def14a
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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Soliciting Material Pursuant to §240.14a-12 |
Nabors Industries Ltd.
(Name of Registrant as Specified In Its Charter)
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Mintflower
Place
8 Par-La-Ville Road
Ground Floor
Hamilton, HM 08 Bermuda
Notice of 2010 Annual General
Meeting of Shareholders
Nabors Industries Ltd.
Tuesday, June 1, 2010, 11:00 a.m. CDT
Hilton Houston North
12400 Greenspoint Drive
Houston, Texas
April 30,
2010
Fellow shareholder:
We cordially invite you to attend Nabors Industries Ltd.s
2010 annual general meeting of shareholders to:
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1.
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Elect two directors, each for a three-year term;
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2.
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Approve and appoint PricewaterhouseCoopers LLP as our
independent auditor for the year ending December 31, 2010
and authorize the Audit Committee of the Board of Directors to
set the auditors remuneration;
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3.
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Consider four shareholder proposals, if properly presented by
the shareholder proponents; and
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4.
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Transact such other business as may properly come before the
meeting.
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Further information regarding the meeting and the above
proposals is set forth in the accompanying proxy statement. You
are entitled to vote at the meeting if you were a shareholder at
the close of business on April 2, 2010. Even if you plan to
attend the meeting, please submit a proxy as soon as possible to
ensure that your shares are voted at the meeting in accordance
with your instructions.
The Companys financial statements will also be presented
at the meeting.
We hope you will read the proxy statement and submit your proxy.
On behalf of the Board of Directors and the management of
Nabors, I extend our appreciation for your continued support.
Sincerely yours,
Eugene M. Isenberg
Chairman of the Board & Chief Executive Officer
YOUR VOTE IS IMPORTANT
You may designate proxies to vote your shares by telephone or
internet, or by mailing the enclosed proxy card. Your internet
or telephone designation authorizes the named proxies to vote
your shares in the same manner as if you marked, signed and
returned your proxy card. Please review the instructions in the
proxy statement and on your proxy card regarding each of these
options.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY
MATERIALS FOR
THE ANNUAL GENERAL MEETING TO BE HELD ON JUNE 1, 2010:
Our Proxy
Statement and our 2009 Annual Report are available at
www.edocumentview.com/NBR.
TABLE OF CONTENTS
NABORS
INDUSTRIES LTD.
Mintflower Place
8 Par-La-Ville Road
Ground Floor
Hamilton, HM 08 Bermuda
Proxy
Statement
2010
ANNUAL GENERAL MEETING OF SHAREHOLDERS
JUNE 1,
2010
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 2010 annual general meeting of
shareholders (the meeting). We are mailing this
proxy statement and the accompanying form of proxy to
shareholders on or about May 3, 2010. In this proxy
statement, Nabors, the Company,
we, us and our refer to
Nabors Industries Ltd. Where the context requires, these
references also include our subsidiaries and predecessors.
Annual
General Meeting Information
Date and location of the annual general
meeting. We will hold the meeting at the Hilton
Houston North, 12400 Greenspoint Drive, Houston, Texas at
11:00 a.m. Central Daylight Time on Tuesday, June 1,
2010, unless adjourned or postponed. Directions to the meeting
can be found under the Investor Relations tab of the
Companys website at www.nabors.com or by calling
our Investor Relations department at
281-775-8063.
Admission to the annual general meeting. Only
record or beneficial owners of Nabors common shares may attend
the meeting in person. If you are a shareholder of record, you
may be asked to present proof of identification, such as a
drivers license. Beneficial owners must also present
evidence of share ownership, such as a recent brokerage account
or bank statement. All attendees must comply with our standing
rules, copies of which are available on our website and will be
distributed upon entrance to the meeting.
Voting
Information
Record date and quorum. The record date for
the meeting is April 2, 2010. You may vote all common
shares of Nabors that you owned as of the close of business on
that date. Each common share entitles you to one vote on each
matter voted on at the meeting. On the record date, 314,431,403
common shares of Nabors were outstanding. A majority of the
shares outstanding on the record date present, in person or by
proxy, constitutes a quorum to transact business at the meeting.
Abstentions and withheld votes will be counted for purposes of
establishing a quorum.
Submitting voting instructions for shares held in your
name. You may vote at the meeting by telephone or
internet, or by completing, signing and returning the enclosed
proxy card. A properly submitted proxy will be voted in
accordance with your instructions, unless you subsequently
revoke your instructions. If you submit a signed proxy without
indicating your vote, the person voting the proxy will vote your
shares according to the Boards recommendation unless they
lack the discretionary authority to do so as discussed below.
Submitting voting instructions for shares held in street
name. If you hold your shares through a broker,
follow the voting instructions you receive from your broker. If
you want to vote in person, you must obtain a legal proxy from
your broker and bring it to the meeting. If you do not submit
voting instructions to your broker, your
broker may still be permitted to vote your shares. New York
Stock Exchange (NYSE) member brokers may vote your
shares under the following circumstances:
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Discretionary items. The approval and
appointment of Nabors independent auditor is a
discretionary item. NYSE member brokers that do not
receive instructions from beneficial owners may vote on this
proposal in their discretion.
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Nondiscretionary items. The election of
directors and consideration of shareholder proposals are
nondiscretionary items. Absent specific voting
instructions from the beneficial owners on these proposals, NYSE
member brokers may not vote on these proposals.
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If you do not submit voting instructions and your broker does
not have discretion to vote your shares on a matter, your shares
will not be voted on that matter at the meeting (broker
nonvotes). Accordingly, broker nonvotes will not be
counted in determining the outcome of the vote on any
nondiscretionary matter at the meeting. Broker nonvote shares
will, however, be counted for purposes of establishing a quorum.
Revoking your proxy. You may revoke your proxy
at any time before it is actually voted by (1) delivering a
written revocation notice prior to the meeting to the Corporate
Secretary in person or by courier at the address on the cover
page of this proxy statement or by mail to
P.O. Box HM3349, Hamilton, HMPX Bermuda;
(2) submitting a later-dated proxy that we receive no later
than the conclusion of voting at the meeting; or
(3) actually voting in person at the meeting. Please note
that merely attending the meeting will not, by itself,
constitute a revocation of a proxy.
Votes required to elect directors and to adopt other
proposals. Directors are elected by a
plurality of the votes cast. The approval and appointment
of PricewaterhouseCoopers LLP and authorization for the Audit
Committee to set the auditors remuneration, and each of
the shareholder proposals, requires the affirmative vote of the
holders of a majority of shares present in person or
represented by proxy and entitled to vote thereon.
Withholding your vote or voting to
abstain. You may withhold your vote
for any nominee for election for director. Withheld votes will
be excluded from the vote and will have no effect on the
outcome. On the other proposals, you may vote to
abstain. If you vote to abstain, your
shares will be counted as present at the meeting for purposes of
that proposal, and your vote will have the effect of a vote
against the proposal.
ITEM 1
ELECTION
OF DIRECTORS
Our Board of Directors currently has seven members and is
divided into three classes. The members of each class are
elected to serve a three-year term, with the term of office for
each class ending in consecutive years. John V. Lombardi and
James L. Payne are the current Class I directors who have
been nominated by the Board, upon the recommendation of the
Governance and Nominating Committee, for re-election to the
Board to serve until the 2013 annual general meeting or until
their successors are duly elected and qualified. Each of the
nominees has agreed to serve as a director if elected. We do not
anticipate that the nominees will be unable or unwilling to
stand for election, but if that happens, your proxy will be
voted for another person nominated by the Board.
In identifying and recommending nominees for director, the
Governance and Nominating Committee places primary emphasis on
the following criteria:
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Reputation, integrity and (for nonmanagement directors)
independence;
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Judgment, age and diversity of viewpoints, backgrounds and
experiences;
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Business or other relevant experience;
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The extent to which the interplay of the nominees
expertise, skills, knowledge and experience with that of the
other members of the Board of Directors will result in an
effective board that is responsive to the needs of the
Company; and
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For current directors, the directors history of attendance
at Board and committee meetings, the directors preparation
for and participation in and contributions to the effectiveness
of those meetings.
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These criteria include those set forth in our Board Guidelines
on Significant Corporate Governance Issues (Governance
Guidelines), which are available on our website at
www.nabors.com and to any shareholder who requests them
in writing. Requests should be addressed to the Corporate
Secretary and delivered in person or by courier to the address
on the cover page of this proxy statement or by mail to P.O. Box
HM3349, Hamilton, HMPX Bermuda.
The Governance and Nominating Committee does not set specific,
minimum qualifications that nominees must meet in order for the
committee to recommend them to the Board of Directors, but
rather believes that each nominee should be evaluated based on
his or her individual merits, taking into account the needs of
the Company and the composition of the Board of Directors.
Members of the Governance and Nominating Committee discuss and
evaluate possible candidates in detail and suggest individuals
to explore in more depth. The Governance and Nominating
Committee may in its discretion engage outside consultants to
help in identifying candidates. During the past year, the
Governance and Nominating Committee recommended that the Board
add Dr. Lombardi as a director to fill a vacancy created by
a resignation during 2008. Dr. Lombardis name was
provided to the committee by Mr. Isenberg, who had become
acquainted with Dr. Lombardis expertise and acumen
during Dr. Lombardis tenure as Chancellor at the
University of Massachusetts Amherst. After a review of
Dr. Lombardis qualifications and a series of
interviews, the Board approved his appointment as a Class I
Director.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE
ELECTION OF MESSRS. LOMBARDI AND PAYNE AS CLASS I DIRECTORS
FOR A TERM ENDING AT THE 2013 ANNUAL GENERAL MEETING.
CLASS I
Nominees
for election for a three-year term ending in 2013
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Name
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Age
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Position with Nabors, Business Experience and
Qualifications
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John V. Lombardi
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67
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Director since 2009. President and Professor of History of Louisiana State University System since 2007.
Dr. Lombardi was Chancellor and Professor of History of the University of Massachusetts Amherst from 2002 until 2007. Prior to that, he served in various capacities, including President, Director of The Center for Measuring University Performance, and Professor of History, at the University of Florida from 1990 to 2002; as Provost, Vice President for Academic Affairs, and Professor of History at The Johns Hopkins University from 1987 to 1990; and in various capacities, including Dean of the College of Arts and Sciences, Dean of International Programs, Director of the Latin American Studies Program, and Professor of History, at Indiana University from 1967 to 1987, where in addition he taught a course on international business. Dr. Lombardi serves on the Advisory Board of the Jay I. Kislak Foundation, Inc. He previously served on the Board of Directors of the Economic Development Council of Western Massachusetts, where he also served on the Executive Committee, and on the Executive Strategic Council of IMS Global Learning Consortium. Dr. Lombardi has authored or co-authored numerous books and articles on a wide variety of topics, including measuring university performance, Latin American history and international business.
Dr. Lombardis experience in the functional role of chief executive officer and other leadership positions in four of the most prominent public institutions in the United States over a period of four decades, combined with his Latin American expertise, were the primary factors considered by the Board in appointing him to the Board and nominating him for election by the shareholders. Other factors included Dr. Lombardis financial expertise in such diverse areas as budgeting, forecasting, risk management and executive compensation.
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Name
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Age
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Position with Nabors, Business Experience and
Qualifications
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James L. Payne
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73
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Director since 1999. Chairman and Chief Executive Officer of Shona Energy Company, Inc. since 2005.
Mr. Payne was Chairman, Chief Executive Officer and President of Nuevo Energy Company (a company engaged in the acquisition, production and exploration of oil and natural gas properties) from 2001 until 2004 when the company merged with Plains Exploration and Production Company. He retired as Vice Chairman of Devon Corp. (a leading independent natural gas and oil exploration and production company) in 2001. Prior to the merger between Devon Corp. and Santa Fe Snyder Company (an independent natural gas and oil exploration and production company) in 2000, he had served as Chairman and Chief Executive Officer of Santa Fe Snyder Company. He was Chairman and Chief Executive Officer of Santa Fe Energy Company from 1990 to 1999 when it merged with Snyder Oil Company. Mr. Payne also serves as a Director of Baker Hughes Incorporated and Global Industries, Ltd. He was a Director of Pool Energy Services Co. from 1993 until its acquisition by Nabors in 1999 and of BJ Services Company from 1999 until its merger with Baker Hughes in April 2010. Mr. Payne is a graduate of the Colorado School of Mines, where he was named a Distinguished Achievement Medalist in 1993. He holds an MBA degree from Golden Gate University and has completed the Stanford Executive Program.
Mr. Paynes decades of experience in the oil and gas industry, particularly in executive management and director roles, provide valuable insight in areas such as corporate governance, executive and director compensation, risk oversight and safety initiatives. His industry knowledge and relationships, as well as his operational and financial acumen, derived from his experiences with both startup and well established companies, provide valuable resources to the Board.
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CLASS II
Directors
Continuing in Office Terms Expiring in
2011
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Name
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Age
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Position with Nabors, Business Experience and
Qualifications
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Anthony G. Petrello
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55
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Director, President and Chief Operating Officer of Nabors since
1991; Deputy Chairman since 2003.
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From
1979 to 1991, Mr. Petrello was with the law firm Baker &
McKenzie, where his practice focused on international
arbitration, taxation and general corporate law. He served as
Managing Partner of the firms New York office from 1986
until his resignation in 1991. Mr. Petrello holds a J.D. degree
from Harvard Law School and B.S. and M.S. degrees in Mathematics
from Yale University.
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In
addition to his operating functions, Mr. Petrello provides
strategic planning initiative and direction enabling the Company
to adapt and prosper in our rapidly changing competitive
environment.
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Myron M. Sheinfeld
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80
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Director since 1988. Counsel with the law firm of King &
Spalding LLP since 2007.
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From
2001 until 2007, Mr. Sheinfeld was Senior Counsel to the law
firm Akin, Gump, Strauss, Hauer & Feld, L.L.P. From 1970
until 2001 he held various positions in the law firm Sheinfeld,
Maley & Kay P.C., where he earned a reputation as one of
the countrys preeminent bankruptcy practitioners and
scholars. Mr. Sheinfeld was an adjunct professor of bankruptcy
and reorganization law at the University of Texas School of Law
from 1975 to 1991 and is a contributing author to numerous legal
and business publications,
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Name
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Position with Nabors, Business Experience and Qualifications
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and a contributor, member of the Board of Editors, co-editor
and co-author of Collier
on Bankruptcy, and a co- author of
Collier on Bankruptcy Tax
for Lexis-Nexis and Matthew Bender & Co., Inc. He
is former President, a current Director and a member of The Tri
Cities Chapter of the National Association of Corporate
Directors. He is a member of the National Bankruptcy
Conference, former Chair of the ABA Standing Committee on
Specialization and former Chair of the Texas Board of Legal
Specialization.
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Mr.
Sheinfeld brings decades of experience dealing with complex
capital and debt structures, forensic accounting issues and risk
management concerns to our Board. His extensive experience with
the financial concerns of businesses in our industry provides
valuable perspective to the Board and the Audit Committee as the
Company has faced challenges presented by its growth,
legislative and regulatory changes, an evolving governance
climate and sometimes volatile market conditions.
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Martin J. Whitman
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85
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Director since 1991; Lead Director since 2003. Chairman and
Trustee of Third Avenue Trust since 1990.
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Mr. Whitman was Chief Executive Officer until 2002 and a
Director of Danielson Holding Corporation (a holding company for
conversion of waste to energy and insurance businesses) until
2004 (Chairman of the Board until 1999); Chief Executive Officer
of Third Avenue Trust from 1990 to 2003; Co-Chief Investment
Officer of Third Avenue Management LLC and its predecessor (the
adviser to Third Avenue Trust) from 2003 to 2009 and Chief
Investment Officer of Third Avenue Management LLC and its
predecessor from 1991 to 2003; Director of Tejon Ranch Co. (an
agricultural and land management company) from 1997 to 2001; and
Director of Stewart Information Services Corp. (a title
insurance and real estate company) from 2000 until 2001. Mr.
Whitman was an Adjunct Lecturer, Adjunct Professor and
Distinguished Fellow in Finance, Yale University School of
Management from 1972 to 1984 and 1992 to 2008 and is currently
an Adjunct Professor in Finance at Syracuse University. He was
an Adjunct Professor at the Columbia University Graduate School
of Business in 2001. Mr. Whitman is co-author of
The Aggressive
Conservative Investor; of
Distress Investing:
Principles and Technique; and author of
Value Investing: A
Balanced Approach.
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Mr. Whitman brings a wealth of experience in capital and
investment management to the Board. His financial expertise and
experience in the areas of risk management and strategic
planning provide the basis for the extraordinary leadership and
critical independent oversight Mr. Whitman brings to the role of
Lead Director.
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CLASS III
Directors
Continuing in Office Terms Expiring 2012
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Name
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Age
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Position with Nabors, Business Experience and
Qualifications
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Eugene M. Isenberg
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80
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Chairman of the Board and Chief Executive Officer of Nabors
since 1987.
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Mr. Isenberg served as a Director of Danielson Holding
Corporation (a holding company for conversion of waste to energy
and insurance businesses) until 2004. He served as a Governor
of the National Association of Securities Dealers (NASD) from
1998 to 2006 and the American Stock Exchange (AMEX) until 2005.
He has served as a member of the National Petroleum Council
since 2000. From 1969 to 1982, Mr. Isenberg was Chairman
of the Board and principal shareholder of Genimar, Inc. (a steel
trading and building products manufacturing company), which was
sold in 1982. From 1955 to 1968, Mr. Isenberg was employed in
various management capacities with
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Name
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Position with Nabors, Business Experience and Qualifications
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Exxon Corporation. Mr. Isenberg also serves as President of
the University of Massachusetts Amherst Foundation.
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Mr. Isenbergs decades of executive experience in the
energy and manufacturing industries, and particularly his
knowledge of the capital markets, has enabled him to guide the
Company through the challenging economic and industry conditions
of the past few years. Mr. Isenbergs strategic
combination of debt and equity financing has enabled the Company
to execute well-timed acquisitions, technological development
and organic growth to become the industry leader that it is
today.
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William T. Comfort
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72
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Director since 2008. Mr. Comfort is Chairman of Citigroup
Venture Capital and has been with Citigroup Venture Capital
since 1979. Mr. Comfort is also Managing Partner & Chairman
of the Investment Committee of Court Square Capital Partners,
Chairman of Oracle Financial Services Software (OFSS-India) and
a Director of Deutsche Annington (DAIG-Germany). He also serves
on the boards of The John A. Hartford Foundation and NYU Law
School Foundation.
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Mr.
Comforts decades of financial experience and successful
capital management provide the basis for strong guidance and
oversight of the Companys approaches to financial
analysis, risk management, strategic planning and all areas of
operations.
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OTHER
EXECUTIVE OFFICERS
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R. Clark Wood
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Principal Accounting Officer and Principal Financial Officer of
Nabors Industries Ltd. since March 2009; Controller of Nabors
Corporate Services, Inc. since 2007; Assistant Controller of
Nabors Corporate Services, Inc. from 2003 through 2007. Prior to
joining Nabors, Mr. Wood worked for seven years at Arthur
Andersen LLP and KPMG LLP and rose to the rank of Senior Audit
Manager. Mr. Wood obtained a Masters in Professional Accounting
from the University of Texas at Austin.
