The authorized stock of Parent consists of 200,000,000
shares of common stock, par value $.10 per share ("Parent Common Stock"),
10,000,000 shares of preferred stock, par value $.10 per share ("Parent
Preferred Stock"), and 8,000,000 shares of Class B Stock, par value $.10 per
share ("Parent Class B Stock"). As of December 31, 1998, 100,808,778 shares of
Parent Common Stock were issued and outstanding and no shares of Parent
Preferred Stock or Parent Class B Stock were issued or outstanding. All the
outstanding shares of Parent Common Stock have been validly issued and are fully
paid and non-assessable. As of December 31, 1998, there were no outstanding
subscriptions, convertible or exchangeable securities, options, warrants, calls,
rights or other arrangements or commitments obligating Parent to issue, deliver
or sell any shares of its capital stock or debt securities, or any securities of
any kind convertible into its capital stock, or obligating Parent to grant,
extend or enter into any such subscription, option, warrant, call, right or
other arrangement or commitment other than: (a) options and other rights to
receive or acquire 18,118,266 shares of Parent Common Stock granted on or prior
to December 31, 1998 pursuant to employee incentive or benefit plans, programs
and arrangements and non-employee director plans; (b) warrants to purchase
200,000 shares of Parent Common Stock issued to the former stockholders of an
acquired entity; (c) rights to acquire shares of Parent Common Stock upon
conversion of Parent's 5% Convertible Subordinated Notes due May 15, 2006; and
(d) approximately 6,825,000 shares of Parent Common Stock, options and other
rights to receive or acquire approximately 486,000 shares of Parent Common Stock
and warrants to receive or acquire approximately 142,000 shares of Parent Common
Stock, all issuable in connection with the closing of that certain Agreement and
Plan of Merger dated October 19, 1998 between Parent, Nabors Acquisition Corp.
VII and Bayard Drilling Technologies, Inc. (the "Bayard Merger Agreement").
Except for (i) the issuance of shares of Parent Common Stock pursuant to the
options and other rights referred to in clauses 3.2(a), (b), (c) and (d), (ii)
any grants of options or other rights to acquire shares of Parent Common Stock
made to employees or non-employee directors in the ordinary course of business
after December 31, 1998, pursuant to employee incentive or benefit plans,
programs or arrangements and non-employee director plans and (iii) potential
future issuances of Parent Common Stock, options, warrants or similar rights to
acquire Parent Common Stock for not less than fair value, in connection with
acquisitions by Parent, since December 31, 1998, no shares of Parent Common
Stock, Parent Preferred Stock or Parent Class B Stock have been issued and no
options, warrants or other securities convertible into shares of capital stock
of Parent have been issued or granted. The shares of Parent Common Stock to be
issued as consideration in the Merger are duly authorized and, when issued in
accordance with the terms of this Agreement, will be validly issued, fully paid
and nonassessable. Except as provided in Section 5.5 of the Bayard Merger
Agreement, Parent has not granted any registration rights with respect to its
securities that are currently exercisable.
3.3 Corporate Authority Relative to this Agreement; No Violation. Each of
Parent and Merger Sub has the corporate power and authority to enter into this
Agreement and, subject to the receipt of any
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required Parent Stockholder Authorization (as defined in Section 3.13), to carry
out its obligations hereunder. The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby have been duly and
validly authorized by the Boards of Directors of Parent and Merger Sub, and,
subject to the receipt of Parent Stockholder Authorization (if required), no
other corporate proceedings on the part of Parent or Merger Sub are necessary to
authorize the consummation of the transactions contemplated hereby. The Boards
of Directors of Parent and Merger Sub have determined that the transactions
contemplated by this Agreement are in the best interests of such entities and
their respective stockholders. This Agreement has been duly and validly executed
and delivered by Parent and Merger Sub and, assuming this Agreement constitutes
a valid and binding agreement of the Company and subject to the receipt of
Parent Stockholder Authorization (if required), this Agreement constitutes a
valid and binding agreement of Parent and Merger Sub, enforceable against them
in accordance with its terms (except insofar as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally, or by principles governing the
availability of equitable remedies). Neither Parent nor Merger Sub is subject to
or obligated under any charter, by-law or contract provision or any license,
franchise or permit, or subject to any order or decree, which would be breached
or violated by its executing or, subject to the receipt of Parent Stockholder
Authorization (if required), carrying out the transactions contemplated by this
Agreement, except for any breaches or violations which would not, individually
or in the aggregate, have a Material Adverse Effect on Parent. Other than in
connection with or in compliance with the provisions of the TBCA, the Securities Act of 1933 as amended (the "Securities Act"),for their
report on the Securities Exchange Act of
1934, as amended (the "Exchange Act"), the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), Section 4043 of ERISA (as
defined in Section 3.8), the regulationsunaudited financial information because that report is not a
"report" or a "part" of the American Stock Exchange, Inc.
("AMEX") and the securities or blue sky laws of the various states
(collectively, the "Parent Required Approvals"), no authorization, consent or
approval of, or filing with, any governmental body or authority is necessary for
the consummation by Parent of the transactions contemplated by this Agreement,
except for such authorizations, consents, approvals or filings, the failure to
obtain or make which would not, individually or in the aggregate, have a
Material Adverse Effect on Parent or substantially impair or delay the
consummation of the transactions contemplated hereby.
3.4 Reports and Financial Statements. Parent has previously furnished to
the Company true and complete copies of: (a) Parent's Annual Reports on Form
10-K filed with the Securities and Exchange Commission (the "SEC") for each of
the years ended September 30, 1995 through 1997; (b) Parent's Quarterly Reports
on Form 10-Q filed with the SEC for the quarters ended December 31, 1997, March
31, 1998, June 30, 1998 and September 30, 1998; (c) each definitive proxy
statement filed by Parent with the SEC since September 30, 1995; (d) each final
prospectus filed by Parent with the SEC since September 30, 1995, except any
final prospectus constituting part of a Form S-8; and (e) all Current Reports on
Form 8-K filed by Parent with the SEC since October 1, 1997. As of their
respective dates, such reports, proxy statements and prospectuses (collectively,
the "Parent SEC Reports") (i) complied as to form in all material respects with
the applicable requirements of the Securities Act, the Exchange Act and the
rules and regulations promulgated thereunder and (ii) did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. Except to the extent
that information contained in any Parent SEC Report has been revised or
superseded by a later filed Parent SEC Report, none of the Parent SEC Reports
contains any untrue statement of a material fact or omits to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The audited consolidated financial statements and unaudited
consolidated interim financial statements included in the Parent SEC Reports
(including any related notes and schedules) have been prepared in accordance
with and fairly present the financial position of Parent and its consolidated
Subsidiaries as of the dates thereof and the results of operations and cash
flows for the periods or as of the dates then ended (subject, where appropriate,
to normal year-end adjustments), in each case in accordance with past practice
and generally accepted accounting principles in the United States ("GAAP")
consistently applied during the periods involved (except (i) as otherwise
disclosed in the notes thereto, (ii) in the case of unaudited interim
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financial statements, such differences in presentation or omissions as are
permitted by Rule 10-01 of Regulation S-X promulgated by the SEC and (iii) the
unaudited interim financial statements do not contain all notes required by
GAAP). Since October 1, 1996, Parent has timely filed all material reports,
registration statements and other filings required to be filed by it with the
SEC under the rules and regulations of the SEC, and each such report,
registration statement prepared or other filing met the standards set forth in the second
sentence of this Section 3.4.
3.5 No Undisclosed Liabilities. Neither Parent nor any of its Subsidiaries
has any liabilities or obligations of any nature, whether or not accrued,
contingent or otherwise, of a type required to be reflected on a balance sheet
prepared in accordance with GAAP, except (a) liabilities or obligations
reflected in the Parent SEC Reports filed after September 30, 1997 but prior to
the date hereof ("Parent Filed SEC Reports"), (b) liabilities and obligations
incurred under this Agreement and fees and expenses related thereto, (c)
liabilities and obligations incurred in the ordinary course of business after
September 30, 1998 and (d) liabilities or obligations which are not reasonably
expected, individually or in the aggregate, to have a Material Adverse Effect on
Parent.
3.6 No Violation of Law. The businesses of Parent and its Subsidiaries are
not being conducted in violation of any law, ordinance or regulation of any
governmental body or authority (provided that no representation or warranty is
made in this Section 3.6 with respect to Environmental Laws (as defined in
Section 3.7)) except (a) as described in the Parent Filed SEC Reports and (b)
for violations or possible violations which would not, individually or in the
aggregate, have a Material Adverse Effect on Parent.
3.7 Environmental Laws and Regulations. Except as described in the Parent
Filed SEC Reports, (a) Parent and each of its Subsidiaries are in compliance
with all applicable international, federal, state, local and foreign laws and
regulations relating to pollution or protection of human health or the
environment (including, without limitation, ambient air, surface water, ground
water, land surface or subsurface strata) (collectively, "Environmental Laws"),
which compliance includes, but is not limited to, the possessioncertified by
Parent and
its Subsidiaries of all material permits and other governmental authorizations
required under applicable Environmental Laws, and compliance with the terms and
conditions thereof, except for noncompliance which would not, individually or in
the aggregate, have a Material Adverse Effect on Parent; (b) neither Parent nor
any of its Subsidiaries has received written notice of, or, to the knowledge of
Parent, is the subject of, any actions, causes of action, claims,
investigations, demands or notices by any Person asserting an obligation to
conduct investigations or clean-up activities under Environmental Laws or
alleging liability under or noncompliance with any Environmental Laws
(collectively, "Environmental Claims") which would, individually or in the
aggregate, have a Material Adverse Effect on Parent; and (c) to the knowledge of
Parent, there are no facts, circumstances or conditions in connection with the
operation of the businesses of Parent and its Subsidiaries or any currently or
formerly owned, leased or operated facilities that are reasonably likely to lead
to any such Environmental Claims in the future, except for any such
Environmental Claims which would not, individually or in the aggregate, have a
Material Adverse Effect on Parent.
3.8 No Undisclosed Employee Benefit Plan Liabilities or Severance
Arrangements. Except as described in the Parent Filed SEC Reports, all "employee
benefit plans," as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), maintained or contributed to by
Parent or its Subsidiaries are in compliance with all applicable provisions of
ERISA and the Code, and Parent and its Subsidiaries do not have any liabilities
or obligations with respect to any such employee benefit plans, whether accrued,
contingent or otherwise, except (a) as described in the Parent Filed SEC
Reports, and (b) for instances of noncompliance or liabilities or obligations
that would not, individually or in the aggregate, have a Material Adverse Effect
on Parent. No employee of Parent will be entitled to any additional benefits or
any acceleration of the time of payment or vesting of any benefits under any
employee incentive or benefit plan, program or other arrangement as a result of
the transactions contemplated by this Agreement.
3.9 Absence of Certain Changes or Events. Other than as disclosed in the
Parent Filed SEC Reports, since October 1, 1997 the businesses of Parent and its
Subsidiaries have been conducted in all
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material respects in the ordinary course consistent with past practice, and
there has not been any event, occurrence, development or state of circumstances
or facts that has had, or would have, a Material Adverse Effect on Parent.
3.10 Litigation. Except as described in the Parent Filed SEC Reports,
there are no actions, suits or proceedings pending (or, to Parent's knowledge,
threatened) against or affecting Parent or its Subsidiaries, or any of their
respective properties at law or in equity, or before any federal, state, local
or foreign governmental body or authority, which, individually or in the
aggregate, are reasonably likely to have a Material Adverse Effect on Parent.
The Parent Disclosure Schedule sets forth a complete list of all pending or
threatened actions, suits or proceedings involving amounts in excess of
$250,000.
3.11 Ownership of Company Common Stock. As of the date of this Agreement,
Parent and its Subsidiaries own 2,209,500 shares of Company Common Stock or
other securities convertible into shares of Company Common Stock.
3.12 Tax Matters.
(a) All federal, state, local and foreign Tax Returns (as defined in
Section 3.12(c)) required to be filed by or on behalf of Parent, each of
its Subsidiaries, and each affiliated, combined, consolidated or unitary
group of which Parent or any of its Subsidiaries (i) is a member (a
"Current Parent Group") or (ii) has been a member within six years prior to
the date hereof but is not currently a member, but only insofar as any such
Tax Return relates to a taxable period ending on a date within the last six
years (a "Past Parent Group" and, together with Current Parent Groups, a
"Parent Affiliated Group") have been timely filed, and all such Tax Returns
are complete and accurate except to the extent any failure to file or any
inaccuracies in filed returns would not, individually or in the aggregate,
have a Material Adverse Effect on Parent (it being understood that the
representations made in this Section 3.12, to the extent that they relate
to Past Parent Groups, or to any Subsidiary of Parent for periods prior to
the time such Subsidiary was acquired by Parent, are made to the knowledge
of Parent). All Tax Returns include any required disclosure of all
positions taken therein that could give rise to a substantial underpayment
penalty within Section 6662 of the Code or similar provision of state,
local, foreign or other law. All Taxes (as defined in Section 3.12(c)) due
and owing by Parent, any Subsidiary of Parent or any Parent Affiliated
Group have been paid, or adequately reserved for, except to the extent any
failure to pay or reserve would not, individually or in the aggregate, have
a Material Adverse Effect on Parent. There is no audit examination,
deficiency, refund litigation, proposed adjustment or matter in controversy
with respect to any Taxes due and owing by Parent, any Subsidiary of Parent
or any Parent Affiliated Group which would, individually or in the
aggregate, have a Material Adverse Effect on Parent. All assessments for
Taxes due and owing by Parent, any Subsidiary of Parent or any Parent
Affiliated Group with respect to completed and settled examinations or
concluded litigation have been paid. As soon as practicable after the
public announcement of the execution of this Agreement, Parent will provide
the Company with written schedules of (i) the taxable years of Parent for
which the statutes of limitations with respect to federal income Taxes have
not expired, and (ii) with respect to federal income Taxes, those years for
which examinations have been completed, those years for which examinations
are presently being conducted, and those years for which examinations have
not yet been initiated. Parent and each of its Subsidiaries have complied
in all material respects with all rules and regulations relating to the
payment and withholding of Taxes, except to the extent any such failure to
comply would not, individually or in the aggregate, have a Material Adverse
Effect on Parent.
(b) None of Parent nor any of its Subsidiaries knows of any fact or
has taken any action that could reasonably be expected to prevent the
Merger from qualifying as a reorganizationPricewaterhouseCoopers LLP within the meaning of Section
368(a)Sections 7 and 11 of the Code.
(c) For purposes of this Agreement: (i) "Taxes" means any and all
federal, state, local, foreign or other taxes of any kind (together with
any and all interest, penalties, additions to tax and additional amounts
imposed with respect thereto) imposed by any taxing authority, including,
without limitation, taxes or other charges on or with respect to income,
franchises, windfall or other profits, gross
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receipts, property, sales, use, capital stock, payroll, employment, social
security, workers' compensation, unemployment compensation, or net worth,
and taxes or other charges in the nature of excise, withholding, ad valorem
or value added, and (ii) "Tax Return" means any return, report or similar
statement (including the attached schedules) required to be filed with
respect to any Tax, including, without limitation, any information return,
claim for refund, amended return or declaration of estimated Tax.
3.13 Required Vote. Assuming that Parent's pending acquisition of Bayard
Drilling Technologies, Inc. is consummated prior to the Closing Date, no vote of
the stockholders of Parent ("Parent Stockholder Authorization") is required by
law, the charter or by-laws of Parent or otherwise in order to consummate the
Merger and the transactions contemplated hereby. No other vote of the
stockholders of Parent is required by law, the charter or by-laws of Parent or
otherwise in order for Parent to consummate the Merger and the transactions
contemplated hereby.
3.14 Insurance. The Parent Disclosure Schedule sets forth all material
policies of insurance or programs of self-insurance by which Parent or any of
its Subsidiaries or any of their respective properties or assets are covered
against present losses, all of which are now in full force and effect. Parent
agrees to maintain such policies (or policies of substantially the same nature)
in full force and effect at all times until the Effective Time. The Parent
Disclosure Schedule sets forth for the current policy year and each of the
preceding five policy years (i) a summary of the loss experience under each
policy; (ii) a statement describing each claim under an insurance policy which
sets forth the name of the claimant, a description of the policy, and the amount
and a brief description of the claim; and (iii) a statement describing the loss
experience for all claims that were self-insured, including the number and
aggregate cost of such claims. Neither Parent nor any of its Subsidiaries has
received any refusal of coverage or any notice that a defense will be afforded
with reservation of rights.
3.15 Intellectual Property. Parent and its Subsidiaries own or possess
adequate licenses or other valid rights to use all patents, patent rights,
trademarks, trademark rights and proprietary information used or held for use in
connection with their respective businesses as currently being conducted, except
where the failure to own or possess such licenses and other rights would not
have, individually or in the aggregate, a Material Adverse Effect on Parent, and
there are no assertions or claims challenging the validity of any of the
foregoing which are likely to have, individually or in the aggregate, a Material
Adverse Effect on Parent. The conduct of Parent's and its Subsidiaries'
businesses as currently conducted does not conflict with any patents, patent
rights, licenses, trademarks, trademark rights, trade names, trade name rights
or copyrights of others in any way likely to have, individually or in the
aggregate, a Material Adverse Effect on Parent. The systems, processes, and
computer software and hardware used, operated, sold or licensed by Parent or its
Subsidiaries that is material to its business or its internal operations is
capable of providing or is being or will be adapted, or is capable of being
replaced, to provide uninterrupted millennium functionality to record, store,
process and present calendar dates falling on or after January 1, 2000 in
substantially the same manner and with substantially the same functionality as
such systems, processes, software and hardware records, stores, processes and
presents such calendar dates falling on or before December 31, 1999, except as
would not have a Material Adverse Effect on Parent. The costs of the adaptations
and replacements referred to in the prior sentence will not have a Material
Adverse Effect on Parent.
3.16 Material Contracts. The Parent Disclosure Schedule lists the
following contracts and other agreements to which Parent or any of its
Subsidiaries is a party (other than intercompany arrangements) as of the date
hereof (collectively, the "Parent Contracts"):
(a) any agreement (or group of related agreements) for the lease of
personal property to or from any person providing for lease payments in
excess of $5,000,000 per annum and a term of more than one year;
(b) any agreement (or group of related agreements) for the purchase or
sale of raw materials, commodities, supplies, products, or other personal
property, or for the furnishing or receipt of services,
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the performance of which has a term more than six months, and involves
consideration in excess of $5,000,000;
(c) any partnership or joint venture agreement;
(d) any agreement (or group of related agreements) under which it has
created, incurred, assumed, or guaranteed any indebtedness for borrowed
money, or any capitalized lease obligation, in excess of $5,000,000, or
under which it has imposed a lien, security interest or other encumbrance
on any of its assets, tangible or intangible, to secure such indebtedness
or obligations;
(e) any agreement which purports to limit in any material respect the
manner in which, or the localities in which, all or any material portion of
the business of Parent and its Subsidiaries, taken as a whole, or the
Company and its Subsidiaries, taken as a whole, is conducted;
(f) any agreement with any of the stockholders of Parent and their
affiliates relating to the voting, transfer or disposition of Parent's
securities;
(g) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance or other material plan or
arrangement (including any employee benefit plan) for the benefit of its
current or former directors, officers and employees;
(h) any collective bargaining agreement;
(i) all turnkey and footage drilling contracts and all daywork
drilling contracts for amounts in excess of $2,000,000 or that are not
terminable or subject to completion within 90 days;
(j) any agreement under which the consequences of a default or
termination could have a Material Adverse Effect on Parent; and
(k) any other agreement (or group of related agreements) the
performance of which involves consideration in excess of $5,000,000 other
than agreements entered into in the ordinary course.
