PREM14A 1 d455352dprem14a.htm PREM14A PREM14A
Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE 14A

(Rule 14a-101)

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

 

 

Filed by the Registrant  ☒                             Filed by a Party other than the Registrant  ☐

Check the appropriate box:

 

Preliminary Proxy Statement

 

Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

 

Definitive Proxy Statement

 

Definitive Additional Materials

 

Soliciting Material Pursuant to §240.14a-12

Tesco Corporation

(Name of Registrant as Specified In Its Charter)

N/A

(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

Payment of Filing Fee (Check the appropriate box):

 

  No fee required.
  Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
  (1)  

Title of each class of securities to which transaction applies:

Common Shares, par value $0.01, of Tesco Corporation.

 

  (2)  

Aggregate number of securities to which transaction applies: 48,780,240 securities (including 46,754,956 common shares, 565,136 options, and 1,460,148 restricted stock units, collectively, the “Securities”).

 

  (3)  

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): Solely for the purpose of calculating the filing fee, the proposed maximum aggregate value of the transaction (as defined in Rule 0-11), was computed by multiplying the 48,780,240 Securities by $4.59 per share, that being the average of the high and low prices reported on NASDAQ Global Select Market for such shares on September 12, 2017. In accordance with Section 14(g) of the Securities Act of 1934, as amended, the filing fee was determined by multiplying the proposed maximum aggregate value of the transaction by 0.0001159.

 

  (4)  

Proposed maximum aggregate value of transaction:

$223,901,301.60

 

  (5)  

Total fee paid:

$25,950.16

  Fee paid previously with preliminary materials.
  Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
  (1)  

Amount Previously Paid:

 

  (2)  

Form, Schedule or Registration Statement No.:

 

  (3)  

Filing Party:

 

  (4)  

Date Filed:

 

 

 

 


Table of Contents

LOGO

TESCO CORPORATION

NOTICE OF SPECIAL MEETING AND PROXY STATEMENT


Table of Contents

LOGO

[●], 2017

Dear Fellow Securityholder:

On August 13, 2017, Tesco Corporation (TESCO) entered into an Arrangement Agreement (the Arrangement Agreement) with Nabors Industries Ltd., a Bermuda exempted company (Nabors), and Nabors Maple Acquisition Ltd. (Nabors Maple), a corporation organized under the laws of Alberta, Canada, pursuant to which Nabors Maple will acquire all of the issued and outstanding common shares of TESCO (the Common Shares) pursuant to a statutory plan of arrangement under section 193 of the Business Corporations Act (Alberta) (the ABCA) (the Arrangement).

Subject to the terms and conditions of the Arrangement Agreement, at the effective time of the Arrangement, each Common Share, other than Common Shares with respect to which dissent rights have been properly exercised and not withdrawn, will be exchanged for 0.68 of a common share of Nabors (the Share Consideration). Each dissenting Common Share will be transferred to Nabors Maple in accordance with, and for the consideration contemplated in, the Arrangement Agreement.

Pursuant to the Arrangement, at the effective time of the Arrangement: (i) all outstanding, unexpired TESCO options (Options) to purchase Common Shares will be accelerated, cancelled, and exchanged for the right to receive an amount in cash per share, less tax withholdings, equal to (a) the excess of the Market Value per share over the Option’s exercise price, multiplied by (b) the aggregate number of Common Shares subject to such Option immediately prior to the effective time, and each Option with an exercise price per share that is equal to or greater than the Market Value will be cancelled for no consideration; (ii) all outstanding TESCO restricted stock units (including performance-based restricted stock units) (RSUs) will vest and be cancelled in exchange for the right to receive an amount in cash, less tax withholding, equal to (a) the Market Value per share, multiplied by (b) the aggregate number of Common Shares underlying the RSU immediately prior to the effective time. “Market Value” means 0.68 multiplied by the closing price of one common share of Nabors on the New York Stock Exchange (NYSE) on the last trading day prior to the closing date of the Arrangement.

Your vote is very important. You are invited to attend a special meeting (Special Meeting) of the holders of Common Shares (Shareholders), holders of Options (Option Holders) and holders of RSUs (RSU Holders and, together with the Shareholders and Option Holders, the Securityholders) of TESCO to be held in [ADDRESS], Calgary, Alberta, Canada at [TIME] to obtain your vote to approve a special resolution (the Arrangement Resolution) approving the Arrangement. The vote requirement to approve the Arrangement Resolution (Proposal 1) is the affirmative approval of not less than two-thirds of the votes cast by the Securityholders present in person or represented by proxy at the Special Meeting and voting together as a single class.

The Board of Directors of TESCO (the Board), having undertaken a thorough review of, and having carefully considered, information concerning TESCO, Nabors, Nabors Maple and the Arrangement, has unanimously concluded that the Arrangement is in the best interests of TESCO, that the Arrangement is fair to the Shareholders, and has unanimously approved the Arrangement and entry into the Arrangement Agreement. Accordingly, the Board unanimously recommends that the Securityholders vote FOR the Arrangement Resolution.

 

By Order of the Board of Directors

Sincerely,

   Sincerely,
Michael Sutherlin    Fernando R. Assing
Chairman    President and Chief Executive Officer


Table of Contents

LOGO

TESCO CORPORATION

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS AND OTHER SECURITY HOLDERS

Notice is hereby given that, pursuant to an order (the Interim Order) of the Court of Queen’s Bench of Alberta (the Court) dated [●], 2017, a special meeting (Special Meeting) of the holders of common shares (the Shareholders), holders of options (Option Holders) and holders of restricted stock units including performance stock units (RSU Holders and, together with the Shareholders and Option Holders, the Securityholders) of Tesco Corporation (TESCO) will be held in [ADDRESS] Calgary, Alberta, Canada at [TIME] for the purposes of:

 

  1. Arrangement Resolution. To consider and, if deemed advisable, to pass a special resolution (the Arrangement Resolution), the full text of which is set forth in Annex B to the accompanying proxy statement, approving an arrangement (the Arrangement) pursuant to Section 193 of the Business Corporations Act (Alberta) (the ABCA), all as more particularly described in the accompanying proxy statement (Proposal 1).

In addition, Shareholders will be asked to vote on the following Proposal:

 

  2. Advisory Proposal Regarding Golden Parachute Compensation. To consider, solely on a non-binding, advisory basis, the agreements or understandings between TESCO’s named executive officers and TESCO and the related compensation that will or may be paid to its named executive officers in connection with the Arrangement, as disclosed pursuant to Item 402(t) of Regulation S-K in the “Golden Parachute Compensation” table and the related narrative disclosures in the section of the accompanying proxy statement entitled “Interests of Directors and Executive Officers in the Arrangement—Golden Parachute Compensation” (Proposal 2).

Each Option Holder and RSU Holder will be entitled to vote on Proposal 2 only in respect of that number of Common Shares held by such Option Holder or RSU Holder as of the Record Date.

The Arrangement is described in the accompanying proxy statement. The full text of the Arrangement Resolution is set out in Annex B to the proxy statement.

TESCO has set [●] as the record date for the determination of the Securityholders entitled to receive notice of and to vote at the Special Meeting. Only Shareholders whose names have been entered in the register of the holders of Common Shares as of the record date, and Option Holders and RSU Holders as of the record date, will be entitled to receive notice of and to vote at the Special Meeting in respect of such Common Shares, options (Options) or restricted stock units (including performance-based restricted stock units) (RSUs), as applicable. Securityholders may attend the Special Meeting in person or may be represented by proxy. Registered Shareholders, Option Holders and RSU Holders are encouraged to complete, sign, date, and return the accompanying applicable form of proxy so that such Securityholders’ Common Shares, and in respect of Proposal 1, Options and RSUs, can be voted at the Special Meeting (or at any adjournments or postponements thereof) in accordance with such Securityholders’ instructions, whether or not you plan to attend. To be effective, the enclosed proxy must be received by [●] ([●]) or [●] ([●]) no later than [●] on [●] or at least [●] hours (excluding Saturdays, Sundays or statutory holidays) prior to the time set for any adjournment or postponement of the Special Meeting. The time limit for the deposit of proxies may be waived or extended by the Chair of the Special Meeting at his discretion, without notice.


Table of Contents

Your Common Shares, Options and RSUs will be voted in accordance with your instructions as indicated on the form of proxy or, if no instructions are given on the form of proxy, the proxy holder will vote “FOR” the Arrangement Resolution and “FOR” the Advisory Proposal Regarding Golden Parachute Compensation.

Non-registered Shareholders who hold their Common Shares through a broker, investment dealer, bank, trust company, custodian, nominee or other intermediary, should carefully follow the instructions of their intermediary to ensure that their Common Shares are voted at the Special Meeting in accordance with such Shareholder’s instructions, to arrange for their intermediary to complete the necessary transmittal documents and to ensure that they receive appropriate consideration for their common shares if the Arrangement is completed.

Registered Shareholders, Option Holders and RSU Holders may exercise their rights by attending the Special Meeting or by completing and returning a form of proxy. If you are unable to attend the Special Meeting in person, please complete, date and sign the enclosed form of proxy and return it in the envelope provided for that purpose.

A Securityholder that has questions or requires more information with regard to the voting of Common Shares, Options and RSUs, as applicable, should contact Alliance Advisors LLC, by mail at 200 Broadacres Drive, 3rd Floor, Bloomfield, NJ 07003, or by telephone at 1-833-501-4828.

Pursuant to the Interim Order, registered Shareholders have the right to dissent with respect to the Arrangement, and if the Arrangement is completed, to be paid the fair value of their common shares in accordance with the provisions of Section 191 of the ABCA, as modified by the Interim Order. The right to dissent of a registered Shareholder is more particularly described in the proxy statement. Failure to strictly comply with the requirements set forth in Section 191 of the ABCA, as modified by the Interim Order, may result in the loss of any right of dissent that a registered Shareholder may otherwise have.

DATED at Houston, Texas this [●] day of [●], 2017.

By Order of the Board of Directors

Christopher L. Boone

Senior Vice President and Chief Financial Officer

Important Notice Regarding the Availability of Proxy Materials for the Meeting

The proxy statement and the proxy card are available under TESCO’s profile at www.proxyvote.com.

Your Vote is Important

Please vote as promptly as possible by using the Internet or telephone or by signing, dating, and returning the Proxy Card mailed to those who receive paper copies of this proxy statement.


Table of Contents

IN THE COURT OF QUEEN’S BENCH OF ALBERTA

JUDICIAL CENTRE OF CALGARY

IN THE MATTER OF SECTION 193 OF THE BUSINESS

CORPORATIONS ACT, R.S.A. 2000, c. B-9, AS AMENDED,

AND IN THE MATTER OF A PROPOSED ARRANGEMENT

INVOLVING TESCO CORPORATION, NABORS INDUSTRIES LTD. AND NABORS MAPLE ACQUISITION LTD.

