Filed Pursuant to Rule 424(b)(3)
Registration Number 333-107806
Registration Number 333-107806-01
PROSPECTUS
NABORS INDUSTRIES, INC. NABORS INDUSTRIES LTD.
$700,000,000
ZERO COUPON SENIOR EXCHANGEABLE NOTES DUE 2023
GUARANTEED BY NABORS INDUSTRIES LTD.
------------------
COMMON SHARES, PAR VALUE U.S.$0.001 PER SHARE, OF NABORS INDUSTRIES LTD.
ISSUABLE UPON EXCHANGE OR REPURCHASE OF THE NOTES
------------------
GUARANTEE OF NABORS INDUSTRIES LTD.
This prospectus relates to $700,000,000 aggregate principal amount of Zero
Coupon Senior Exchangeable Notes Due 2023 (which we refer to as the notes in
this prospectus) of Nabors Industries, Inc. (which we refer to as Nabors
Delaware in this prospectus) and the common shares of our parent company, Nabors
Industries Ltd. (which we refer to as Nabors in this prospectus) issuable upon
exchange or repurchase of such notes. In particular, this prospectus covers:
- Resales from time to time by the selling securityholders of the notes
held by such selling securityholders. The notes may be sold from time to
time by or on behalf of the selling securityholders named in this
prospectus or in supplements to this prospectus.
and
- The issuance by Nabors to holders of the notes of 9,985,710 common shares
of Nabors upon the exchange of the notes by us, plus an additional
indeterminate number of common shares as may become issuable upon:
- exchange of the notes by reason of adjustment of the exchange price as
described in this prospectus; or
- repurchase of the notes at the option of the holder if we elect to pay
the purchase price in respect of the notes to be repurchased in common
shares of Nabors at a price determined by a formula described in this
prospectus. See "Description of Notes -- Repurchase of Notes at the
Option of the Holder."
We originally issued the notes in a private placement on June 10, 2003.
When this prospectus is used by selling securityholders to offer the notes,
the selling securityholders may sell all or a portion of the notes from time to
time in market transactions, in negotiated transactions or otherwise, and at
prices and on terms which will be determined by the then prevailing market price
for the notes or at negotiated prices directly or through a broker or brokers,
who may act as agent or as principal or by a combination of such methods of
sale. The selling securityholders will receive all proceeds from the sale of the
notes being registered in the registration statement of which this prospectus is
a part. For additional information on the methods of sale, you should refer to
the section entitled "Plan of Distribution" on page 47.
When this prospectus is used by Nabors to issue its common shares to
holders of the notes upon the exchange or repurchase of the notes by us, neither
we nor Nabors will receive any proceeds.
The notes are exchangeable prior to maturity into Nabors' common shares at
an initial exchange rate of 14.2653 shares per $1,000 principal amount of notes
surrendered, subject to adjustment. The notes will not bear interest, will not
accrete and will have a zero yield to maturity. The notes will mature on June
15, 2023, unless earlier exchanged, redeemed or repurchased.
We may redeem some or all of the notes at any time on or after June 15,
2008. In addition, the holders may require us to repurchase the notes on June
15, 2008, June 15, 2013 and June 15, 2018 or upon a fundamental change.
The notes are unsecured and will rank equally with all of our other
unsecured and unsubordinated indebtedness from time to time outstanding. In
addition, the notes are fully and unconditionally guaranteed by Nabors. The
guarantee is unsecured and ranks equally with all of Nabors' other unsecured and
unsubordinated indebtedness from time to time outstanding.
Nabors' common shares are listed on the American Stock Exchange under the
symbol "NBR." On August 20, 2003, the last sale price of Nabors' common shares
on the American Stock Exchange was $39.50 per share. The notes are not listed on
any national securities exchange or on Nasdaq. However, the notes are eligible
for trading in the Private Offerings, Resales and Trading through Automatic
Linkages Market commonly referred to as the PORTAL Market.
INVESTING IN THE NOTES INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON PAGE
6.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this prospectus is August 21, 2003.
IN MAKING YOUR INVESTMENT DECISION, YOU SHOULD RELY ONLY ON THE INFORMATION
CONTAINED IN OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS. NEITHER WE NOR
NABORS HAVE AUTHORIZED ANY OTHER PERSON TO PROVIDE YOU WITH DIFFERENT
INFORMATION. IF ANYONE PROVIDES YOU WITH DIFFERENT OR INCONSISTENT INFORMATION,
YOU SHOULD NOT RELY ON IT. YOU SHOULD ASSUME THAT THE INFORMATION APPEARING IN
THIS PROSPECTUS IS ACCURATE AS OF THE DATE ON THE FRONT COVER OF THIS PROSPECTUS
ONLY. NABORS DELAWARE'S AND NABORS' BUSINESS, FINANCIAL CONDITION, RESULTS OF
OPERATIONS AND PROSPECTS MAY HAVE CHANGED SINCE THAT DATE. NEITHER THE DELIVERY
OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES
IMPLY THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE
DATE ON THE COVER OF THIS PROSPECTUS.
As used in this prospectus, references to "Nabors Delaware," "Company,"
"we," "our" and "us" refer to Nabors Industries, Inc. and references to "Nabors"
refer to Nabors Industries Ltd., except where the context otherwise requires or
as otherwise indicated.
TABLE OF CONTENTS
<Table>
<Caption>
PAGE
----
Summary..................................................... 1
Risk Factors................................................ 6
Special Note Regarding Forward-Looking Statements........... 13
Ratio of Earnings to Fixed Charges.......................... 14
Use of Proceeds............................................. 14
Description of Notes........................................ 14
Description of Nabors' Share Capital........................ 32
Price Range of Common Shares................................ 34
Dividend Policy............................................. 35
Certain Material United States Federal Tax Considerations... 35
Selling Securityholders..................................... 43
Plan of Distribution........................................ 47
Legal Matters............................................... 49
Independent Accountants..................................... 49
Where You Can Find More Information......................... 49
Incorporation by Reference.................................. 50
</Table>
SUMMARY
NABORS INDUSTRIES, INC.
We are a Delaware holding company and an indirect, wholly-owned subsidiary
of Nabors. Prior to the corporate reorganization that was completed on June 24,
2002, Nabors Delaware was a publicly-traded corporation. Nabors Delaware was
incorporated in Delaware on May 3, 1978. Our principal executive offices are
located at 515 West Greens Road, Suite 1200, Houston, Texas 77067 and our
telephone number at that address is (281) 874-0035.
NABORS INDUSTRIES LTD.
Nabors became the publicly traded parent company of the Nabors group of
companies, effective June 24, 2002, pursuant to a corporate reorganization.
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 almost 600 land drilling rigs. Nabors conducts
oil, gas and geothermal land drilling operations in the U.S. Lower 48 states,
Alaska, Canada, South and Central America, the Middle East and Africa. Nabors is
also one of the largest land well-servicing and workover contractors in the
United States and Canada. Nabors owns approximately 750 land workover and
well-servicing rigs in the United States, and approximately 200 land workover
and well-servicing rigs in Canada. Nabors is a leading provider of offshore
platform workover and drilling rigs and owns 43 platform, 16 jack-up and three
barge rigs in the Gulf of Mexico and international markets. These rigs provide
well-servicing, workover and drilling services. Nabors has a 50% ownership
interest in a joint venture in Saudi Arabia, which owns 17 rigs.
To further supplement and complement its primary business, Nabors offers a
wide range of ancillary well-site services, including oilfield management,
engineering, transportation, construction, maintenance, well logging,
directional drilling, rig instrumentation, data collection and other support
services. 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 maintains approximately 290 fluid
hauling trucks, approximately 700 fluid storage tanks, eight salt water disposal
wells and other auxiliary equipment used in domestic drilling, workover and
well-servicing operations. In addition, Nabors owns a fleet of 30 marine
transportation and support vessels, primarily in the Gulf of Mexico, which
provide transportation of drilling materials, supplies and crews for offshore
operations. Nabors manufactures and leases or sells top drives for a broad range
of drilling applications, directional drilling systems, rig instrumentation and
data collection equipment, and rig reporting software.
CORPORATE INFORMATION
Nabors was formed as a Bermuda exempt company on December 11, 2001. Through
predecessors and acquired entities, Nabors has been continuously operating in
the drilling sector since the early 1900s. Nabors' principal executive offices
are located at 2nd Fl. International Trading Centre, Warrens, St. Michael,
Barbados and its telephone number at that address is (246) 421-9471.
THE OFFERING
This prospectus covers resales of $700,000,000 aggregate principal amount
of the notes. Nabors may also use this prospectus to issue 9,985,710 common
shares of Nabors issuable upon exchange of the notes by us plus an additional
indeterminate number of shares as may become issuable upon exchange or
repurchase of notes by us by reason of adjustment of the exchange price or
computation of the purchase price as described in "Description of the
Notes -- Repurchase of Notes at the Option of the Holder."
1
We issued and sold $700,000,000 aggregate principal amount of the notes on
June 10, 2003, in a private offering to Citigroup Global Markets Inc. (which we
refer to as the initial purchaser in this prospectus).
We have been advised by the initial purchaser that the notes were resold in
transactions which were exempt from the registration requirements of the
Securities Act of 1933, as amended (which we refer to as the Securities Act in
this prospectus) to persons reasonably believed by the initial purchaser to be
"qualified institutional buyers" (as defined in Rule 144A under the Securities
Act) or to non-"U.S. Persons" (as defined in Regulation S under the Securities
Act).
The following is a brief summary of certain terms of the notes. For a more
complete description of the terms of the notes, see "Description of Notes" in
this prospectus.
Securities Offered............ $700,000,000 aggregate principal amount of Zero
Coupon Senior Exchangeable Notes Due 2023 of
Nabors Delaware.
Interest...................... Interest on the notes is zero unless we are
obligated to pay contingent interest or
additional amounts on the notes under the
circumstances described in this prospectus. The
notes will not accrete. See "Description of
Notes -- Contingent Interest" and "Registration
Rights of Noteholders."
Maturity Date................. June 15, 2023.
Guarantee..................... Nabors has fully and unconditionally guaranteed
the due and punctual payment of the principal
and contingent interest, if any, on the notes,
and any other of our obligations under the
notes when and as they come due and payable,
whether at maturity, upon redemption, by
acceleration or otherwise, if we are unable to
satisfy these obligations. The guarantee
provides that, in the event of default on the
notes, the holders of the notes may institute
legal proceedings directly against Nabors to
enforce the guarantee without first proceeding
against us. See "Description of Notes --
Guarantee."
Ranking....................... The notes:
- are unsecured;
- are effectively junior in right of payment to
any of our future secured debt;
- rank equally in right of payment with any of
our existing and future unsubordinated debt;
and
- are senior in right of payment to any of our
future senior subordinated or subordinated
debt.
Contingent Interest........... We will make payments of interest, referred to
in this prospectus as "contingent interest,"
during any six month period from June 15 to
December 14 or from December 15 to June 14
commencing on or after June 15, 2008 for which
the average trading price of the notes for each
day of the applicable five trading day
reference period equals or exceeds 120% of the
principal amount of the notes as of the day
immediately preceding the first day of the
applicable six-month interest period. The
amount of contingent interest payable per note
in respect of any six-month period will be
equal to 0.185% of the principal amount of a
note. The five trading day reference period
2
means the five trading days ending on the
second trading day immediately preceding the
relevant six-month interest period. For more
information about contingent interest, see
"Description of Notes -- Contingent Interest."
Exchange Rate................. For each $1,000 principal amount of notes
surrendered for exchange you will receive
14.2653 shares of common shares of our parent
company, Nabors. This represents an initial
exchange price of $70.10 per Nabors' common
share.
Exchange Rights............... You may exchange your notes into common shares
of our parent company, Nabors, prior to the
close of business on the final maturing date of
the notes only under any of the following
circumstances:
- after the quarter ending September 30, 2003,
if the price of Nabors' common shares
issuable upon exchange reaches specified
thresholds described in this prospectus;
- at any time, subject to certain exceptions,
during the five business-day period after any
ten consecutive trading-day period in which
the trading price per note for each day of
the ten trading-day period was less than 95%
of the product of the closing sale price of
Nabors' common shares and the exchange rate
of such note; provided, however, you may not
exchange your notes if the average closing
sale price of Nabors' common shares for such
ten consecutive trading-day period was
between the then current exchange price on
the notes and 120% thereof until June 15,
2008, and 110% thereafter, of the then
current exchange price on the notes;
- if we call the notes for redemption; or
- upon the occurrence of specified corporate
transactions described under "Description of
Notes -- Exchange of Notes -- Exchange Upon
Specified Corporate Transactions."
In lieu of delivering Nabors' common shares
upon exchange of any notes, we may elect to pay
you cash for all or a portion of your notes in
an amount equal to the average of the last
reported sales prices of Nabors' common shares
for the five trading days beginning on the
first trading day after the date on which we
notify you of such election, multiplied by the
applicable exchange rate.
As described in this prospectus, the exchange
rate may be adjusted upon the occurrence of
certain events, but it will not be adjusted for
accrued and unpaid contingent interest or
additional amounts. Generally, you will not
receive any cash payment representing accrued
and unpaid contingent interest upon exchange of
the notes. Instead, contingent interest, if
any, will be deemed cancelled, extinguished and
forfeited upon exchange. Notes called for
redemption may be surrendered for exchange
prior to the close of business on the business
day immediately preceding the redemption date.
Sinking Fund.................. None.
3
Optional Redemption........... We may not redeem the notes prior to June 15,
2008. On or after June 15, 2008, we may redeem
some or all of the notes for a price equal to
100% of the principal amount of the notes to be
redeemed, plus accrued and unpaid contingent
interest, if any, and additional amounts owed,
if any, to such redemption date.
Repurchase of Notes by Us at
the Option of the Holder...... You have the right to require us to purchase
all or any portion of your notes on June 15,
2008, June 15, 2013 and June 15, 2018. In each
case, we will pay a purchase price equal to
100% of the principal amount of the notes to be
purchased plus accrued and unpaid contingent
interest, if any, and additional amounts owed,
if any, to such purchase date. We may elect to
pay the purchase price in cash or Nabors'
common shares or any combination thereof based
on the average closing price for Nabors' common
shares for the five trading-day period ending
on the third business day prior to the purchase
date. See "Description of Notes -- Repurchase
of Notes by Us at the Option of the Holder."
Fundamental Change............ If Nabors undergoes a Fundamental Change (as
defined under "Description of
Notes -- Repurchase at the Option of the Holder
Upon a Fundamental Change") prior to maturity,
you will have the right, at your option, to
require us to purchase any or all of your notes
for cash, or any portion of the principal
amount thereof that is equal to $1,000 or an
integral multiple of $1,000. The cash price we
are required to pay is equal to 100% of the
principal amount of the notes to be purchased
plus accrued and unpaid contingent interest, if
any, and additional amounts owed, if any, to
the Fundamental Change purchase date. See
"Description of Notes -- Repurchase at the
Option of the Holder Upon a Fundamental
Change."
Registration Rights........... We and Nabors have agreed to file a shelf
registration statement under the Securities Act
of 1933 relating to the notes and the common
shares issuable upon exchange or repurchase
thereof. If the registration statement is not
filed or has not become effective within the
time periods set forth in this prospectus or
fails to continue to be effective under certain
circumstances, we and Nabors will be required
to pay additional amounts to holders of the
notes and holders of the common shares issued
upon exchange or repurchase thereof. See
"Description of Notes -- Registration Rights of
Noteholders."
Use of Proceeds............... Neither we nor Nabors will receive any of the
proceeds from the sale by any selling
securityholder of the notes. Neither we nor
Nabors will receive any proceeds when Nabors
issues common shares to holders of notes upon
an exchange by us of such notes for common
shares or upon a repurchase by us of such notes
with Nabors' common shares.
Trustee, Paying Agent and
Exchange Agent................ Bank One, N.A.
Risk Factors.................. You should consider carefully all of the
information set forth in this prospectus and,
in particular, you should evaluate the
4
specific factors set forth under "Risk Factors"
beginning on page 6, before deciding whether to
invest in the notes.
U.S. Federal Income Tax
Considerations................ We and each holder agreed in the indenture to
treat the notes as contingent payment debt
instruments for U.S. federal income tax
purposes. As a holder of notes, you agreed to
accrue original issue discount on a constant
yield to maturity basis at a rate comparable to
the rate at which we would borrow in a
noncontingent, nonconvertible borrowing, 5.53%,
compounded semi-annually, even though the notes
will have zero yield to maturity unless we
become obligated to pay contingent interest or
additional amounts. You will recognize taxable
income in each year even though you may not
receive any cash interest payments in that
year. Additionally, you will generally be
required to recognize ordinary income on the
gain, if any, realized on a sale, exchange or
redemption of the notes. In the case of an
exchange, this gain will be measured by the
fair market value of the stock received. A
summary of the United States federal income tax
consequences of ownership of the notes and
Nabors' common shares is described in this
prospectus under the heading "Certain Material
United States Federal Income Tax
Considerations."
Holders of the notes should consult their tax
advisors as to the United States federal,
state, local or other tax consequences of
acquiring, owning and disposing of the notes
and Nabors' common shares.
Governing Law................. The indenture and the notes are governed by,
and construed in accordance with, the laws of
the State of New York.
Book-Entry Form............... The notes were issued in book-entry form and
are represented by permanent global
certificates deposited with, or on behalf of,
The Depository Trust Company ("DTC") and
registered in the name of a nominee of DTC.
Beneficial interests in any of the notes will
be shown on, and transfers will be effected
only through, records maintained by DTC or its
nominee and any such interest may not be
exchanged for certificated securities, except
in limited circumstances.
Trading....................... The notes are not listed on any securities
exchange or included in any automated quotation
system. The notes are eligible for trading in
the PORTAL Market; however, no assurance can be
given as to the liquidity of or trading market
for the notes. The common shares of Nabors are
listed on the American Stock Exchange under the
symbol "NBR."
5
RISK FACTORS
You should carefully consider the risks described below before making an
investment decision. The risks described below are not the only ones facing us
or Nabors. Additional risks not presently known to us or that we currently deem
immaterial may also impair our business operations.
The business, financial condition or results of operations of Nabors or us
could be materially adversely affected by any of these risks. The trading price
of the notes and Nabors' common shares could decline due to any of these risks,
and you may lose all or part of your investment.
This prospectus and the incorporated documents also contain forward-looking
statements that involve risks and uncertainties. Our and Nabors' actual results
could differ materially from those anticipated in these forward-looking
statements as a result of certain factors, including the risks faced by us and
Nabors described below and elsewhere in this prospectus.
RISKS RELATED TO OUR COMPANY'S AND NABORS' BUSINESSES
FLUCTUATIONS IN OIL AND GAS PRICES COULD ADVERSELY AFFECT DRILLING ACTIVITY
AND OUR AND NABORS' REVENUES, CASH FLOWS AND PROFITABILITY.
The Company's and 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, may
affect both the demand for, and the supply of, oil and gas. Weather conditions,
governmental regulation (both in the United States and elsewhere), levels of
consumer demand, the availability of pipeline capacity, and other factors beyond
our and Nabors' control may also affect the supply of and demand for oil and
gas. Fluctuations during the last few years in the demand and supply of oil and
gas have contributed to, and are likely to continue to contribute to, price
volatility. We and Nabors believe 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 our and Nabors'
services and could have a material adverse effect on our and Nabors' revenues,
cash flows and profitability. Lower oil and gas prices could also cause our and
Nabors' customers to seek to terminate, renegotiate or fail to honor our and
Nabors' drilling contracts; affect the fair market value of our and Nabors' rig
fleet which in turn could trigger a writedown for accounting purposes; affect
our and Nabors' ability to retain skilled rig personnel; and affect our and
Nabors' ability to obtain access to capital to finance and grow our and Nabors'
businesses. There can be no assurances as to the future level of demand for our
and Nabors' services or future conditions in the oil and gas and oilfield
services industries.
