We are sending you this proxy statement in connection with the
solicitation of proxies by the Board of Directors of Nabors
Industries Ltd. for the 2006 annual general meeting of
shareholders. We are mailing this proxy statement and the
accompanying form of proxy to shareholders on or about
May 5, 2006. In this proxy statement, Nabors,
the Company, we, us and
our refer to Nabors Industries Ltd. or, for
information pertaining to periods prior to June 24, 2002,
to Nabors Industries, Inc. Where the context requires, such
references also include our subsidiaries.
The following table provides information with respect to stock
options exercised during 2005 and the value as of
December 30, 2005 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
Nabors Chairman and Chief Executive Officer, Eugene M.
Isenberg, and its Deputy Chairman, President and Chief Operating
Officer, Anthony G. Petrello, have employment agreements which
were amended and restated effective October 1, 1996 and
which currently are due to expire on September 30, 2010.
Mr. Isenbergs employment agreement was originally
negotiated with a creditors committee in 1987 in
connection with the reorganization proceedings of Anglo Energy,
Inc., which subsequently changed its name to Nabors. These
contractual arrangements subsequently were approved by the
various constituencies in those reorganization proceedings,
including equity and debt holders, and confirmed by the United
States Bankruptcy Court.
Mr. Petrellos employment agreement was first entered
into effective October 1, 1991. Mr. Petrellos
employment agreement was agreed upon as part of arms
length negotiations with the Board before he joined Nabors in
October 1991, and was reviewed and approved by the Compensation
Committee of the Board and the full Board of Directors at that
time.
The employment agreements for Messrs. Isenberg and Petrello
were amended in 1994 and 1996. These amendments were approved by
the Compensation Committee of the Board and the full Board of
Directors at that time.
The employment agreements provide for an initial term of five
years with an evergreen provision which automatically extended
the agreement for an additional one-year term on each
anniversary date, unless Nabors provided notice to the contrary
ten days prior to such anniversary. The Board of Directors in
March 2006 exercised its election to fix the expiration date of
the employment agreements for Messrs. Isenberg and
Petrello, and accordingly these agreements will expire at the
end of their current term at September 30, 2010.
In addition to a base salary, the employment agreements provide
for annual cash bonuses in an amount equal to 6% and 2%, for
Messrs. Isenberg and Petrello, respectively, of
Nabors net cash flow (as defined in the respective
employment agreements) in excess of 15% of the average
shareholders equity for each fiscal year.
(Mr. Isenbergs cash bonus formula originally was set
at 10% in excess of a 10% return on shareholders equity
and he has voluntarily reduced it over time to its 6% in excess
of 15% level.) Mr. Petrellos bonus is subject to a
minimum of $700,000 per year. In 15 of the last
16 years, Mr. Isenberg has agreed voluntarily to
accept a lower annual cash bonus (i.e., a cash amount lower than
the cash amount provided for under his employment agreement) in
light of his overall compensation package. Mr. Petrello has
agreed voluntarily to accept a lower annual cash bonus (i.e., a
cash amount lower than the cash amount provided for under his
employment agreement) in light of his overall compensation
package in 13 of the last 15 years. For 2005 the annual
cash bonuses for Messrs. Isenberg and Petrello pursuant to
the formula described in their employment agreements were
$41.2 million and $13.7 million, respectively; but in
light of their overall compensation package
options was approximately $3.1 million. Estimates of the
cash value of Nabors obligations to Messrs. Isenberg
and Petrello under (c), (d) and (e) above are included
in the payment amounts above.
In the event that Messrs. Isenbergs or
Petrellos termination of employment is related to a Change
in Control (as defined in their respective employment
agreements), they would be entitled to receive a cash amount
equal to the greater of (a) one dollar less than the amount
that would constitute an excess parachute payment as
defined in Section 280G of the Internal Revenue Code, or
(b) the cash amount that would be due in the event of a
termination without cause, as described above. If, by way of
example, there was a change of control event that applied on
March 13, 2006, then the payments to Messrs. Isenberg
and Petrello would be approximately $204 million and
$104 million, respectively. These payment amounts are based
on historical data and are not intended to be estimates of
future payments required under the agreements. Depending upon
future operating results, the
true-up
could result in the payment of amounts which are significantly
higher. In addition, they would receive (a) any unvested
restricted stock outstanding, which shall immediately and fully
vest; (b) any unvested outstanding stock options, which
shall immediately and fully vest; (c) 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), which shall be
continued through the later of the expiration date or three
years after the termination date; (d) 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 (e) any
other or additional benefits in accordance with applicable plans
and programs of Nabors. For Mr. Isenberg, as of
March 13, 2006, the value of unvested restricted stock was
approximately $10.9 million and the value of
in-the-money
unvested stock options was approximately $6.2 million. For
Mr. Petrello, as of March 13, 2006, the value of
unvested restricted stock was approximately $5.5 million
and the value of
in-the-money
unvested stock options was approximately $3.1 million. The
cash value of Nabors obligations to Messrs. Isenberg
and Petrello under (c), (d) and (e) above are included
in the payment amounts above. Also, they would receive
additional stock options immediately exercisable for
5 years to acquire a number of shares of common stock equal
to the highest number of options granted during any fiscal year
in the previous three fiscal years, at an option exercise price
equal to the average closing price during the 20 trading days
prior to the event which resulted in the change of control. If,
by way of example, there was a change of control event that
applied at March 13, 2006, Mr. Isenberg would have
received 1,683,333 options valued at approximately
$41 million and Mr. Petrello would have received
841,666 options valued at approximately $20 million, in
each case based upon a Black Scholes analysis. Finally, in the
event that an excise tax were applicable, they would receive a
gross-up
payment to make them whole with respect to any excise taxes
imposed by Section 4999 of the Internal Revenue Code. With
respect to the preceding sentence, by way of example, if there
was a change of control event that applied on March 13,
2006, and assuming that the excise tax were applicable to the
transaction, then the additional payments to
Messrs. Isenberg and Petrello for the
gross-up
would be up to approximately $92 million and
$49 million, respectively.
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. Premiums payable under the split
dollar life insurance policies have been suspended as a result
of the adoption of the Sarbanes-Oxley Act of 2002.
REPORT OF
THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
Compensation
and Role of the Compensation Committee
The Compensation Committee (the Committee) of the
Company is composed entirely of independent directors within the
meaning of the NYSE listing rules and the standards for director
independence adopted by the Board of Directors. The Committee is
responsible for overseeing the administration of our
compensation programs and setting the compensation of our key
executives. The Committee operates pursuant to a written charter
adopted by the Board of Directors, which is available in the
Investor Relations section of our website at www.nabors.com. We
discuss below our policies for compensating our executives and
aligning the interests of management with the long-term
interests of shareholders.
Compensation
Policies
The Committees goal is to incentivize and reward superior
executive performance that will create long-term investor value
and to attract and retain executives who deliver that level of
performance. The Committee supports a practice of paying base
salaries that approximate the median of the
17
competitive market, and bonuses and long-term incentives which
deliver above average compensation if financial results
and/or
shareholder returns exceed the results obtained by peer
companies. On an annual basis, the Committee will review a tally
sheet setting forth the base salary, annual bonus, long-term
incentives awarded, perquisites and other benefits for the Chief
Executive Officer and each Named Executive Officer as compared
to a peer group of companies.
To assist the Committee with its responsibilities, it is
regularly provided with briefing materials and is authorized to
retain, and has retained from time to time, nationally
recognized independent compensation consultants who report
directly to the Committee to provide expertise regarding
competitive compensation practices, peer analysis and advice to
the Committee. The Committee reports to the Board of Directors
on its actions and recommendations following every meeting and
regularly meets in executive session without members of
management present.
The Committee is mindful that the oil field services industry,
particularly the contract drilling segment, historically has
been volatile but currently is in a period of rapid expansion.
The ability of the Company to compete in this market place
depends in part on its ability to attract and retain executives
with the necessary industry knowledge and management and
financial skills to preserve and enhance Nabors position,
notwithstanding the industrys characteristics. The
Committee reviews and approves all of the policies under which
compensation is paid to our senior executive officers and
oversees and evaluates the effectiveness of the executive
compensation programs in hiring, motivating and retaining key
employees.
Nabors executive compensation program includes base salary
and incentive bonuses as follows:
Base salary.
The Committee reviews the
performance of each senior executive officer individually with
the Chief Executive Officer and determines an appropriate salary
level for each senior executive officer based primarily on
individual performance and competitive factors. These
competitive factors include as a reference the base salary of
other top executives of drilling contractors and the oil service
sector generally, and also the compensation levels needed to
attract and retain highly talented executives from outside the
industry.
Incentive bonus program.
Financial performance
goals for the Chief Executive Officer and President are set
forth in the contractual bonus formula described above under
MANAGEMENT COMPENSATION Employment
Contracts.
The Committee administers annual review programs to determine
overall rewards to senior executive officers and key employees
based upon Nabors performance in relation to performance
goals. The performance goals include both financial and
nonfinancial objectives, including achieving certain financial
targets in relation to internal budgets, developing internal
infrastructure and enhancing positions in certain markets. The
financial criteria include, among other things, increasing
revenues, controlling direct and overhead expenses and
increasing cash flow from operations. The nonfinancial criteria
include: obtainment of safety goals, maintaining Nabors
share in its principal geographic markets, enhancing
Nabors technical capabilities and developing operations in
identified strategic markets. Based on these reviews, the
Committee recommends annual incentive rewards. Annual incentive
awards include cash, options or restricted shares, or a
combination thereof. Share awards or stock option grants
typically have been issued on a four-year vesting schedule, but
the Committee reserves the right to modify the vesting schedule
in its discretion. Annual incentive bonus awards are not
guaranteed except for those provided under contractual
arrangements. The Committee believes that equity awards are
critical in motivating and rewarding the creation of long-term
shareholder value and the Committee has established a policy of
including equity awards in the employees overall
compensation package from time to time based on the continuing
progress of Nabors and on individual performance.
18
Section 162(m) of the Internal Revenue Code of 1986, as
amended, limits to $1 million the amount of compensation
that may be deducted by Nabors in any year with respect to
certain of Nabors highest paid executives. Certain
performance-based compensation that has been approved by
shareholders is not subject to the $1 million limit, nor is
compensation paid pursuant to employment contracts in existence
prior to the adoption of Section 162(m) in 1993. Although
the contractual bonus arrangements remained the same from their
previous contracts, certain bonus compensation, as well as the
share options granted to Mr. Isenberg and Mr. Petrello
pursuant to the new and amended employment contracts entered
into in 1996 may not be exempt from Section 162(m).
