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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K/A
AMENDMENT NO. 1
ANNUAL REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002
COMMISSION FILE NUMBER:
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NABORS INDUSTRIES LTD.
INCORPORATED IN BERMUDA
2ND FLOOR, INTERNATIONAL TRADING CENTRE
WARRENS
P.O. BOX 905E
ST. MICHAEL, BARBADOS
(246) 421-9471
98-0363970
(I.R.S. Employer Identification No.)
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SECURITIES REGISTERED PURSUANT TO
SECTION 12(b) OF THE SECURITIES EXCHANGE ACT OF 1934:
NAME OF EACH
TITLE OF EACH CLASS EXCHANGE ON WHICH REGISTERED
------------------- --------------------------------
Common Shares, $.001 par value per share The American Stock Exchange, LLC
Indicate by check mark whether registrant: (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES [X] NO [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained in this Form 10-K, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2).
YES [X] NO [ ]
The aggregate market value of the 124,063,360 common shares held by
non-affiliates of the registrant, based upon the closing price of our common
shares as of the last business day of our most recently completed second fiscal
quarter, June 28, 2002, of $35.30 per share as reported on the American Stock
Exchange, was $4,379,436,608. Common Shares held by each officer and director
and by each person who owns 5% or more of the outstanding common shares have
been excluded in that such persons may be deemed affiliates. This determination
of affiliate status is not necessarily a conclusive determination for other
purposes.
The number of common shares, par value $.001 per share, outstanding as of March
14, 2003 was 145,234,077.
DOCUMENTS INCORPORATED BY REFERENCE
None.
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TABLE OF CONTENTS
EXPLANATORY NOTE..................................................................................................2
PART III
Item 10. Directors and Executive Officers of the Registrant..............................................2
Item 11. Executive Compensation..........................................................................6
Item 12. Security Ownership of Certain Beneficial Owners and Management.................................11
Item 13. Certain Relationships and Related Transactions.................................................13
SIGNATURES.......................................................................................................14
CERTIFICATIONS ..................................................................................................15
EXPLANATORY NOTE
Nabors Industries Ltd. (Nabors) is hereby amending its Form 10-K for fiscal year
ending December 31, 2002 filed on March 31, 2003 (the "Form 10-K"), solely for
the purposes of amending and restating Part III, Item 10 thereto in full and to
disclose the information required by Part III, Items 11 through 13. The
remaining items of the Form 10-K continue to speak as of the date of the Form
10-K, and Nabors is not updating the disclosure in these items.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Item 10 of the Form 10-K is hereby amended and restated to read in its entirety
as follows:
The Board of Directors of Nabors currently consists of eight members. The
Bye-laws of Nabors provide for three classes of directors, designated Class I,
Class II, and Class III, each currently having a three-year term of office. A
biographical statement for each director follows:
CLASS III DIRECTORS - TERMS EXPIRING IN 2003
DIRECTOR
POSITION WITH NABORS OF NABORS
NAME AGE AND PRIOR BUSINESS EXPERIENCE SINCE
---- --- ----------------------------- ----------
Eugene M. Isenberg........ 73 Chairman of the Board, Chairman of the Executive Committee of 1987
the Board and Chief Executive Officer of Nabors since 1987. Mr.
Isenberg has served as a Director of Danielson Holding Company
(a financial services holding company) since 1990. He has been
a Governor of the National Association of Securities Dealers
(NASD) since 1998 and the American Stock Exchange (AMEX) since
1996. He has served as a member of the National Petroleum
Council since 2000. From 1969 to 1982, Mr. Isenberg was
Chairman of the Board and principal shareholder of Genimar, Inc.
(a steel trading and building products manufacturing company),
which was sold in 1982. From 1955 to 1968, Mr. Isenberg was
employed in various management capacities with Exxon Corporation.
2
Jack Wexler................ 77 Chairman of the Compensation Committee of the Board, a member of 1987
the Executive and Audit Committees of the Board since 1987 and a
member of the Governance and Nominating Committee since 2002.
Mr. Wexler was employed by Exxon Corporation and its affiliates,
serving in senior staff and operating management positions in
the United States and the Far East until his retirement in 1982.
CLASS I DIRECTORS - TERMS EXPIRING IN 2004
DIRECTOR
POSITION WITH NABORS OF NABORS
NAME AGE AND PRIOR BUSINESS EXPERIENCE SINCE
---- --- ----------------------------- ---------
James L. Payne............. 66 Chairman of the Governance and Nominating Committee of the Board 1999
since 2002 and a member of the Technical and Safety Committee of
the Board since 1999. Mr. Payne is currently Chairman, Chief
Executive Officer and President of Nuevo Energy Company (a
company engaged in the acquisition, production and exploration
of oil and natural gas properties). He also serves as a Director
of BJ Services and Global Industries. He was a Director of Pool
Energy Services Co. from 1993 until its acquisition by Nabors in
November 1999. He retired as Vice Chairman of Devon Corp. in
February 2001. Prior to the merger between Devon Corp. and
Santa Fe Snyder Company in 2000, he had served as Chairman and
Chief Executive Officer of Santa Fe Snyder Company. He was
Chairman and Chief Executive Officer of Santa Fe Energy Company
from 1990 to 1999 when it merged with Snyder Oil Company. Mr.