OUR COMPANY AND NABORS OPERATE IN A HIGHLY COMPETITIVE INDUSTRY WITH EXCESS
DRILLING CAPACITY, WHICH MAY ADVERSELY AFFECT OUR AND NABORS' RESULTS OF
OPERATIONS.
The oilfield services industry in which we and Nabors operate 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, workover and well-servicing rigs can be moved from one
region to another in response to changes in levels of activity and provided
market conditions warrant, which may result in an oversupply of rigs in an area.
In many markets in which we and Nabors operate, 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 larger numbers
of rigs and competitors.
Certain competitors are present in more than one of the regions in which we
and Nabors operate, although no one competitor operates in all of these areas.
In the U.S. Lower 48 states, there are several hundred competitors with smaller
national, regional or local rig operations. In the Alaska market, we and
6
Nabors have two principal competitors. In Canada and offshore, we and Nabors
compete with several firms of varying size, many of which have more significant
operations in those areas than the Company and Nabors. Internationally, we and
Nabors compete directly with various competitors at each location where the
Company and Nabors operate. We and Nabors believe that the market for land
drilling and workover contracts will continue to be competitive for the
foreseeable future. Although we and Nabors believe that both we and Nabors have
a strong competitive position in the domestic land drilling, workover and
well-servicing sector, certain of our and Nabors' competitors internationally
and offshore may be better positioned in certain markets, allowing them to
compete more effectively.
THE NATURE OF OUR AND NABORS' OPERATIONS PRESENTS INHERENT RISKS OF LOSS THAT,
IF NOT INSURED OR INDEMNIFIED AGAINST, COULD ADVERSELY AFFECT OUR AND NABORS'
RESULTS OF OPERATIONS.
Our and 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 or natural disasters. Any of
these hazards 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. Our and Nabors' offshore operations are also
subject to the hazards of marine operations including capsizing, grounding,
collision, damage from heavy weather or sea conditions and unsound ocean bottom
conditions. In addition, our and Nabors' international operations are subject to
risks of war, civil disturbances or other political events. Generally, drilling
contracts provide for the division of responsibilities between a drilling
company and its customer, and we and Nabors seek to obtain indemnification from
our respective customers by contract for certain of these risks. To the extent
that we and Nabors are unable to transfer such risks to customers by contract or
indemnification agreements, we and Nabors seek protection through insurance.
However, there is no assurance that such insurance or indemnification agreements
will adequately protect us and Nabors against liability from all of the
consequences of the hazards described above. The occurrence of an event not
fully insured or indemnified against, or the failure of a customer or insurer to
meet its indemnification or insurance obligations, could result in substantial
losses. In addition, there can be no assurance that insurance will be available
to cover any or all of these risks, or, even if available, that it will be
adequate or that insurance premiums or other costs will not rise significantly
in the future, so as to make such insurance prohibitive. This is particularly of
concern in the wake of the September 11 terrorist attacks, which adversely
affected an already tightening insurance market. It is likely that, in our and
Nabors' upcoming insurance renewals, our and Nabors' premiums and deductibles
will be higher, and certain insurance coverage either will be unavailable or
considerably more expensive than it has been in the recent past (as is expected
to be the case for terrorism coverage, for example). Moreover, our and Nabors'
insurance coverage generally provides that we and Nabors assume a portion of the
risk in the form of an insurance coverage deductible. We and Nabors expect that
we may choose to increase the levels of deductibles (and thus assume a greater
degree of risk) from time to time in order to minimize the effect of insurance
premium increases.
THE PROFITABILITY OF OUR AND NABORS' INTERNATIONAL OPERATIONS COULD BE
ADVERSELY AFFECTED BY WAR, CIVIL DISTURBANCE OR POLITICAL OR ECONOMIC TURMOIL.
Our Company and Nabors derive a significant portion of business from
international markets, including major operations in Canada, the Middle East,
Asia and South and Central 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 deprivation of contract rights or the taking of property without
fair compensation. In certain countries, our and Nabors' operations may be
subject to the additional risk of fluctuating currency values and exchange
controls. In the international markets in which we and Nabors operate, we and
Nabors are subject to various laws and regulations that govern the operation and
taxation of our and Nabors' businesses and the import and export of our and
Nabors' equipment from country to country, the imposition, application and
interpretation of which can prove to be uncertain.
7
PROPOSED TAX LEGISLATION COULD ELIMINATE THE BENEFITS OF THE REORGANIZATION.
Various bills have been introduced in Congress that would retroactively
eliminate the tax benefits associated with the Company's reorganization under a
Bermuda holding company that was completed in June 2002. However, no such
legislation passed the U.S. Congress in its session ending during 2002. Because
Nabors cannot predict whether any such legislation ultimately will be adopted,
no assurances can be given that the tax benefits associated with the
reorganization ultimately will accrue to the benefit of Nabors and its
shareholders. If legislation is enacted that retroactively eliminates the
benefit of the reorganization, Nabors' net operating loss carryforward for U.S.
tax purposes would be reduced significantly and Nabors' effective tax rate in
future periods could be increased significantly.
NONCOMPLIANCE WITH GOVERNMENTAL REGULATION OR EXPOSURE TO ENVIRONMENTAL
LIABILITIES COULD ADVERSELY AFFECT OUR AND NABORS' RESULTS OF OPERATIONS.
The drilling of oil and gas wells is subject to various federal, state,
local and foreign laws, rules and regulations. Our and Nabors' cost of
compliance with these laws and regulations may be substantial. For example,
federal law imposes specific design and operational standards on rigs and
platforms. Failure to comply with these requirements could subject us and Nabors
to substantial civil and criminal penalties as well as potential court
injunctions. In addition, federal law imposes a variety of regulations on
"responsible parties" related to the prevention of oil spills and liability for
damages from such spills. As an owner and operator of onshore and offshore rigs
and transportation equipment, we and Nabors may be deemed to be responsible
parties under federal law. In addition, our and Nabors' well-servicing, workover
and production services operations routinely involve the handling of significant
amounts of waste materials, some of which are classified as hazardous
substances. Our and Nabors' operations and facilities are subject to numerous
state and federal environmental laws, rules and regulations, including, without
limitation, laws concerning the containment and disposal of hazardous
substances, oilfield waste and other waste materials, the use of underground
storage tanks and the use of underground injection wells. We and Nabors
generally require customers to contractually assume responsibility for
compliance with environmental regulations. However, we and Nabors are not always
successful in allocating to customers all of these risks nor is there any
assurance that the customer will be financially able to bear those risks
assumed.
Our Company and Nabors employ personnel responsible for monitoring
environmental compliance and arranging for remedial actions that may be required
from time to time and also use outside experts to advise on and assist with its
environmental compliance efforts. Costs that we and Nabors incur to investigate
and remediate contaminated sites are expensed unless the remediation extends the
useful lives of assets employed at the site. Remediation costs that extend the
useful lives of the assets are capitalized and amortized over the remaining
useful lives of such assets. Liabilities are recorded when the need for
environmental assessments and/or remedial efforts become known or probable and
the cost can be reasonably estimated.
Laws protecting the environment generally have become more stringent than
in the past and are expected to continue to become more so. Violation of
environmental laws and regulations can lead to the imposition of administrative,
civil or criminal penalties, remedial operations, and in some cases injunctive
relief. Such violations could also result in liabilities for personal injuries,
property damage, and other costs and claims.
Under the Comprehensive Environmental Response, Compensation and Liability
Act, also known as CERCLA or Superfund, and related state laws and regulations,
on certain classes of persons (including Nabors) liability can be imposed
jointly on all responsible parties or separately on any responsible party,
without regard to fault or the legality of the original conduct. Under CERCLA,
such persons may be liable for the costs of cleaning up all hazardous substances
that have been released into the environment and for damages to natural
resources. In addition, it is not uncommon for the neighboring land owners and
other third parties to file claims for personal injury, property damage and
recovery of response costs allegedly caused by the hazardous substances released
into the environment. The Company and Nabors have been notified of their
possible responsibility with respect to the cleanup of a federal national
priority
8
list site and a state abandoned site, which were formerly operated by parties
unrelated to us and Nabors as oilfield waste disposal facilities. In addition,
we and Nabors have been named as a potentially responsible party with respect to
the cleanup of three other sites, which were formerly operated by various
parties unrelated to us and Nabors. We and Nabors believe that our respective
cost to clean up each of these sites will be less than $100,000. Although at
this time information regarding ours and Nabors' possible responsibility with
respect to cleanup of the federal national priority list site and the state
abandoned site has not been fully developed and it is not feasible to predict
such outcome with certainty, we and Nabors are of the opinion that their
ultimate resolution should not have a material adverse effect on our or Nabors'
financial statements or results of operations.
Changes in federal and state environmental regulations may also negatively
impact oil and natural gas exploration and production companies, which in turn
could have a material adverse effect on us and Nabors. For example, legislation
has been proposed from time to time in Congress which would reclassify certain
oil and natural gas production wastes as hazardous wastes, which would make the
reclassified wastes subject to more stringent handling, disposal and clean-up
requirements. If enacted, such legislation could dramatically increase operating
costs for oil and natural gas companies and could reduce the market for our and
Nabors' services by making many wells and/or oilfields uneconomical to operate.
Nabors' operations of offshore support vessels is affected by certain U.S.
governmental regulations. One of Nabors' wholly owned subsidiaries qualifies to
own Nabors' offshore U.S. flag vessels. The subsidiary bareboat chartered the
vessels for an original term of five years, subject to renewals, to an entity
qualified as a U.S. citizen under applicable law. The law which permits this
structure and the proposed regulations is controversial. If the Coast Guard were
to change its interpretation of the proposed regulations or if the U.S. Congress
were to change existing law, Nabors might not be permitted to own its offshore
support vessels. Additionally, even under the existing law and proposed
regulations, Nabors' continued ownership of the vessels is dependent upon the
continuation of the bareboat charter, which could terminate for reason of
default by either party during its term.
The Oil Pollution Act of 1990, as amended, contains provisions specifying
responsibility for removal costs and damages resulting from discharges of oil
into navigable waters or onto the adjoining shorelines. Among other
requirements, this law requires owners and operators of vessels over 300 gross
tons displacement to provide the U.S. Coast Guard with evidence of financial
responsibility to cover the costs of cleaning up oil spills from such vessels.
Nabors believes it has provided satisfactory evidence of financial
responsibility to the U.S. Coast Guard for all vessels over 300 tons. In
addition, the Outer Continental Shelf Lands Act provides the federal government
with broad discretion in regulating the leasing of offshore oil and gas
production sites. Because Nabors' offshore support vessel operations rely on
offshore oil and gas exploration and production, if the government were to
exercise its authority under this law to restrict the availability of offshore
oil and gas leases, such an action could have a material adverse effect on ours
and Nabors' offshore support vessel operations.
AS HOLDING COMPANIES, WE AND NABORS DEPEND ON OUR RESPECTIVE SUBSIDIARIES TO
MEET OUR RESPECTIVE FINANCIAL OBLIGATIONS.
As holding companies, we and Nabors have no significant assets other than
the stock of our respective subsidiaries. In order to meet financial needs, we
and Nabors rely exclusively on repayments of interest and principal on
intercompany loans made by us and Nabors to our and Nabors' operating
subsidiaries and income from dividends and other cash flow from such
subsidiaries. There can be no assurance that our or Nabors' operating
subsidiaries will generate sufficient net income to pay upstream dividends or
cash flow to make payments of interest and principal to us or Nabors in respect
of their intercompany loans. In addition, from time to time, our and Nabors'
operating subsidiaries may enter into financing arrangements which may
contractually restrict or prohibit such upstream payments to us and Nabors.
There may also be adverse tax consequences associated with making dividend
payments upstream.
9
NABORS DOES NOT PAY DIVIDENDS.
Nabors has not paid any cash dividends on its common shares since 1982.
Nabors does not anticipate that it will pay any cash dividends on common shares
in the foreseeable future.
BECAUSE NABORS' OPTION, WARRANT AND CONVERTIBLE SECURITIES HOLDERS HAVE A
CONSIDERABLE NUMBER OF COMMON SHARES AVAILABLE FOR ISSUANCE AND RESALE,
SIGNIFICANT ISSUANCES OR RESALES IN THE FUTURE MAY ADVERSELY AFFECT THE MARKET
PRICE OF NABORS' COMMON SHARES.
As of August 4, 2003, there were 400,000,000 authorized Nabors' common
shares, of which 146,470,489 shares were outstanding. In addition, 33,353,257
Nabors' common shares were reserved for issuance pursuant to option and employee
benefit plans and 8,490,815 (excluding shares issuable upon exchange or
repurchase of the notes) and 18,476,525 (including shares issuable upon exchange
or repurchase of the notes) shares were reserved for issuance upon conversion or
repurchase of outstanding zero coupon convertible debentures (and the notes). In
addition, in connection with Nabors' Enserco and Ryan acquisitions, up to
423,193 Nabors' common shares could be issuable on exchange of the shares of
Nabors Exchangeco (Canada) Inc. Nabors also may sell up to $700 million of
securities of various types in connection with a shelf registration statement
declared effective on January 16, 2003 by the Securities and Exchange
Commission. The sale, or availability for sale, of substantial amounts of
Nabors' common shares in the public market, whether directly by Nabors or
resulting from the exercise of warrants or options (and, where applicable, sales
pursuant to Rule 144) or the conversion into, or repurchase of, debentures using
common shares, would be dilutive to existing securityholders, could adversely
affect the prevailing market price of Nabors' common shares and could impair
Nabors' ability to raise additional capital through the sale of equity
securities.
Nabors is not restricted from issuing additional common shares during the
life of the notes and, in doing so, has no obligation to consider your interests
as a holder of notes for any reason. If Nabors issues additional common shares,
it may materially and adversely affect the price of Nabors' common shares and,
in turn, the price of the notes.
PROVISIONS OF NABORS' ORGANIZATIONAL DOCUMENTS MAY DETER A CHANGE OF CONTROL
TRANSACTION AND DECREASE THE LIKELIHOOD OF A SHAREHOLDER RECEIVING A CHANGE OF
CONTROL PREMIUM.
Nabors' board of directors is divided into three classes, with each class
serving a staggered three year term. In addition, Nabors' board of directors has
the authority to issue a significant amount of common shares and up to
25,000,000 preferred shares (of which one preferred share is issued and
outstanding) and to determine the price, rights (including voting rights),
conversion ratios, preferences and privileges of the preferred shares, in each
case without further vote or action by the holders of the common shares.
Although Nabors has no present plans to issue additional preferred shares, the
classified board and Nabors' board's ability to issue additional preferred
shares may discourage, delay or prevent changes in control of Nabors that are
not supported by Nabors' board, thereby possibly preventing certain of Nabors'
shareholders from realizing a possible premium on their shares.
NABORS AND ITS SUBSIDIARIES HAVE A SUBSTANTIAL AMOUNT OF DEBT OUTSTANDING,
WHICH COULD AFFECT NABORS' FINANCIAL POSITION AND PREVENT IT FROM FULFILLING
ITS OBLIGATIONS.
Nabors and its subsidiaries had approximately $2.3 billion in debt
outstanding at June 30, 2003, resulting in a funded debt to capital ratio of
0.49:1 and a net funded debt to capital ratio of 0.26:1 as of June 30, 2003. The
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 debt and (3) long-term debt.
Capital is defined as shareholders' equity. The net funded debt to capital ratio
nets cash and cash equivalents and marketable securities against funded debt.
This ratio is calculated by dividing net funded debt by net funded dept plus
capital. Both of these ratios are a method for calculating the amount of
leverage a company has in relation to its capital.
10
Nabors and its subsidiaries may still be able to incur substantially more
debt. The terms of the indenture governing the notes and the agreements
governing Nabors' and its subsidiaries' other indebtedness permit additional
borrowings and any such borrowings may be senior in right of payment to the
notes and the related guarantees. Nabors and its subsidiaries incurrence of
additional debt could further exacerbate the risks described in this prospectus.
RISKS RELATED TO THE OFFERING
THE MARKET PRICE OF THE NOTES COULD BE SIGNIFICANTLY AFFECTED BY THE MARKET
PRICE OF NABORS' COMMON SHARES.
We expect that the market price of the notes will be significantly affected
by the market price of Nabors' common shares. This may result in greater
volatility in the market price of the notes than would be expected for
nonconvertible debt securities. The market price of Nabors' common shares will
likely continue to fluctuate in response to factors including the following,
many of which are beyond our control:
- quarterly fluctuations in Nabors' operating and financial results,
- changes in financial estimates and recommendations by financial analysts,
- changes in the ratings of the notes or our other securities or securities
of Nabors,
- developments related to litigation or regulatory proceedings involving us
or Nabors,
- fluctuations in the stock price and operating results of Nabors'
competitors,
- dispositions, acquisitions and financings, and
- general conditions in the industries in which Nabors operates.
In addition, the stock markets in general, including the American Stock
Exchange, recently have experienced significant price and trading fluctuations.
These fluctuations have resulted in volatility in the market prices of
securities that often has been unrelated or disproportionate to changes in
operating performance. These broad market fluctuations may affect adversely the
market prices of the notes and Nabors' common shares.
WE CANNOT ASSURE THAT AN ACTIVE TRADING MARKET WILL DEVELOP FOR THE NOTES.
There is no established trading market for the notes and the notes will not
be listed on any securities exchange. Although the notes are currently traded on
PORTAL, there can be no assurance as to: (1) the liquidity of any market for the
notes, (2) the ability of the holders to sell their notes, or (3) the prices at
which holders of the notes would be able to sell their notes. The notes could
trade at prices higher or lower than their initial purchase prices depending on
many factors. Under the registration rights agreement, we and Nabors are
required to use reasonable best efforts to have the registration statement of
which this prospectus is a part declared effective by the SEC, we and Nabors
cannot assure you that an active trading market for the notes will develop. If
an active trading market does not develop, the market price and liquidity of the
notes may be adversely affected.
WE MAY NOT HAVE THE ABILITY TO RAISE THE FUNDS NECESSARY TO PURCHASE THE NOTES
UPON A FUNDAMENTAL CHANGE OR OTHER PURCHASE DATE, AS REQUIRED BY THE INDENTURE
GOVERNING THE NOTES.
On June 15, 2008, June 15, 2013 and June 15, 2018, holders of the notes may
require us to purchase their notes for cash. In addition, holders of the notes
also may require us to purchase their notes upon a Fundamental Change as
described under "Description of Notes -- Redemption at the Option of the Holder
Upon a Fundamental Change." If we are required to repurchase the notes (except
upon a Fundamental Change), we will have the right to deliver, in lieu of cash,
common shares of our parent
11
company, Nabors, or a combination of cash and such common shares. A Fundamental
Change also may constitute an event of default, and result in the acceleration
of the maturity of our then existing indebtedness, under another indenture or
other agreement. We cannot assure you that we would have sufficient financial
resources, or would be able to arrange financing, to pay the purchase price for
the notes tendered by holders. Failure by us to purchase the notes when required
will result in an event of default with respect to the notes.
YOU ARE URGED TO CONSIDER THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF
OWNING THE NOTES AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXCHANGE OF THE
NOTES.