NOTICE OF ORIGINATING APPLICATION

NOTICE IS HEREBY GIVEN that an originating application (the “Application”) has been filed with the Court of Queen’s Bench of Alberta, Judicial Centre of Calgary (the “Court”) on behalf of Tesco Corporation (the “Company”) with respect to a proposed arrangement (the “Arrangement”) under section 193 of the Business Corporations Act, R.S.A. 2000, B-9, as amended (the “ABCA”), involving the Company, Nabors Industries Ltd. and Nabors Maple Acquisition Ltd., the holders of common shares of the Company (the “Shareholders”) and the holders of certain incentive awards of the Company (together with the Shareholders, the “Securityholders”). The Arrangement is described in greater detail in the proxy statement of the Company dated [●], 2017, accompanying this Notice of Originating Application.

At the hearing of the Application, the Company intends to seek:

 

(a) an order approving the Arrangement pursuant to the provisions of section 193 of the ABCA;

 

(b) a declaration that the terms and conditions of the Arrangement, and the procedures relating thereto, are fair and reasonable, substantively and procedurally, to the Securityholders and other affected persons;

 

(c) a declaration that the Arrangement will, upon the filing of the Articles of Arrangement and the issuance of a proof of filing thereof pursuant to the provisions of section 193 of the ABCA, be effective under the ABCA in accordance with its terms and will be binding on and after the Effective Time (as defined in the plan of arrangement setting forth the Arrangement); and

 

(d) such other and further orders, declarations and directions as the Court may deem just.

AND NOTICE IS FURTHER GIVEN that the said Application was directed to be heard before a Justice of the Court at the Calgary Courts Centre, 601 – 5th Street S.W., Calgary, Alberta, on [●], 2017 at [●] (Calgary time), or as soon thereafter as counsel may be heard. Any Securityholder or any other interested party desiring to support or oppose the Application, may appear at the time of hearing in person or by counsel for that purpose. Any Securityholder, or any other interested party desiring to appear at the hearing for the final order approving the Arrangement is required to file with the Court, and serve upon the Company at or before 5:00 p.m. (Calgary time) on [●], 2017, a notice of intention to appear, including an address for service in the Province of Alberta, indicating whether such Securityholder, or other interested party intends to support or oppose the Application or make submissions at the hearing, together with a summary of the position such Securityholder or other interested party intends to advocate before the Court and any evidence or materials which are to be presented to the Court by such Securityholder, or other interested party. Service on the Company shall be effected by delivery to the solicitors for the Company at the address below. If any Securityholder, or other interested party does not attend, either in person or by counsel, at that time, the Court may approve the Arrangement as presented or may approve it subject to such terms and conditions as the Court shall deem fit, without any further notice.

AND NOTICE IS FURTHER GIVEN that no further notice of the Application will be given by the Company and that, in the event the hearing of the Application is adjourned, only those persons who have appeared before the Court for the Application at the hearing, or who have filed a notice of intention to appear as described above, shall be served with notice of the adjourned date.


Table of Contents

AND NOTICE IS FURTHER GIVEN that the Court, by the Interim Order, has given directions as to the calling and holding of a special meeting of Securityholders for the purpose of Securityholders voting upon a special resolution to approve the Arrangement and, in particular, has directed that registered Shareholders shall have the right to dissent with respect to the Arrangement in accordance with the provisions of section 191 of the ABCA, as modified by such Interim Order and the plan of arrangement setting forth the Arrangement.

AND NOTICE IS FURTHER GIVEN that a copy of the said Application and other documents in the proceedings will be furnished to any Securityholder or other interested party requesting the same by the under-mentioned solicitors for the Company upon written request delivered to such solicitors as follows:

Norton Rose Fulbright Canada LLP

Suite 3700

400 – Third Avenue S.W.

Calgary, Alberta T2P 4H2

Attention: Steven H. Leitl

Facsimile No.: 403-264-5973

DATED at Houston, Texas this [●] day of [●], 2017.

 

 

BY ORDER OF THE BOARD OF DIRECTORS OF TESCO CORPORATION

 

(signed) “[●]”

Christopher L. Boone

Senior Vice President and Chief Financial Officer

 


Table of Contents

TABLE OF CONTENTS

 

QUESTIONS AND ANSWERS REGARDING THE ARRANGEMENT AND THE MEETING

     iii  

About the Meeting

     iii  

About the Arrangement

     vi  

Whom to Call with Questions

     ix  

SUMMARY

     1  

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

     12  

ENFORCEABILITY OF CIVIL LIABILITIES

     13  

NOTICE TO CANADIAN SHAREHOLDERS AND OTHER SECURITYHOLDERS

     13  

RISK FACTORS

     15  

Risks Related to the Arrangement

     15  

THE COMPANIES

     20  

TESCO

     20  

Nabors

     20  

Nabors Maple Acquisition Ltd.

     21  

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF TESCO

     22  

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF NABORS

     23  

COMPARATIVE PER SHARE DATA

     24  

COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND INFORMATION

     25  

SPECIAL MEETING OF THE SECURITYHOLDERS OF TESCO

     27  

General

     27  

Date, Time and Place of the Special Meeting

     27  

Matters to be Considered at the Special Meeting

     27  

Recommendation of the TESCO Board of Directors

     27  

Record Date

     27  

Solicitation of Proxies

     28  

Quorum

     28  

Persons Entitled to Vote and Principal Shareholders

     28  

List of Registered Securityholders

     28  

Registered Securityholders

     29  

Voting

     29  

Beneficial Shareholders

     30  

Attendance at the Special Meeting

     31  

THE ARRANGEMENT

     32  

Transaction Structure

     32  

Background to the Arrangement

     33  

Board of Directors and Management of Nabors after the Arrangement

     37  

Recommendation of the Board

     37  

Reasons for the Arrangement

     37  

TESCO

     37  

Nabors

     41  

Opinion of TESCO’s Financial Advisor

     44  

Treatment of Options and RSUs

     48  

Procedure for Surrendering TESCO Common Share Certificates

     49  

Fractional Shares

     50  

Court Approval of the Arrangement

     50  

Listing of Nabors Shares

     50  

Regulatory Approvals Required for the Arrangement

     51  

U.S. Securities Law Matters

     53  

Restrictions on Sales of Nabors Shares Received in the Arrangement

     53  

Canadian Securities Law Matters

     53  

Dissenters’ Rights

     55  

Accounting Treatment

     56  

Certain U.S. Federal Income Tax Consequences

     57  

Treatment of the Arrangement

     59  

Ownership and Disposition of Nabors Shares

     60  

Information Reporting and Backup Withholding Tax

     62  

Certain Canadian Federal Income Tax Consequences of the Arrangement

     63  

Holders Resident in Canada

     63  

Holders Not Resident in Canada

     65  

THE ARRANGEMENT AGREEMENT

     67  

The Arrangement

     67  

Closing and Effective Time of the Arrangement

     67  

Conditions to Closing

     67  

Representations and Warranties

     69  

Definition of “Material Adverse Effect”

     70  

Covenants and Conduct of Business Pending the Arrangement

     70  

No Solicitation by TESCO

     70  

Termination of the Arrangement Agreement

     71  

Termination Fee Payable by TESCO

     73  

Covenant to Hold the Special Meeting

     73  
 

 

i


Table of Contents

TABLE OF CONTENTS

 

Reasonable Best Efforts Covenants

     73  

Amendments; Waivers

     74  

Expenses

     74  

INTERESTS OF DIRECTORS AND EXECUTIVE OFFICERS IN THE ARRANGEMENT

     75  

Interest of Directors

     75  

Potential Payments to Named Executive Officers (NEOs) upon a Change of Control

  

Treatment of Outstanding Equity Awards

     75  

Retention Payments

     76  

Golden Parachute Compensation

     76  

Indemnification and Insurance

     78  

INDEBTEDNESS OF DIRECTORS AND EXECUTIVE OFFICERS

     79  

DESCRIPTION OF NABORS CAPITAL STOCK

     80  

COMPARISON OF SHAREHOLDER RIGHTS

     84  

PROPOSAL ONE—APPROVAL OF THE ARRANGEMENT RESOLUTION

     101  

PROPOSAL TWO—NON-BINDING ADVISORY PROPOSAL REGARDING EXECUTIVE COMPENSATION RELATED TO THE ARRANGEMENT

     102  

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     103  

AUDITORS, TRANSFER AGENT AND REGISTRAR

     106  

INTERESTS OF EXPERTS

     106  

FUTURE SHAREHOLDER PROPOSALS

     106  

HOUSEHOLDING OF PROXY MATERIALS

     107  

WHERE YOU CAN FIND ADDITIONAL INFORMATION

     107  

Incorporation of Certain Documents by Reference

     108  

Electronic Availability of Proxy Statement

     109  

Proxy Solicitation Costs

     109  

ANNEX A

     A-1  

GLOSSARY OF TERMS

     A-1  
 

 

ii


Table of Contents

QUESTIONS AND ANSWERS REGARDING THE ARRANGEMENT AND THE MEETING

Unless stated otherwise or unless the context otherwise requires, all references in this proxy statement to “TESCO,” “we,” “our” and “us” are to Tesco Corporation, a corporation organized under the laws of Alberta, Canada, all references to “Nabors” are to Nabors Industries Ltd., a Bermuda exempted company, all references to “Nabors Maple” are to Nabors Maple Acquisition Ltd., a corporation organized under the laws of Alberta, Canada, all references to the “Special Meeting” are to the special meeting of Securityholders of TESCO on [] at [], at [], all references to the “Arrangement Agreement” are to the Arrangement Agreement dated August 13, 2017, as it may be amended from time to time, by and among TESCO, Nabors and Nabors Maple, a copy of which is attached as Annex C to this proxy statement, all references to the “Arrangement Resolution” are to the form of arrangement resolution, a copy of which is attached as Annex B to this proxy statement, all references to the “Arrangement” or “Plan of Arrangement” are to the proposed plan of arrangement under section 193 of the Business Corporations Act (Alberta) (ABCA) involving the acquisition by Nabors Maple of all of the issued and outstanding common shares of TESCO, a copy of which is attached as Schedule A to the Arrangement Agreement (attached as Annex C to this proxy statement) all references to the “Court” are to the Court of Queen’s Bench of Alberta, all references to the “Interim Order” are to the interim order of the Court attached as Annex D to this proxy statement and all references to the “Final Order” are to a final order of the Court approving the Arrangement. Capitalized terms used but not defined in this and other sections of this proxy statement have the meaning set forth in the “Glossary of Terms” attached as Annex A to this proxy statement or the meaning set forth in the Arrangement Agreement which is attached as Annex C to this proxy statement.

All Annexes to this proxy statement are deemed to be an integral part of this proxy statement and are incorporated by reference herein. TESCO first began mailing this proxy statement, the attached Notice of Special Meeting of Securityholders and the accompanying proxy card on or about [], 2017.