There is no contract or agreement that is material to the business, financial
condition or results of operations of Parent and its Subsidiaries, taken as a
whole, that is not set forth in the Parent Disclosure Schedule. Neither Parent
nor any of its Subsidiaries is in violation or default under (nor does there
exist any condition which upon the passage of time or the giving of notice would
cause a violation or default under) any Parent Contract, other than such
violations or defaults as would not have a Material Adverse Effect on Parent. To
the knowledge of Parent, none of the other parties to the Parent Contracts is in
violation of or in default under (nor does there exist any condition which upon
the passage of time or the giving of notice would cause a violation or default
under) any Parent Contract, other than such violations or defaults as would not
have a Material Adverse Effect on Parent.
3.17 Ownership of Merger Sub; No Prior Activities. Merger Sub is a direct,
wholly owned subsidiary of Parent. Except for obligations or liabilities
incurred in connection with its incorporation or organization and the
transactions contemplated by this Agreement and except for this Agreement and
any other agreements or arrangements contemplated by this Agreement, Merger Sub
has not and will not have incurred, directly or indirectly, through any
Subsidiary or affiliate, any obligations or liabilities or engaged in any
business activities of any type or kind whatsoever or entered into any
agreements or arrangements with any person.
3.18 Brokers. Other than Merrill Lynch, Pierce, Fenner & Smith
Incorporated, no broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Parent or Merger Sub.
3.19 Property. Parent and each of the Subsidiaries, as the case may be,
have sufficient title or leaseholds to property to conduct their respective
businesses as currently conducted with only such exceptions as individually or
in the aggregate would not have a Material Adverse Effect on Parent.
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3.20 Parent Equipment. Parent and its Subsidiaries have such ownership of
or such rights by license, lease or other agreement to all equipment used or
necessary to conduct their respective businesses as currently conducted (the
"Parent Equipment") with only such exceptions as individually or in the
aggregate would not have a Material Adverse Effect on Parent. The Parent
Equipment that is currently under contract or is being actively marketed by
Parent or a Subsidiary is in good operating condition and repair and adequate
for the uses to which it is being put.
3.21 Permits. Parent and each of its Significant Subsidiaries has all
permits, licenses, franchises and other governmental authorizations necessary to
conduct their respective businesses as currently conducted with only such
exceptions as individually or in the aggregate would not have a Material Adverse
Effect on Parent. All such permits, licenses, franchises and authorizations are
in full force and effect and Parent is not aware of any pending or threatened
suspension, cancellation or termination of any such permit, license, franchise
or authorization, with only such exceptions as individually or in the aggregate
would not have a Material Adverse Effect on Parent.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth on the Disclosure Schedule delivered by the Company to
Parent prior to the execution of this Agreement (the "Company Disclosure
Schedule"), the Company represents and warrants to Parent and Merger Sub that:
4.1 Organization, Qualification, Etc. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Texas and has the requisite corporate power and authority to own its properties
and assets and to carry on its business as it is now being conducted and is duly
qualified to do business and is in good standing in each jurisdiction in which
the ownership of its properties or the conduct of its business requires such
qualification, except for jurisdictions in which the failure to be so qualified
or in good standing would not, individually or in the aggregate, have a Material
Adverse Effect on the Company. The copies of the Company's Articles of
Incorporation, as amended, and Bylaws, as amended, which have been delivered to
Parent are complete and correct and in full force and effect on the date of this
Agreement. Each of the Company's Significant Subsidiaries is duly organized,
validly existing and (if applicable) in good standing under the laws of its
jurisdiction of incorporation or organization, has the power and authority to
own its properties and to carry on its business as it is now being conducted,
and is duly qualified to do business and is (if applicable) in good standing in
each jurisdiction in which the ownership of its property or the conduct of its
business requires such qualification, except for jurisdictions in which the
failure to be so qualified or (if applicable) in good standing would not,
individually or in the aggregate, have a Material Adverse Effect on the Company.
All the outstanding shares of capital stock of, or other ownership interests in,
the Company's Significant Subsidiaries are validly issued, fully paid and
non-assessable and are owned by the Company, directly or indirectly, free and
clear of all liens, claims, charges or encumbrances, except for restrictions
contained in credit agreements and similar instruments to which the Company is a
party under which no event of default has occurred or arisen. There are no
existing options, rights of first refusal, preemptive rights, calls or
commitments of any character relating to the issued or unissued capital stock or
other securities of, or other ownership interests in, any Significant Subsidiary
of the Company.
4.2 Capital Stock. The authorized capital stock of the Company consists of
40,000,000 shares of Company Common Stock and 1,000 shares of preferred stock,
without par value ("Company Preferred Stock"). As of January 8, 1999, 21,114,655
shares of Company Common Stock were issued and outstanding, no shares of Company
Common Stock were held in the Company's treasury and 1,000 shares of Company
Preferred Stock were held in the Company's treasury. All of the shares of
Company Common Stock and Company Preferred Stock (whether outstanding or in
treasury) have been validly issued and are fully paid and nonassessable. As of
January 8, 1999, there were no outstanding subscriptions, convertible or
exchangeable securities, options, warrants, or other rights, arrangements or
commitments obligating the Company to issue, deliver or sell any shares of its
capital stock or debt securities, or any securities of any
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kind convertible into its capital stock, or obligating the Company to grant,
extend or enter into any such subscription, option, warrant, or other right,
arrangement or commitment, other than: (a) rights ("Company Rights") to acquire
shares of the Company Common Stock pursuant to the Rights Agreement, dated as of
June 7, 1994, between the Company and The First National Bank of Boston (the
"Company Rights Plan") and (b) options to acquire 1,431,754 shares of Company
Common Stock granted on or prior to January 8, 1999, (the "Company Stock
Options") and incentive awards and other similar rights to receive up to a
maximum of 174,954 shares of the Company Common Stock granted on or prior to
January 8, 1999 ("Incentive Awards"), pursuant to employee incentive or benefit
plans, programs and arrangements and nonemployee director plans. Except for the
issuance of shares of the Company Common Stock pursuant to the options, awards
and other rights referred to in clauses (a) and (b) of this Section 4.2, since
January 8, 1999, no shares of Company Common Stock or Company Preferred Stock
have been issued and no options, awards or other securities convertible into
shares of capital stock of the Company have been issued, awarded or granted.
Section 4.2 of the Company Disclosure Schedule sets forth a true and complete
list of all Company Stock Options and Incentive Awards, showing for each holder
the number and type of Company Stock Options held, the exercise prices thereof,
and the dates of grant, expiration and vesting thereof. The Company has made
available to Parent complete and correct copies of all agreements evidencing the
Company Stock Options and Incentive Awards. The Company has not granted any
registration rights with respect to its securities that are currently
exercisable.
4.3 Corporate Authority Relative to this Agreement; No Violation. The
Company has the requisite corporate power and authority to execute and deliver
this Agreement and, subject to the receipt of the Company Shareholder Approval
(as defined in Section 4.14), to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of the Company and, subject to the receipt of Company
Shareholder Approval, no other corporate proceedings on the part of the Company
are necessary to authorize the consummation of the transactions contemplated
hereby and thereby. The Board of Directors of the Company has taken all
appropriate action so that none of the Company, Parent or Merger Sub will be
subject to the limitations on "business combinations" set forth in Part Thirteen
of the TBCA by virtue of the Company, Parent and Merger Sub entering into this
Agreement and consummating the transactions contemplated hereby. The Board of
Directors of the Company has determined that the transactions contemplated by
this Agreement are advisable and in the best interests of the Company and that
it will recommend to the Company's shareholders that they adopt this Agreement.
Neither the Company nor any affiliate or associate of the Company has, at any
time during the last three years, owned in excess of 15% of the Parent Common
Stock. This Agreement has been duly and validly executed and delivered by the
Company and, assuming this Agreement constitutes a valid and binding agreement
of the other parties hereto and the Company Shareholder Approval is received,
this Agreement constitutes a valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms (except insofar as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights
generally, or by principles governing the availability of equitable remedies).
Neither the Company nor any of its Subsidiaries is subject to or obligated under
any charter, by-law, joint venture or partnership agreement or contract
provision or any license, franchise or permit, or subject to any order or
decree, which would be breached or violated by its executing or, subject to the
receipt of Company Shareholder Approval, carrying out the transactions
contemplated by this Agreement, except for any breaches or violations which
would not, individually or in the aggregate, have a Material Adverse Effect on
the Company. The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby will not (a) cause a change in control
to occur under the Shareholders Agreement by and between Pool International Inc.
and Arabian Petroleum Services Company ("Petroserv"), dated as of September 20,
1974, as amended to the date of this Agreement or under any other governing
documents related thereto (collectively, the "Saudi Joint Venture Agreement"),
(b) result in Petroserv having the right to acquire in excess of 65% of Pool
Arabia, Ltd. or (c) result in Petroserv obtaining management control of Pool
Arabia, Ltd. Other than in connection with or in compliance with the provisions
of the TBCA, the
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Securities Act, the Exchange Act, the HSR Act, Section 4043 of ERISA and the
securities or blue sky laws of the various states (collectively, the "Company
Required Approvals"), no authorization, consent or approval of, or filing with,
any governmental body or authority is necessary for the consummation by the
Company of the transactions contemplated by this Agreement, except for such
authorizations, consents, approvals or filings, the failure to obtain or make
which would not, individually or in the aggregate, have a Material Adverse
Effect on the Company or substantially impair or delay the consummation of the
transactions contemplated hereby.
4.4 Reports and Financial Statements. The Company has previously furnished
to Parent true and complete copies of: (a) the Company's Annual Reports on Form
10-K filed with the SEC for each of the years ended December 31, 1995 through
1997; (b) the Company's Quarterly Reports on Form 10-Q filed with the SEC for
the quarters ended March 31, 1998, June 30, 1998 and September 30, 1998; (c)
each definitive proxy statement filed by the Company with the SEC since December
31, 1995; (d) each final prospectus filed by the Company with the SEC since
December 31, 1995, except any final prospectus constituting part of a Form S-8;
and (e) all Current Reports on Form 8-K filed by the Company with the SEC since
January 1, 1998. As of their respective dates, such reports, proxy statements
and prospectuses (collectively, "Company SEC Reports") (i) complied as to form
in all material respects with the applicable requirements of the Securities Act,
the Exchange Act, and the rules and regulations promulgated thereunder and (ii)
did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Except to the extent that information contained in any Company SEC
Report has been revised or superseded by a later filed Company SEC Report, none
of Company SEC Reports contains any untrue statement of a material fact or omits
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading. The audited consolidated financial statements and
unaudited consolidated interim financial statements included in the Company SEC
Reports (including any related notes and schedules) have been prepared in
accordance with and fairly present the financial position of the Company and its
consolidated Subsidiaries as of the dates thereof and the results of their
operations and their cash flows for the periods or as of the dates then ended
(subject, where appropriate, to normal year-end adjustments), in each case in
accordance with past practice and GAAP consistently applied during the periods
involved (except (i) as otherwise disclosed in the notes thereto, (ii) in the
case of unaudited interim financial statements, such differences in presentation
or omissions as are permitted by Rule 10-01 of Regulation S-X promulgated by the
SEC and (iii) the unaudited interim financial statements do not contain all
notes required by GAAP). Since January 1, 1996, the Company has timely filed all
material reports, registration statements and other filings required to be filed
by it with the SEC under the rules and regulations of the SEC, and each such
report, registration statement or other filing met the standards set forth in
the second sentence of this Section 4.4.
4.5 No Undisclosed Liabilities. Neither the Company nor any of its
Subsidiaries has any liabilities or obligations of any nature, whether or not
accrued, contingent or otherwise, of a type required to be reflected on a
balance sheet prepared in accordance with GAAP, except (a) liabilities or
obligations reflected in Company SEC Reports filed after December 31, 1997 but
prior to the date hereof ("Company Filed SEC Reports"), (b) liabilities and
obligations incurred under this Agreement and fees and expenses related thereto,
(c) liabilities and obligations incurred in the ordinary course of business
after September 30, 1998 and (d) liabilities or obligations which are not
reasonably expected, individually or in the aggregate, to have a Material
Adverse Effect on the Company.
4.6 No Violation of Law. The businesses of the Company and its
Subsidiaries are not being conducted in violation of any law, ordinance or
regulation of any governmental body or authority (provided that no
representation or warranty is made in this Section 4.6 with respect to
Environmental Laws) except (a) as described in the Company Filed SEC Reports and
(b) for violations or possible violations which would not, individually or in
the aggregate, have a Material Adverse Effect on the Company.
4.7 Environmental Laws and Regulations. Except as described in the Company
Filed SEC Reports, (a) the Company and each of its Subsidiaries are in
compliance with all applicable Environmental Laws,
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which compliance includes, but is not limited to, the possession by the Company
and its Subsidiaries of all material permits and other governmental
authorizations required under applicable Environmental Laws, and compliance with
the terms and conditions thereof, except for non-compliance which would not,
individually or in the aggregate, have a Material Adverse Effect on the Company;
(b) neither the Company nor any of its Subsidiaries has received written notice
of, or, to the knowledge of the Company, is the subject of, any Environmental
Claims which would, individually or in the aggregate, have a Material Adverse
Effect on the Company; and (c) to the knowledge of the Company, there are no
facts, circumstances or conditions in connection with the operation of the
businesses of the Company and its Subsidiaries or any currently or formerly
owned, leased or operated facilities that are reasonably likely to lead to any
such Environmental Claims in the future, except for any such Environmental
Claims which would not, individually or in the aggregate, have a Material
Adverse Effect on the Company.
4.8 Employee Benefit Matters.
(a) The Company Disclosure Schedule sets forth a complete and accurate
list of:
(i) each "employee welfare benefit plan" (as such term is defined
in Section 3(1) of the ERISA) (the "Company Welfare Plans");
(ii) each "employee pension benefit plan" (as such term is defined
in Section 3(2) of ERISA) (the "Company Pension Plans");
(iii) all other material employee benefit agreements or
arrangements, including, without limitation, deferred compensation
plans, incentive plans, bonus plans or arrangements, stock option plans,
stock purchase plans, golden parachute agreements, severance pay plans,
dependent care plans, cafeteria plans, employee assistance programs,
scholarship programs, employment contracts, vacation policies,
supplemental income arrangements and other similar plans, agreements and
arrangements (collectively, with the Company Welfare Plans and the
Company Pension Plans, the "Company Benefit Plans"), that are in effect
on the date of this Agreement, or have been approved before the date of
this Agreement but are not yet effective, for the benefit of directors,
officers, employees or former employees (or their respective
beneficiaries or consultants) of the Company, any of its Subsidiaries
incorporated in the United States (the "Company U.S. Subsidiaries") or
any corporation, trade, business or entity that is a member of a
controlled group, affiliated service group or otherwise under common
control with the Company (within the meaning of Section 414(b), (c), (m)
or (o) of the Code) and that is incorporated or domiciled in the United
States (collectively, the "Company Group"). The Company and U.S.
Subsidiaries will provide to Parent, as to each Company Benefit Plan, as
applicable, access to a complete and accurate copy of (i) each such
plan, agreement or arrangement; (ii) the trust, group annuity contract
or other document that provides the funding for such plan; (iii) the
most recent annual Form 5500, 990 and 1041 reports; (iv) the most recent
actuarial report or valuation statement; (v) the most current summary
plan description, handbook or other booklet that describes any Company
Benefit Plan, and any summary of material modifications prepared after
each such summary plan description; (vi) the most recent Internal
Revenue Service ("IRS") determination letter and all rulings or
determinations requested from the IRS subsequent to the date of such
determination letter; and (vii) all other pending correspondence from
the IRS or the Department of Labor received by any member of the Company
Group that relates to such plan; and
(iv) all amendments or modifications to any Company Benefit Plan
(including any increase in salary or bonus) authorized or implemented
since October 1, 1998 which increase the cost of such Company Benefit
Plan to the Company.
(b) Each Company Welfare Plan and Company Pension Plan (i) is in
compliance with ERISA, including, without limitation, all reporting and
disclosure requirements of Part 1 of Subtitle B of Title I of ERISA and the
Code; (ii) has not engaged in any transaction described in Section 406 or
407 of ERISA or Section 4975 of the Code unless it received or is entitled
to an exemption under
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Section 408 of ERISA or Section 4975 of the Code, as applicable, or unless
such transaction has been corrected and all applicable excise taxes paid or
waived; (iii) has no issue, action, suit or claim pending (other than the
payment of benefits in the normal course or the qualification of the plan
pursuant to an application pending before the IRS) nor any issue resolved
adversely to the Company Group that, in either case, may subject the
Company Group to the payment of a penalty, interest, tax or other amount;
and (iv) can be unilaterally terminated or amended on no more than 90 days'
notice. No notice has been received by the Company Group of an increase or
proposed increase in any premium relative to any Company Benefit Plan, and
no amendment to any Company Benefit Plan within the last 12 months has
increased the rate of employer contributions thereunder. (i) The Company
Group has substantially performed all obligations, whether arising by
operation of law or by contract, required to be performed by it in
connection with the Company Benefit Plans, (ii) each Company Benefit Plan
has been administered in compliance with its governing documents and
applicable law, (iii) no act, omission or transaction has occurred which
would result in imposition on any member of the Company Group of (A) breach
of fiduciary duty liability damages under Section 409 of ERISA, (B) a civil
penalty assessed pursuant to subsections (c), (i) or (l) of Section 502 of
ERISA or (C) a tax imposed pursuant to Chapter 43 of Subtitle D of the
Code.
(c) Each Company Benefit Plan that is intended to be a voluntary
employee benefit association has been submitted to and approved by the IRS
as exempt from federal income tax under Section 501(c)(9) of the Code or
the applicable submission period relating to any such plan will not have
ended prior to the Closing. No Company Benefit Plan will cause the Company
Group to have liability for severance pay as a result of this Agreement.
(d) Each Company Pension Plan that is intended to be qualified under
Section 401(a) of the Code has been submitted to and approved as qualifying
under Section 401(a) of the Code by the IRS or the applicable remedial
amendment period relating to such plan will not have ended prior to the
Closing. To the knowledge of the Company, no facts have occurred that, if
known by the IRS, could cause disqualification of any Company Pension Plan.
As to any Company Pension Plan that is intended to be qualified under
Section 401(a) of the Code, there has been no termination or partial
termination of such plan within the meaning of Section 411(d)(3) of the
Code. Each Company Pension Plan to which Section 302 of ERISA or Section
412 of the Code is applicable fully complies with the funding requirements
of that Section and there is no "accumulated funding deficiency" as defined
in Section 302(a)(2) of ERISA or Section 412 of the Code (whether or not
waived) in any such plan. The Company Group has paid all premiums
(including, without limitation, interest, charges and penalties for late
payment) due the Pension Benefit Guaranty Corporation (the "PBGC") with
respect to each Company Pension Plan for which premiums are required. No
Company Pension Plan has been terminated, and there has been no event or
condition which presents the material risk of termination, under
circumstances that would result in any material liability to the PBGC or
the Company Group. There has been no "reportable event" (as defined in
Section 4043(c) of ERISA and the regulations under that Section) with
respect to any Company Pension Plan subject to Title IV of ERISA. With
respect to each Company Pension Plan subject to Title IV of ERISA, (i) no
notice of intent to terminate the plan has been given under Section 4041 of
ERISA, (ii) no proceeding has been instituted under Section 4042 of ERISA
to terminate the plan, (iii) no liability to the PBGC has been incurred and
(iv) the Company Group has not (A) ceased operations at a facility so as to
become subject to the provisions of Section 4062(e) of ERISA, (B) withdrawn
as a substantial employer so as to become subject to the provisions of
Section 4063 of ERISA or (C) ceased making contributions on or before the
Closing Date to any such plan subject to Section 4064(a) of ERISA to which
the Company Group made contributions at any time during the six years prior
to the Closing Date. No member of the Company Group contributes to or has
an obligation to contribute to, and has not at any time within six years
prior to the Closing Date contributed to or had an obligation to contribute
to, from a multiemployer plan (as defined in Section 3(37) of ERISA).