We and each holder agreed in the indenture to treat the notes as
indebtedness that is subject to U.S. Treasury regulations governing contingent
payment debt instruments. The following discussion assumes that the notes will
be so treated, though we cannot assure you that the Internal Revenue Service
will not assert that the notes should be treated differently. Any differing
treatment could affect the amount, timing and character of income, gain or loss
in respect of an investment in the notes. In particular, a holder might be
required to accrue interest income at a higher or lower rate, might not
recognize income gain or loss upon exchange of the notes into Nabors' common
shares, and/or might recognize capital gain or loss upon a taxable disposition
of the notes. Under the contingent payment debt regulations, a holder will be
required to include amounts in income, as original issue discount, in advance of
cash such holder receives on a note, and to accrue interest on a constant yield
to maturity basis at a rate comparable to the rate at which we could borrow in a
noncontingent, nonconvertible borrowing, even though the note will have no
stated rate of interest. A U.S. holder will recognize taxable income
significantly in excess of cash received while the notes are outstanding. In
addition, under the U.S. federal income tax laws, a U.S. holder will recognize
ordinary income, if any, upon a sale, exchange, redemption or repurchase of the
notes at a gain. In computing such gain, the amount realized by a U.S. holder
will include, in the case of an exchange, the amount of cash and the fair market
value of shares received. Holders are urged to consult their own tax advisors as
to the United States federal, state and other tax consequences of acquiring,
owning and disposing of the notes and the common shares issuable upon exchange
of the notes. For more information, see "Certain Material United States Federal
Income Tax Considerations."
ALTHOUGH THE NOTES ARE DESIGNATED AS "SENIOR," YOUR RIGHT TO RECEIVE PAYMENT
ON THE NOTES AND THE GUARANTEE IS UNSECURED AND WILL BE EFFECTIVELY
SUBORDINATED TO ANY EXISTING AND FUTURE SECURED DEBT OF THE COMPANY TO THE
EXTENT OF THE VALUE OF THE COLLATERAL THEREFOR AND THE NOTES AND GUARANTEE
WILL BE EFFECTIVELY SUBORDINATE TO EXISTING AND FUTURE INDEBTEDNESS AND OTHER
LIABILITIES OF OUR AND NABORS' SUBSIDIARIES.
The 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' guarantee is effectively subordinated in right of
payment to the claims of existing and future secured creditors of Nabors, in
each case, to the extent of the collateral therefor. If we default on the 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 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 notes. The guarantee of the notes will have a
similar ranking as with respect to secured indebtedness of Nabors as the notes
do with respect to our secured indebtedness.
In addition, we derive substantially all our income from, and hold
substantially all our assets through, our subsidiaries. As a result, we and
Nabors will depend on distributions from our subsidiaries in order to meet our
payment obligations under any debt securities, including the notes and the
guarantee and our other obligations. Accordingly, our and Nabors' rights to
receive any assets of any subsidiary, and therefore the right of our and Nabors'
creditors to participate in those assets, will be effectively subordinated to
the
12
claims of that subsidiary's creditors, including trade creditors. As of June 30,
2003, our and Nabors' subsidiaries had approximately $2.3 billion of
indebtedness, excluding intercompany indebtedness.
IF YOU HOLD NOTES, YOU WILL NOT BE ENTITLED TO ANY RIGHTS WITH RESPECT TO
NABORS' COMMON SHARES, BUT YOU WILL BE SUBJECT TO ALL CHANGES MADE WITH
RESPECT TO NABORS' COMMON SHARES.
If you hold notes, you will not be entitled to any rights with respect to
Nabors' common shares (including, without limitation, voting rights and rights
to receive any dividends or other distributions on Nabors' common shares), but
you will be subject to all changes affecting the common shares. You will only be
entitled to rights on the common shares if and when we deliver common shares to
you upon exchange or repurchase of your notes and in limited cases under the
exchange rate adjustments of the notes. For example, in the event that an
amendment is proposed to Nabors' memorandum of association or bye-laws requiring
shareholder approval and the record date for determining the shareholders of
record entitled to vote on the amendment occurs prior to delivery of the common
shares, you will not be entitled to vote on the amendment, although you will
nevertheless be subject to any changes in the powers, preferences or special
rights of Nabors' common shares.
THE CONDITIONAL EXCHANGE FEATURE OF THE NOTES COULD RESULT IN YOU RECEIVING
LESS THAN THE VALUE OF THE COMMON SHARES INTO WHICH A NOTE IS EXCHANGEABLE.
The notes are exchangeable into Nabors' common shares only if specified
conditions are met. If the specific conditions for exchange are not met, you
will not be able to exchange your notes, and you may not be able to receive the
value of the common shares into which the notes would otherwise be exchangeable.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus and the documents incorporated in this prospectus by
reference contain forward-looking statements. We typically use words such as
"anticipate," "believe," "plan," "expect," "intend," "estimate," "project,"
"will," "should," "could," "may," "predict" and similar expressions to identify
forward-looking statements. You are cautioned that actual results could differ
materially from those anticipated in forward-looking statements. Any
forward-looking statements, including statements regarding the 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 and Nabors operate, including, among other things:
- fluctuations in worldwide prices and demand for oil and natural gas;
- fluctuations in levels of natural gas and oil exploration and development
activities;
- fluctuations in the demand for contract drilling and workover services;
- the existence of competitors, technological changes and developments in
the oilfield services industry;
- the existence of operating risks inherent in the oilfield services
industry;
- the existence of regulatory 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 we, Nabors or Nabors' other subsidiaries do or
will do business;
- the possibility of changes in tax laws;
- changes in capital needs; and
- general economic conditions.
13
All forward-looking statements in this 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 documents, reports, filings or press releases, whether as a result of new
information, future events or otherwise.
RATIO OF EARNINGS TO FIXED CHARGES
Nabors Delaware, prior to June 24, 2002, the effective date of the
reorganization of Nabors Delaware under Nabors, a Bermuda company, 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 ratio 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. The following table sets forth Nabors' ratio of earnings to fixed
charges for each of the periods indicated:
NABORS INDUSTRIES LTD. AND SUBSIDIARIES
RATIO OF EARNINGS TO FIXED CHARGES
<Table>
<Caption>
SIX MONTHS
ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
------------- --------------------------------------
2003 2002 2002 2001 2000 1999 1998
----- ----- ----- ----- ----- ----- ------
Ratio (earnings divided by fixed
charges before adjustments).......... 2.67x 3.80x 2.90x 9.27x 6.50x 2.48x 11.60x
</Table>
USE OF PROCEEDS
When this prospectus is used by selling securityholders to resell their
notes, neither we nor Nabors will receive any proceeds from the sale of the
notes. When Nabors issues its common shares to holders of notes upon an exchange
by us of such notes for Nabors' common shares or upon a repurchase by us of such
notes with Nabors' common shares pursuant to this prospectus, neither we nor
Nabors will receive any proceeds.
DESCRIPTION OF NOTES
The notes were issued under an indenture dated as of June 10, 2003 among
us, Nabors and Bank One, N.A., as trustee. See "Where You Can Find More
Information" for information on how to obtain a copy of the indenture.
We have summarized the material terms and provisions of the indenture in
this section. It does not purport to be complete. This summary is subject to and
is qualified by reference to all the provisions of the indenture, including the
definitions of certain terms used in the indenture. We urge holders of the notes
and common shares issuable upon exchange or repurchase thereof to read the
indenture because it, and not this description, define each holder's rights as a
holder of the notes. Wherever particular provisions or defined terms of the
indenture or form of note are referred to, these provisions or defined terms are
incorporated in this prospectus by reference.
References in this section to "we," "us," "our" or the "Company" are
references solely to Nabors Industries, Inc. and not to its subsidiaries.
References in this section to "Nabors" refer to Nabors Industries Ltd. and not
to its subsidiaries.
14
GENERAL
The notes are our unsecured obligations, ranking equal in right of payment
with all of our other senior unsecured indebtedness. The notes were limited to
$700,000,000 aggregate principal amount. The notes are scheduled to mature on
June 15, 2023.
There will be no periodic cash payments of interest on the notes, except as
described under "-- Contingent Interest" and the notes will not accrete.
The principal amount of each note is payable at the office or agency of the
paying agent, initially the trustee, in the Borough of Manhattan, The City of
New York, or any other office of the paying agent maintained for this purpose.
Notes may be presented for exchange into common shares of Nabors at the office
of the exchange agent. Notes in certificated form may be presented for exchange
for other notes or registration of transfer at the office of the registrar.
Initially, the trustee will be the paying agent, the exchange agent and the
registrar. We will not charge a service charge for any registration, transfer or
exchange of notes. However, we may require the holder to pay for any tax,
assessment or other governmental charge to be paid in connection with any
registration, transfer or exchange of notes.
Neither we, Nabors nor any of our subsidiaries are subject to any financial
covenants under the indenture. In addition, neither we, Nabors nor any of our
subsidiaries are restricted under the indenture from paying dividends, incurring
debt or issuing or repurchasing our securities.
You are not afforded protection under the indenture in the event of a
highly leveraged transaction or a change in control of Nabors or us except to
the extent described below under "-- Repurchase at the Option of the Holder Upon
a Fundamental Change."
GUARANTEE
Nabors has fully and unconditionally guaranteed the due and punctual
payment of the principal of, additional amounts, if any, and contingent
interest, if any, on the notes and any other obligations of ours under the 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.
Nabors' guarantee of our obligations under the notes is its unsecured and
unsubordinated obligation and has the same ranking with respect to Nabors'
indebtedness as the notes have with respect to our indebtedness. The guarantee
provides that, in the event of a default in payment by us on the notes, the
holders of the notes may institute legal proceedings directly against Nabors to
enforce its guarantee without first proceeding against us.
EXCHANGE OF NOTES
You may exchange any of your notes, in whole or in part, into common shares
of Nabors, prior to the close of business on the final maturity date of the
notes (unless earlier redeemed or repurchased) and only under any of the
following circumstances:
- upon satisfaction of a sale price condition;
- upon satisfaction of a trading price condition;
- upon notice of redemption; or
- upon specified corporate transactions,
all as described below, provided that you may exchange your notes in part
only if such part is $1,000 principal amount or an integral multiple of $1,000
principal amount.
EXCHANGE PROCEDURES
The initial exchange rate for the notes is 14.2653 common shares of Nabors
per $1,000 principal amount of notes. Nabors will not issue fractional common
shares upon exchange of notes. Instead, we will pay cash in lieu of a fractional
share based on the "sale price" (as defined under "-- Exchange Upon
15
Satisfaction of Sale Price Condition," below) of Nabors' common shares on the
trading day prior to the exchange date. The exchange rate will be adjusted as
described under "-- Adjustments to Exchange Rate" below. The "exchange price" as
of any day will equal $1,000 divided by the exchange rate. The initial exchange
price is equal to $70.10.
To exchange your note into common shares you must:
- complete and manually sign the exchange notice on the back of the note
(or a facsimile of such exchange notice) and deliver it to the exchange
agent;
- surrender the note to the exchange agent;
- if required, furnish appropriate endorsements and transfer documents;
- pay any transfer or similar taxes; and
- if required, pay funds equal to interest payable on the next contingent
interest payment date.
The date you comply with these requirements is the exchange date under the
indenture.
Upon exchange of notes, a holder will not receive any cash payment of
contingent interest. Except as described in the immediately following paragraph,
accrued but unpaid contingent interest, if any, attributable to the period from
the most recent interest payment date to the exchange date will be deemed
cancelled, extinguished or forfeited. Our delivery to the holder of the full
number of Nabors' common shares into which the note is exchangeable and any cash
payment of fractional shares (or cash or a combination of cash and Nabors'
common shares in lieu thereof as described below) will be deemed to satisfy our
obligation to pay:
- the principal amount of the note; and
- accrued but unpaid contingent interest, if any, and additional amounts,
if any, attributable to the period from the most recent interest payment
date to the exchange date.
Notwithstanding the preceding paragraph, if the exchange date occurs after
a record date but prior to the next succeeding contingent interest payment date,
holders of notes at the close of business on the record date will receive any
contingent interest payable on such notes on the corresponding contingent
interest payment date notwithstanding the exchange. Such notes, upon surrender
for exchange, must be accompanied by funds equal to the amount of contingent
interest payable on the notes so exchanged; provided that no such payment need
be made if (1) we have specified a redemption date that is after a record date
and prior to the next contingent interest payment date, (2) we have specified a
purchase date following a Fundamental Change that is during such period or (3)
only overdue contingent interest exists at the time of exchange with respect to
such notes to the extent of such overdue contingent interest.
In lieu of delivering Nabors' common shares upon notice of exchange of any
notes (for all or any portion of such notes), we may elect to pay holders
surrendering notes an amount in cash per note equal to the average of the sale
prices of Nabors' common shares for the five trading days beginning on the
trading date immediately following the date on which we notify the holders that
we have elected to pay cash in lieu of delivering Nabors' common shares with
respect to all or part of such exchanges, multiplied by the exchange rate in
effect on that notification day, subject to adjustment upon the occurrence of
the events described below; provided, that if the payment of cash is not
permitted pursuant to the provisions of the indenture or otherwise, we will
deliver Nabors' common shares (and cash in lieu of fractional shares) as
described below. We will use reasonable efforts to notify, on the same business
day as our receipt of an exchange notice (but in any event within one business
day of our receipt of an exchange notice), the exchange agent for delivery to
the holders of notes of our election to deliver Nabors' common shares or to pay
cash in lieu of delivery of the common shares. If we elect to deliver all or a
portion of such payment in Nabors' common shares, the shares will be delivered
through the trustee no later than the seventh business day following the
exchange date. If we elect to pay all of such payment in cash, the cash payment
will be made to holders surrendering notes no later than the tenth business day
following the applicable exchange date. If an event of default, as described
under the caption entitled "-- Events of Default;
16
Notice and Waiver" below (other than a default in a cash payment upon exchange
of the notes), has occurred or is continuing, we may not pay cash upon exchange
of any notes (other than cash in lieu of fractional shares).
Pursuant to the indenture, the date on which all of the requirements for
delivery of the notes for exchange have been satisfied is the exchange date.
EXCHANGE UPON SATISFACTION OF SALE PRICE CONDITION
A holder may surrender any of its notes for exchange into Nabors' common
shares in any calendar quarter (and only during such calendar quarter) after the
quarter ending September 30, 2003 if the sale price of Nabors' common shares for
at least 20 trading days during the period of 30 consecutive trading days ending
on the last trading day of the previous calendar quarter is greater than or
equal to 120% or, with respect to all calendar quarters beginning on or after
July 1, 2008, 110% of the applicable exchange price per share of the Nabors'
common shares on such last trading day.
The "sale price" of Nabors' common shares on any date means the closing
sale price per share (or if no closing sale price is reported, the average of
the bid and asked prices or, if more than one in either case, the average of the
average bid and the average asked prices) on that date as reported in
transactions for the principal U.S. securities exchange on which such common
shares are traded or, if such common shares are not listed on a U.S. national or
regional securities exchange, as reported by the Nasdaq National Market. The
sale price will be determined without reference to after-hours or extended
market trading.
If Nabors' common shares are not listed for trading on a U.S. national or
regional securities exchange and not reported by the Nasdaq National Market on
the relevant date, the "sale price" will be the last quoted bid price for
Nabors' common shares in the over-the-counter market on the relevant date as
reported by the National Quotation Bureau or similar organization.
If Nabors' common shares are not so quoted, the "sale price" will be the
average of the mid-point of the last bid and asked prices for Nabors' common
shares on the relevant date from each of at least three nationally recognized
independent investment banking firms selected by us for this purpose.
"Trading day" means a day during which trading in securities generally
occurs on the American Stock Exchange or, if Nabors' common shares are not then
listed on the American Stock Exchange, on the principal other national or
regional securities exchange on which such common shares are then listed or, if
such common shares are not then listed on a national or regional securities
exchange, on the National Association of Securities Dealers Automated Quotation
System ("Nasdaq") or, if such common shares are not then quoted on Nasdaq, on
the principal other market on which such common shares are then traded.
EXCHANGE UPON SATISFACTION OF TRADING PRICE CONDITION
You may surrender your notes for exchange into Nabors' common shares at any
time prior to maturity during the five business days immediately following any
ten consecutive trading-day period in which the trading price per $1,000
principal amount of notes (as determined following a request by a holder of the
notes in accordance with the procedures described below) for each day of that
period was less than 95% of the product of the sale price of Nabors' common
shares and the then applicable exchange rate; provided, however, you may not
exchange your notes if the average closing sale price of the Nabors common
shares for such ten consecutive trading-day period was between the then current
exchange price on the notes and 120% thereof until June 15, 2008, and 110%
thereafter, of the then current exchange price of the notes.
The "trading price" of the notes on any date of determination means the
average of the secondary market bid quotations per $1,000 principal amount of
notes obtained by the trustee for $5,000,000 principal amount of the notes at
approximately 3:30 p.m., New York City time, on such determination date from
three independent nationally recognized securities dealers we select, provided
that if three such
17
bids cannot reasonably be obtained by the trustee, but two such bids are
obtained, then the average of the two bids shall be used, and if only one such
bid can reasonably be obtained by the trustee, this one bid shall be used. If
the trustee cannot reasonably obtain at least one bid for $5,000,000 principal
amount of the notes from a nationally recognized securities dealer, then the
trading price per $1,000 principal amount of the notes will be deemed to be less
than 95% of the product of the sale price of Nabors' common shares and the then
applicable exchange rate.
In connection with any exchange upon satisfaction of the above trading
price condition, the trustee shall have no obligation to determine the trading
price of the notes unless we have requested such determination; and we shall
have no obligation to make such request unless you provide us with reasonable
evidence that the trading price per $1,000 principal amount of the notes would
be less than 95% of the product of the sale price of Nabors' common shares and
the then applicable exchange rate; at which time, we shall instruct the trustee
to determine the trading price of the notes beginning on the next trading day
and on each successive trading day until the trading price is greater than or
equal to 95% of the product of the sale price of Nabors' common shares and the
then applicable exchange rate.
EXCHANGE UPON NOTICE OF REDEMPTION
If we call any or all of the notes for redemption, holders may exchange
notes into Nabors' common shares at any time prior to the close of business on
the business day immediately preceding the redemption date, even if the notes
are not otherwise exchangeable at such time. However, if a holder already has
delivered a repurchase notice with respect to a note (described below under
"-- Repurchase of Notes at the Option of the Holder"), then the holder may not
surrender the note for exchange until the holder has withdrawn the repurchase
notice in accordance with the indenture.
EXCHANGE UPON SPECIFIED CORPORATE TRANSACTIONS
If Nabors elects to:
- distribute to all holders of its common shares certain rights entitling
them to purchase, for a period expiring within 45 days after the date of
the distribution, common shares at less than the sale price of a common
share on the trading day immediately preceding the declaration date of
the distribution, or
- distribute to all holders of its common shares its assets, debt
securities or certain rights to purchase its securities, which
distribution has a per share value as determined by its board of
directors exceeding 15% of the sale price of a common share on the
trading day immediately preceding the declaration date of the
distribution,
we must notify the holders of the notes at least 20 business days prior to the
ex-dividend date for such distribution. Once we have given such notice, holders
may surrender their notes for exchange at any time until the earlier of the
close of business on the business day immediately prior to the ex-dividend date
or our announcement that such distribution will not take place, even if the
notes are not otherwise exchangeable at such time. No holder may exercise this
right to exchange if the holder otherwise may participate in the distribution
without exchange. The ex-dividend date is the first date upon which a sale of
the common shares does not automatically transfer the right to receive the
relevant distribution from the seller of the common shares to its buyer.
In addition, if Nabors is party to a consolidation, merger or binding share
exchange pursuant to which its common shares would be exchanged into cash or
property other than securities, a holder may surrender notes for exchange at any
time from and after the date that is 15 days prior to the announced anticipated
effective date of the transaction until 5 days after the actual effective date
of such transaction. If Nabors engages in certain reclassifications of its
common shares or is a party to a consolidation, merger, binding share exchange
or transfer of all or substantially all of its assets pursuant to which its
common shares are exchanged into cash, securities or other property, then at the
effective time of the transaction, the right to exchange a note into Nabors'
common shares will be changed into a right to exchange a note into the kind
18
and amount of cash, securities or other property that the holder would have
received if the holder had exchanged its notes immediately prior to the
applicable record date for such transaction. If the transaction also constitutes
a Fundamental Change, as defined below, a holder can require us to purchase all
or a portion of its notes as described below under "-- Repurchase at the Option
of the Holder Upon a Fundamental Change."