Payne is a graduate of the Colorado School of Mines where he was
named a Distinguished Achievement Medalist in 1993. He holds an
MBA degree from Golden Gate University and has completed the
Stanford Executive Program.
Hans W. Schmidt............ 73 Chairman of the Technical and Safety Committee of the Board 1993
since 1998 and a member of the Governance and Nominating
Committee of the Board since 2002. From 1958 to his retirement
in 1992, Mr. Schmidt held a number of positions with C. Deilmann
A.G., a diversified energy company located in Bad Bentheim,
Germany, including serving as a Director from 1982 to 1992.
From 1965 to 1992 he served as Director of a subsidiary of C.
Deilmann A.G., Deutag Drilling, a company with worldwide
drilling operations. From 1988 to 1991, Mr. Schmidt served as
President of Transocean Drilling Company, a company of which he
was also a Director from 1981 until 1991.
3
Richard F. 59 Member of the Governance and Nominating Committee of the Board 2003
Syron............. since 2003 and a member of the Compensation Committee of the
Board since 2003. Mr. Syron has served as Executive Chairman
of Thermo Electron Corporation (a manufacturer of electronic
measurement equipment, laboratory gems and other scientific
instruments) since November 2002; was Chairman of the Board of
Directors of Thermo Electron since January 2000, and was the
Chief Executive Officer of Thermo Electron from June 1999 to
July 2000. Mr. Syron served from April 1994 to May 1999 as the
Chairman and Chief Executive Officer of the American Stock
Exchange. From 1989 to 1994, he served as president of the
Federal Reserve Bank of Boston, and as a member of the Federal
Open Market Committee. From 1986 to 1989, he was president of
the Federal Home Loan Bank of Boston. Earlier, he served as
assistant to then-Federal Reserve Chairman Paul Volcker, and
as Deputy Assistant Secretary of the U.S. Treasury Department
in Washington D.C. Mr. Syron is Trustee and past Chairman of
the Boston College Board of Trustees and serves as Trustee for
the Woods Hole Oceanographic Institution in Massachusetts. He
also serves as a Director of John Hancock Financial Services,
Inc., McKesson Corporation and the American Stock Exchange.
CLASS II DIRECTORS - TERMS EXPIRING IN 2005
DIRECTOR
POSITION WITH NABORS OF NABORS
NAME AGE AND PRIOR BUSINESS EXPERIENCE SINCE
---- --- ----------------------------- ---------
Anthony G. Petrello........ 48 President and Chief Operating Officer of Nabors since 1992, 1991
Deputy Chairman since 2003, and a member of the Executive
Committee of the Board since 1991. From 1979 to 1991, Mr.
Petrello was with the law firm Baker & McKenzie, where he had
been Managing Partner of its New York Office from 1986 until his
resignation in 1991. Mr. Petrello holds a J.D. degree from
Harvard Law School and B.S. and M.S. degrees in Mathematics from
Yale University.
Myron M. Sheinfeld........ 73 Chairman of the Audit Committee of the Board since 1988, a 1988
member of the Compensation Committee of the Board since 1993 and
a member of the Governance and Nominating Committee of the Board
since 2002. He is Senior Counsel to the law firm Akin, Gump,
Strauss, Hauer & Feld, L.L.P. From 1970 until April 2001 he
held various positions in the law firm Sheinfeld, Maley & Kay
P.C., most recently as counsel to the firm. Mr. Sheinfeld was
an adjunct professor of law at the University of Texas, School
of Law from 1975 to 1991, and has been a contributing author to
numerous legal publications, and a contributor, co-editor and
co-author of Collier On Bankruptcy, and a co-author of Collier
On Bankruptcy Tax for Matthew Bender & Co., Inc. He is a member
of the Board of Editors of "The Practical Lawyer."
4
Martin J. Whitman.......... 78 Member of the Audit Committee of the Board since 1993 and a 1991
member of the Governance and Nominating Committee of the Board
since 2002. Chief Executive Officer until June 2002 and a
Director of Danielson Holding Company (an insurance products
holding company) since 1990 (Chairman of the Board until July
1999); Chairman, Chief Executive Officer and Trustee of Third
Avenue Trust and its predecessor and Chief Investment Officer of
Third Avenue Management LLC and its predecessor (the adviser to
Third Avenue Trust) since 1990; Director of Tejon Ranch Co. (an
agricultural and land management company) from 1997 to 2001;
and, Director of Stewart Information Services, Inc. (a title
insurance company) from 2000 until 2002. Mr. Whitman was an
Adjunct Lecturer, Adjunct Professor and Distinguished Fellow in
Finance, Yale University School of Management from 1972 to 1984
and 1992 to 1999 and is currently an Adjunct Lecturer in Finance
at Yale University. He was an Adjunct Professor at the Columbia
University Graduate School of Business in 2001. Mr. Whitman is
co-author of The Aggressive Conservative Investor and author of
Value Investing: A Balanced Approach.