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(e) The Company Disclosure Schedule sets forth the amounts of all
severance payments or similar obligations, including but not limited to any
increased employee compensation or additional benefits, vested rights or
service credits under any Company Benefit Plan (whether or not some other
subsequent action or event would be required to cause such payment or
provision to be triggered), that will be owed by Company or any of its
Subsidiaries to any of their respective employees, officers, directors or
consultants, and all increases in severance payments or other benefits to
which any of such persons will be entitled, as a result of the Merger or
the transactions contemplated by this Agreement. Except as set forth in the
Company Disclosure Schedule, no such payments shall be due and payable as a
result of the Merger or the transactions contemplated hereby. Company has
made available to Parent (i) copies of all employment agreements with
officers of Company and its Subsidiaries; (ii) copies of all agreements
with consultants obligating Company to make annual cash payments in an
amount exceeding $100,000 or with a term greater than one year; (iii) a
schedule listing all officers of Company and its Subsidiaries who have
executed a non-competition agreement with Company or its Subsidiaries; (iv)
copies of all severance agreements, programs and policies of Company with
or relating to its employees; and (v) copies of all plans, programs,
agreements and other arrangements of Company with or relating to its
employees which contain change in control provisions. Except as set forth
in the Company Disclosure Schedule, in connection with the consummation of
the transactions contemplated by this Agreement, no payments of money or
other property, acceleration of benefits, or provisions of other rights
have or will be made hereunder, under the Company Benefit Plans or under
any other agreement that would be reasonably likely to result in imposition
of the sanctions imposed under Section 280G and 4999 of the Code, whether
or not some other subsequent action or event would be required to cause
such payment, acceleration or provision to be triggered.
(f) Since January 1, 1996, neither the Company nor any of its
Subsidiaries has been a party to any collective bargaining or other labor
contract. Since January 1, 1997, there has not been, there is not presently
pending or existing, and to the Company's knowledge there is not
threatened, (i) any strike, slowdown, picketing, work stoppage or employee
grievance process; (ii) any proceeding against or affecting the Company or
any of its Subsidiaries relating to the alleged violation of any legal
requirement pertaining to labor relations or employment matters, including
any charge or complaint filed by an employee or union with the National
Labor Relations Board, the Equal Employment Opportunity Commission or any
comparable governmental authority, organizational activity or other labor
or employment dispute against or affecting Company or any of its
Subsidiaries or their premises; or (iii) any application for certification
of a collective bargaining agent. To the Company's knowledge, no event has
occurred or circumstance exists that could provide the basis for any work
stoppage or other labor dispute. There is no lockout of any employees by
Company or any of its Subsidiaries, and no such action is contemplated by
Company or any of its Subsidiaries. To the knowledge of Company, Company
and each of its Subsidiaries has complied in all material respects with all
legal requirements relating to employment, equal employment opportunity,
nondiscrimination, immigration, wages, hours, benefits, collective
bargaining, the payment of social security and similar taxes, occupational
safety and health, and plant closing. To the knowledge of Company, neither
Company nor any of its Subsidiaries is liable for the payment of
compensation, damages, taxes, fines, penalties, or other amounts, however
designated, for failure to comply with any of the foregoing legal
requirements.
(g) Except as otherwise required by law, (i) no Company Benefit Plan
provides retiree medical or retiree life insurance benefits to any person,
and (ii) none of Company or its Subsidiaries is contractually obligated
(whether or not in writing) to provide any person with life insurance or
medical benefits upon retirement or termination of employment. The Company
Group has not made any representations, agreements, covenants or
commitments to provide such coverage or benefits.
4.9 Absence of Certain Changes or Events. Other than as disclosed in the
Company Filed SEC Reports, since January 1, 1998 the businesses of the Company
and its Subsidiaries have been conducted in all material respects in the
ordinary course consistent with past practice, and there has not been any event,
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occurrence, development or state of circumstances or facts that has had, or
would have, a Material Adverse Effect on the Company.
4.10 Litigation. Except as described in the Company Filed SEC Reports or
previously disclosed in writing to Parent, there are no actions, suits or
proceedings pending (or, to the Company's knowledge, threatened) against or
affecting the Company or its Subsidiaries, or any of their respective properties
at law or in equity, or before any federal, state, local or foreign governmental
body or authority which, individually or in the aggregate, are reasonably likely
to have a Material Adverse Effect on the Company. The Company Disclosure
Schedule sets forth a complete list of all pending or threatened actions, suits
or proceedings involving amounts in excess of $250,000.
4.11 Company Rights Plan. Under the terms of the Company Rights Plan, as
amended on the date of this Agreement, the execution and delivery of this
Agreement, the performance of the transactions contemplated by this Agreement in
accordance with the terms hereof will not (except to the extent caused by
Parent's becoming the beneficial owner of any Company Common Stock other than in
accordance with this Agreement) cause (i) Company Rights to become exercisable
under the Company Rights Plan or (ii) a "Distribution Date", "Share Acquisition
Date", "Triggering Event", "Flip-In Event" or "Flip-Over Event" (as such terms
are defined in the Company Rights Plan) to occur upon the consummation of any
such transactions. In addition, the Company has taken all actions necessary to
cause the Company Rights Plan to be amended so that the Company Rights will
expire immediately prior to the Closing Date.
4.12 Lack of Ownership of Parent Common Stock. Neither the Company nor any
of its Subsidiaries owns any shares of Parent Common Stock or other securities
convertible into shares of Parent Common Stock.
4.13 Tax Matters.
(a) All federal, state, local and foreign Tax Returns required to be
filed by or on behalf of the Company, each of its Subsidiaries, and each
affiliated, combined, consolidated or unitary group of which the Company or
any of its Subsidiaries (i) is a member (a "Current Company Group") or (ii)
has been a member within six years prior to the date hereof but is not
currently a member, but only insofar as any such Tax Return relates to a
taxable period ending on a date within the last six years (a "Past Company
Group" and, together with Current Company Groups, a "Company Affiliated
Group") have been timely filed, and all such Tax Returns are complete and
accurate except to the extent any failure to file or any inaccuracies in
filed returns would not, individually or in the aggregate, have a Material
Adverse Effect on the Company (it being understood that the representations
made in this Section 4.13, to the extent that they relate to Past Company
Groups, or to any Subsidiary of the Company for periods prior to the time
such Subsidiary was acquired by the Company, are made to the knowledge of
the Company). All Tax Returns include any required disclosure of all
positions taken therein that could give rise to a substantial underpayment
penalty within Section 6662 of the Code or similar provision of state,
local, foreign or other law. All Taxes due and owing by the Company, any
Subsidiary of the Company or any Company Affiliated Group have been paid,
or adequately reserved for, except to the extent any failure to pay or
reserve would not, individually or in the aggregate, have a Material
Adverse Effect on the Company. There is no audit examination, deficiency,
refund litigation, proposed adjustment or matter in controversy with
respect to any Taxes due and owing by the Company, any Subsidiary of the
Company or any Company Affiliated Group which would, individually or in the
aggregate, have a Material Adverse Effect on the Company. All assessments
for Taxes due and owing by the Company, any Subsidiary of the Company or
any Company Affiliated Group with respect to completed and settled
examinations or concluded litigation have been paid. As soon as practicable
after the public announcement of the execution of this Agreement, the
Company will provide Parent with written schedules of (i) the taxable years
of the Company for which the statutes of limitations with respect to
federal income Taxes have not expired, and (ii) with respect to federal
income Taxes, those years for which examinations have been completed, those
years for which examinations are presently being conducted, and those years
for which examinations have not yet been initiated. The Company and each of
its
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Subsidiaries have complied in all material respects with all rules and
regulations relating to the payment and withholding of Taxes, except to the
extent any such failure to comply would not, individually or in the
aggregate, have a Material Adverse Effect on the Company. Neither the
Company nor any Subsidiary is (nor has it ever been) a party to any tax
sharing agreement and has not assumed the tax liability of any other person
under a contract; has ever filed a consent under Section 341(f) of the
Code; is required to make any adjustment under Section 481(a) of the Code
for any tax year ending after the Effective Time by reason of a change in
method of accounting or otherwise; or is required to make a payment with
respect to the remuneration of an employee which would result in
non-deductible expense pursuant to Section 162(m) of the Code. Neither the
Company nor any Subsidiary is (nor has it ever been) a United States real
property holding corporation within the meaning of Section 897(c)(2) of the
Code during the applicable period specified in Section 897(c)(1)(A)(ii).
(b) None of the Company nor any of its Subsidiaries knows of any fact
or has taken any action that could reasonably be expected to prevent the
Merger from qualifying as a reorganization within the meaning of Section
368(a) of the Code.
4.14 Required Vote. The affirmative vote of the holders of at least
two-thirds of the outstanding shares of the Company Common Stock (the "Company
Shareholder Approval") is required to adopt the Merger Agreement. No other vote
of the shareholders of the Company is required by law, the charter or bylaws of
the Company or otherwise in order for the Company to consummate the Merger and
the transactions contemplated hereby.
4.15 Insurance. The Company Disclosure Schedule sets forth all material
policies of insurance or programs of self-insurance by which the Company or any
of its Subsidiaries or any of their respective properties or assets are covered
against present losses, all of which are now in full force and effect. The
Company agrees to maintain such policies (or policies of substantially the same
nature) in full force and effect at all times until the Effective Time. The
Company Disclosure Schedule sets forth for the current policy year and each
other policy year since January 1996 (i) a summary of the loss experience under
each policy; (ii) a statement describing each claim under an insurance policy;
and (iii) a statement describing the loss experience for all claims that were
self-insured, including the number and aggregate cost of such claims. Neither
the Company nor any of its Subsidiaries has received any refusal of coverage or
any notice of reservation of rights.
4.16 Intellectual Property. The Company and its Subsidiaries own or
possess adequate licenses or other valid rights to use all patents, patent
rights, trademarks, trademark rights and proprietary information used or held
for use in connection with their respective businesses as currently being
conducted, except where the failure to own or possess such licenses and other
rights would not have, individually or in the aggregate, a Material Adverse
Effect on the Company, and there are no assertions or claims challenging the
validity of any of the foregoing which are likely to have, individually or in
the aggregate, a Material Adverse Effect on the Company. The conduct of the
Company's and its Subsidiaries' businesses as currently conducted does not
conflict with any patents, patent rights, licenses, trademarks, trademark
rights, trade names, trade name rights or copyrights of others in any way likely
to have, individually or in the aggregate, a Material Adverse Effect on the
Company. The systems, processes, and computer software and hardware used,
operated, sold or licensed by the Company or its Subsidiaries that is material
to its business or its internal operations is capable of providing or is being
or will be adapted, or is capable of being replaced, to provide uninterrupted
millennium functionality to record, store, process and present calendar dates
falling on or after January 1, 2000 in substantially the same manner and with
substantially the same functionality as such systems, processes, software and
hardware records, stores, processes and presents such calendar dates falling on
or before December 31, 1999, except as would not have a Material Adverse Effect
on the Company. The costs of the adaptations and replacements referred to in the
prior sentence will not have a Material Adverse Effect on the Company.
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4.17 Material Contracts. The Company Disclosure Schedule lists the
following contracts and other agreements to which the Company or any of its
Subsidiaries is a party (other than intercompany arrangements) as of the date
hereof (collectively, the "Company Contracts"):
(a) any agreement (or group of related agreements) for the lease of
personal property to or from any person providing for lease payments in
excess of $500,000 per annum and a term of more than one year;
(b) any agreement (or group of related agreements) for the purchase or
sale of raw materials, commodities, supplies, products, or other personal
property, or for the furnishing or receipt of services, the performance of
which has a term more than six months, and involves consideration in excess
of $500,000;
(c) any partnership or joint venture agreement;
(d) any agreement (or group of related agreements) under which it has
created, incurred, assumed, or guaranteed any indebtedness for borrowed
money, or any capitalized lease obligation, in excess of $500,000, or under
which it has imposed a lien, security interest or other encumbrance on any
of its assets, tangible or intangible, to secure such indebtedness or
obligations;
(e) any agreement which purports to limit in any material respect the
manner in which, or the localities in which, all or any material portion of
the business of the Company and its Subsidiaries, taken as a whole, or
Parent and its Subsidiaries, taken as a whole, is conducted;
(f) any agreement with any of the shareholders of the Company and
their affiliates relating to the voting, transfer or disposition of the
Company's securities;
(g) all turnkey and footage drilling contracts and all daywork
drilling contracts for amounts in excess of $2,000,000 or that are not
terminable or subject to completion within 90 days;
(h) any agency, representation or similar agreement;
(i) any agreement for the construction or modification of a drilling
rig or vessel where total costs are expected to exceed $500,000;
(j) any agreement having any "change in control" or similar provision;
(k) any agreement under which the consequences of a default or
termination could have a Material Adverse Effect on the Company; and
(l) any other agreement (or group of related agreements) the
performance of which involves consideration in excess of $500,000, other
than agreements entered into in the ordinary course.
There is no contract or agreement that is material to the business, financial
condition or results of operations of the Company and its Subsidiaries, taken as
a whole, that is not set forth in the Company Disclosure Schedule. Neither the
Company nor any of its Subsidiaries is in violation or default under (nor does
there exist any condition which upon the passage of time or the giving of notice
would cause a violation or default under) any Company Contract, other than such
violations or defaults as would not have a Material Adverse Effect on the
Company. To the knowledge of the Company, none of the other parties to the
Company Contracts is in violation of or in default under (nor does there exist
any condition which upon the passage of time or the giving of notice would cause
a violation or default under) any Company Contract, other than such violations
or defaults as would not have a Material Adverse Effect on the Company.
4.18 Vessels. All vessels owned or chartered by the Company are set out in
the Company Disclosure Schedule (the "Vessels"). Except as set out in the
Company Disclosure Schedule, each of the Vessels is, and will be at the
Effective Time, owned by the Company or one of its Subsidiaries free and clear
of all liens, charges and rights of others and duly documented under the laws
and flag of the U.S. entitling the Vessels to engage in the coastwise trade in
the United States and to operate on a
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worldwide basis in support of the offshore petroleum industry. Except as set out
in the Company Disclosure Schedule, none of the equipment on board any of the
Vessels or held for use on any of the Vessels is leased to the Company or one of
its Subsidiaries. All logs (deck and engine) shall be onboard the Vessels at the
Effective Time.
4.19 Brokers. Other than Morgan Stanley & Co. Incorporated ("Morgan
Stanley"), no broker, finder or investment banker is entitled to any brokerage,
finder's or other fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
the Company. A copy of the Company's engagement letter with Morgan Stanley has
been provided to Parent.
4.20 Opinion of Financial Advisor. The Company has received the opinion of
Morgan Stanley (a copy of which has been delivered to Parent) to the effect
that, as of the date of this Agreement, the Exchange Ratio is fair to the
holders of Company Common Stock from a financial point of view.
4.21 Property. The Company and each of the Subsidiaries, as the case may
be, have sufficient title or leaseholds to property to conduct their respective
businesses as currently conducted with only such exceptions as individually or
in the aggregate would not have a Material Adverse Effect on the Company.
4.22 Company Equipment. The Company and its Subsidiaries have such
ownership of or such rights by license, lease or other agreement to all
equipment used or necessary to conduct their respective businesses as currently
conducted (the "Company Equipment") with only such exceptions as individually or
in the aggregate would not have a Material Adverse Effect on the Company. The
Company Equipment that is currently under contract or is being actively marketed
by the Company or a Subsidiary is in good operating condition and repair and
adequate for the uses to which it is being put. None of the Company Equipment
that is currently under contract or is being actively marketed by the Company or
a Subsidiary is in need of maintenance or repairs except for ordinary, routine
maintenance and repairs that are not material in nature or cost.
4.23 Permits. The Company and each of its Subsidiaries has all permits,
licenses, franchises and other governmental authorizations necessary to conduct
their respective businesses as currently conducted with only such exceptions as
individually or in the aggregate would not have a Material Adverse Effect on the
Company. All such permits, licenses, franchises and authorizations are in full
force and effect and the Company is not aware of any pending or threatened
suspension, cancellation or termination of any such permit, license, franchise
or authorization, with only such exceptions as individually or in the aggregate
would not have a Material Adverse Effect on the Company.
4.24 Financial Condition. As of December 31, 1998, the Company had at
least $30 million in cash or short-term investments of a duration of not more
than seven days and no more than $174 million in funded debt.
ARTICLE V
COVENANTS
5.1 Affirmative Covenants of the Company. The Company hereby covenants and
agrees that, prior to the Effective Time, unless otherwise expressly
contemplated by this Agreement or consented to in writing by Parent, the Company
will and will cause its Subsidiaries to:
(a) operate its business only in the usual and ordinary course
consistent with past practices and in compliance in all material respects
with all applicable laws and regulations;
(b) use its commercially reasonable efforts to preserve substantially
intact its business organizations, maintain its rights and franchises,
retain the services of its officers and key employees and maintain its
material relationships with its customers, suppliers, creditors and joint
venture or other business partners;
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(c) use its commercially reasonable efforts to maintain and keep its
properties and assets in as good repair and condition in all material
respects as at present, ordinary wear and tear excepted; and
(d) use its commercially reasonable efforts to keep in full force and
effect insurance and bonds comparable in amount and scope of coverage to
that currently maintained;
provided, however, that, in the event the Company deems it necessary to take
certain actions that would otherwise be proscribed by clauses 5.1(a) through
(c), the Company shall consult with Parent and Parent shall consider in good
faith the Company's request to take such actions and not unreasonably withhold
its consent.