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Mark D. Andrews
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Corporate Secretary of Nabors since 2007. Prior to joining
Nabors, Mr. Andrews served in various treasury and financial
management positions with General Electric Company beginning in
2000. Mr. Andrews was employed by Pricewaterhouse Coopers LLP
from 1996 to 2000 in a number of capacities, including Tax
Manager, within the firms Mining and Resource Practice.
Mr. Andrews holds a Bachelor of Business Administration
degree from Wilfrid Laurier University and is also a Chartered
Accountant and a CFA charterholder.
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CORPORATE
GOVERNANCE
The Board of Directors met four times during 2009. Each of our
incumbent directors attended 100% of the aggregate meetings of
the Board and committees on which he served during 2009. The
Board has six committees: Audit, Compensation, Governance and
Nominating, Risk Oversight, Technical and Safety, and Executive.
Appointments to and chairmanships of the committees are
recommended by the Governance and Nominating Committee and
approved by the Board. All committees report their activities to
the Board. The charters of each of our Audit Committee,
Compensation Committee, Governance and Nominating Committee, and
Risk Oversight Committee are available on our website at
www.nabors.com. Copies of the respective
charters are available in print without charge to any
shareholder who requests a copy; please direct any requests to
the Corporate Secretary and deliver them in person or by courier
to the address on the cover page of this proxy statement or by
mail to P.O. Box HM3349, Hamilton, HMPX Bermuda.
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Committee
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Current Members
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Primary Responsibilities
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No. of Meetings
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Audit(1)
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Myron M. Sheinfeld
(Chair)
John V. Lombardi
Martin J. Whitman
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Oversees the integrity of our
consolidated financial statements, system of internal controls,
financial risk management, and compliance with legal and
regulatory requirements.
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4(2
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Selects, determines the compensation of,
evaluates and, when appropriate, replaces the independent
auditor, and preapproves audit and permitted nonaudit services.
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Determines the qualifications and
independence of our independent auditor and evaluates the
performance of our internal auditors and independent auditor.
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After review, recommends to the Board
the acceptance and inclusion of the annual audited consolidated
financial statements in our annual report on Form 10-K.
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Compensation(1)
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John V. Lombardi
(Chair)
William T. Comfort
James L. Payne
Myron M. Sheinfeld
Martin J. Whitman
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Reviews and approves the compensation of
our executive officers and other senior leaders.
Oversees the administration of our
equity-based compensation plans.
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4(3
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Executive
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Eugene M. Isenberg
(Chair)
Anthony G. Petrello
Martin J. Whitman
|
|
As necessary between meetings of the
Board, exercises all power and authority of the Board in
overseeing the management of the business and affairs of the
Company.
|
|
|
0(4
|
)
|
Governance and
Nominating(1)
|
|
James L. Payne
(Chair)
William T. Comfort
John V. Lombardi
Myron M. Sheinfeld
Martin J. Whitman
|
|
Identifies and recommends candidates for
election to the Board.
Establishes procedures for the
committees oversight of the evaluation of the Board.
|
|
|
4
|
|
7
|
|
|
|
|
|
|
|
|
Committee
|
|
Current Members
|
|
Primary Responsibilities
|
|
No. of Meetings
|
|
|
|
|
|
|
Recommends director compensation.
|
|
|
|
|
|
|
|
|
Reviews annually our corporate
governance policies.
|
|
|
|
|
|
|
|
|
Reviews and approves any related-party
transactions involving directors and executive officers.
|
|
|
|
|
Risk
Oversight(5)
|
|
Martin J. Whitman
(Chair)
William T. Comfort
John V. Lombardi
James L. Payne
Myron M. Sheinfeld
|
|
Monitors managements
identification and evaluation of major strategic, operational,
regulatory, information and external risks inherent in the
Companys business.
|
|
|
0
|
|
|
|
|
|
Reviews the integrity of the
Companys systems of operational controls regarding legal
and regulatory compliance.
|
|
|
|
|
|
|
|
|
Reviews the Companys processes for
managing and mitigating operational risk.
|
|
|
|
|
Technical and
Safety(1)
|
|
William T. Comfort
(Chair)
John V. Lombardi
James L. Payne
Anthony G. Petrello
|
|
Monitors the Companys compliance with health, safety and environmental standards.
Reviews the Companys safety performance.
Reviews the Companys strategic technology position.
|
|
|
2
|
|
|
|
|
(1) |
|
Dr. Lombardi joined each of the Audit, Compensation,
Governance and Nominating and Technical and Safety Committees
upon his appointment to the Board on April 23, 2009.
Mr. Schmidt concluded service on each of those committees
on June 30, 2009. |
|
(2) |
|
In addition to its formal meetings, the Audit Committee
conducted telephonic information sessions in connection with the
Companys quarterly earnings releases and other matters. |
|
(3) |
|
In addition to its formal meetings, the Compensation Committee
convened by telephone on numerous occasions and once in person
to discuss executive employment agreements. |
|
(4) |
|
The Executive Committee did not meet formally during 2009, but
took action on one occasion by written consent. |
|
(5) |
|
The Risk Oversight Committee was established in February 2010. |
Mr. Whitman serves as our Lead Director. In that role, his
primary responsibility is to preside over executive sessions of
the nonemployee directors and to call meetings of the
nonemployee directors as desirable. The Lead Director also
chairs the Risk Oversight Committee and certain portions of
Board meetings, serves as liaison between the Chairman of the
Board and the nonemployee directors, and develops and approves,
together with the Chairman, the agenda for Board meetings. The
Lead Director also performs other duties the Board delegates
from time to time to assist the Board in fulfilling its
responsibilities. Mr. Isenberg continues in the roles of
Chairman and CEO, positions he has held since he brought the
Company out of bankruptcy and which are specified in his
employment agreement. The Board believes Mr. Isenberg
serving as both Chairman and CEO and Mr. Whitman serving as
Lead Director provides the most effective leadership structure
for the Company at the present time.
8
Director
Independence
The Governance and Nominating Committee conducts a review at
least annually of the independence of the members of the Board
and its committees and reports its findings to the full Board.
Five of our seven directors are nonemployee directors (all
except Messrs. Isenberg and Petrello). As permitted by the
rules of the NYSE, the Board has adopted categorical standards
to assist it in making determinations of director independence.
These standards incorporate and are consistent with the
definition of independent contained in the NYSE
listing rules. Those standards are set forth in our Governance
Guidelines available on our website at www.nabors.com.
The Board has affirmatively determined that each of our
nonemployee directors meets these standards and is independent.
Other than the transactions, relationships and arrangements
described in the section entitled Certain Relationships
and Related-Party Transactions, there were no other
transactions, relationships, or arrangements considered by the
Board in determining that a director was independent.
The Board has determined that Mr. Whitman is an audit
committee financial expert as defined under the current
rules of the Securities and Exchange Commission
(SEC). In addition, each of our directors holds a
Certificate of Director Education from the National Association
of Corporate Directors.
Nominations
for Directors
The Governance and Nominating Committee recommends director
candidates to the full Board after receiving input from all
directors. The Governance and Nominating Committee will consider
director candidates recommended by shareholders. The Governance
and Nominating Committee considers the entirety of each
candidates credentials and does not have specific, minimum
qualifications or requirements that nominees must meet. The
Committee is guided by the following basic selection criteria
for all nominees: independence, highest character and integrity,
experience, reputation and sufficient time to devote to Board
matters. The Committee also gives consideration to diversity of
viewpoints and experience, age, international background and
experience, and specialized expertise in the context of the
needs of the Board as a whole. From a diversity standpoint, the
Committee places particular emphasis on identifying candidates
whose experiences and talents complement and augment those of
other Board members with respect to current and anticipated
matters of importance to the Company. The Committee attempts to
balance the composition of the Board to promote comprehensive
consideration of issues. For example, the widely varying levels
of industry experience among Board members reflect the
Committees strategy of balancing extensive industry
knowledge with relevant experience in other forms of business.
The Committee has the authority to engage consultants, including
retained search firms to help identify new director candidates.
The policy adopted by the Committee provides that candidates
recommended by shareholders are given appropriate consideration
in the same manner as other candidates. Shareholders who wish to
submit a candidate for director for consideration by the
Governance and Nominating Committee for election at our 2011
annual general meeting of shareholders may do so by submitting
in writing the candidates name, together with the
information described on our website at www.nabors.com.
Submissions to the Board of Directors should be delivered in
person or by courier to the address on the cover page of this
proxy statement or by mail to P.O. Box HM3349,
Hamilton, HMPX Bermuda, prior to January 3, 2011.
Shareholder
and Interested Parties Communications with the
Board
Shareholders and other interested parties 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.,
c/o Corporate
Secretary. Communications should be delivered in person or by
courier to the address shown on the cover of this proxy
statement or by mail to 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. The Company encourages
directors to attend the annual general meeting of shareholders.
Three directors attended the 2009 annual general meeting of
shareholders.
9
Executive
Sessions of Nonemployee Directors
Our nonemployee directors, each of whom is independent, meet in
executive session at each regular meeting of the Board without
the Chief Executive Officer or any other member of management
present. The Lead Director presides over these executive
sessions.
NONEMPLOYEE
DIRECTOR COMPENSATION
We believe that it is important to attract and retain
outstanding nonemployee directors. One way we achieve this goal
is through a competitive compensation program. Nabors
compensates its nonemployee directors through a combination of
an annual retainer and equity incentive awards. Directors
typically also receive an equity incentive grant upon initial
appointment or election to the Board. In February 2009, the
Board approved for each director an annual retainer of $50,000;
for the Chairman of each committee, an additional retainer of
$50,000 (except in the case of the Chairman of the Audit
Committee, whose additional retainer was $100,000); and for the
Lead Director, an annual retainer of $50,000 for service in this
capacity. No additional amounts are paid for attendance at Board
or committee meetings. The cash component of director
compensation is paid on a pro rata basis at the end of each
quarter. In July 2009, commensurate with salary reductions made
throughout the Company, the Board reduced by 10% the cash
component of its compensation for the remainder of 2009.
Messrs. Comfort and Whitman agreed at that time to forego
all cash compensation for the remainder of the year. The Board
also approved in July 2009 a policy to allow each director to
receive, in lieu of any quarterly cash payment, immediately
vested stock options valued at the amount of the payment.
Nabors issues equity incentives to its nonemployee directors to
align their interests with those of its other shareholders.
Awards are made pursuant to equity incentive plans adopted from
time to time. During 2006, 2007 and 2009, the Governance and
Nominating Committee retained Towers Perrin to conduct a
competitive assessment of our nonemployee director compensation
program. As a result of these reviews, the Board agreed in March
2006 to reduce the equity component of nonemployee director
compensation 25%, from an annual award of 20,000 shares of
restricted stock to an annual award of 15,000 shares of
restricted stock. The Board agreed in February 2007 to further
reduce the equity component of nonemployee director compensation
20%, to an annual award of 12,000 shares of restricted
stock. The Board believes that its practice of awarding
directors a predetermined number of shares, rather than a
predetermined equity value, better aligns directors
interests with those of our other shareholders. The result is
fluctuating compensation values, which rise when our stock price
is higher and decline when our stock price is lower, as
evidenced in the following table. Each director received an
award of 12,000 restricted shares in February 2009, except
Dr. Lombardi who received a grant of 24,000 restricted
shares upon his appointment to the Board in April.
Dr. Lombardis award appears more than three times as
valuable as the annual grants made to our other directors
because of the significant share price appreciation between the
two award dates. Overall director compensation relative to a
peer group also fluctuates to the extent other directors in that
peer group receive equity of a predetermined value. The Board
considers those fluctuations in deciding whether to follow past
practice with respect to equity grants.
The following table sets forth information concerning total
director compensation during the 2009 fiscal year for each
nonemployee director.
10
2009 Director
Compensation Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Value
|
|
|
|
|
|
|
|
|
|
Fees
|
|
|
|
|
|
|
|
|
|
|
|
and Nonqualified
|
|
|
|
|
|
|
|
|
|
Earned
|
|
|
|
|
|
|
|
|
Non-Equity
|
|
|
Deferred
|
|
|
|
|
|
|
|
|
|
or Paid
|
|
|
Stock
|
|
|
Option
|
|
|
Incentive Plan
|
|
|
Compensation
|
|
|
All Other
|
|
|
|
|
|
|
in Cash
|
|
|
Awards ($)
|
|
|
Awards
|
|
|
Compensation
|
|
|
Earnings
|
|
|
Compensation
|
|
|
Total
|
|
Name(4)
|
|
($)
|
|
|
(1)(2)
|
|
|
($)(3)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
William T. Comfort
|
|
|
25,000
|
|
|
|
118,440
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
143,440
|
|
John V. Lombardi
|
|
|
12,500
|
|
|
|
369,840
|
|
|
|
45,000
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
427,340
|
|
James L. Payne
|
|
|
95,000
|
|
|
|
118,440
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
213,440
|
|
Hans W. Schmidt
|
|
|
50,000
|
|
|
|
118,440
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
168,440
|
|
Myron M. Sheinfeld
|
|
|
142,500
|
|
|
|
118,440
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
260,940
|
|
Martin J. Whitman
|
|
|
75,000
|
|
|
|
118,440
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
193,440
|
|
|
|
|
(1) |
|
The amounts shown in the Stock Awards column reflect
the grant date fair value of restricted stock awards. On
February 25, 2009, each nonemployee director then on the
Board received a restricted stock award of 12,000 shares
scheduled to vest over three years. Dr. Lombardi received a
restricted stock award of 24,000 shares on April 23,
2009. The grant date fair value of the restricted stock award is
based on Nabors closing stock price on the grant date,
which was $9.87 on February 25, 2009 and $15.41 on
April 23, 2009. |
|
(2) |
|
As of December 31, 2009, the aggregate numbers of
restricted stock awards outstanding were:
Mr. Comfort 28,000 shares;
Dr. Lombardi 24,000 shares;
Mr. Payne 24,000 shares;
Mr. Schmidt 24,000 shares;
Mr. Sheinfeld 24,000 shares and
Mr. Whitman 24,000 shares. |
|
(3) |
|
The amount shown in the Option Awards column
reflects the grant date fair value of the stock option awards.
No stock option awards were granted to nonemployee directors
during 2009, except to Dr Lombardi, who voluntarily agreed to
receive stock options in lieu of the quarterly cash payments he
would otherwise have received as a Nabors director. As of
December 31, 2009, the aggregate numbers of stock options
outstanding were: Dr. Lombardi 6,528;
Mr. Payne 80,000; Mr. Schmidt
300,000; Mr. Sheinfeld 280,000 and
Mr. Whitman 265,000. |
|
(4) |
|
Messrs. Isenberg and Petrello, who are employees of the
Company, are not included in this table. Their compensation is
discussed in our Compensation Discussion and Analysis section
beginning on page 15 and is included in the Summary
Compensation Table beginning on page 25. |
BENEFICIAL
OWNERSHIP OF COMPANY COMMON STOCK
Stock ownership of directors and executive
officers. We encourage our directors, officers
and employees to own our common stock; owning our common stock
aligns their interests with those of other shareholders.
Ownership of Company stock ties a portion of their net worth to
the Companys stock price and provides a continuing
incentive for them to work toward superior long-term stock
performance. The following table sets forth
11
the beneficial ownership of common stock, as of April 2,
2010, by each of our current directors and named executive
officers, and by all our current directors and executive
officers as a group:
|
|
|
|
|
|
|
|
|
|
|
Common Shares Beneficially Owned
|
|
|
|
|
|
|
Percent of
|
|
Beneficial Owner(1)
|
|
Number of Shares
|
|
|
Total(2)
|
|
|
Directors
|
|
|
|
|
|
|
|
|
William T. Comfort(2)
|
|
|
148,000
|
|
|
|
|
*
|
Eugene M. Isenberg(2)(3)
|
|
|
23,161,540
|
|
|
|
7.03
|
%
|
John V. Lombardi(2)
|
|
|
42,528
|
|
|
|
|
*
|
James L. Payne(2)
|
|
|
171,100
|
|
|
|
|
*
|
Anthony G. Petrello(2)
|
|
|
11,731,123
|
|
|
|
3.60
|
%
|
Myron M. Sheinfeld(2)(4)
|
|
|
376,334
|
|
|
|
|
*
|
Martin J. Whitman(2)(5)
|
|
|
11,721,038
|
|
|
|
3.72
|
%
|
Other Named Executive Officers
|
|
|
|
|
|
|
|
|
Mark D. Andrews(2)
|
|
|
3,794
|
|
|
|
|
*
|
R. Clark Wood(2)
|
|
|
22,081
|
|
|
|
|
*
|
All Directors/Executive Officers as a group
(9 persons)(2)-(5)
|
|
|
47,377,538
|
|
|
|
14.00
|
%
|
|
|
|
(1) |
|
The address of each of the directors and officers listed is in
care of Nabors Industries Ltd. at the address shown on the cover
page of this proxy statement. |
|
(2) |
|
As of April 2, 2010, Nabors had 314,431,403 shares
outstanding and entitled to vote. For purposes of this table,
beneficial ownership is determined in accordance
with
Rule 13d-3
under the Securities Exchange Act of 1934, as amended (the
Exchange Act) pursuant to which a person or group of
persons is deemed to have beneficial ownership of
any common shares that such person has the right to acquire
within 60 days. We have included in the table common shares
underlying stock options that are vested or scheduled to vest
within 60 days of April 2, 2010. For purposes of
computing the percentage of shares held by the persons named
above, such option shares are not deemed to be outstanding for
purposes of computing the ownership of any person other than the
relevant option holder. |
|
|
|
The number of common shares underlying fully vested stock
options, or those vesting within 60 days, included in the
table are as follows: Mr. Andrews 915;
Mr. Isenberg 15,216,666; Dr. Lombardi
6,528; Mr. Payne 80,000;
Mr. Petrello 8,183,487;
Mr. Sheinfeld 280,000;
Mr. Whitman 265,000; Mr. Wood
12,927; and all directors and named executive officers as a
group 24,045,523. |
|
(3) |
|
The shares listed for Mr. Isenberg are held directly or
indirectly through certain trusts, defined benefit plans and
individual retirement accounts of which Mr. Isenberg is a
grantor, trustee or beneficiary. Included in the table are
772 shares owned directly or held in trust by
Mr. Isenbergs spouse. Mr. Isenberg disclaims
beneficial ownership of those shares. |
|
(4) |
|
The shares listed for Mr. Sheinfeld include 584 shares
owned directly by Mr. Sheinfelds spouse.
Mr. Sheinfeld disclaims beneficial ownership of those
shares. |
|
(5) |
|
The shares listed for Mr. Whitman include 193,038 common
shares owned by M.J. Whitman & Co., Inc. and
11,090,000 common shares owned by Third Avenue Value Fund.