The following sets forth a biographical statement for each executive officer
of Nabors who does not also serve on the Board of Directors of Nabors:
POSITION WITH NABORS
NAME AGE AND PRIOR BUSINESS EXPERIENCE
---- --- -----------------------------
Bruce P. 43 Vice President and Chief Financial Officer since February 2003, Vice
Koch................. President-Finance from January 1996 to February 2003, and Corporate Controller
of Nabors from March 1990 to 1995. He was employed with the
accounting firm of Coopers & Lybrand from 1983 to 1990 in a
number of capacities, most recently as Audit Manager.
Daniel McLachlin........... 65 Vice President-Administration and Secretary of Nabors since 1986. He was
Manager, Administration of Nabors from 1984 to 1986. From 1979 to 1984 he was
the Vice President, Human Resources of Nabors Drilling Limited, a subsidiary
of Nabors.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE.
Section 16(a) of the Securities Exchange Act of 1934 requires Nabors' directors
and executive officers, and persons who own more than 10% of a registered class
of Nabors' equity securities, to file with the Securities and Exchange
Commission (the "Commission") and the American Stock Exchange initial reports of
ownership and reports of changes in ownership of common shares and other equity
securities of Nabors. Officers, directors and greater than 10% shareholders are
required by Commission regulation to furnish Nabors with copies of all Section
16(a) forms which they file.
To our knowledge, based solely on review of the copies of Forms 3 and 4 and
amendments thereto furnished to us during 2002 and Form 5 and amendments thereto
furnished to us with respect to the year 2002, and written representations that
no other reports were required, all Section 16(a) filings required to be made by
Nabors' officers, directors and greater than 10% beneficial owners with respect
to the fiscal year 2002 were timely filed, except that Mr. Jack Wexler filed one
Form 4 late with respect to a single purchase transaction that occurred in
December 2002 and Mr. Martin Whitman filed one Form 5 late with respect to a
single option grant that occurred in January 2002.
5
ITEM 11. EXECUTIVE COMPENSATION
The table below sets forth all reportable compensation awarded to, earned by or
paid to the named executive officers for services rendered in all capacities to
Nabors and its subsidiaries whose compensation for the year exceed $100,000 for
each of the last three fiscal years.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION AWARDS
------------------------------------------------------------ ------------------------
RESTRICTED SECURITIES
OTHER ANNUAL STOCK UNDERLYING ALL OTHER
NAME AND PRINCIPAL COMPENSATION AWARD(s) OPTIONS/ COMPENSATION
POSITION PERIOD SALARY($) BONUS($) ($) ($) SARS (1) ($)
-------------------------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Eugene M. Isenberg 2002 325,000(2) 1,400,000(3) 273,270(4) 0 1,900,000 134,012(5)
Chairman of the
Board, Director and 2001 325,000 2,000,000(3) 134,748 0 0 119,542
Chief Executive Officer
2000 325,000 1,350,000 75,730 0 3,548,839 101,215
Anthony G. Petrello 2002 275,000(6) 700,000(7) 112,267(8) 0 950,000 88,031(9)
Director, President and
Chief Operating Officer 2001 275,000 1,000,000(7) 127,956 0 0 137,424
2000 275,000 700,000 313,424 0 1,740,325 414,941
Richard A. Stratton(10) 2002 275,000(11) 0 35,411(12) 0 400,000 15,816(13)
Vice Chairman of the
Board and Director 2001 275,000 550,000 36,782 0 0 15,524
2000 275,000 500,000 34,623 0 565,943 17,000
Bruce P. Koch 2002 185,000 40,000 -- 0 25,000 8,325(14)
Vice President and
Chief Financial Officer 2001 185,000 40,000 -- 0 0 7,650
2000 185,000 37,000 -- 0 15,000 7,650
Daniel McLachlin 2002 92,000 10,000 18,636(15) 0 5,000 4,140(16)
Vice President-Administration
and Secretary 2001 92,000 14,000 -- 0 0 4,140
2000 87,000 12,500 -- 0 3,915
(1) The awards reflected on the table above for 2002 were awards made in
early 2002 relating to performance for 2001. The awards reflected on
the table above for 2000 relate to performance for calendar years 1999
and 2000. Each of the Named Executive Officers received the number of
options indicated below, effective February 20, 2003 for performance
during 2002. The exercise price of the options awarded is $38.75, the
closing price per share of our common stock on the American Stock
Exchange on the grant date. The options vest in three equal annual
installments beginning on the first anniversary of the date of the
grant for Mr. Isenberg and Mr. Petrello and four equal annual
installments beginning on the first anniversary date of the grant for
Mr. Koch and Mr. McLachlin: Mr. Isenberg - 950,000, Mr. Petrello -
475,000, Mr. Koch - 20,000 and Mr. McLachlin - 4,000.