The following are some questions that you, as a Securityholder of TESCO, may have regarding the Arrangement and the Special Meeting and brief answers to those questions. You are urged to read carefully this proxy statement and the other documents incorporated by reference and referred to in this proxy statement in their entirety because this section may not provide all of the information that is important to you with respect to the Arrangement and the Special Meeting. Additional important information is contained in the Annexes to, and the documents incorporated by reference into, this proxy statement.

About the Meeting

Why did I receive this package of information?

TESCO, Nabors and Nabors Maple have agreed to the Arrangement, pursuant to which Nabors Maple will acquire all of the issued and outstanding common shares of TESCO (the Common Shares). In order to complete the Arrangement, Securityholders must approve the Arrangement Resolution, and TESCO is holding the Special Meeting to obtain such approval. Pursuant to the Plan of Arrangement, at the effective time of the Arrangement each issued and outstanding Common Share, other than Common Shares with respect to which dissent rights have been properly exercised and not withdrawn, will be exchanged for 0.68 of a Nabors Share (the Share Consideration). Each Common Share with respect to which dissent rights have been properly exercised and not withdrawn will be deemed to be transferred to Nabors Maple in accordance with, and for the consideration contemplated in, the Plan of Arrangement. All outstanding, unexpired options (Options) to purchase Common Shares will be accelerated, cancelled, and exchanged for, in the case of “in-the-money” options, the right to receive an amount in cash, and all outstanding restricted stock units (including performance-based restricted stock units) (RSUs) will vest and be cancelled in exchange for the right to receive an amount in cash, in each case, in accordance with the Plan of Arrangement.

This document is being delivered to you as a proxy statement and management information circular of TESCO (together referred to herein as the proxy statement) in connection with the Arrangement and the Special Meeting. It is the proxy statement by which TESCO’s board of directors (the Board) and management are

 

iii


Table of Contents

soliciting proxies from you to vote on, among other items, the Arrangement Resolution at the Special Meeting or at any adjournment or postponement of the Special Meeting.

Who is soliciting my proxy?

Your proxy is being solicited by and on behalf of TESCO’s management and the Board for use at the Special Meeting or any adjournment(s) or postponement(s) thereof. It is expected that the solicitation will be made primarily by mail, but proxies may also be solicited personally, by telephone or through electronic means (including via the internet, e-mail or facsimile). We have retained Alliance Advisors LLC to solicit proxies for us at an estimated cost of $20,000 plus customary costs and expenses for these services.

When and where is the Special Meeting?

The Special Meeting will be held in [Calgary, Alberta], at [address], on [●] at [●] [a./p.m.].

What am I being asked to vote on?

Securityholders are being asked to vote on the Arrangement Resolution (Proposal 1) to approve the Arrangement, which provides for, among other things, the acquisition by Nabors, through Nabors Maple, of all of the issued and outstanding Common Shares. Only Shareholders are being asked to approve, on a non-binding, advisory basis, the agreements or understandings between TESCO’s named executive officers and TESCO and the related compensation that will or may be paid in connection with the Arrangement.

What shareholder vote is required for the approval of the Arrangement Resolution (Proposal 1)?

The vote requirement to approve the Arrangement Resolution is the affirmative approval of not less than two-thirds of the votes cast by the holders of Common Shares, Options and RSUs (collectively, the Securities and the holders of Securities are collectively, the Securityholders) present in person or represented by proxy at the Special Meeting and voting together as a single class.

What shareholder vote is required for the approval of the Advisory Proposal Regarding Golden Parachute Compensation (Proposal 2)?

The vote requirement to approve, on a non-binding, advisory basis, the compensation payments that will or may be paid by TESCO to its named executive officers in connection with the Arrangement is the affirmative approval of a majority of the votes cast by holders of Common Shares present in person or by proxy at the Special Meeting.

What if amendments are made to these matters or other business is brought before the Special Meeting?

The accompanying form of proxy confers discretionary authority on the persons named therein as proxies with respect to any amendments or variations to the matters identified in the Notice of Meeting accompanying this proxy statement or other matters that may properly come before the Special Meeting and the named proxies in your properly executed proxy will vote on such matters in accordance with their judgment. As of the date of this proxy statement, the management of TESCO is not aware of any such amendments, variations or other matters which are to be presented for action at the Special Meeting.

When must I be a Securityholder in order to be entitled to vote?

Except as otherwise provided herein, you need to be a Securityholder as of the close of business (Calgary time) on the Record Date (being [●]), to be entitled to receive notice of, attend, be heard and vote at the Special Meeting.

 

iv


Table of Contents

What if I acquire ownership of Common Shares, Options or RSUs after the Record Date of []?

Except as set forth immediately below, only Securityholders as of the close of business (Calgary time) on the Record Date (being [●]) are entitled to receive notice of, attend, be heard and vote at the Special Meeting. Notwithstanding the foregoing, a transferee of Common Shares who either (i) produces properly endorsed share certificates or (ii) otherwise establishes ownership of the Common Shares and demands, not later than 10 days before the Special Meeting, shall be entitled to vote the transferee’s shares at the Special Meeting.

What happens if I sell my Common Shares after the Record Date but before the Special Meeting?

Only Securityholders whose names have been entered on the register of holders of Common Shares, Options or RSUs respectively, as at the close of business (Calgary time) on the Record Date will be entitled to receive notice of, attend, be heard and to vote at the Special Meeting provided that, to the extent a Shareholder transfers the ownership of any Common Shares after the Record Date and the transferee of those Common Shares produces properly endorsed Common Share certificates, or otherwise establishes ownership of such Common Shares and demands, not later than 10 days before the Special Meeting, to be included on the list of Securityholders entitled to vote at the Special Meeting, such transferee will be entitled to vote those Common Shares at the Special Meeting.

How can I vote my Common Shares, Options or RSUs?

You can vote your Common Shares, Options or RSUs either by attending the Special Meeting and voting your Common Shares, Options or RSUs at the Special Meeting or, if you cannot attend, by having your Common Shares, Options or RSUs voted by proxy in accordance with the instructions set out on the accompanying form of proxy.

If you were a registered Shareholder as of the close of business (Calgary time) on the Record Date, you can attend and vote at the Special Meeting. If you cannot attend the Special Meeting in person, please carefully follow the instructions provided in the applicable enclosed form of proxy in order to vote.

If you are a non-registered Shareholder (meaning that your Common Shares are held on your behalf, or for your account, by a broker, investment dealer, bank, trust company or other intermediary), please carefully follow the instructions provided by such broker, investment dealer, bank, trust company or other intermediary in order to vote.

Who can I call if I have questions or need assistance in voting my Common Shares, Options or RSUs?

If you have any questions and/or need assistance voting your Securities, please contact Alliance Advisors LLC, by mail at 200 Broadacres Drive, 3rd Floor, Bloomfield, NJ 07003, or by telephone at 1-833-501-4828.

What is the quorum for the Special Meeting?

A quorum will be present if at least two persons are present, in person or by proxy, at the Special Meeting together holding or representing 331/3% of the outstanding Common Shares, being shares of TESCO entitled to vote at the Special Meeting.

How many Common Shares, Options or RSUs are entitled to vote?

All Common Shares, Options and RSUs issued and outstanding as of the close of business (Calgary time) on the Record Date (being []) are entitled to vote on Proposal 1 set forth in the Notice of Meeting. All Common Shares issued and outstanding as of the close of business (Calgary time) on the Record Date are entitled to vote on Proposal 2 set forth in the Notice of Meeting.

 

v


Table of Contents

About the Arrangement

What are the benefits of the Arrangement?

The Board reviewed and considered a significant amount of information and considered a number of factors relating to the Arrangement. Among the principal reasons for the conclusion of the Board that the Arrangement is in the best interests of TESCO and is fair to TESCO’s shareholders are the following:

 

    Significant Premium. The Arrangement values the Common Shares at $4.62 per share based on Nabors’ closing share price of $6.80 on the New York Stock Exchange on August 11, 2017 (the last trading day on the NYSE prior to execution of the Arrangement Agreement). This represents a premium of 19% to TESCO’s closing share price on the NASDAQ Stock Market on the same date, and represents a premium of 30% to TESCO’s enterprise value based on TESCO’s June 30, 2017 cash balance. The Board believed a fixed share price ratio would provide the maximum potential upside as opposed to cash consideration at this stage of the market, and based on the historical relative stock patterns, including the market consensus of stock price upside potential.

 

    Continued Upside Participation by Shareholders. Shareholders, through their 10% ownership of Nabors following consummation of the Arrangement, will continue to participate in the value and any upside associated with Nabors’ business and the synergies of the combination with TESCO, including Nabors’ expanded platform and stronger and broader offering of complementary rig equipment, product lines and tubular services.

 

    Liquidity of Consideration. Shareholders will receive Nabors Shares, a stock with a higher average daily trading volume, which will provide the Shareholders with access to more liquidity for their holdings.

 

    Risk Mitigation and Stock Price Down Side Protection. The combined entity presents a more resilient business to weather deteriorating market conditions including a potential softening of the North American drilling market and offshore activity.

What is a plan of arrangement?

A plan of arrangement is a statutory procedure under Alberta corporate law that allows a company to carry out transactions with the approval of its Securityholders and the Court. The Plan of Arrangement that you are being asked to consider will provide for, among other things, the acquisition by Nabors Maple of all of the issued and outstanding Common Shares.

Does the Board of Directors of TESCO support the Arrangement?

Yes. The Board, having undertaken a thorough review of, and having carefully considered, information concerning TESCO, Nabors, Nabors Maple and the Arrangement, has unanimously concluded that the Arrangement is in the best interests of TESCO, that the Arrangement is fair to the Shareholders, and has unanimously approved the Arrangement and entry into the Arrangement Agreement. Accordingly, the Board unanimously recommends that the Securityholders vote FOR the Arrangement Resolution.

See “The Arrangement—Reasons for the Arrangement” and “The Arrangement—Recommendation of the Board” on pages 37 and 37, respectively, of this proxy statement.

How will TESCO’s directors and executive officers vote on the proposal to approve the Arrangement Resolution?

The directors and executive officers of TESCO have informed TESCO that as of the date of this proxy statement, they intend to vote their Securities in favor of the Arrangement Resolution. As of the Record Date for the Special Meeting, the directors and executive officers of TESCO have the right to vote, in the aggregate, 1,772,714 Securities, representing 3.6% of the issued and outstanding Securities entitled to vote at the Special Meeting.

 

vi


Table of Contents

Do any of TESCO’s directors or executive officers have interests in the Arrangement that may differ from or be in addition to my interests as a Securityholder?

Yes. In considering the recommendation of the Board with respect to the Arrangement, you should be aware that TESCO’s directors and executive officers may have interests in the Arrangement that are different from, or in addition to, the interests of Securityholders. These interests may create potential conflicts of interest. The Board was aware of those interests and considered them, among other matters, in approving the Arrangement Agreement, the Arrangement, and the transactions contemplated by the Arrangement Agreement. See the section entitled “Interests of Directors and Executive Officers in the Arrangement” on page 75 of this proxy statement.