Consequently, Nabors may not be able to deduct that portion of
such compensation that exceeds $1 million (see
MANAGEMENT COMPENSATION-Option/Exercises During 2004 and
Year-End Options Values and Employment
Contracts). While Nabors intends to take reasonable steps
to obtain deductibility of compensation, it reserves the right
not to do so in its judgment, particularly with respect to
retaining the service of its principal executive officers.
Chief
Executive Officer and President
Nabors arrangements with its Chief Executive Officer and
President have been designed from the outset to align their
compensation with enhancing shareholder value.
Mr. Isenbergs compensation was originally negotiated
with a creditors committee in 1987 in connection with the
reorganization proceedings of Anglo Energy, Inc., which
subsequently changed its name to Nabors. These contractual
arrangements were subsequently approved by the various
constituencies in those reorganization proceedings, including
equity and debt holders, and confirmed by the United States
Bankruptcy Court. Mr. Petrellos employment agreement
was first entered into effective October 1, 1991, was
agreed upon as part of arms length negotiations with the
Board before he joined Nabors in October 1991, and was reviewed
and approved by the Committee and the full Board of Directors at
that time.
The employment agreements for Messrs. Isenberg and Petrello
were amended in 1994 and 1996. These amendments were approved by
the Committee and the full Board of Directors at that time.
These agreements may limit the Committees flexibility in
designing compensation programs for these executives.
Mr. Isenbergs base salary remained constant from 1987
through the end of 2003 and Mr. Petrellos base salary
remained constant since his employment began in 1991 through the
end of 2003. The major portion of Mr. Isenbergs and
Mr. Petrellos cash compensation is performance-based
bonus compensation. In addition to a base salary, their
employment agreements provide for annual cash bonuses in an
amount equal to 6% and 2%, respectively, of Nabors net
cash flow (as defined in the respective employment agreements)
in excess of 15% of the average shareholders equity for
each fiscal year. (Mr. Isenbergs cash bonus formula
originally was set at 10% in excess of a 10% return on
shareholders equity and he has voluntarily reduced it over
time to its 6% in excess of 15% level.) Mr. Petrellos
bonus is subject to a minimum of $700,000 per year. In 15
of the last 16 years, Mr. Isenberg has agreed
voluntarily to accept a lower annual cash bonus (i.e., an amount
lower than the amount provided for under his employment
agreement) in light of his overall compensation package.
Mr. Petrello has agreed voluntarily to accept a lower
annual cash bonus (i.e., an amount lower than the amount
provided for under his employment agreement) in light of his
overall compensation package in 13 of the last 15 years.
For 2005 the annual cash bonuses for Messrs. Isenberg and
Petrello pursuant to the formula described in their employment
agreements were $41.2 million and $13.7 million,
respectively; but in light of their overall compensation package
(including significant stock option grants and restricted stock
awards), they agreed to accept cash bonuses in the amounts of
$3 million and $1.5 million, respectively. There can
be no assurance that Messrs. Isenberg and Petrello will agree in
the future to accept annual cash bonuses in an amount less than
the cash amounts provided for in their agreements.
19
Mr. Isenberg voluntarily agreed to amend his employment
agreement in March 2006. Under the 2006 Amendment,
Mr. Isenberg agreed to reduce the annual cash bonus to an
amount equal to 3% of Nabors net cash flow (as defined in
his employment agreement) in excess of 15% of the average
shareholders equity for 2006. For 2007 through the
expiration date of the employment agreement, the annual cash
bonus will return to 6% of Nabors net cash flow (as
defined in his employment agreement) in excess of 15% of the
average shareholders equity for each fiscal year.
On December 5, 2005, taking into account the reduction in
annual cash bonus provided for in the employment agreements, the
Committee granted to Messrs. Isenberg and Petrello
1,333,333 and 666,667 stock options, respectively, with a per
share exercise price of $71.61, the closing price of an
underlying share on the date of grant (vesting on
December 30, 2005). On February 28, 2006, taking into
account the reduction in annual cash bonus provided for in the
employment agreements, the Committee also granted to
Messrs. Isenberg and Petrello 100,000 and 50,000 restricted
shares, respectively (vesting pro rata over a three year period).
In reviewing Mr. Isenbergs and
Mr. Petrellos compensation, the Committee noted that
Nabors financial results in 2005 were the best in the
Companys history, with significant financial and
operational achievements in virtually every operating and
business category. The Company generated significant free cash
flows after an aggressive capital expenditure program. The
Committee also took notice of the strategies employed by senior
management to help ensure the continued financial success of the
Company over the ensuing years including
organic growth in developing and deploying new, state of the art
rigs at attractive costs, obtaining long-term contracts with key
customers, and negotiating favorable arrangements with key
vendors to ensure availability of equipment needed to support
the Companys growth. These strategies have resulted in
capturing approximately one-third of the new rig contract
opportunities worldwide, among over 200 competitors, mostly with
term contracts from creditworthy customers that assure high
returns and short term payouts.
The senior executive management team in place for many years has
demonstrated its versatility and leadership in forging a stable
and effective organization. The Compensation Committee also
noted The Wall Street Journals special supplement
published on February 27, 2006 which again listed Nabors
among the top U.S. companies in long-term shareholder
returns, with a one-year return of 47% and a ten-year return of
21%, meriting placement in the top 20% of its list of 1,000
largest companies.
The Compensation Committee believes that the consistent high
ranking of Nabors in such studies throughout the industrys
cyclical ups and downs validates its assertion that the current
management team has delivered consistently superior returns to
its shareholders over the long term. In fact, according to
Bloomberg, Nabors ten-year average is 21.28% which is
nearly triple that of the S&P 500 (the ten-year average
return for companies in the S&P 500 Index is 7.29% for the
ten-year period ending December 31, 2005). The Compensation
Committee also believes that retention and financial motivation
of the current management team is vital to sustaining this level
of performance.
The Committee is mindful that the competitive, financial
accounting, and regulatory landscape of executive compensation
continues to evolve. The Committee accordingly has made
adjustments in the forms of equity-based compensation and, at
the Committees recommendation, the Board of Directors in
March 2006 exercised its election to fix the expiration date of
the employment agreements for Messrs. Isenberg and
Petrello. Accordingly these agreements will expire at the end of
their current term at September 30, 2010, which will permit
the Committee to exercise greater flexibility in determining the
incentive arrangements for the Companys senior executives.
20
Financial
Highlights Nabors Industries Ltd. and
Subsidiaries
(In
millions, except per share amounts)
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2005 Versus 2004
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2005 Versus 2000
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Fiscal
Year
(1)
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Increase/(Decrease)
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Increase/(Decrease)
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Financial Data
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2005
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2004
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2000
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$
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%
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$
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%
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Revenues and earnings from
unconsolidated affiliates
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$
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3,465.6
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$
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2,398.1
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$
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1,414.9
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$
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1,067.5
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45
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$
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2,050.7
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145
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Net income
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648.7
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302.5
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137.4
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346.2
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114
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511.3
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372
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Net income per diluted Share
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4.00
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1.92
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.90
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2.08
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108
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3.10
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344
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Stockholders equity
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3,758.1
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2,929.4
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1,806.5
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828.7
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28
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1,951.6
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108
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Year end market value of shares
outstanding
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$
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11,945.5
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$
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7,686.4
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$
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8,669.3
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$
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4,259.1
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55
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$
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3,276.2
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38
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(1)
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The fiscal years ended 2005, 2004
and 2000 are for the period January 1 through December 31.
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THE COMPENSATION COMMITTEE (as
of
April 30, 2006)
Martin J. Whitman, Chairman
Alexander M. Knaster
James L. Payne
Hans Schmidt
Myron M. Sheinfeld
21
REPORT OF
THE AUDIT COMMITTEE
The Audit Committee is comprised of three independent directors
and operates pursuant to a written Charter that is available on
our website at www.nabors.com. In 2005 the Committee met four
times. The primary purposes of the Audit Committee are to assist
the Board in monitoring (a) the quality and integrity of
the financial statements of Nabors; (b) the independent
auditors qualifications and independence; (c) the
performance of Nabors independent auditors; and
(d) compliance by Nabors with legal and regulatory
requirements. The Board has determined that the Audit
Committees current composition satisfies the rules of the
NYSE that govern audit committee composition, including the
requirement that each member of the Audit Committee be
independent as that term is defined under the
listing standards of the NYSE and specified in
Rule 10A-3
under the Securities Exchange Act of 1934. In addition, the
Board has determined that Mr. Whitman is an audit
committee financial expert as defined under the current
rules of the SEC.
Management is responsible for the preparation, presentation and
integrity of Nabors financial statements, accounting and
financial reporting principles and internal controls and
procedures designed to assure compliance with accounting
standards and applicable laws and regulations. The independent
auditors are responsible for performing an independent audit of
the financial statements in accordance with generally accepted
auditing standards. The independent auditors have free access to
the Audit Committee to discuss any matters they deem appropriate.
In performing its oversight role, the Audit Committee has
reviewed and discussed the audited financial statements with
management and the independent auditors. The Audit Committee has
also discussed with the independent auditors the matters
required to be discussed by Statement on Auditing Standards
No. 61,
Communication with Audit Committees
, as
updated by Statement on Auditing Standards No. 89,
Audit
Adjustments
, and Statement on Auditing Standards
No. 90,
Audit Committee Communications.
The
Committee has received the written disclosures and the letter
from the independent auditors required by Independence Standards
Board Standard No. 1,
Independence Discussions with
Audit Committees
, as currently in effect and has discussed
with the independent auditors their independence. The Audit
Committee has also considered whether the provision of certain
non-audit services by the independent auditors is compatible
with maintaining the auditors independence and has
enhanced its pre-approval policies and procedures for services
provided by our independent auditors. The Committee also reviews
reports received from the internal auditors and corrective
actions taken by management where warranted.
During fiscal 2005 the Audit Committee performed all of its
duties and responsibilities under the then-applicable Audit
Committee Charter. In addition, based on the review and
discussions described in this Report of the Audit Committee, the
Audit Committee recommended to the Board of Directors and the
Board approved that the audited financial statements of Nabors
for fiscal 2005 be included in its Annual Report on
Form 10-K
for such fiscal year.
THE AUDIT COMMITTEE (as of April 30, 2006)
Myron M. Sheinfeld, Chairman
Martin J. Whitman
Hans W. Schmidt
Preapproval of independent auditor
services.