ADJUSTMENTS TO EXCHANGE RATE
The exchange rate is subject to adjustment under formulae as set forth in
the indenture in certain events, including:
(1) the issuance of Nabors' common shares as a dividend or
distribution on the Nabors' common shares;
(2) certain subdivisions and combinations of the Nabors' common
shares;
(3) the issuance to all holders of Nabors' common shares of certain
rights or warrants to purchase common shares;
(4) the distribution to all holders of Nabors' common shares of
capital stock, other than Nabors' common shares, or evidences of Nabors'
indebtedness or of assets. This includes securities other than Nabors'
common shares, but excludes those rights, warrants, dividends and
distributions referred to in clauses (1) and (3) above or paid in cash; and
(5) distributions consisting of cash, excluding any quarterly cash
dividend on the Nabors' common shares to the extent that the aggregate cash
dividend per share of common shares in any quarter does not exceed the
greater of:
- the amount per Nabors' common share of the immediately preceding
quarterly cash dividend on the Nabors' common shares to the extent
that the preceding quarterly dividend did not require an adjustment of
the exchange rate pursuant to this clause (5) (as adjusted to reflect
subdivisions or combinations of the common shares); and
- 4.5% of the average of the last reported sales price of the Nabors'
common shares during the ten trading days immediately prior to the
date of declaration of the dividend, and excluding any dividend or
distribution in connection with the liquidation, dissolution or
winding up of Nabors.
If an adjustment is required to be made as set forth in clause (5) above as
a result of a distribution that is a quarterly dividend, the adjustment would be
based upon the amount by which the distribution exceeds the amount of the
quarterly cash dividend permitted to be excluded pursuant to clause (5) above.
If an adjustment is required to be made as set forth in clause (5) above as a
result of a distribution that is not a quarterly dividend, the adjustment would
be based upon the full amount of the distribution.
The indenture provides that if Nabors implements a stockholders' rights
plan, the rights plan must provide that upon exchange of the notes the holders
will receive, in addition to the Nabors' common shares issuable upon exchange,
the rights which would attach to the common shares issuable upon exchange,
regardless of whether the rights have separated from the common shares at the
time of exchange.
No adjustment in the exchange rate will be required unless the adjustment
would require a change of at least 1% in the rate then in effect; provided that
any adjustment that would otherwise be required to be made will be carried
forward and taken into account in any subsequent adjustment.
Except as stated above, the exchange rate will not be adjusted for the
issuance of Nabors' common shares or any securities exchangeable for Nabors'
common shares or carrying the right to purchase any of the foregoing.
19
In the case of either:
- any reclassification of the Nabors' common shares, or
- a consolidation or merger involving Nabors or a sale or conveyance to
another corporation of the property and assets of Nabors as an entirety
or substantially as an entirety,
if holders of Nabors' common shares would be entitled to receive any form
of consideration with respect to or in exchange for Nabors' common shares, the
holders of the notes then outstanding would be entitled to exchange their notes
into the kind and amount of consideration which they would have owned or been
entitled to receive had their notes been exchanged immediately prior to the
applicable transaction. This assumes that a holder of notes would not have
exercised any rights of election as to the consideration receivable in
connection with the transaction.
In the event of a taxable distribution to holders of Nabors' common shares
or in certain other circumstances requiring an adjustment to the exchange rate,
the holders of notes may, in certain circumstances, be deemed to have received a
distribution subject to United States income tax as a dividend. In certain other
circumstances, the absence of an adjustment may result in a taxable dividend to
the holders of Nabors' common shares. See "Certain Material U.S. Federal Income
Tax Considerations."
Nabors from time to time may to the extent permitted by law increase the
exchange rate by any amount for any period of at least 20 business days, if its
board of directors has made a determination that the increase would be in its
best interests. Subsequent to such increase, Nabors may from time to time lower
the exchange rate to any rate that is not lower than the exchange rate that
would have been applicable had such increase not occurred, if the board of
directors has determined that the decrease would be in Nabors' best interests.
For purposes of this paragraph, a determination by the board of directors will
be conclusive. If Nabors increases or decreases the exchange rate, Nabors will
give at least seven days' notice of the increase or decrease. Nabors may, at its
option, make increases or decreases in the exchange rate, in addition to those
described above, as the board of directors deems advisable to avoid or diminish
any income tax to holders of common shares resulting from any dividend or
distribution of stock, or rights to acquire stock, or from any event treated as
a dividend, distribution or a right to acquire stock for income tax purposes.
See "Certain Material U.S. Federal Income Tax Considerations."
CONTINGENT INTEREST
We will pay contingent interest to the holders of notes during any
six-month period from June 15 to December 14 or from December 15 to June 14
commencing on or after June 15, 2008 for which the average trading price of a
note (as described under "Description of Notes -- Exchange of Notes -- Exchange
Upon Satisfaction of Trading Price Condition") for the applicable five trading
day reference period equals or exceeds 120% of the principal amount of the note
as of the day immediately preceding the first day of the applicable six-month
interest period. The five trading day reference period means the five trading
days ending on the second trading day immediately preceding the relevant
six-month interest period.
During any period when contingent interest shall be payable, the contingent
interest payable per note in respect of any six-month period will equal 0.185%
of the principal amount of a note.
Any contingent interest will be payable on the June 15 or December 15
immediately following the relevant six-month interest period to the persons in
whose names the notes are registered at the close of business on the June 1 or
December 1 immediately preceding the applicable contingent interest payment
date, except that contingent interest payable upon redemption or repurchase will
be paid to the person to whom principal is payable unless the redemption date or
repurchase date is a contingent interest payment date. Contingent interest will
be computed on the basis of a 360-day year composed of twelve 30-day months.
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We will maintain an office in the Borough of Manhattan, The City of New
York, for the payment of any additional amounts and contingent interest, which
shall initially be an office or agency of the trustee. We may pay contingent
interest either:
- by check mailed to your address as it appears in the note register,
provided that, if you are a holder with an aggregate principal amount in
excess of $2.0 million, you will be paid, if you so elect in writing,
according to the immediately following bullet point; or
- by wire transfer of immediately available funds to an account maintained
by you in the United States.
We will notify the holders of the notes and provide appropriate public
notice upon a determination that they will be entitled to receive contingent
interest during a six-month interest period.
REDEMPTION OF NOTES AT OUR OPTION
We may not redeem the notes prior to June 15, 2008. Beginning on June 15,
2008, we may redeem the notes for cash in whole or in part at any time, by
giving by mail to holders of notes not less than 15 days' nor more than 60 days'
notice of redemption prior to the redemption date for an amount in cash equal to
(1) the sum of the principal amount of notes to be redeemed and (2) any accrued
and unpaid contingent interest, if any, and additional amounts owed, if any, on
such notes to the date of redemption. At the same time, we will provide public
notice of redemption through certain financial news services. The notes will be
redeemable in multiples of $1,000 original principal amount. No sinking fund is
provided for the notes. We may, upon at least 30 days' notice given to the
holders of notes, on one or more occasions, elect to extend the period during
which we cannot redeem the notes.
If less than all of the outstanding notes held in certificated form are to
be redeemed, the trustee will select the notes held in certificated form to be
redeemed in principal amounts of $1,000 or integral multiples thereof by lot,
pro rata or by another method the trustee considers fair and appropriate. If a
portion of a holder's certificated notes is selected for partial redemption and
the holder exchanges a portion of its notes, the exchanged portion will be
deemed to be the portion selected for redemption. Notes registered in the name
of DTC or its nominee will be redeemed as described under "-- Form, Denomination
and Registration -- Global Note; Book-Entry Form."
REPURCHASE AT THE OPTION OF THE HOLDER UPON A FUNDAMENTAL CHANGE
"Fundamental Change" means the occurrence of any transaction or event in
connection with which all or substantially all common shares of Nabors or any
successor thereto will be exchanged for, converted into, acquired for or
constitute solely the right to receive any form of consideration which is not
all or substantially all common shares listed, or, upon consummation of or
immediately following such transaction or event, which will be listed, on a
United States national securities exchange or approved for quotation on The
NASDAQ National Market or any similar United States system of automated
dissemination of quotations of securities prices.
If a Fundamental Change occurs at any time prior to June 15, 2023, each
holder will have the right, at the holder's option, to require us to repurchase
any or all of the holder's notes. The notes may be repurchased in multiples of
$1,000 principal amount. We will repurchase the notes at a price equal to the
principal amount plus any accrued and unpaid contingent interest, if any, and
additional amounts owed, if any, to the repurchase date.
On or before the 30th day after the occurrence of a Fundamental Change, we
will mail to all holders of record of the notes a notice of the occurrence of
the Fundamental Change and of the resulting repurchase right. We also will
deliver to the trustee a copy of the notice. To exercise the repurchase right,
holders of notes must deliver, on or before the 30th day after the date of our
notice of a Fundamental Change, the notes to be repurchased, duly endorsed for
transfer, together with the form entitled "Option to Elect Repurchase Upon a
Fundamental Change" on the reverse side of the notes duly completed, to us, or
an agent designated by us.
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We will comply with the provisions of Rule 13e-4 and any other tender offer
rules under the Securities Exchange Act which may then be applicable in
connection with the repurchase of the notes in the event of a Fundamental
Change.
The repurchase rights of the holders of notes could discourage a potential
acquiror of Nabors. The Fundamental Change repurchase feature, however, is not
the result of management's knowledge of any specific effort to obtain control of
Nabors by any means or part of a plan by management to adopt a series of
anti-takeover provisions.
The term Fundamental Change is limited to specified transactions and may
not include other events that might adversely affect our financial condition or
the financial condition of Nabors. In addition, holders may not be protected by
the requirement that we offer to repurchase the notes upon a Fundamental Change
in the event of a highly leveraged transaction, reorganization, merger or
similar transaction involving Nabors.
No notes may be repurchased at the option of holders upon a Fundamental
Change if there has occurred and is continuing an event of default described
under "-- Events of Default; Notice and Waiver" below. However, notes may be
repurchased if the event of default is in the payment of the Fundamental Change
purchase price with respect to the notes.
REPURCHASE OF NOTES AT THE OPTION OF THE HOLDER
On June 15, 2008, June 15, 2013 and June 15, 2018, we will be obligated to
repurchase, at the option of the holder, all or any portion of the holder's
notes. The purchase price payable in respect of a note will be equal to the
principal amount plus any accrued and unpaid contingent interest and additional
amounts owed, if any, to the repurchase date.
We may elect to pay the purchase price payable, as of any repurchase date,
in cash or Nabors' common shares or any combination of cash and such common
shares.
If we elect to pay the purchase price, in whole or in part, in Nabors'
common shares, the number of shares to be delivered in respect of the portion of
the purchase price to be paid in common shares will be equal to the portion of
the purchase price divided by the Market Price of the Nabors' common shares.
However, no fractional common shares will be delivered upon any repurchase by us
of notes through the delivery of common shares in payment, in whole or in part,
of the purchase price. Instead, we will pay cash based on the Market Price for
all fractional shares of common shares.
"Market Price" means the average of the sale prices of the Nabors' common
shares for the five trading day period ending on the third business day prior to
the applicable purchase date, if the third business day prior to the applicable
purchase date is a trading day or, if it is not a trading day, then on the last
trading day prior to such third business day, appropriately adjusted to take
into account the occurrence during the period commencing on the first of such
trading days during such five trading day period and ending on such purchase
date of certain events that would result in an adjustment of the exchange rate
under the indenture with respect to the Nabors' common shares. Because the
Market Price of the Nabors' common shares is determined prior to the applicable
purchase date, holders of notes bear the market risk with respect to the value
of the Nabors' common shares to be received from the date of determination of
such Market Price to such purchase date. We may elect to pay the purchase price
in Nabors' common shares only if the information necessary to calculate the
Market Price is reported in a daily newspaper of national circulation.
The holder's right to require us to repurchase notes is exercisable by
delivery during the repurchase period of a written repurchase notice by the
holder to the office of the paying agent. The paying agent will initially be the
trustee. The repurchase period will begin at any time from the opening of
business on the date that is 20 business days prior to the applicable repurchase
date until the close of the business day on the applicable repurchase date. If
the repurchase notice is withdrawn during the period, we will not be obligated
to repurchase the notes. Our repurchase obligation will be subject to additional
conditions set forth in the indenture.
22
The repurchase notice will state:
(1) the certificate numbers of the notes to be delivered by the holder
for repurchase by us;
(2) the portion of the principal amount of notes to be repurchased,
which must be $1,000 or in multiples of $1,000;
(3) that the notes are to be repurchased by us pursuant to the
applicable provisions of the notes and the indenture; and
(4) in the event that we elect to pay the purchase price in Nabors'
common shares but do not end up satisfying the conditions to payment and
ultimately have to pay the holder in cash, whether the holder would choose:
- to withdraw the repurchase notice as to some or all of the notes to
which it relates; or
- to receive cash in respect of the entire purchase price for all notes
subject to the repurchase notice.
If the holder fails to indicate the holder's choice with respect to the
election described in clause (4) above, the holder will be deemed to have
elected to receive cash for the entire purchase price for all notes subject to
the repurchase notice. For a discussion of the tax treatment of a holder
receiving cash or common shares pursuant to its election to tender its notes to
us on a repurchase date, see the discussion under "Certain Material U.S. Federal
Income Tax Considerations."
Any repurchase notice may be withdrawn by the holder by a written notice of
withdrawal delivered to the paying agent prior to the close of business on the
repurchase date. The notice of withdrawal will state the principal amount and
the certificate numbers of the notes as to which the withdrawal notice relates
and the principal amount, if any, which remains subject to the repurchase
notice.
We will give notice not less than 20 business days prior to the repurchase
date to all holders at their addresses shown in the register of the registrar.
We will also give notice to beneficial owners as required by applicable law.
This notice will state, among other things:
- whether we will pay the purchase price of the notes in cash or Nabors'
common shares, or any combination of cash and such common shares. The
notice will specify the percentage of each, and
- if we elect to pay in Nabors' common shares, in whole or in part, the
method of calculating the Market Price of the common shares.
Upon determination of the actual number of Nabors' common shares in
accordance with the foregoing provisions, we will give appropriate public
notice.
Our right to repurchase notes with Nabors' common shares is subject to the
satisfaction of various conditions, including:
- the registration of the common shares under the Securities Act, if
required, and
- compliance with other applicable federal and state securities laws, if
any.
If the conditions are not satisfied by a repurchase date, we will pay the
purchase price of the notes to be purchased on the repurchase date entirely in
cash. We will comply with the provisions of Rule 13e-4 and any other tender
offer rules under the Securities Exchange Act which may then be applicable and
will file a Schedule 13E-4 or any other schedule required under the Securities
Exchange Act in connection with any offer by us to repurchase notes at the
option of holders.
Payment of the repurchase price for a note for which a repurchase notice
has been delivered and not withdrawn is conditioned upon book-entry transfer or
delivery of the note, together with necessary endorsements, to the paying agent
at its office in the Borough of Manhattan, The City of New York, or any other
office of the paying agent, at any time after delivery of the repurchase notice.
Payment of the purchase price for the note will be made promptly following the
later of the repurchase date or the time of
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book-entry transfer or delivery of the note. If the paying agent holds money or
securities sufficient to pay the purchase price of the note on the business day
following the repurchase date, then, on and after the date, the note will cease
to be outstanding and contingent interest, if any, on the notes, will cease to
accrue. This will be the case whether or not book-entry transfer of the note is
made or the note is delivered to the paying agent, and all other rights of the
holder will terminate, other than the right to receive the purchase price upon
delivery of the note.
No notes may be repurchased at the option of the holder for cash if there
has occurred, prior to, on or after the giving by the holders of the notes of
the required repurchase notice, and is continuing an event of default described
under "-- Events of Default; Notice and Waiver," other than a default in the
payment of the purchase price with respect to the notes.
MERGERS AND SALES OF ASSETS
The indenture provides that neither we nor Nabors will consolidate with or
merge into any other person or convey, transfer or lease our or its properties
and assets substantially as an entirety to another person, unless, among other
items:
- in our case, the resulting surviving or transferee person, if other than
us is organized and existing under the laws of the United States, any
state thereof or the District of Columbia;
- the successor person assumes all of our and/or Nabors' obligations, as
applicable, under the notes and the indenture; and
- neither we, Nabors nor the successor person will immediately thereafter
be in default under the indenture.
Upon the assumption of our and/or Nabors' obligations by a successor as
described above, subject to certain exceptions, we and/or Nabors will be
discharged from all obligations under the notes and the indenture. Certain of
these transactions which would constitute a Fundamental Change would permit each
holder to require us to repurchase their notes as described under "-- Repurchase
at Option of the Holder Upon a Fundamental Change."
EVENTS OF DEFAULT; NOTICE AND WAIVER
The indenture provides that, if an event of default specified in the
indenture has happened and is continuing, either the trustee or the holders of
not less than 25% in aggregate principal amount of the notes then outstanding
may declare due and payable:
- the principal amount of the notes; plus
- contingent interest on the notes and additional amounts, if any, accrued
and unpaid to the date of the declaration; plus
- any liquidated damages owing as described under "Registration Rights."
In the case of certain events of bankruptcy or insolvency, the principal
amount of the notes plus contingent interest, if any, and additional amounts, if
any, on the notes, accrued and unpaid to the occurrence of the event, will
automatically become and be immediately due and payable.
Under certain circumstances, the holders of a majority in aggregate
principal amount of the outstanding notes may rescind any acceleration with
respect to the notes and its consequences.
Interest will accrue at the rate of 1.0% per annum and be payable on demand
upon a default in the payment of any redemption price or purchase price and,
after acceleration, of the principal amount and accrued and unpaid contingent
interest, if any, to the extent that payment of the interest is legally
enforceable. Contingent interest, if any, will cease to accrue after declaration
of acceleration.
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Under the indenture, events of default are defined as:
(1) default in payment of:
- the principal amount (if the default continues for 10 days),
- accrued contingent interest on the notes and additional amounts, if
any (if the default continues for 30 days),
- liquidated damages (if the default continues for 30 days),
- redemption price (if the default continues for 10 days),
- purchase price (if the default continues for 10 days), or
- Fundamental Change purchase price (if the default continues for 10
days)
with respect to any note when it becomes due and payable;
(2) our failure for 20 days to deliver Nabors' common shares
(including cash in lieu of fractional shares) or, if we elect, cash in lieu
of Nabors' common shares, when Nabors' common shares or cash is required to
be delivered following the exchange of a note;
(3) our or Nabors' failure to comply with any of our or their other
agreements in the notes or the indenture upon the receipt by us of notice
of the default by the trustee or by holders of not less than 25% in
aggregate principal amount of the notes then outstanding and our failure to
cure the default within 90 days after receipt by us of the notice;
(4) certain events of our or Nabors' bankruptcy or insolvency; or
(5) the failure to keep Nabors' full and unconditional guarantee in
place.
The trustee will give notice to holders of the notes of any continuing
default known to the trustee within 90 days after the trustee becomes aware of
such default; provided that, except in the case of a default as described in
clause (1) above, the trustee may withhold notice if it determines in good faith
that withholding the notice is in the interests of the holders.