I own Common Shares. What will I receive if the Arrangement is completed?

Subject to the terms and conditions of the Arrangement Agreement, at the Effective Time of the Arrangement, each issued and outstanding Common Share, other than Common Shares with respect to which dissent rights have been properly exercised and not withdrawn, will be exchanged for 0.68 of a Nabors Share.

I own Options and/or RSUs. What will I receive if the Arrangement is completed?

All outstanding, unexpired Options to purchase Common Shares will be accelerated, cancelled, and exchanged for the right to receive an amount in cash per share, less any required tax withholdings, without interest, equal to (a) the excess of the Market Value per Common Share over the Option’s exercise price, multiplied by (b) the aggregate number of Common Shares subject to such Option immediately prior to the Effective Time, and each Option with an exercise price per share that is equal to or greater than the Market Value will be cancelled for no consideration (such amount, if any, the Option Consideration).

All outstanding RSUs will vest and be cancelled in exchange for the right to receive an amount in cash, less any required tax withholding, without interest, equal to (a) the Market Value per Common Share, multiplied by (b) the aggregate number of Common Shares underlying the RSUs immediately prior to the Effective Time (such amount, the RSU Consideration). Market Value means 0.68 multiplied by the closing price of one Nabors Share on the New York Stock Exchange (NYSE) on the last trading day prior to the effective date of the Arrangement. See “The Arrangement—Treatment of Options and RSUs” on page 48 of this proxy statement.

Will I be entitled to fractional shares?

No fractional Nabors Shares shall be issued upon the surrender of Common Share certificates for exchange, and any such fractional share interests to which a former Shareholder would otherwise have been entitled will not entitle such former Shareholder to vote or to any other rights of a holder of Nabors Shares. In lieu of any such fractional Nabors Shares, each former Shareholder otherwise entitled to fractional Nabors Shares shall receive the nearest whole number of Nabors Shares. For greater certainty, where such fractional interest is greater than or equal to 0.5, the number of Nabors Shares to be issued shall be rounded up to the nearest whole number of Nabors Shares and where such fractional interest is less than 0.5, the number of Nabors Shares to be issued shall be rounded down to the nearest whole number of Nabors Shares.

Am I entitled to Dissent Rights?

Pursuant to the Interim Order, registered Shareholders have the right to dissent with respect to the Arrangement Resolution and, if the Arrangement becomes effective, to be paid the fair value of their Common Shares in accordance with the provisions of section 191 of the ABCA, as modified by the Interim Order and the Plan of Arrangement. A registered Shareholder wishing to exercise rights of dissent with respect to the Arrangement must: (i) send to TESCO a written objection to the Arrangement Resolution, which written objection must be received by TESCO c/o Norton Rose Fulbright Canada LLP, Suite 3700, 400 – 3rd Avenue S.W., Calgary, Alberta, T2P 4H2, Attention: Steven H. Leitl, by no later than 4:00 p.m. (Eastern time) on [●] (or the day that is

 

vii


Table of Contents

two business days immediately preceding the date that the adjourned or postponed Special Meeting is reconvened or held, as the case may be): (ii) send the certificates representing the Common Shares in respect of which the Shareholder is dissenting to TESCO or to its transfer agent; and (iii) otherwise strictly comply with the dissent procedures described in this proxy statement. A registered Shareholder’s right to dissent is more particularly described in this proxy statement, and a copy of the Interim Order and the text of section 191 of the ABCA are set forth in Annexes D and J respectively, to this proxy statement.

When will the Arrangement be completed?

It is presently anticipated that the Arrangement will be completed in the fourth quarter of 2017. However, completion of the Arrangement is dependent on many factors outside of TESCO’s or Nabors’ control and it is not possible at this time to determine precisely when or if the Arrangement will become effective.

When and how do I send in my share certificates?

After the closing of the Arrangement, Nabors will send out separate materials consisting of a Letter of Transmittal and detailed instructions to each person who was a registered Shareholder and holding Common Shares in certificated form on the Record Date. After receiving those materials, you must deliver to the Transfer Agent a duly completed and validly executed Letter of Transmittal, including such additional documents and instruments as the Transfer Agent may reasonably require (including any certificate which immediately prior to the Effective Time represented one or more outstanding Common Shares). Upon delivery of such documents, you shall be entitled to receive in exchange for the Common Shares so deposited a share certificate evidencing the number of Nabors Shares to which you are entitled to receive under the Arrangement.

Registered Shareholders holding Common Shares in book-entry form will not be required to deliver any certificates or a Letter of Transmittal to the Transfer Agent. Your Common Shares will be automatically cancelled and converted by the Transfer Agent into the right to receive the number of Nabors Shares to which you are entitled to receive under the Arrangement, and no further action or information is required on your behalf to receive the Share Consideration. If you are a non-registered or beneficial Shareholder (Beneficial Shareholder) holding your Common Shares through a nominee such as a broker or dealer, you should carefully follow any instructions provided to you by such nominee.

Option Holders and RSU Holders will not receive certificates representing Common Shares and will not be required to deliver any such certificates or a Letter of Transmittal to the Transfer Agent in order to receive the amount in cash they are entitled to receive pursuant to the Arrangement.

What happens if the Securityholders do not approve the Arrangement?

If the Arrangement Resolution does not receive the Requisite Approval at the Meeting, the Arrangement will not become effective. Failure to complete the Arrangement could have a material negative effect on the market price of the Common Shares. Further, depending on the circumstances in which termination of the Arrangement Agreement occurs, TESCO may have to pay the Company Termination Fee. See “Risk Factors—Risks Related to the Arrangement” and “The Arrangement Agreement—Termination of the Arrangement Agreement”. Subject to the risks referenced above, TESCO would otherwise continue as a standalone company.

Will the Common Shares continue to be listed on the NASDAQ or registered under the U.S. Exchange Act after the Arrangement?

No. If the Arrangement is completed, TESCO will use its reasonable best efforts to cooperate with Nabors to cause the Common Shares to be delisted from the NASDAQ and deregistered under the U.S. Exchange Act as soon as practicable following the Effective Time.

 

viii


Table of Contents

What are the tax consequences of the Arrangement to me as a Shareholder?

This proxy statement contains a summary of the principal Canadian federal and certain U.S. federal income tax considerations relevant to Shareholders. Please see the discussions under the headings “Certain Canadian Federal Income Tax Consequences of the Arrangement” and “Certain U.S. Federal Income Tax Consequences” in this proxy statement. These summaries are of a general nature only and are not, and are not intended to be, nor should they be construed to be, legal or tax advice or representations to any particular Shareholder.

About the Advisory Proposal Regarding Golden Parachute Compensation

Why am I being asked to approve the Advisory Proposal Regarding Golden Parachute Compensation (Proposal 2)?

The United States Securities and Exchange Commission (SEC) has adopted rules that require TESCO to seek a non-binding, advisory vote on the compensation payments that will or may be paid by TESCO to its named executive officers in connection with the Arrangement.

What happens if the Advisory Proposal Regarding Golden Parachute Compensation (Proposal 2) is not approved?

Approval of this proposal is not a condition to the completion of the Arrangement, and as a non-binding, advisory vote, the results will not be binding on TESCO, the Board or Nabors. Further, the underlying plans and arrangements are contractual in nature and not, by their terms, subject to shareholder approval. Accordingly, regardless of the outcome of this proposal, if the Arrangement is consummated, TESCO’s named executive officers will be eligible to receive the compensation that is based on or otherwise relates to the Arrangement in accordance with the terms and conditions applicable to those payments, as described in this proxy statement.

Whom to Call with Questions

Whom can I contact if I have questions?

If you have any questions about the information contained in this proxy statement or require assistance in completing your form of proxy, please contact TESCO’s proxy solicitation and information agent, Alliance Advisors LLC, by mail at 200 Broadacres Drive, 3rd Floor, Bloomfield, NJ 07003, or by telephone at 1-833-501-4828.

If you have questions about deciding how to vote, you should contact your own legal, tax, financial or other professional advisor.

 

ix


Table of Contents

PROXY STATEMENT

SUMMARY

Information about Nabors and TESCO (See Page 20)

Nabors (See Page 20)

Nabors owns and operates the world’s largest land-based drilling rig fleet and is a leading provider of offshore platform drilling rigs in the U.S. and multiple international markets. Nabors also provides advanced wellbore placement services, drilling software and performance tools, drilling equipment and innovative technologies throughout the world’s most significant oil and gas markets. In today’s performance-driven environment, Nabors believes it is well positioned to seamlessly integrate downhole hardware, surface equipment and software solutions into its AC rig designs. Leveraging its advanced drilling automation capabilities, Nabors believes its highly skilled workforce continues to set new standards for operational excellence and transform the industry.

Nabors’ principal executive offices are located at Crown House, 4 Par-La-Ville Road, Second Floor, Hamilton, HM08, Bermuda, its telephone is (441) 292-1510, and its website is www.nabors.com. The information contained in, or that can be accessed through, Nabors’ website is not incorporated by reference in this proxy statement and you should not consider information contained on Nabors’ website as part of this proxy statement. For additional information about Nabors, see “The Companies—Nabors”, “The Companies—Nabors After Giving Effect to the Arrangement”, “Where You Can Find Additional Information” in this proxy statement and Annexes F, G, H, and I to this proxy statement.

TESCO (See Page 20)

TESCO was organized under the laws of Alberta, Canada on December 1, 1993 through the amalgamation of Shelter Oil and Gas Ltd., Coexco Petroleum Inc., Forewest Industries Ltd. and Tesco Corporation. TESCO is a global leader and provider of highly engineered technology-based solutions for drilling, servicing, and completion of wells for the upstream energy industry. TESCO seeks to improve the way wells are drilled by delivering safer and more efficient solutions that add value by reducing the costs of drilling for, and producing, oil and natural gas. TESCO’s operations consist of top drives and automated pipe handling equipment sales and rentals; aftermarket sales and services; and tubular services, including related products and accessories sales.

TESCO’s principal executive offices are located at 11330 Clay Road, Suite 350, Houston, Texas, 77041 United States of America, its telephone is (713) 359-7000 and its website is www.tescocorp.com. The information contained in, or that can be accessed through, TESCO’s website is not incorporated by reference in this proxy statement and you should not consider information contained on TESCO’s website as part of this proxy statement. For additional information about TESCO, see “Where You Can Find Additional Information” in this proxy statement.

Nabors Maple Acquisition Ltd. (See Page 21)

Nabors Maple Acquisition Ltd. (Nabors Maple) is a direct, wholly-owned subsidiary of Nabors. Nabors Maple was formed on August 11, 2017 for the purpose of acquiring all of the issued and outstanding Common Shares by way of the Plan of Arrangement, with Nabors Maple continuing as a wholly-owned subsidiary of Nabors. Nabors Maple has not carried on any activities other than in connection with the Arrangement Agreement.