5.2 Negative Covenants of the Company. Except as expressly contemplated by
this Agreement, as set forth in the Company Disclosure Schedule or otherwise
consented to in writing by Parent, from the date of this Agreement until the
Effective Time, the Company will not directly or indirectly, and will not permit
any of its Subsidiaries to directly or indirectly, do any of the following:
(a) (i) increase the compensation payable to, or to become payable to,
any director, executive officer or employee; (ii) grant any severance or
termination pay (other than in accordance with the terms of the severance
agreements set forth on the Company Disclosure Schedule, as the same may be
amended pursuant to this Agreement) to, or enter into any employment or
severance agreement with, any director, officer or employee; or (iii)
establish, adopt, enter into, amend or otherwise increase, or accelerate
the payment or vesting of the amounts payable under, any employee benefit
plan or arrangement except as may be required by applicable law;
(b) declare or pay any dividend on, or make any other distribution in
respect of, outstanding shares of capital stock, except for dividends by a
Subsidiary of the Company to the Company or another wholly owned Subsidiary
of the Company;
(c) (i) redeem, purchase or otherwise acquire any shares of its or any
of its Subsidiaries' capital stock or any securities or obligations
convertible into or exchangeable or exercisable for any shares of its or
its Subsidiaries' capital stock including, but not limited to, options,
warrants and other rights to acquire securities (other than any such
acquisition directly from any wholly owned Subsidiary of the Company in
exchange for capital contributions or loans to such Subsidiary), (ii)
effect any recapitalization; or (iii) split, combine or reclassify any of
its or its respective Subsidiaries' capital stock or issue or authorize or
propose the issuance of any other securities in respect of, in lieu of or
in substitution for, shares of its or its respective Subsidiaries' capital
stock;
(d) (i) issue, deliver, award, grant or sell, or authorize or propose
the issuance, delivery, award, grant or sale (including the grant of any
security interests, liens, claims, pledges or other encumbrances) of, any
shares of any class of its or its Subsidiaries' capital stock (including
shares held in treasury), any securities convertible into or exercisable or
exchangeable for any other shares, or any rights, warrants or options to
acquire, any such shares (except for the issuance of shares upon the
exercise of Company Stock Options or pursuant to Incentive Awards
outstanding on the date of this Agreement in accordance with their terms or
issuances by any Subsidiary of the Company to the Company or any other
Subsidiary of the Company); (ii) amend or otherwise modify the terms of any
such rights, warrants or options the effect of which shall be to make such
terms more favorable to the holders thereof (including, without limitation,
declaring a "change of control" or similar event thereunder); or (iii) take
any action to accelerate the vesting of any Company Stock Options;
(e) acquire or agree to acquire, by merging or consolidating with, by
purchasing an equity interest valued in excess of $1 million or portion of
the assets (for a purchase price in excess of $1 million) of, or by any
other manner, any corporation, partnership, association or other business,
organization or division (other than a wholly owned Subsidiary) thereof, or
otherwise acquire or agree to acquire any assets of any other person (other
than the purchase of assets from suppliers or vendors in the ordinary
course of business and consistent with past practice) which are material,
individually or in the aggregate, to the Company and its Subsidiaries,
taken as a whole;
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(f) other than (i) dispositions or proposed dispositions set forth on
the Company Disclosure Schedule, (ii) as may be necessary or required by
law to consummate the transactions contemplated hereby or (iii)
dispositions in the ordinary course of business consistent with past
practice not to exceed $150,000 individually or $1 million in the
aggregate, sell, lease, exchange, mortgage, pledge, transfer or otherwise
dispose of, or agree to sell, lease, exchange, mortgage, pledge, transfer
or otherwise dispose of, any of its material assets or any material assets
of any of the Company's Significant Subsidiaries;
(g) propose or adopt any amendments to its Articles of Incorporation,
as amended, or to its Bylaws;
(h) (i) change any of its methods of accounting in effect at December
31, 1997 or (ii) make or rescind any express or deemed election relating to
Taxes, settle or compromise any claim, action, suit, litigation,
proceeding, arbitration, investigation, audit or controversy relating to
Taxes (except where the amount of such settlements or controversies,
individually or in the aggregate, does not exceed $500,000), or change any
of its methods of reporting income or deductions for federal income tax
purposes from those employed in the preparation of the federal income tax
returns for the taxable year ended December 31, 1997, except, in the case
of clause (i) or clause (ii), as may be required by law or GAAP;
(i) (A) spend or commit to spend more than $2 million in the aggregate
on the purchase of new or used equipment, supplies (including drill pipe
and other capital expenditures not referred to in (ii) below) (provided
that the Company shall inform Parent prior to committing to make capital
expenditures in excess of $750,000 in the aggregate), except for (i)
capital expenditures heretofore approved by the Company's Board of
Directors and described in the Company Disclosure Schedule; and (ii)
sustaining capital expenditures for Company Equipment and Vessels in the
ordinary course of business consistent with past practice; or (B) except
for draw downs on the existing working capital line of credit, incur any
obligation for borrowed money or purchase money indebtedness, whether or
not evidenced by a note, bond, debenture or similar instrument, except in
the ordinary course of business consistent with past practice;
(j) enter into any contract, agreement or other arrangement that would
have been required to be disclosed as a Company Contract had such contract,
agreement or other arrangement been in effect on the date of this
Agreement;
(k) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other
than the payment, discharge or satisfaction of any such claims, liabilities
or obligations, (x) in the ordinary course of business and consistent with
past practice, properly reflected or reserved against in, the consolidated
financial statements (or the notes thereto) as of and for the fiscal year
ended December 31, 1997 of the Company and its consolidated Subsidiaries,
(y) incurred since December 31, 1997 in the ordinary course of business and
consistent with past practice or (z) which are legally required to be paid,
discharged or satisfied (provided that if such claims, liabilities or
obligations referred to in this clause (z) are legally required to be paid
and are also not otherwise payable in accordance with clauses (x) or (y)
above, the Company will notify Parent in writing if such claims,
liabilities or obligations exceed, individually or in the aggregate,
$250,000 in value, reasonably in advance of their payment);
(l) (i) incur or assume any long-term debt, or except in the ordinary
course of business, incur or assume any short-term indebtedness in amounts
not consistent with past practice; (ii) assume, guarantee, endorse or
otherwise become liable or responsible (whether directly, contingently or
otherwise) for the obligations of any other person, except in the ordinary
course of business and consistent with past practice; (iii) make any loans,
advances or capital contributions to, or investments in, any other person
(other than to wholly owned Subsidiaries of the Company or customary loans
or advances to employees in accordance with past practice or with respect
to Pool International Argentina S. A. not in an amount in excess of $2
million); or (iv) enter into any material
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commitment or transaction (including, but not limited to, any borrowing,
capital expenditure or purchase, sale or lease of assets);
(m) take or agree to take any action that would or is reasonably
likely to result in any of the Company's representations and warranties set
forth in this Agreement being untrue as of the Closing Date (unless such
representations and warranties speak as of an earlier date, in which case
as of such date) or in any of the conditions to the Merger not being
satisfied; or
(n) enter into an agreement, contract, commitment or arrangement to do
any of the foregoing, or to authorize, recommend, propose or announce an
intention to do any of the foregoing;
provided, that, in the event the Company deems it necessary to take certain
actions that would otherwise be proscribed by this Section 5.2, the Company
shall consult with Parent and Parent shall consider in good faith the Company's
request to take such actions.
5.3 Negative Covenants of Parent. Except as expressly contemplated by this
Agreement or otherwise consented to in writing by the Company, from the date of
this Agreement until the Effective Time, Parent will not, and will not permit
Merger Sub to, do any of the following:
(a) amend any of the material terms or provisions of the Parent Common
Stock;
(b) knowingly take any action which would result in a failure to
maintain the trading of Parent Common Stock on the AMEX;
(c) declare or pay any dividends or other distribution (whether in
cash, stock or other property) on outstanding shares of capital stock;
(d) take or agree to take any action that would or is reasonably
likely to result in any of Parent's or Merger Sub's representations and
warranties set forth in this Agreement being untrue as of the Closing Date
(unless such representations and warranties speak as of an earlier date, in
which case as of such date) or in any of the conditions to the Merger not
being satisfied; or
(e) enter into an agreement, contract, commitment or arrangement to do
any of the foregoing, or to authorize, recommend, propose or announce an
intention to do any of the foregoing.
5.4 Access and Information. Subject to confidentiality agreements to which
the Company or Parent or any of their respective Subsidiaries is a party, each
of the Company and Parent shall, and shall cause its Subsidiaries to, (a) afford
to the other party and its officers, directors, employees, accountants,
consultants, legal counsel, agents and other representatives (collectively, the
"Representatives") reasonable access at reasonable times upon reasonable prior
notice to its officers, employees, agents, properties, offices and other
facilities and its Subsidiaries and to the books and records thereof and (b)
furnish promptly to the other party and its Representatives such information
concerning its business, properties, contracts, records and personnel
(including, without limitation, financial, operating and other data and
information) as may be reasonably requested, from time to time, by such other
party. In connection with the foregoing, the Company hereby consents to Parent's
use of the services and advice of William J Myers from and after the date of
this Agreement in conducting its inquiry into the business and affairs of the
Company. Notwithstanding the foregoing, no party shall be required to provide
any information which it reasonably believes it may not provide to the other
party by reason of applicable law, rules or regulations, which constitutes
information protected by attorney/client privilege, or which it is required to
keep confidential by reason of contract or agreement with third parties. The
parties hereto will make reasonable and appropriate substitute disclosure
arrangements under circumstances in which the restrictions of the preceding
sentence apply. Each of Parent and the Company agrees that (i) it will, and will
cause its Representatives to, treat any information obtained hereunder in strict
accordance with Section 5.6 and (ii) it will not, and will cause its respective
Representatives not to, use any information obtained pursuant to this Section
5.4 for any purpose unrelated to the consummation of the transactions
contemplated by this Agreement. The Company shall permit Parent and its
representatives to confirm, on reasonable notice and on the basis of agreed
methods, with the Company's and Subsidiaries' principal vendors, customers and
trade affiliates, that the acquisition by Parent of the Company will be
acceptable to such vendors,
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customers and trade affiliates and that the acquisition will not adversely
affect the relationship of such vendors, customers or trade affiliates with the
Company or its Subsidiaries. The Company agrees that such access by Parent and
its representatives shall include the right to perform a soil and groundwater
analysis of any real estate owned or leased by the Company or its Subsidiaries
as Parent shall deem necessary or appropriate to determine on-site conditions
and the presence or absence of any hazardous materials, provided, however, such
analysis shall only be performed after good faith consultation by Parent with
the Company and its Representatives. In connection with such environmental
investigations, the Company will provide to or make available for inspection by
Parent and its Representatives (i) all records relating to the disposal of waste
materials generated at any real estate owned or leased by the Company or its
Subsidiaries; (ii) all environmental permits and records relating to compliance
with such permits; (iii) all records of spills or other releases; (iv) all
records relating to employee exposure to workplace chemicals; (v) all chemical
inventories and reports of chemical emissions; (viii) all correspondence
relating to pending or threatened environmental claims; and (ix) all records
obtained from prior owners or operators of the real estate owned or leased by
the Company or its Subsidiaries relating to environmental conditions.
5.5 No Solicitation.
(a) Except as pursuant this Section 5.5 or otherwise consented to in
writing by Parent, from and after the date of this Agreement until the
earlier of the Effective Time or the date of termination of this Agreement
in accordance with its terms, the Company will not directly or indirectly,
and will not permit any of its Subsidiaries, or its or its Subsidiaries'
directors, officers, employees, representatives and agents, to, directly or
indirectly, initiate, solicit or encourage (including by way of furnishing
information or assistance), or take any other action to facilitate, any
Company Acquisition Proposal (as defined below), or enter into discussions
or negotiate with any person or entity in furtherance of such Company
Acquisition Proposal, or enter into an agreement with respect to any
Company Acquisition Transaction (as defined below) or agree to or endorse
any Company Acquisition Proposal, or authorize or permit any of the
officers, directors or employees of the Company or any of its Subsidiaries
or any investment banker, financial advisor, attorney, accountant or other
representative retained by the Company or any of its Subsidiaries to take
any such action, and the Company shall notify Parent of all terms of any
Company Acquisition Proposal received by the Company or any of its
Subsidiaries or by any such officer, director, investment banker, financial
advisor or attorney within two business days after receipt thereof, and if
such inquiry or proposal is in writing, the Company shall deliver or cause
to be delivered to Parent a copy of such inquiry or proposal; provided,
however, that nothing contained in this Agreement shall prohibit the Board
of Directors of the Company from (i) complying with Rule 14e-2 promulgated
under the Exchange Act with regard to a Company Acquisition Proposal; or
(ii) at any time prior to the satisfaction of the condition set forth in
Section 7.1(b), furnishing information to, or entering into discussions or
negotiations with, any person or entity in connection with an unsolicited,
bona fide, written Company Acquisition Proposal, recommending the same to
the Company's shareholders or otherwise communicating with the Company's
shareholders regarding such proposal in a manner permitted by law, if, and
only to the extent that (A) the Board of Directors of the Company, after
consultation with legal counsel (which may include its regularly engaged
legal counsel), determines in good faith that such action is required for
the Board of Directors of the Company to comply with its fiduciary duties
to shareholders imposed by the TBCA and other applicable Texas law; (B)
prior to furnishing such information to, or entering into discussions or
negotiations with, such person or entity the Company (x) provides two
business days' written notice to Parent to the effect that it is furnishing
information to, or entering into discussions or negotiations with, such
person or entity and (y) obtains from such person or entity a customary
confidentiality agreement; and (C) the Board of Directors of the Company
determines in good faith (after consultation with its financial advisor)
that, in light of the information furnished to it relating to such Company
Acquisition Proposal is a Superior Proposal (as defined below). The Company
will immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any parties heretofore conducted which are
prohibited pursuant to this Section 5.5(a). The Company agrees that it will
take the necessary steps to promptly inform the
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individuals or entities referred to in the first sentence of this Section
5.6(a) of the obligations undertaken in this Section 5.5(a).
(b) "Company Acquisition Proposal" means an inquiry or proposal which
relates to or contemplates a Company Acquisition Transaction.
(c) "Company Acquisition Transaction" means any of the following
transactions:
(i) any merger, consolidation, share exchange or other business
combination involving the Company or any Subsidiary of the Company
(other than any such arrangement between the Company and any of its
Subsidiaries or among any of its Subsidiaries);
(ii) any sale, exchange, transfer or other disposition (whether in
the form of an asset sale, merger or otherwise) to any person (other
than Parent or any of its Subsidiaries) of properties or assets of the
Company or any of its Subsidiaries which constitute (i) all or
substantially all of the properties and assets of the Company, (ii) all
or substantially all of the properties and assets of any Significant
Subsidiary, or a material division or other business unit of the Company
or any Significant Subsidiary, or (iii) properties and assets which are
material to the business or operations of the Company at its
Subsidiaries, taken as a whole;
(iii) any tender offer or exchange offer by any person (other than
the Parent or any of its Subsidiaries) for 15% or more of the
outstanding shares of Company Common Stock; or
(iv) any acquisition of shares of Company Common Stock by any
person or group (other than Parent or any of its Subsidiaries) which
would require an amendment, waiver, termination or alteration of the
Company Rights Plan so that such acquisition would not result in such
person becoming an "Acquiring Person" under the terms of the Company
Rights Plan.
(d) "Superior Proposal" means any Company Acquisition Proposal on
terms which, if consummated pursuant thereto, the Board of Directors of the
Company determines in good faith in the exercise of its fiduciary duties to
be more favorable to the Company and its shareholders than the Merger
taking into account such factors as the Board deems relevant (based on
advice of the Company's financial advisor that the value of the
consideration provided for in such proposal is superior to the value of the
consideration provided for in the Merger), for which financing, to the
extent required, is then committed or which, in the good faith reasonable
judgment of the Board of Directors, after receiving advice from its
financial advisor, is reasonably capable of being financed by such third
party.
5.6 Confidentiality. Between the date of this Agreement and the Effective
Time, the parties hereto will maintain in confidence, and will cause its
Representatives to maintain in confidence, and not use to the detriment of a
party to this Agreement any information obtained from a party to this Agreement
or its Subsidiaries in connection with this Agreement or the transactions
contemplated hereby (regardless of whether such information was obtained prior
to, on or after the date of this Agreement), unless (a) such information is
already known to such receiving party or to others not bound by a duty of
confidentiality or such information becomes publicly available through no fault
of such receiving party, (b) use of such information is necessary or appropriate
in making any filing or obtaining any consent or approval required for the
consummation of the transactions contemplated hereby or (c) the furnishing or
use of such information is required by legal proceedings or applicable law or
requirement of the AMEX. Upon any termination of this Agreement, each party will
return or destroy all confidential information provided to it by the other
party.
5.7 Inspection of Vessels. Parent shall have the right to inspect the
Vessels at any reasonable time and from time to time prior to the Closing Date,
provided that such inspection shall be conducted in a manner that does not
unreasonably interfere with the operation of the Vessels. Any such inspection
may include the opening up of machinery and equipment and, at Parent's option,
may be conducted by drydocking any Vessel (subject to obtaining the consent of
the user of such Vessel). The Company shall keep Parent advised of the location
and whereabouts of each Vessel to facilitate such an inspection.
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5.8 Company Rights Plan. Except for the amendments contemplated by this
Agreement or amendments approved in writing by Parent, the Company will not,
following the date of this Agreement, amend the Company Rights Plan in any
manner. In addition the Company covenants and agrees that it will not redeem the
Company Rights unless such redemption is consented to in writing by Parent prior
to such redemption.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 Meetings of Shareholders.
(a) The Company shall promptly after the date of this Agreement take
all action necessary in accordance with applicable law and its Articles of
Incorporation, as amended, and Bylaws, as amended, to convene a meeting of
its shareholders to consider and vote upon the approval of this Agreement
and the Merger, and the Company shall consult with Parent in connection
therewith; provided that the Company shall use its reasonable best efforts
to hold the special meeting of shareholders within 40 days after
effectiveness of the Registration Statement (as defined in Section 6.2(a)).
The Company, through its Board of Directors, shall recommend approval of
such matters, subject to the terms and conditions set forth in Section 5.5.
The Company, through its Board of Directors, shall vote the 769,231 shares
of Company Common Stock subject to that certain Voting Agreement dated as
of March 31, 1998, between the Company and Al A. Gonsoulin in favor of this
Agreement and the Merger.
(b) If required, Parent shall promptly after the date of this
Agreement take all action necessary in accordance with applicable law and
its Restated Certificate of Incorporation and Bylaws to convene a special
meeting of its stockholders to consider and vote on the Parent Stockholder
Authorization; and Parent shall consult with the Company in connection
therewith. Parent, through its Board of Directors, shall recommend approval
of the Parent Stockholder Authorization.
6.2 Registration Statement; Proxy Statement
(a) Parent promptly shall prepare and shall file with the SEC and the
AMEX a registration statement on Form S-4 under the Securities Act (the
registration statement, together with the amendments thereto, being the
"Registration Statement"), containing a proxy statement/prospectus, in
connection with the registration of the Parent Common Stock to be issued in
the Merger. The Company promptly shall prepare and file with the SEC a
proxy statement that will be the same proxy statement/prospectus contained
in the Registration Statement, and a form of proxy with respect to the
meeting of the shareholders of the Company in connection with the Merger
and the other transactions contemplated by this Agreement (such proxy
statement/prospectus, together with any amendments thereof or supplements
thereto, in each case in the form or forms mailed to such shareholders,
being the "Proxy Statement"). Each of Parent and the Company shall use its
best efforts to (i) cause the Registration Statement to become effective as
promptly as practicable after such filing and (ii) cause the Proxy
Statement to be mailed to shareholders of the Company at the earliest
practicable date. Parent shall take any action required to be taken under
any applicable federal or state securities laws in connection with the
issuance of shares of Parent Common Stock in the Merger. Each of Parent and
the Company shall furnish all information concerning it and the holders of
its capital stock as the other may reasonably request in connection with
such actions. As promptly as practicable after the Registration Statement
shall have become effective, the Company shall mail the Proxy Statement to
its shareholders. The Proxy Statement shall include the unanimous
recommendation of the Board of Directors of the Company in favor of the
Merger subject to the terms and conditions set forth in Section 5.5.