The holders of a majority in aggregate principal amount of the outstanding
notes may direct the time, method and place of conducting any proceeding for any
remedy available to the trustee or exercising any trust or power conferred on
the trustee; provided that the direction may not conflict with any law or the
indenture and will be subject to certain other limitations. Before proceeding to
exercise any right or power under the indenture at the direction of the holders,
the trustee will be entitled to receive from the holders reasonable security or
indemnity satisfactory to it against the costs, expenses and liabilities
incurred by it in complying with the direction. No holder of any note will have
any right to pursue any remedy with respect to the indenture or the notes
unless:
(1) the holder will have previously given us and the trustee written
notice of a continuing event of default;
(2) the holders of at least 25% in aggregate principal amount of the
outstanding notes have made a written request to the trustee to pursue the
remedy;
(3) the holder or holders have offered to the trustee reasonable
indemnity satisfactory to the trustee;
(4) the holders of a majority in aggregate principal amount of the
outstanding notes have not given the trustee a direction inconsistent with
the request within 60 days after receipt of the request; and
(5) the trustee has failed to comply with the request within the
60-day period.
25
However, the right of any holder:
(1) to receive payment of:
- the principal amount,
- accrued contingent interest or additional amounts, if any, on the
notes,
- liquidated damages,
- redemption price,
- purchase price,
- Fundamental Change purchase price,
- and any overdue interest,
in respect of the notes held by such holder, on or after the respective
due dates of such payments;
(2) to institute suit for the enforcement of any payments or exchange;
or
(3) to exchange notes,
will not be impaired or adversely affected without the holder's
consent.
The holders of at least a majority in aggregate principal amount of the
outstanding notes may waive an existing default and its consequences, other
than:
- any default in any payment on the notes;
- any default with respect to the exchange rights of the notes; or
- any default in respect of certain covenants or provisions in the
indenture which may not be modified without the consent of the holder of
each note as described under "-- Modification."
We will be required to furnish to the trustee annually a statement as to
any default by us or Nabors in the performance and observance of our or Nabors'
obligations under the indenture.
MODIFICATION
Modification and amendment of the indenture or the notes may be effected by
us, Nabors and the trustee with the consent of the holders of not less than a
majority in aggregate principal amount of the notes then outstanding.
Notwithstanding the foregoing, no amendment may without the consent of each
holder affected:
(1) reduce the principal amount, redemption price or purchase price,
or extend the stated maturity of any notes or alter the manner or rate of
accrual of contingent interest or additional amounts or make any note
payable in money or securities other than that stated in the notes;
(2) make any change to the principal amount of notes whose holders
must consent to an amendment or any waiver under the indenture or modify
the indenture provisions relating to amendments or waivers with respect to
the payment of principal;
(3) make any change that adversely affects the right to exchange any
note or the right to require us to repurchase a note or the right to
require us to repurchase a note upon a Fundamental Change; or
(4) impair the right to institute suit for the enforcement of any
payment with respect to, or exchange of, the notes.
The indenture also provides for certain modifications of its terms without
the consent of the holders.
26
PAYMENT OF ADDITIONAL AMOUNTS
Unless otherwise required by Bermudan law, neither we nor Nabors will
deduct or withhold from payments made with respect to the notes and the
guarantee 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 Bermuda having
the power to tax. In the event that either we or Nabors is required to withhold
or deduct on account of any Bermudan taxes due from any payment made under or
with respect to the notes or the guarantee, as the case may be, we 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 Bermudan taxes had not been required to be withheld or deducted. The
amounts that we or Nabors are required to pay to preserve the net amount
receivable by the holders of the notes are referred to as "additional amounts."
Also, additional amounts will not be payable with respect to a payment made
to a holder of the notes to the extent:
- that any Bermudan taxes would not have been so imposed but for the
existence of any present or former connection between the holder and
Bermuda other than the mere receipt of the payment, the acquisition,
ownership or disposition of such notes or the exercise or enforcement of
rights under the notes, the guarantee or the indenture;
- of any estate, inheritance, gift, sales, transfer or personal property
taxes imposed with respect to the notes, except as described below or as
otherwise provided in the indenture;
- that any such Bermudan taxes would not have been imposed but for the
presentation of the 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 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 Bermudan taxes but for the failure to make a valid
declaration of non-residence or other similar 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 relevant taxes; and
- at least 60 days prior to the first payment date with respect to which
we or Nabors shall apply this clause, we or Nabors shall have notified
all holders of the notes in writing that they shall be required to
provide this declaration or claim.
We and Nabors will also:
- withhold or deduct such 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 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 payment by us or Nabors and, notwithstanding our or Nabors' efforts
to obtain the receipts, if the same are not obtainable, other evidence of
such payments.
In addition, we or Nabors will pay any stamp, issue, registration,
documentary or other similar taxes and duties, including interest, penalties and
additional amounts with respect thereto, payable in Bermuda
27
or the United States or any political subdivision or taxing authority of or in
the foregoing with respect to the creation, issue, offering, enforcement,
redemption or retirement of the notes or the guarantee.
If payments with respect to the notes or the guarantee become subject
generally to the taxing jurisdiction of any 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 Bermuda having the power to
tax, immediately upon becoming aware thereof we will notify the trustee of such
event, and we or Nabors, 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 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 Nabors as the case may be, is
incorporated or in which we or Nabors has our or its place of central management
or central control.
FORM, DENOMINATION AND REGISTRATION
The notes are issuable in fully registered form, without coupons, in
denominations of $1,000 principal amount and multiples of $1,000. We may not
reissue a note that has matured or been exchanged, redeemed, repurchased by us
at the option of a holder or otherwise canceled, except for the transfer,
exchange or replacement of the note.
Global Note; Book-Entry Form. The notes will be issued in the form of one
or more global notes (collectively, the "global note"). The global note will be
deposited with, or on behalf of, The Depository Trust Company and registered in
the name of Cede & Co., DTC's nominee. Except as set forth below, the global
note may be transferred, in whole or in part, only to another nominee of DTC or
to a successor of DTC or its nominee.
Purchasers of the notes may hold their interests in the global note
directly through DTC if the holder is a participant in DTC, or indirectly
through organizations which are participants in DTC. Transfers between
participants will be effected in the ordinary way in accordance with DTC rules
and, if applicable, those of Euroclear Bank S.A./N.V., as operator of the
Euroclear System ("Euroclear"), and Clearstream Banking, societe anonyme
("Clearstream"), and will be settled in same-day funds. The laws of some states
require that certain persons take physical delivery of securities in definitive
form. As a result, the ability to transfer beneficial interests in the global
note to such persons may be limited.
Persons who are not participants may beneficially own interests in the
global note held by DTC only through participants, or certain banks, brokers,
dealers, trust companies and other parties that clear through or maintain a
custodial relationship with a participant, either directly or indirectly. So
long as Cede & Co., as the nominee of DTC, is the registered owner of the global
note, Cede & Co. for all purposes will be considered the sole holder of the
global note. Except as provided below under "-- Certificated Notes," owners of
beneficial interests in the global note will not be entitled to have
certificates registered in their names. These owners will not receive or be
entitled to receive physical delivery of certificates in definitive registered
form and will not be considered the holders of the global note.
Payment of the principal amount or the redemption price or the purchase
price of notes represented by the global note will be made to Cede & Co., the
nominee for DTC, as the registered owner of the global note. Payments will be
made by wire transfer of immediately available funds on the payment date. We,
Nabors, the trustee and any paying agent will have no responsibility or
liability for any aspect of the records relating to or payments made on account
of beneficial ownership interests in the global note. In addition, we, Nabors,
the trustee and any paying agent will have no responsibility or liability for
maintaining, supervising or reviewing any records relating to any beneficial
ownership interests.
28
We have been informed by DTC that, with respect to any payment of principal
amount or the redemption price or the purchase price of notes represented by the
global note, DTC's practice is to credit participants' accounts on the payment
date. These payments will be in amounts proportionate to the participants'
respective beneficial interests in the principal amount represented by the
global note as shown on the records of DTC. DTC will not credit participants'
accounts if DTC has reason to believe that it will not receive payment on the
applicable payment date. Payments by participants to owners of beneficial
interests in the principal amount represented by the global note held through
participants will be the responsibility of the participants. This is currently
the case with securities held for the accounts of customers registered in street
name.
Because DTC can only act on behalf of participants who in turn act on
behalf of indirect participants and certain banks, the ability of a person
having a beneficial interest in the principal amount represented by the global
note to pledge its interest to persons or entities that do not participate in
the DTC system, or otherwise take actions in respect of its interest, may be
affected by the lack of physical certificates evidencing its interest.
DTC has advised us as follows: DTC is a limited purpose trust company
organized under the laws of the State of New York, a member of the Federal
Reserve System, a clearing corporation within the meaning of the Uniform
Commercial Code and a clearing agency registered pursuant to the provisions of
Section 17A of the Securities Exchange Act. DTC was created to hold securities
for its participants and to facilitate the clearance and settlement of
securities transactions between participants through electronic book-entry
changes to the accounts of its participants. This practice eliminates the need
for physical movement of certificates. Participants include securities brokers
and dealers, banks, trust companies and clearing corporations and may include
certain other organizations. Some of the participants, or their representatives,
together with other entities, own DTC. Indirect access to the DTC system is
available to others such as banks, brokers, dealers and trust companies that
clear through, or maintain a custodial relationship with, a participant, either
directly or indirectly.
Conveyance of notices and other communications by DTC to participants, by
participants to indirect participants and indirect participants to beneficial
owners will be governed by arrangements among them, subject to any statutory or
regulatory requirements that may be in effect from time to time. Redemption
notices will be sent to Cede & Co., as nominee of DTC. If less than all of the
notes are being redeemed, DTC will reduce the amount of interest of each
participant in the notes in accordance with its procedures.
Transfers between participants in DTC will be effected in the ordinary way
in accordance with DTC rules and will be settled in same-day funds. Transfers
between participants in Euroclear and Clearstream will be effected in DTC in
accordance with DTC rules on behalf of Euroclear or Clearstream, as the case may
be, by its respective depositary; however, such cross-market transactions will
require delivery of instruction to Euroclear or Clearstream, as the case may be,
by the counterparty in such system in accordance with its rules and procedures
and within its established deadlines (Brussels time). Euroclear or Clearstream,
as the case may be, will, if the transaction meets its settlement requirements,
deliver instructions to its respective depositary to take action to effect final
settlement on its behalf by delivering or receiving interests in the global
notes in DTC, and making or receiving payment in accordance with normal
procedures for same-day funds settlement applicable to DTC. Euroclear
participants and Clearstream participants may not deliver instructions directly
to the depositaries for Euroclear or Clearstream.
Because of time zone differences, the securities account of a Euroclear or
Clearstream participant purchasing an interest in the global securities from a
DTC participant will be credited during the securities settlement processing day
(which must be a business day for Euroclear or Clearstream, as the case may be)
immediately following the DTC settlement date, and such credit of any
transactions involving interests in the global note settled during such
processing day will be reported to the relevant Euroclear or Clearstream
participant on such day. Cash received by Euroclear or Clearstream as a result
of sales of interests in the global note by or through a Euroclear or
Clearstream participant to a DTC participant will
29
be received with value on the DTC settlement date, but will be available in the
relevant Euroclear or Clearstream cash account only as of the business day
following settlement in DTC.
We expect that DTC will take any action permitted to be taken by a holder
of notes (including the presentation of notes for exchange as described below)
only at the direction of one or more participants to whose account the DTC
interests in the global note is credited and only in respect of such portion of
the aggregate principal amount of the notes as to which such participant or
participants has or have given such direction. However, if there is an event of
default under the notes, DTC will exchange the global note for notes in
definitive form, which it will distribute to its participants.
Although we expect that DTC, Euroclear and Clearstream will agree to the
foregoing procedures in order to facilitate transfers of interests in the global
note among participants of DTC, Euroclear, and Clearstream, DTC, Euroclear and
Clearstream are under no obligation to perform or continue to perform such
procedures, and such procedures may be discontinued at any time. None of us,
Nabors, the trustee, or any registrar, paying agent or exchange agent under the
indenture will have any responsibility for the performance by DTC, Euroclear or
Clearstream or their participants or indirect participants of their respective
obligations under the rules and procedures governing their operations.
If DTC is at any time unwilling to continue as a depositary for the global
note and a successor depositary is not appointed by us within 90 days, we will
issue notes in fully registered, definitive form in exchange for the global
note.
Certificated Notes. Certificated notes may be issued in exchange for notes
represented by the global note if no successor depositary is appointed by us as
set forth under "-- Global Note; Book-Entry Form."
TAXATION OF NOTES
See the description under "Certain Material U.S. Federal Income Tax
Considerations" for a discussion of certain tax considerations relevant to a
holder of notes.
REGISTRATION RIGHTS OF NOTEHOLDERS
We and Nabors have entered into a registration rights agreement with the
initial purchaser for the benefit of the holders of the notes and the common
shares issuable on exchange of the notes. Under this agreement, we have agreed,
at our cost to:
- use all reasonable best efforts to file the shelf registration statement
of which this prospectus is a part with the Securities and Exchange
Commission covering resales of the notes and the issuance by Nabors or,
to the extent applicable, resale by the holders of the common shares
issuable on exchange of the notes, on or prior to the 90th day after the
first date of original issuance of the notes;
- use all reasonable best efforts to cause the shelf registration statement
to be declared effective under the Securities Act no later than 180 days
after the first date of original issuance of the notes; and
- use all reasonable best efforts to keep the shelf registration statement
continuously effective under the Securities Act until the earliest of (i)
the date on which the notes and the common shares issuable upon their
exchange may be sold by persons that are not affiliated with us or Nabors
pursuant to paragraph (k) of Rule 144 (or any successor provision)
promulgated by the Securities and Exchange Commission under the
Securities Act; (ii) the date as of which all the notes or the common
shares issuable upon their exchange have been sold under Rule 144 under
the Securities Act (or any similar provision then in force); (iii) the
date as of which all the notes and the common shares issuable upon their
exchange have been sold pursuant to the shelf registration statement; or
(iv) all notes and common shares issuable upon exchange thereof cease to
be outstanding.
30
We and Nabors have the right to suspend the use of the shelf registration
statement during specified periods of time relating to pending corporate
developments and public filings with the Securities and Exchange Commission and
similar events.
If we and Nabors fail to file the shelf registration statement on or prior
to the 90th day after original issuance of the notes or fail to use all
reasonable efforts to cause the shelf registration statement to be declared
effective within the next 90 days, or if, after the shelf registration statement
has been declared effective, we and Nabors fail to keep the shelf registration
statement effective or usable in accordance with and during the periods
specified in the registration rights agreement, then, in each case, we and
Nabors will pay liquidated damages to all holders of notes and to all holders of
common shares issued on exchange, redemption or repurchase of the notes equal to
0.25% per annum of the principal amount of such notes and a comparable amount in
the case of the common shares until such failure is cured. Liquidated damages
will not accrue at a rate per annum in excess of 0.25%.
A holder who elects to sell any securities pursuant to the shelf
registration statement will be:
- required to be named as a selling securityholder;
- required to deliver a prospectus to purchasers;
- subject to the civil liability provisions under the Securities Act in
connection with any sales; and
- bound by the provisions of the registration rights agreement including
indemnification obligations.
We refer to the notes (including the related guarantee) and the common
shares issuable on exchange, redemption or repurchase of the notes as
"registrable securities." Promptly upon request from any holder of registrable
securities, we will provide a form of notice and questionnaire to be completed
and delivered by that holder to us at least three business days before any
intended distribution of registrable securities under the shelf registration
statement. To be named as a selling securityholder in the shelf registration
statement when it first becomes effective, holders must complete and deliver the
questionnaire in the form of Annex A to the offering memorandum before the
effectiveness of the shelf registration statement. If we receive from a holder
of registrable securities a completed questionnaire, together with such other
information as may be reasonably requested by us, after the effectiveness of,
the shelf registration statement, we will file an amendment to the shelf
registration statement or supplement to the related prospectus to permit the
holder to deliver a prospectus to purchasers of registrable securities. Any
holder that does not complete and deliver a questionnaire or provide such other
information will not be named as a selling securityholder in this prospectus and
therefore will not be permitted to sell any registrable securities under the
shelf registration statement.
This summary of the registration rights agreement is not complete. This
summary is subject to, and is qualified in its entirety by reference to, all the
provisions of the registration rights agreement. See "Incorporation by
Reference" for information on obtaining a copy of the registration rights
agreement.
INFORMATION CONCERNING THE TRUSTEE
Nabors has appointed Bank One, N.A., as trustee under the indenture, and as
paying agent, exchange agent, registrar and custodian with regard to the notes.
The trustee is one of a number of banks with which we, Nabors and our
subsidiaries maintain ordinary banking relationships.
GOVERNING LAW
The indenture, the notes and the guarantee are governed by, and construed
in accordance with, the laws of the State of New York.
31
CERTAIN BERMUDA LAW MATTERS
Bermuda has exchange controls which apply to residents in respect of the
Bermudan dollar. As an exempt company, Nabors is considered to be nonresident
for such controls, consequently, there are no Bermuda governmental restrictions
on Nabors' ability to make transfers and carry out transactions in all other
currencies, including currency of the United States.
There is no reciprocal tax treaty between Bermuda and the United States
regarding withholding taxes. Under existing Bermuda law, there is no Bermuda
income or withholding tax on dividends, if any, paid by Nabors to its
shareholders. Furthermore, no Bermuda tax or other levy is payable on the sale
or other transfer (including by gift or on the death of the shareholder) of
Nabors' common shares (other than by shareholders resident in Bermuda).
DESCRIPTION OF NABORS' SHARE CAPITAL
Nabors' authorized share capital consists of 425,000,000 shares of capital
stock of which 400,000,000 are common shares, par value US$0.001 per share, and
25,000,000 are preferred shares, par value US$0.001 per share. The following
summary is qualified in its entirety by the provisions of Nabors' Memorandum of
Association, dated December 10, 2001 and Nabors' Amended and Restated Bye-Laws
adopted on June 24, 2002, which are both publicly available. See "Where You Can
Find More Information." As of August 4, 2003, there were 146,470,489 Nabors'
common shares outstanding and one Nabors' special voting preferred share, par
value US$0.001 per share, outstanding. No other shares of any class or series
were outstanding as of August 4, 2003.
COMMON SHARES
Holders of Nabors' common shares are entitled to one vote on any question
to be decided on a show of hands and one vote per common share on a poll on all
matters submitted to a vote of the shareholders of Nabors. Except as
specifically provided in Nabors' bye-laws or in The Companies Act 1981
(Bermuda), as amended (which we refer to as the Companies Act in this
prospectus), any action to be taken by shareholders at any meeting at which a
quorum is in attendance shall be decided by a majority of the issued shares
present in person or represented by proxy and entitled to vote. There are no
limitations imposed by Bermuda law or Nabors' bye-laws on the right of
shareholders who are not Bermuda residents to hold or to vote their Nabors'
common shares.
Nabors' bye-laws do not provide for cumulative voting. A special meeting of
shareholders may be called by Nabors' board of directors or as otherwise
provided by the Companies Act and applicable law. Any action, except the removal
of auditors and directors, required or permitted to be taken at any annual or
special meeting of shareholders may be taken by unanimous resolution if the
resolution is signed by each shareholder, or their proxy, entitled to vote on
the matter.
Holders of Nabors' common shares do not have a preemptive or preferential
right to purchase any other securities of Nabors. Nabors' common shares have no
sinking fund provision.