(2) Includes $14,538 paid as director's fees.
6
(3) Mr. Isenberg is entitled to receive an annual bonus as provided in his
employment agreement. For each of fiscal years 2002 and 2001, Mr.
Isenberg agreed to accept a bonus that was less than the bonus he was
entitled to receive under his employment agreement
(4) Includes various club dues; auto allowance; imputed life insurance; tax
preparation fees ($84,925); and gross-up amount for auto allowance and
tax preparation fees ($72,827).
(5) Includes (a) Nabors' matching contributions to a retirement savings
plan and a non-qualified deferred compensation plan of $9,000; and (b)
$125,012 that is the net benefit to Mr. Isenberg of the premiums paid
by Nabors, as projected on an actuarial basis, for a split dollar life
insurance arrangement (Nabors has suspended additional premium payments
under these policies pending clarification of certain provisions of the
Sarbanes - Oxley Act of 2002).
(6) Includes $14,538 paid as director's fees.
(7) Mr. Petrello is entitled to receive an annual bonus as provided in his
employment agreement. For fiscal year 2001 Mr. Petrello agreed to
accept a bonus that was less than the bonus he was entitled to receive
under his employment agreement.
(8) Includes club dues; auto allowance; imputed life insurance; and
gross-up amounts for auto allowance and imputed interest ($64,433).
(9) Includes (a) Nabors' matching contributions to a retirement savings
plan and a non-qualified deferred compensation plan of $9,000; (b)
$6,643 that is the net benefit to Mr. Petrello of the premiums paid by
Nabors, as projected on an actuarial basis, for a split dollar life
insurance arrangement (Nabors has suspended additional premium payments
under these policies pending clarification of certain provisions of the
Sarbanes - Oxley Act of 2002); and (c) imputed interest of $72,388 on a
loan from Nabors in the maximum amount of $2,881,915 pursuant to his
employment agreement in connection with his relocation to Houston, the
balance of which was $2,881,915 as of March 31, 2003, and on which no
interest has been paid or charged thereon.
(10) Mr. Stratton retired from Nabors effective as of February 20, 2003.
(11) Includes $14,538 paid as director's fees.
(12) Includes club dues ($13,466); auto allowance ($11,400); imputed life
insurance and gross-up amounts for auto allowance and imputed interest
($9,366).
(13) Includes (a) Nabors' matching contributions to a retirement savings
plan and non-qualified deferred compensation plan of $9,000; (b) $4,194
that is the benefit to Mr. Stratton of the premiums paid by Nabors, as
projected on an actuarial basis, for a split dollar life insurance
arrangement (Nabors has suspended additional premium payments under
these policies pending clarification of certain provisions of the
Sarbanes - Oxley Act of 2002); and (c) imputed interest of $2,622 on a
loan from Nabors in the maximum amount of $104,374 in connection with
his relocation to Houston, the balance of which was $104,374 as of
March 31, 2003, and on which no interest has been paid or charged
thereon.
(14) Includes Nabors' matching contributions to a retirement savings plan
and a non-qualified deferred compensation plan of $8,325.
(15) Includes club dues; auto allowance and imputed life insurance.
(16) Includes Nabors' matching contributions to a retirement savings plan
and a non-qualified deferred compensation plan of $4,140.
7
The following table provides information with respect to stock options granted
during the fiscal year ended December 31, 2002 to the named executive officers.
Nabors did not grant any stock appreciation rights to the Named Executive
Officers during the fiscal year ended December 31, 2002.
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
-------------------------------------------------------------------------------------------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS EXERCISE OR
UNDERLYING GRANTED TO BASE GRANT DATE
OPTIONS EMPLOYEES IN PRICE EXPIRATION PRESENT
NAME GRANTED FISCAL YEAR ($/SH) DATE VALUE ($)(1)
------------------------------ ------------------ ---------------- -------------- ---------------- ----------------
Eugene M. Isenberg 1,900,000 (2) 36.12% 27.05 01/22/2012 20,114,160
Anthony G. Petrello 950,000 (2) 18.06% 27.05 01/22/2012 10,057,080
Richard A. Stratton 400,000 (2) 7.60% 27.05 01/22/2012 4,234,560
Bruce P. Koch 25,000 (3) .48% 27.05 01/22/2012 264,660
Daniel McLachlin 5,000 (3) .10% 27.05 01/22/2012 52,932
(1) All options are granted at an exercise price equal to the market value
of Nabors' common stock on the date of grant. Therefore, if there is no
appreciation in the market value, no value will be realizable. In
accordance with Securities and Exchange Commission rules, the
Black-Scholes option pricing model was chosen to estimate the grant
date present value of the options set forth in this table. Nabors' use
of this model should not be construed as an endorsement of its accuracy
at valuing options. All stock option valuation models, including the
Black-Scholes model, require a prediction about the future movement of
the stock price. The following assumptions were made for purposes of
calculating the grant date present value: (a) the expected term is
assumed to be three and a half years, (b) volatility of 48.1931%, (c)
dividend of $0 per share and (d) risk-free rate of return of 3.84%. The
figures given are not intended to forecast future price appreciation of
the shares. The real value of the options in this table depends solely
upon the actual performance of the Nabors' stock during the applicable
period.