Mr. Whitman is a majority shareholder in
M.J. Whitman & Co., Inc., and he has sole voting
and dispositive power with respect to shares owned by
M.J. Whitman & Co. Mr. Whitman is
co-portfolio manager of the Third Avenue Value Fund. He has
shared voting and dispositive power, but disclaims beneficial
ownership, with respect to shares owned by that Fund. |
12
Principal Shareholders. The following table
contains information regarding the only persons we know of that
beneficially owned more than 5% of our common stock as of
April 2, 2010:
|
|
|
|
|
|
|
|
|
|
|
Common Shares Beneficially Owned
|
|
|
|
|
|
|
Percent of
|
|
Beneficial Owner
|
|
Number of Shares
|
|
|
Total(1)
|
|
|
BlackRock Inc.(2)
|
|
|
26,791,131
|
|
|
|
8.52
|
%
|
40 East 52nd Street
|
|
|
|
|
|
|
|
|
New York, NY 10022
|
|
|
|
|
|
|
|
|
Citigroup Inc.(3)
|
|
|
15,767,231
|
|
|
|
5.01
|
%
|
399 Park Avenue
|
|
|
|
|
|
|
|
|
New York, NT 10043
|
|
|
|
|
|
|
|
|
FMR LLC(4)
|
|
|
39,908,920
|
|
|
|
12.70
|
%
|
82 Devonshire St.,
|
|
|
|
|
|
|
|
|
Boston, MA 02109
|
|
|
|
|
|
|
|
|
Wentworth, Hauser & Violich, Inc.(5)
|
|
|
16,285,998
|
|
|
|
5.18
|
%
|
301 Battery Street, Suite 400
|
|
|
|
|
|
|
|
|
San Francisco, CA 94111
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Based upon total shares outstanding as of April 2, 2010. |
|
(2) |
|
Based on a Schedule 13G filed on January 29, 2010,
BlackRock Inc. and certain of its affiliates have sole voting
and dispositive power with respect to all shares reported. |
|
(3) |
|
Based on a Schedule 13G filed on February 11, 2010,
Citigroup Inc. and certain of its affiliates have shared voting
and dispositive power with respect to all shares reported. |
|
(4) |
|
Based on a Schedule 13G filed on February 16, 2010,
FMR LLC and certain of its affiliates have sole voting power
with respect to 5,653,248 shares and sole dispositive power
with respect to 39,908,920 shares. |
|
(5) |
|
Based on a Schedule 13G filed on February 16, 2010,
Wentworth, Hauser, & Violich, Inc. and certain of its
affiliates have sole voting power with respect to
15,637,253 shares and shared dispositive power with respect
to 16,285,998 shares. |
REPORT OF
THE AUDIT COMMITTEE
The Audit Committee operates under a written charter adopted by
the Board. The charter is available on our website at
www.nabors.com. The Audit Committee is responsible for
the oversight of the integrity of the Companys
consolidated financial statements, the Companys system of
internal controls over financial reporting, financial risk
management, the qualifications and independence of the
Companys independent registered public accounting firm
(independent auditor), the performance of the Companys
internal auditors and independent auditor, and the
Companys compliance with legal and regulatory
requirements. Subject to approval by the shareholders, we have
the sole authority and responsibility to select, determine the
compensation of, evaluate and, when appropriate, replace the
Companys independent auditor. The Board has determined
that each Committee member is independent under applicable
independence standards of the NYSE and the Exchange Act.
The Committee serves in an oversight capacity and is not part of
the Companys managerial or operational decision-making
process. Management is responsible for the financial reporting
process, including the system of internal controls, for the
preparation of consolidated financial statements in accordance
with accounting principles generally accepted in the United
States (GAAP) and for the report on the
Companys internal control over financial reporting. The
Companys independent auditor, PricewaterhouseCoopers LLP,
is responsible for auditing those financial statements and
expressing an opinion as to their conformity with GAAP and
expressing an opinion on the effectiveness of the Companys
internal controls over financial reporting. Our responsibility
is to oversee the financial reporting process and to review and
discuss managements report on the Companys internal
controls over financial reporting. We rely, without independent
verification, on the information provided to us and on the
representations made by management, the internal auditors and
the independent auditor.
13
We held four meetings during 2009. The Committee, among other
things:
|
|
|
|
|
Reviewed and discussed the Companys quarterly earnings
releases, quarterly reports on
Form 10-Q
and annual report on
Form 10-K,
including the consolidated financial statements;
|
|
|
|
Reviewed and discussed the Companys policies and
procedures for risk assessment and risk management and the major
risk exposures of the Company and its business units, as
appropriate;
|
|
|
|
Reviewed and discussed the annual plan and the scope of work of
the internal auditors for 2009 and summaries of the significant
reports to management by the internal auditors;
|
|
|
|
Reviewed and discussed the annual plan and scope of work of the
independent auditor;
|
|
|
|
Provided input to the Compensation Committee regarding
performance goals for key finance, internal control and risk
management personnel;
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Reviewed and discussed reports from management on the
Companys policies regarding applicable legal and
regulatory requirements;
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Reviewed, made technical amendments to and approved the
Committees charter; and
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Met with PricewaterhouseCoopers and the internal auditors in
executive sessions.
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We reviewed and discussed with management, the internal auditors
and PricewaterhouseCoopers the audited consolidated financial
statements for the year ended December 31, 2009, the
critical accounting policies that are set forth in the
Companys annual report on
Form 10-K,
managements annual report on the Companys internal
controls over financial reporting, and
PricewaterhouseCoopers opinion on the effectiveness of the
internal controls over financial reporting.
We discussed with PricewaterhouseCoopers matters that
independent registered public accounting firms must discuss with
audit committees under generally accepted auditing standards and
standards of the Public Company Accounting Oversight Board
(PCAOB), including, among other things, matters
related to the conduct of the audit of the Companys
consolidated financial statements and the matters required to be
discussed by PCAOB AU 380 (Communications with Audit
Committees). This review included a discussion with management
and the independent auditor of the quality (not merely the
acceptability) of the Companys accounting principles, the
reasonableness of significant estimates and judgments, and the
disclosures in the Companys consolidated financial
statements, including the disclosures related to critical
accounting policies.
PricewaterhouseCoopers also provided to the Committee the
written disclosures and the letter required by applicable
requirements of the PCAOB and represented that it is independent
from the Company. We discussed with PricewaterhouseCoopers their
independence from the Company, and considered if services they
provided to the Company beyond those rendered in connection with
their audit of the Companys annual consolidated financial
statements included in its annual report on
Form 10-K,
reviews of the Companys interim condensed consolidated
financial statements included in its quarterly reports on
Form 10-Q,
and their opinion on the effectiveness of the Companys
internal controls over financial reporting were compatible with
maintaining their independence. We also reviewed and
preapproved, among other things, the audit, audit-related, tax
and other services performed by PricewaterhouseCoopers. We
received regular updates on the amount of fees and scope of
audit, audit-related, tax and other services provided.
Based on our review and these meetings, discussions and reports
discussed above, and subject to the limitations on our role and
responsibilities referred to above and in the Audit Committee
charter, we recommended to the Board that the Companys
audited consolidated financial statements for the year ended
December 31, 2009 be included in the Companys annual
report on
Form 10-K.
We also selected PricewaterhouseCoopers as the Companys
independent auditor for the year ending December 31, 2010
and are presenting that selection to the shareholders for
approval.
Respectfully submitted,
THE AUDIT COMMITTEE
Myron M. Sheinfeld, Chairman
John V. Lombardi
Martin J. Whitman
14
COMPENSATION
COMMITTEE REPORT
The Compensation Committee of the Board of Directors has
reviewed and discussed the section of this Proxy Statement
entitled Compensation Discussion and Analysis with
management. Based on that review and discussion, the committee
has recommended to the Board that the section entitled
Compensation Discussion and Analysis as it appears
on pages 15 through 24, be included in this Proxy Statement and
incorporated by reference into the Companys annual report
on
Form 10-K
for the fiscal year ended December 31, 2009.
Respectfully submitted,
THE COMPENSATION COMMITTEE
John V. Lombardi, Chairman
William T. Comfort
James L. Payne
Myron M. Sheinfeld
Martin J. Whitman
COMPENSATION
DISCUSSION AND ANALYSIS
The following Compensation Discussion and Analysis is intended
to help the reader understand our executive compensation
practices and specifically the decisions we made in 2009
concerning the compensation payable to the following
individuals, referred to hereafter as our named executive
officers:
Eugene M. Isenberg, our Chairman and Chief Executive
Officer,
Anthony G. Petrello, our Deputy Chairman, President
and Chief Operating Officer,
Bruce P. Koch, our former Vice President and Chief
Financial Officer,
R. Clark Wood, our Principal Accounting Officer and
Principal Financial Officer, and
Mark D. Andrews, our Corporate Secretary.
This Compensation Discussion and Analysis is provided as a
supplement to, and should be read in conjunction with, the
tables and related narratives that appear on pages 25 through 33
of this proxy statement.
Overview
Role of the Compensation Committee. The
Compensation Committee, which is comprised solely of independent
directors, oversees the compensation program for our named
executive officers, other key executives comprising our senior
leadership team and employees generally. The committee
administers our equity-based programs and reviews and approves
all forms of compensation (including equity grants). The
committee also evaluates the performance of the CEO and reviews
the performance of our other named executive officers and key
executives annually. The full details of the Compensation
Committees duties are described in its charter, which is
available on our website at www.nabors.com.
Our Compensation Philosophy. To meet the
challenges of running a business of our diversity and scope, it
is critical to attract, retain and motivate leaders who
understand the complexities of our business and can deliver
positive business results for the benefit of our shareholders
and other stakeholders. We have shaped our compensation program
to accomplish this purpose. Our executive compensation
philosophy is to provide our executives with appropriate and
competitive individual pay opportunities with actual pay
outcomes that reward superior corporate and individual
performance. The ultimate goal of our program is to increase
shareholder value by providing executives with appropriate
incentives to achieve our long-term business objectives. Toward
that end, we provide a program of cash and equity-based awards
designed to reward executives for superior performance, as
measured by both financial and nonfinancial factors. We use
equity-based awards to align executives interests with
those of other shareholders. The time-vesting feature of those
awards, combined with other forms of deferred compensation,
encourages our talented executives to remain in our employ.
15
Key Developments in 2009. The prevailing
global economic decline has presented significant challenges for
most companies, and Nabors is no exception. Natural gas and oil
prices declined significantly beginning in the second half of
2008, driven in part by the deterioration of the global economic
environment, including the extreme volatility in the capital and
credit markets. All of these factors had an adverse effect on
our customers spending for exploration, production and
development activities, which has had a negative impact on our
operations since late 2008. Although the market price of oil has
rebounded significantly, natural gas prices remain depressed. As
a result, our financial performance declined significantly in
2009. Although our stock price recovered somewhat during the
year, it remained substantially below 2007 levels.
The Compensation Committee took steps to appropriately adjust
management compensation for 2009 based on the special challenges
of our current business environment and in a manner designed to
incentivize performance and encourage retention. Specifically,
as discussed later in this Compensation Discussion and Analysis:
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The Compensation Committee negotiated with Messrs. Isenberg
and Petrello amendments and extensions of their employment
agreements on terms substantially more favorable to the Company
than before, as described more fully below. Significant
improvements include:
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Substantial reductions in the bonus formulas, severance payments
and
change-in-control
benefits for Messrs. Isenberg and Petrello;
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Elimination of tax
gross-ups; and
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Minimum share ownership requirements.
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The Compensation Committee elected to freeze salaries for 2009
for our named executive officers (other than
Messrs. Isenberg and Petrello) and senior leadership at
their 2008 levels. With limited exceptions, the Compensation
Committee elected to continue the salary freeze for named
executive officers and senior leadership in 2010.
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Beginning in June 2009, salaries of our named executive officers
and other senior leadership were reduced by 10%, and the
Compensation Committee has elected to continue the salary
reduction through at least the first half of 2010.
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After freezing most 2008 bonuses at their 2007 levels in
February 2009, the Compensation Committee reduced bonuses for
2009, with limited exceptions, for our other named executive
officers and other senior leadership or, as applicable, froze
those bonuses at the minimum levels required under existing
employment contracts.
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To preserve cash flow and better incentivize management to
improve shareholder value, our senior leadership (other than our
named executive officers) received stock options that vested six
months from the date of grant in lieu of all or a significant
portion of the cash bonuses they would have otherwise received
in March 2009 for service in 2008.
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The Compensation Committee elected in February 2009 to make
long-term awards to our senior leadership for 2008 performance
in the form of stock options rather than restricted stock in
order to better incentivize growth. The committee elected in
February 2010 to return to its practice of granting long-term
equity incentives in the form of restricted stock to reduce the
burn rate of shares in our stock plan and to incentivize
stability, while at the same time significantly reducing the
grant date value of equity incentives awarded.
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Messrs. Isenberg and Petrello received no equity awards in
2009 other than the restricted stock and options they agreed to
take in lieu of a portion of their earned cash bonuses, as more
fully described in the Employment Agreements section
beginning on page 31.
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How We
Determine Executive Compensation
Chief Executive Officer and Chief Operating
Officer. The compensation of our Chief Executive
and Chief Operating Officers, Messrs. Isenberg and
Petrello, is determined primarily by the terms of their
employment agreements. The agreements that governed the
compensation of these two executives through April 2009 had been
in place since they joined the Company in 1987 and 1991,
respectively. Their current agreements provide for a base
salary, an annual cash bonus and various other elements of
compensation (described more fully below).
For context, it is important to understand the historical
backdrop for these contractual arrangements. In 1987, as the
Company was emerging from bankruptcy, Mr. Isenberg took on
the role of Chairman and Chief Executive Officer, with the task
of turning the Company around and building significant value for
our shareholders. Aside from a personal equity investment,
Mr. Isenberg did not receive any equity stake in the
Company at the outset. Rather, the creditors committee
negotiated an employment agreement with Mr. Isenberg that
included a minimum annual salary and established a performance
formula for determining his annual cash bonus, originally 10% of
the Companys cash flow, if any, that exceeded a target of
10% of average shareholders equity for the year. This
contractual arrangement subsequently was approved by the various
constituencies in those reorganization proceedings, including
equity and debt holders, and confirmed by the United States
Bankruptcy Court. As the Company grew and prospered,
Mr. Isenberg agreed to adjust the bonus formula to reduce
the stated percentage of cash flow and increase the stated
percentage of equity, resulting in a lower bonus yield. A
similar employment agreement was negotiated with
Mr. Petrello when he joined Nabors in 1991 as our
President. That agreement was entered after arms length
negotiations with the Board before Mr. Petrello 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. At that time, Mr. Isenberg
voluntarily reduced the stated percentage of cash flow in his
bonus formula by the stated percentage of cash flow in the bonus
formula in Mr. Petrellos agreement.
Since 1987, under Mr. Isenbergs leadership, the
Companys senior executive management team has demonstrated
its versatility and leadership in forging a stable and effective
organization. The cash compensation Messrs. Isenberg and
Petrello have earned under their agreements has grown
significantly, primarily because of the extraordinary growth of
the Company over the years. The Compensation Committee believes
that retention and financial motivation of the current
management team best positions the Company to sustain this level
of performance. Nevertheless, the committee is mindful of the
evolving competitive, financial accounting and regulatory
landscape of executive compensation, which dictated
reconsideration of these compensation arrangements in contracts
negotiated many years ago. Accordingly, at the committees
recommendation, the Board of Directors in March 2006 set a
September 30, 2010 expiration date for
Messrs. Isenbergs and Petrellos employment
agreements.
The Compensation Committee subsequently conducted a thorough
review of the compensation arrangements with
Messrs. Isenberg and Petrello and considered adjustments to
each element of compensation taking into account current
compensation standards, performance evaluations of the
executives, mitigation of contingent payments in existing
arrangements, and succession planning and retention objectives.
In conducting its review, the committee engaged BDO Seidman as
its independent compensation consultant to assist in the
identification and analysis of appropriate elements and levels
of executive compensation. In considering the appropriateness of
the compensation arrangements under Messrs. Isenbergs
and Petrellos renegotiated employment agreements, the
Compensation Committee reviewed market data from the following
companies in the oilfield sector, which were selected with the
input of BDO Seidman based on their industry affiliation and
size: Baker Hughes Incorporated, BJ Services Company, Diamond
Offshore Drilling, Inc., Ensco International Incorporated,
Halliburton Co., Helmerich & Payne, Inc., Noble
Corporation, Pride International, Inc., Rowan Companies, Inc.,
Schlumberger Limited, Smith International, Inc., Transocean
Ltd., Weatherford International Ltd., ConocoPhillips, National
Oilwell Varco, Inc. and Plains Exploration &
Production Company. The Compensation Committee did not target
individual elements of compensation or total compensation at a
specific percentile within the peer group.
Effective April 1, 2009, the Company entered into amended
and extended employment agreements with Messrs. Isenberg
and Petrello on terms that are substantially more favorable to
the Company than before. Notably:
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Mr. Isenbergs annual base salary was set at
$1.3 million. He volunteered to donate the entire after-tax
proceeds of his base salary to education. Pursuant to his new
employment agreement, Mr. Isenberg has
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established a foundation to provide assistance based on need or
merit to employees of the Company or their children to pursue
higher education. Mr. Petrellos annual base salary
was set at $1.1 million. These amounts are subject to
annual review and possible increase.
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The annual bonus formula for Mr. Isenberg was reduced by
62%, to 2.25% (formerly 6%) of net cash flow in excess of 15% of
average shareholders equity for the year. The annual bonus
formula for Mr. Petrello was reduced by 25%, to 1.5%
(formerly 2%) of such excess net cash flow.
Mr. Petrellos bonus formula will adjust to 2% of
excess net cash flow in the event he is appointed Chief
Executive Officer. In addition, as an inducement to enter into
the amended agreements, Nabors will credit $600,000 and
$250,000, respectively, to Messrs. Isenbergs and
Petrellos accounts under our executive deferred
compensation plan (the Executive Plan) at the end of
each quarter they remain employed beginning with the second
quarter of 2009 and, in Mr. Petrellos case, ending
with the first quarter of 2019.
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All tax
gross-ups
were eliminated, including without limitation tax
gross-ups on
perquisites and golden parachute excise taxes.
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Additional stock option grants in the event of a change in
control were eliminated.
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Noncompetition and nonsolicitation covenants were added.
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The terms were extended to March 30, 2013, with one-year
extensions beginning on April 1, 2011 unless either party
gives notice of nonrenewal.
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The previous formulas for severance payments in the event of
Mr. Isenbergs or Mr. Petrellos death,
disability, termination without cause, or constructive
termination without cause were eliminated and replaced with
significantly lower amounts.