The Audit Committee preapproves all
audit and permitted non-audit services (including the fees and
terms thereof) to be performed for the Company by
PricewaterhouseCoopers LLP (PricewaterhouseCoopers),
the Companys independent auditors. The Chairman of the
Audit Committee may preapprove additional permissible proposed
non-audit services that arise between Committee meetings,
provided that the decision to pre-approve the service is
presented for ratification at the next regularly scheduled
Committee meeting.
22
Independent
Auditor Fees
The following table summarizes the aggregate fees for
professional services rendered by PricewaterhouseCoopers. The
Audit Committee pre-approved fiscal 2005 services and 2004
services.
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2005
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2004
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Audit Fees
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$
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4,111,481
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$
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4,787,460
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Audit-Related Fees
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24,166
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314,799
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Tax Fees
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661,241
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1,133,206
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All Other Fees
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Total
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$
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4,796,888
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$
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6,235,465
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The
Audit
fees for the years ended December 31, 2005
and 2004, respectively, include fees for professional services
rendered for the audits of the consolidated financial statements
of the Company, the audit of managements report on the
effectiveness of the Companys internal control over
financial reporting and PricewaterhouseCoopers own audit
of the Companys internal control over financial reporting,
in each case as required by Section 404 of the
Sarbanes-Oxley Act of 2002 and applicable SEC rules, statutory
audits, consents, and accounting consultation attendant to the
audit.
The
Audit-Related
fees as of the years ended
December 31, 2005 include consultations concerning
financial accounting and reporting standards. Audit related fees
for the year 2004 include audits of employee benefit plans, work
performed in anticipation of the requirements of
Section 404 of the Sarbanes-Oxley Act of 2002, limited to
data entry of the Companys policies and procedures into
the project management database of Section 404 compliance.
Tax
fees as of the years ended December 31, 2005 and
2004, respectively, include services related to tax compliance,
including the preparation of tax returns and claims for refund;
and tax planning and tax advice.
There were no other professional services rendered during 2005
or 2004.
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*
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The aggregate fees included in Audit Fees are fees billed
for
the fiscal years for the audit of the registrants
annual financial statements and review of financial statements
and statutory and regulatory filings or engagements. The
aggregate fees included in each of the other categories are fees
billed
in
the fiscal years.
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ITEM 2
APPROVAL AND APPOINTMENT OF INDEPENDENT AUDITORS AND
AUTHORIZATION OF THE AUDIT COMMITTEE TO SET THE AUDITORS
REMUNERATION
Under Bermuda law, our shareholders have the responsibility to
appoint the independent auditors of the Company to hold office
until the close of the next annual general meeting and to
authorize the Audit Committee of the Board of Directors to set
the auditors remuneration. At the annual general meeting,
the shareholders will be asked to approve the appointment of
PricewaterhouseCoopers LLP as our independent auditors and to
authorize the Audit Committee of the Board of Directors to set
the independent auditors remuneration.
PricewaterhouseCoopers LLP, or a predecessor, has been our
independent auditors since May 1987.
A representative from PricewaterhouseCoopers LLP is expected to
be present at the annual general meeting, will have the
opportunity to make a statement if he or she desires to do so,
and will be available to respond to appropriate questions.
23
Directors
Recommendation
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR
THE
APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT
AUDITORS OF THE COMPANY AND TO AUTHORIZE THE AUDIT COMMITTEE OF
THE BOARD OF DIRECTORS TO SET THE AUDITORS
REMUNERATION.
ITEM 3
APPROVAL OF THE AMENDED AND RESTATED 2003 EMPLOYEE STOCK
PLAN
We are asking our shareholders to approve our Amended and
Restated 2003 Employee Stock Plan (the Plan) so that
we may continue to attract and retain talented employees
necessary for the Companys continued growth and success.
We want to set the number of common shares of our common stock
that can be issued under the Plan at 7 million common
shares, and also provide, commencing on June 1, 2006, and
thereafter for a period of four (4) years on each
January 1, for an automatic increase in the number of
shares reserved and available for issuance under the Plan by an
amount equal to two percent (2%) of the Companys
outstanding common shares as of such June 1 or January 1 date.
In addition, the aggregate number of shares of common stock that
are reserved and available for issuance under the Plan will be
automatically increased in the following circumstances:
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if the exercise price of an option granted under the Plan
exceeds the fair market value of our common shares at the date
of grant, the aggregate number of available common shares will
be automatically increased by an amount based on the following
formula:
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Increase = ([M/E] - 1) x G
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M =
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Value of the option if it were granted at fair market value
(using either a Black Scholes or Lattice Model)
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E =
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Value of the option at its actual exercise price (using either a
Black Scholes or Lattice Model)
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G = Number of options granted to option holder at above market
value
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if a cap value is placed on the option pursuant to the award
agreement, the aggregate number of available common shares will
be automatically increased by an amount based on the following
formula:
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Increase = ([M/E] - 1) x G
M = Black Scholes value of the option that is not capped at the
date of grant
E = Lattice Model value of a capped option at the date of grant
G = Number of capped options granted to option holder
If the fair market value of the common shares on the exercise
date exceeds the cap value, the number of common shares to be
issued to the participant under the award agreement will be
reduced to ensure that the value of each share on the exercise
date received by the participant upon exercise of the option
will not exceed the cap value.
The adjustment in the formula is intended to permit the Company
to issue performance-based option awards (i.e., awards issued
with an exercise price greater than the market price on the date
of award premium-priced options) or
option awards subject to a cap in the amount of appreciation
which can be realized capped option
awards. To the extent that the Company issues
premium-priced options or capped option awards, the number of
common shares which could be issued under the plan would be
increased pursuant to the formulas described above, which is
intended to create additional authorized common shares under the
plan to the extent that the value of the premium-priced options
or capped option awards is less than the value of awards which
are not subject to those restrictions.
24
Various shareholder groups have advocated premium priced options
as a mechanism to help ensure that equity incentives are more
closely aligned with shareholders interests by having more
demanding corporate performance goals. Similarly, capped option
awards, which limit the appreciation that can be realized under
an option award, arguably help ensure that an optionee does not
profit unduly from broad-based gains of the stock market.
The Company believes that it would be more likely to issue
premium-priced options or capped options awards (which have a
lower value at the time of the award than awards without such
limitations) if it had additional shares which could be issued
to optionees under the Plan.
The approval of the Plan requires the vote of a majority of the
voting power of the shares that are present by person or by
proxy and entitled to vote at the annual general meeting. Our
Named Executive Officers and directors have an interest in this
proposal because they, along with other eligible employees, may
participate in the Plan.
Description
of the Plan
The following paragraphs provide a summary of the principal
features of the Plan and its operation. The Plan is set forth in
its entirety as Exhibit A to this Proxy Statement. The
following summary is qualified in its entirety by reference to
Exhibit A.
The Plan will reserve for issuance a maximum of 7,000,000 common
shares, subject to increase as set forth above. If an award
granted under the Plan expires or is terminated, the common
shares underlying the award will again be available under the
Plan. In addition, to the extent common shares are used to
exercise any award (as described below) or to satisfy tax
withholding obligations under the Plan, an equal number of
shares will remain available for issuance under the Plan.
No individual may be granted awards under the Plan in any
calendar year covering more than 3,000,000 shares.
In the event of any change in the Companys capitalization
or in the event of a corporate transaction such as a merger,
amalgamation, consolidation, separation or similar event, the
Plan provides for appropriate adjustments in the number and
class of common shares available for issuance or grant and in
the number
and/or
price
of shares subject to awards.
Types of Awards
The Plan permits a variety of types of awards to be granted
under the Plan:
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stock options, including incentive stock options and
non-qualified stock options,
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restricted stock,
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restricted stock units,
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stock appreciation rights, and
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stock bonuses.
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These awards are all described in more detail below.
Administration
The Plan is administered by the Compensation Committee of the
Board of Directors. The Committee may, subject to the provisions
of the Plan, determine the persons to whom awards will be
granted, the type of awards to be granted, the number of shares
to be made subject to awards and the exercise price. The
Committee may also condition the award on the attainment of
certain goals, determine other terms and conditions that shall
apply to awards, interpret the Plan and prescribe, amend and
rescind rules and regulations relating to the Plan. The
Committee may delegate to any of
25
our employees (or a committee of employees) the authority to
make grants of awards to our employees who are not our executive
officers or directors. The terms and conditions of each award
granted under the Plan are set forth in a written award
agreement relating to the award.
In the event that the Committee grants an award that is intended
to constitute qualified performance-based compensation within
the meaning Section 162(m) of the Code, the Committee in
its discretion may condition payment under the award in whole or
in part on the attainment of (or a specified increase or
decrease in) one or more of the following business criteria as
applied to an award recipient under the Plan
and/or
a
business unit of the Company or its subsidiaries or affiliates:
(i) income before federal taxes and net interest expense;
(ii) achievement of specific and measurable operational
objectives in the areas of rig operating costs, accident
records, and employee turnover; (iii) working capital,
generally defined to include receivables, inventories and
controllable current liabilities, measured either in absolute
dollars or relative to sales; (iv) earnings growth,
revenues, expenses, share price, market share, return on assets,
return or capital, equity or investment, regulatory compliance,
satisfactory internal or external audits, improvement of
financial ratings, or achievement of balance sheet, income
statement or cash flow objectives; (v) adjusted cash flow
or adjusted income derived from operating activities;
and/or
(vi) a percentage of cash flow in excess of a percentage of
shareholders average book equity. Payments under such
awards will be made, in the case of employees covered under
Section 162(m) of the Code, solely on account of the
attainment of such performance goals established in writing by
the Committee not later than the date on which 25% of the period
of service to which the award relates has elapsed (or if
earlier, 90 days after the beginning of the period).
Eligibility
Awards may be granted under the Plan to employees of the Company
or its subsidiaries or affiliates, as selected by the Committee
in its sole discretion. Member of the Board of Directors also
receive the equity component of their compensation pursuant to
the Plan.
Terms and
Conditions of Options
Stock options granted under the Plan may be either
incentive stock options, as that term is defined in
Section 422 of the Code, or non-qualified stock options
(i.e., any option that is not such an incentive stock option).
The exercise price of a stock option granted under the Plan is
determined by the Committee at the time the option is granted,
but the exercise price may not be less than the fair market
value of the common shares (determined generally as the closing
price per common share of the Company on the date of grant).
Stock options are exercisable at the times and upon the
conditions that the Committee may determine, as reflected in the
applicable option agreement. The Committee will also determine
the maximum duration of the period in which the option may be
exercised, which may not exceed ten years from the date of grant.