(b) The information supplied by the Company for inclusion in the
Registration Statement shall not, at the time the Registration Statement is
declared effective, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in
order to
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make the statements therein not misleading. The information supplied by the
Company for inclusion in the Proxy Statement to be sent to the Company's
shareholders in connection with the special meeting of shareholders to
consider the Merger shall not, at the date the Proxy Statement (or any
amendment thereof or supplement thereto) is first mailed to shareholders,
at the time of the special shareholders' meeting or at the Effective Time,
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make
the statements therein, in the light of the circumstances under which they
are made, not misleading. If at any time prior to the Effective Time any
event or circumstance relating to the Company or any of its affiliates, or
its or their respective officers or directors, occurs or exists which
should be set forth in an amendment to the Registration Statement or a
supplement to the Proxy Statement, the Company shall promptly inform Parent
and the Company shall cooperate with Parent in the prompt filing with the
SEC of any necessary amendment or supplement to the Proxy Statement and the
Registration Statement and, as required by law, in disseminating the
information contained in such amendment or supplement to the shareholders
of the Company. All documents that the Company is responsible for filing
with the SEC in connection with the transactions contemplated herein will
comply as to form and substance in all material respects with the
applicable requirements of the Securities Act and the rules and regulations
thereunder and the Exchange Act and the rules and regulations thereunder.
(c) The information supplied by Parent for inclusion in the
Registration Statement shall not, at the time the Registration Statement is
declared effective, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in
order to make the statements therein not misleading. The information
supplied by Parent for inclusion in the Proxy Statement to be sent to the
Company's shareholders in connection with the special shareholders' meeting
shall not, at the date the Proxy Statement (or any amendment thereof or
supplement thereto) is first mailed to shareholders, at the time of the
meeting or at the Effective Time, contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in the light
of the circumstances under which they are made, not misleading. If at any
time prior to the Effective Time any event or circumstances relating to
Parent or any of its respective affiliates, or to its or their respective
officers or directors, occurs or exists which should be set forth in an
amendment to the Registration Statement or a supplement to the Proxy
Statement, Parent shall promptly inform the Company and Parent shall
cooperate with the Company in the prompt filing with the SEC of any
necessary amendment or supplement to the Proxy Statement and the
Registration Statement and, as required by law, in disseminating the
information contained in such amendment or supplement to the shareholders
of the Company. All documents that Parent is responsible for filing with
the SEC in connection with the transaction contemplated herein will comply
as to form and substance in all material respects with the applicable
requirements of the Securities Act and the rules and regulations thereunder
and the Exchange Act and the rules and regulations thereunder.
(d) (i) The Company shall use its reasonable efforts to cause to be
delivered to Parent a letter of Deloitte & Touche LLP dated as of a date
within five business days before the date on which the Registration
Statement shall become effective and addressed to Parent in form and
substance reasonably satisfactory to Parent and customary in scope and
substance for "comfort" letters delivered by independent public accountants
in connection with registration statements and proxy statements similar to
the Registration Statement and Proxy Statement; and (ii) Parent shall use
its reasonable efforts to cause to be delivered to the Company a letter of
PricewaterhouseCoopers LLP dated as of a date within five business days
before the date on which the Registration Statement shall become effective
and addressed to the Company in form and substance reasonably satisfactory
to the Company and customary in scope and substance for "comfort" letters
delivered by independent public accountants in connection with registration
statements and proxy statements similar to the Registration Statement and
Proxy Statement.
6.3 Appropriate Action; Consents; Filings.
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(a) The Company and Parent each shall use its reasonable best efforts
to (i) take, or cause to be taken, all appropriate action, and do, or cause
to be done, all things necessary, proper or advisable under applicable law
or otherwise to consummate and make effective the transactions contemplated
by this Agreement; (ii) obtain the Parent Required Approvals and the
Company Required Approvals; and (iii) make all necessary filings, and
thereafter make any other required submissions, with respect to this
Agreement and the Merger required under (A) the Securities Act (in the case
of Parent) and the Exchange Act and the rules and regulations thereunder,
and any other applicable federal or state securities laws, (B) the HSR Act
and (C) any other applicable law; provided that Parent and the Company
shall cooperate with each other in connection with the making of all such
filings, including providing copies of all such documents to the non-filing
party and its advisors prior to filing and, if requested, accepting all
reasonable additions, deletions or changes suggested in connection
therewith; and provided, further, that, unless otherwise agreed by Parent,
in its sole discretion, the reasonable efforts of Parent shall not include
(a) proffering Parent's willingness to accept an order providing for the
divestiture of such of the properties, assets, operations or business of
the Company or any of its Subsidiaries (or, in lieu thereof, such
properties, assets, operations or business of Parent or any of Parent's
affiliates) as are necessary to permit the consummation of the transactions
contemplated by this Agreement, including an offer to hold separate such
properties, assets, operations or businesses pending any such divestiture,
(b) proffering Parent's willingness to accept any other conditions,
restrictions, limitations or agreements affecting the full rights of
ownership of the Company's or any of its Subsidiary's assets (or any
portion thereof) as may be necessary to permit the consummation of the
transactions contemplated by this Agreement or (c) entering into or
continuing any litigation relating to this Agreement or the transactions
contemplated hereby. The Company and Parent shall furnish all information
required for any application or other filing to be made pursuant to the
rules and regulations of any applicable law (including all information
required to be included in the Proxy Statement and the Registration
Statement) in connection with the transactions contemplated by this
Agreement. If (x) necessary approvals under the HSR Act are conditioned
solely upon Parent taking one or more actions described in clauses (a), (b)
and (c) of this Section 6.3(a), which condition may not be waived,
appealed, or modified, (y) Parent has conclusively decided not to take such
action or actions, and (z) the Company has fulfilled its obligations under
this Section 6.3(a), then Parent shall notify the Company of its intent not
to take such action or actions (the "HSR Act Termination Notice"). Delivery
by Parent to the Company of the HSR Act Termination Notice shall constitute
a failure of the condition contained in Section 7.1(e) of this Agreement.
(b) (i) Each of the Company and Parent shall give (or shall cause each
of their respective Subsidiaries to give) any notices to third parties, and
shall use, and cause each of their respective Subsidiaries to use, its
reasonable best efforts to obtain any third party consents (A) necessary,
proper or advisable to consummate the transactions contemplated in this
Agreement, (B) disclosed or required to be disclosed in the Company
Disclosure Schedule or the Parent Disclosure Schedule, (C) otherwise
required under any contracts, licenses, leases or other agreements in
connection with the consummation of the transactions contemplated herein or
(D) required to prevent a Company Material Adverse Effect from occurring
prior to or after the Effective Time or a Parent Material Adverse Effect
from occurring after the Effective Time. Without in any way limiting the
foregoing, each of the Company and Parent agrees to use commercially
reasonable efforts to maintain the business relationship and goodwill of
Petroserv and to obtain an amendment to the Saudi Joint Venture Agreement
or other arrangement so that (A) the operation in the Kingdom of Saudi
Arabia of Pool Arabia, Ltd. and Nadrico Saudi Company Limited, immediately
after the Effective Time, will not be materially adversely affected by the
Merger and (B) the change in control provisions thereof will not be
triggered as a result of the Merger.
(ii) In the event that either party shall fail to obtain any third
party consent described in Section 6.3(b)(i), such party shall use its
reasonable best efforts, and shall take any such actions reasonably
requested by the other party hereto, to minimize any adverse effect upon
the Company and Parent, their respective Subsidiaries, and their respective
businesses resulting, or which could reasonably be expected to result after
the Effective Time, from the failure to obtain such consent.
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6.4 Tax Treatment; Affiliates.
(a) From and after the date hereof and until the Effective Time, none
of Parent, the Company or any of their respective Subsidiaries shall
knowingly (i) take any action, or fail to take any reasonable action, as a
result of which the Merger would fail to qualify as a reorganization within
the meaning of Section 368(a) of the Code or (ii) enter into any contract,
agreement, commitment or arrangement to take or fail to take any such
action. Each of the parties shall use its reasonable best efforts to obtain
the opinion of counsel referred to in Section 7.1(d).
(b) The Company shall use its best efforts to obtain from any person
who may be deemed to have become an affiliate of the Company after the date
of this Agreement and on or prior to the Effective Time a written agreement
substantially in the form of Exhibit 6.4 as soon as practicable after
attaining such status.
(c) The Company shall deliver to Parent a statement dated no more than
30 days prior to the Effective Time in form and substance as is described
in Treas. Reg. Section 1.1445-2(c)(3)(i).
6.5 Public Announcements. Parent and the Company will agree upon the
timing and content of the initial press release to be issued describing the
transactions contemplated by this Agreement, and will not make any public
announcement thereof prior to reaching such agreement unless required to do so
by applicable law or regulation. Thereafter, unless otherwise required by
applicable law or stock exchange requirements (and in that event, only if time
does not permit), Parent and the Company shall consult with each other before
issuing any press release or otherwise making any public statements with respect
to the Merger or the Stock Option Agreement and shall not issue any such press
release or make any such public statement prior to such consultation.
6.6 AMEX Listing. Parent shall use its best efforts to cause the shares of
Parent Common Stock to be issued in the Merger to be approved for listing on the
AMEX prior to the Effective Time.
6.7 Indemnification of Directors and Officers.
(a) The Articles of Incorporation and Bylaws of the Surviving
Corporation shall contain the provisions with respect to indemnification
set forth in Exhibit 1.4A and Exhibit 1.4B, which provisions shall not be
amended, repealed or otherwise modified for a period of six years after the
Effective Time in any manner that would adversely affect the rights
thereunder of individuals who at any time prior to the Effective Time were
directors or officers of the Company in respect of actions or omissions
occurring at or prior to the Effective Time (including, without limitation,
the transactions contemplated by this Agreement), unless such modification
is required by applicable law. Parent covenants and agrees that, from and
after the Effective Time, it will cause the Surviving Corporation to
perform its obligations under the Indemnification Agreements between the
Company and its directors substantially in the form filed as Exhibit 10.1
to the Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1998.
(b) For a period of six years following the Effective Time, the
Surviving Corporation and Parent (each, an "Indemnifying Party") shall
jointly and severally indemnify, defend and hold harmless the present and
former officers and directors of the Company or any of its Subsidiaries
(collectively, the "Indemnified Parties") against all losses, expenses,
claims, damages, liabilities or amounts that are paid in settlement of
(with the approval of Parent and the Surviving Corporation (which approval
shall not unreasonably be withheld or delayed)), or otherwise in connection
with, any threatened or actual claim, action, suit, proceeding or
investigation (a "Claim"), based in whole or in part on the fact that such
person is or was a director or officer of the Company or any of its
Subsidiaries and arising out of actions or omissions occurring at or prior
to the Effective Time (including, without limitation, the transactions
contemplated by this Agreement), in each case to the full extent permitted
under the TBCA (and shall pay expenses (including fees and disbursements of
counsel), as incurred, in advance of the final disposition of any such
action or proceeding to each Indemnified Party to the fullest extent
permitted under the TBCA, upon receipt from the Indemnified Party to whom
expenses are advanced of the undertaking to repay such advances
contemplated by the TBCA).
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(c) Without limiting the foregoing, in the event any Claim is brought
against any Indemnified Party (whether arising before or after the
Effective Time) after the Effective Time (i) the Indemnified Parties may
retain the Company's regularly engaged independent legal counsel, or other
independent legal counsel satisfactory to them provided that such other
counsel shall be reasonably acceptable to the Surviving Corporation, (ii)
the Indemnifying Parties shall jointly and severally pay all reasonable
fees and expenses of such counsel for the Indemnified Parties promptly as
statements therefor are received and (iii) the Indemnifying Parties will
use their reasonable best efforts to assist in the vigorous defense of any
such matter, provided that no Indemnifying Party shall be liable for any
settlement of any Claim effected without its written consent, which consent
shall not be unreasonably withheld or delayed. Any Indemnified Parties
wishing to claim indemnification under this Section 6.7, upon learning of
any such Claim, shall notify the Indemnifying Parties (although the failure
so to notify the Indemnifying Parties shall not relieve the Indemnifying
Parties from any liability which the Indemnifying Parties may have under
this Section 6.7 except to the extent such failure prejudices the
Indemnifying Parties), and shall, if requested, deliver to the Indemnifying
Parties the undertaking contemplated by the TBCA. The Indemnified Parties
as a group may retain one law firm (in addition to local counsel) to
represent them with respect to each such matter unless there is, under
applicable standards of professional conduct (as determined by counsel to
the Indemnified Parties), a conflict on any significant issue between the
positions of any two or more Indemnified Parties, in which event, such
additional counsel as may be required may be retained by the Indemnified
Parties.
(d) Commencing at the Effective Time, the directors and officers of
the Surviving Corporation shall be insured under the policies of directors
and officers insurance currently or hereafter maintained by Parent. In
addition, for a period of six years after the Effective Time, Parent shall
use commercially reasonable efforts to maintain in effect the current
policies of directors' and officers' liability insurance maintained by the
Company and its Subsidiaries (provided that Parent may substitute therefor
policies of at least the same coverage and amounts containing terms that
are no less advantageous in any material respect to the persons covered
thereby) with respect to claims arising from facts or events which occurred
before the Effective Time; provided that Parent shall not be required to
pay an annual premium for such insurance in excess of two times the last
annual premium paid by the Company prior to the date hereof, but in such
case shall purchase as much coverage as possible for such amount.
(e) This Section 6.7 is intended to be for the benefit of, and shall
be enforceable by, the Indemnified Parties, their heirs and personal
representatives and shall be binding on Parent, Merger Sub and the
Surviving Corporation and their representative successors and assigns. No
termination or modification of the obligations of the Indemnifying Parties
under this Section 6.7 that adversely affects the rights of any Indemnified
Party shall be effective against such Indemnified Party without his or her
prior written consent.
(f) The rights granted to the Indemnified Parties hereunder shall be
in addition to, and not in limitation of, any other rights that the
Indemnified Parties may have by contract, the TBCA, or otherwise.
(g) In the event Parent, the Surviving Corporation or any of their
respective successors or assigns (i) consolidates with or merges into any
other person and shall not be the continuing or surviving corporation or
entity in such consolidation or merger or (ii) transfers all or
substantially all of its properties and assets to any person, then and in
either such case, proper provision shall be made so that the successors and
assigns of Parent or the Surviving Corporation, as the case may be, shall
assume the obligations set forth in this Section 6.7.
6.8 Agreement to Defend. In the event any claim, action, suit,
investigation or other proceeding by any governmental body or other person or
other legal or administrative proceeding is commenced that questions the
validity or legality of the transactions contemplated hereby or seeks damages in
connection
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therewith, whether before or after the Effective Time, the parties hereto agree
to cooperate and use their reasonable efforts to defend against and respond
thereto.
6.9 Obligations of Merger Sub. Parent shall take all action necessary to
cause Merger Sub to approve and adopt the Agreement, to perform its obligations
hereunder and to consummate the Merger on the terms and conditions set forth in
this Agreement.
6.10 Accounting for Merger. The Merger shall be accounted for under the
purchase method.
6.11 Takeover Statutes. If any "fair price", "moratorium", "control share
acquisition" or other form of antitakeover statute or regulation (in addition to
Part Thirteen of the TBCA) shall become applicable to the transactions
contemplated hereby, each of Parent and the Company and the members of their
respective Boards of Directors shall grant such approvals and take such actions
as are reasonably necessary so that the transactions contemplated hereby may be
consummated as promptly as practicable on the terms contemplated hereby and
otherwise act to eliminate or minimize the effects of such statute or regulation
on the transactions contemplated hereby.
6.12 Board of Directors of Parent. At the Effective Time, the Board of
Directors of Parent shall be expanded to add one additional member to Class I,
which member shall be designated by mutual agreement of Parent and the Company
from the current independent members of the Company's Board of Directors. If the
individual so selected consents to serve as a director, such individual shall be
elected as a director of Parent, effective as of the Effective Time, for a term
expiring at Parent's next annual meeting of shareholders following the Effective
Time at which the term of the class to which such director belongs expires,
subject to being renominated as a director at the discretion of Parent's Board
of Directors.
6.13 Transition Employment. The Surviving Corporation shall continue to
employ five (the "Transition Employees") of the persons listed on Exhibit 6.13
for a period of between three and nine months after the Effective Time at a
salary for each Transition Employee equal to two times his current annual base
salary on the date of this Agreement, pro rated for the number of days such
person is so employed. Parent shall select the Transition Employees in its sole
discretion, and shall notify the Company at least 20 days prior to the Effective
Time of the names of the Transition Employees selected by Parent. In the event a
person listed on Exhibit 6.13 leaves his employment with the Company prior to
the Effective Time or any such Transition Employee notifies Parent and the
Company prior to the Effective Time that he is unwilling to continue his
employment with the Surviving Corporation, the Company shall have the
opportunity to provide the name of a substitute employee having similar
credentials and experience for Parent to consider.
6.14 Additional Agreements. Subject to the terms and conditions herein
provided, each of the parties hereto agrees to use all reasonable efforts to
take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations, or
to remove any injunctions or other impediments or delays, legal or otherwise, to
consummate and make effective the Merger and the other transactions contemplated
by this Agreement.
6.15 Notification of Certain Matters. The Company shall give prompt notice
to Parent and Parent shall give prompt notice to the Company, of (i) the
occurrence, or non-occurrence of any event the occurrence, or non-occurrence of
which would cause any representation or warranty contained in this Agreement to
be untrue or inaccurate in any material respect (unless such representation or
warranty is qualified by materiality in which case notice shall be given if such
representation or warranty would become untrue or inaccurate in any respect as
so qualified) at or prior to the Effective Time and (ii) any material failure of
the Company or Parent, as the case may be, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder; provided, however, that the delivery of any notice pursuant to this
Section 6.16 shall not limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
6.16 Post-Closing Employee Benefits. After the Effective Time, employees
of the Surviving Corporation and its Subsidiaries shall be entitled to benefits
that are comparable to those in effect from time to time applicable to
comparably located and situated employees of Parent and its Subsidiaries and
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each employee shall be entitled to receive severance on the same basis as
currently applies to employees of Parent or its Subsidiaries. For all purposes
other than benefit plan accrual, post-retirement medical plans and vacation
policies, employees of the Surviving Corporation and its Subsidiaries shall be
credited for service with the Company and its Subsidiaries and each employee
shall be entitled to receive severance on the same basis as currently applies to
employees of Parent or its Subsidiaries. For purposes of this Section 6.16,
employees of the Surviving Corporation and its Subsidiaries, (i) shall not
include persons (a) subject to a collective bargaining agreement, (b) on
long-term disability (which persons shall be terminated prior to the Effective
Time) or (c) on short-term disability in excess of 90 days (which persons shall
be terminated prior to the Effective Time) but (ii) shall include any employee
on short-term disability for less than 90 days, absent as a result of a workers'
compensation claim or on authorized leave (such as maternity, military, family
and medical leave or other leave where return to work is subject to statutory
requirements). Notwithstanding the foregoing, in no respect shall this Section
6.16 be interpreted to provide for a duplication of benefits.
6.17 Parent Stockholder Authorization. Each of Parent, Merger Sub and the
Company agrees that, in the event the Parent Stockholder Authorization shall be
required in connection with the Merger, such parties shall amend this Agreement
to provide that (a) obtaining the Parent Stockholder Authorization shall be a
condition to each party's obligation to consummate the Merger, (b) either Parent
or the Company shall have a right to terminate this Agreement if the required
Parent Stockholder Authorization is not obtained at a special meeting of Parent
stockholders held for that purpose, (c) Parent shall pay the Company a fee of $1
million, plus all actual, documented Third Party Costs (as defined in Section
8.5(b)), at the time of a termination pursuant to clause (b) of this Section
6.17, in cash by wire transfer to an account designated by the Company and (d)
Parent shall have the equivalent obligations with respect to its special meeting
of stockholders and the proxy statement related thereto as the Company to the
extent relevant.