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Consistent with our
pay-for-performance
philosophy, the compensation of our named executive officers is
directly affected by our financial performance and shareholder
returns, in good times and bad. Specifically,
Messrs. Isenberg and Petrello will earn an annual bonus
only if the Companys net cash flow exceeds 15% of our
average shareholders equity for that fiscal year. The
excess cash flow metric was originally established when the
Company was emerging from bankruptcy to incentivize growth and,
in particular, cash generation. The Compensation Committee
continues to rely on free cash flow as the primary metric for
senior executive compensation because it has proven over the
years to be an effective measure of actual operating results and
shareholder value generation, while incentivizing and rewarding
financial growth, operational efficiencies and safety, effective
management of working capital, sound investment decisions,
access to capital markets, and liquidity, each of which is
vitally important in our highly competitive, capital-intensive
industry. Similarly, the emphasis on equity incentives
identified as a best practice by the U.S. administrations
pay czar, Kenneth Feinberg, has long been part of our
executives compensation structure. Messrs. Isenberg
and Petrello have accumulated in excess of 10% of the
Companys outstanding shares over roughly two decades,
largely through voluntarily accepting equity awards in lieu of
cash compensation, thereby placing a significant portion of
their earned compensation at the risk of forward stock
performance. Their employment agreements also require that they
maintain a certain threshold of share ownership. They will
realize the economic benefit of these shareholdings only by
generating strong long-term shareholder returns. The executive
management of Nabors has delivered superior returns to its
shareholders over the long term despite the industrys
cyclical ups and downs. Nabors 10-and
20-year
compounded average growth rates were 4.1% and 13.5%, which
compare favorably with that of the S&P 500 (according to
Bloomberg, the compounded average growth rates for companies in
the S&P 500 Index were -2.6% and 5.8% for the 10- and
20-year
periods ended December 31, 2009). The committee considers
these factors when making compensation decisions.
The Compensation Committee recognizes that financial results and
stock price do not always move in tandem. The stock market
generally anticipates and reacts quickly to upward and downward
trends in our business, while those trends may take longer to
impact our financial results. Consequently, it is not uncommon
in times of significant fluctuations in the market, such as we
have experienced over the past two years, for our financial
performance to lag behind trends in our stock price. Elements of
our executives compensation tied to financial performance
may not immediately reflect changes in shareholder value and
vice versa. For example, during the downturn in 2008, our cash
performance remained strong such that Messrs. Isenberg and
Petrello earned robust
18
bonuses during that year. During that same period, however, our
stock price dropped precipitously, causing the value of their
substantial shareholdings to decline by over 50%. Conversely,
after the first quarter of 2009, our share price rebounded
significantly, but our operating results declined. The decline
in operating results, combined with a reduction in their bonus
formulas, caused Messrs. Isenbergs and
Petrellos bonuses to drop significantly after the first
quarter of 2009. Because we strive to achieve both strong
financial performance and significant shareholder returns, we
consider each element of compensation separately and as a whole
in evaluating the effectiveness of our executive compensation
program.
Other named executive officers and senior leadership of the
Company. The Compensation Committee sets the
compensation for our other named executive officers and for
other senior leadership of the Company, which is comprised
generally of the heads of the Companys significant
business units and certain corporate departments. In setting the
compensation of our senior leadership team, including the named
executive officers other than Messrs. Isenberg and
Petrello, we generally focus on three key elements: performance
considerations and business goals; the subjective judgment of
the Compensation Committee with input from Messrs. Isenberg
and Petrello; and in some years, market referencing.
Performance Considerations and Business
Goals. We award our executives compensation and
assign them additional responsibilities as recognition for how
well they perform individually and as a team in achieving
individual and collective business goals. At the end of each
year, each such executives overall performance is assigned
a rating by Messrs. Isenberg and Petrello, which is
reviewed by the Compensation Committee. These performance
ratings heavily influence the executives compensation, but
they are not applied in a formulaic manner. For example, rather
than setting specific targets for achievement of business or
individual goals, the performance rating is determined on a more
subjective basis as further explained below.
Compensation Committee Judgment. Our
Compensation Committee exercises subjective judgment in making
compensation decisions with respect to our senior management
team. Messrs. Isenberg and Petrello provide significant
input to the committee on the compensation, including annual
merit-based salary adjustments, bonus and equity awards, of the
senior leadership of the Company other than themselves. The
committee draws on its own judgment and observations of the
executive officers and other senior leadership, but also relies
heavily on the judgment of Messrs. Isenberg and Petrello in
evaluating the performance of such officers and leaders. We do
not employ a purely formulaic approach to any of our
compensation programs applicable to these executive officers and
senior leaders. The Compensation Committee has discretion to
increase or decrease formula-driven awards, if any, based on
individual performance and executive retention considerations.
The committee also considers input from the Audit Committee with
respect to risk management considerations in evaluating
performance objectives and incentives.
Market Referencing. In some years, we also
consider market data in making compensation decisions for this
group of executives. The principle of market referencing means
that our compensation is considered in light of similarly
situated executives at selected peer companies
and/or
industrial and finance companies in general. To help collect
market information, we look at proxy statement disclosures of
the peer companies
and/or
review published compensation survey sources of industrial and
finance companies generally. We do not target individual
elements of compensation or total compensation at a certain
percentile within a peer group. When we use market referencing,
we review peer group information
and/or
survey data solely to inform ourselves how our executives
and senior leaders aggregate compensation compares to
competitive norms in order to set compensation at levels we
believe are appropriate for attracting and retaining talented
leaders. We did not employ a peer group analysis in determining
the compensation of our named executive officers for 2009.
Tally Sheets. In making compensation
determinations, our Compensation Committee reviews tally sheets
including each of the named executive officers and senior
leadership team. These tally sheets present the dollar amount of
each component of the named executive officers and senior
leaders compensation, including current cash compensation
(base salary and bonus), accumulated deferred compensation
balances, outstanding equity awards, retirement benefits,
perquisites and any other compensation, including compensation
if any to which senior leaders are entitled by virtue of
employment agreements. These tally sheets reflect the annual
compensation for the named executive officers and senior leaders.
19
In its most recent review of tally sheets, the Compensation
Committee determined that, during normal economic times, all of
these elements in the aggregate provide a reasonable and
competitive compensation opportunity for each executive and that
each element contributes to our overall compensation objectives
discussed above. However, given the uncertainty of the current
economy and the special challenges of our current industry
environment, the Compensation Committee made certain adjustments
to the compensation mix and program design for 2010, as
highlighted in the Overview section of this
Compensation Discussion and Analysis and as discussed more fully
below.
Components
of Executive Compensation
The key elements of our executive compensation program are base
salary, annual performance bonus and long-term incentives, such
as equity awards that vest over several years. Stock ownership
is the simplest, most direct way to align our executive
officers interests with those of our other shareholders.
The vesting and other design features of these awards encourage
long-term stock ownership by our executive officers to further
motivate them to create long-term shareholder value. This is
particularly true in the case of Messrs. Isenberg and
Petrello, who have exercised stock options in only four of the
last twenty years and continue to hold a combined equity
interest in the Company of greater than 10%. Our three-part
compensation approach enables us to remain competitive within
our industry while ensuring that our named executive officers
are appropriately incentivized to deliver shareholder value.
Retirement benefit accruals and perquisites or other fringe
benefits make up only a minor portion of the total annual
compensation opportunity. We also provide severance protection
for Messrs. Isenberg and Petrello as discussed later in
this Compensation Discussion and Analysis and in the section
entitled Employment Agreements beginning on
page 31 of this proxy statement.
Base
Salary
Chief Executive Officer and Chief Operating
Officer. 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 base
salaries for both executives were adjusted consistent with
competitive analysis in 2003 and remained constant through March
2009. Effective April 1, 2009, as part of the overall
adjustment of their compensation arrangements,
Messrs. Isenbergs and Petrellos base salaries
were increased to $1.3 million and $1.1 million,
respectively. Mr. Isenberg volunteered in his agreement to
donate the entire after-tax proceeds of his base salary to
education and has established a foundation to provide assistance
based on need or merit to employees of the Company or their
children to pursue higher education. Effective June 29,
2009, Messrs. Isenberg and Petrello agreed to reduce their
base salaries by 10% commensurate with reductions in the
salaries of all named executive officers and other senior
leaders of the Company, and their employment agreements were
amended accordingly. Those reductions are currently set to
expire on June 30, 2010.
Other named executive officers and senior leadership of the
Company. The Compensation Committee reviews the
performance of each other senior executive officer individually
with Messrs. Isenberg and Petrello and determines an
appropriate base salary level based primarily on individual
performance and competitive factors. These competitive factors
sometimes include as a reference the compensation levels of
similarly situated executives of other drilling contractors and
in the oil service sector generally, and also the compensation
levels needed to attract and retain highly talented executives
from outside the industry. We do not target base salaries at a
certain percentile within any peer group. Instead, we review
market data generally to inform ourselves how our
executives and senior leaders aggregate compensation
compares to competitive norms. In the case of newly hired
executives, the Compensation Committee sometimes considers the
previous salary of the candidate in his or her last employment.
Base salaries for our named executive officers for 2007 through
2009 are reported in the Summary Compensation Table on
page 25 under the Salary column. As mentioned in the
Overview section, in light of the current
uncertainty of the economic environment, salaries of our named
executives and other senior leaders were reduced by 10% in June
2009. The Compensation Committee elected to freeze 2010 salaries
for most of our named executive officers and other senior
leaders at their 2009 levels, including the 10% reduction
through at least the first half of 2010. However, effective
January 1, 2010, the Compensation Committee increased the
salary of Mr. Wood,
20
our corporate controller who has acted as our principal
financial and accounting officer since March 2009, in
recognition of the expansion of his duties and his strong
performance.
Annual
Performance Bonus and Long-Term Incentives
Overview. We intend our annual performance
bonus and long-term incentive program to reward achievement of
corporate objectives and to incentivize our named executive
officers to deliver strong shareholder returns. By granting
annual equity awards that vest over several years, we provide a
longer-term focus that further aligns the interests of our
executives with our other shareholders. The Compensation
Committee supports a practice of paying bonuses and long-term
incentives that deliver above-average compensation if financial
results
and/or
shareholder returns exceed expectations. As noted above, 2009
was a challenging year, but one in which our operating results
proved relatively resilient despite prevailing industry
conditions. Strategies employed by senior management in prior
years combined with successful implementation of cost-cutting
initiatives, enabled us to generate strong operating cash flow,
and we continued to enjoy access to capital markets on an
attractive basis. Our resulting cash position enabled us to
continue to fund capital expenditures necessary to sustain our
position in the market, to repurchase a significant amount of
shorter-term convertible debt at substantial savings, and to
retire maturing term debt. The Compensation Committee believes
that retention and financial motivation of the current
management team best positions the Company to continue to grow
shareholder value.
Chief Executive Officer and Chief Operating
Officer. As noted above, Messrs. Isenberg
and Petrello have employment agreements with the Company that
were designed from the outset to align their compensation with
enhancing shareholder value. The major portion of
Messrs. Isenbergs and 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 a specified
percentage 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. Under
the prior agreements in effect through the first quarter of
2009, the specified percentages of net cash flow in
Messrs. Isenbergs and Petrellos bonus formulas
were 6% and 2%, respectively. Based on the Companys strong
cash performance in the first quarter of 2009,
Messrs. Isenberg and Petrello earned bonuses of $15,425,204
and $4,931,874, respectively, for the first quarter of 2009.
Beginning April 1, 2009, those percentages were reduced to
2.25% and 1.5%, respectively. Messrs. Isenberg and Petrello
earned bonuses of $4,466,071 and $2,954,677, respectively, for
the remainder of 2009.
Messrs. Isenberg and Petrello are eligible under their
employment agreements to receive long-term equity incentive
awards. In light of their overall compensation packages, no
equity awards (other than the portion of their annual cash
bonuses for 2008 that they agreed to take in the form of equity)
were requested by or made to Messrs. Isenberg or Petrello
in 2009.
Other named executive officers and senior leadership of the
Company. We provide incentives to these executive
officers and senior leadership in two categories:
(1) annual performance bonuses that are designated in cash,
but are sometimes paid in whole or in part in the form of equity
awards, and (2) long-term incentives that are delivered in
the form of restricted stock, stock options or other equity
awards. The Compensation Committee balances the goals of
rewarding past performance, incentivizing future performance,
and retention in determining the amount and form of these
incentives. Through our annual cash bonus and long-term equity
incentives, we link individual awards to both Company and
individual performance.
Annual incentive awards are not guaranteed. Generally, the
Compensation Committee determines the amount of the annual
bonus, if any, for an officer and then uses that amount as a
basis for determining the number of shares of restricted stock
or options to be granted as a long-term equity award to that
officer, as explained below. While not based on objective
formulas or specific targets, the performance considerations for
the annual bonus include both financial and nonfinancial
assessments, including financial achievements in relation to
internal budgets, developing internal infrastructure and
enhancing positions in certain markets. The nonfinancial
criteria include attainment of safety goals, maintaining
Nabors share in its principal geographic markets,
enhancing Nabors technical capabilities and developing
operations in identified strategic markets. At the end of each
year, Messrs. Isenberg and Petrello perform a personal
assessment of each member of the leadership team other than
themselves, which is
21
reviewed by the Compensation Committee. These assessments
heavily influence the executives annual bonus and
long-term equity incentives, but are not applied in a formulaic
manner.
The Compensation Committee also considers overall corporate
performance during the year, the amount of cash bonus as a
percentage of the individuals base salary, market
referencing information in some years, and the recommendations
of the Chief Executive Officer and Chief Operating Officer.
Based on these considerations, the Compensation Committee
approves annual incentive awards for the other named executive
officers and senior leadership team.
As indicated in the Overview section, in recognition
of the deterioration of the global economic environment and its
negative effect on our businesses, the Compensation Committee
reduced or froze bonuses for 2009 for most of the senior
leadership group, including our named executive officers other
than Messrs. Isenberg and Petrello, at their 2008 levels
or, as applicable, at the minimum levels required under their
employment contracts. The Compensation Committee elected to
increase the cash bonus paid to Mr. Wood in recognition of
the expansion of his duties and strong performance. The
severance payment to Mr. Koch reflected in the Summary
Compensation Table represents the severance payment he received
after his resignation in 2009, which was equal to the cash bonus
he received in 2007.
For 2009, as in prior years, long-term incentives were
determined by multiplying the value of the annual cash bonus
amount by a multiple determined for that individual based upon
position and performance, and delivering the resulting value in
the form of equity, based on the value of our stock on the grant
date. For example, Mr. Andrews earned an annual cash bonus
of $40,000 for 2009. Mr. Andrews also received a separate
long-term incentive award for 2009 in the form of restricted
shares, the number of which was determined by multiplying the
total value of his annual bonus ($40,000) by the applicable
multiple (0.75) and dividing the resulting amount by the value
of our stock on the grant dates. Based on this calculation, he
was granted 1,282 shares of restricted stock, with the
restrictions lapsing ratably over four years. This incentive
award is 12.5% less than the long-term incentive he received for
services in 2008.
The annual cash bonuses for the named executive officers for
2009 are reported in the Summary Compensation Table on
page 25 under the column entitled Bonus. The
grant-date values of long-term incentives granted to our named
executive officers in 2009 are reported in the Stock
Awards column of that table.
Equity Award Policy. The Company has
established a Stock Option/Restricted Stock Award Policy that
applies to the grant of equity incentive awards to all
employees, including our named executive officers. The policy
does not restrict the timing of awards, although the
Compensation Committee generally makes incentive awards to our
named executive officers and senior leadership at the first
meeting of the Compensation Committee following the end of each
calendar year, which usually occurs in February. We do not
coordinate the timing of equity grants with the release of
material information.
Pursuant to this policy, the Compensation Committee delegates to
the Chairman of the Compensation Committee and to
Mr. Isenberg authority, subject to predetermined caps, to
approve equity awards to employees at other times during the
year, such as in connection with new hires and promotions, or in
connection with the appraisal review and compensation adjustment
process for employees. All awards granted by Mr. Isenberg
are required to be reported to the Compensation Committee at its
next regularly scheduled meeting. In connection with the
appraisal review and compensation adjustment process for 2009,
Mr. Isenberg was delegated authority to grant up to an
aggregate of 4,750,000 options to employees other than the named
executive officers.
Retirement
Benefits
Our named executive officers and senior leaders are eligible to
participate in the following retirement plans:
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a tax-qualified 401(k) plan, and
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a nonqualified deferred compensation plan (the Deferred
Compensation Plan).
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Collectively, these plans facilitate retention and encourage our
employees to accumulate assets for retirement. The 401(k) plan
is a tax-qualified, defined-contribution benefit plan covering
substantially all our employees. A description of the Deferred
Compensation Plan, the benefits of our named executive officers
under that plan, and the
22
terms of their participation can be found in the Nonqualified
Deferred Compensation table and the discussion following that
table beginning on page 25 of this proxy statement.
At the end of 2008, the Company terminated the portion of the
Deferred Compensation Plan with respect to interests that were
vested as of December 31, 2005 and distributed the account
balances attributable to such interests to participants. These
distributions to our named executive officers were reflected in
the Nonqualified Deferred Compensation table for 2008. In
addition, participants were given an opportunity to elect to
receive a distribution in 2009 of their vested interests in the
Deferred Compensation Plan as of December 31, 2008 with
respect to post-2005 contributions. Messrs. Isenberg and
Petrello elected to do so. These distributions are reflected in
the Nonqualified Deferred Compensation table for 2009.
Messrs. Isenberg, Petrello and Wood are also eligible to
participate in the Executive Plan. Pursuant to
Mr. Isenbergs amended employment agreement, at the
end of each calendar quarter he remains employed beginning the
second quarter of 2009, Nabors will credit $600,000 to his
account under this plan. These deferred amounts, together with
earnings thereon, will be distributed to Mr. Isenberg upon
expiration of the agreement or earlier upon his termination of
employment due to death, disability, termination without cause
or constructive termination without cause. Pursuant to
Mr. Petrellos amended employment agreement, at the
end of each calendar quarter he remains employed beginning the
second quarter of 2009 and through the first quarter of 2019,
Nabors will credit $250,000 to his account under this plan.
These deferred amounts, together with earnings thereon, will be
distributed to Mr. Petrello when he reaches age 65 or
earlier upon his termination of employment due to death,
disability, termination without cause or constructive
termination without cause. Both Messrs. Isenberg and
Petrello will forfeit their account balances under this plan
upon termination of employment for cause or voluntary
resignation. In February 2010, the Compensation Committee
elected to establish and credit $100,000 to an account for
Mr. Wood under the Executive Plan in recognition of his
strong performance in 2009. Some of our other senior leaders
also participate in the Executive Plan.
Other
Benefits and Perquisites
All of our employees, including our named executive officers,
are entitled to participate in health and welfare benefits
plans. Our named executive officers may also receive
company-sponsored club memberships
and/or an
automobile allowance as part of their overall compensation
package. In addition, Messrs. Isenberg and Petrello are
entitled to additional benefits under the terms of their
employment agreements, as described in the section entitled
Employment Agreements beginning on page 31.
Termination
and
Change-in-Control
Arrangements
Severance protections, particularly in the context of a
change-in-control
transaction, can play a valuable role in attracting and
retaining key executive officers. Accordingly, we provide such
protections for Messrs. Isenberg and Petrello in their
employment agreements. Detailed information regarding these
employment agreements and severance benefits they provide is
included in the section entitled Employment
Agreements beginning on page 31 of this proxy
statement. The severance benefits in the prior agreements were
negotiated when the employment agreements were entered into in
1987 and 1991, respectively.