(2) These options were granted on January 22, 2002 and vest six months from
the date of grant.
(3) The options were granted on January 22, 2002 and vest in four annual
installments beginning on January 22, 2003.
The following table provides information with respect to stock options exercised
during 2002 and the value as of December 31, 2002 of unexercised in-the-money
options held by the named executive officers. The value realized on the exercise
of options is calculated using the difference between the per share option
exercise price and the market value of a share on the date of the exercise. The
value of unexercised in-the-money options at fiscal year end is calculated using
the difference between the per share option exercise price and the market value
of $35.27 per share at December 31, 2002.
8
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
NAME SHARES VALUE NUMBER OF SECURITIES VALUE OF UNEXERCISED
ACQUIRED REALIZED UNDERLYING UNEXERCISED IN-THE-MONEY
ON ($) OPTIONS OPTIONS AT
EXERCISE AT FISCAL YEAR-END FISCAL YEAR-END ($)
EXERCISABLE / UNEXERCISABLE EXERCISABLE / UNEXERCISABLE
------------------------- ------------ --------------- ---------------- -------------- -------------- -------------
Eugene M. Isenberg 0 0 10,295,079 / 0 107,591,885 / 0
Anthony G. Petrello 0 0 5,320,248 / 0 58,442,347 / 0
Richard A. Stratton 0 0 2,066,568 / 0 23,874,319 / 0
Bruce P. Koch 0 0 58,950 / 45,150 954,629 / 423,378
Daniel McLachlin 4,338 119,001 3,000 / 9,900 15,780 / 102,043
DIRECTOR COMPENSATION
Nabors compensates its directors through a combination of an annual retainer and
stock options. Beginning June 25, 2002, all directors receive an annual retainer
of $28,000 for service on the Board and for non-employee directors an additional
annual retainer of $3,000 for serving as chairman of a Board committee. No
additional amounts are paid for attendance at Board or committee meetings.
Non-employee directors who serve on the Executive Committee receive an
additional annual retainer of $125,000. In the event of retirement, permanent
and total disability or death of a non-employee director who served on the
Executive Committee, the $125,000 annual retainer, together with the amount of
the annual retainer for serving as a Board member shall continue for an
additional five years following the end of the quarter in which retirement,
permanent and total disability, or death occurs. Prior to June 25, 2002,
non-employee directors received an annual retainer of $28,000 and an additional
annual retainer of $3,000 for serving as chairman of a Board committee. Employed
directors did not receive compensation for their service on the Board. Each of
the employed director's annual salary was reduced by an amount equal to the
annual retainer they receive for service on the Board, beginning June 25, 2002.
Nabors also issues stock options to its non-employee directors to align their
interests with Nabors' shareholders. Option awards are made under option plans
adopted from time to time for non-employee directors and are determined by a
committee comprised of employee directors of the Board. Each non-employee
director was awarded on February 20, 2003, options to purchase at least 30,000
shares and certain non-employed directors received additional awards in
recognition of their service as a committee member or committee chairman. The
awards were as follows: Mr. Payne, 35,000 options; Mr. Schmidt, 35,000 options;
Mr. Sheinfeld, 40,000 options; Mr. Syron, 30,000 options; Mr. Wexler, 45,000
options; and Mr. Whitman, 30,000 options. In addition, Mr. Syron, who joined the
Board on February 20, 2003, received options to purchase an additional 30,000
options upon his appointment. All of the options were granted at a per share
price of $38.75, the market value of the Company's shares on the date of grant.
The options generally vest in three equal annual installments beginning on the
first anniversary of the date of the grant and are exercisable for ten years
from the date of grant.