Risk Factors (See Page 15)

The Arrangement and an investment in Nabors Shares involve risks, some of which are related to the Arrangement. In considering the Arrangement, you should carefully consider the information about these risks

 



 

1


Table of Contents

set forth under the section entitled “Risk Factors,” together with the other information included or incorporated by reference in this proxy statement.

The Arrangement and the Arrangement Agreement (See Page 32)

TESCO, Nabors Maple and Nabors entered into the Arrangement Agreement on August 13, 2017. Subject to the terms and conditions of the Arrangement Agreement, at the effective time of the Arrangement, each outstanding Common Share, other than Common Shares with respect to which dissent rights have been properly exercised and not withdrawn, will be exchanged for 0.68 of a common share of Nabors (the Share Consideration). Each dissenting Common Share will be transferred to Nabors Maple in accordance with, and for the consideration contemplated in, the Arrangement Agreement.

A copy of the Arrangement Agreement is attached as Annex C to this proxy statement. You should read the Arrangement Agreement carefully and in its entirety because it is the legal document that governs the Arrangement.

Special Meeting of Securityholders (See Page 27)

Date, Time and Place of the Special Meeting

The Special Meeting will be held on [date] at [time], at [location], Calgary, Alberta, Canada.

Record Date

The record date for determining the Securityholders entitled to receive notice of and to vote at the Special Meeting is [] (Record Date). Only Securityholders of record as of the close of business (Calgary time) on the Record Date are entitled to receive notice of and to vote at the Special Meeting. Notwithstanding the foregoing, a transferee of Common Shares who either (i) produces properly endorsed share certificates or (ii) otherwise establishes ownership of the Common Shares and demands, not later than 10 days before the Special Meeting, shall be entitled to vote the transferee’s shares at the Special Meeting.

The record date for Securityholders entitled to receive notice of and to vote at the Special Meeting will not change in respect of or as a consequence of any adjournment or postponement of the Special Meeting.

Quorum

A quorum will be present if at least two persons are present, in person or by proxy, at the Special Meeting, together holding or representing 331/3% of the outstanding Common Shares, being shares of TESCO entitled to vote at the Special Meeting. If you have returned an instrument of proxy, including an instrument marked as an abstention, or if you hold your Common Shares in your own name as a holder of record and attend the Special Meeting in person, your Common Shares will be counted for the purpose of determining whether there is a quorum.

Required Vote (See Pages 101 and 102)

The vote requirement to approve the Arrangement Resolution is the affirmative approval of not less than two-thirds of the votes cast by the holders of Common Shares, Options and Restricted Stock Units (RSUs) (Common Shares, Options and RSUs are, collectively, the Securities and the holders of Securities are collectively, the Securityholders) present in person or represented by proxy at the Special Meeting and voting together as a single class. The vote requirement to approve the Advisory Proposal Regarding Golden Parachute Compensation is the affirmative approval of a majority of the votes cast by holders of Common Shares present in person or by proxy at the Special Meeting.

 



 

2


Table of Contents

Persons Entitled to Vote

Only registered Securityholders are entitled to vote at the Special Meeting. With respect to Proposal 1, each registered Securityholder has one vote for each Security held at the close of business (Calgary time) on the Record Date. With respect to Proposal 2, each registered Shareholder has one vote for each Common Share held at the close of business (Calgary time) on the Record Date. As of the Record Date, there were [46,754,956] Common Shares, [565,136] Options and [1,460,148] RSUs outstanding.

What Shareholders will Receive in the Arrangement (See Page 32)

Subject to the terms and conditions of the Arrangement Agreement, at the Effective Time of the Arrangement, each issued and outstanding Common Share, other than Common Shares with respect to which dissent rights have been properly exercised and not withdrawn, will be exchanged for 0.68 of a Nabors Share.

Treatment of Equity Awards (See Page 48)

Subject to the terms and conditions of the Arrangement Agreement and pursuant to the Plan of Arrangement, each Option that is outstanding immediately prior to the Effective Time will be fully vested and exercisable pursuant to the provisions of the applicable Company Stock Incentive Plan and award agreements, by virtue of the Arrangement and without any further action by Nabors, Nabors Maple, TESCO or the holder of that Option, and will be cancelled in consideration for the right to receive the Option Consideration, provided that each Option with an exercise price that is equal to or more than the Market Value will be cancelled for no consideration.

Each RSU that is outstanding immediately prior to the Effective Time will be fully vested pursuant to the provisions of the applicable Company Stock Incentive Plan and award agreements, by virtue of the Arrangement and without any further action by Nabors, Nabors Maple, TESCO or the holder of that RSU, and shall be cancelled in consideration for the right to receive the RSU Consideration. Each outstanding RSU that is subject to a performance-based vesting requirement will become fully vested and converted as provided above based upon the number of units at the “target” level of performance applicable to such award.

Recommendation of the TESCO Board of Directors (See Page 27)

After considering, among other things, the Fairness Opinion and the advice of its financial and legal advisors, the Board has unanimously concluded that the Arrangement is in the best interests of TESCO, that the Arrangement is fair to the Shareholders, and has unanimously approved the Arrangement and entry into the Arrangement Agreement. Accordingly, the Board of Directors unanimously recommends that Securityholders vote “FOR” the Arrangement Resolution and unanimously recommends that Shareholders vote “FOR” the Advisory Proposal Regarding Golden Parachute Compensation.

Opinion of TESCO’s Financial Advisor (See Page 44)

TESCO retained J.P. Morgan as its financial advisor in connection with the proposed Arrangement. At the meeting of the Board on August 13, 2017, J.P. Morgan rendered its oral opinion to the Board that, as of such date and based upon and subject to the factors and assumptions set forth in its opinion, the consideration to be paid to Shareholders in the proposed Arrangement was fair, from a financial point of view, to such Shareholders. J.P. Morgan has confirmed its August 13, 2017 oral opinion by delivering its written opinion to the Board, dated August 13, 2017, that, as of such date, the consideration to be paid to Shareholders in the proposed Arrangement was fair, from a financial point of view, to such Shareholders. The full text of the written opinion of J.P. Morgan dated August 13, 2017, which sets forth the assumptions made, matters considered and limits on the review

 



 

3


Table of Contents

undertaken, is attached as Annex E to this proxy statement and is incorporated herein by reference. The summary of the opinion of J.P. Morgan beginning on page 44 of this proxy statement is qualified in its entirety by reference to the full text of such opinion. Securityholders are urged to read the opinion in its entirety. J.P. Morgan’s written opinion was addressed to the Board (in its capacity as such) in connection with and for the purposes of its evaluation of the proposed transaction, was directed only to the consideration to be paid to Shareholders in the Arrangement and did not address any other aspect of the Arrangement. J.P. Morgan expressed no opinion as to the fairness of the consideration to the holders of any other class of securities, creditors or other constituencies of TESCO or as to the underlying decision by TESCO to engage in the proposed Arrangement. The issuance of J.P. Morgan’s opinion was approved by a fairness committee of J.P. Morgan. The opinion does not constitute a recommendation to any Securityholder of TESCO as to how such Securityholder should vote with respect to the proposed Arrangement or any other matter.

The Arrangement Requires the Approval of the Court (See Page 50)

Interim Order

On [●], 2017, the Court granted the Interim Order directing the calling of the Special Meeting and prescribing the conduct of the Meeting and other matters. A copy of the Interim Order is attached as Annex D to this proxy statement.

Final Order

An arrangement under the ABCA requires Court approval. Subject to the terms of the Arrangement Agreement, and if the Arrangement Resolution is approved by the Securityholders at the Special Meeting in the manner required by the Interim Order, TESCO will make an application to the Court for the Final Order.

The application for the Final Order approving the Arrangement is scheduled for [●], 2017 at [●] a.m. (Calgary time), or as soon thereafter as counsel may be heard, at the Calgary Courts Centre, 601 – 5th Street S.W., Calgary, Alberta. At the hearing, any Securityholder and any other interested party who wishes to participate or to be represented or to present evidence or argument may do so, subject to filing with the Court and serving upon TESCO a notice of intention to appear together with any evidence or materials that such party intends to present to the Court on or before 5:00 p.m. (Calgary time) on [●], 2017. See the “Notice of Originating Application” included in this proxy statement.

The Court may approve the Arrangement either as proposed or as amended in any manner the Court may direct, subject to compliance with such terms and conditions, if any, as the Court thinks fit. Depending upon the nature of any required amendments, TESCO or Nabors Maple may determine not to proceed with the Arrangement.

Interests of Directors and Executive Officers in the Arrangement (See Page 75)

In considering the Board’s recommendation that you vote to approve the Arrangement Resolution, you should be aware that aside from their respective interests as Securityholders, our directors and executive officers have interests in the Arrangement that may be different from, or in addition to, those of Securityholders generally. Such interests may include, but are not limited to, the right to receive certain payments resulting from the closing of the Arrangement and additional payments in exchange for their continued employment or service with TESCO after the closing of the Arrangement. For more information see “Interests of Directors and Executive Officers in the Arrangement” on page 75 of the proxy statement.

Members of the Board were aware of and considered these interests, among other matters, in evaluating and negotiating the Arrangement Agreement and the Arrangement, and in recommending to Securityholders that the

 



 

4


Table of Contents

Arrangement Agreement be approved. For more information see the sections entitled “Background to the Arrangement” and “The Arrangement Proposal—TESCO’s Reasons for the Arrangement; Recommendation of the Board.”

Dissent Rights Available (See Page 55)

Pursuant to the Interim Order, Dissenting Shareholders are given rights analogous to rights of dissenting shareholders under the ABCA, as modified by the Interim Order and the Plan of Arrangement. Under the Interim Order, each registered Shareholder is entitled, in addition to any other rights a registered Shareholder may have, to dissent and to be paid by Nabors Maple the fair value of the Common Shares held by such Shareholder determined as of the close of business on the last Business Day before the day on which the Arrangement Resolution is approved. If a registered Shareholder exercises Dissent Rights, he or she may only do so as to all of the Common Shares held by such Shareholder and not solely as to any portion of such Shareholder’s Common Shares.

All Common Shares held by registered Shareholders who exercise their Dissent Rights in respect of their Common Shares will, if the Shareholders are ultimately entitled to be paid the fair value thereof, be deemed to be transferred to Nabors Maple, without any further act or formality on its part, free and clear of any Liens, in exchange for a debt claim against Nabors Maple for the fair value of such Common Shares, which fair value, notwithstanding anything to the contrary to section 191 of the ABCA, shall be determined as of the close of business on the Business Day before the Arrangement Resolution was approved. Registered Shareholders who exercise their Dissent Rights in respect of their Common Shares and who are not ultimately entitled to be paid the fair value of their Common Shares shall be deemed to have participated in the Arrangement.