The severance benefits in Messrs. Isenbergs and
Petrellos employment agreements were substantially
renegotiated in 2009. Under the previous formula for severance
payments approved by creditors and the bankruptcy court in 1987,
in the event of Mr. Isenbergs death, disability,
termination without cause, or constructive termination without
cause, he would have been entitled (if his employment had
terminated on December 31, 2008) to
$263.63 million, excluding excise tax
gross-ups.
Effective April 1, 2009, those provisions were eliminated
and substituted with a flat payment of $100 million upon
any such termination in consideration of the surrender by
Mr. Isenberg of entitlements under the prior agreement and
these and other concessions under the new agreement. Also
effective April 1, 2009, all tax
gross-ups
were eliminated under his new agreement, including the
gross-up for
golden parachute excise taxes.
Similarly, the previous formula for severance payments in the
event of Mr. Petrellos death or disability was
eliminated and substituted with a flat payment of
$50 million upon any such termination, representing a
negotiated amount taking into account Mr. Petrellos
entitlements under the prior agreement and his concessions under
the new
23
agreement. The formula for termination without cause, or
constructive termination without cause, was reduced to three
times the average of the base salary and annual bonus paid to
Mr. Petrello during each of the three fiscal years
preceding the date of termination, with the bonus amounts to be
calculated in all cases as though the bonus formula under the
new agreement had been in effect. The formula will be further
reduced to two times the average stated above effective
April 1, 2015. Also effective April 1, 2009, all tax
gross-ups
were eliminated under his new agreement, including the
gross-up for
golden parachute excise taxes. For comparison, the cash
severance amount to which Mr. Petrello would have been
entitled under the old agreement if his employment had
terminated on December 31, 2008 under any of these
conditions was $89.6 million (excluding excise tax
gross-ups).
In light of the overall concessions by Messrs. Isenberg and
Petrello in the renegotiation of their employment agreements,
including the elimination of tax
gross-up
payments, the elimination of substantial stock option grants in
the event of a change in control, and substantial reductions in
their bonus formulas, the committee agreed to retain a death
benefit in the new agreements, although at a much reduced level,
in order to mitigate the risk of paying a substantially higher
death benefit during the term of the prior agreements. The
committee believes that it was able to obtain a more balanced
compensation package in the new employment agreements through
inclusion of the substantially reduced death benefit.
Risk
Assessment
In view of the current economic and financial environment, the
Compensation Committee has reviewed and will continue to review
with management the design and operation of our incentive
compensation arrangements, including the performance objectives
and the mix of short- and long-term performance horizons used in
connection with incentive awards, for the purpose of assuring
that these arrangements will not provide our executives with
incentive to engage in business activities or other behavior
that would impose unnecessary or excessive risk to the value of
our company or the investments of our shareholders.
Tax
Considerations
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 approved by shareholders is not
subject to the $1 million limit. Although Nabors intends to
take reasonable steps to obtain deductibility of compensation,
it reserves the right not to do so in its judgment, particularly
with respect to retaining the service of its executive officers.
24
2009
SUMMARY COMPENSATION TABLE
The table below summarizes the total compensation paid to or
earned by each of our named executive officers for the fiscal
years ended December 31, 2007, December 31, 2008 and
December 31, 2009.
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Change in Pension
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Value and
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Nonqualified
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Non-Equity
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Deferred
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Stock
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Option
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Incentive Plan
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Compensation
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All Other
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Name and Principal
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Salary
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Bonus
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Award(s)
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Awards
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Compensation
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Earnings
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Compensation
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Total
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Position
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Year
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($)(1)
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($)(2)
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($)(3)
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($)(4)
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($)(5)
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($)(6)
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($)(7)
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($)
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Eugene M. Isenberg
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2009
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1,141,750
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19,891,275
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0
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|
|
0
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0
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2,925
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2,222,038
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23,257,988
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Chairman of the Board and
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2008
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825,000
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70,808,851
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0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
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254,043
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71,887,894
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Chief Executive Officer
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2007
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825,000
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50,925,216
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0
|
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|
|
0
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|
|
|
0
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0
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170,110
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51,920,326
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Anthony G. Petrello
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2009
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965,806
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7,886,551
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0
|
|
|
|
0
|
|
|
|
0
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1,219
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954,446
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9,808,022
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Deputy Chairman of the
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2008
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700,000
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23,128,790
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0
|
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|
|
0
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|
|
|
0
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|
0
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97,760
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23,926,550
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Board, President and Chief
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2007
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700,000
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22,726,311
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0
|
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|
|
0
|
|
|
|
0
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0
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242,932
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23,669,243
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Operating Officer
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|
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|
|
|
|
|
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Bruce P. Koch
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2009
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76,630
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0
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0
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|
|
0
|
|
|
|
0
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|
|
0
|
|
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|
158,410
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235,040
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Vice President and Chief
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2008
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358,543
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|
0
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225,014
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|
|
0
|
|
|
|
0
|
|
|
|
0
|
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|
25,444
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609,001
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Financial Officer
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2007
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330,000
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|
|
|
250,000
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|
|
224,990
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|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
41,793
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|
|
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846,783
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R. Clark Wood
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2009
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193,732
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60,000
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|
|
0
|
|
|
|
75,000
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|
|
0
|
|
|
|
0
|
|
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6,047
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334,779
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Principal Accounting Officer and Principal Financial
Officer
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|
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Mark D. Andrews
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2009
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171,000
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|
|
40,000
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|
|
0
|
|
|
|
30,000
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|
|
|
0
|
|
|
|
0
|
|
|
|
75,626
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|
316,626
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Corporate Secretary
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2008
|
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|
|
180,000
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|
|
50,000
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|
|
20,338
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|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
73,777
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|
|
|
324,115
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|
|
|
|
2007
|
|
|
|
54,269
|
|
|
|
50,000
|
|
|
|
30,009
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|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
23,712
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|
|
|
157,990
|
|
|
|
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(1) |
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A portion of Messrs. Isenbergs and Petrellos
contractual salaries is paid in the form of directors
fees. The amounts in this column for 2009 include $47,500 paid
as directors fees to each of Messrs. Isenberg and
Petrello. Mr. Petrello agreed to receive stock options in
lieu of the $11,250 cash payment he would otherwise have
received as a Nabors director for the third quarter. The stock
option award is reported in the Grants of Plan-Based Awards
Table on page 27. Mr. Koch resigned effective
February 28, 2009. |
|
(2) |
|
Messrs. Isenberg and Petrello are entitled to receive an
annual cash bonus under their employment agreements. For 2007
and 2008, they agreed to accept cash bonuses that were less than
they were entitled to under their agreements. See
above Annual Performance Bonus and Long-Term
Incentives. For 2007, each of them voluntarily agreed to
accept a portion of his bonus in the form of restricted stock
that was granted in February 2008. For 2008, each of them
voluntarily agreed to accept a portion of his bonus in the form
of restricted stock that was granted in October 2008 and in the
form of stock options that were granted in February 2009. The
amounts in this column include the grant-date fair value of the
restricted stock awards and stock option awards that
Messrs. Isenberg and Petrello voluntarily agreed to accept
as part of their annual bonuses. |
|
(3) |
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The amounts shown in the Stock Awards column reflect
the grant-date fair value of restricted stock awards. |
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(4) |
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The amounts shown in the Option Award column reflect
the grant-date fair value of stock option awards. |
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(5) |
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Incentive awards paid in cash are reported under the
Bonus column above. |
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(6) |
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The amounts in the Change in Pension Value and
Nonqualified Deferred Compensation Earnings column are
attributable to above-market earnings in the Executive Plan.
Above-market earnings represent the difference between the 6%
interest rate earned under the plan and 5.35%, which is 120% of
the Internal Revenue Service Long-Term Applicable Federal Rate
as of December 31, 2008. Nonqualified deferred compensation
activity for 2009 is detailed in the 2009 Nonqualified Deferred
Compensation Table on page 29. |
|
(7) |
|
The All Other Compensation amounts in the Summary Compensation
Table consist of the following items: |
25
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|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
Imputed
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Insurance
|
|
|
Club
|
|
|
Life
|
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|
Automobile
|
|
|
|
|
|
|
|
|
NQP
|
|
|
401(k)
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefits
|
|
|
Membership
|
|
|
Insurance
|
|
|
Allowance
|
|
|
Gross-up
|
|
|
Other
|
|
|
Company
|
|
|
Company
|
|
|
|
|
|
|
|
Name
|
|
Year
|
|
|
(a)
|
|
|
(b)
|
|
|
(c)
|
|
|
(d)
|
|
|
(e)
|
|
|
(f)
|
|
|
Match
|
|
|
Match
|
|
|
Total
|
|
|
|
|
|
Eugene M. Isenberg
|
|
|
2009
|
|
|
|
0
|
|
|
|
50,649
|
|
|
|
20,877
|
|
|
|
24,008
|
|
|
|
127,642
|
|
|
|
1,992,900
|
|
|
|
177
|
|
|
|
5,785
|
|
|
|
2,222,038
|
|
|
|
|
|
|
|
|
2008
|
|
|
|
0
|
|
|
|
54,534
|
|
|
|
14,499
|
|
|
|
24,000
|
|
|
|
84,313
|
|
|
|
67,497
|
|
|
|
5,382
|
|
|
|
3,818
|
|
|
|
254,043
|
|
|
|
|
|
|
|
|
2007
|
|
|
|
0
|
|
|
|
49,288
|
|
|
|
9,698
|
|
|
|
23,539
|
|
|
|
30,800
|
|
|
|
47,785
|
|
|
|
5,175
|
|
|
|
3,825
|
|
|
|
170,110
|
|
|
|
|
|
Anthony G. Petrello
|
|
|
2009
|
|
|
|
0
|
|
|
|
23,446
|
|
|
|
2,156
|
|
|
|
27,475
|
|
|
|
12,917
|
|
|
|
884,539
|
|
|
|
0
|
|
|
|
3,913
|
|
|
|
954,446
|
|
|
|
|
|
|
|
|
2008
|
|
|
|
0
|
|
|
|
15,417
|
|
|
|
1,446
|
|
|
|
30,373
|
|
|
|
21,413
|
|
|
|
19,911
|
|
|
|
0
|
|
|
|
9,200
|
|
|
|
97,760
|
|
|
|
|
|
|
|
|
2007
|
|
|
|
0
|
|
|
|
14,681
|
|
|
|
3,790
|
|
|
|
38,532
|
|
|
|
26,458
|
|
|
|
150,471
|
|
|
|
5,175
|
|
|
|
3,825
|
|
|
|
242,932
|
|
|
|
|
|
Bruce P. Koch
|
|
|
2009
|
|
|
|
0
|
|
|
|
3,530
|
|
|
|
71
|
|
|
|
2,215
|
|
|
|
0
|
|
|
|
150,000
|
|
|
|
83
|
|
|
|
2,511
|
|
|
|
158,410
|
|
|
|
|
|
|
|
|
2008
|
|
|
|
0
|
|
|
|
6,237
|
|
|
|
407
|
|
|
|
9,600
|
|
|
|
0
|
|
|
|
0
|
|
|
|
5,382
|
|
|
|
3,818
|
|
|
|
25,444
|
|
|
|
|
|
|
|
|
2007
|
|
|
|
0
|
|
|
|
6,767
|
|
|
|
1,534
|
|
|
|
9,415
|
|
|
|
15,077
|
|
|
|
0
|
|
|
|
5,175
|
|
|
|
3,825
|
|
|
|
41,793
|
|
|
|
|
|
R. Clark Wood
|
|
|
2009
|
|
|
|
0
|
|
|
|
0
|
|
|
|
153
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
262
|
|
|
|
5,632
|
|
|
|
6,047
|
|
|
|
|
|
Mark D. Andrews
|
|
|
2009
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
75,626
|
|
|
|
0
|
|
|
|
0
|
|
|
|
75,626
|
|
|
|
|
|
|
|
|
2008
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
73,777
|
|
|
|
0
|
|
|
|
0
|
|
|
|
73,777
|
|
|
|
|
|
|
|
|
2007
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
23,712
|
|
|
|
0
|
|
|
|
0
|
|
|
|
23,712
|
|
|
|
|
|
|
|
|
(a) |
|
The economic benefit related to a split-dollar life insurance
arrangement was $154,530 and $15,825 for Messrs. Isenberg
and Petrello, respectively. These amounts were reimbursed to the
Company during 2009. The benefit as projected on an actuarial
basis was $469,852 and $73,747, respectively, before taking into
account any reimbursements to the Company. We have used the
economic benefit method for purposes of disclosure in the
Summary Compensation Table. Nabors suspended premium payments
under these policies in 2002 as a result of the Sarbanes-Oxley
Act. |
|
(b) |
|
Includes club dues. |
|
(c) |
|
Represents value of life insurance premiums for coverage in
excess of $50,000. |
|
(d) |
|
Represents amounts paid for auto allowance. |
|
(e) |
|
The amounts in the
Gross-up
column for Mr. Isenberg represent tax reimbursements
related to auto allowance and club memberships incurred prior to
April 1, 2009 and tax preparation fees for tax years prior
to 2009. The amounts in the
Gross-up
column for Mr. Petrello represent tax reimbursements
related to auto allowance and club memberships incurred prior to
April 1, 2009. Effective April 1, 2009, all tax
gross-ups
were eliminated. |
|
(f) |
|
The amounts in the Other column for
Mr. Isenberg include tax preparation fees and, for 2009,
contributions of $1,800,000 to the Executive Plan. These
contributions are detailed in the 2009 Nonqualified Deferred
Compensation Table on page 25. The amounts in the
Other column for Mr. Petrello include the
incremental variable operating costs to the Company (which
include fuel, landing fees, on-board catering and crew travel
expenses) attributable to his personal use of the corporate
aircraft and, for 2009, contributions of $750,000 to the
Executive Plan. These contributions are detailed in the 2009
Nonqualified Deferred Compensation Table on page 25. The
amount in the Other column for Mr. Koch
represents a severance payment upon his departure from Nabors in
February 2009. The amount in the Other column for
Mr. Andrews includes a housing allowance of $48,000. In
addition, the Other column for Mr. Andrews
includes reimbursement of Bermuda payroll taxes, company
matching contributions to a Bermuda pension plan, and
reimbursement of Bermuda health and social insurance premiums,
none of which individually exceeds the greater of $25,000 or 10%
of the total amount of these benefits for Mr. Andrews. |
26
2009
GRANTS OF PLAN-BASED AWARDS
The table below shows each grant of stock options made to a
named executive officer under any plan during the year ended
December 31, 2009. Nabors did not grant any restricted
stock awards or stock appreciation rights to any named executive
officer during the year ended December 31, 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All
|
|
All Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
Option
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
Awards:
|
|
Exercise
|
|
Grant
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
Number of
|
|
Or Base
|
|
Date Fair
|
|
|
|
|
Estimated Future Payouts Under
|
|
Estimated Future Payouts Under
|
|
Number of
|
|
Securities
|
|
Price of
|
|
Value
|
|
|
|
|
Non-Equity Incentive Plan Awards
|
|
Equity Incentive Plan Awards
|
|
Shares of
|
|
Underlying
|
|
Option
|
|
of Option
|
|
|
Grant
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
Stock
|
|
Options
|
|
Awards
|
|
Awards
|
Name
|
|
Date
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
(#)
|
|
(#)(1)
|
|
($/Share)
|
|
($)
|
|
Eugene M. Isenberg
|
|
|
2/25/09
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
3,000,000
|
|
|
$
|
9.87
|
|
|
|
8,831,700
|
|
Anthony G. Petrello
|
|
|
2/25/09
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
1,698,427
|
|
|
$
|
9.87
|
|
|
|
5,000,000
|
|
|
|
|
9/30/09
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
1,726
|
|
|
$
|
20.90
|
|
|
|
11,250
|
|
R. Clark Wood
|
|
|
3/10/09
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
27,460
|
|
|
$
|
9.18
|
|
|
|
75,000
|
|
Mark D. Andrews
|
|
|
2/25/09
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
6,794
|
|
|
$
|
9.87
|
|
|
|
20,000
|
|
|
|
|
3/10/09
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