The option exercise price must be paid in full at the time of
exercise, and is payable (in the discretion of the Committee) by
any one of the following methods or a combination thereof:
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in cash or cash equivalents,
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the surrender of previously acquired common shares that have
been held by the participant for at least six months prior to
the date of surrender, or
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to the extent permitted by applicable law, through a
broker cashless exercise procedure acceptable to the
Committee.
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Restricted
Stock
The Plan provides for awards of common shares that are subject
to restrictions on transferability and other restrictions
determined by the Committee in its discretion. Such restrictions
will lapse on
26
terms established by the Committee. Except as may be otherwise
provided under the award agreement relating to the restricted
stock, a participant granted restricted stock will have all the
rights of a shareholder (for instance, the right to receive
dividends on the shares of restricted stock, if any, and the
right to vote the shares). The restricted period shall not be
less than three years, but the restricted period can be
shortened to one or more years if vesting of the restricted
stock unit is conditioned upon the attainment of the performance
goals identified above or other corporate or individual
performance goals established by the Committee at the time of
grant.
Restricted
Stock Units
The Plan permits awards of restricted stock units which, upon
vesting, entitle the participant to receive an amount in cash or
common shares (as determined by the Committee and set forth in
the applicable award agreement) equal to the fair market value
of the number of shares made subject to the award. Vesting of
all or a portion of a restricted stock unit award may be subject
to terms and conditions established by the Committee. As with
awards of restricted stock, the restricted period shall not be
less than three years, but the restricted period can be
shortened to one or more years if vesting of the restricted
stock is conditioned upon the attainment of the performance
goals identified above or other corporate or individual
performance goals established by the Committee at the time of
grant.
Stock
Appreciation Rights (SARs)
The Plan permits the Committee, in its discretion, to award
stock appreciation rights, either in tandem with stock options
or freestanding and unrelated to options. The grant price of a
freestanding SAR will be the fair market value of a common share
(as described above). The grant price of tandem SARs will equal
the exercise price of the related option. Tandem SARs may be
exercised for all or part of the shares subject to the related
option upon surrender of the right to exercise the equivalent
portion of the related option. Freestanding SARs may be
exercised upon whatever terms and conditions the Committee
imposes. SARs will be payable in cash, common shares or a
combination of both, as determined in the Committees
discretion and set forth in the applicable award agreement.
Stock
Bonuses
The Plan permits the Committee, in its discretion, to award
common shares to employees that are not subject to restrictions
on transferability or otherwise, but only in lieu of salary or a
cash bonus otherwise payable to the employee.
Change
in Control
The Committee in its discretion may provide that, in the event
of a change in control (as defined in an applicable award
agreement), whether alone or in combination with other events,
the vesting and exercisability restrictions on any outstanding
award that is not yet fully vested and exercisable will lapse in
part or in full.
Termination
of Employment
Unless otherwise determined by the Committee in an award
agreement, the termination of a participants employment or
service will immediately cancel any awards granted to the
participant under the Plan, whether or not it is then
exercisable. However, in no case may an option be exercised
after it expires.
Amendment
and Termination
The Board of Directors may modify or terminate the Plan or any
portion of the Plan at any time, except that an amendment that
requires shareholder approval in order for the Plan to continue
to
27
comply with any law, regulation or stock exchange requirement
will not be effective unless approved by the requisite vote of
our shareholders. In addition, any amendment shall be subject to
approval of our shareholders if it materially increases the
benefits accruing to participants under the Plan, materially
increases the number of shares that may be issued under the
Plan, or materially modifies the requirements for participation
in the Plan. Any amendment to the Plan or an award agreement
that accelerates the date on which an award is exercisable or
payable or that reduces the exercise price of any outstanding
option will also be subject to the approval of our shareholders.
No awards may be granted under the Plan after the day prior to
the tenth anniversary of the date of its approval by the
Companys shareholders, but awards granted prior to that
time can continue after such time in accordance with their terms.
Certain
Federal Income Tax Consequences of Options
The following is a discussion of certain federal income tax
effects currently applicable to stock options granted under the
Plan. The discussion is a summary only, and the applicable law
is subject to change. Reference is made to the Code for a
complete statement of all relevant federal tax provisions.
Nonqualified
Stock Options (NSOs)
An optionee generally will not recognize taxable income upon the
grant of an NSO. Rather, at the time of exercise of such NSO,
the optionee will recognize ordinary income for income tax
purposes in an amount equal to the excess of the fair market
value of the shares purchased over the exercise price. The
Company will generally be entitled to a tax deduction at such
time and in the same amount that the optionee recognizes
ordinary income.
If shares acquired upon exercise of an NSO are later sold or
exchanged, then the difference between the amount received upon
such sale, exchange or disposition and the fair market value of
such shares on the date of such exercise will generally be
taxable as long-term or short-term capital gain or loss (if the
shares are a capital asset of the optionee) depending upon the
length of time such shares were held by the optionee.
Incentive
Stock Options (ISOs)
An optionee will not recognize any ordinary income (and the
Company will not be permitted any deduction) upon the grant or
timely exercise of an ISO. However, the amount by which the fair
market value of the common shares on the exercise date of an ISO
exceeds the purchase price generally will constitute an item
which increases the optionees alternative minimum
taxable income.
Exercise of an ISO will be timely if made during its term and if
the optionee remains an employee of the Company or a subsidiary
at all times during the period beginning on the date of grant of
the ISO and ending on the date three months before the date of
exercise (or one year before the date of exercise in the case of
a disabled optionee, and without limit in the case of death).
The tax consequences of an untimely exercise of an ISO will be
determined in accordance with the rules applicable to NSOs,
discussed above.
If shares acquired pursuant to the timely exercise of an ISO are
later disposed of, and if the shares are a capital asset of the
optionee, the optionee generally will recognize short-term or
long-term capital gain or loss (depending upon the length of
time such shares were held by the optionee) equal to the
difference between the amount realized upon such sale and the
exercise price. The Company, under these circumstances, will not
be entitled to any income tax deduction in connection with
either the exercise of the ISO or the sale of such shares by the
optionee.
If, however, shares acquired pursuant to the exercise of an ISO
is disposed of by the optionee prior to the expiration of two
years from the date of grant of the ISO or within one year from
the date such shares are transferred to him or her upon exercise
(a disqualifying disposition), any gain realized by
28
the optionee generally will be taxable at the time of such
disqualifying disposition as follows: (i) at ordinary
income rates to the extent of the difference between the
exercise price and the lesser of the fair market value of the
shares on the date the ISO is exercised or the amount realized
on such disqualifying disposition and (ii) if the shares
are a capital asset of the optionee, as short-term or long-term
capital gain (depending upon the length of time such shares were
held by the optionee) to the extent of any excess of the amount
realized on such disqualifying disposition over the sum of the
exercise price and any ordinary income recognized by the
optionee. In such case, the Company may claim an income tax
deduction at the time of such disqualifying disposition for the
amount taxable to the optionee as ordinary income.
THE BOARD
OF DIRECTORS RECOMMENDS A VOTE
FOR
THE APPROVAL OF NABORS
INDUSTRIES LTD. AMENDED AND RESTATED
2003 EMPLOYEE STOCK PLAN.
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 and the NYSE 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 our review of the copies of
Forms 3 and 4 and amendments thereto furnished to us during
2005 and Form 5 and amendments thereto furnished to us with
respect to the year 2005, 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 2005 were timely filed, except that Mr. Martin Whitman
filed one Form 4 late with respect to a single sale
transaction that occurred in May 2005.
SHAREHOLDER
MATTERS
Bermuda has exchange controls which apply to residents in
respect of the Bermudian dollar. As an exempt company, Nabors is
considered to be nonresident for such controls; consequently,
there are no Bermuda governmental restrictions on the
Companys 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).
29
STOCK
PERFORMANCE GRAPH
The following graph illustrates comparisons of five-year
cumulative total returns among Nabors Industries Ltd., the
S&P 500 Index and the Dow Jones Oil Equipment and Services
Index. Total return assumes $100 invested on December 31,
2000 in shares of Nabors Industries Ltd., the S&P 500 Index,
and the Dow Jones Oil Equipment and Services Index. It also
assumes reinvestment of dividends and is calculated at the end
of each calendar year, December 31, 2001 to
December 31, 2005.
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2001
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2002
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2003
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2004
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2005
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Nabors
Industries
Ltd.
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58
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60
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70
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87
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128
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S&P 500 Index
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88
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69
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88
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98
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103
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Dow Jones Oil Equipment and
Services Index
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69
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63
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73
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98
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149
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SHAREHOLDER
PROPOSALS
Shareholders who, in accordance with the SECs
Rule 14a-8,
wish to present proposals for inclusion in the proxy materials
to be distributed by us in connection with our 2007 annual
general meeting of shareholders must submit their proposals and
their proposals must be received at our principal executive
offices no later than January 5, 2007. As the rules of the
SEC make clear, simply submitting a proposal does not guarantee
its inclusion.
In accordance with our Bye-Laws, in order to be properly brought
before the 2007 annual general meeting, a shareholder notice of
the matter the shareholder wishes to present must be delivered
to the Secretary of Nabors at Nabors Industries Ltd., P.O.
Box HM3349, Hamilton, HMPX, Bermuda, not less than sixty
(60) nor more than ninety (90) days prior to the first
anniversary of this years annual general meeting
(provided, however, that if the 2007 annual general meeting is
called for a date that is not within thirty (30) days
before or after such anniversary date, notice must be received
not later than the close of business on the tenth (10th) day
following the day on which notice of the date of the annual
general meeting is mailed or public disclosure of the date of
the annual general meeting is made, whichever first occurs). As
a result, any notice given by or on behalf of a shareholder
pursuant to
30
these provisions of our Bye-Laws (and not pursuant to the
SECs
Rule 14a-8)
generally must be received no earlier than March 9, 2007
and no later than April 7, 2007.
OTHER
MATTERS
The Board knows of no other business to come before the annual
general meeting. However, if any other matters are properly
brought before the annual general meeting, the persons named in
the accompanying form of proxy, or their substitutes, will vote
in their discretion on such matters.
Costs of Solicitation.
We will pay the
expenses of the preparation of the proxy materials and the
solicitation by the Board of your proxy. We have retained
Georgeson Shareholder Communications Inc., 17 State Street, New
York, New York 10004 to solicit proxies on behalf of the Board
of Directors at an estimated cost of $15,000 plus reasonable
out-of-pocket
expenses. Proxies may be solicited on behalf of the Board of
Directors by mail, in person and by telephone. Proxy materials
will also be provided for distribution through brokers,
custodians, and other nominees and fiduciaries. We will
reimburse such parties for their reasonable
out-of-pocket
expenses for forwarding the proxy materials.