Completion of the Arrangement Is Subject to Certain Conditions (See Page 67)

Each party’s obligation to complete the Arrangement is subject to the satisfaction or waiver of the following mutual conditions:

 

    the Requisite Approval having been obtained at the Special Meeting in accordance with the Interim Order;

 

    the Interim Order and the Final Order having been obtained on terms consistent with the Arrangement Agreement, and having not been set aside or modified in a manner unacceptable to TESCO or Nabors acting reasonably, on appeal or otherwise;

 

    no governmental or judicial action taken or circumstance arising (whether temporary, preliminary or permanent) that would make illegal or otherwise prevent or prohibit the consummation of the Arrangement;

 

    the exemption of the Nabors Shares to be issued pursuant to the Arrangement from the registration requirements of the U.S. Securities Act pursuant to Section 3(a)(10) thereof or another available exemption; and

 

    approval for the listing on the New York Stock Exchange of the Nabors Shares to be issued in the Arrangement, subject to official notice of issuance.

The obligations of Nabors and Nabors Maple to complete the Arrangement are also subject to the satisfaction (or, to the extent permitted by applicable law, waiver) of the following conditions:

 

    all covenants of TESCO under the Arrangement Agreement to be performed or complied with on or before the Effective Time which have not been waived by Nabors having been duly performed or complied with by TESCO in all material respects;

 



 

5


Table of Contents
    as to the representations and warranties of TESCO:

 

    the representations and warranties of TESCO regarding capital structure and absence of certain changes, having been true and correct in all respects (other than de minimis inaccuracies) as of the date of the Arrangement Agreement and as of Effective Time as if made at and as of such time (except for representations and warranties made only as of a specified date, which must have been true and correct other than in de minimis respects as of the specified date);

 

    the representations and warranties of TESCO regarding organization, standing and power, issuances and repurchases of securities, authority, certain agreements, board approval, vote required of the company stockholders and brokers or finders having been true and correct in all material respects as of the date of the Arrangement Agreement and as of the Effective Time as if made at and as of such time (except for representations and warranties made only as of a specified date, must have been true and correct as of the specified date); and

 

    the remaining representations and warranties of TESCO (other than those discussed above) having been true and correct (disregarding all qualifications and exceptions contained therein regarding materiality or Material Adverse Effect), in each case as of the date of the Arrangement Agreement and as of the Effective Time as if made at and as of such time (except that any such representation and warranty that by its terms speaks specifically as of another date must have been true and correct as of such date), except in the case where the failures of these other representations and warranties to be so true and correct, in the aggregate, have not had, and would not reasonably be expected to have, a Material Adverse Effect on TESCO;

 

    TESCO’s delivery of a certificate addressed to Nabors and Nabors Maple dated as of the Effective Date, signed on behalf of TESCO by the chief executive officer and chief financial officer of TESCO, confirming the satisfaction of the conditions set forth above as of the Effective Date; and

 

    the non-occurrence of any Event that has had or would be reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on TESCO since the date of the Arrangement Agreement.

The obligation of TESCO to complete the Arrangement is also subject to the satisfaction (or, to the extent permitted by applicable law, waiver) of the following conditions:

 

    all covenants of Nabors and Nabors Maple under the Arrangement Agreement to be performed or complied with on or before the Effective Time which have not been waived by TESCO having been duly performed or complied with by Nabors and Nabors Maple in all material respects;

 

    as to the representations and warranties of Nabors:

 

    the representations and warranties of Nabors regarding capital structure and absence of certain changes of the Arrangement Agreement having been true and correct, other than de minimis respects, as of the date of the Arrangement Agreement and as of immediately prior to the Effective Time as if made at and as of such time (except for representations and warranties made only as of a specified date, which must have been true and correct, other than de minimis respects, only as of the specified date);

 

    the representations and warranties of Nabors regarding authority, board approval and vote required of Nabors Maple shareholders having been true and correct in all material respects as of the date of the Arrangement Agreement and as of immediately prior to the Effective Time as if made at and as of such time (except for representations and warranties made only as of a specified date, which must have been true and correct in all material respects only as of the specified date); and

 

   

the remaining representations and warranties of Nabors contained in the Arrangement Agreement (other than those discussed above) (disregarding all qualifications and exceptions contained

 



 

6


Table of Contents
 

therein regarding materiality and Material Adverse Effect) having been true and correct, in each case as of the date of the Arrangement Agreement and as of immediately prior to the Effective Time as if made at and as of such time (except that any such representation and warranty that by its terms speaks specifically as of another date, which must have been true and correct as of such date), except in the case where the failures of any of these other representations and warranties to be so true and correct, in the aggregate, have not had, and would not reasonably be expected to have, a Material Adverse Effect on Nabors;

 

    the delivery by Nabors and Nabors Maple of a certificate addressed to TESCO dated as of the Effective Date, signed on behalf of Nabors and Nabors Maple by their respective chief executive officers and chief financial officers, confirming the satisfaction of the conditions set forth above as of the Effective Date; and

 

    the non-occurrence of any Event that has had or would reasonably be likely to have, individually or in the aggregate a Material Adverse Effect on Nabors since the date of the Arrangement Agreement.

Listing of Nabors Stock and Delisting and Deregistration of TESCO Stock (See Page 50)

Listing of Nabors Shares

The Nabors Shares are listed on the NYSE under the symbol “NBR”. It is Nabors’ intention to rely upon the exemption from registration provided by Section 3(a)(10) of the U.S. Securities Act with respect to the issuance of Nabors Shares pursuant to the Arrangement Agreement. Section 3(a)(10) exempts from registration the offer and sale of a security which is issued in specified exchange transactions where, among other things, the terms and conditions of such issuance and exchange are approved, after a hearing upon the fairness of such terms and conditions at which all persons to whom it is proposed to issue securities in such exchange have the right to appear, by a court or governmental authority expressly authorized by law to grant such approval.

Following the consummation of the Arrangement, the Nabors Shares issued pursuant to the Arrangement will be listed on the NYSE, subject to official notice of issuance.

Delisting and Deregistration of TESCO Common Shares

It is expected that the Common Shares will be delisted from the NASDAQ and deregistered under the U.S. Exchange Act promptly following consummation of the Arrangement.

The Common Shares are currently listed on the NASDAQ under the symbol “TESO”. If permitted by applicable laws, Nabors intends to delist the Common Shares from the NASDAQ with effect from the Effective Date and to apply for a decision for TESCO to cease to be a reporting issuer under the securities laws of each jurisdiction of Canada in which TESCO is a reporting issuer.

If the Arrangement is completed, the registration of the Common Shares under the U.S. Exchange Act and all obligations to file or furnish reports under the U.S. Exchange Act will be terminated.

No Solicitation by TESCO (See Page 70)

Except as expressly provided in the Arrangement Agreement, TESCO may not, directly or indirectly, through any officer, director, employee, representative (including any financial or other advisor) or agent of TESCO or of any of its Subsidiaries (collectively, Representatives):

 

    initiate, solicit, knowingly encourage or knowingly facilitate any inquiries regarding, or the making of any proposal or offer, relating to any Acquisition Proposal;

 



 

7


Table of Contents
    have any discussions with or provide any confidential information or data relating to TESCO or any of its Subsidiaries to any Person relating to an Acquisition Proposal, or engage in any negotiations concerning an Acquisition Proposal, except under certain limited circumstances; or

 

    approve, recommend, execute or enter into, or propose to approve, recommend, execute or enter into, any letter of intent, agreement in principle, merger agreement, asset purchase or share exchange agreement, option agreement or other agreement related to any Acquisition Proposal (other than an Acceptable Confidentiality Agreement entered into pursuant to the terms and conditions of the Arrangement Agreement) or propose or agree to do any of the foregoing. However, this will not prevent TESCO or the Board, directly or indirectly, through any officer, employee or Representative, from informing any Person that TESCO is a party to the Arrangement Agreement and referring such Person to this requirement set forth therein.

For purposes of the discussion above, the term “Acquisition Proposal” has the meaning set forth in the “Glossary of Terms” attached as Annex A to this proxy statement.

Termination of the Arrangement Agreement (See Page 71)

The Arrangement Agreement may be terminated at any time prior to the Effective Time:

 

    by mutual written agreement of TESCO and Nabors;

 

    by either TESCO or Nabors, if:

 

    any Governmental Entity of competent jurisdiction has issued an order, decree, ruling or injunction permanently restraining, enjoining or otherwise prohibiting the Arrangement, and such order, decree, ruling or injunction has become final and non-appealable; provided, however, that this right of termination will not be available to any party whose failure to comply with the Arrangement Agreement has been the cause of, or resulted in, such action;

 

    the Arrangement has not been consummated on or before February 14, 2018 (the Outside Date), provided that if as of the Outside Date the Arrangement has not been completed due to the failure to obtain Regulatory Approvals, then the Outside Date will be extended to April 15, 2018, except that this right to terminate the Arrangement Agreement will not be available to any Party whose failure to comply with the provisions of the Arrangement Agreement has been the cause of, or resulted in, the failure of the Effective Time to occur by such Outside Date; or

 

    the Requisite Approval has not been obtained after a vote of the Securityholders at the Special Meeting.

 

    by Nabors, if:

 

    the Board, or any committee thereof: (1) fails to make or publicly withdraws, qualifies or modifies, or publicly proposes to withdraw, qualify or modify, in any manner adverse to Nabors, its recommendation to Securityholders that they vote in favor of the Arrangement Resolution, (2) fails to include in the proxy statement the Board’s recommendation to the Securityholders that they vote in favor of the Arrangement Resolution, (3) takes any action with respect to any tender offer or exchange offer for Common Shares (including by disclosing that it is taking no position with respect to the acceptance of such tender offer or exchange offer by the Securityholders) other than a recommendation against such offer that reaffirms the Board’s recommendation to the Securityholders that they vote in favor of the Arrangement Resolution, or (4) adopts, approves or recommends, or publicly proposes to adopt, approve or recommend any letter of intent, agreement, commitment or agreement in principle with respect to any Acquisition Proposal ((1), (2), (3) and (4) collectively a Company Change in Recommendation);

 



 

8


Table of Contents
    TESCO breaches its obligations under Section 5.3 of the Arrangement Agreement (non-solicitation covenants); or

 

    there has been a breach of any of the covenants or agreements, or a failure to be true of any of the representations or warranties set forth in the Arrangement Agreement on the part of TESCO, which breach, or failure to be true, either individually or in the aggregate, would result in, if occurring or continuing on the Effective Date, the failure of Nabors’ conditions precedent that all of TESCO’s covenants were performed in all material respects and all of TESCO’s representations and warranties are true, in the manner set forth in the Arrangement Agreement, and such breach or failure has not been cured by the earlier of 15 days following written notice thereof to TESCO or the Outside Date, or by its nature, cannot be cured within such time period; however, this right of termination will not be available to Nabors if Nabors is itself then in breach of its representations, warranties or covenants such as would result in any of the conditions precedent to the obligations of TESCO that were referenced in this paragraph not being satisfied.