3,661
|
|
|
$
|
9.18
|
|
|
|
10,000
|
|
|
|
|
(1) |
|
Stock options granted in February and March 2009 relate to 2008
performance. Half of the stock option award to Mr. Isenberg
vested immediately and half is scheduled to vest in two equal
annual installments beginning on the first anniversary of the
grant date. Mr. Petrellos stock option awards vested
immediately. Messrs. Woods and Andrews awards
are scheduled to vest ratably over a four-year period. |
OUTSTANDING
EQUITY AWARDS AT 2009 FISCAL YEAR END
This table shows unexercised options, restricted stock awards
that have not vested, and equity incentive plan awards for each
named executive officer outstanding as of December 31,
2009. The amounts reflected as Market Value are based on the
closing price of our common stock ($21.89) on December 31,
2009 as reported on the New York Stock Exchange.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan Awards:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
Market
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
or Payout
|
|
|
Number of
|
|
Number of
|
|
|
|
|
|
|
|
Market
|
|
Plan Awards:
|
|
Value of
|
|
|
Securities
|
|
Securities
|
|
|
|
|
|
|
|
Value of
|
|
Number of
|
|
Unearned
|
|
|
Underlying
|
|
Underlying
|
|
Option
|
|
|
|
Number of
|
|
Shares That
|
|
Unearned
|
|
Shares That
|
|
|
Unexercised
|
|
Unexercised
|
|
Exercise
|
|
Option
|
|
Shares That
|
|
Have Not
|
|
Shares That
|
|
Have Not
|
|
|
Options (#)
|
|
Options (#)
|
|
Price
|
|
Expiration
|
|
Have Not
|
|
Vested
|
|
Have Not
|
|
Vested
|
Name
|
|
Exercisable
|
|
Unexercisable
|
|
($)
|
|
Date
|
|
Vested (#)
|
|
($)
|
|
Vested (#)
|
|
($)
|
|
Isenberg, E(1)
|
|
|
225,000
|
|
|
|
0
|
|
|
$
|
19.000
|
|
|
|
3/23/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,000,000
|
|
|
|
0
|
|
|
$
|
22.775
|
|
|
|
12/4/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,800,000
|
|
|
|
0
|
|
|
$
|
13.525
|
|
|
|
1/22/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,900,000
|
|
|
|
0
|
|
|
$
|
19.375
|
|
|
|
2/20/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,900,000
|
|
|
|
0
|
|
|
$
|
22.955
|
|
|
|
2/20/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
700,000
|
|
|
|
0
|
|
|
$
|
28.825
|
|
|
|
2/24/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,666,666
|
|
|
|
0
|
|
|
$
|
35.805
|
|
|
|
12/5/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,500,000
|
|
|
|
1,500,000
|
|
|
$
|
9.870
|
|
|
|
2/25/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
233,212
|
|
|
|
5,105,011
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
307,022
|
|
|
|
6,720,712
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,385,879
|
|
|
|
30,336,891
|
|
|
|
N/A
|
|
|
|
N/A
|
|
27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan Awards:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
Market
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
or Payout
|
|
|
Number of
|
|
Number of
|
|
|
|
|
|
|
|
Market
|
|
Plan Awards:
|
|
Value of
|
|
|
Securities
|
|
Securities
|
|
|
|
|
|
|
|
Value of
|
|
Number of
|
|
Unearned
|
|
|
Underlying
|
|
Underlying
|
|
Option
|
|
|
|
Number of
|
|
Shares That
|
|
Unearned
|
|
Shares That
|
|
|
Unexercised
|
|
Unexercised
|
|
Exercise
|
|
Option
|
|
Shares That
|
|
Have Not
|
|
Shares That
|
|
Have Not
|
|
|
Options (#)
|
|
Options (#)
|
|
Price
|
|
Expiration
|
|
Have Not
|
|
Vested
|
|
Have Not
|
|
Vested
|
Name
|
|
Exercisable
|
|
Unexercisable
|
|
($)
|
|
Date
|
|
Vested (#)
|
|
($)
|
|
Vested (#)
|
|
($)
|
|
Petrello, A(2)
|
|
|
182,000
|
|
|
|
0
|
|
|
$
|
19.000
|
|
|
|
3/23/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,000,000
|
|
|
|
0
|
|
|
$
|
22.775
|
|
|
|
12/4/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,900,000
|
|
|
|
0
|
|
|
$
|
13.525
|
|
|
|
1/22/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
950,000
|
|
|
|
0
|
|
|
$
|
19.375
|
|
|
|
2/20/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
950,000
|
|
|
|
0
|
|
|
$
|
22.955
|
|
|
|
2/20/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
350,000
|
|
|
|
0
|
|
|
$
|
28.825
|
|
|
|
2/24/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,333,334
|
|
|
|
0
|
|
|
$
|
35.805
|
|
|
|
12/5/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,698,427
|
|
|
|
0
|
|
|
$
|
9.870
|
|
|
|
2/25/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,726
|
|
|
|
0
|
|
|
$
|
20.900
|
|
|
|
9/30/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
154,695
|
|
|
|
3,386,274
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
130,255
|
|
|
|
2,851,282
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
567,476
|
|
|
|
12,422,050
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Wood, R(3)
|
|
|
2,800
|
|
|
|
0
|
|
|
$
|
19.375
|
|
|
|
6/30/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1500
|
|
|
|
0
|
|
|
$
|
23.990
|
|
|
|
2/20/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,762
|
|
|
|
0
|
|
|
$
|
29.790
|
|
|
|
2/24/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
27,460
|
|
|
$
|
9.180
|
|
|
|
3/10/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
204
|
|
|
|
4,466
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
595
|
|
|
|
13,025
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
234
|
|
|
|
5,122
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,188
|
|
|
|
26,005
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Andrews, M(4)
|
|
|
0
|
|
|
|
6,794
|
|
|
$
|
9.870
|
|
|
|
2/25/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
3,661
|
|
|
$
|
9.180
|
|
|
|
3/10/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
482
|
|
|
|
10,551
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
475
|
|
|
|
10,398
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
(1) |
|
Mr. Isenbergs restricted stock is scheduled to vest
as follows: 233,212 shares vested on 1/31/10;
249,990 shares vested on 3/31/10; 249,990 shares vest
on 6/30/10; 249,990 shares vest on 9/30/10;
249,991 shares vest on
12/31/10;
173,235 shares vest on
3/31/11;
173,235 shares vest of
6/30/11;
173,235 shares vest on
9/30/11 and
173,235 shares vest on
12/31/11. |
|
(2) |
|
Mr. Petrellos restricted stock is scheduled to vest
as follows: 154,695 shares vested on
1/31/10;
103,498 shares vested on
3/31/10;
103,498 shares vest on
6/30/10;
103,499 shares vest on
9/30/10;
103,498 shares vest on
12/31/10;
70,934 shares vest on
3/31/11;
70,934 shares vest on
6/30/11;
70,934 shares vest on
9/30/11 and
70,936 shares vest on
12/31/11. |
|
(3) |
|
Mr. Woods restricted stock is scheduled to vest as
follows: 204 shares vested 3/10/10; 693 shares vested
on 3/14/10;
117 shares vested on 4/13/10; 694 shares vest on
3/14/11; 117 shares vest on 4/13/11; 396 shares vest
on 3/14/12. |
|
(4) |
|
Mr. Andrews restricted stock is scheduled to vest as
follows: 158 shares vested on 3/14/10; 241 shares vest
on 10/1/10; 158 shares vest on 3/14/11; 241 shares
vest on 10/1/11; 159 shares vest on 3/14/12. |
28
OPTION
EXERCISES AND STOCK VESTED IN 2009
The following table shows stock options exercised by the named
executive officers and restricted stock awards vested during
2009. The value realized on the exercise of options is
calculated by subtracting exercise price per share from the
market price per share on the date of the exercise.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
|
Number of
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
Shares
|
|
|
|
|
|
Shares
|
|
|
|
|
|
|
Acquired on
|
|
|
Value Realized
|
|
|
Acquired on
|
|
|
Value Realized
|
|
Name
|
|
Exercise (#)
|
|
|
on Exercise ($)
|
|
|
Vesting (#)
|
|
|
on Vesting ($)
|
|
|
Eugene M. Isenberg
|
|
|
0
|
|
|
|
0
|
|
|
|
1,299,920
|
|
|
|
21,279,074
|
|
Anthony G. Petrello
|
|
|
1,500,000
|
|
|
|
15,090,000
|
|
|
|
602,051
|
|
|
|
9,510,032
|
|
R. Clark Wood
|
|
|
0
|
|
|
|
0
|
|
|
|
1,257
|
|
|
|
11,620
|
|
Mark D. Andrews
|
|
|
0
|
|
|
|
0
|
|
|
|
399
|
|
|
|
6,440
|
|
2009
NONQUALIFIED DEFERRED COMPENSATION
The Deferred Compensation Plan allows certain employees,
including some of our named executive officers, to defer an
unlimited portion of their base salary and cash bonus and to
receive company matching contributions in excess of
contributions allowed under our 401(k) plan because of IRS
qualified plan limits. Individual account balances in the
Deferred Compensation Plan are adjusted in accordance with
deemed investment elections made by the participant using
investment vehicles made available from time to time.
Distributions from the Deferred Compensation Plan are generally
made in the form of a lump-sum payment upon separation of
service from the Company. At the end of 2008, however, we
terminated the portion of the Deferred Compensation Plan with
respect to interests that were vested as of December 31,
2005 and distributed the account balances attributable to such
interests to participants. These distributions to our named
executive officers were reflected in the Nonqualified Deferred
Compensation table for 2008. In addition, participants were
given an opportunity to elect to receive a distribution in 2009
of their vested interests in the Deferred Compensation Plan as
of December 31, 2008 with respect to post-2005
contributions. Messrs. Isenberg and Petrello and a number
of our other senior leaders elected to do so. These
distributions are reflected in the Nonqualified Deferred
Compensation table for 2009. As a result of the termination of
his employment on February 28, 2009, Mr. Koch received
a distribution of his remaining balance in 2009 upon expiration
of the required waiting period.
Under the Executive Plan, we make deferred bonus contributions
to accounts established for certain employees, including some of
our named executive officers and other senior leaders, based
upon their employment agreements or their performance during the
year. Individual account balances in the Executive Plan are
adjusted in accordance with deemed investment elections made by
the participant either using investment vehicles made available
from time to time or in a deemed investment fund that provides
an annual interest rate on such amounts as established by the
Compensation Committee from time to time. The interest rate for
the deemed investment fund is currently set at 6%.
Messrs. Isenberg and Petrello have elected to participate
in this fund, as have some of our other senior leaders.
Distributions from the Executive Plan are made in the form of
lump-sum payments upon vesting, which generally occurs upon
death, disability, termination without cause (as defined), or
five years (or other specified period) after the first
contribution to the participants account.
29
Both the Deferred Compensation Plan and Executive Plan are
unfunded deferred-compensation arrangements. The table below
shows aggregate earnings and balances for each of the named
executive officers under our nonqualified deferred compensation
plans.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive
|
|
Company
|
|
|
|
|
|
|
|
|
Contributions
|
|
Contributions
|
|
Aggregate
|
|
Aggregate
|
|
Aggregate
|
|
|
in Last Fiscal
|
|
in Last Fiscal
|
|
Earnings
|
|
Withdrawals/
|
|
Balance at
|
|
|
Year
|
|
Year
|
|
in Last Fiscal
|
|
Distributions
|
|
Last Fiscal
|
Name
|
|
($)(1)
|
|
($)(2)
|
|
Year ($)(3)
|
|
($)(4)
|
|
Year-End ($)(5)
|
|
Eugene M. Isenberg
|
|
|
8,279
|
|
|
|
1,800,177
|
|
|
|
30,628
|
|
|
|
2,729,188
|
|
|
|
1,839,084
|
|
Anthony G. Petrello
|
|
|
0
|
|
|
|
750,000
|
|
|
|
11,250
|
|
|
|
3,617,704
|
|
|
|
761,250
|
|
Bruce P. Koch
|
|
|
1,385
|
|
|
|
83
|
|
|
|
(5,437
|
)
|
|
|
66,852
|
|
|
|
0
|
|
R. Clark Wood
|
|
|
785
|
|
|
|
262
|
|
|
|
5,528
|
|
|
|
0
|
|
|
|
23,605
|
|
Mark D. Andrews(6)
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
(1) |
|
The amounts shown in the Executive Contributions in Last
Fiscal Year column reflect contributions to the Deferred
Compensation Plan. |
|
(2) |
|
The amounts shown in the Company Contributions in Last
Fiscal Year column for Messrs. Isenberg and Petrello
include contributions of $1,800,000 and $750,000, respectively,
to the Executive Plan. All other amounts in that column reflect
company matching contributions to the Deferred Compensation
Plan. These amounts are included in the All Other
Compensation column of the Summary Compensation Table
beginning on page 25. |
|
(3) |
|
The amounts shown in the Aggregate Earnings in Last Fiscal
Year column for Messrs. Isenberg and Petrello include
interest of $27,000 and $11,250, respectively, earned in the
Executive Plan. All other amounts in that column reflect
earnings or losses in the Deferred Compensation Plan. The
portion of these amounts representing above-market earnings is
reflected in the Change in Pension Value and Nonqualified
Deferred Compensation Earnings column of the Summary
Compensation Table on page 25. |
|
(4) |
|
The amounts shown in the Aggregate
Withdrawals/Distributions column reflect the 2009
distributions to Messrs. Isenberg, Petrello and Koch of
their vested interests in the Deferred Compensation Plan as of
December 31, 2008 with respect to post-2005 contributions. |
|
(5) |
|
The amounts shown in the Aggregate Balance at Last Fiscal
Year-End column for Messrs. Isenberg and Petrello
include balances of $1,827,000 and $761,250, respectively, in
the Executive Plan. All other amounts in that column reflect
balances in the Deferred Compensation Plan. |
|
(6) |
|
Mr. Andrews does not participate in either of our
nonqualified deferred compensation plans. |
Potential
Payments Upon Termination or Change in Control
The following table reflects potential payments to executive
officers under agreements in place with Messrs. Isenberg
and Petrello on December 31, 2009 for termination upon a
change in control or upon their death, disability, termination
without cause or constructive termination without cause (as
defined in their respective employment agreements). The amounts
shown assume the termination was effective on December 31,
2009. In addition to the amounts set forth below, in the event
of death, disability or termination without cause, Messrs.
Isenberg and Petrello would be entitled to a distribution of
their account balances under the Executive Plan, as described
above.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement and
|
|
Welfare
|
|
|
|
|
|
|
Cash
|
|
|
|
Option
|
|
Stock
|
|
Savings Plan
|
|
Benefits and
|
|
Tax
|
|
|
Name
|
|
Severance
|
|
Bonus
|
|
Awards(2)
|
|
Awards(3)
|
|
Contributions
|
|
Out-placement
|
|
Gross-up(4)
|
|
Total
|
|
Eugene M. Isenberg
|
|
$
|
100,000,000
|
|
|
|
0
|
|
|
$
|
18,030,000
|
|
|
$
|
42,162,614
|
|
|
|
0
|
|
|
|
0
|
|
|
$
|
0
|
|
|
$
|
160,192,614
|
|
Anthony G. Petrello
|
|
|
50,000,000
|
(1)
|
|
|
0
|
|
|
|
0
|
|
|
|
18,659,605
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
68,659,605
|
|
Bruce P. Koch
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
R. Clark Wood
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Mark D. Andrews
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
30
|
|
|
(1) |
|
If Mr. Petrello were terminated without cause, the payment
would equal three times the average of the base salary and
annual bonus contemplated in his current employment agreement
during the three fiscal years preceding the termination. In the
event Mr. Petrello had been terminated without cause on
December 31, 2009, his cash severance entitlement would
have been $44,824,097. |
|
(2) |
|
Amounts shown for option awards represent the value of unvested
options that would become vested and exercisable based on the
difference between the $21.89 closing stock price on
December 31, 2009 and the exercise price of the respective
options. |
|
(3) |
|
Amounts shown for stock awards represent the value of unvested
awards that would become vested upon a change in control based
upon the $21.89 closing stock price on December 31, 2009. |
|
(4) |
|
Effective April 1, 2009, tax
gross-ups
were eliminated. |
Employment
Agreements
Messrs. Isenberg and Petrello had employment agreements
(prior employment agreements) in effect through the
first quarter of 2009. The prior employment agreements were
originally negotiated in 1987 and 1991, respectively. They were
restated in 1996 and subsequently amended in 2002, 2005, 2006
(in the case of Mr. Isenberg) and 2008. Effective
April 1, 2009, the Compensation Committee negotiated new
employment agreements for Messrs. Isenberg and Petrello
(new employment agreements) that amend and restate
the prior employment agreements.
The new employment agreements provide for an initial term
extending through March 30, 2013, with automatic one-year
extensions on each anniversary date beginning April 1,
2011, unless either party provides notice of termination
90 days prior to such anniversary. If the Company provides
notice of termination to Mr. Isenberg, then during the
one-year extension period, the Company need not maintain
Mr. Isenberg in the position of Chief Executive Officer,
but must retain him only in the position of Chairman of the
Board. If the Company provides notice of termination to
Mr. Petrello, then provided that he remains employed with
the Company for a period of up to six months as specified by the
Company to assist with the transition of management, the
termination will be treated as a constructive termination
without cause and the Company will buy out the remaining term of
his contract as described below.
In addition to a base salary, the employment agreements in
effect through the first quarter of 2009 provided 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 (the equity
hurdle). Mr. Petrellos bonus was subject to a
minimum of $700,000 per year. Effective April 1, 2009, that
minimum payment was eliminated and the annual cash bonuses under
Messrs. Isenbergs and Petrellos employment
agreements were reduced to 2.25% and 1.5%, respectively, of
Nabors net cash flow in excess of the equity hurdle.
Mr. Petrellos bonus formula will adjust to 2% of
Nabors net cash flow in excess of the equity hurdle in the
event he is appointed Chief Executive Officer.
Messrs. Isenberg and Petrello voluntarily accepted lower
cash bonuses than provided for under their employment agreements
in light of their overall compensation package in 18 of the last
20 and 15 of the last 19 years, respectively.
For 2007, Mr. Isenbergs employment agreement provided
for a cash bonus in the amount of $69.7 million; however,
he voluntarily agreed to reduce the amount of the bonus to
$50.9 million and to receive that bonus in cash in the
amount of $22.5 million, with the remainder in restricted
stock vesting over a three-year period. For 2007,
Mr. Petrello was entitled to a cash bonus in the amount of
$24.4 million under his employment agreement; however, he
voluntarily agreed to reduce the amount of the bonus to
$22.7 million and to receive that bonus in cash in the
amount of $10.7 million, with the remainder in restricted
stock vesting over a three-year period. For 2008,
Messrs. Isenberg and Petrello were entitled to cash bonuses
in the amounts of $70.8 million and $23.1 million,
respectively. They voluntarily agreed to accept a portion of
their bonuses in restricted stock and stock option awards.
Mr. Isenberg received his bonus in cash in the amount of
$33.6 million, restricted stock having a value at the grant
date of $28.4 million vesting over a three-year period, and
stock options having a value at the grant date of
$8.8 million. Half of the stock options granted to
Mr. Isenberg vest over a period of two years; the remaining
stock options vested immediately. Mr. Petrello received his
bonus in cash in the amount of $6.5 million, restricted
stock
31
having a value at the grant date of $11.6 million vesting
over a three-year period, and stock options having a value at
the grant date of $5.0 million vesting immediately. For
2009, the annual cash bonuses for Messrs. Isenberg and
Petrello pursuant to the formulas described in their employment
agreements were $15.4 million and $4.9 million,
respectively, for the first quarter of 2009 in accordance with
the prior employment agreement provisions and $4.5 million
and $3.0 million, respectively, for the second through
fourth quarter of 2009 in accordance with the new employment
agreements.
Messrs. Isenberg and Petrello are also entitled to
participate in the Companys Executive Plan. For each
quarter Mr. Isenberg is employed beginning the second
quarter of 2009, Nabors will credit $600,000 to his account
under the plan. These deferred amounts, together with earnings
thereon, will be distributed to Mr. Isenberg upon
expiration of the agreement or earlier upon termination of
employment due to death, disability, termination without cause
or constructive termination without cause, but will be forfeited
upon his earlier termination of employment for cause or
voluntary resignation. For each quarter Mr. Petrello is
employed from the second quarter of 2009 through the first
quarter of 2019, Nabors will credit $250,000 to his account
under the plan. These deferred amounts, together with earnings
thereon, will be distributed to Mr. Petrello when he
reaches age 65, or earlier upon termination of employment
due to death, disability, termination without cause or
constructive termination without cause, but will be forfeited
upon his earlier termination of employment for cause or
voluntary resignation. During 2009, the Company credited
$1,800,000 and $750,000, respectively, to
Messrs. Isenbergs and Petrellos accounts under
the plan.
Messrs. Isenberg and Petrello also are eligible for awards
under Nabors equity plans, may participate in annual
long-term incentive programs and pension and welfare plans on
the same basis as other executives, and may receive special
bonuses from time to time as determined by the Board.
Termination in the event of death, disability, or termination
without cause (including in the event of a change in
control). The new employment agreements provide
for severance payments in the event that either
Mr. Isenbergs or Mr. Petrellos employment
agreement is terminated (i) upon death or disability,
(ii) by Nabors prior to the expiration date of the
employment agreement for any reason other than for cause, or
(iii) by either individual for constructive termination
without cause, each as defined in the respective employment
agreements. Termination in the event of a change in control (as
defined in the respective employment agreements) is considered a
constructive termination without cause. Mr. Isenberg would
be entitled to receive within 30 days of any such
triggering event a payment of $100 million.