PREFERRED SHARES
The board of directors of Nabors is authorized, without further shareholder
action, to issue from time to time up to 25,000,000 preferred shares in one or
more classes or series, and fix for each such class or series such voting power,
full or limited, or no voting power, and such designations, preferences and
relative, participating, optional or other special rights and such
qualifications, limitations or restrictions thereof, as are provided in the
resolutions adopted by the board of directors providing for the issuance of such
class or series. Nabors' board of directors in authorizing such class or series
may provide that any such class or series may be:
- subject to redemption at the option of Nabors or the holders, or both, at
such time or times and at such price or prices;
32
- entitled to receive dividends (which may be cumulative or non-cumulative)
at such rates, on such conditions, and at such times, and payable in
preference to, or in relation to, the dividends payable on any other
class or classes or any other series;
- entitled to such rights upon the dissolution of, or upon any distribution
of the assets of, Nabors; or
- convertible into, or exchangeable for, shares of any other class or
classes of shares, or of any other series of the same or any other class
or classes of shares, of Nabors at such price or prices or at such rates
of exchange and with such adjustments;
in each case, as set forth in the resolutions authorizing that class or series
of preferred shares.
A series of preferred shares, consisting of one share, has been designated
as a special voting preferred share, having a par value of US$0.001 per share
and a liquidation preference of US$0.01. The special voting preferred share has
been issued to Computershare Trust Company of Canada, as trustee under a voting
and exchange trust agreement among Nabors, Nabors Exchangeco (Canada) Inc., a
Canadian corporation and an indirect subsidiary of Nabors and such trustee. The
special voting preferred share was issued in connection with Nabors' acquisition
of Enserco Energy Services Company Inc. and Ryan Energy Technologies Inc., both
Canadian corporations. Nabors Exchangeco shares are exchangeable for Nabors'
common shares, at each holder's option, on a one-for-one basis and are listed on
the Toronto Stock Exchange. Additionally, these exchangeable shares have
essentially identical rights as Nabors' common shares, including but not limited
to voting rights and the right to receive dividends, if any. Except as otherwise
required by law, Nabors' memorandum of association or Nabors' bye-laws, the one
special voting preferred share will possess a number of votes for the election
of directors and on all other matters submitted to a vote of Nabors'
shareholders equal to the number of outstanding exchangeable shares of Nabors
Exchangeco from time to time not owned by Nabors or any entity controlled by
Nabors. The holders of Nabors' common shares and the holder of the special
voting preferred shares will vote together as a single class on all matters on
which holders of Nabors' common shares are eligible to vote. In the event of
Nabors' liquidation, dissolution or winding-up, all outstanding exchangeable
shares will automatically be exchanged for Nabors' common shares, and the holder
of the special voting preferred share will not be entitled to receive any assets
available for distribution to Nabors' shareholders (other than the US$0.01
liquidation preference). The holder of the special voting preferred share will
not be entitled to receive dividends. At such time as the one special voting
preferred share has no votes attached to it because there are no exchangeable
shares outstanding not owned by Nabors or an entity controlled by Nabors, the
special voting preferred share will be redeemed by Nabors for an amount equal to
US$0.01 and canceled.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for Nabors' common shares is EquiServe.
ANTI-TAKEOVER EFFECTS OF PROVISIONS OF NABORS' MEMORANDUM OF ASSOCIATION AND
BYE-LAWS
Nabors' bye-laws have provisions that could have an anti-takeover effect.
In addition, Nabors' bye-laws include an "advance notice" provision which places
time limitations on shareholders' nominations of directors and submission of
proposals for consideration at an annual general meeting. These provisions are
intended to enhance the likelihood of continuity and stability in the
composition of the board of directors and in the policies formulated by the
board of directors and to encourage negotiations with the board of directors in
transactions that may involve an actual or potential change of control of
Nabors.
The bye-laws provide that Nabors' board of directors will be divided into
three classes serving staggered three-year terms. Directors can be removed from
office prior to the expiration of their term only for cause by the affirmative
vote of the holders of a majority of the voting power of Nabors on the relevant
record date. The board of directors does not have the power to remove directors.
As long as a quorum of directors remains and is present, vacancies on the board
of directors may be filled by a majority vote of the remaining directors. Any
general meeting can authorize the board of directors to fill any vacancy left
33
unfilled at a general meeting. Each of these provisions can delay a shareholder
from obtaining majority representation on the board of directors.
The bye-laws also provide that the board of directors will consist of not
less than five nor more than eighteen persons, the exact number to be set from
time to time by the affirmative vote of a majority of the directors then in
office. Accordingly, the board of directors, and not the shareholders, has the
authority to determine the number of directors and could delay any shareholder
from obtaining majority representation on the board of directors by enlarging
the board of directors and filling the new vacancies with its own nominees.
The bye-laws of Nabors provide that at any annual general meeting, only
such business shall be conducted as shall have been brought before the meeting
by or at the direction of the board of directors, by any shareholder who
complies with certain procedures set forth in the bye-laws or by any shareholder
pursuant to the valid exercise of the power granted under the Companies Act.
For business to be properly brought before an annual general meeting by a
shareholder in accordance with the terms of the bye-laws the shareholder must
have given timely notice thereof in proper written form to the Secretary of
Nabors and satisfied all requirements under applicable rules promulgated by the
SEC. To be timely for consideration at the annual general meeting, a
shareholder's notice must be received by the Secretary at Nabors' principal
executive offices and its registered office in Bermuda not less than 60 days nor
more than 90 days prior to the anniversary date of the immediately preceding
annual general meeting, provided that in the event that the annual general
meeting is called for a date that is not within 30 days before or after such
anniversary date, not later than the 10th day following the day on which such
notice of the date of the annual general meeting was mailed or public disclosure
of the date of the annual general meeting was made, whichever occurs first. In
order for a shareholder to nominate directors in connection with an annual
general meeting of shareholders, a shareholder's notice of his intention to make
such nominations must be received in proper written form as specified in the
bye-laws of Nabors by the Secretary of Nabors within the time limits described
above.
In addition, the Companies Act provides for a mechanism by which not less
than 100 shareholders acting together or any number of shareholders representing
not less than one twentieth of the voting power of a Bermuda company may
properly propose a resolution for consideration at a general meeting of such
company.
Subject to the terms of any other class of shares in issue, any action
required or permitted to be taken by the holders of Nabors' common shares must
be taken at a duly called annual or special general meeting of shareholders
unless taken by written resolution of all holders of common shares. Under the
bye-laws, special general meetings may be called at any time by the board of
directors or when requisitioned by shareholders pursuant to the provisions of
the Companies Act. The Companies Act currently permits shareholders holding not
less than 10% of the paid up shares of a company entitled to vote at a general
meeting to requisition a special general meeting.
The board of directors is authorized, without obtaining any vote or consent
of the holders of any class or series of shares unless expressly provided by the
terms of issue of a class or series, to from time to time issue any authorized
and unissued shares on such terms and conditions as it may determine. For
example, the board of directors could authorize the issuance of preferred shares
with terms and conditions that could discourage a takeover or other transaction
that holders of some or a majority of the Nabors' common shares might believe to
be in their best interests or in which holders might receive a premium for their
shares over the then market price of the shares.
PRICE RANGE OF COMMON SHARES
Nabors' common shares are traded on the American Stock Exchange under the
symbol "NBR." The following table sets forth, for the periods indicated, the
high and low sale price per share of Nabors' common shares, since the
reorganization of Nabors as a Bermuda company, and the high and low sale
34
price per share of Nabors Delaware's common stock, prior to the reorganization,
in each case on the American Stock Exchange.
<Table>
<Caption>
HIGH LOW
------- -------
2001 -- NABORS DELAWARE
First Quarter............................................... $ 62.88 $ 50.70
Second Quarter.............................................. 61.25 37.20
Third Quarter............................................... 38.12 18.00
Fourth Quarter.............................................. 36.15 19.76
2002 -- NABORS DELAWARE
First Quarter............................................... 43.00 26.98
Second Quarter (through June 25, 2002)...................... 49.98 36.00
2002 -- NABORS
Second Quarter (from June 26, 2002 to June 30, 2002)........ 36.99 35.13
Third Quarter............................................... 37.63 26.14
Fourth Quarter.............................................. 39.30 29.79
2003 -- NABORS
First Quarter............................................... 42.60 32.20
Second Quarter.............................................. 45.85 37.65
Third Quarter (through August 20, 2003)..................... 40.15 33.87
</Table>
On August 20, 2003, the last sale price reported on the American Stock
Exchange for Nabors' common shares was $39.50 per share.
DIVIDEND POLICY
Nabors has not declared or paid any cash dividends on its common shares
since 1982. Nabors does not intend to pay any cash dividends on its common
shares for the foreseeable future.
CERTAIN MATERIAL UNITED STATES FEDERAL TAX CONSIDERATIONS
GENERAL
This is a summary of certain material United States federal income tax
consequences relevant to holders of the notes. This summary is based upon laws,
regulations, rulings and decisions now in effect, all of which are subject to
change (including retroactive changes) or possible differing interpretations.
The discussion below deals only with holders who hold the notes (and Nabors'
common shares acquired upon exchange of the notes) as capital assets. The
discussion does not purport to deal with persons in special tax situations, such
as financial institutions, insurance companies, regulated investment companies,
dealers in securities or currencies, tax-exempt entities, persons holding the
notes (or Nabors' common shares acquired upon exchange or repurchase of a note)
in a tax-deferred or tax-advantaged account or persons holding the notes or
Nabors' common shares as a hedge against currency risks, as a position in a
"straddle" or as part of a "hedging" or "exchange" transaction for tax purposes.
We do not address all of the tax consequences that may be relevant to an
investor in the notes. In particular, we do not address:
- the United States federal income tax consequences to shareholders in, or
partners or beneficiaries of, an entity that is a holder of the notes (or
Nabors' common shares acquired upon exchange or repurchase of a note),
35
- the United States federal estate, gift or alternative minimum tax
consequences of the purchase, ownership or disposition of the notes (or
Nabors' common shares acquired upon exchange or repurchase of a note),
- the United States federal income tax consequences to holders whose
functional currency is not the United States dollar, or
- any state, local or foreign tax consequences of the purchase, ownership
or disposition of the notes (or Nabors' common shares acquired upon
exchange or repurchase of a note).
Persons considering the purchase of the notes should consult their own tax
advisors concerning the application of the United States federal income tax laws
to their particular situations as well as any consequences of the purchase,
ownership and disposition of the notes (or Nabors' common shares acquired upon
exchange or repurchase of a note) arising under other United States federal tax
laws and the laws of any other taxing jurisdiction.
For purposes of the discussion that follows, a U.S. holder is a beneficial
owner of the notes (or Nabors' common shares acquired upon exchange or
repurchase of a note) that for U.S. federal income tax purposes is:
- an individual citizen or resident of the United States,
- a corporation, including any entity treated as a corporation for United
States federal income tax purposes, created or organized in or under the
laws of the United States, or any political subdivision thereof,
- an estate if its income is subject to United States federal income
taxation regardless of its source, or
- a trust (1) that is subject to the primary supervision of a United States
court and the control of one or more United States persons or (2) that
has a valid election in effect under applicable Treasury regulations to
be treated as a United States person.
Except in the case of a partnership, a non-U.S. holder is a beneficial
owner of the notes (or Nabors' common shares acquired upon exchange or
repurchase of a note) other than a U.S. holder. If a partnership (including for
this purpose any entity treated as a partnership for United States federal
income tax purposes) is a beneficial owner of the notes (or Nabors' common
shares acquired upon exchange of a note), the United States federal income tax
treatment of a partner in the partnership will generally depend on the status of
the partner and the activities of the partnership. A holder of the notes (or
Nabors' common shares acquired upon exchange or repurchase of a note) that is a
partnership and partners in such partnership should consult their individual tax
advisors about the United States federal income tax consequences of holding and
disposing of the notes (or Nabors' common shares acquired upon exchange or
repurchase of a note).
No statutory or judicial authority directly addresses the treatment of the
notes or instruments similar to the notes for United States federal income tax
purposes. The Internal Revenue Service (the "IRS") has recently issued a revenue
ruling with respect to instruments similar to the notes. To the extent it
addresses the issues, this ruling supports certain aspects of the treatment
described below. No ruling has been or is expected to be sought from the IRS
with respect to the United States federal income tax consequences to the holders
of the notes. The IRS would not be precluded from taking contrary positions. As
a result, no assurance can be given that the IRS will agree with all of the tax
characterizations and the tax consequences described below.
WE URGE PROSPECTIVE INVESTORS TO CONSULT THEIR OWN TAX ADVISORS WITH
RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND
DISPOSITION OF THE NOTES AND NABORS' COMMON SHARES IN LIGHT OF THEIR OWN
PARTICULAR CIRCUMSTANCES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL,
FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN UNITED STATES
FEDERAL OR OTHER TAX LAWS.
36
CLASSIFICATION OF THE NOTES
We intend to treat the notes as indebtedness for United States federal
income tax purposes and assume that the notes will be subject to the special
regulations governing contingent payment debt instruments (which we refer to as
the "CPDI regulations"). Pursuant to the terms of the indenture, we and each
holder of the notes agree, for United States federal income tax purposes, to
treat the notes as debt instruments that are subject to the CPDI regulations,
and the remainder of this discussion assumes that the notes will be so treated.
In addition, under the indenture, each holder will be deemed to have agreed
to treat the fair market value of Nabors' common shares received by such holder
upon exchange as a contingent payment and to accrue interest with respect to the
notes as original issue discount for United States federal income tax purposes
according to the "noncontingent bond method," set forth in section 1.1275-4(b)
of the CPDI regulations, using the comparable yield (as defined below)
compounded semiannually and the projected payment schedule (as defined below)
determined by us. Notwithstanding the issuance of the recent revenue ruling
referred to above, the application of the CPDI regulations to instruments such
as the notes is uncertain in several respects, and, as a result, no assurance
can be given that the IRS or a court will agree with the treatment described
herein. Any differing treatment could affect the amount, timing and character of
income, gain or loss in respect of an investment in the notes. In particular, a
holder might be required to accrue interest income at a higher or lower rate
(and therefore recognize a greater or lesser amount of interest in any given
year), might not recognize income, gain or loss upon exchange of the notes into
Nabors' common shares, and might recognize capital gain or loss upon a taxable
disposition of the notes. Holders should consult their tax advisors concerning
the tax treatment of holding and disposing of the notes.
TREATMENT OF U.S. HOLDERS
ACCRUAL OF INTEREST ON THE NOTES
Pursuant to the CPDI regulations, a U.S. holder will be required to accrue
interest income on the notes, which we sometimes refer to as original issue
discount, in the amounts described below, regardless of whether the U.S. holder
uses the cash or accrual method of tax accounting. Accordingly, U.S. holders
will likely be required to include interest in taxable income in each year in
excess of the accruals on the notes for non-tax purposes (i.e., in excess of any
contingent interest payments actually received in that year).
The CPDI regulations provide that a U.S. holder must accrue an amount of
ordinary interest income, as original issue discount for United States federal
income tax purposes, for each accrual period prior to and including the maturity
date of the notes that equals:
(1) the product of (i) the adjusted issue price (as defined below) of
the notes as of the beginning of the accrual period and (ii) the comparable
yield (as defined below) of the notes, adjusted for the length of the
accrual period,
(2) divided by the number of days in the accrual period, and
(3) multiplied by the number of days during the accrual period that
the U.S. holder held the notes.
The notes' issue price is the first price at which a substantial amount of
the notes is sold to the public, excluding sales to bond houses, brokers or
similar persons or organizations acting in the capacity of underwriters,
placement agents or wholesalers. The adjusted issue price of a note is its issue
price increased by any interest income previously accrued, determined without
regard to any adjustments to interest accruals described below, and decreased by
the amount of any projected payments (as defined below) previously made with
respect to the notes.
Unless certain conditions are met, the term "comparable yield" means the
annual yield we would pay, as of the initial issue date, on a noncontingent,
nonexchangeable, fixed-rate debt instrument with terms and
37
conditions otherwise comparable to those of the notes. We intend to take the
position that the comparable yield for the notes is 5.53%, compounded
semiannually. The precise manner of calculating the comparable yield, however,
is not entirely clear. If the comparable yield were successfully challenged by
the IRS, the redetermined yield could differ materially from the comparable
yield provided by us. Moreover, the projected payment schedule could differ
materially from the projected payment schedule provided by us.
The CPDI regulations require that we provide to U.S. holders, solely for
United States federal income tax purposes, a schedule of the projected amounts
of payments, which we refer to as projected payments, on the notes. This
schedule must produce the comparable yield. The projected payment schedule
includes estimates for certain contingent interest payments and an estimate for
a payment at maturity taking into account the exchange feature. In this
connection, the fair market value of any Nabors' common shares (and cash, if
any) received by a holder upon exchange will be treated as a contingent payment.
The comparable yield and the schedule of projected payments will be set
forth in the indenture. U.S. holders may also obtain the projected payment
schedule by submitting a written request for such information to: Nabors
Industries Ltd., 2nd Fl. International Trading Centre, Warrens, St. Michael,
Barbados.
THE COMPARABLE YIELD AND THE SCHEDULE OF PROJECTED PAYMENTS ARE NOT
DETERMINED FOR ANY PURPOSE OTHER THAN FOR THE DETERMINATION OF A U.S. HOLDER'S
INTEREST ACCRUALS AND ADJUSTMENTS THEREOF IN RESPECT OF THE NOTES FOR UNITED
STATES FEDERAL INCOME TAX PURPOSES AND DO NOT CONSTITUTE A PROJECTION OR
REPRESENTATION REGARDING THE ACTUAL AMOUNTS PAYABLE ON THE NOTES.
Amounts treated as interest under the CPDI regulations are treated as
original issue discount for all purposes of the Internal Revenue Code of 1986,
as amended (which we refer to as the "Code").
ADJUSTMENTS TO INTEREST ACCRUALS ON THE NOTES
If, during any taxable year, a U.S. holder receives actual payments with
respect to the notes for that taxable year that in the aggregate exceed the
total amount of projected payments for that taxable year, the U.S. holder will
incur a "net positive adjustment" under the CPDI regulations equal to the amount
of such excess. The U.S. holder will treat a "net positive adjustment" as
additional interest income. For this purpose, the payments in a taxable year
include the fair market value of property received in that year, including the
fair market value of Nabors' common shares received upon exchange.
If a U.S. holder receives in a taxable year actual payments with respect to
the notes for that taxable year that in the aggregate are less than the amount
of projected payments for that taxable year, the U.S. holder will incur a "net
negative adjustment" under the CPDI regulations equal to the amount of such
deficit. This adjustment will (a) first reduce the U.S. holder's interest income
on the notes for that taxable year and (b) to the extent of any excess after the
application of (a), give rise to an ordinary loss to the extent of the U.S.
holder's interest income on the notes during prior taxable years, reduced to the
extent such interest was offset by prior net negative adjustments. A net
negative adjustment is not subject to the 2-percent floor on miscellaneous
itemized deductions. Any negative adjustment in excess of the amounts described
in (a) and (b) will be carried forward and treated as a negative adjustment in
the succeeding taxable year and will offset future interest income accruals in
respect of the notes or will reduce the amount realized on the sale, exchange,
repurchase by us at the holder's option, redemption or retirement of the notes.
PURCHASES OF NOTES AT A PRICE OTHER THAN THE ADJUSTED ISSUE PRICE
If a U.S. holder purchases a note for an amount that differs from the
adjusted issue price of the notes at the time of the purchase, such holder will
be required to accrue interest income on the note in accordance with the
projected payment schedule based on the comparable yield even if market
conditions have changed since the date of issuance. The normal rules for
accruing bond premium, acquisition premium, and market discount will not apply;
instead, a U.S. holder must reasonably determine whether the difference between
the purchase price for a note and the adjusted issue price of such note is
38
attributable to a change in expectations as to the contingent amounts
potentially payable in respect of the notes, a change in interest rates since
the notes were issued, or both, and allocate reasonably the difference according
to such determination. To the extent that the difference between purchase price
and adjusted issue price is attributable to a change in interest rates, it must
be allocated reasonably to the daily portions of interest over the remaining
term of the notes. To the extent that such difference is attributable to a
change in expectations as to the contingent amounts payable in respect of the
notes, it must be allocated reasonably to the contingent payments based on the
projected payment schedule.