Financial Statements.
The financial statements
for the Companys 2005 fiscal year will be presented at the
annual general meeting.
Shareholder Communications with
Directors.
Shareholders may contact any of the
Companys directors, a committee of the Board of Directors,
the Boards independent directors as a group or the Board
generally, by writing to them at Nabors Industries Ltd., P.O.
Box HM3349, Hamilton, HMPX, Bermuda. Shareholder
communications received in this manner will be handled in
accordance with procedures approved by the Boards
independent directors. The Boards Policy Regarding
Shareholder Communications with the Board of Directors is
available at www.nabors.com. In addition, the Company encourages
directors to attend the annual general meeting of shareholders.
Four directors attended the 2005 annual general meeting of
shareholders.
NABORS INDUSTRIES LTD.
Daniel McLachlin
Secretary
Dated:
May 5, 2006
31
EXHIBIT SCHEDULE
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Exhibit
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Document
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Exhibit A
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Amended and Restated 2003 Employee
Stock Plan
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EXHIBIT A
NABORS
INDUSTRIES LTD.
AMENDED AND RESTATED 2003 EMPLOYEE STOCK PLAN
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Section 1.
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Purpose
of Plan.
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The name of this plan is the Nabors Industries Ltd. Amended and
Restated 2003 Employee Stock Plan (the Plan). The
purpose of the Plan is to provide additional incentive to those
officers and employees of the Company and its Subsidiaries and
Affiliates whose contributions are essential to the growth and
success of the Companys business, in order to strengthen
the commitment of such persons to the Company and its
Subsidiaries and Affiliates, motivate such persons to faithfully
and diligently perform their responsibilities and attract and
retain competent and dedicated persons whose efforts will result
in the long-term growth and profitability of the Company and its
Subsidiaries and Affiliates. To accomplish such purposes, the
Plan provides that the Company may grant Incentive Stock
Options, Nonqualified Stock Options, Stock Appreciation Rights,
Restricted Stock, Restricted Stock Units, and Stock Bonuses. The
Plan is intended to permit awards that satisfy the requirements
of section 162(m) of the Code and shall be interpreted in a
manner consistent with the requirements thereof.
For purposes of the Plan, in addition to terms defined elsewhere
in the Plan, the following terms shall be defined as set forth
below:
(a)
Administrator
means the Board, or if
and to the extent the Board does not administer the Plan, the
Committee, in accordance with Section 3 hereof.
(b)
Affiliate
means any corporation or
other entity, more than 50% of the voting power of the
outstanding voting securities of which is owned by the Company,
its Subsidiaries, or any other Affiliate.
(c)
Award
means an award of Incentive
Stock Options, Nonqualified Stock Options, Stock Appreciation
Rights, Restricted Stock, Restricted Stock Units, or Stock Bonus
under the Plan.
(d)
Award Agreement
means, with respect
to any Award, the written agreement between the Company and the
Participant setting forth the terms and conditions of the Award.
(e)
Board
means the Board of Directors
of the Company.
(f)
Change in Capitalization
means any
increase, reduction, or change or exchange of Shares for a
different number or kind of shares or other securities or
property by reason of a reclassification, recapitalization,
merger, amalgamation, consolidation, reorganization, issuance of
warrants or rights, stock dividend, stock split or reverse stock
split, combination or exchange of shares, repurchase of shares,
change in corporate structure or otherwise; or any other
corporate action, such as declaration of a special dividend,
that affects the capitalization of the Company.
(g)
Code
means the Internal Revenue Code
of 1986, as amended from time to time, or any successor thereto.
(h)
Committee
means any committee or
subcommittee the Board may appoint to administer the Plan. If at
any time or to any extent the Board shall not administer the
Plan, then the functions of the Administrator specified in the
Plan shall be exercised by the Committee. Unless otherwise
determined by the Board, the composition of the Committee shall
at all times consist solely of persons who are
(i) Nonemployee Directors as defined in
Rule 16b-3
issued under the Exchange Act, and (ii) outside
directors as defined in section 162(m) of the Code.
A-1
(i)
Common Shares
means the common
shares, par value $0.001 per share, of the Company.
(j)
Company
means Nabors Industries
Ltd., a Bermuda exempt company (or any successor corporation).
(k)
Disability
means (1) any
physical or mental condition that would qualify a Participant
for a disability benefit under any long-term disability plan
maintained by the Company (or by the Subsidiary or Affiliate by
which he is employed); (2) when used in connection with the
exercise of an Incentive Stock Option following termination of
employment, disability within the meaning of
section 22(e)(3) of the Code; or (3) such other
condition as may be determined in the sole discretion of the
Administrator to constitute Disability.
(l)
Eligible Recipient
means an employee
or officer of the Company or of any Subsidiary or Affiliate, and
in the case of awards of Restricted Stock, shall include
nonemployee directors of the Company.
(m)
Exchange Act
shall mean the
Securities Exchange Act of 1934, as amended from time to time.
(n)
Exercise Price
means the per share
price at which a holder of an Option may purchase the Shares
issuable upon exercise of the Option.
(o)
Fair Market Value
of a Common Share
as of a particular date shall mean (1) the closing sale
price reported for such share on the national securities
exchange or national market system on which such share is
principally traded on such date (or, if there were no trades on
such date, on the most recently preceding day on which there was
a sale), or (2) if the Common Shares are not then listed on
a national securities exchange or national market system, or the
value of such shares is not otherwise determinable, such value
as determined by the Administrator in good faith in its sole
discretion.
(p)
Freestanding SAR
means an SAR that
is granted independently of any Options, as described
Section 11 hereof.
(q)
Immediate Family
means any child,
stepchild, grandchild, parent, stepparent, grandparent, spouse,
sibling,
mother-in-law,
father-in-law,
son-in-law,
daughter-in-law,
brother-in-law
or
sister-in-law,
including adoptive relationships of the Participant; trusts for
the benefit of such immediate family members; or partnerships in
which such immediate family members are the only partners.
(r)
Incentive Stock Option
shall mean an
Option that is an incentive stock option
within the meaning of section 422 of the Code, or any
successor provision, and that is designated by the Administrator
as an Incentive Stock Option.
(s)
Nonqualified Stock Option
means any
Option that is not an Incentive Stock Option, including any
Option that provides (as of the time such Option is granted)
that it will not be treated as an Incentive Stock Option.
(t)
Option
means an Incentive Stock
Option, a Nonqualified Stock Option, or either or both of them,
as the context requires.
(u)
Participant
means any Eligible
Recipient selected by the Administrator, pursuant to the
Administrators authority in Section 3 hereof, to
receive grants of Options or Stock Appreciation Rights or awards
of Restricted Stock, Restricted Stock Units, or Stock Bonus. A
Participant who receives the grant of an Option is sometimes
referred to herein as Optionee.
(v)
Performance Goal
shall mean one or
more of the following business criteria applied to a Participant
and/or
a
business unit or the Company
and/or
a
Subsidiary: (i) income before
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federal taxes and net interest expense; (ii) achievement of
specific and measurable operational objectives in the areas of
rig operating costs, accident records, and employee turnover;
(iii) working capital, generally defined to include
receivables, inventories and controllable current liabilities,
measured either in absolute dollars or relative to sales;
(iv) earnings growth, revenues, expenses, share price,
market share, return on assets, return on capital, equity or
investment, regulatory compliance, satisfactory internal or
external audits, improvement of financial ratings, or
achievement of balance sheet, income statement or cash flow
objectives; (v) adjusted cash flows or adjusted income
derived from operating activities;
and/or
(vi) a percentage of cash flow in excess of a percentage of
shareholders average book equity.
(w)
Restricted Stock Unit
means the
right to receive a Share or the Fair Market Value of a Share in
cash granted pursuant to Section 9 hereof.
(x)
Restricted Stock
means Shares
subject to certain restrictions granted pursuant to
Section 8 hereof.
(y)
Shares
means Common Shares and the
common equity of any successor security.
(z)
Stock Appreciation Right
or
SAR
means an Award, granted alone or in
connection with a related Option, designated as an SAR, pursuant
to Section 11 hereof.
(aa)
Stock Bonus
means the right to
receive a Share granted pursuant to Section 10 hereof.
(bb)
Subsidiary
means any corporation
(other than the Company) in an unbroken chain of corporations
beginning with the Company, if each of the corporations (other
than the last corporation) in the unbroken chain owns stock
possessing more than 50% of the total combined voting power of
all classes of stock in one of the other corporations in the
chain.
(cc)
Tandem SAR
means an SAR that is
granted in connection with a related Option pursuant to
Section 11 hereof, the exercise of which shall require
forfeiture of the right to purchase a Share under the related
Option (and when a Share is purchased under the Option, the
Tandem SAR shall similarly be canceled).
Section 3. Administration.
(a) The Plan shall be administered by the Board or, at the
Boards sole discretion, by the Committee, which shall
serve at the pleasure of the Board. Pursuant to the terms of the
Plan, the Administrator shall have the power and authority,
without limitation:
(i) to select those Eligible Recipients who shall be
Participants;
(ii) to determine in an Award Agreement whether and to what
extent Options or Stock Appreciation Rights or awards of
Restricted Stock, Restricted Stock Units, or Stock Bonus are to
be granted hereunder to Participants;
(iii) to determine in an Award Agreement the number of
Shares to be covered by each Award granted hereunder;
(iv) to determine in an Award Agreement the terms and
conditions, not inconsistent with the terms of the Plan, of each
Award granted hereunder;
(v) to determine the terms and conditions, not inconsistent
with the terms of the Plan, which shall govern all written
instruments evidencing Options or Stock Appreciation Rights or
awards of Restricted Stock, Restricted Stock Units, or Stock
Bonus granted hereunder;
(vi) to adopt, alter and repeal such administrative rules,
guidelines and practices governing the Plan as it shall from
time to time deem advisable; and
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(vii) to interpret the terms and provisions of the Plan and
any Award issued under the Plan (and any Award Agreement
relating thereto), and to otherwise supervise the administration
of the Plan.
(b) All decisions made by the Administrator pursuant to the
provisions of the Plan shall be final, conclusive and binding on
all persons, including the Company and the Participants. No
member of the Board or the Committee, nor any officer or
employee of the Company acting on behalf of the Board or the
Committee, shall be personally liable for any action,
determination, or interpretation taken or made in good faith
with respect to the Plan, and all members of the Board or the
Committee and each and any officer or employee of the Company
acting on their behalf shall, to the extent permitted by law, be
fully indemnified and protected by the Company in respect of any
such action, determination or interpretation.