Mr. Petrello would be entitled to receive within
30 days of his death or disability a payment of
$50 million or, in the event of termination without cause
or constructive termination without cause, three times the
average of his base salary and annual bonus (calculated as
though the bonus formula under the new employment agreement had
been in effect) during the three fiscal years preceding the
termination. If, by way of example, Mr. Petrello were
terminated without cause subsequent to December 31, 2009,
his payment would be approximately $45 million. The formula
will be further reduced to two times the average stated above
effective April 1, 2015.
The new employment agreements continue to provide that, upon his
death, disability, termination without cause, or constructive
termination without cause, the executive is entitled to 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, including distribution
of account balances under the Companys Executive Plan. For
Messrs. Isenberg and Petrello, the value of unvested
restricted stock was approximately $42 million and
$19 million, respectively, as of December 31, 2009.
The value of Mr. Isenbergs unvested stock options was
approximately $18 million as of December 31, 2009.
Mr. Petrello did not have any unvested stock options as of
December 31, 2009. 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.
32
Other Obligations. In addition to salary and
bonus, each of Messrs. Isenberg and Petrello receive group
life insurance in an amount equal to his base salary (up to a
limit of $1 million), various split-dollar life insurance
policies, reimbursement of expenses, various perquisites and a
personal umbrella policy in the amount of $5 million.
Premium payments under the split-dollar life insurance policies
were suspended in 2002 as a result of the adoption of the
Sarbanes-Oxley Act. Under each executives new agreement,
the Companys only obligation with respect to the
split-dollar life insurance policies is to make contributions
during the term of the executives employment in the
amounts necessary to maintain the face value of the insurance
coverage. If the Company is not legally permitted to make such
contributions to the policies, it will pay an additional bonus
to the executive equal to the amount required to permit him to
lend sufficient funds to the insurance trusts that own the
policies to keep them in force.
CERTAIN
RELATIONSHIPS AND RELATED-PARTY TRANSACTIONS
Our Governance Guidelines charge the Governance and Nominating
Committee, which is comprised of all of the nonmanagement
members of our Board (each of whom is independent), with
reviewing any transaction between the Company and an officer or
director to ensure its fairness to the Company and to determine
its potential impact on the independence of any director
involved. Our independence standards are set forth in our
Governance Guidelines and described above under Corporate
Governance Director Independence on
page 9.
During the fourth quarter of 2008, the Company entered into a
transaction with Shona Energy Company, Inc. (Shona),
a company in which Mr. Payne, an outside director of the
Company, is chairman and chief executive officer. Shona offered
all of its existing shareholders, including a subsidiary of the
Company, the opportunity to purchase additional Shona common
shares by subscribing for units (the Common Units),
each consisting of one share of Shona common stock and a warrant
to purchase an additional share of Shona common stock during the
next five years, in proportion to each shareholders
respective current share ownership in Shona. In addition, Shona
shareholders were offered the opportunity to participate, up to
their respective ownership proportions, in the purchase of
additional Common Units to the extent that other shareholders of
Shona did not fully subscribe for and purchase their
proportionate share of the Common Units. The Company elected to
participate in the Shona offering by way of both an initial
subscription in proportion to its current equity interest and a
more limited subscription under the overallotment option. As a
result of the Companys participation, it acquired
1,844,819 shares of Shona for an aggregate purchase price
of $922,410. Its equity ownership percentage in Shona increased
from 15.77% to 16.34%.
In the first quarter 2010, the Company entered into another
transaction with Shona. Shona offered all existing shareholders
an opportunity to acquire convertible preferred shares by
subscribing for units (the Preferred Units), each
consisting of one share of Shona Series A 10% convertible
preferred stock and a warrant to purchase an additional
120 shares of Shona common stock during the next five
years. Each current shareholder was entitled to subscribe to
Preferred Units in proportion to its respective current share
ownership in Shona, as well as to purchase additional Preferred
Units to the extent that other shareholders of Shona did not
fully subscribe for and purchase their proportionate share of
the Preferred Units. The Company elected to subscribe for 9,950
Preferred Units, at an aggregate purchase price of $995,000,
which represented less than its proportionate subscription
right. As a result of this transaction, as well as a previous
share issuance by Shona in which Nabors did not participate, the
Companys equity ownership percentage in Shona decreased to
11.12%, with all preferred shares counted on an as-converted
basis.
The Governance & Nominating Committee reviewed each of
these transactions and determined that they were conducted at
arms length and did not impair Mr. Paynes
independence. Mr. Payne did not take part in the
determinations.
COMPENSATION
COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee for 2009 was comprised of Messrs.
Comfort, Payne, Schmidt (until his resignation on June 30,
2009), Sheinfeld, Whitman and Dr. Lombardi (beginning
April 23, 2009), all independent directors. None of these
directors has ever served as an officer or employee of Nabors or
any of its subsidiaries, nor has any participated in any
transaction during the last fiscal year required to be disclosed
pursuant to the SECs proxy rules, except as disclosed in
the preceding section, Certain Relationships and
Related-Party Transactions,
33
with respect to Mr. Payne. No executive officer of Nabors
serves as a member of the compensation committee of the board of
directors of any entity that has one or more of its executive
officers serving as a member of our Compensation Committee. In
addition, none of our executive officers serves as a member of
the compensation committee of the board of directors of any
entity that has one or more of its executive officers serving as
a member of our Board of Directors.
ITEM 2
APPROVAL
AND APPOINTMENT OF INDEPENDENT AUDITOR AND AUTHORIZATION
OF THE AUDIT COMMITTEE TO SET THE AUDITORS
REMUNERATION
Under Bermuda law, our shareholders have the responsibility to
appoint the independent auditor 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 meeting, the
shareholders will be asked to approve the appointment of
PricewaterhouseCoopers LLP as our independent auditor and to
authorize the Audit Committee of the Board of Directors to set
the independent auditors remuneration.
PricewaterhouseCoopers or its predecessor has been our
independent auditor since May 1987.
A representative from PricewaterhouseCoopers is expected to be
present at the 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.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR THE APPOINTMENT OF PRICEWATERHOUSECOOPERS
LLP AS INDEPENDENT AUDITOR OF THE COMPANY AND TO AUTHORIZE THE
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS TO SET THE
AUDITORS REMUNERATION.
Preapproval of independent auditor
services. The Audit Committee preapproves all
audit and permitted nonaudit services (including the fees and
terms thereof) to be performed for the Company by
PricewaterhouseCoopers, the Companys independent auditor.
The Chairman of the Audit Committee may preapprove additional
permissible proposed nonaudit services that arise between
Committee meetings, provided that the decision to preapprove the
service is presented for ratification at the next regularly
scheduled committee meeting.
Independent
Auditor Fees
The following table summarizes the aggregate fees for
professional services rendered by PricewaterhouseCoopers. The
Audit Committee preapproved 2009 and 2008 services.
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Audit Fees
|
|
$
|
5,233,551
|
|
|
$
|
5,855,437
|
|
Audit-Related Fees
|
|
|
20,177
|
|
|
|
36,167
|
|
Tax Fees
|
|
|
231,105
|
|
|
|
361,804
|
|
All Other Fees
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
5,484,833
|
|
|
$
|
6,253,408
|
|
|
|
|
|
|
|
|
|
|
The Audit fees for the years ended December 31, 2009
and 2008, respectively, include fees for professional services
rendered for the audits of the consolidated financial statements
of the Company and the audits 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 for the years ended
December 31, 2009 and 2008, respectively, include
consultations concerning financial accounting and reporting
standards.
Tax fees as of the years ended December 31, 2009 and
2008, respectively, include services related to tax compliance,
including the preparation of tax returns and claims for refund;
and tax planning and tax advice.
They rendered no other professional services during 2009 or 2008.
34
ITEM 3
SHAREHOLDER
PROPOSAL REGARDING PAY FOR SUPERIOR PERFORMANCE
The following shareholder proposal has been submitted to the
Company for action by the Massachusetts Laborers Pension
Fund, a holder of 6,090 shares, 14 New England Executive
Park, Suite 200, Burlington, Massachusetts 01803. The
affirmative vote of a majority of the shares voted at the
meeting is required for the approval of the shareholder
proposal. Our Board recommends that you vote
Against this Proposal. The text of the
proposal follows:
Resolved: That the shareholders of Nabors
Industries Ltd. (Company) request that the Board of
Directors Executive Compensation Committee adopt a Pay for
Superior Performance principle by establishing an executive
compensation plan for senior executives (Plan) that
does the following:
|
|
|
|
|
Sets compensation targets for the Plans annual and
long-term incentive pay components at or below the peer group
median;
|
|
|
|
Delivers a majority of the Plans target long-term
compensation through performance-vested, not simply time-vested,
equity awards;
|
|
|
|
Provides the strategic rationale and relative weightings of the
financial and nonfinancial performance metrics or criteria used
in the annual and performance-vested long-term incentive
components of the Plan;
|
|
|
|
Establishes performance targets for each Plan financial metric
relative to the performance of the Companys peer
companies; and
|
|
|
|
Limits payment under the annual and performance-vested long-term
incentive components of the Plan to when the Companys
performance on its selected financial performance metrics
exceeds peer group median performance.
|
Supporting
Statement
We feel it is imperative that executive compensation plans for
senior executives be designed and implemented to promote
long-term corporate value. A critical design feature of a
well-conceived executive compensation plan is a close
correlation between the level of pay and the level of corporate
performance. The
pay-for-performance
concept has received considerable attention, yet all too often
executive pay plans provide generous compensation for average or
below average performance when measured against peer
performance. We believe the failure to tie executive
compensation to superior corporate performance has fueled the
escalation of executive compensation and detracted from the goal
of enhancing long-term corporate value.
We believe that the Pay for Superior Performance principle
presents a straightforward formulation for senior executive
incentive compensation that will help establish more rigorous
pay for performance features in the Companys Plan. A
strong pay and performance nexus will be established when
reasonable incentive compensation target pay levels are
established; demanding performance goals related to
strategically selected financial performance metrics are set in
comparison to peer company performance; and incentive payments
are awarded only when median peer performance is exceeded.
We believe the Companys Plan fails to promote the Pay for
Superior Performance principle in several important ways. Our
analysis of the Companys executive compensation plan
reveals the following features that do not promote the Pay for
Superior Performance principle:
|
|
|
|
|
The compensation plans for the CEO and President are determined
by their employment agreements.
|
|
|
|
The company does not target executive compensation at any
particular level relative to its peer group.
|
|
|
|
There is no upper limit on the annual incentive award for the
CEO or President, as the award consists of a certain percentage
of Company net cash flow.
|
|
|
|
For the other NEOs, annual incentive awards are discretionary;
the executive does not have to achieve any particular
performance targets in order to receive awards.
|
|
|
|
Long-term incentive awards are not performance-vested.
|
|
|
|
Stock options vest ratably over four years.
|
35
BOARDS
STATEMENT AGAINST SHAREHOLDER PROPOSAL IN
ITEM 3
OUR BOARD RECOMMENDS THAT YOU VOTE AGAINST
THIS PROPOSAL. Our Board believes that this
proposal is not in the best interest of shareholders and opposes
this proposal for the following reasons.
Similar or identical shareholder proposals have been presented
in four of the last five years and defeated each time. As we
explained in prior years proxy statements, the Board
agrees with the premise of this proposal, that it is
imperative that compensation plans for senior executives be
designed and implemented to promote long-term corporate
value. However, the Board believes that the Companys
executive compensation system already meets this imperative and
accordingly recommends that shareholders vote
AGAINST this proposal.
The compensation of our Chief Executive Officer and Chief
Operating Officer decreased significantly last year, largely due
to the Compensation Committees renegotiation of their
employment agreements on terms substantially more favorable to
the Company than before. As discussed more fully in the
Compensation Discussion and Analysis beginning on
page 13 and in the section entitled Employment
Agreements beginning on page 26, we believe that the
compensation arrangements in the new agreements more closely
align our compensation structure with market standards and
performance goals, while still creating a meaningful incentive
to the executives to sustain the high level of performance they
have delivered over the past two decades.
Nabors compensation system is and has been
market-competitive and performance-based for many years. For the
Chief Executive Officer and the Chief Operating Officer, all but
their current and deferred cash compensation is
performance-based. A significant portion of that compensation
takes the form of equity incentives issued at market value that
vest over time, naturally aligning these executives
interests with those of shareholders. If stock prices decline,
stock options have no value, and restricted stock loses value.
As discussed in more detail above in the Compensation
Discussion and Analysis, we believe that our current
compensation structure best incentivizes the executives to
achieve strong financial performance and to deliver superior
shareholder returns. Cash incentives tied to specific financial
targets encourage strong financial performance year after year.
With respect to equity grants, the time-vesting requirement,
their current beneficial ownership of greater than a 10% equity
interest in the Company, and the historical practice of our
Chief Executive Officer and Chief Operating Officer to hold
their equity awards through cyclical downturns, infrequently
selling their shares or exercising their stock options, together
provide a continuing incentive to these executives not only to
achieve but to sustain superior performance over the long term.
Indeed, through the economic downturn of 2008, our Chief
Executive Officer and Chief Operating Officer saw their equity
holdings, the vast majority of which were acquired by
voluntarily agreeing to take equity awards in lieu of cash
compensation, decline in aggregate value by more than
$200 million, which is greater than 50% of their
2007 year-end value. This is true notwithstanding the fact
that these same executives produced compounded average growth
rates during the periods they have held that equity at a rate
that significantly outperforms the S&P 500. Over the
approximately
20-year
period since Mr. Isenberg became the Chief Executive
Officer, the Companys compounded annual growth rate has
exceeded that of the S&P 500. The same has been true over
the most recent
10-year
period, as shown below.
|
|
|
|
|
|
|
|
|
|
|
20 years
|
|
|
10 years
|
|
|
Nabors
|
|
|
13.5
|
%
|
|
|
4.1
|
%
|
S&P 500
|
|
|
5.8
|
%
|
|
|
-2.6
|
%
|
We further believe that implementing this proposal by setting
incentive compensation targets at or below peer group
median fails to achieve the proponents stated goal
of correlating the level of pay (at or below average) with the
desired level of corporate performance (above average to
superior). We also believe it would severely impair our ability
to attract, motivate and retain high-caliber executive talent.
It is unlikely that offering to reward someone with only average
or below-average pay would motivate them to deliver
above-average results, much less provide an effective incentive
either to attract or to retain them. This is particularly true
for exceptional executive talent in a highly competitive market
for top-performing individuals. Finally, with respect to our
executives whose compensation is not governed by an employment
contract, rigidly tying their compensation to the actions and
performance of our competitors unduly limits the Compensation
Committees flexibility to design and implement incentives
which they determine in their business judgment are appropriate
after considering all relevant factors.
Our Board recommends that you vote AGAINST this
proposal.
36
ITEM 4
SHAREHOLDER
PROPOSAL REGARDING AN ADVISORY RESOLUTION TO RATIFY
THE COMPENSATION OF THE NAMED EXECUTIVE OFFICERS
The following shareholder proposal has been submitted to the
Company for action by The Nathan Cummings Foundation, a holder
of 500 shares, 475 Tenth Avenue, 14th Floor, New York, NY
10017. The affirmative vote of a majority of the shares voted at
the meeting is required for the approval of the shareholder
proposal. Our Board recommends that you vote
Against this Proposal. The text of the
proposal follows:
Resolved, that the shareholders of Nabors Industries Ltd.
(Nabors or the Company) urge the board
of directors to adopt a policy under which shareholders could
vote at each annual meeting on an advisory resolution, to be
proposed by Nabors management, to ratify the compensation
of the named executive offices (NEOs) set forth in
the proxy statements Summary Compensation Table (the
SCT) and the accompanying narrative disclosure of
material factors provided to understand the SCT (but not the
Compensation Discussion and Analysis). The proposal submitted to
shareholders should make clear that the vote is non-binding and
would not affect compensation paid or awarded to any NEO.
Supporting
Statement
Investors are increasingly concerned about mushrooming executive
compensation that sometimes appears to be insufficiently aligned
with the creation of shareholder value. Those concerns have only
increased in the current economic downturn.
A recent SEC rule, which received record support from investors,
requires companies to disclose additional information about
compensation and perquisites for top executives. In adopting
this rule, the SEC made it clear that market forces, not the
SEC, should provide checks and balances on compensation
practices.
We believe that existing U.S. corporate governance
arrangements, including SEC rules and stock exchange listing
standards, do not give shareholders enough mechanisms to provide
input to boards on senior executive compensation. By contrast,
public companies in the United Kingdom allow shareholders to
cast an advisory vote on the directors remuneration
report, which discloses executive compensation. Such a
vote is not binding, but gives shareholders a clear voice that
could help shape senior executive compensation.
U.S. stock exchange listing standards require shareholder
approval of equity-based compensation plans, but those plans set
only general parameters and accord the compensation committee
substantial discretion in making awards and establishing
performance thresholds for a particular year. Shareholders do
not have a means to provide ongoing feedback on the application
of those general standards to individual pay packages. (See
Lucian Bebchuk & Jesse Fried, PAY WITHOUT
PERFORMANCE 49 (2004))
Similarly, performance criteria submitted for shareholder
approval that would allow a company to deduct compensation in
excess of $1 million are broad and do not constrain
compensation committees in setting performance targets for
particular senior executives. Withholding votes from
compensation committee members who are standing for reelection
is a blunt and inadequate instrument for registering
dissatisfaction with the way in which the committee has
administered compensation plans and policies in the previous
year.
Accordingly, we urge Nabors board to let shareholders
express their opinion about senior executive compensation by
establishing an annual referendum process. The results of such a
vote would, we think, provide Nabors with useful information
about whether shareholders view the Companys senior
executive compensation, as reported each year, to be in
shareholders best interests.
We urge shareholders to vote for this proposal.
BOARDS
STATEMENT AGAINST SHAREHOLDER PROPOSAL IN
ITEM 4
OUR BOARD RECOMMENDS THAT YOU VOTE AGAINST
THIS PROPOSAL. Our Board believes that this
proposal is not in the best interest of shareholders and opposes
this proposal for the following reasons.
37
First, far from mushrooming, the Companys
executives saw their compensation significantly reduced in 2009.
Second, it is unclear what it means for shareholders to ratify
our compensation disclosure. Finally, we think such a policy is
confusing and, ultimately, premature.
Our shareholders rejected a similar proposal in 2007. The Board
continues to believe that an advisory vote is an ineffective
mechanism for conveying meaningful opinions regarding executive
compensation. The proposed advisory vote would benefit neither
the Company nor its shareholders because it would not
distinguish among the various elements of compensation and thus
would not provide the Compensation Committee with specific and
actionable input about pay decisions. An advisory vote would not
communicate shareholder views of the merits, limitations or
preferred enhancements of our executive compensation
arrangements. Rather, an advisory vote would require the
Committee to speculate about the meaning of shareholder approval
or disapproval. A negative vote would not specify what aspect of
the executive compensation package or program shareholders find
objectionable. Even an affirmative vote would be unclear as to
whether shareholders approve the levels of executive pay or
overall compensation practices. Instead of encouraging
shareholders to avail themselves of Nabors direct
communication policy, this proposal advocates substituting a
narrower, more confusing and less effective mechanism.