If the purchase price of a note is less than its adjusted issue price, the
amount of the difference is treated as a positive adjustment on the date the
daily portion of interest accrues or the contingent payment is made (depending
on how such difference was allocated, as discussed in the preceding paragraph).
This positive adjustment will increase (a) the amount of interest (including
with respect to contingent payments) that the U.S. holder otherwise would accrue
and include in income each year or (b) the amount of ordinary income (or
decrease the amount of ordinary loss) recognized upon redemption or maturity, or
both. If the purchase price of a note is more than its adjusted issue price, the
amount of the difference is treated as a negative adjustment on the date the
daily portion of interest accrues or the contingent payment is made (depending
on how such difference was allocated, as discussed above). This negative
adjustment will decrease (a) the amount of interest (including with respect to
contingent payments) that the U.S. holder must include in income each year or
(b) the amount of ordinary income (or increase the amount of ordinary loss)
recognized upon redemption or maturity, or both. Any positive or negative
adjustment that a U.S. holder is required to make during its holding period as a
result of purchasing a note at a price other than the note's adjusted issue
price will increase or decrease, respectively, such holder's tax basis in the
note.
Certain U.S. holders will receive Forms 1099-OID reporting interest
accruals on their notes. Those forms will not, however, reflect the effect of
any positive or negative adjustments resulting from a U.S. holder's purchase of
a note at a price that differs from its adjusted issue price on the date of
purchase.
U.S. holders are urged to consult their tax advisors as to whether, and
how, the adjustments should be made to the amounts reported on any Form
1099-OID.
SALE, EXCHANGE, OR REDEMPTION OF THE NOTES
Generally, the sale or exchange of a note, the repurchase of a note by us
at the holder's option or the redemption or retirement of a note for cash will
result in taxable gain or loss to a U.S. holder. As described above, our
calculation of the comparable yield and the schedule of projected payments for
the notes includes the receipt of common shares upon exchange as a contingent
payment with respect to the notes. Accordingly, we intend to treat the receipt
of Nabors' common shares by a U.S. holder upon the exchange of a note as a
contingent payment under the CPDI regulations. Under this treatment, exchange
also would result in taxable gain or loss to the U.S. holder. As described
above, holders will be deemed to have agreed to be bound by our determination of
the comparable yield and the schedule of projected payments.
The amount of gain or loss on a taxable sale, exchange, repurchase by us at
the holder's option, redemption or retirement would be equal to the difference
between (a) the amount of cash plus the fair market value of any other property
received by the U.S. holder, including the fair market value of any Nabors'
common shares received, and (b) the U.S. holder's adjusted tax basis in the
note. A U.S. holder's adjusted tax basis in a note will generally be equal to
the U.S. holder's original purchase price for the note, increased by any
interest income previously accrued by the U.S. holder (determined without regard
to any adjustments to interest accruals described above), and decreased by the
projected amount of any contingent payments that have been previously made in
respect of the notes to the U.S. holder. Gain recognized upon a sale, exchange,
repurchase by us at the holder's option, redemption or retirement of a note will
generally be treated as ordinary interest income; any loss will be ordinary loss
to the extent of interest previously included in income, and thereafter, capital
loss (which will be long-term if the note is
39
held for more than one year). The deductibility of net capital losses by
individuals and corporations is subject to limitations.
A U.S. holder's tax basis in Nabors' common shares received upon an
exchange of a note will equal the then current fair market value of such common
shares. The U.S. holder's holding period for the common shares received will
commence on the day immediately following the date of exchange.
CONSTRUCTIVE DIVIDENDS
If at any time Nabors were to make a distribution of property to its
shareholders that would be taxable to the shareholders as a dividend for United
States federal income tax purposes and, in accordance with the anti-dilution
provisions of the notes, the exchange rate of the notes were increased, such
increase might be deemed to be the payment of a taxable dividend to holders of
the notes.
For example, an increase in the exchange rate in the event of distributions
of Nabors' evidences of indebtedness, or assets, or an increase in the event of
an extraordinary cash dividend may result in deemed dividend treatment to
holders of the notes, but, generally, an increase in the event of stock
dividends or the distribution of rights to subscribe for common shares would not
be so treated.
ADDITIONAL PAYMENTS
We may be required to make payments of additional amounts if the shelf
registration statement is not timely filed or made effective or if the
prospectus is unavailable for periods in excess of those permitted by the
registration rights agreement, as described under "Registration Rights." We
intend to take the position for United States federal income tax purposes that
any such additional payments should be taxable to U.S. holders as additional
ordinary income when received or accrued, in accordance with their method of tax
accounting. Our determination is binding on holders of the notes, unless they
explicitly disclose that they are taking a different position to the IRS on
their tax returns for the year during which they acquire the note. The IRS could
take a contrary position from that described above, which could affect the
timing and character of U.S. holders' income from the notes with respect to the
payments of additional amounts.
U.S. holders should consult their tax advisors concerning the appropriate
tax treatment of the payment of any such additional amounts with respect to the
notes.
DIVIDENDS ON COMMON SHARES
If, after a U.S. holder exchanges a note into Nabors' common shares or
receives Nabors' common shares upon a repurchase of the notes by us, Nabors
makes distributions on Nabors' common shares, the gross amount of any
distribution of cash or property (other than certain distributions, if any, of
common shares distributed pro rata to all of Nabors' shareholders) with respect
to the common shares would be includible in income by a U.S. holder as dividend
income to the extent such distributions are paid out of Nabors' current or
accumulated earnings and profits as determined under United States federal
income tax principles. An individual U.S. holder may be eligible for capital
gains tax rates on the receipt of dividends. Dividends generally would not be
eligible for the dividends received deduction generally allowed to U.S. holders
that are corporations. To the extent, if any, that the amount of any
distribution on common shares exceeds Nabors' current and accumulated earnings
and profits as determined under United States federal income tax principles,
such distributions will be treated first as a tax-free return of capital to the
extent of the U.S. holder's adjusted tax basis in the common shares and
thereafter as capital gain. Any such distributions in excess of the U.S.
holder's tax basis in the common shares will generally be treated as capital
gain. Nabors will maintain calculations of its earnings and profits under United
States federal income tax principles.
The amount of any distribution of property other than cash would be the
fair market value of such property on the date of distribution.
It is anticipated that only a portion of any dividends received by a U.S.
holder with respect to Nabors' common shares would be treated as foreign source
income for purposes of calculating such holder's foreign tax credit limitation.
This is because it is anticipated that (1) United States persons will own a
majority of
40
Nabors' common shares and (2) a portion of the income derived by us will be U.S.
source income. To the extent that dividends distributed are treated as foreign
source income, they generally would constitute passive income, or, in the case
of certain U.S. holders, financial services income.
SALE OF COMMON SHARES
A U.S. holder generally will recognize capital gain or loss on a sale or
exchange of Nabors' common shares. The U.S. holder's gain or loss will equal the
difference between the proceeds received by the holder and the holder's tax
basis in the common shares, which will generally be the fair market value of the
common shares at the time of the exchange. The proceeds received by a U.S.
holder will include the amount of any cash and the fair market value of any
other property received for the common shares. The gain or loss recognized by a
U.S. holder on a sale or exchange of common shares will be long-term capital
gain or loss if the holder's holding period for the common shares is more than
one year. Long-term capital gains of noncorporate taxpayers are generally taxed
at a lower maximum marginal tax rate than the maximum marginal tax rate
applicable to ordinary income. The deductibility of net capital losses by
individuals and corporations is subject to limitations.
TREATMENT OF NON-U.S. HOLDERS
OWNERSHIP AND DISPOSITION OF THE NOTES
All payments on the notes made to a non-U.S. holder, including interest
payments, a payment in common shares pursuant to an exchange or repurchase, and
any gain realized on a sale or exchange of the notes will be exempt from United
States income and withholding tax provided that: (i) such non-U.S. holder does
not own, actually, indirectly or constructively, 10% or more of the total
combined voting power of all classes of Nabors' shares entitled to vote and is
not a controlled foreign corporation related, directly or indirectly, to us
through stock ownership, (ii) the statement requirement described below has been
fulfilled with respect to the beneficial owner, as discussed below and (iii)
such payments and gain are not effectively connected with the conduct by such
non-U.S. holder of a trade or business in the United States (or in the case of
an applicable tax treaty is attributable to the non-U.S. holder's permanent
establishment in the United States). However, if a non-U.S. holder were deemed
to have received a constructive dividend (see "-- Constructive Dividends"
above), the non-U.S. holder will generally be subject to United States federal
withholding tax at a 30% rate, subject to a reduction by an applicable treaty,
on the taxable amount of such dividend (see "-- Ownership and Disposition of
Common Shares" below).
The statement requirement referred to in the preceding paragraph will be
fulfilled if the beneficial owner of a note certifies on IRS Form W-8BEN (or
successor form), under penalties of perjury, that it is not a United States
person and provides its name and address or otherwise satisfies applicable
documentation requirements. If a non-U.S. holder of the notes is engaged in a
trade or business in the United States, and if interest or constructive
dividends on the notes is effectively connected with the conduct of such trade
or business (or in the case of an applicable tax treaty is attributable to the
non-U.S. holder's permanent establishment in the United States), the non-U.S.
holder, although exempt from the withholding tax discussed in the preceding
paragraph, will generally be subject to regular United States federal income tax
on interest, dividends, and on any gain realized on the sale, exchange, purchase
by us at the holder's option, redemption or retirement of the notes in the same
manner as if it were a U.S. holder. In lieu of the certificate described above,
such a non-U.S. holder would be required to provide to the withholding agent a
properly executed IRS Form W-8ECI (or successor form) in order to claim an
exemption from withholding tax. In addition, if such a non-U.S. holder is a
foreign corporation, such holder may be subject to a branch profits tax equal to
30% (or such lower rate provided by an applicable treaty) of its effectively
connected earnings and profits for the taxable year, subject to certain
adjustments.
41
OWNERSHIP AND DISPOSITION OF COMMON SHARES
As discussed above, if, after a non-U.S. holder exchanges a note into
Nabors' common shares or receives Nabors' common shares upon a repurchase of the
notes by us, Nabors makes distributions on Nabors' common shares, the
distributions will constitute a foreign or U.S. source dividend for United
States federal income tax purposes to the extent of Nabors' current or
accumulated earnings and profits as determined under United States federal
income tax principles.
Except as described below, U.S. source dividends paid on common stock held
by a non-U.S. holder will be subject to United States federal withholding tax at
a rate of 30% or lower treaty rate, if applicable. A non-U.S. holder generally
will be required to satisfy certain IRS certification requirements in order to
claim a reduction of or exemption from withholding under a tax treaty by filing
IRS Form W-8BEN upon which the non-U.S. holder certifies, under penalties of
perjury, its status as a non-U.S. person and its entitlement to the lower treaty
rate with respect to such payments. If U.S. source dividends paid to a non-U.S.
holder are effectively connected with the conduct of a United States trade or
business by the non-U.S. holder and, if required by a tax treaty, the dividends
are attributable to a permanent establishment maintained in the United States,
Nabors generally is not required to withhold tax from the dividends, provided
that the non-U.S. holder furnishes a valid IRS Form W-8ECI certifying, under
penalties of perjury, that the holder is a non-U.S. person, and the dividends
are effectively connected with the holder's conduct of a United States trade or
business and are includible in the holder's gross income. Effectively connected
U.S. source dividends will be subject to United States federal income tax on net
income that applies to U.S. persons generally (and, with respect to a non-U.S.
holder that is a foreign corporation, under certain circumstances, the 30%
branch profits tax).
As a general matter, a non-U.S. holder will not be subject to United States
federal income tax or withholding tax on foreign source dividends paid on the
common shares, provided that such dividends are not effectively connected with
the conduct by such non-U.S. holder of a trade or business in the United States.
Effectively connected foreign source dividends could, under certain
circumstances, be subject to United States federal income tax on net income that
applies to U.S. persons generally (and, with respect to a non-U.S. holder that
is a foreign corporation, under certain circumstances, the 30% branch profits
tax).
A non-U.S. holder generally will not be subject to United States federal
income or withholding tax on gain realized on the sale or other taxable
disposition of Nabors' common shares received upon exchange or repurchase of a
note unless:
- the holder is an individual who was present in the United States for 183
days or more during the taxable year of the disposition and certain other
conditions are met; or
- the gain is effectively connected with the conduct of a United States
trade or business by the non-U.S. holder (and, if required by a tax
treaty, the gain is attributable to a permanent establishment maintained
in the United States).
- The holder was a citizen or resident of the United States and is subject
to special rules that apply to expatriates.
BACKUP WITHHOLDING TAX AND INFORMATION REPORTING
A non-corporate U.S. holder may be subject to United States federal backup
withholding tax at the applicable statutory rate (currently 28%) with respect to
payments of principal, premium, if any, and interest (including original issue
discount and a payment in common shares pursuant to an exchange or repurchase of
the notes) on the notes, the payments of dividends on Nabors' common shares, and
the proceeds of dispositions of the notes or Nabors' common shares, if the U.S.
holder fails to supply an accurate taxpayer identification number or otherwise
fails to comply with applicable United States backup withholding certification
requirements. A non-U.S. holder may be subject to United States backup
withholding tax on payments on the notes or Nabors' common shares and the
proceeds from a sale or other disposition of the notes or Nabors' common shares
unless the non-U.S. holder complies with
42
certification procedures to establish that it is not a United States person. Any
amounts so withheld will be allowed as a credit against a holder's United States
federal income tax liability and may entitle a holder to a refund, provided the
required information is timely furnished to the IRS. Payments on the notes and
Nabors' common shares, as well as the proceeds from a sale or other disposition,
may be subject to information reporting. Holders of the notes should consult
their tax advisors concerning the application of the backup withholding and
information reporting rules in their particular circumstances.
SELLING SECURITYHOLDERS
We originally issued the notes to Citigroup Global Markets Inc. in a
private placement on June 10, 2003. Selling securityholders may offer and sell
any or all of the notes pursuant to this prospectus. When we refer to "selling
securityholders" in this prospectus, we mean those persons listed in the table
below, as well as their transferees, pledgees, donees and successors.
The selling securityholders table below contains information with respect
to the selling securityholders and the principal amount of notes beneficially
owned by each selling securityholder that may be offered using this prospectus.
Unless set forth below, none of the selling securityholders has had within the
past three years any material relationship with us or any of our predecessors or
affiliates.
We have prepared the following tables based on information given to us by
the selling securityholders named in the table on or before August 20, 2003.
Information about the selling securityholders may change over time. Any change
in this information will be set forth in prospectus supplements, if required.
The selling securityholders may offer all or some of their notes from time
to time, as a result, we cannot estimate the amount of the notes that will be
held by the selling securityholders upon the termination of any particular
offering. See "Plan of Distribution."
Generally, only selling securityholders identified in the selling
securityholders table below who beneficially own the securities set forth
opposite their respective names may sell offered securities under the
registration statement of which this prospectus forms a part. We may from time
to time include additional selling securityholders in an amendment to this
registration statement or a supplement to this prospectus.
SELLING SECURITYHOLDERS TABLE
<Table>
<Caption>
PRINCIPAL AMOUNT
AT MATURITY OF NOTES PERCENTAGE OF
SELLING SECURITYHOLDER BENEFICIALLY OWNED AND OFFERED OUTSTANDING NOTES
- ---------------------- ------------------------------ -----------------
ABN AMRO Inc. ..................................... $ 36,499,000 5.21%
Allstate Insurance Company......................... $ 1,500,000 *
Amaranth L.L.C. ................................... $ 18,480,000 2.64%
Arbitex Master Fund, L.P. ......................... $ 27,000,000 3.86%
Barclays Global Investors Diversified Alpha Plus
Funds c/o Forest Investment Management L.L.C. ... $ 371,000 *
Bear, Stearns & Co. Inc. .......................... $ 10,000,000 1.43%
Black Diamond Convertible Offshore LDC............. $ 3,322,000 *
Black Diamond Offshore Ltd. ....................... $ 1,846,000 *
CALAMOS(R) Convertible Growth and Income Fund --
CALAMOS(R) Investment Trust...................... $ 20,000,000 2.86%
Citigroup Global Markets Inc.(1)................... $ 69,500,000 9.93%
CNH CA Master Account, L.P. ....................... $ 1,000,000 *
Credit Lyonnais Securities (USA) Inc............... $ 2,500,000 *
Deephaven Domestic Convertible Trading Ltd. ....... $ 986,000 *
Deutsche Bank Securities Inc. ..................... $ 200,000 *
Double Black Diamond Offshore LDC.................. $ 9,494,000 1.36%
Dylan (IMA) Ltd. .................................. $ 5,000,000 *
Forest Fulcrum Fund L.P. .......................... $ 763,000 *
</Table>
43
<Table>
<Caption>
PRINCIPAL AMOUNT
AT MATURITY OF NOTES PERCENTAGE OF
SELLING SECURITYHOLDER BENEFICIALLY OWNED AND OFFERED OUTSTANDING NOTES
- ---------------------- ------------------------------ -----------------
Forest Global Convertible Fund, Ltd., Class A-5.... $ 4,147,000 *
Forest Multi-Strategy Master Fund SPC, On behalf of
its Multi-Strategy Segregated Portfolio.......... $ 1,020,000 *
Gaia Offshore Master Fund Ltd. .................... $ 8,800,000 1.26%
GLG Market Neutral Fund............................ $ 20,000,000 2.86%
Hamilton Multi-Strategy Master Fund, L.P. ......... $ 29,500,000 4.21%
J.P. Morgan Securities Inc. ....................... $ 5,000,000 *
Jersey (IMA) Ltd. ................................. $ 2,000,000 *
KBC Convertible Arbitrage Fund..................... $ 22,500,000 3.21%
KBC Convertible Mac 28 Fund, Ltd. ................. $ 9,000,000 1.29%
KBC Multi-Strategy Arbitrage Fund.................. $ 9,000,000 1.29%
Laurel Ridge Capital, L.P. ........................ $ 2,000,000 *
LDG Limited........................................ $ 2,056,000 *
LibertyView Funds, L.P. ........................... $ 4,000,000 *
LibertyView Global Volatility Fund, L.P............ $ 4,000,000 *
Lydian Overseas Partners Master Fund............... $ 35,000,000 5.00%
Lyxor/Forest Fund Limited c/o Forest Investment
Management L.L.C. ............................... $ 2,028,000 *
Lyxor/Gaia II Fund Ltd. ........................... $ 2,850,000 *
Melody IAM, Ltd. .................................. $ 3,950,000 *
Nomura Securities International, Inc. ............. $ 36,500,000 5.21%
NORDINVEST Norddeutsche Investment -- Gesellschaft
mbH.............................................. $ 1,500,000 *
Relay 11 Holdings Co. c/o Forest Investment
Management L.L.C. ............................... $ 248,000 *
Royal Bank of Canada............................... $ 2,000,000 *
Silverback Master, Ltd. ........................... $ 7,000,000 1.00%
Sphinx Convertible Arbitrage Fund SPC.............. $ 14,000 *
Sphinx Convertible Arbitrage SPC c/o Forest
Investment Management L.L.C. .................... $ 135,000 *
Sphinx Fund c/o TQA Investors, L.L.C. ............. $ 382,000 *
Sunrise Partners Limited Partnership .............. $ 7,520,000 1.07%
Teachers Insurance and Annuity Association of
America.......................................... $ 20,000,000 2.86%
Topanga XI......................................... $ 2,850,000 *
TQA Master Fund, Ltd. ............................. $ 15,150,000 2.16%
TQA Master Plus Fund, Ltd. ........................ $ 11,477,000 1.64%
UBS AG Credit Derivative........................... $ 25,000,000 3.57%
UBS AG London...................................... $ 1,000,000 *
UBS O'Connor LLC F/B/O O'Connor Global Convertible
Arbitrage Master Ltd. ........................... $ 7,500,000 1.07%
Univest Convertible Arbitrage Fund Ltd. c/o Forest
Investment Management L.L.C. .................... $ 196,000 *
White River Securities L.L.C. ..................... $ 10,000,000 1.43%
Windmill Master Fund, L.P. ........................ $ 5,000,000 *
Worldwide Transactions Ltd. ....................... $ 338,000 *
Xavex Convertible Arbitrage 4 Fund c/o Forest
Investment Management L.L.C. .................... $ 176,000 *
XAVEX -- Convertible Arbitrage 7 Fund.............. $ 1,600,000 *
Zurich Institutional Benchmarks Master Fund, Ltd.
c/o TQA Investors, L.L.C. ....................... $ 1,824,000 *
</Table>
44
<Table>
<Caption>
PRINCIPAL AMOUNT
AT MATURITY OF NOTES PERCENTAGE OF
SELLING SECURITYHOLDER BENEFICIALLY OWNED AND OFFERED OUTSTANDING NOTES
- ---------------------- ------------------------------ -----------------
Zurich Institutional Benchmarks Master Fund Ltd.
c/o Forest Investment Management L.L.C. ......... $ 576,000 *
Unnamed securityholders or any future transferees,
pledges, donees or successors of or from any such
unnamed securityholders.......................... $166,702,000 23.81%
------------ -----
TOTAL.............................................. $700,000,000 100%
============ =====
</Table>
- ---------------
* Less than one percent (1%)
(1) Citigroup Global Markets Inc. and/or its affiliates have provided, and may
in the future provide, investment banking services to Nabors and/or Nabors
Delaware, including being the initial purchaser of the notes.