 

    by TESCO, if:

 

    there has been a breach of any of the covenants or agreements, or a failure to be true of any of the representations or warranties set forth in the Arrangement Agreement on the part of Nabors, which breach, or failure to be true, either individually or in the aggregate, would result in, if occurring or continuing on the Effective Date, the failure of TESCO’s conditions precedent that all of Nabors’ covenants were performed in all material respects and all of Nabors’ representations and warranties must have been true, in the manner set forth in the Arrangement Agreement, and such breach or failure has not been cured by the earlier of 15 days following written notice thereof to Nabors or the Outside Date, or by its nature, cannot be cured within such time period; however, this right of termination will not be available to TESCO if TESCO is itself then in breach of its representations, warranties or covenants such as would result in any of the conditions precedent to the obligations of Nabors that were referenced in this paragraph not being satisfied; or

 

    at any time prior to the Special Meeting, in order to enter into a binding written agreement with respect to a Superior Proposal, provided that TESCO has complied in all material respects with its obligations under Section 5.3 of the Arrangement Agreement (non-solicitation covenants), and subject to the payment of the termination fees due under the Arrangement Agreement, in accordance with the terms and at the times specified therein.

Termination Fee Payable by TESCO (See Page 73)

If a Company Termination Fee Event occurs, TESCO will be required to pay Nabors a termination fee in the amount of $8,000,000 (the Company Termination Fee). For the purposes of the Arrangement Agreement, “Company Termination Fee Event” means the termination of the Arrangement Agreement:

 

    by Nabors as a result of a Company Change in Recommendation or TESCO breaching its covenants under Section 5.3 of the Arrangement Agreement (non-solicitation covenants);

 

    by TESCO in order to enter into a binding written agreement for a Superior Proposal;

 

    by either Party if (i) the Requisite Approval was not obtained and (ii) at any time after the date of the Arrangement Agreement and at or before the date of the Special Meeting, an Acquisition Proposal has been made or publicly announced or communicated to the Board and still be pending at the time the Arrangement Agreement is terminated or have been withdrawn less than 10 days prior to the date of such termination and (iii) within 12 months of the date of such termination, TESCO or any of its Subsidiaries enters into any definitive agreement with respect to, or consummates any Acquisition Proposal (provided that, for purposes of this termination provision, any reference to “15%” in the definition of Acquisition Proposal should be read as “50%”); and

 



 

9


Table of Contents
    by either Party if (i) the Arrangement has not been completed by the Outside Date or by Nabors if TESCO breaches any of its covenants, representations or warranties under the Arrangement Agreement and (ii) at any time after the date of the Arrangement Agreement and before such termination an Acquisition Proposal shall have been publicly announced and still be pending at the time of such termination or have been withdrawn less than 10 days prior to the date of such termination and (iii) within 12 months of the date of such termination, TESCO or any of its Subsidiaries enters into any definitive agreement with respect to, or consummates any Acquisition Proposal (provided that, for purposes of this termination provision, any reference to “15%” in the definition of Acquisition Proposal should be read as “50%”).

Material United States Federal Income Tax Considerations (See Page 57)

The Arrangement has not been structured to achieve a particular treatment for U.S. federal income tax purposes, and TESCO and Nabors have no obligation to structure the Arrangement in a manner that is tax-free to U.S. Holders. As structured, the Arrangement may qualify as a tax-deferred reorganization under the provisions of Section 368(a) of the Internal Revenue Code of 1986, as amended (the Code). However, qualification of the Arrangement as a reorganization depends on the resolution of issues and facts that will not be known until or after the date of the Arrangement. As a result, TESCO is not able to provide a higher degree of certainty regarding the qualification of the Arrangement as a reorganization for U.S. federal income tax purposes. Neither TESCO nor Nabors has requested a ruling from the IRS or a legal opinion with respect to any of the U.S. federal income tax consequences of the Arrangement.

Assuming TESCO was not a passive foreign investment company (PFIC) at any time during a U.S. Holder’s holding period, if the Arrangement qualifies as a reorganization, except for certain 5% Shareholders described below, a U.S. Holder will not recognize gain or loss upon the exchange of Common Shares for Nabors Shares in the Arrangement. A U.S. Holder that owns, actually or constructively, at least 5% of the total voting power or the total value of the Nabors Shares immediately after the Arrangement will qualify for non-recognition of gain only if such U.S. Holder files with the IRS a “gain recognition agreement,” as defined in the Treasury regulations promulgated under Section 367(a) of the Code, and complies with certain annual filing requirements.

If the Arrangement does not qualify as a reorganization, a U.S. Holder that exchanges its Common Shares for Nabors Shares will recognize gain or loss equal to the difference between the fair market value of the Nabors Shares received and the U.S. Holder’s adjusted tax basis in the Common Shares exchanged. Assuming TESCO was not a PFIC at any time during a U.S. Holder’s holding period, such gain or loss will be capital gain or loss and will be long-term capital gain or loss if the U.S. Holder’s holding period for the Common Shares exceeds the applicable holding period (currently one year). Long-term capital gains of non-corporate U.S. Holders, including individuals, currently are subject to reduced rates of U.S. federal income taxation. The deduction of capital losses is subject to limitation.

The foregoing summary is qualified in its entirety by the more detailed information in the proxy statement under the heading “Certain U.S. Federal Income Tax Consequences” beginning on page 57. The determination of the actual tax consequences of the Arrangement to a U.S. Holder of Common Stock will depend on the holder’s specific situation. Shareholders are urged to consult their own tax advisors to determine the particular tax consequences to them of the Arrangement. Neither this summary nor the longer discussion is intended to be legal or tax advice to any U.S. Holder.

Material Canadian Federal Income Tax Considerations (See Page 63)

This proxy statement contains a summary of the principal Canadian federal income tax considerations applicable to certain Shareholders with respect to the Arrangement and the comments below are qualified in their entirety

 



 

10


Table of Contents

by reference to such summary. For a more detailed discussion of the Canadian federal income tax considerations of the Arrangement, please see the discussion under the heading “Certain Canadian Federal Income Tax Consequences of the Arrangement”.

A Shareholder who is a resident of Canada for purposes of the Income Tax Act (Canada) (Tax Act) who disposes of a Common Share under the Arrangement will generally recognize a capital gain (or a capital loss) for Canadian federal income tax purposes equal to the amount by which the fair market value at the Effective Time of any Nabors Shares received for such Common Share under the Arrangement exceeds (or is less than) the adjusted cost base to the Shareholder of the Common Share and any reasonable costs of disposition.

Shareholders who are non-residents of Canada for the purposes of the Tax Act will not be subject to tax under the Tax Act in respect of a capital gain realized upon the disposition of Common Shares under the Arrangement unless those Common Shares constitute “taxable Canadian property” to such Shareholder at the time the Common Shares are disposed of under the Arrangement and that capital gain is not exempt from tax under the Tax Act pursuant to an exemption contained in an applicable income tax treaty.

Accounting Treatment (See Page 56)

In accordance with accounting principles generally accepted in the United States (which we refer to as GAAP), Nabors will account for the Arrangement by applying the acquisition method of accounting for business combinations. For a more detailed discussion of the accounting treatment of the Arrangement, see the section entitled “The Arrangement—Accounting Treatment”.

Rights of Shareholders Will Change as a Result of the Arrangement (See Page 84)

Upon completion of the Arrangement, Shareholders will no longer be shareholders of TESCO, a corporation organized under the laws of Alberta, Canada, but will be shareholders of Nabors, a Bermuda exempted company. There will be certain differences between your current rights as a Shareholder, on the one hand, and the rights to which you will be entitled as a Nabors shareholder, on the other hand. For a more detailed discussion of the differences in the rights of Shareholders and Nabors shareholders, see the section entitled “Comparison of Shareholder Rights.

 



 

11


Table of Contents

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements in this proxy statement (including information incorporated by reference) are “forward-looking statements” within the meaning of applicable securities legislation including the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended (the U.S. Exchange Act), and are intended to be covered by the safe harbors provided by these regulations and applicable securities legislation. All statements other than statements of historical fact set forth herein or incorporated herein by reference are forward-looking statements. These forward-looking statements may, in some cases, be identified by the use of terms such as “believe,” “project,” “expect,” “anticipate,” “estimate,” “intend,” “strategy,” “future,” “opportunity,” “plan,” “may,” “should,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions.

Such forward-looking statements may include, but are not limited to, statements regarding the timing and anticipated receipt of required Securityholder, Court and regulatory approvals for the Arrangement; the ability of TESCO and Nabors to satisfy the other conditions to, and to complete, the Arrangement; the anticipated timing for the completion of the Arrangement; the delisting of the Common Shares from the NASDAQ and deregistration under the U.S. Exchange Act; the benefits of the Arrangement and its impact on the participants’ businesses; various events which could disrupt TESCO’s or Nabors’ operations; any projections of economic prospects, earnings, revenues or other financial items; any statements regarding the plans, strategies and objectives for future operations; any statements of expectation or belief; any statements regarding general industry conditions and competition; any statements regarding economic conditions, such as interest rate, commodity prices and currency exchange rate fluctuations; any statements regarding timing of development or potential expansion or improvements or synergies; and any statements of assumptions underlying any of the foregoing. In addition, if and when the Arrangement is consummated, there will be risks and uncertainties related to Nabors’ ability to successfully integrate the operations and employees of Nabors and TESCO as well as the ability to ensure continued performance or market growth of TESCO’s business and operations.

Such forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in, or implied by, such statements. These risks and uncertainties include, but are not limited to:

 

    the failure to obtain the required Securityholder, Court and regulatory approvals, or to otherwise satisfy the conditions to the completion of the Arrangement, in a timely manner, or at all;

 

    levels and volatility of oil and gas prices;

 

    cyclical nature of the energy industry and credit risks of our customers;

 

    fluctuations of our revenue and earnings;

 

    operating hazards inherent in our operations;

 

    changes in governmental regulations, including those related to the climate and hydraulic fracturing;

 

    consolidation or loss of our customers;

 

    the highly competitive nature of our business with excess drilling capacity;

 

    the need to renew customer contracts to remain competitive;

 

    long-term debt and other financial commitments;

 

    technological advancements and trends in our industry, and improvements in our competitors’ products; global economic and political environment, and financial markets;

 

    terrorist attacks, natural disasters and pandemic diseases;

 



 

12


Table of Contents
    our presence in international markets, including political or economic instability, currency restrictions and trade and economic sanctions;

 

    cybersecurity incidents;

 

    the ability to protect and enforce our intellectual property rights;

 

    changes in, or our failure to comply with, environmental regulations;

 

    failure of our manufactured products and claims under our product warranties;

 

    additional losses or impairment charges related to sold or idle rigs;

 

    availability of raw materials, component parts and finished products to produce our products, and our ability to deliver the products we manufacture in a timely manner;

 

    retention and recruitment of a skilled workforce and key employees;

 

    ability to identify and complete acquisitions; and

 

    other risks identified from time to time in Nabors’ reports and registration statements filed with the SEC, including risk factors identified in Nabors’ Annual Report on Form 10-K for the year ended December 31, 2016, which is included as Annex F to this proxy statement.