(c) The Administrator in its discretion may condition
entitlement to an Award in whole or in part on the attainment of
one or more Performance Goals. The Administrator shall establish
any such Performance Goal not later than 90 days after the
commencement of the period of service to which the Award relates
if the period equals or exceeds one year (or if the period is
shorter, 25% of such period of service), and once granted, the
Administrator shall not have discretion to increase the amount
payable under such Award, provided, however, that whether or not
an Award is intended to constitute qualified performance based
compensation within the meaning of section 162(m) of the
Code, the Administrator shall have the authority to make
appropriate adjustments in Performance Goals under an Award to
reflect the impact of extraordinary items not reflected in such
Performance Goals. For purposes of the Plan, extraordinary items
shall be defined as (1) any profit or loss attributable to
acquisitions or dispositions of stock or assets, (2) any
changes in accounting standards that may be required or
permitted by the Financial Accounting Standards Board or adopted
by the Company after the goal is established, (3) all items
of gain, loss or expense for the year related to restructuring
charges for the Company, (4) all items of gain, loss or
expense for the year determined to be extraordinary or unusual
in nature or infrequent in occurrence or related to the disposal
of a segment of a business, (5) all items of gain, loss or
expense for the year related to discontinued operations as
defined in APB Opinion No. 30 or FAS No. 144, and
(6) such other items as may be prescribed by
section 162(m) of the Code and the Treasury Regulations
thereunder as may be in effect from time to time, and any
amendments, revisions or successor provisions and any changes
thereto.
(d) Subject to section 162(m) of the Code and except
as required by
Rule 16b-3
under the Exchange Act with respect to grants of Awards to
individuals who are subject to section 16 of the Exchange
Act, or as otherwise required for compliance with
Rule 16b-3
under the Exchange Act or other applicable law, the
Administrator may delegate all or any part of its authority
under the Plan to an employee, employees or committee of
employees of the Company or any Subsidiary.
(e) If at any time (whether before or after termination of
employment) a majority of either the Board or the Committee
determines that a Participant has engaged in fraud,
embezzlement, theft, commission of a felony, dishonesty, or any
other conduct inimical to the Company, either the Board or the
Committee (as the case may be) may provide for the immediate
forfeiture of any Award held by the Participant, whether or not
then vested. Any determination by the Board or Committee (as the
case may be) under this subsection (e) shall be final,
conclusive and binding on all persons.
Section 4. Shares Reserved
for Issuance Under the Plan.
(a) There shall be reserved and available for issuance
under the Plan 7,000,000 Common Shares. Commencing on
June 1, 2006, and thereafter for a period of four
(4) years on each January 1, the aggregate number of
Common Shares reserved and available for issuance under the Plan
shall be increased automatically by a number of shares equal to
two percent (2%) of the total outstanding Common Shares as of
such June 1 or January 1 date. In addition, the aggregate number
of Common
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Shares that are reserved and available for issuance under the
Plan shall be automatically increased in the following
circumstances:
(i) if the Exercise Price of any Option granted under the
Plan exceeds the Fair Market Value of a Common Share at the date
of grant, the aggregate number of available Common Shares will
be automatically increased by an amount based on the following
formula:
Increase = ([M/E] - 1) x G
M = Value of the Option if it were granted at Fair Market Value
(using either a Black Sholes or Lattice Model)
E = Value of the Option at its actual Exercise Price (using
either a Black Sholes or Lattice Model)
G = Number of Options granted to Participant at above Fair
Market Value
(ii) (a) if a cap value is placed on the Option
pursuant to an Award Agreement, the aggregate number of
available Common Shares under the Plan will be automatically
increased by an amount based on the following formula:
Increase = ([M/E] - 1) x G
M = Black Sholes value of the option that is not capped at the
date of grant
E = Lattice Model value of a capped option at the date of grant
G = Number of capped options granted to the option holder
(b) If the Fair Market Value of the Common Shares on the
exercise date exceeds the cap value set forth in the Award
Agreement, the number of Common Shares to be issued to the
Participant under the Award Agreement will be reduced to ensure
that the value of each Common Share on the exercise date
received by the Participant upon exercise of the Option does not
exceed the cap value.
The grant of any Restricted Stock Units or SARs that may be
settled only in cash shall not reduce the number of Common
Shares with respect to which Awards may be granted pursuant to
the Plan.
(b) To the extent that (i) an Option expires or is
otherwise cancelled or terminated without being exercised as to
the underlying Shares, (ii) any Shares subject to any award
of Stock Appreciation Rights, Restricted Stock, Restricted Stock
Unit, or Stock Bonus are forfeited, (iii) payment for an
Option upon exercise is made with Shares owned by the Optionee
for at least six months on the date of surrender or
(iv) Shares are withheld from payment of an Award in
satisfaction of any federal, state or local tax withholding
requirements, such Shares shall again be available for issuance
in connection with future Awards granted under the Plan.
(c) The aggregate number of Shares with respect to which
Awards (including Awards payable in cash but denominated in
Common Shares,
i.e.
, cash-settled Restricted Stock Units
or SARs) may be granted to any individual Participant during any
calendar year shall not exceed 1,500,000.
Section 5. Equitable
Adjustments.
In the event of any Change in Capitalization, an equitable
substitution or proportionate adjustment shall be made in
(i) the aggregate number
and/or
kind
of common shares or other property reserved for issuance under
the Plan, (ii) the kind, number
and/or
option price of shares or other property subject to outstanding
Options and Stock Appreciation Rights granted under the Plan,
and (iii) the kind, number
and/or
purchase price of shares or other property subject to
outstanding awards of Restricted Stock, and Restricted Stock
Units granted under the Plan, in each case as may be determined
by the Administrator, in its sole discretion. Such other
equitable substitutions or adjustments shall be made as may be
determined by the Administrator, in its sole discretion. Without
limiting the generality of the foregoing, in connection with a
Change in Capitalization, the
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Administrator may provide, in its sole discretion, for the
cancellation of any outstanding Awards in exchange for payment
in cash or other property of the Fair Market Value of the Shares
covered by such Awards reduced, in the case of Options, by the
Exercise Price thereof, and in the case of Stock Appreciation
Rights, by the grant price thereof, or by any other applicable
purchase price.
Section 6. Eligibility.
The Participants under the Plan shall be selected from time to
time by the Administrator, in its sole discretion, from among
Eligible Recipients. The Administrator shall have the authority
to grant to any Eligible Recipient Incentive Stock Options,
Nonqualified Stock Options, Stock Appreciation Rights,
Restricted Stock, Restricted Stock Units, or a Stock Bonus.
Section 7. Options.
(a)
General.
Options may be granted
alone or in addition to other Awards granted under the Plan. Any
Option granted under the Plan shall be evidenced by an Award
Agreement in such form as the Administrator may from time to
time approve. The provisions of each Option need not be the same
with respect to each Participant. Participants who are granted
Options shall enter into an Award Agreement with the Company, in
such form as the Administrator shall determine, which Award
Agreement shall set forth, among other things, the Exercise
Price of the Option, the term of the Option and provisions
regarding exercisability of the Option granted thereunder. The
Options granted under the Plan may be of two types:
(i) Incentive Stock Options and (ii) Nonqualified
Stock Options. To the extent that any Option does not qualify as
an Incentive Stock Option, it shall constitute a separate
Nonqualified Stock Option. More than one Option may be granted
to the same Participant and be outstanding concurrently
hereunder. Options granted under the Plan shall be subject to
the terms and conditions set forth in paragraphs (b)-(i) of
this Section 7 and shall contain such additional terms and
conditions, not inconsistent with the terms of the Plan, as the
Administrator shall deem desirable.
(b)
Exercise Price.
The per share
Exercise Price of Shares purchasable under an Option shall be
determined by the Administrator in its sole discretion at the
time of grant but shall not be less than 100% of the Fair Market
Value per Share on such date (or, in the case of Incentive Stock
Options, 110% of the Fair Market Value per Share on such date
if, on such date, the Eligible Recipient owns (or is deemed to
own under the Code) stock possessing more than 10% (a Ten
Percent Owner) of the total combined voting power of all
classes of shares of the Company or its Subsidiaries).
(c)
Option Term
. The term of each Option
shall be fixed by the Administrator, but no Option shall be
exercisable more than ten years after the date such Option is
granted. If the Eligible Participant is a Ten Percent Owner, an
Incentive Stock Option may not be exercisable after the
expiration of five years from the date such Incentive Stock
Option is granted.
(d)
Exercisability
. Options shall be
exercisable at such time or times and subject to such terms and
conditions, including the attainment of preestablished
Performance Goals or other corporate or individual performance
goals, as shall be determined by the Administrator in its sole
discretion. The Administrator may also provide that any Option
shall be exercisable only in installments.
(e)
Method of Exercise
. Options may be
exercised in whole or in part by giving written notice of
exercise to the Company specifying the number of Shares to be
purchased, accompanied by payment in full of the aggregate
Exercise Price of the Shares so purchased in cash or its
equivalent, as determined by the Administrator. As determined by
the Administrator, in its sole discretion, payment in whole or
in part may also be made (i) by means of any properly
executed broker-assisted exercise procedure, subject to approval
by the Administrator, (ii) in the form of unrestricted
Shares already owned by the Optionee for at least six months on
the date of surrender to the extent the Shares have a Fair
Market Value on the date of surrender equal to the aggregate
option price of the Shares as to which such Option shall be
exercised,
provided
that, in the case of an Incentive
Stock Option, the right
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to make payment in the form of already owned Shares may be
authorized only at the time of grant, or (iii) any
combination of the foregoing.
(f)
Rights as Shareholder
. An Optionee
shall have no rights to dividends or any other rights of a
shareholder with respect to the Shares subject to the Option
until the Optionee has given written notice of exercise, has
paid in full for such Shares, and has satisfied the requirements
of Section 15 hereof.
(g)
Nontransferability of Options
. The
Optionee shall not be permitted to sell, transfer, pledge or
assign any Option other than by will and the laws of descent and
distribution and all Options shall be exercisable during the
Participants lifetime only by the Participant, in each
case, except as set forth in the following two sentences. During
an Optionees lifetime, the Administrator may, in its
discretion, permit the transfer, assignment or other encumbrance
of an outstanding Option if such Option is a Nonqualified Stock
Option or an Incentive Stock Option that the Administrator and
the Participant intend to change to a Nonqualified Stock Option.