EMPLOYMENT CONTRACTS
Mr. Isenberg and Mr. Petrello's employment contracts were amended and restated
effective October 1, 1996 and both contracts currently are set to expire on
September 30, 2007. The expiration date automatically extends for an additional
one-year term on each anniversary date, unless Nabors provides notice to the
contrary ten days prior to such anniversary. Mr. Isenberg's salary is subject to
annual review for increase at the discretion of the Board and its Compensation
Committee. The formula for the calculation of his cash bonus remained as it had
been under the prior version, a shareholder approved contract, which provided
that Mr. Isenberg is entitled to receive an annual cash bonus equal to 6% of
Nabors' net cash flow (as defined in the employment contract) in excess of 15%
of the average stockholders' equity for such fiscal year. Mr. Petrello's salary
is subject to annual review for increase at the
9
discretion of the Board and its Compensation Committee. His annual bonus
remained as it had been at the greater of $700,000 or 2% of the net cash flow
(as defined in the employment contract) in excess of 15% of the average
stockholders' equity in such year. Mr. Isenberg and Mr. Petrello are eligible
for stock options and grants; may participate in annual long-term incentive
programs, and pension and welfare plans, on the same basis as other executives;
and may receive special bonuses from time to time as determined by the Board.
Effective June 24, 2002, Mr. Isenberg's and Mr. Petrello's employment contracts
were amended to reflect a reduction in salary equivalent to the amount of
director's fees to be paid by Nabors as of that date. Pursuant to an Executive
Cost Allocation Agreement, a percentage of Mr. Isenberg's and Mr. Petrello's
salary, bonus, stock options or other compensation payable pursuant to their
employment agreements will be paid by Nabors Corporate Services, Inc. for
services performed for that Company, beginning on June 25, 2002.
In addition to salary and bonus, each of Mr. Isenberg and Mr. Petrello receive
group life insurance at an amount at least equal to three times their respective
base salaries; various split-dollar life insurance policies, reimbursement of
expenses, various perquisites and a personal umbrella policy in the amount of $5
million. Further, if Mr. Isenberg or Mr. Petrello is subject to the tax imposed
by Section 4999 of the Internal Revenue Code, Nabors has agreed to reimburse
them for such tax on an after-tax basis. Premiums payable under the split dollar
life insurance policies have been suspended pending clarification of certain
provisions of the Sarbanes - Oxley Act of 2002.
In the event that either Mr. Isenberg's or Mr. Petrello's employment contract is
terminated by Nabors by reason of death, disability, or any reason other than
for cause, or is terminated by either individual for Constructive Termination
Without Cause (as defined in the respective agreements) or is terminated as a
result of or following a Change in Control (as defined in the respective
agreements), the terminated individual will be entitled to receive: (a) all base
salary which would have been payable through the expiration date of the contract
or three times his then current base salary, whichever is greater; (b) all
annual cash bonus which would have been payable through the expiration date, or
three times the highest bonus, (including the imputed value of grants of stock
awards and stock options), paid or payable during the last three fiscal years
prior to termination, whichever is greater; (c) any restricted stock
outstanding, which shall immediately and fully vest; (d) any outstanding stock
options, which shall immediately and fully vest; (e) any amounts earned, accrued
or owing to the executive but not yet paid (including executive benefits, life
insurance, disability benefits and reimbursement of expenses and perquisites)
shall be continued through the later of the expiration date or three years after
the termination date; (f) continued participation in medical, dental and life
insurance coverage until the executive receives equivalent benefits or coverage
through a subsequent employer or until the death of the executive or his spouse,
whichever is later; and (g) any other or additional benefits in accordance with
applicable plans and program of Nabors. In the event that either Mr. Isenberg's
or Mr. Petrello's termination is related to a Change in Control, the terminated
individual, at his election, would be entitled to receive a cash amount equal to
one dollar less than the amount that would constitute an "excess parachute
payment" as defined in Section 280G of the Internal Revenue Code, in place of
the salary and bonus referred to in (a) and (b) above. In addition, the
terminated individual would be entitled, at his election, to terminate his
employment because of such Change in Control, and to receive instead of any such
number of outstanding options, as selected by the individual, an amount of cash
in exchange therefor equal to (x) the excess of the Change in Control Price (as
defined in the respective agreements) over the exercise price of the options per
share of common stock multiplied by (y) the number of options selected by the
individual. In addition, the terminated individual would be entitled a grant of
additional vested options exercisable for five years, at a price equal to the
average closing price per share during the 20 days prior to the Change in
Control in an amount equal to the highest number of options granted during any
fiscal year during the period comprising the then current fiscal year and the
three fiscal years preceding the Change in Control. In the event that either Mr.
Isenberg's or Mr. Petrello's employment contract is terminated for cause or as a
result of resignation (other than as described above), the terminated individual
will be entitled to receive: (1) base salary through the date of termination;
(2) all annual cash bonus which would have been payable through the date of
termination; (3) all restricted stock that has vested on or prior to the date of
termination; (4) any outstanding stock options vested on or prior to the date of
termination; (5) any amounts earned, accrued or owing to the executive but not
yet paid (including executive benefits, life insurance, disability benefits and
reimbursement of expenses and perquisites if to be performed following
termination); and (6) other or additional benefits in accordance with applicable
plans and program of Nabors. If Mr. Petrello's employment is terminated for any
reason, he also is entitled to certain relocation benefits as set forth in his
employment agreement.