ARTICLE VII
CLOSING CONDITIONS
7.1 Conditions to Obligations of Each Party Under this Agreement. The
respective obligations of each party to effect the Merger and the other
transactions contemplated herein shall be subject to the satisfaction at or
prior to the Effective Time of the following conditions, any or all of which may
be waived, in whole or in part, to the extent permitted by applicable law:
(a) Effectiveness of the Registration Statement. The Registration
Statement shall have been declared effective by the SEC under the
Securities Act. No stop order suspending the effectiveness of the
Registration Statement shall have been issued by the SEC and no proceedings
for that purpose shall have been initiated by the SEC.
(b) Shareholder Approval. The Company Shareholder Approval shall have
been obtained and, if required, the Parent Stockholder Authorization shall
have been obtained.
(c) No Order. No governmental entity or federal or state court of
competent jurisdiction shall have enacted, issued, promulgated, enforced or
entered any statute, rule, regulation, executive order, decree, injunction
or other order (whether temporary, preliminary or permanent) which is in
effect and which has the effect of making the Merger illegal or otherwise
prohibiting consummation of the Merger.
(d) Tax Opinions. The Company shall have received an opinion of its
tax counsel and Parent shall have received an opinion of its tax counsel,
each dated as of the Closing Date, substantially to the effect that the
Merger will qualify as a reorganization within the meaning of Section
368(a) of the Code. The issuance of such opinions shall be conditioned upon
the receipt by such tax counsel of customary representation letters from
each of the Company, Parent and Merger Sub, in each case, in form and
substance reasonably satisfactory to such tax counsel. The specific
provisions of each such representation letter shall be in form and
substance reasonably satisfactory to such tax counsel, and
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each such representation letter shall be dated on or before the date of
such opinion and shall not have been withdrawn or modified in any material
respect.
(e) HSR Act. The applicable waiting period under the HSR Act shall
have expired or been terminated.
(f) AMEX. The shares of Parent Common Stock to be issued in the Merger
shall have been approved for listing on the AMEX, subject to notice of
issuance.
7.2 Additional Conditions to Obligations of Parent and Merger Sub. The
obligations of Parent to effect the Merger and the other transactions
contemplated in this Agreement, unless otherwise waived in writing, are also
subject to the following conditions:
(a) Representations and Warranties. The representations and warranties
of the Company contained in this Agreement shall be true and correct when
made and on and as of the Effective Time as if made on and as of such date,
except where failure to be so true and correct would not have a Material
Adverse Effect on the Company, and except that those representations and
warranties which address matters only as of a particular date shall remain
true and correct as of such date, except where the failure to be so true
and correct would not have a Material Adverse Effect on the Company. Solely
for purposes of this Section 7.2(a) and in determining compliance with the
conditions set forth herein, any representation and warranty made by the
Company in this Agreement shall be read and interpreted as if the
qualification stated therein with respect to materiality or the Material
Adverse Effect on the Company were not contained therein. Parent shall have
received a certificate of the President of the Company to such effect.
(b) Agreements and Covenants. The Company shall have performed or
complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by it on or
prior to the Effective Time. Parent shall have received a certificate of
the President or Chief Financial Officer of the Company to such effect.
(c) Affiliate Agreements. The affiliate agreements to be entered into
prior to the Effective Time, as contemplated by Section 6.4, shall be in
full force and effect.
(d) Company Material Adverse Effect. Since the date of this Agreement,
there shall not have occurred any Material Adverse Effect or combination of
state of facts, events, changes or effects that has had, or would
reasonably be expected to have, a Material Adverse Effect on the Company.
(e) Saudi Joint Venture. The Saudi Joint Venture Agreement shall have
been amended or other arrangement shall be made prior to the Effective Time
so that, as of and after the Effective Time, Parent shall be reasonably
satisfied in its good faith judgment that the operations of Pool Arabia,
Ltd. and Nadrico Saudi Company Limited will not be materially adversely
affected by the Merger and that the Merger shall not result in a change in
control of Pool Arabia, Ltd. under the provisions of the Saudi Joint
Venture Agreement.
7.3 Additional Conditions to Obligations of the Company. The obligation of
the Company to effect the Merger and the other transactions contemplated in this
Agreement, unless otherwise waived in writing, is also subject to the following
conditions:
(a) Representations and Warranties. The representations and warranties
of Parent and Merger Sub contained in this Agreement shall be true and
correct when made and on and as of the Effective Time as if made on and as
of such date, except where the failure to be so true and correct would not
have a Material Adverse Effect on Parent, and except that those
representations and warranties which address matters only as of a
particular date shall remain true and correct as of such date, except where
the failure to be so true and correct would not have a Material Adverse
Effect on Parent. Solely for purposes of this Section 7.3(a) and in
determining compliance with the conditions set forth herein, any
representation and warranty made by the Parent in this Agreement shall be
read and interpreted as if the qualification stated therein with respect to
materiality or Material Adverse Effect
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on Parent were not contained therein. The Company shall have received a
certificate of the President of Parent to such effect.
(b) Agreements and Covenants. Each of Parent and Merger Sub shall have
performed or complied in all material respects with all agreements and
covenants required by this Agreement to be performed or complied with by
such party on or prior to the Effective Time. The Company shall have
received a certificate of the President of Parent and Merger Sub to that
effect.
(c) Parent Material Adverse Effect. Since the date of this Agreement,
there shall not have occurred any Material Adverse Effect or combination of
state of facts, events, changes or effects that has had, or would
reasonably be expected to have, a Material Adverse Effect on Parent.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.1 Termination.
(a) This Agreement may be terminated at any time prior to the
Effective Time, whether before or after approval of this Agreement and the
Merger by the shareholders of the Company, only in the following ways:
(i) by mutual written consent of Parent and the Company;
(ii) by Parent, upon a breach of any covenant or agreement on the
part of the Company set forth in this Agreement, or if any
representation or warranty of the Company shall be or shall have become
untrue, in either case such that the conditions set forth in Section
7.2(a) or Section 7.2(b) would not be satisfied (a "Terminating Company
Breach"), provided that if such Terminating Company Breach is curable by
the Company through the exercise of its reasonable best efforts and for
so long as the Company continues to exercise such reasonable best
efforts, Parent may not terminate this Agreement under this Section
8.1(a)(ii);
(iii) by the Company, upon a breach of any covenant or agreement on
the part of Parent or Merger Sub set forth in this Agreement, or if any
representation or warranty of Parent or Merger Sub shall be or shall
have become untrue, in either case such that the conditions set forth in
Section 7.3(a) or Section 7.3(b) would not be satisfied (a "Terminating
Parent Breach"), provided that if such Terminating Parent Breach is
curable by Parent or Merger Sub through the exercise of its reasonable
best efforts and for so long as Parent or Merger Sub continues to
exercise such reasonable best efforts, the Company may not terminate
this Agreement under this Section 8.1(a)(iii);
(iv) by either Parent or the Company, if there shall be any order,
decree or ruling of any United States federal or state court of
competent jurisdiction, or any United States federal or state
governmental, regulatory or administrative authority, which is final and
nonappealable, permanently restraining, enjoining or otherwise
preventing the consummation of the Merger;
(v) By either Parent or the Company, if the Merger shall not have
been consummated on or before October 1, 1999, provided, however, that
such date shall be extended for up to an additional six months if the
applicable waiting period under the HSR Act shall not have expired or
been terminated by such date (unless the failure to consummate the
Merger by the applicable date shall be due to the action or failure to
act of the party seeking to terminate this Agreement);
(vi) by either Parent or the Company, if the shareholders' meeting
provided for in Section 6.1 shall have been held and the Agreement shall
fail to receive the requisite shareholder approval required by Section
7.1(b) at such meeting (including any adjournments and postponements
thereof);
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(vii) by Parent, if, (A) the Board of Directors of the Company
withdraws, or materially modifies or materially changes, its
recommendation of this Agreement or the Merger in a manner adverse to
Parent or Merger Sub or shall have resolved to do any of the foregoing;
(B) the Board of Directors of the Company (i) shall have recommended to
the shareholders of the Company a Company Acquisition Proposal or (ii)
after the expiration of ten business days following the commencement of
any Company Acquisition Proposal that is a tender offer, shall have (1)
failed to recommend against accepting such tender offer or (2) taken no
position with respect thereto or (iii) resolved to do any of the
foregoing; or (C) the Company shall have effected an amendment, waiver,
termination or other alteration of the provisions of the Company Rights
Plan in such a manner that any person (other than Parent or Merger Sub)
shall have been permitted to acquire "beneficial ownership" or the right
to acquire beneficial ownership of, or any "group" (as such terms are
defined under Section 13(d) of the Exchange Act and the rules and
regulations promulgated thereunder), shall have been formed which
beneficially owns, or has the right to acquire beneficial ownership of,
more than 15% of the then outstanding shares of Company Common Stock, in
each case without triggering the Company Rights Plan or shall have
resolved to do any of the foregoing;
(viii) by the Company, if the Board of Directors of the Company
shall have withdrawn, or modified or changed in a manner adverse to
Parent or Merger Sub, its approval or recommendation of this Agreement
or the Merger in order to approve and permit the Company to execute a
definitive agreement providing for a Superior Proposal, and elects to
terminate this Agreement effective prior to the satisfaction of the
condition set forth in Section 7.1(b); provided that the Company may not
effect such termination pursuant to this Section 8.1(a)(viii) unless and
until (A) Parent receives at least five business days' prior written
notice from the Company of its intention to effect such termination
pursuant to this Section 8.1(a)(viii), which notice specifies the
material terms and conditions of such Superior Proposal and identifies
the person making such Superior Proposal; (B) during such period, the
Company shall, and shall cause its respective financial and legal
advisors to, negotiate in good faith with Parent to make such
adjustments in the terms and conditions of this Agreement that would
enable the Company to proceed with the transactions contemplated by this
Agreement on such adjusted terms; and provided, further, that any
termination of this Agreement pursuant to this Section 8.1(a)(viii)
shall not be effective until the Company has made the termination
payment required by Section 8.5(b); or
(ix) by the Company, if Parent shall have delivered to the Company
the HSR Act Termination Notice.
(b) Notwithstanding any of the foregoing, the right of any party
hereto to terminate this Agreement pursuant to Section 8.1(a) shall remain
operative and in full force and effect regardless of any investigation made
by or on behalf of any party hereto, any person controlling any such party
or any of their respective officers or directors, whether prior to or after
the execution of this Agreement.
8.2 Effect of Termination. Except as provided in Section 8.5 or Section
9.1, in the event of the termination of this Agreement pursuant to Section
8.1(a), this Agreement shall forthwith become void, there shall be no liability
on the part of Parent, Merger Sub or the Company or any of their respective
officers or directors to the other and all rights and obligations of any party
hereto shall cease.
8.3 Amendment. This Agreement may be amended by the parties hereto by
action taken by or on behalf of their respective Boards of Directors at any time
prior to the Effective Time; provided, however, that, after approval of this
Agreement and the Merger by the shareholders of the Company, no amendment shall
be made which by the TBCA requires the further approval of shareholders. This
Agreement may not be amended except by an instrument in writing signed by the
parties hereto.
8.4 Waiver. At any time prior to the Effective Time, any party hereto may
(a) extend the time for the performance of any of the obligations or other acts
of the other parties hereto, (b) waive any inaccuracies in the representations
and warranties of the other party contained herein or in any document
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delivered pursuant hereto and (c) waive compliance by the other parties with any
of the agreements or conditions contained herein (other than those required to
be complied with by applicable law). Any such extension or waiver shall be valid
only if set forth in an instrument in writing signed by the party or parties to
be bound thereby.
8.5 Fees; Expenses and Other Payments.
(a) Except as provided in clauses (b), (c) and (d) of this Section
8.5, each party shall bear its own costs and expenses in connection with
this Agreement and the transactions contemplated hereby, provided, however,
that the allocable share of each of Parent and the Company for all costs
and expenses related to printing, filing and mailing the Registration
Statement and the Proxy Statement and all SEC and other regulatory filing
fees incurred in connection with the Registration Statement and the Proxy
Statement shall be one-half. Notwithstanding anything to the contrary, all
of the costs and expenses in connection with this Agreement and the
transactions contemplated hereby incurred by the Company and the Parent
shall, upon the consummation of the Merger, be borne by the Surviving
Corporation.
(b) If this Agreement is terminated for any reason pursuant to Section
8.1(a)(ii), (vii) or (viii), then the Company shall pay Parent a fee of $15
million, plus all actual, documented third party costs, including, but not
limited to, filing fees and costs for attorneys, accountants and other
advisors ("Third Party Costs") incurred by Parent, at the time of such
termination in cash by wire transfer to an account designated by Parent.
(c) If this Agreement is terminated by the Company pursuant to Section
8.1(a)(iii), then Parent shall pay the Company a fee of $15 million, plus
all actual, documented Third Party Costs, at the time of such termination
in cash by wire transfer to an account designated by the Company.
(d) If this Agreement is terminated by Parent or the Company pursuant
to Section 8.1(a)(vi), the Company shall pay Parent a fee of $1 million,
plus all actual, documented Third Party Costs, at the time of such
termination in cash by wire transfer to an account designated by Parent,
provided, however, that if at or prior to the time the shareholders'
meeting has been held there has been announced (whether or not rejected or
withdrawn) any Company Acquisition Proposal and within 18 months thereafter
the Company enters into any agreement with respect to any Company
Acquisition Proposal, then the Company shall pay Parent an additional fee
of $14 million, upon execution of such agreement in cash by wire transfer
to an account designated by Parent.
(e) The parties agree that the amounts provided in clauses (b), (c)
and (d) of this Section 8.5 payable upon the occurrence of the events
specified therein have been determined by negotiation and reflect their
best estimate and judgment of the monetary value of the losses and damages
to be incurred in connection with, and time, effort, expense and cost of
opportunity associated with, the transactions contemplated in this
Agreement, and the parties agree to accept payment of such amount as
liquidated damages in full and complete satisfaction of all claims and
expenses arising from the occurrence of such events (including, but not
limited to, claims for specific performance and not as a penalty payment).
ARTICLE IX
GENERAL PROVISIONS
9.1 Effectiveness of Representations, Warranties and Agreements.
(a) Except as set forth in Section 9.1(b), the representations,
warranties and agreements of each party hereto shall remain operative and
in full force and effect regardless of any investigation made by or on
behalf of any other party hereto, any person controlling any such party or
any of their officers or directors, whether prior to or after the execution
of this Agreement.
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(b) The representations, warranties and agreements in this Agreement
shall terminate at the Effective Time or upon the termination of this
Agreement pursuant to Article VIII, except that the agreements set forth in
Article I and II, and Sections 6.4(a), 6.7, 6.8, 6.10, 6.13 and 6.16 shall
survive the Effective Time and those set forth in Sections 5.6, 8.2, 8.5
and Article IX shall survive the termination of this Agreement.
9.2 Notices. All notices and other communications given or made pursuant
hereto shall be in writing and shall be deemed to have been duly given or made
as of the date delivered, mailed or transmitted, and shall be effective upon
receipt, if delivered personally, sent by expedited courier or messenger
service, mailed by registered or certified mail (postage prepaid, return receipt
requested) to the parties at the following addresses (or at such other address
for a party as shall be specified by like changes of address) or sent by
electronic transmission to the telecopier number specified below:
(a) If to Parent or Merger Sub:
Nabors Industries, Inc.
515 West Greens Road, Suite 1200
Houston, Texas 77067
Attention: Anthony G. Petrello, President and Chief Operating
Officer
Telecopier No.: (281) 775-8188
with a copy to:
Nabors Corporate Services, Inc.
515 West Greens Road, Suite 1200
Houston, Texas 77067
Attention: Legal Department
Telecopier No.: (281) 775-8431
(b) If to the Company:
Pool Energy Services Co.
10375 Richmond Avenue
Houston, Texas 77042
Attention: J.T. Jongebloed, Chairman, President and Chief Executive
Officer
Telecopier No.: (713) 954-3037
with a copy to:
Bracewell & Patterson, L.L.P.
2900 South Tower Pennzoil Place
711 Louisiana Street
Houston, Texas 77002-2781
Attention: Edgar J. Marston III
Telecopier No.: (713) 221-1212
Notice to a "copy to" address shall be provided as a courtesy, but shall
not be deemed to be actual notice received by a party for any purpose. Any party
may change the address to which notices, requests, demands, claims and other
communications hereunder are to be delivered by giving the other parties notice
in the manner herein set forth.
9.3 Certain Definitions. For purposes of this Agreement, the term:
(a) "affiliate" means a person that directly or indirectly, through
one or more intermediaries, controls, is controlled by, or is under common
control with, the first mentioned person.
(b) "business day" means any day other than a day on which banks in
the State of Texas are authorized or obligated to be closed.
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(c) "control" (including the terms "controlled," "controlled by" and
"under common control with") means the possession, directly or indirectly,
of the power to direct or cause the direction of the management or policies
of a person, whether through the ownership of stock, by contract or credit
arrangement or otherwise.
(d) "knowledge" or "known" shall mean, with respect to any matter in
question, if an executive officer of the Company or Parent, as the case may
be, has actual knowledge of such matter.
(e) "person" means an individual, corporation, partnership,
association, trust, unincorporated organization, other entity or group (as
defined in Section 13(d) of the Exchange Act).
(f) "Significant Subsidiary" or "Significant Subsidiaries" means any
Subsidiary of the Company or Parent, as the case may be, that would
constitute a Significant Subsidiary of such party within the meaning of
Rule 1-02 of Regulation S-X of the SEC.
(g) "Subsidiary" or "Subsidiaries" of the Company, Parent, the
Surviving Corporation or any other person, means any corporation,
partnership, limited liability company, joint venture or other legal entity
of which the Company, Parent, the Surviving Corporation or such other
person, as the case may be (either alone or through or together with any
other Subsidiary), owns, directly or indirectly, 50% or more of the capital
stock or other equity interests the holders of which are generally entitled
to vote for the election of the board of directors or other governing body
of such corporation or other legal entity.
9.4 Headings. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
9.5 Severability. If any term or other provision of this Agreement is
determined to be invalid, illegal or incapable of being enforced by any rule of
law or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated hereby is not affected in any
manner materially adverse to any party. Upon such determination that any term or
other provision is invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in an acceptable
manner to the end that the transactions contemplated hereby are fulfilled to the
extent possible.
9.6 Entire Agreement. This Agreement (together with the Exhibits)
constitutes the entire agreement of the parties and supersedes all prior
agreements and undertakings, both written and oral, between the parties, or any
of them, with respect to the subject matter hereof.
9.7 Assignment. This Agreement shall not be assigned by operation of law
or otherwise except Merger Sub may, without the Company's approval, assign its
interests to any wholly owned Subsidiary of Parent.
9.8 Parties in Interest. This Agreement shall be binding upon and inure
solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied (other than the provisions of Article II and Sections 6.7,
6.13 and 6.16), is intended to or shall confer upon any other person any right,
benefit or remedy of any nature whatsoever under or by reason of this Agreement.