Shareholders already have an effective mechanism for influencing
executive compensation which the proponent has not utilized.
Shareholders may contact directly any of our Companys
directors, the Lead Director, a committee of the Board
(including the Compensation Committee), the Boards
nonemployee directors as a group or the Board generally by
writing to them (see Shareholders and Interested Parties
Communications with the Board on page 9 of this proxy
statement). Direct communications between shareholders and the
Board allow shareholders to voice specific observations or
concerns and to communicate clearly and effectively with the
Board. An advisory vote does not provide that level of
communication. The Board demonstrated its responsiveness to
shareholder concerns in its 2009 renegotiation of executive
employment contracts. The two aspects of executive compensation
identified by shareholders as presenting the most concern were
tax
gross-ups
and death benefits. The new employment agreements address both
concerns by eliminating the former and significantly curtailing
the latter. More recently, the Board adopted a policy that it
would not grant additional death benefits to executives other
than those generally available to other employees, such as group
life insurance. An advisory vote simply is not necessary or
helpful to enable effective shareholder communication.
An advisory vote is not a substitute for the informed judgment
of independent directors. In accordance with the rules of the
NYSE, the Compensation Committee operates under a written
charter adopted by the Board and is responsible for approving
compensation awarded to the Companys executive officers,
including the Chief Executive Officer and the other named
executive officers. Each Committee member satisfies the
independence requirements of both the Company and the NYSE. The
Committee takes very seriously its fiduciary duty to oversee
executive compensation programs that are designed to promote
long-term shareholder value. The Committees work is
complex and time-consuming. It involves analysis of both public
and confidential information, including competitively sensitive
strategic and operational information. It also involves
consultation with independent consultants as appropriate. Any
vote by shareholders would necessarily be based on less
information and analysis and therefore could not adequately
substitute for the fully informed judgment of the independent
directors. Our Board believes that our compensation practices
and programs serve the interests of shareholders by resulting in
compensation that is performance-based (as discussed in the
Compensation Disclosure and Analysis section beginning on
page 15 of this proxy statement) and by enabling the
Company to hire and retain the best executives and motivate
those executives to contribute to our future success.
Adoption of the proposal could put our Company at a competitive
disadvantage and negatively impact shareholder value by impeding
our ability to recruit and retain critical personnel. Our
Company operates in an intensely competitive environment, and
our success is closely correlated with the recruitment and
retention of talented employees and a strong management team. A
competitive compensation program is therefore essential to the
Companys long-term performance. Adoption of an advisory
vote could lead to a perception among our talent and the talent
for which we compete that compensation opportunities at our
Company may be limited, especially as compared with
opportunities at companies that have not adopted this practice,
and may impede our ability to recruit and retain critical
personnel.
Finally, in light of the current legislative landscape related
to executive compensation, the Board believes that implementing
any type of advisory vote would be premature. The United States
Congress is considering legislation
38
to make some type of advisory vote mandatory for all companies
publicly traded on a U.S. exchange. The passage and content
of such a law are uncertain. If and when legislation is passed,
the Board will be in a better position to evaluate the best
course of action for the Company in accordance with the law.
Pending resolution of the legislative debate, the Board believes
implementation of an advisory vote is inadvisable.
Our Board recommends that you vote AGAINST this
proposal.
ITEM 5
SHAREHOLDER
PROPOSAL TO ADOPT A BYE-LAW PROVIDING THAT
THE CHAIRMAN OF THE BOARD BE AN INDEPENDENT DIRECTOR
The following shareholder proposal has been submitted to the
Company for action by the AFSCME Employees Pension Plan, a
holder of 2,030 shares, 1625 L Street NW,
Washington, DC 20036. The affirmative vote of a majority of the
shares voted at the meeting is required for the approval of the
shareholder proposal. Our Board recommends that you vote
Against this Proposal. The text of the
proposal follows:
Resolved, that the shareholders of Nabors Industries
(Nabors or the Company) urge the board
of directors (the Board) to adopt a bylaw
providing that the Chairman of the Board shall be a director who
is independent from Nabors. The bylaws definition of
independence should provide that a director is not
independent if he or she:
(a) in the last five years has been (i) employed by
the Company; (ii) employed by, served as a director of or
has had a five percent or greater equity interest in an entity
that makes payments to or receives payments from the Company and
either: (A) such payments account for one percent or more
of the entitys or the Companys consolidated gross
revenues in any single fiscal year; or (B) if the entity is
a debtor or creditor of the Company, the amount owed exceeds one
percent of the Companys or entitys assets;
(iii) an employee or director of a foundation, university
or other non-profit organization that receives donations from
the Company, or the director has been a direct beneficiary of
any donations to such an organization; or (iv) part of an
interlocking directorate in which the CEO or other employee of
the Company serves on the board of an entity employing the
director; or
(b) in the past five years has provided consulting or other
services to the Company or an executive officer of the
Company; or
(c) is the parent, child, sibling, aunt, uncle or cousin of
someone described in any of the subsections in (a) or
(b) above.
The bylaw should provide that if the Board determines that a
Chairman who was independent when selected is no longer
independent, the Board shall select a new Chairman who satisfies
the requirements of the policy within 60 days of such
determination. Compliance with the bylaw should be excused if no
director who qualifies as independent is elected by the
stockholders or if no director who is independent is willing to
serve as Chairman. The bylaws should apply prospectively so as
not to violate any existing contractual obligation.
Supporting
Statement
Nabors CEO, Eugene Isenberg, also serves of chairman of
the Companys board of directors. As Intel former chairman
Andrew Grove stated, The separation of the two jobs goes
to the heart of the conception of a corporation. Is a company a
sandbox for the CEO, or is the CEO an employee? If hes an
employee, he needs a boss, and that boss is the board. The
chairman runs the board. How can the CEO be his own boss?
Also, in our view, these roles require different skills and
temperaments. We believe that independent board leadership would
be particularly constructive at Nabors, where Mr. Isenberg
has served in both positions since 1987.
We urge shareholders to vote for this proposal.
BOARDS
STATEMENT AGAINST SHAREHOLDER PROPOSAL IN
ITEM 5
OUR BOARD RECOMMENDS THAT YOU VOTE AGAINST
THIS PROPOSAL. Our Board believes that this
proposal is not in the best interest of shareholders and opposes
this proposal for the following reasons.
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The Board believes that the decision as to who should serve as
Chairman and CEO, and whether the offices should be combined or
separated, is properly the responsibility of the Board. The
members of the Board possess considerable experience and unique
knowledge of the challenges and opportunities the Company faces.
As such, they are in the best position to evaluate the needs of
the Company and to determine how to organize the capabilities of
the directors and senior managers to meet those needs. A
binding, proscriptive Bye-law amendment such as is set forth in
the proposal would unnecessarily restrict the Boards
flexibility to structure the Boards composition and
leadership as it deems appropriate to best serve the interests
of shareholders.
The Companys corporate governance structure, including the
composition of the Board, its committees, and the appointment of
a Lead Director, already provides effective independent
oversight of management. Five of our seven directors are
independent under NYSE rules and our director independence
standards, and four of the standing Board committees are
comprised solely of independent directors. The Board and its
committees each meet in executive session on a regular basis
without the presence of management, and all Board members have
complete access to management and outside advisors. The Board
has had a Lead Director since 2003. The Lead Director must be an
independent director under our director independence standards,
which include the NYSE rules. The Lead Director has clearly
defined responsibilities, including approving Board meeting
agendas with the Chairman of the Board and CEO, calling and
chairing meetings of nonmanagement directors, chairing the Risk
Oversight Committee, and facilitating communication between the
Board and senior management. The Boards effective
committee structure and full Board operations, including the
independent Lead Director, allow the nonmanagement directors to
carry out the fiduciary responsibilities entrusted to them by
shareholders to provide proper oversight of management. The
Board does not believe that mandating an independent Chairman is
necessary to achieve effective independent oversight. The Board
may choose to appoint an independent Chairman at some point if
it deems it appropriate. In the meantime, the Board believes
that the most effective leadership structure for the Company at
present is for Mr. Isenberg to serve as both Chairman and
CEO and for Mr. Whitman to serve as Lead Director.
Finally, the proponent does not indicate whether shareholders
would be well served by its proposal; it simply advocates
change. The proposals premise, that the chairman controls
the Board, is simply wrong and denigrates the role of the other
directors. The Board reports to the shareholders. The Chairman
is on the Board, but he does not constitute a quorum and cannot
force any Board action. Although the Chairman plays an important
role in shaping Board agendas and is occasionally delegated
Board authority in certain matters to ease administrative
burdens, any Board member may raise an agenda item or proposal,
and a majority vote of the Board is required for any Board
action. Each of our directors is fully versed on his role as an
independent director and, where applicable, committee chairman.
In addition to the orientation they receive upon appointment to
our Board, our directors undergo regular training with respect
to their roles and obligations, and each holds a Certificate of
Director Education from the National Association of Corporate
Directors. The proponent does not cite any examples of
ineffective oversight of management arising from
Mr. Isenbergs dual service for the past
23 years. To the contrary, during Mr. Isenbergs
tenure as Chairman and Chief Executive Officer, the Company has
delivered strong shareholder value by regularly outperforming
the S&P 500.
Our Board recommends that you vote AGAINST this
proposal.
ITEM 6
SHAREHOLDER
PROPOSAL TO REQUIRE
ALL DIRECTORS TO STAND FOR ELECTION ANNUALLY
The following shareholder proposal has been submitted to the
Company for action by the Connecticut Retirement
Plans & Trust Funds, a holder of
59,824 shares, 55 Elm Street, Hartford, Connecticut 06106.
The affirmative vote of a majority of the shares voted at the
meeting is required for the approval of the shareholder
proposal. Our Board recommends that you vote
Against this Proposal. The text of
the proposal follows:
Resolved, that shareholders of Nabors Industries Ltd.
(Nabors) urge the board of directors to take the
necessary steps (excluding those steps that must be taken by
shareholders) to eliminate the classification of Nabors
board and to require that all directors stand for election
annually. The declassification should be completed in a manner
that does not affect the unexpired terms of directors.
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Supporting
Statement
We believe the election of directors is the most powerful way
shareholders influence Nabors strategic direction.
Currently, the board is divided into three classes and each
class serves staggered three-year terms. Because of this
structure, shareholders may only vote on roughly one-third of
the directors each year.
In our opinion, the classified structure of the board is not in
shareholders best interest because it reduces
accountability to shareholders. Annual election of directors
gives shareholders the power to completely replace the board, or
replace a majority of directors, if a situation arises
warranting such drastic action. We dont believe
declassifying the board will destabilize Nabors or affect the
continuity of director service.
Academic studies provide strong evidence that classified boards
harm shareholders. A 2004 Harvard study by Lucian Bebchuk and
Alma Cohen found that staggered boards are associated with a
lower firm value (as measured by Tobins Q) and found
evidence that staggered boards may bring about, not merely
reflect, that lower value.
A 2002 study by Professor Bebchuk and two colleagues, which
included all hostile bids from 1996 through 2000, found that an
effective staggered board a classified
board plus provisions that disable shareholders from changing
control of the board in a single election despite the
classification doubles the odds that a target
company will remain independent, without providing any
countervailing benefit such as a higher acquisition premium. The
study estimated that effective staggered boards cost target
shareholders $8.3 billion during that period.
A growing number of shareholders appear to agree with our
concerns. In 2009, 43 came to a vote, averaging 68% support.
(Georgeson, 2009 Annual Corporate Governance Review at
20.) Also in 2009, management at 29 companies sought
shareholder approval for proposals to declassify their boards.
(Id. at 42.)
In our view, fostering greater accountability to shareholders is
particularly important at Nabors, where recent compensation
decisions by the board have not been in shareholders best
interests. As RiskMetrics Group noted in its 2009 analysis, both
CEO Eugene Isenberg and President/Chief Operating Officer
Anthony Petrello receive quarterly guaranteed deferred
compensation payments, which undermine the pay/performance
relationship. In addition, both Isenberg and Petrellos
employment agreement contain single-trigger change in control
arrangements, which allow the executives to voluntarily quit and
be entitled to severance payments.
We urge shareholders to vote for this proposal.
BOARDS
STATEMENT AGAINST SHAREHOLDER PROPOSAL IN
ITEM 6
OUR BOARD RECOMMENDS THAT YOU VOTE AGAINST
THIS PROPOSAL. Our Board believes that this
proposal is not in the best interest of shareholders and opposes
this proposal for the following reasons.
The Governance & Nominating Committee, comprised
entirely of independent directors, regularly considers and
evaluates a broad range of corporate governance issues affecting
the Company, including whether to maintain the Companys
current classified board structure. Most recently, the Committee
engaged in a comprehensive review of the Companys
governance model and practices and implemented a governance
action plan that raised the Companys global governance
rating, as determined by Governance Metrics International, from
6.5 to 8.5 on a 10-point scale, moving it significantly above
its industry peers rated on the same bases. In this recent
review and in connection with its review of this shareholder
proposal, the Committee considered the history of the classified
board system, the current industry environment and the arguments
advanced by the proponent. After careful consideration, the
Committee concluded that the continuity and quality of
leadership that results from a classified board creates
long-term shareholder value and is in the best interests of the
Company and its shareholders.
The staggered election of directors provides continuity and
stability in the management of the business and affairs of the
Company, while allowing for the introduction of new directors as
appropriate. The Board believes that this continuity and
stability is critical because it:
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creates a more experienced board that is better able to make
fundamental strategic decisions for the Company;
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enables us to better focus on the development, refinement and
execution of long-range strategic planning, free from the
inherent dangers of abrupt changes in course based upon
short-term objectives;
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assists us in attracting director candidates who are willing to
make longer-term commitments to the Company; and
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allows new directors to benefit from the historical perspective
of continuing directors.
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The Board believes that continuity and stability are
particularly important at a time of adverse market conditions in
our industry because they ensure that our Company will have the
benefit of experienced directors who are well versed in the
complex issues we face.
Electing directors to three-year terms enhances the independence
of nonmanagement directors by providing them with a longer
assured term of office, thereby insulating them against pressure
from management or special interest groups who might have an
agenda contrary to the long-term interests of all shareholders.
The Board believes that the ability to replace the entire board
at a single meeting undercuts director independence, the
cornerstone of good corporate governance.
A classified board also enhances our ability to negotiate the
best results for our shareholders in the event of an unsolicited
takeover proposal. Our current board structure gives our Board
the time and leverage necessary to evaluate the adequacy and
fairness of any takeover proposal, consider alternative
proposals, and ultimately to negotiate the best possible result
for our shareholders. Absent a classified board, a potential
acquirer could gain control of the company by replacing a
majority of the Board with its own slate of nominees at a single
annual general meeting and without paying an appropriate premium
to the shareholders.
Our Board recommends that you vote AGAINST this
proposal.
CODE OF
ETHICS
All of our employees, including our Chief Executive Officer, our
principal financial and accounting officer and other senior
officials, are required to abide by our Code of Business Conduct
to ensure that Nabors business is conducted in a
consistently legal and ethical manner. The Code of Business
Conduct is posted on our website at www.nabors.com. We
intend to disclose on our website any amendments to the Code of
Business Conduct and any waivers of the Code of Business Conduct
that apply to our principal executive officer or our principal
financial and accounting officer. A copy of the Code of Business
Conduct is available in print without charge to any shareholder
that requests a copy. Direct requests to the Corporate Secretary
and deliver them in person or by courier to the address on the
cover page of this proxy statement or by mail to P.O. Box
HM3349, Hamilton, HMPX Bermuda.
SECTION 16(a)
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act 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 SEC 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 SEC regulation to furnish Nabors
with copies of all Section 16(a) forms that 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
2009 and Form 5 and amendments thereto furnished to us with
respect to 2009, 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 2009 were
timely filed except that Mr. Andrews filed one Form 4
late with respect to a single stock option award that occurred
in March 2009.
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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).
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 2011 annual
general meeting of shareholders must submit their proposals and
their proposals must be received at our principal executive
offices no later than January 3, 2011. 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 2011 annual general meeting, a shareholder notice of
the matter the shareholder wishes to present must be delivered
to the Corporate Secretary in person or by courier at the
address shown on the cover page of this proxy statement or by
mail at 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 meeting
(provided, however, that if the 2011 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 these provisions of our Bye-laws (and not pursuant
to the SECs
Rule 14a-8)
must be received no earlier than March 3, 2011 and no later
than April 2, 2011.
OTHER
MATTERS
The Board knows of no other business to come before the meeting.
However, if any other matters are properly brought before the
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 $9,000 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 these parties for their reasonable
out-of-pocket
expenses for forwarding the proxy materials.
Financial Statements. The financial statements
for the Companys 2009 fiscal year will be presented at the
meeting.
NABORS INDUSTRIES LTD.
Mark D. Andrews
Corporate Secretary
Dated: April 30, 2010
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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 2, 2010 at Nabors annual general meeting of
shareholders to be held on June 1, 2010 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.
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ELECTION OF DIRECTORS: Election of two Class I directors of Nabors to serve until the
2013 annual general meeting of shareholders or until their respective successors are
elected and qualified. |
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Nominees: John V. Lombardi and James L. Payne |
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APPOINTMENT OF THE INDEPENDENT AUDITOR AND AUTHORIZATION OF AUDIT COMMITTEE TO SET THE
AUDITORS REMUNERATION: Appointment of PricewaterhouseCoopers LLP as independent auditor
and to authorize the Audit Committee of the Board of Directors to set the auditors
remuneration. |
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SHAREHOLDER PROPOSAL: Shareholder Proposal to adopt a pay-for-superior-performance
standard in the Companys executive compensation plan for senior executives. |
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SHAREHOLDER PROPOSAL: Shareholder Proposal regarding an advisory resolution to ratify
the compensation of the named executive officers. |
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SHAREHOLDER PROPOSAL: Shareholder Proposal to adopt a Bye-law providing that the
chairman of the board be an independent director. |
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SHAREHOLDER PROPOSAL: Shareholder Proposal regarding the requirement that all directors
stand for election annually. |
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,
FOR THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS AUDITOR AND AGAINST THE FOUR SHAREHOLDER
PROPOSALS 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 AND 2.
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Election of Directors
John V. Lombardi
James L. Payne
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Appointment of
Pricewaterhouse
Coopers LLP as
independent auditor
and to authorize
the Audit Committee
of the Board of
Directors to set
the auditors
remuneration.
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For, except vote withheld from the following nominee(s): |
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST ITEMS 3, 4, 5 AND 6. PROXIES WILL BE
VOTED AGAINST THESE PROPOSALS UNLESS OTHERWISE INSTRUCTED.
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3.
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Shareholder Proposal to
adopt a
pay-for-superior-performance
standard in the Companys
executive compensation plan
for senior executives.
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AGAINST
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Shareholder
Proposal regarding
an advisory
resolution to
ratify the
compensation of the
named executive
officers.
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Shareholder Proposal to
adopt a Bye-law providing
that the chairman of the
board be an independent
director.
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Shareholder
Proposal to require
all directors to
stand for election
annually.
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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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