VOTING/INVESTMENT CONTROL TABLE
<Table>
<Caption>
NATURAL PERSON OR PERSONS
SELLING SECURITYHOLDER WITH VOTING OR DISPOSITIVE POWER
- ---------------------- --------------------------------
ABN AMRO Inc. .................................... +
Allstate Insurance Company........................ +
Amaranth L.L.C. .................................. +
Arbitex Master Fund, L.P. ........................ Clark Hunt, Jonathan Bren and Ken Tananbaum
Barclays Global Investors Diversified Alpha Plus
Funds c/o Forest Investment Management
L.L.C. ......................................... Michael A. Boyd
Bear, Stearns & Co. Inc. ......................... +
Black Diamond Convertible Offshore LDC............ +++
Black Diamond Offshore Ltd. ...................... +++
CALAMOS(R) Convertible Growth and Income Fund --
CALAMOS(R) Investment Trust..................... Nick Calamos
Citigroup Global Markets Inc...................... +
CNH CA Master Account, L.P. ...................... +
Credit Lyonnais Securities (USA) Inc.............. +
Deephaven Domestic Convertible Trading Ltd. ...... +
Deutsche Bank Securities Inc. .................... Thomas Sullivan
Double Black Diamond Offshore LDC................. +++
Dylan (IMA) Ltd. ................................. +
Forest Fulcrum Fund L.P. ......................... Michael A. Boyd
Forest Global Convertible Fund, Ltd., Class A-5... Michael A. Boyd
Forest Multi-Strategy Master Fund SPC, On behalf
of its Multi-Strategy Segregated Portfolio...... Michael A. Boyd
Gaia Offshore Master Fund Ltd..................... +
GLG Market Neutral Fund........................... +
Hamilton Multi-Strategy Master Fund, L.P. ........ Michael G. Knot
J.P. Morgan Securities Inc. ...................... +
Jersey (IMA) Ltd. ................................ +
KBC Convertible Arbitrage Fund.................... Andy Preston
KBC Convertible Mac 28 Fund, Ltd. ................ Andy Preston
KBC Multi-Strategy Arbitrage Fund................. Andy Preston
Laurel Ridge Capital, L.P. ....................... +
LDG Limited....................................... Bart Torsoriero, Robert Butman, John Idone, Paul
Bucci, Matthew Tewlesbury, Ian Dickson, Andrew
Kain
LibertyView Funds, L.P. .......................... +
LibertyView Global Volatility Fund, L.P. ......... +
</Table>
45
<Table>
<Caption>
NATURAL PERSON OR PERSONS
SELLING SECURITYHOLDER WITH VOTING OR DISPOSITIVE POWER
- ---------------------- --------------------------------
Lydian Overseas Partners Master Fund.............. +
Lyxor/Forest Fund Limited c/o Forest Investment
Management L.L.C. .............................. Michael A. Boyd
Lyxor/Gaia II Fund Ltd. .......................... +
Melody IAM, Ltd. ................................. Andy Preston
Nomura Securities International, Inc. ............ Robert Citrino
NORDINVEST Norddeutsche Investment -- Gesellschaft
mbH............................................. +
Relay 11 Holdings Co. c/o Forest Investment
Management L.L.C. .............................. Michael A. Boyd
Royal Bank of Canada.............................. +
Silverback Master, Ltd............................ +
Sphinx Convertible Arbitrage Fund SPC............. +
Sphinx Convertible Arbitrage SPC c/o Forest
Investment Management L.L.C. ................... Michael A. Boyd
Sphinx Fund c/o TQA Investors, L.L.C. ............ ++
Sunrise Partners Limited Partnership ............. S. Donald Sussman
Teachers Insurance and Annuity Association of
America......................................... +
Topanga XI........................................ +
TQA Master Fund, Ltd. ............................ ++
TQA Master Plus Fund, Ltd. ....................... ++
UBS AG Credit Derivative.......................... +
UBS AG London..................................... +
UBS O'Connor LLC F/B/O O'Connor Global Convertible
Arbitrage Master Ltd. .......................... +
Univest Convertible Arbitrage Fund Ltd. c/o Forest
Investment Management L.L.C. ................... Terri Engelman Rhoads
White River Securities L.L.C...................... +
Windmill Master Fund, L.P. ....................... +
Worldwide Transactions Ltd. ...................... +++
Xavex Convertible Arbitrage 4 Fund c/o Forest
Investment Management L.L.C. ................... Michael A. Boyd
XAVEX -- Convertible Arbitrage 7 Fund............. ++
Zurich Institutional Benchmarks Master Fund, Ltd.
c/o TQA Investors, L.L.C........................ ++
Zurich Institutional Benchmarks Master Fund Ltd.
c/o Forest Investment Management L.L.C. ........ Michael A. Boyd
</Table>
- ---------------
+ The securityholder has informed us that there is no natural person with
voting or investment power over the respective notes.
++ The securityholder has informed us that TQA Investors, L.L.C. has voting or
investment power over the respective notes.
+++ The securityholder has informed us that any authorized person at Carlson
Capital L.P. is authorized to vote or exercise investment power over the
respective notes.
46
PLAN OF DISTRIBUTION
Neither we nor Nabors will receive any proceeds from the sale of the
securities covered by this prospectus. The notes are being offered on behalf of
the selling securityholders. The notes may be sold or distributed from time to
time by the selling securityholders, or pledgees, donees or transferees of, or
other successors in interest to, the selling securityholders, directly to one or
more purchasers (including pledgees) or through brokers, dealers or underwriters
who may act solely as agents or who may acquire the notes as principals, at
market prices prevailing at the time of sale, at varying prices determined at
the time of sale, at negotiated prices, or at fixed prices, which may be
changed. If the notes are sold through brokers, dealers or underwriters the
selling securityholder will be responsible for underwriting discounts or
commissions or agent's commissions. Unless otherwise permitted by law, if the
notes are to be sold by pledgees, donees or transferees of, or other successors
in interest to the selling securityholders, then we must distribute a prospectus
supplement and/or file an amendment to the registration statement of which this
prospectus is a part under Rule 424(b)(3) or other applicable provision of the
Securities Act amending the list of selling securityholders to include the
pledgee, transferee or other successors in interest as selling securityholders
under this prospectus.
The sale of the notes may be effected in one or more of the following
methods (which may involve block transactions):
- on any national securities exchange or quotation service on which the
notes may be listed or quoted at the time of sale;
- in the over-the-counter market;
- in transactions otherwise than on such exchanges or services in the
over-the-counter market;
- through the writing of options, whether the options are listed on an
option exchange or otherwise; or
- through the settlement of short sales.
In addition, any notes that qualify for resale pursuant to Rule 144 or Rule
144A of the Securities Act may be sold under Rule 144 or Rule 144A of the
Securities Act rather than pursuant to this prospectus.
These transactions may include block transactions in which a broker-dealer
will attempt to sell as agent, but may position or resell a portion of the
block, as principal in order to facilitate the transaction or crosses
transactions in which the same broker acts as agent on both sides of the trade.
In addition, the selling securityholders or their successors in interest
may enter into hedging transactions with broker-dealers who may engage in short
sales of the notes short and deliver the notes to close out such short
positions, or loan or pledge the notes to broker-dealers that in turn may sell
the notes. The selling securityholders or their successors in interest may also
enter into option or other transactions with broker-dealers that require the
delivery by such broker-dealers of the notes which may be resold thereafter
pursuant to this prospectus if the notes are delivered by the selling
securityholders. However, if the notes are to be delivered by the selling
securityholder's successors in interest, unless permitted by law, we must
distribute a prospectus supplement and/or file an amendment to this registration
statement under Rule 424(b)(3) or other applicable provision of the Securities
Act amending the list of selling securityholders to include the successors in
interest as selling securityholders under this prospectus. Each selling
securityholder may not satisfy its obligations in connection with short sale or
hedging transactions entered into before the effective date of the registration
statement of which this prospectus is a part by delivering securities registered
under such registration statement.
The selling securityholders or their successors in interest may from time
to time pledge or grant a security interest in some or all of the notes and, if
the selling securityholders default in the performance of their secured
obligation, the pledgees or secured parties may offer and sell the notes from
time to time under this prospectus; however, in the event of a pledge or the
default on the performance of a secured obligation by the selling
securityholders, in order for the notes to be sold under cover of this
registration statement, unless permitted by law, we must distribute a prospectus
supplement and/or an amendment to the registration statement of which this
prospectus is a part under Rule 424(b)(3) or other applicable
47
provision of the Securities Act amending the list of selling securityholders to
include the pledgee, transferee, secured party or other successors in interest
as selling securityholders under this prospectus.
Brokers, dealers, underwriters or agents participating in the distribution
of the notes as agents may receive compensation in the form of commissions,
discounts or concessions from the selling securityholders and/or purchasers of
the notes for whom such broker-dealers may act as agent, or to whom they may
sell as principal, or both (which compensation as to a particular broker-dealer
may be less than or in excess of customary commissions).
The selling securityholders and any broker-dealers who act in connection
with the sale of notes hereunder may be deemed to be "underwriters" within the
meaning of Section 2(a)(11) of the Securities Act, and any commissions they
receive and proceeds of any sale of notes may be deemed to be underwriting
discounts and commissions under the Securities Act. If any selling
securityholder qualifies as an "underwriter," it will be subject to the
prospectus delivery requirements of Section 5(b)(2) of the Securities Act.
Neither we nor any selling securityholder can presently estimate the amount of
such compensation. ABN AMRO Inc., Bear, Stearns & Co. Inc., Credit Lyonnais
Securities (USA) Inc., Citigroup Global Markets Inc., Deutsche Bank Securities
Inc., Forest Fulcrum Fund L.P., JP Morgan Securities Inc., Nomura Securities
International, Inc., UBS AG London and White River Securities LLC have informed
us that they are registered broker-dealers, and as a result, they may be deemed
to be underwriters in connection with the sale of the notes. Several of the
selling securityholders are affiliates of registered broker-dealers, each of
these selling securityholders have informed us that: (1) such selling
securityholder purchased its notes in the ordinary course of business and (2) at
the time that the notes were purchased, such selling securityholder had no
agreements or understandings, directly or indirectly, to distribute the notes.
The selling securityholders and any other person participating in such
distribution will be subject to the Exchange Act. The Exchange Act rules
include, without limitation, Regulation M, which may limit the timing of
purchases and sales of any of the notes and underlying Nabors' common shares by
the selling securityholders and any such other person. In addition, Regulation M
of the Exchange Act may restrict the ability of any person engaged in the
distribution of the notes and underlying Nabors' common shares to engage in
market-making activities with respect to the particular notes and underlying
Nabors' common shares being distributed for a period of up to five business days
prior to the commencement of distribution. This may affect the marketability of
the notes and underlying Nabors' common shares and the ability of any person or
entity to engage in market-making activities with respect to the notes and
underlying Nabors' common shares.
The selling securityholders may indemnify any broker-dealer that
participates in transactions involving the sale of the notes against certain
liabilities, including liabilities arising under the Securities Act, as amended.
Any commissions paid or any discounts or concessions allowed to any such
broker-dealers, any profits received on the resale of such notes, may be deemed
to be underwriting discounts and commissions under the Securities Act, if any
such broker-dealers purchase notes as principal.
In addition, Nabors may use this prospectus to offer and sell Nabors'
common shares to noteholders upon exchange by us or repurchase by us of the
notes at the option of the holder when we elect to pay the purchase price in
respect of the notes to be repurchased in Nabors' common shares. See
"Description of Notes -- Repurchase of Notes at the Option of the Holder".
Neither we nor Nabors has an agreement with any underwriter or other third party
for the distribution of the common shares Nabors would offer in such event. In
this event, Nabors would offer and sell Nabors' common shares through this
prospectus and no commissions or other remunerations will be paid to any person
for the exchange or repurchase of the notes.
The notes were issued and sold in June 2003 in transactions exempt from the
registration requirements of the Securities Act pursuant to Rule 144A under the
Securities Act or in offshore transactions pursuant to Regulation S under the
Securities Act. Pursuant to the registration rights agreement filed as an
exhibit to the registration statement of which this prospectus is a part, we and
Nabors have agreed to indemnify the initial purchaser, holders who have provided
us with selling security
48
holders questionnaires and each person, if any, who controls (within the meaning
of either Section 15 of the Securities Act or Section 20 of the Exchange Act)
the initial purchaser or the holders who have provided us with selling security
holders questionnaires, from and against certain liabilities under the
Securities Act or such persons will be entitled to contribution in connection
with these liabilities. Pursuant to such registration rights agreement, the
selling securityholders have agreed, severally and not jointly, to indemnify us
and Nabors and each of our respective directors, officers and control persons
for certain liabilities under the Securities Act or we and Nabors will be
entitled to contribution in connection with these liabilities.
We have agreed to pay substantially all of the expenses incidental to the
registration, offering and sale of the notes and underlying Nabors' common
shares other than commissions, fees and discounts of underwriters, brokers,
dealers and agents.
LEGAL MATTERS
The validity of the notes has been passed upon for us by Skadden, Arps,
Slate, Meagher & Flom LLP, Washington, D.C. and the validity of the underlying
Nabors' common shares issuable upon exchange or repurchase of the notes and
Nabors' guarantee has been passed upon for us and Nabors by Appleby, Spurling &
Kempe.
INDEPENDENT ACCOUNTANTS
The consolidated financial statements incorporated in this Prospectus by
reference to the Annual Report on Form 10-K for the year ended December 31, 2002
have been so incorporated in reliance on the report of PricewaterhouseCoopers
LLP, independent accountants, given on the authority of said firm as experts in
auditing and accounting.
With respect to the unaudited financial information of Nabors Industries
Ltd. for the three-month periods ended March 31, 2003 and 2002, and six-month
periods ended June 30, 2003 and 2002, incorporated by reference in this
Prospectus, PricewaterhouseCoopers LLP reported that they have applied limited
procedures in accordance with professional standards for a review of such
information. However, their separate reports dated April 29, 2003 and July 29,
2003, 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 reliance on their reports on such information should be restricted
in light of the limited nature of the review procedures applied.
PricewaterhouseCoopers LLP is not subject to the liability provisions of Section
11 of the Securities Act of 1933 for their reports on the unaudited financial
information because those reports are not a "report" or a "part" of the
Registration Statement prepared or certified by PricewaterhouseCoopers LLP
within the meaning of Sections 7 and 11 of the Act.
WHERE YOU CAN FIND MORE INFORMATION
Nabors files annual, quarterly and current reports, proxy and information
statements and other information with the Securities and Exchange Commission. We
are not required to file such reports and materials with the Securities and
Exchange Commission. You may read and copy materials that Nabors has filed with
the Securities and Exchange Commission at the Securities and Exchange Commission
public reference room at 450 Fifth Street, N.W., Room 1024, Washington, D.C.
20549.
Please call the Securities and Exchange Commission at 1-800-SEC-0330 for
further information on the public reference room.
Nabors' common shares are quoted on the American Stock Exchange under the
symbol "NBR" and Nabors' Securities and Exchange Commission filings can also be
read at: American Stock Exchange, 86 Trinity Place, New York, New York 10006.
49
Nabors' Securities and Exchange Commission filings are also available to
the public on the Securities and Exchange Commission's Internet website at
http://www.sec.gov. Such filings are also available at Nabors' website at
http://www.nabors.com. Website materials are not a part of this prospectus.
INCORPORATION BY REFERENCE
We incorporate by reference into this prospectus the documents listed below
and any future filings Nabors makes with the Securities and Exchange Commission
under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934,
as amended, including any filings after the date of this prospectus. The
information incorporated by reference is an important part of this prospectus.
Any statement in a document incorporated by reference into this prospectus will
be deemed to be modified or superseded to the extent a statement contained in
(1) this prospectus or (2) any other subsequently filed document that is
incorporated by reference into this prospectus 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 the registration
statement of which this prospectus is a part.
- Nabors' Annual Report on Form 10-K filed on March 31, 2003, and the Form
10-K/A filed on April 30, 2003 for Nabors' fiscal year ended December 31,
2002;
- Nabors' Quarterly Report on Form 10-Q for the quarter ended March 31,
2003 filed by Nabors on May 12, 2003 and on Form 10-Q for the quarter
ended June 30, 2003 filed by Nabors on August 8, 2003;
- Nabors' Current Reports on Form 8-K filed on January 30, 2003, as amended
by Form 8-K/A filed on January 31, 2003; February 21, 2003; February 25,
2003; June 3, 2003; and August 8, 2003; and
- The description of Nabors' common shares contained in Nabors'
Registration Statement on Form S-4, filed on January 2, 2002, as amended
by Pre-Effective Amendment No. 1, Pre-Effective Amendment No. 2,
Pre-Effective Amendment No. 3 and Pre-Effective Amendment No. 4 to Form
S-4, filed with the SEC on March 25, 2002, April 17, 2002, April 29,
2002, and May 10, 2002, respectively (Registration No. 333-76198).
All documents subsequently filed by Nabors pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act, as amended, after the date of this
registration statement and prior to the effectiveness of this registration
statement, shall be deemed to be incorporated herein by reference.
We will furnish without charge to you, upon written or oral request, a copy
of any or all of the documents incorporated by reference herein, other than
exhibits to such documents that are not specifically incorporated by reference
therein. You should direct any requests for documents to Nabors at: 2nd Fl.
International Trading Centre, Warrens, St. Michael, Barbados, Attention:
Investor Relations, or by telephoning us at (246) 421-9471.
We have filed with the Securities and Exchange Commission a registration
statement on Form S-3 under the Securities Act of 1933, as amended (which we
refer to as the Securities Act in this prospectus), covering the securities
described in this prospectus. Any statement made in this prospectus concerning
the contents of any agreement or other document is only a summary of the actual
agreement or other document. If we have filed any agreement or other document as
an exhibit to the registration statement, you should read the exhibit for a more
complete understanding of the document or matter involved. Each statement
regarding an agreement or other document is qualified in its entirety by
reference to the actual document.
50