9.9 Failure or Indulgence Not Waiver; Remedies Cumulative. No failure or
delay on the part of any party hereto in the exercise of any right hereunder
shall impair such right or be construed to be a waiver of, or acquiescence in,
any breach of any representation, warranty or agreement herein, nor shall any
single or partial exercise of any such right preclude other or further exercise
thereof or of any other right. Except as set forth in Section 8.5(c), all rights
and remedies existing under this Agreement are in addition to, and not exclusive
of, any rights or remedies otherwise available.
9.10 Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Texas, regardless of the laws that
might otherwise govern under applicable principles
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of conflicts of law, except to the extent that the General Corporation Law of
the State of Delaware shall be mandatorily applicable to the shares of Parent
Common Stock issuable in the Merger.
9.11 Jurisdiction. Each party hereby irrevocably submits to the exclusive
jurisdiction of the United States District Court for the Southern District of
Texas, Houston Division, or any court of the State of Texas located in the City
of Houston in any action, suit or proceeding arising in connection with this
Agreement, and agrees that any such action, suit or proceeding shall be brought
only in such court (and waives any objection based on forum non conveniens or
any other objection to venue therein); provided, however, that such consent to
jurisdiction is solely for the purpose referred to in this Section 9.11 and
shall not be deemed to be a general submission to the jurisdiction of said
Courts or in the State of Texas other than for such purpose. PARENT, MERGER SUB
AND THE COMPANY HEREBY WAIVE ANY RIGHT TO A TRIAL BY JURY IN CONNECTION WITH ANY
SUCH ACTION, SUIT OR PROCEEDING.
9.12 Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
NABORS INDUSTRIES, INC
By: /s/ ANTHONY G. PETRELLO
----------------------------------
Anthony G. Petrello
President and Chief Operating
Officer
STARRY ACQUISITION CORP.
By: /s/ ANTHONY G. PETRELLO
----------------------------------
Anthony G. Petrello
President
POOL ENERGY SERVICES CO.
By: /s/ J. T. JONGEBLOED
----------------------------------
J. T. Jongebloed
Chairman, President and
Chief Executive Officer
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APPENDIX B
January 10, 1999
Board of Directors
Pool Energy Services Co.
10375 Richmond Avenue
Houston, TX 77042
Members of the Board
We understand that Pool Energy Services Co. (the "Company"), Nabors
Industries, Inc. ("Nabors") and Starry Acquisition Corp., a wholly owned
subsidiary of Nabors ("Acquisition Sub"), propose to enter into an Agreement and
Plan of Merger substantially in the form of the draft dated January 10, 1999
(the "Merger Agreement"), which provides, among other things, for the merger
(the "Merger") of Acquisition Sub with and into the Company. Pursuant to the
Merger, Company will become a wholly owned subsidiary of Nabors and each
outstanding share of common stock, no par value per share, of the Company (the
"Common Stock"), other than shares held in treasury or held by Nabors or any
subsidiary of Nabors, will be converted into the right to receive 1.025 (the
"Exchange Ratio") shares of common stock, par value $0.10 per share, of Nabors
("Nabors Common Stock"). The terms and conditions of the Merger are more fully
set forth in the Merger Agreement.
You have asked for our opinion as to whether the Exchange Ratio pursuant to
the Merger Agreement is fair from a financial point of view to the holders of
the Common Stock, other than Nabors, Acquisition Sub and their subsidiaries.
For purposes of the opinion set forth herein, we have:
(i) reviewed certain publicly available financial statements and other
information of the Company;
(ii) reviewed certain internal financial statements and other
financial and operating data concerning the Company prepared by the
management of the Company;
(iii) discussed the past and current operations and financial
condition and the prospects of the Company with senior executives of the
Company;
(iv) reviewed the reported prices and trading activity for the Common
Stock; compared the financial performance of the Company and the prices and
trading activity of the Common Stock with that of certain other comparable
publicly-traded companies and their securities;
(v) reviewed the financial terms, to the extent publicly available, of
certain comparable acquisition transactions;
(vi) reviewed certain publicly available financial statements and
other information of Nabors;
(vii) reviewed the reported prices and trading activity for Nabors
Common Stock; compared the financial performance of Nabors and the prices
and trading activity of the Nabors Common Stock with that of certain other
comparable publicly-traded companies and their securities;
(viii) reviewed the pro forma impact of the Merger on Nabors earnings
per share, cash flow, capitalization and financial ratios;
(ix) reviewed the draft Merger Agreement and certain related
documents;
(x) participated in discussions and negotiations among representatives
of the Company and Nabors and their financial and legal advisors; and
(xi) performed such other analyses and considered such other factors
as we have deemed appropriate.
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We have assumed and relied upon without independent verification the
accuracy and completeness of the information reviewed by us for the purposes of
this opinion. We have assumed that the Merger Agreement, when executed and
delivered, will not contain any terms or conditions that differ materially from
the draft which we have reviewed and that the Merger will be consummated in
accordance with the terms of Merger Agreement without any waiver of any material
term or condition thereof. We have also assumed that the Merger will be treated
as a tax-fee reorganization and/or exchange, pursuant to the Internal Revenue
Code of 1986. We have not made any independent valuation or appraisal of the
assets or liabilities of the Company or Nabors, nor have we been furnished with
any such appraisals. Our opinion is necessarily based on financial, economic,
market and other conditions as in effect on, and the information made available
to us as of, the date hereof.
We have acted as financial advisor to the Board of Directors of the Company
in connection with this transaction and will receive a fee for our services. In
the ordinary course of our business, we and our affiliates may actively trade
the securities of the Company and Nabors, for our own account and for the
account of customers. In the past, Morgan Stanley & Co. Incorporated and its
affiliates ("Morgan Stanley") have provided financial advisory and financing
services for the Company and Nabors and have received fees for the rendering of
these services and may have other business relationships with the Company and
Nabors and their affiliates in the future.
It is understood that this letter is for the information of the Board of
Directors of the Company, except that this opinion may be included in its
entirety in any filing made by the Company in respect of the Merger with the
Securities and Exchange Commission. In addition, this opinion does not in any
manner address the prices at which Nabors Common Stock will trade following the
consummation of the Merger or address the Company's underlying business decision
to effect the Merger, and Morgan Stanley expresses no opinion or recommendation
as to how the shareholders of the Company or Nabors should vote at the
shareholders' meeting held in connection with the Merger.
Based upon and subject to the foregoing, we are of the opinion on the date
hereof that the Exchange Ratio pursuant to the Merger Agreement is fair from a
financial point of view to the holders of the Common Stock, other than Nabors,
Acquisition Sub and their subsidiaries.
Very truly yours,
MORGAN STANLEY & CO. INCORPORATED
By: /s/ STEPHEN M. TRAUBER
----------------------------------
Stephen M. Trauber
Managing Director
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145OFFICERS
NABORS HOLDINGS 1, ULC
Under Nova Scotia law, a company is permitted to indemnify its directors
and officers subject to certain restrictions. The Articles of the Delaware General Corporation Law permits the
indemnificationAssociation of
directors, employees and agents of Delaware corporations.
Consistent therewith, Article Seventh of the Certificate of Incorporation
of the Registrant states as follows:
(a) EachNabors Holdings state:
"1. Every director or officer, former director or officer, or person who
wasacts or is made a party or is threatened to be made
a party to or is involved in any action, suit or proceeding, whether civil,
criminal, administrative or investigative (hereinafter collectively
referred toacted at the Company's request, as a "proceeding"), by reason of the fact that he or she, or a
person of whom he or she is the legal representative, is or was a director or officer of
the CorporationCompany, a body corporate, partnership or other association of
which the Company is or was servinga shareholder, partner, member or
creditor, and the heirs and legal representatives of such person, in
the absence of any dishonesty on the part of such person, shall be
indemnified by the Company against, and it shall be the duty of the
directors out of the funds of the Company to pay, all costs, losses
and expenses, including an amount paid to settle an action or claim or
satisfy a judgment, that such director, officer or person may incur or
become liable to pay in respect of any claim made against such person
or civil, criminal or administrative action or proceeding to which
such person is made a party by reason of being or having been a
director or officer of the Company or such body corporate, partnership
or other association, whether the Company is a claimant or party to
such action or proceeding or otherwise; and the amount for which such
indemnity is proved shall immediately attach as a lien on the property
of the Company and have priority as against the shareholders over all
other claims.
2. No director or officer, former director or officer, or person who acts
or acted at the Company's request, of the
Corporation as a director or officer employee or agent of another
corporation or ofthe
Company, a body corporate, partnership joint venture, trust or other enterprise,
including serviceassociation of which
the Company is or was a shareholder, partner, member or creditor, in
the absence of any dishonesty on such person's part, shall be liable
for the acts, receipts, neglects or defaults of any other director,
officer or such person, or for joining in any receipt or other act for
conformity, or for any loss, damage or expense happening to the
Company through the insufficiency or deficiency of title to any
property acquired for or on behalf of the Company, or through the
insufficiency or deficiency of any security in or upon which any of
the funds of the Company are invested, or for any loss or damage
arising from the bankruptcy, insolvency or tortious acts of any person
with respect to employee benefit plans, whetherwhom any funds, securities or effects are deposited, or for any
loss occasioned by error of judgment or oversight on the basispart of such
proceeding is alleged actionperson, or for any other loss, damage or misfortune whatsoever which
happens in an official capacity as a director,
officer, employee or agentthe execution of the duties of such person or in relation
thereto."
NABORS INDUSTRIES LTD.
Under Bermuda law, a company is permitted to indemnify its directors and
officers subject to certain restrictions. Section One (1) and Section
Seventy-Five (75) of Nabors' Amended and Restated Bye-Laws, states:
"Officer" means a Director, Secretary, or other officer of the Company
appointed pursuant to these Bye-laws, but does not include any person
holding the office of auditor in relation to the Company;
"75. Exemption and Indemnification of Officers. Subject always to these
Bye-laws, no Officer shall be liable for the acts, receipts, neglects or
defaults of any other capacity while serving as a
director, officer, employeeOfficer nor shall any Officer be liable in respect
of any negligence, default or agent,breach of duty on his or her own part in
relation to the Company or any Subsidiary, or for any loss, misfortune
or damage which may happen, in or arising out of the actual or purported
execution or discharge of his or her duties or the exercise or purported
exercise of his or her powers or otherwise in relation to or in
connection with his or her duties, powers or office.
75.1. Subject always to these Bye-laws, every Officer shall be
indemnified and held harmless out of the funds of the Company against
all liabilities, losses, damages or expenses (including but not
II-1
limited to liabilities under contract, tort and statute or any
applicable foreign law or regulation and all legal and other costs and
expenses properly payable) incurred or suffered by the CorporationOfficer arising
out of the actual or purported execution or discharge of the Officer's
duties (including, without limitation, in respect of his or her service
at the request of the Company as a director, officer, partner, trustee,
employee, agent or similar functionary of another person) or the
exercise or purported exercise of the Officer's powers or otherwise, in
relation to or in connection with the Officer's duties, powers or office
(including but not limited to liabilities attaching to the Officer and
losses arising by virtue of any rule of law in respect of any
negligence, default, breach of duty or breach of trust of which such
Officer may be guilty in relation to the Company or any Subsidiary of
the Company).
75.2. Every Officer shall be indemnified out of the funds of the Company
against all liabilities arising out of the actual or purported execution
or discharge of the Officer's duties or the exercise or purported
exercise of the Officer's powers or otherwise, in relation to or in
connection with the Officer's duties, powers or office, incurred by such
Officer in defending any proceedings, whether civil or criminal, in
which judgement is given in the Officer's favour, or in which the
Officer is acquitted, or in connection with any application under the
Companies Acts in which relief from liability is granted to the Officer
by the court.
75.3. In this Bye-law 75 (i) the term "Officer" includes, in addition to
the persons specified in the definition of that term in Bye-law 1, the
Resident Representative, a member of a committee constituted under these
Bye-laws, any person acting as an Officer or committee member in the
reasonable belief that the Officer has been so appointed or elected,
notwithstanding any defect in such appointment or election, and any
person who formerly was an Officer or acted in any of the other
capacities described in this clause (i) and (ii) where the context so
admits, references to an Officer include the estate and personal
representatives of a deceased Officer or any such other person.
75.4. The provisions for exemption from liability and indemnity
contained in this Bye-law shall have effect to the fullest extent
authorizedpermitted by Applicable Law, but shall not extend to any matter which
would render any of them void pursuant to the Delaware General Corporation Law, as the same exists or may hereafter be
amended (but, in the case of any such amendment, only toCompanies Acts.
75.5. To the extent that any person is entitled to claim an indemnity
pursuant to these Bye-laws in respect of an amount paid or discharged by
him or her, the relevant indemnity shall take effect as an obligation of
the Company to reimburse the person making such payment (including
advance payments of fees or other costs) or effecting such discharge.
75.6. The rights to indemnification and reimbursement of expenses
provided by these Bye-laws shall not be deemed to be exclusive of, and
are in addition to, any other rights to which a person may be entitled.
Any repeal or amendment permitsof this Bye-law 75 shall be prospective only and
shall not limit the Corporationrights of any Officer or the obligation of the
Company with respect to provide broader indemnification
rights than said law permitted the Corporation to provideany claim arising prior to any such amendment),repeal or
amendment.
75.7. In so far as it is permissible under Applicable Law, each
Shareholder and the Company agree to waive any claim or right of action
the Shareholder or it may at any time have, whether individually or by
or in the right of the Company, against all expense, liability and loss (including attorneys'
fees, judgments, fines, ERISA excise taxesany Officer on account of any
action taken by such Officer or penalties and amounts paidthe failure of such Officer to take any
action in the performance of his duties with or for the Company,
provided however, that such waiver shall not apply to any claims or
rights of action arising out of the fraud or dishonesty of such Officer
or to be paid in settlement) reasonably incurredrecover any gain, personal profit or suffered byadvantage to which such
person in
connection therewith and such indemnification shall continue as to a person
who has ceased to be a director, officer, employee or agent and shall inureOfficer is not legally entitled.
75.8. Subject to the benefit of his or her heirs, executors and administrators.
(b) The right to indemnification conferred in this Section shall
include the right to be paid by the Corporation theCompanies Acts, expenses incurred in defending any
suchcivil or criminal action or proceeding in advance of its final disposition;
provided, however, that iffor which indemnification is
required pursuant to this Bye-law 75 shall be paid by the Delaware General Corporation Law requires,
the payment of such expenses incurred by a director or officerCompany in
advance of the final disposition of asuch action or proceeding shall be made only upon
delivery
to the Corporationreceipt of an undertaking by or on behalf of such director or
officer,the indemnified party to
repay all amounts so advancedsuch amount if it shall ultimately be determined that such director or officerthe
indemnified party is not entitled to be indemnified pursuant to this
Bye-law 75.
II-2
75.9 Each Shareholder of the Company, by virtue of its acquisition and
continued holding of a Share, shall be deemed to have acknowledged and
agreed that the advances of funds may be made by the Company as
aforesaid, and when made by the Company under this SectionBye-law 75 are made
to meet expenditures incurred for the purpose of enabling such Officer
to properly perform his or otherwise. The Corporation may, by action of its
Board of Directors, provide indemnification to employees and agents of the
Corporation with the same scope and effecther duties as the foregoing indemnification
of directors and officers.
(c) The right to indemnification and the payment of expenses incurred
in defending a proceeding in advance of its final disposition conferred in
this Section shall not be exclusive of any other right which any person may
have or hereafter acquire under any statute, provision of the Certificate
of Incorporation, By-laws, agreement, vote of stockholders or disinterested
directors or otherwise.
(d) The Corporation may maintain insurance, at its expense, to protect
itself and any director, officer, employee or agent of the Corporation or
another corporation, partnership, joint venture, trust or other enterprise
against any such expense, liability or loss, whether or not the Corporation
would have the power to indemnify such person against such expense,
liability or loss under the Delaware General Corporation Law.
(e) Any repeal or modification of this Section directly or indirectly,
such as by adoption of an inconsistent provision of this Certificate of
Incorporation, shall not apply to or have any effect on the rights of any
officer and director to indemnification and advancement of expenses with
respect to any acts or omissions occurring prior to such repeal or
modification.
II-1
118
(f) If this Section or any portion hereof shall be invalidated on any
ground by any court of competent jurisdiction, then the Corporation shall
nevertheless indemnify each director and officer of the Corporation as to
expense, liability and loss (including attorneys' fees, judgments, fines,
ERISA excise taxes or penalties and amounts paid or to be paid in
settlement) with respect to any proceeding to the full extent permitted by
any applicable portion of this Section that shall not have been invalidated
and to the full extent permitted by applicable law.
The RegistrantOfficer."
Nabors has entered into agreements with eachcertain of its directors and
officers indemnifying each of them against expenses, settlements, judgments and fines in
connection with any threatened, pending or completed action, suit, arbitration
or proceeding where the individual's involvement is by reason of the fact that
he is or was a director or officer or served at the Registrant'sNabors' request as a director or
officer of another organization, except thatwhere such indemnification is not
provided against judgments or fines in a derivative suit
unless permitted by Delawareunder applicable law.
The officers and directors of the RegistrantNabors are covered by directors and officers
insurance aggregating $25,000,000.$100,000,000.
NABORS INDUSTRIES, INC.
Section 145 of the Delaware General Corporation Law permits the
indemnification of directors, employees and agents of Delaware corporations.
Consistent therewith, Section 10 of the Nabors Delaware's Restated
Certificate of Incorporation states as follows:
"All persons who the corporation is empowered to indemnify pursuant to
the provisions of Section 145 of the General Corporation Law of the
State of Delaware (or any similar provision or provisions of applicable
law at the time in effect) shall be indemnified by the corporation to
the fullest extent permitted thereby. The foregoing right of
indemnification shall not be deemed to be exclusive of any other rights
to which those seeking indemnification may be entitled under any by-law,
agreement, vote of shareholders or disinterested directors, or
otherwise. No repeal or amendment of this Section 10 shall adversely
affect any rights of any person pursuant to this Section 10 which
existed at the time of such repeal or amendment with respect to acts or
omissions occurring prior to such repeal or amendment."
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling Nabors, Nabors
Delaware or Nabors Holdings pursuant to the foregoing provisions, Nabors, Nabors
Delaware and Nabors Holdings have been informed that, in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Securities Act and is therefore unenforceable.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.SCHEDULES
EXHIBIT
NUMBERNO. DESCRIPTION OF EXHIBIT
- ------- ---------------------------------
2.1 --+2.1 Agreement and Plan of Merger dated as of January 10,
1999, among Nabors Industries, Inc.,
StarryNabors Acquisition Corp. VIII, Nabors Industries Ltd. and
Pool Energy Services Co.Nabors US Holdings Inc. (incorporated by reference to Exhibit 2.1 of the Form 8-K filed byAnnex
I to proxy statement/prospectus included in Nabors
Industries Inc. (Commission FileLtd.'s Registration Statement on Form S-4
(Registration No. 1-9245)333-76198) filed with the SecuritiesSEC on May 10,
2002, as amended).
+3.1 Memorandum of Association of Nabors Industries Ltd.
(incorporated by reference to Annex II to the proxy
statement/prospectus included in Nabors Industries Ltd.'s
Registration Statement on Form S-4 (Registration No.
333-76198) filed with the SEC on May 10, 2002, as amended).
+3.2 Amended and Exchange CommissionRestated Bye-Laws of Nabors Industries Ltd.
(incorporated by reference to Annex III to the proxy
statement/prospectus included in Nabors Industries Ltd.'s
Registration Statement on January 11, 1999)Form S-4 (Registration No.
333-76198) filed with the SEC on May 10, 2002, as amended).
2.2* -- First Amendment to Agreement and Plan of Merger, dated as
of August 6, 1999.