Subject to the approval of the Administrator and to any
conditions that the Administrator may prescribe, an Optionee
may, upon providing written notice to the Company, elect to
transfer any or all Options described in the preceding sentence
(i) to members of his or her Immediate Family,
provided
that no such transfer by any Participant may be made in
exchange for consideration, or (ii) by instrument to an
inter vivos or testamentary trust in which the Options are to be
passed to beneficiaries upon the death of the Participant.
(h)
Termination of Employment or
Service
. Except as otherwise provided in an
Award Agreement, if a Participants employment with the
Company or any Subsidiary or Affiliate terminates for any
reason, all outstanding Options granted to such Participant
shall expire on the date of such termination (whether or not
then vested or exercisable). Notwithstanding the foregoing, no
Option shall be exercisable after the expiration of its term.
(i)
Limitation on Incentive Stock
Options
. To the extent that the aggregate Fair
Market Value of Shares with respect to which Incentive Stock
Options are exercisable for the first time by an Optionee during
any calendar year under the Plan and any other stock option plan
of the Company or any Subsidiary or Affiliate shall exceed
$100,000, such Options shall be treated as Nonqualified Stock
Options. Such Fair Market Value shall be determined as of the
date on which each such Incentive Stock Option is granted.
Section 8. Restricted
Stock.
(a)
General
. Awards of Restricted Stock
may be issued either alone or in addition to other Awards
granted under the Plan and shall be evidenced by an Award
Agreement. The Administrator shall determine the Eligible
Recipients to whom, and the time or times at which, Awards of
Restricted Stock shall be made; the number of Shares to be
awarded; the price, if any, to be paid by the Participant for
the acquisition of Restricted Stock; and the Restricted Period
(as defined in Section 8(d)) applicable to awards of
Restricted Stock. The provisions of the awards of Restricted
Stock need not be the same with respect to each Participant.
(b)
Purchase Price
. The price per Share,
if any, that a Recipient must pay for Shares purchasable under
an award of Restricted Stock shall be determined by the
Administrator in its sole discretion at the time of grant.
(c)
Awards and Certificates
. The
prospective recipient of an Award of Restricted Stock shall not
have any rights with respect to any such Award, unless and until
such recipient has executed an Award Agreement evidencing the
Award and delivered a fully executed copy thereof to the
Company, within such period as the Administrator may specify
after the award date. Each Participant who is granted an award
of Restricted Stock shall be issued a share certificate in
respect of such shares of Restricted Stock, which certificate
shall be registered in the name of the Participant and shall
bear an
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appropriate legend referring to the terms, conditions, and
restrictions applicable to any such Award,
provided
that
the Company may require that the share certificates evidencing
Restricted Stock granted hereunder be held in the custody of the
Company until the restrictions thereon shall have lapsed, and
that, as a condition of any award of Restricted Stock, the
Participant shall have delivered a stock power, endorsed in
blank, relating to the Shares covered by such Award.
(d)
Nontransferability
. Any Award of
Restricted Stock granted pursuant to this Section 8 shall
be subject to the restrictions on transferability set forth in
this paragraph (d). During such period as may be set by the
Administrator in the Award Agreement (the Restricted
Period), the Participant shall not be permitted to sell,
transfer, pledge, hypothecate or assign Shares of Restricted
Stock awarded under the Plan except by will or the laws of
descent and distribution. The Administrator may also impose such
other restrictions and conditions, including the attainment of
preestablished Performance Goals or other corporate or
individual performance goals, on Restricted Stock as it
determines in its sole discretion. The Restricted Period shall
be not less than three years,
provided
that the
Restricted Period may be shorter (but not less than one year) if
vesting of the Restricted Stock is conditioned upon the
attainment of preestablished Performance Goals or other
corporate or individual performance goals. However, in no event
shall the Restricted Period end with respect to a Restricted
Stock Award prior to the satisfaction by the Participant of any
liability arising under Section 15 hereof. Any attempt to
dispose of any Restricted Stock in contravention of any such
restrictions shall be null and void and without effect.
(e)
Rights as a Shareholder
. Except as
provided in Section 8(c) and (d), the Participant shall
possess all incidents of ownership with respect to Shares of
Restricted Stock during the Restricted Period, including the
right to receive or reinvest dividends with respect to such
Shares (except that the Administrator may provide in its
discretion that any dividends paid in property other than cash
shall be subject to the same restrictions as those that apply to
the underlying Restricted Stock) and to vote such Shares.
Certificates for unrestricted Shares shall be delivered to the
Participant promptly after, and only after, the Restricted
Period shall expire without forfeiture in respect of such awards
of Restricted Stock except as the Administrator, in its sole
discretion, shall otherwise determine.
(f)
Termination of Employment
. The
rights of Participants granted an Award of Restricted Stock upon
termination of employment with the Company or any Subsidiary or
Affiliate for any reason during the Restricted Period shall be
set forth in the Award Agreement governing such Award.
Section 9. Restricted
Stock Units
(a)
Vesting
. At the time of the grant of
Restricted Stock Units, the Administrator may impose such
restrictions or conditions to the vesting of such Restricted
Stock Units as it, in its sole discretion, deems appropriate, to
be contained in the Award Agreement, including the attainment of
preestablished Performance Goals or other corporate or
individual performance goals. The Administrator may divide such
Restricted Stock Units into classes and assign different vesting
conditions for each class. Provided that all conditions to the
vesting of a Restricted Stock Unit are satisfied, and except as
provided in Section 9(c), upon the satisfaction of all
vesting conditions with respect to a Restricted Stock Unit, such
Restricted Stock Unit shall vest. The provisions of the awards
of Restricted Stock Units need not be the same with respect to
each Participant.
(b)
Benefit Upon Vesting
. Upon the
vesting of a Restricted Stock Unit, the Participant shall be
entitled to receive, within 30 days of the date on which
such Restricted Stock Unit vests, an amount in cash or, in the
Companys sole discretion, in Common Shares with a Fair
Market Value equal to the sum of (1) the Fair Market Value
of a Common Share on the date on which such Restricted Stock
Unit vests and (2) the aggregate amount of cash dividends
paid with respect to a Common Share during the period commencing
on the date on which the Restricted Stock Unit was granted and
terminating on the date on which such Share vests.
Notwithstanding the foregoing provisions of this
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Section 9, if a Restricted Stock Unit is to be settled in
Common Shares, the Restricted Stock Unit shall vest not earlier
than three years from the date of grant,
provided
that
the Restricted Stock Unit may vest earlier (but not less than
one year from the date of grant) if vesting of the Restricted
Stock Unit is conditioned upon the attainment of preestablished
Performance Goals or other corporate or individual performance
goals.
(c)
Termination of Employment
. The rights
of Participants granted a Restricted Stock Unit upon termination
of employment with the Company or any Subsidiary or Affiliate
for any reason before the Restricted Stock Unit vests shall be
set forth in the Award Agreement governing such Award.
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Section 10.
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Stock
Bonus Awards
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In the event that the Administrator grants a Stock Bonus, a
certificate for the Common Shares constituting such Stock Bonus
shall be issued in the name of the Participant to whom such
grant was made and delivered to such Participant as soon as
practicable after the date on which such Stock Bonus is payable.
The Fair Market Value of the Shares subject to a Stock Bonus
shall not exceed the salary or cash bonus otherwise payable to
the Participant on the date of grant, and the Stock Bonus shall
be in lieu of an amount of the Participants salary or cash
bonus equal to such Fair Market Value.
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Section 11.
|
Stock
Appreciation Rights.
|
(a)
Grant of SARs
. Subject to the terms
and conditions of the Plan, SARs may be granted to Participants
at any time and from time to time as shall be determined by the
Administrator in its sole discretion. The Administrator may
grant Freestanding SARs, Tandem SARs, or any combination of
these forms of SAR. The Administrator in its sole discretion
shall determine the number of SARs granted to each Participant
(subject to Section 4 hereof) and, consistent with the
provisions of the Plan, the terms and conditions pertaining to
such SARs, including any conditions relating to the attainment
of preestablished Performance Goals or other corporate or
individual performance goals as may be determined by the
Administrator in its sole discretion. The provisions of the
awards of SARs need not be the same with respect to each
Participant.
(b)
Grant Price
. The grant price of a
Freestanding SAR shall be not less than the Fair Market Value of
a Share on the date of grant of the SAR. The grant price of
Tandem SARs shall equal the Exercise Price of the related Option.
(c)
Exercise of Tandem SARs
. Tandem SARs
may be exercised for all or part of the Shares subject to the
related Option upon the surrender of the right to exercise the
equivalent portion of the related Option. A Tandem SAR may be
exercised only with respect to the Shares for which its related
Option is then exercisable. Notwithstanding any other provision
of this Plan to the contrary, with respect to a Tandem SAR
granted in connection with an Incentive Stock Option:
(i) the Tandem SAR shall expire no later than the
expiration of the underlying Incentive Stock Option;
(ii) the value of the payout with respect to the Tandem SAR
may be for no more than one hundred percent (100%) of the
difference between the Exercise Price of the underlying
Incentive Stock Option and the Fair Market Value of the Shares
subject to the underlying Incentive Stock Option at the time the
Tandem SAR is exercised; and (iii) the Tandem SAR may be
exercised only when the Fair Market Value of the Shares subject
to the Incentive Stock Option exceeds the Exercise Price of the
Incentive Stock Option.
(d)
Exercise of Freestanding
SARs
. Freestanding SARs may be exercised upon
whatever terms and conditions the Administrator, in its sole
discretion, imposes upon them.
(e)
SAR Agreement
. Each SAR grant shall
be evidenced by an Award Agreement that shall specify the grant
price, the term of the SAR, and such other provisions as the
Administrator shall determine.
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(f)
Term of SARs
. The term of an SAR
granted under the Plan shall be determined by the Administrator,
in its sole discretion; provided, however, that such term shall
not exceed ten (10) years.
(g)
Payment of SAR Amount
. Upon exercise
of an SAR, a Participant shall be entitled to receive payment
from the Company in an amount determined by multiplying:
(i) the difference between the Fair Market Value of a Share
on the date of exercise over the grant price; by
(ii) the number of Shares with respect to which the SAR is
exercised.
At the discretion of the Administrator, the payment upon SAR
exercise may be in cash, in Shares of equivalent value, or in
some combination thereof. The Administrators determination
regarding the form of SAR payout shall be set forth in the Award
Agreement pertaining to the grant of the SAR.
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Section 12.
|
Effect of
Change in Control.