10
On February 20, 2003, Mr. Stratton resigned as an officer, director, employee
and all other positions held with Nabors. Pursuant to a letter of agreement
regarding his retirement which was reviewed by the Executive Committee, Mr.
Stratton will (a) receive bi-weekly payments through September 30, 2007, each in
the gross amount of $12,576.04; (b) along with his spouse and children, be
entitled to participate under the medical and dental portions of the group
insurance plan at his own cost and expense so long as he is receiving bi-weekly
payments; (c) be entitled to exercise all vested options pursuant to the terms
of the initial awards; (d) repay in full the principal amount of his loan in the
amount of $104,374; (e) be treated the same as other senior executive with
respect to future premium payments of split dollar life insurance policies; (f)
agree for a period of five years not to accept any employment with or render any
services to any person, firm or corporation that competes with the Company and
if he should do so the Company may cease to make bi-weekly payment; and (g) in
the event of Mr. Stratton's death, his beneficiaries would be entitled to
receive the unpaid balance of his bi-weekly payments.
During 2002 Mr. Stratton received compensation and benefits in accordance with
his employment contract entered into effective October 1, 1996. Pursuant to that
agreement, Mr. Stratton received, in addition to his base pay and incentive
compensation, vacation, reimbursement of expenses, comprehensive medical,
disability and life insurance protection, a split-dollar life insurance
agreement in an amount of not less than $2 million, other perquisites and a
personal umbrella policy in the amount of $5 million. Premium payments under the
split dollar life insurance policy have been suspended pending resolution of
certain issues under the Sarbanes - Oxley Act of 2002.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee for fiscal 2002 was comprised of two non-employee
directors: Mr. Wexler (Chairman) and Mr. Sheinfeld. Neither Mr. Wexler nor Mr.
Sheinfeld has ever served as an officer or employee of Nabors or any of its
subsidiaries, nor has either participated in any transaction during the last
fiscal year required to be disclosed pursuant to the federal proxy rules. No
executive officer of Nabors serves on any board of directors of any entity of
which Mr. Wexler or Mr. Sheinfeld is an employee.
The adult son of one of our directors, Jack Wexler, is an employee of Nabors
Corporate Services, Inc., a subsidiary of Nabors, and has been employed by
Nabors since February 1, 1992. The employee is paid an annual salary of $108,000
and is eligible to receive cash bonuses and stock options.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of April 10, 2003, certain information with
respect to the beneficial ownership of Nabors' outstanding common shares by (a)
each current director, (b) each executive officer named in the Summary
Compensation Table appearing elsewhere herein (the "Named Executive Officers"),
(c) all directors and executive officers as a group, and (d) any other person or
entity known by Nabors to be the beneficial owner of more than 5% of Nabors'
common shares:
11
Common Shares Beneficially Owned
BENEFICIAL OWNER (1) NUMBER OF SHARES PERCENT OF TOTAL(2)
-------------------- ---------------- -------------------
DIRECTORS
Eugene M. Isenberg (2) (3).......................................... 11,969,347 7.66%
James L. Payne (2).................................................. 87,500 *
Anthony G. Petrello (2)............................................. 5,421,260 3.58%
Hans W. Schmidt (2)................................................. 116,500 *
Myron M. Sheinfeld (2) (4).......................................... 163,635 *
Richard A. Stratton (2) 2,016,999 1.36%
Richard F. Syron ................................................... 0
Jack Wexler (2)..................................................... 124,700 *
Martin J. Whitman (2) (5)........................................... 265,366 *
OTHER EXECUTIVE OFFICERS
Bruce P. Koch (2)................................................... 71,600 *
Daniel McLachlin (2) ............................................... 1,591 *
All Directors/Executive Officers as a group (11 persons) (2)-(5).... 20,238,498 12.32%
OTHER
FMR Corp. (6) ...................................................... 13,555,816 9.29%
----------
* Less than 1%
(1) The address of each of the directors and officers listed is in care of
Nabors Industries Ltd., 2nd Floor International Trading Center,
Warrens, P.O. Box 905E, St. Michael, Barbados.
(2) As of April 10, 2003, Nabors had 145,991,619 shares outstanding and
entitled to vote. For purposes of this table, "beneficial ownership" is
determined in accordance with Rule 13d-3 under the U.S. Securities
Exchange Act of 1934, pursuant to which a person or group of persons is
deemed to have "beneficial ownership" of any common shares that such
person has the right to acquire within 60 days. We have included in the
table common shares underlying fully vested stock options (without
giving effect to accelerated vesting that might occur in certain
circumstances). For purposes of computing the percentage of outstanding
common shares held by each person or group of persons named above, any
shares which such person or persons has the right to acquire within 60
days (as well as common shares underlying fully vested stock options)
are deemed to be outstanding, but are not deemed to be outstanding for
purposes of computing the percentage ownership of any other person.