3.1 --3.3 Restated Certificate of Incorporation of Nabors Industries,
Inc.
(incorporated by reference to Exhibit
3.1 of the Quarterly Report on Form 10-Q3.4 Restated By-laws of Nabors Industries, Inc.
(Commission File No. 1-9245) for the
quarter ended March 31, 1997).
3.2 -- Restated By-Laws3.5 Memorandum of Association of Nabors Industries, Inc. (incorporated
by reference to Exhibit 3.2Holdings 1, ULC.
II-3
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
- ------- ----------------------
3.6 Articles of the Annual Report on Form
10-KAssociation of Nabors Holdings 1, ULC.
4.1 Indenture, dated August 22, 2002, among Nabors Holdings 1,
ULC, Nabors Industries, Inc. (Commission File No.
1-9245) for the fiscal year ended September 30, 1997).
5* -- Opinion of Katherine P. Ellis, Senior Counsel,, Nabors Corporate Services,Industries Ltd. and
Bank One, N.A.
4.2 Registration Rights Agreement, dated August 22, 2002, among
Nabors Holdings 1, ULC, Nabors Industries, Inc., regarding the shares to be
issuedNabors
Industries Ltd. and Lehman Brothers Inc.
4.3 Form of 4.875% Senior Exchange Note due 2009 (included in
the merger.
8.1* -- Opinion of Bracewell & Patterson, L.L.P. regarding
certain federal income tax considerations.
8.2* --Exhibit 4.1).
5.1 Opinion of Skadden Arps, Slate, Meagher & Flom LLP regarding certain federal income tax considerations.
23.1* -- Consentwith
respect to the new notes.
5.2 Opinion of DeloitteAppleby Spurling & ToucheKempe with respect to the new
notes.
5.3 Opinion of Stikeman Elliott with respect to the new notes.
5.4 Opinion of Stewart McKelvey Stirling Scales with respect to
the new notes.
12.1 Computation of ratio of earnings to fixed charges.
15.1 Awareness Letter of PricewaterhouseCoopers LLP regardingto the
financial
statementsSecurities and Exchange Commission.
21.1 Significant Subsidiaries of Pool Energy Services Co.
23.2* --Nabors Holdings 1, ULC, Nabors
Industries, Inc. and Nabors Industries Ltd.
23.1 Consent of PricewaterhouseCoopers LLP regarding the
financial statements of Nabors Industries, Inc.
23.3* -- Consent of Grant Thorton LLP regarding the financial
statements of Bayard Drilling Technologies, Inc.
23.4* -- Consent of PricewaterhouseCoopers LLP regarding the
financial statements of Bayard Drilling Technologies,
Inc.
23.5* -- Consent of PricewaterhouseCoopers LLP regarding the
incorporation by reference of financial statements of
Ward Drilling Company, Inc.
23.6* -- Consent of PricewaterhouseCoopers LLP regarding the
incorporation by reference of the financial statements of
Trend Drilling Company, Inc.
II-2
119
EXHIBIT
NUMBER DESCRIPTION
------- -----------
23.7* -- Consent of Ernst & Young LLP regarding the incorporation
by reference of the financial statements of Bonray
Drilling Corporation.
23.8* -- Consent of Morgan Stanley & Co. Incorporated (included in
Annex B to the Proxy Statement/Prospectus included in
this Registration Statement).
23.9* -- Consent of Katherine P. Ellis, Senior Counsel, Nabors
Corporate Services, Inc. (included in Exhibit 5).
23.10* -- Consent of Bracewell & Patterson, L.L.P. (included in
Exhibit 8.1).
23.11* --LLP.
23.2 Consent of Skadden, Arps, Slate, Meagher & Flom LLP
(included in Exhibit 8.2)5.1).
24* -- Power23.3 Consent of Appleby Spurling & Kempe (included in Exhibit
5.2).
23.4 Consent of Stikeman Elliott (included in Exhibit 5.3).
23.5 Consent of Stewart McKelvey Stirling Scales (included in
Exhibit 5.4).
24.1 Powers of Attorney (included on thein signature page hereto).
25.1 Statement of this
Registration Statement).
99.1* --Eligibility and Qualification on Form T-1 of
Bank One, N.A., as trustee under the Indenture for the
4.875% Senior Notes due 2009.
99.1 Form of proxy card.
99.2* -- OpinionLetter of Morgan Stanley & Co. Incorporated asTransmittal.
99.2 Form of Notice of Guaranteed Delivery.
99.3 Form of Letter to the
fairnessClients.
99.4 Form of the considerationLetter to be received by the
shareholders of Pool Energy Services Co. (attached as
Appendix B to the Proxy Statement/Prospectus included in
this Registration Statement).Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees.
- ---------------
* Filed with this Registration Statement.+ Incorporated by reference as indicated.
ITEM 22. UNDERTAKINGS.
(a)UNDERTAKINGS
The undersigned Registrantregistrants hereby undertakes:undertake:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:registration statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statementregistration statement (or the most recent
post-effective amendment thereto)thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the
Registration Statement.registration statement. Notwithstanding the foregoing, any increase or
decrease in the volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering
range may be reflected in the form of a prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than 20%20 percent change in the maximum
aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective Registration Statement.registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration Statementregistration statement
or any material change to such information in the Registration
Statement.registration
statement;
II-4
provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
information required to be included in a post-effective amendment by these
paragraphs is contained in periodic reports filed by the registrant pursuant to
Section 13 or Section 15(d) of the Securities and Exchange Act of 1934 that are
incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b)(4) If the registrant is a foreign private issuer, to file a
post-effective amendment to the registration statement to include any
financial statements required by Item 8.A. of Form 20-F at the start of any
delayed offering or throughout a continuous offering. Financial statements
and information otherwise required by Section 10(a)(3) of the Act need not
be furnished, provided that the registrant includes in the prospectus, by
means of a post-effective amendment, financial statements required pursuant
to this paragraph (a)(4) and other information necessary to ensure that all
other information in the prospectus is at least as current as the date of
those financial statements.
The undersigned Registrantregistrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant'sregistrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the Registration
Statement shall be deemed to be a new Registration Statement relating to the securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
II-3
120
(c) (1) The undersigned Registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder through use
of a prospectus which is a part of this Registration Statement, by any
person or party who is deemed to be an underwriter within the meaning of
Rule 145(c), the issuer undertakes that such reoffering prospectus will
contain the information called for by the applicable registration form with
respect to reofferings by persons who may be deemed underwriters, in
addition to the information called for by the other items of the applicable
form.
(2) The registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (1) immediately preceding, or (ii) that purports to
meet the requirements of Section 10(a)(3) of the Act and is used in
connection with an offering of securities subject to Rule 415, will be
filed as a part of an amendment to the Registration Statement and will not
be used until such amendment is effective, and that, for purposes of
determining any liability under the Securities Act of 1933, each such post-
effective amendmentstatement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(d) Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrantregistrant pursuant to the foregoing provisions, or otherwise, the Registrantregistrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrantregistrant of expenses incurred
or paid by a director, officer or controlling person of the Registrantregistrant in the
successful defense of any action, suit or proceedings)proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrantregistrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final adjudication of
such issue.
(e) The undersigned registrantregistrants hereby undertakesundertake (i) to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. Thismeans; and (ii) to arrange or provide for a facility in the
U.S. for the purpose of responding to such requests. The undertaking in
subparagraph (i) above includes information contained in documents filed
subsequent to the effective date of the Registration Statementregistration statement through the date
of responding to the request.
(f) The undersigned registrantregistrants hereby undertakesundertake to supply by means of a
post-effective amendment all information concerning a transaction and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statementregistration statement when it became effective.
II-4II-5
121
SIGNATURES
Pursuant to the requirements of the Securities Act, of 1933, the Registrantregistrant has duly
caused this Registration Statementregistration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Houston, State of Texas,
on the
9th day of August, 1999.October 10, 2002.
NABORS INDUSTRIES, INC.HOLDINGS 1, ULC
By: /s/ ANTHONY G. PETRELLO
----------------------------------
Anthony G. Petrello,BRUCE P. KOCH
------------------------------------
Bruce P. Koch
President and Chief Operating
OfficerDirector
Each person whose signature to this registration statement appears below
hereby severally constitutes and appoints Bruce P. Koch and Diana Moore, and
each of them singly, as his true and lawful attorney-in-fact and agent with full
power of substitution and resubstitution for him and in his name, place and
stead, and in any and all capacities to sign any and all amendments (including
pre-effective and post-effective amendments) to this Registration Statement, and
to file the same with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, and hereby grants to
such attorney-in-fact and agent full power and authority to do and perform each
and every act and thing requisite and necessary to be done, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agent, or his substitute or
substitutes may lawfully do or cause to be done by virtue hereof. In accordance
with the requirements of the Securities Act of 1933, this Registration Statementregistration statement
has been signed by the following persons in the capacities and on the dates
stated.
Each person whose signature to this
Registration Statement appears below hereby appoints Anthony G. Petrello or
Bruce P. Koch as his attorney-in-fact to sign on his behalf, individually and in
the capacities stated below, and to file any and all amendments and
post-effective amendments to this Registration Statement which amendment or
amendments or Registration Statement may make such changes and additions as such
attorney-in-fact may deem necessary or appropriate.
SIGNATURE TITLE DATE
--------- ----- ----
President and Director October 10, 2002
/s/ BRUCE P. KOCH (Principal Executive Officer)
- ------------------------------------------
Bruce P. Koch
Director October 10, 2002
/s/ DANIEL MCLACHLIN
- ------------------------------------------
Daniel McLachlin
Treasurer October 10, 2002
/s/ DIANA MOORE (Principal Financial and
- ------------------------------------------ Accounting Officer)
Diana Moore
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in St. Michael, Barbados, on October 10,
2002.
NABORS INDUSTRIES LTD.
By: /s/ DANIEL MCLACHLIN
------------------------------------
Daniel McLachlin
Vice President -- Administration
and Corporate Secretary
Each person whose signature to this registration statement appears below
hereby severally constitutes and appoints Daniel McLachlin, Anthony G. Petrello
and Bruce P. Koch, and each of them singly, as his true and lawful
attorney-in-fact and agent with full power of substitution and resubstitution
for him and in his name, place and stead, and in any and all capacities to sign
any and all amendments (including pre-effective and post-effective amendments)
to this Registration Statement, and to file the same with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, and hereby grants to such attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and necessary
to be done, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or his substitute or substitutes may lawfully do or cause to be done by
virtue hereof. In accordance with the requirements of the Securities Act of
1933, this registration statement has been signed by the following persons in
the capacities and on the dates stated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ EUGENE M. ISENBERG Chairman and Chief Executive August 9, 1999Officer October 10, 2002
- --------------------------------------------------- Officer and Director------------------------------------------
Eugene M. Isenberg (principal executive
officer)
/s/ ANTHONY G. PETRELLO President, Chief Operating August 9, 1999Officer October 10, 2002
- --------------------------------------------------- Officer------------------------------------------ and Director
Anthony G. Petrello
/s/ RICHARD A. STRATTON Vice Chairman and Director August 9, 1999October 10, 2002
- ---------------------------------------------------------------------------------------------
Richard A. Stratton
/s/ BRUCE P. KOCH Vice President -- Finance August 9, 1999President-Finance October 10, 2002
- --------------------------------------------------- (principal financial------------------------------------------ (Principal Financial and Accounting
Bruce P. Koch accounting officer)Officer)
/s/ JAMES L. PAYNE Director October 10, 2002
- ------------------------------------------
James L. Payne
/s/ HANS W. SCHMIDT Director August 9, 1999October 10, 2002
- ---------------------------------------------------------------------------------------------
Hans W. Schmidt
/s/ MYRON M. SHEINFELD Director August 9, 1999October 10, 2002
- ---------------------------------------------------------------------------------------------
Myron M. Sheinfeld
/s/ JACK WEXLER Director August 9, 1999October 10, 2002
- ---------------------------------------------------------------------------------------------
Jack Wexler
/s/ MARTIN J. WHITMAN Director August 9, 1999October 10, 2002
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Martin J. Whitman
II-5
122SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Houston, State of Texas,
on October 10, 2002.
NABORS INDUSTRIES, INC.
By: /s/ ANTHONY G. PETRELLO
------------------------------------
Anthony G. Petrello
President and Chief Operating
Officer
Each person whose signature to this registration statement appears below
hereby severally constitutes and appoints Christopher P. Papouras and Anthony G.
Petrello, and each of them singly, as his true and lawful attorney-in-fact and
agent with full power of substitution and resubstitution for him and in his
name, place and stead, and in any and all capacities to sign any and all
amendments (including pre-effective and post-effective amendments) to this
Registration Statement, and to file the same with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, and hereby grants to such attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and necessary
to be done, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or his substitute or substitutes may lawfully do or cause to be done by
virtue hereof. In accordance with the requirements of the Securities Act of
1933, this registration statement has been signed by the following persons in
the capacities and on the dates stated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ ANTHONY G. PETRELLO President, Chief Operating Officer October 10, 2002
- ------------------------------------------ and Director
Anthony G. Petrello (Principal Executive Officer)
/s/ BRUCE P. KOCH Vice President-Finance October 10, 2002
- ------------------------------------------ (Principal Financial and Accounting
Bruce P. Koch Officer)
/s/ MALCOLM CALKINS Director October 10, 2002
- ------------------------------------------
Malcolm Calkins
/s/ CHRISTOPHER P. PAPOURAS Director October 10, 2002
- ------------------------------------------
Christopher P. Papouras
EXHIBIT INDEX TO EXHIBITS
EXHIBIT
NUMBERNO. DESCRIPTION OF EXHIBIT
- ------- ---------------------------------
2.1 --+2.1 Agreement and Plan of Merger dated as of January 10,
1999, among Nabors Industries, Inc.,
StarryNabors Acquisition Corp. VIII, Nabors Industries Ltd. and
Pool Energy Services Co.Nabors US Holdings Inc. (incorporated by reference to Exhibit 2.1 of the Form 8-K filed byAnnex
I to proxy statement/prospectus included in Nabors
Industries Inc. (Commission FileLtd.'s Registration Statement on Form S-4
(Registration No. 1-9245)333-76198) filed with the SecuritiesSEC on May 10,
2002, as amended).
+3.1 Memorandum of Association of Nabors Industries Ltd.
(incorporated by reference to Annex II to the proxy
statement/prospectus included in Nabors Industries Ltd.'s
Registration Statement on Form S-4 (Registration No.
333-76198) filed with the SEC on May 10, 2002, as amended).
+3.2 Amended and Exchange CommissionRestated Bye-Laws of Nabors Industries Ltd.
(incorporated by reference to Annex III to the proxy
statement/prospectus included in Nabors Industries Ltd.'s
Registration Statement on January 11, 1999)Form S-4 (Registration No.
333-76198) filed with the SEC on May 10, 2002, as amended).
2.2* -- First Amendment to Agreement and Plan of Merger, dated as
of August 6, 1999.
3.1 --3.3 Restated Certificate of Incorporation of Nabors Industries,
Inc.
(incorporated by reference to Exhibit
3.1 of the Quarterly Report on Form 10-Q3.4 Restated By-laws of Nabors Industries, Inc.
(Commission File No. 1-9245) for the
quarter ended March 31, 1997).
3.2 -- Restated By-Laws3.5 Memorandum of Association of Nabors Industries, Inc. (incorporated
by reference to Exhibit 3.2Holdings 1, ULC.
3.6 Articles of the Annual Report on Form
10-KAssociation of Nabors Holdings 1, ULC.
4.1 Indenture, dated August 22, 2002, among Nabors Holdings 1,
ULC, Nabors Industries, Inc. (Commission File No.
1-9245) for the fiscal year ended September 30, 1997).
5* -- Opinion of Katherine P. Ellis, Senior Counsel,, Nabors Corporate Services,Industries Ltd. and
Bank One, N.A.
4.2 Registration Rights Agreement, dated August 22, 2002, among
Nabors Holdings 1, ULC, Nabors Industries, Inc., regarding the shares to be
issuedNabors
Industries Ltd. and Lehman Brothers Inc.
4.3 Form of 4.875% Senior Exchange Note due 2009 (included in
the merger.
8.1* -- Opinion of Bracewell & Patterson, L.L.P. regarding
certain federal income tax considerations.
8.2* --Exhibit 4.1).
5.1 Opinion of Skadden Arps, Slate, Meagher & Flom LLP regarding certain federal income tax considerations.
23.1* -- Consentwith
respect to the new notes.
5.2 Opinion of DeloitteAppleby Spurling & ToucheKempe with respect to the new
notes.
5.3 Opinion of Stikeman Elliott with respect to the new notes.
5.4 Opinion of Stewart McKelvey Stirling Scales with respect to
the new notes.
12.1 Computation of ratio of earnings to fixed charges.
15.1 Awareness Letter of PricewaterhouseCoopers LLP regardingto the
financial
statementsSecurities and Exchange Commission.
21.1 Significant Subsidiaries of Pool Energy Services Co.
23.2* --Nabors Holdings 1, ULC, Nabors
Industries, Inc. and Nabors Industries Ltd.
23.1 Consent of PricewaterhouseCoopers LLP regarding the
financial statements of Nabors Industries, Inc.
23.3* -- Consent of Grant Thorton LLP regarding the financial
statements of Bayard Drilling Technologies, Inc.
23.4* -- Consent of PricewaterhouseCoopers LLP regarding the
financial statements of Bayard Drilling Technologies,
Inc.
23.5* -- Consent of PricewaterhouseCoopers LLP regarding the
incorporation by reference of financial statements of
Ward Drilling Company, Inc.
23.6* -- Consent of PricewaterhouseCoopers LLP regarding the
incorporation by reference of the financial statements of
Trend Drilling Company, Inc.
23.7* -- Consent of Ernst & Young LLP regarding the incorporation
by reference of the financial statements of Bonray
Drilling Corporation.
23.8* -- Consent of Morgan Stanley & Co. Incorporated (included in
Annex B to the Proxy Statement/Prospectus included in
this Registration Statement).
23.9* -- Consent of Katherine P. Ellis, Senior Counsel, Nabors
Corporate Services, Inc. (included in Exhibit 5).
23.10* -- Consent of Bracewell & Patterson, L.L.P. (included in
Exhibit 8.1).
23.11* --LLP.
23.2 Consent of Skadden, Arps, Slate, Meagher & Flom LLP
(included in Exhibit 8.2)5.1).
24* -- Power23.3 Consent of Appleby Spurling & Kempe (included in Exhibit
5.2).
23.4 Consent of Stikeman Elliott (included in Exhibit 5.3).
23.5 Consent of Stewart McKelvey Stirling Scales (included in
Exhibit 5.4).
24.1 Powers of Attorney (included on thein signature page hereto).
25.1 Statement of this
Registration Statement).
99.1* --Eligibility and Qualification on Form T-1 of
Bank One, N.A., as trustee under the Indenture for the
4.875% Senior Notes due 2009.
99.1 Form of proxy card.
99.2* -- OpinionLetter of Morgan Stanley & Co. Incorporated asTransmittal.
99.2 Form of Notice of Guaranteed Delivery.
99.3 Form of Letter to the
fairnessClients.
99.4 Form of the considerationLetter to be received by the
shareholders of Pool Energy Services Co. (attached as
Appendix B to the Proxy Statement/Prospectus included in
this Registration Statement).Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees.
- ---------------
* Filed with this Registration Statement.+ Incorporated by reference as indicated.