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The Administrator in its discretion may provide that, upon the
occurrence of a change in control (as such term may be defined
in an Award Agreement) or upon termination of employment under
specified circumstances during a specified period following such
a change in control, all as specified in the applicable Award
Agreement, all outstanding Shares of Restricted Stock, and
Restricted Stock Units granted to a Participant which have not
theretofore vested shall immediately vest and all restrictions
on such Shares and Units shall immediately lapse, and each
Option and Stock Appreciation Right granted to a Participant and
outstanding at such time shall become fully and immediately
exercisable.
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Section 13.
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Amendment
and Termination.
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(a) The Board may amend, alter or discontinue the Plan, but
(i) no amendment, alteration, or discontinuation shall be
made that would impair the rights of a Participant under any
Award theretofore granted without such Participants
consent, and (ii) any amendment shall be subject to
approval of shareholders if it (A) materially increases the
benefits accruing to Participants under the Plan,
(B) materially increases the number of Shares that may be
issued under the Plan, or (C) materially modifies the
requirements for participation in the Plan. Unless the Board
determines otherwise, the Board shall obtain approval of
shareholders of the Company for any amendment that would require
such approval in order to satisfy the requirements of
section 162(m) of the Code, section 422 of the Code,
stock exchange rules or other applicable law.
(b) The Administrator may amend the terms of any Award
theretofore granted, prospectively or retroactively, but
(i) unless approved by the shareholders of the Company, no
such amendment shall (A) accelerate the date on which any
Option or SAR granted under the Plan becomes exercisable or
(B) accelerate the lapse of restrictions, or waive any
condition imposed hereunder, with respect to any Restricted
Stock, Restricted Stock Units, or Stock Bonus, and
(ii) subject to Section 4 of Plan, no such amendment
shall impair the rights of any Participant without his or her
consent.
(c) Notwithstanding the foregoing provisions of this
Section 13, any decrease in the Exercise Price of any
outstanding Option (whether effected by amendment to the Plan or
an Award Agreement) shall be subject to the approval of the
shareholders of the Company.
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Section 14.
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Unfunded
Status of Plan.
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The Plan is intended to constitute an unfunded plan
for incentive compensation. With respect to any payments not yet
made to a Participant by the Company, nothing contained herein
shall give any such Participant any rights that are greater than
those of a general creditor of the Company.
A-10
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Section 15.
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Withholding
Taxes.
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(a) Whenever cash is to be paid pursuant to an Award, the
Company (or Subsidiary or Affiliate, as the case may be) shall
have the right to deduct therefrom an amount sufficient to
satisfy any federal, state and local tax withholding
requirements related thereto. Whenever Shares are to be
delivered pursuant to an Award, the Company (or Subsidiary or
Affiliate, as the case may be) shall have the right to require
the Participant to remit to the Company (or Subsidiary or
Affiliate, as the case may be) in cash an amount sufficient to
satisfy any federal, state and local tax withholding
requirements related thereto. With the approval of the
Administrator, a Participant may satisfy the foregoing
requirement by electing to have the Company withhold from
delivery Shares or by delivering Shares already owned by the
Participant for at least six months, in each case, having a
value equal to the minimum amount of tax required to be
withheld. Such shares shall be valued at their Fair Market Value
on the date of which the amount of tax to be withheld is
determined
.
Fractional share amounts shall be settled in
cash. Such an election may be made with respect to all or any
portion of the shares to be delivered pursuant to an Award.
(b) If the Participant makes a disposition, within the
meaning of section 424(c) of the Code and regulations
promulgated thereunder, of any Share or Shares issued to such
Participant pursuant to such Participants exercise of an
Incentive Stock Option, and such disposition occurs within the
two-year period commencing on the day after the date of grant or
within the one-year period commencing on the day after the date
of exercise, such Participant shall, within ten (10) days
of such disposition, notify the Company (or Subsidiary or
Affiliate, as the case may be) thereof and thereafter
immediately deliver to the Company (or Subsidiary or Affiliate,
as the case may be) any amount of federal, state or local income
taxes and other amounts which the Company (or Subsidiary or
Affiliate, as the case may be) informs the Participant the
Company (or Subsidiary or Affiliate, as the case may be) is
required to withhold.
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Section 16.
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General
Provisions.
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(a) Shares shall not be issued pursuant to the exercise of
any Award granted hereunder unless the exercise of such Award
and the issuance and delivery of such Shares pursuant thereto
shall comply with all relevant provisions of law, including,
without limitation, the Securities Act of 1933, as amended, the
Exchange Act and the requirements of any stock exchange upon
which the Common Shares may then be listed, and shall be further
subject to the approval of counsel for the Company with respect
to such compliance. The Company shall be under no obligation to
effect the registration pursuant to the Securities Act of 1933,
as amended, of any interests in the Plan or any Common Shares to
be issued hereunder or to effect similar compliance under any
state laws.
(b) All certificates for Shares delivered under the Plan
shall be subject to such stock-transfer orders and other
restrictions as the Administrator may deem advisable under the
rules, regulations, and other requirements of the Securities and
Exchange Commission, any stock exchange upon which the Common
Shares may then be listed, and any applicable federal or state
securities law, and the Administrator may cause a legend or
legends to be placed on any such certificates to make
appropriate reference to such restrictions. The Administrator
may require, as a condition of the issuance and delivery of
certificates evidencing Shares pursuant to the terms hereof,
that the recipient of such Shares make such agreements and
representations as the Administrator, in its sole discretion,
deems necessary or desirable.
(c) Nothing contained in the Plan shall prevent the Board
from adopting other or additional compensation arrangements,
subject to shareholder approval, if such approval is required;
and such arrangements may be either generally applicable or
applicable only in specific cases. The adoption of the Plan
shall not confer upon any Eligible Recipient any right to
continued employment or service with the Company or any
Subsidiary or Affiliate, as the case may be, nor shall it
interfere in any way
A-11
with the right of the Company or any Subsidiary or Affiliate to
terminate the employment or service of an Eligible Recipient at
any time.
(d) No fractional Common Shares shall be issued or
delivered pursuant to the Plan. The Administrator shall
determine whether cash, other Awards, or other property shall be
issued or paid in lieu of such fractional shares or whether such
fractional shares or any rights thereto shall be forfeited or
otherwise eliminated.
(e) If any provision of the Plan is held to be invalid or
unenforceable, the other provisions of the Plan shall not be
affected but shall be applied as if the invalid or unenforceable
provision had not been included in the Plan.
(f) The Plan and all Awards shall be governed by the laws
of the State of Delaware without regard to its principles of
conflict of laws.
(g) Awards may be granted under the Plan from time to time
in substitution for awards held by employees, directors or
service providers of other corporations who are about to become
employees of the Company or a Subsidiary or Affiliate as the
result of a merger or consolidation of the employing corporation
with the Company or Subsidiary or Affiliate, or the acquisition
by the Company or a Subsidiary or Affiliate of the assets of the
employing corporation, or the acquisition by the Company or a
Subsidiary or Affiliate of the shares of the employing
corporation, as the result of which it becomes a Subsidiary or
Affiliate under the Plan. The terms and conditions of the Awards
so granted may vary from the terms and conditions set forth in
this Plan at the time of such grant as the Administrator may
deem appropriate to conform, in whole or in part, to the
provisions of the awards in substitution for which they are made.
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Section 17.
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Shareholder
Approval; Effective Date of Plan.
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The Plan shall be effective as of the date of its approval by
the Companys shareholders.
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Section 18.
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Term of
Plan.
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No Award shall be granted pursuant to the Plan on or after the
tenth anniversary of the date the Plan is approved by the
Companys shareholders, but Awards theretofore granted may
extend beyond that date.
A-12
PROXY
NABORS INDUSTRIES LTD.
This Proxy is Solicited on Behalf of the Board of Directors
The person signing on the reverse by this proxy appoints Eugene M. Isenberg and Anthony G.
Petrello, and each of them (with full power to designate substitutes), proxies to represent, vote
and act with respect to all common shares of Nabors Industries Ltd. held of record by the
undersigned at the close of business on April 7, 2006 at Nabors annual general meeting of
shareholders to be held on June 6, 2006 and at any adjournments or postponements thereof. The
proxies may vote and act upon the matters designated below and upon such other matters as may
properly come before the meeting (including a motion to adjourn the meeting), according to the
number of votes the undersigned might cast and with all powers the undersigned would possess if
personally present.
1.
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ELECTION OF DIRECTORS: Election of one Class III director of
Nabors to serve until the 2009 annual
general meeting of shareholders or until
their respective successors are elected
and qualified.
Nominees:Eugene M. Isenberg
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2.
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APPOINTMENT OF AUDITORS AND AUTHORIZATION OF AUDIT COMMITTEE TO SET
AUDITORS REMUNERATION: Appointment of PricewaterhouseCoopers LLP as
independent auditors and to authorize the Audit Committee of the Board
of Directors to set auditors remuneration.
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3.
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MANAGEMENT PROPOSAL: Approval of the Companys
Amended and Restated 2003 Employee Stock Plan.
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YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICE BY MARKING THE APPROPRIATE BOX ON THE REVERSE SIDE. IF
YOU DO NOT MARK ANY BOX, YOUR SHARES WILL BE VOTED FOR THE ELECTION OF THE ABOVE-NAMED DIRECTORS
AND FOR THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS AUDITORS AND
FOR THE APPROVAL OF THE
AMENDED AND RESTATED 2003 EMPLOYEE STOCK PLAN IN ACCORDANCE WITH THE BOARD OF DIRECTORS RECOMMENDATIONS.
SEE REVERSE
SIDE
þ
Please mark your votes as in this example.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR
ITEMS 1, 2, AND 3.
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1.
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Election of Director
Eugene Isenberg
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FOR
o
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WITHHELD
o
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2.
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Appointment of
Pricewaterhouse
Coopers LLP as
independent
auditors and to
authorize the Audit
Committee of the
Board of Directors
to set auditors
remuneration.
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FOR
o
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AGAINST
o
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ABSTAIN
o
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3.
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Approval of Amended and Restated 2003 Employee Stock Plan
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FOR
o
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AGAINST
o
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ABSTAIN
o
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In their discretion the proxies are authorized to vote upon such other business as may
properly come before the meeting (including a motion to adjourn the meeting) and at any adjournment
of the meeting.
NOTE: Please mark the proxy, sign exactly as your name appears below, and return it promptly in the
enclosed addressed envelope. When shares are held by joint tenants, both parties should sign.
When signing as an attorney, executor, administrator, trustee or guardian, please give full title
as such. If a corporation, please sign in full corporate name by the President or other authorized
person. If a partnership, please sign in full partnership name by an authorized person.
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Signature
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Date
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Signature
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Date
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