The number of common shares underlying fully vested stock options
included in the table are as follows: Mr. Isenberg - 10,295,079; Mr.
Payne - 83,450; Mr. Petrello - 5,320,248; Mr. Schmidt - 116,500; Mr.
Sheinfeld - 146,500; Mr. Stratton - 2,016,568; Mr. Wexler - 121,500;
Mr. Whitman - 132,500; Mr. Koch - 71,600; Mr. McLachlin - 1,500, and
all directors and Named Executive Officers as a group - 18,305,445.
(3) The shares listed for Mr. Isenberg are held directly or indirectly
through certain trusts, defined benefit plans and individual retirement
accounts of which Mr. Isenberg is a grantor, trustee or beneficiary.
Not included in the table are 386 shares owned directly or held in
trust by Mr. Isenberg's spouse.
(4) The shares listed for Mr. Sheinfeld include 292 shares owned directly
by Mr. Sheinfeld's spouse. Mr. Sheinfeld disclaims beneficial ownership
of these shares.
12
(5) The shares listed for Mr. Whitman include 132,819 shares of Nabors
common stock owned by M. J. Whitman & Co., Inc. Because Mr. Whitman is
a majority stockholder in M.J. Whitman & Co, Inc., he may be deemed to
have beneficial ownership of the Nabors shares owned by the company.
The shares listed for Mr. Whitman also include 47 shares owned directly
by Mr. Whitman.
(6) Based on the information contained in Schedule 13G/A of FMR Corp. filed
with the Securities and Exchange Commission on February 14, 2003, the
shares listed include (i) 10,146,412 shares beneficially owned by
Fidelity Management & Research Company, (ii) 905,357 shares
beneficially owned by Fidelity Management Trust Company, (iii) 507
shares beneficially owned by Geode Capital Management, LLC and (iv)
2,503,540 shares beneficially owned by Fidelity International Limited.
FMR Corp. has sole voting power with respect to 3,315,004 shares and
sole dispositive power with respect to 13,555,816 shares. The address
of FMR Corp.'s principal business office is 82 Devonshire Street,
Boston, Massachusetts 02109.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During fiscal 2002 Nabors provided drilling and logistical services to Nuevo
Energy Company, of which Mr. James L. Payne, serves as Chairman, Chief Executive
Officer and President. The drilling and logistical services were provided by
Nabors to Nuevo Energy Company at prevailing market rates. Amounts received for
such services from Nuevo Energy Company combined represented approximately .06%
of Nabors consolidated operating revenues. Amounts received for such services
represented approximately .3% of Nuevo Energy Company's gross revenues.
Mr. Petrello has a loan from Nabors in the maximum amount of $2,881,915 pursuant
to his employment agreement in connection with his relocation to Houston, the
balance of which was $2,881,915 as of December 31, 2002. The repayment of the
loan was automatically extended an additional year on each anniversary of his
employment agreement. In September 2002 Mr. Petrello signed a waiver
discontinuing the automatic extensions of the loan repayment. The loan is
scheduled to be paid on or before September 30, 2006 and shall not be further
extended.
Mr. Stratton has a loan from Nabors for $104,374 related to his relocation to
Houston, the balance of which was $104,374 as of December 31, 2002. Pursuant to
a letter of agreement regarding his retirement, Mr. Stratton has agreed to repay
this loan.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, as of April 30, 2003.
NABORS INDUSTRIES LTD.
By: /s/ Anthony G. Petrello
-------------------------------------------
Anthony G. Petrello
President and Chief Operating Officer
By: /s/ Bruce P. Koch
-------------------------------------------
Bruce P. Koch
Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
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CERTIFICATIONS
CERTIFICATION BY CHAIRMAN AND CHIEF EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002
I, Eugene M. Isenberg, certify that:
1. I have reviewed this amendment to annual report on Form 10-K/A of Nabors
Industries Ltd.;
2. Based on my knowledge, this amendment to annual report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
amendment to annual report; and
3. Based on my knowledge, the financial statements, and other financial
information included in this amendment to annual report, fairly present in all
material respects the financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented in this amendment to
annual report.
Date: April 30, 2003 /s/ Eugene M. Isenberg
-------------- -------------------------------------
Eugene M. Isenberg
Chairman and Chief Executive Officer
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CERTIFICATION BY VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
(THE PRINCIPAL FINANCIAL OFFICER)
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002
I, Bruce P. Koch, certify that:
1. I have reviewed this amendment to annual report on Form 10-K/A of Nabors
Industries Ltd.;
2. Based on my knowledge, this amendment to annual report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
amendment to annual report; and
3. Based on my knowledge, the financial statements, and other financial
information included in this amendment to annual report, fairly present in all
material respects the financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented in this amendment to
annual report.
Date: April 30, 2003 /s/ Bruce P. Koch
-------------- --------------------------------------------
Bruce P. Koch
Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
16