You are cautioned not to place undue reliance on the forward-looking statements made in this proxy statement or documents incorporated by reference into this proxy statement or made by representatives of Nabors or TESCO. These statements speak only as of the date hereof, or, in the case of statements in any document incorporated by reference, as of the date of such document, or, in the case of statements made by representatives of Nabors or TESCO, on the date those statements are made. All subsequent written and oral forward-looking statements concerning the arrangement, Nabors or any other matter addressed in this proxy statement and attributable to Nabors, TESCO or any person acting on behalf of either company are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Nabors and TESCO expressly disclaim any obligation to update or publish revised forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of any unanticipated events, except as may be required under applicable securities laws.

ENFORCEABILITY OF CIVIL LIABILITIES

The enforcement by Shareholders of civil liabilities under U.S. federal or state securities laws may be affected adversely by the fact that TESCO is organized under the laws of Alberta, Canada, that some of the directors of TESCO are residents of countries other than the United States, that some of the experts named in this proxy statement are residents of countries other than the United States, and that assets of TESCO and such persons are located outside the United States. In addition, the courts of Canada might not enforce judgments of U.S. courts obtained in actions against such persons predicated upon civil liabilities under the federal and state securities legislation in the United States and rules, regulations and orders promulgated thereunder.

NOTICE TO CANADIAN SHAREHOLDERS AND OTHER SECURITYHOLDERS

Nabors is a Bermuda exempted company. All of the directors and executive officers of Nabors named herein are resident outside of Canada. In addition, substantial portions of the assets of Nabors and of such individuals are located outside of Canada. As a result, it may be difficult for persons who become securityholders of Nabors to effect service of process upon such persons within Canada with respect to matters arising under Canadian

 



 

13


Table of Contents

securities laws or to enforce against them in Canadian courts judgments predicated upon the civil liability provisions of Canadian securities laws. There is some doubt as to the enforceability in the United States in original actions, or in actions for enforcement of judgments of Canadian courts, of civil liabilities predicated upon Canadian securities laws. In addition, awards of punitive damages in actions brought in Canada or elsewhere may be unenforceable in the United States.

The disclosures relating to Nabors and included in this proxy statement have been prepared in accordance with U.S. securities laws. TESCO Shareholders and Securityholders should be aware that these requirements may differ from Canadian requirements. The financial statements of Nabors included in this proxy statement have been prepared in U.S. dollars and have not been prepared in accordance with Canadian generally accepted accounting principles and may not be comparable to financial statements of Canadian companies.

 



 

14


Table of Contents

RISK FACTORS

In addition to the other information contained in or incorporated by reference into this proxy statement, including the matters addressed in “Cautionary Note Regarding Forward-Looking Statements,” you should carefully consider the following risk factors related to the Arrangement in determining whether to vote for the approval of the Arrangement Resolution and the Arrangement-related compensation proposal. You should also read and consider the risk factors associated with each of the businesses of Nabors and TESCO because these risk factors may affect the operations and financial results of Nabors following the Arrangement. The risk factors associated with TESCO’s business may be found under Part I, Item 1A, “Risk Factors” in TESCO’s Annual Report on Form 10-K for the year ended December 31, 2016 and under Part II, Item 1A, “Risk Factors” in TESCO’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2017, as updated by subsequent Current Reports on Form 8-K, each of which is on file with the SEC under www.sec.gov/edgar and on www.sedar.com and all of which are incorporated by reference into this proxy statement. The risk factors associated with Nabors’ business can be found under “Risks Related to Nabors” in this proxy statement.

Risks Related to the Arrangement

Because the market value of Nabors Shares that Shareholders will receive in the Arrangement may fluctuate, Shareholders cannot be sure of the market value of the Arrangement consideration that they will receive in the Arrangement.

As Arrangement consideration, Shareholders will receive a fixed number of Nabors Shares, not a number of shares that will be determined based on a fixed market value. The market value of Nabors Shares and the market value of the Common Shares at the Effective Time may vary significantly from their respective values on the date that the Arrangement Agreement was executed or at other dates, such as the date of this proxy statement or the date of the Special Meeting. Share price changes may result from a variety of factors, including changes in Nabors’ or TESCO’s respective businesses, operations or prospects, regulatory considerations and general business, market, industry or economic conditions. The exchange ratio will not be adjusted to reflect any changes in the market value of Nabors Shares, the comparative value of the Canadian dollar and U.S. dollar or the market value of the Common Shares. Therefore, the aggregate market value of the Nabors Shares that a Shareholder is entitled to receive at the time that the Arrangement is completed could vary significantly from the value of such shares on the date of this proxy statement, the date of the Special Meeting or the date on which a Shareholder actually receives its Nabors Shares.

Upon completion of the Arrangement, Shareholders will become Nabors shareholders, and the market price for Nabors Shares may be affected by factors different from those that historically have affected TESCO.

Upon completion of the Arrangement, Shareholders will become Nabors shareholders. Nabors’ business differs from that of TESCO, and accordingly, the results of operations of Nabors will be affected by some factors that are different from those currently affecting the results of operations of TESCO. For a discussion of the businesses of TESCO and Nabors and of some important factors to consider in connection with those businesses, see the documents incorporated by reference in this proxy statement and referred to in the section entitled “Where You Can Find Additional Information” for information relating to TESCO and Nabors and the documents attached to this proxy statement.

Certain rights of Shareholders will change as a result of the Arrangement.

Upon completion of the Arrangement, Shareholders will no longer be shareholders of TESCO, a corporation organized under the laws of Alberta, Canada, but will be shareholders of Nabors, a Bermuda exempted company. There will be certain differences between your current rights as a Shareholder, on the one hand, and the rights to which you will be entitled as a Nabors shareholder, on the other hand. For a more detailed discussion of the differences in the rights of Shareholders and Nabors shareholders, see the section entitled “Comparison of Shareholder Rights.

 

15


Table of Contents

There is no assurance when or if the Arrangement will be completed.

The completion of the Arrangement is subject to the satisfaction or waiver of a number of conditions as set forth in the Arrangement Agreement, including, among others, the receipt of Court, Securityholder and regulatory approvals. There can be no assurance as to when these conditions will be satisfied or waived, if at all, or that other events will not intervene to delay or result in the failure to complete the Arrangement.

TESCO and Nabors have made various filings and submissions and are pursuing all required consents, orders and approvals in accordance with the Arrangement Agreement. No assurance can be given that the required consents, orders and approvals will be obtained or that the required conditions to the completion of the Arrangement will be satisfied. Even if all such consents, orders and approvals are obtained and such conditions are satisfied, no assurance can be given as to the terms, conditions and timing of such consents, orders and approvals. For example, these consents, orders and approvals may impose conditions on or require divestitures relating to the divisions, operations or assets of TESCO and Nabors or may impose requirements, limitations or costs or place restrictions on the conduct of TESCO’s or Nabors’ business, and if such consents, orders and approvals require an extended period of time to be obtained, such extended period of time could increase the chance that an adverse event occurs with respect to TESCO or Nabors, such as the loss of key personnel or that the Arrangement is not completed at all. Each party’s obligation to complete the Arrangement is also subject to the accuracy of the representations and warranties of the other party (subject to certain qualifications and exceptions) and the performance in all material respects of the other party’s covenants under the Arrangement Agreement. As a result of these conditions, TESCO and Nabors cannot provide assurance that the Arrangement will be completed on the terms or timeline currently contemplated, or at all. For more information, see the sections entitled “The Arrangement—Regulatory Approvals Required for the Arrangement” and The Arrangement Agreement—Conditions to Closing.”

The Special Meeting may take place before all of the required regulatory approvals have been obtained and before all conditions to such approvals, if any, are known. Notwithstanding the foregoing, if the Arrangement proposal is approved by Securityholders, TESCO and Nabors would not be required to seek further approval of Securityholders, even if the conditions imposed in obtaining required regulatory approvals could have an adverse effect on TESCO or Nabors either before or after completing the Arrangement.

Nabors may not realize all of the anticipated benefits of the Arrangement.

Nabors and TESCO believe that the Arrangement will provide benefits to Nabors as described elsewhere in this proxy statement. However, there is a risk that some or all of the expected benefits of the Arrangement may fail to materialize, or may not occur within the time periods anticipated by Nabors and TESCO. The realization of such benefits may be affected by a number of factors, including regulatory considerations and decisions, many of which are beyond the control of Nabors and TESCO. TESCO and Nabors have operated and, until completion of the Arrangement, will continue to operate, independently. The past financial performance of each of TESCO and Nabors may not be indicative of their future financial performance. Realization of the anticipated benefits of the Arrangement will depend, in part, on Nabors’ ability to successfully integrate TESCO’s business with Nabors’ business. Nabors will be required to devote management attention and resources to integrating TESCO’s business practices and support functions. The diversion of Nabors management’s attention and any delays or difficulties encountered in connection with the Arrangement and the coordination of the two companies’ operations could have an adverse effect on the business, financial results or financial condition of Nabors or Nabors’ share price following the Arrangement. The coordination process may also result in additional and unforeseen expenses.

Failure to realize all of the anticipated benefits of the Arrangement may impact the financial performance of Nabors, the price of the Nabors Shares and the ability of Nabors to continue paying dividends on its common shares at rates consistent with current dividend guidance or at all. The declaration of dividends by Nabors will be at the discretion of its board of directors, which may determine at any time to cease paying dividends, lower the dividend rate or not increase the dividend rate.

 

16


Table of Contents

The announcement and pendency of the Arrangement could adversely affect each of TESCO’s and Nabors’ business, results of operations and financial condition.

The announcement and pendency of the Arrangement could cause disruptions in and create uncertainty surrounding each of TESCO’s and Nabors’ business, including affecting TESCO’s and Nabors’ relationships with their respective existing and future customers, suppliers and employees, which could have an adverse effect on TESCO’s or Nabors’ business, results of operations and financial condition, regardless of whether the Arrangement is completed. In particular, TESCO and Nabors could potentially lose important personnel as a result of the departure of employees who decide to pursue other opportunities in light of the Arrangement. TESCO and Nabors could also potentially lose customers or suppliers, and new customer or supplier contracts could be delayed or decreased. In addition, each of TESCO and Nabors has expended, and continues to expend, management resources in an effort to complete the Arrangement, which resources are being diverted from TESCO’s and Nabors’ day-to-day operations.

If the Arrangement is not completed, TESCO common share prices may fall to the extent that the current prices of the Common Shares reflect a market assumption that the Arrangement will be completed. In addition, the failure to complete the Arrangement may result in negative publicity or a negative impression of TESCO in the investment community and may affect TESCO’s relationship with employees, customers, suppliers and other partners in the business community.

TESCO and Nabors will incur substantial transaction fees and costs in connection with the Arrangement.

TESCO and Nabors have incurred and expect to incur additional expenses in connection with the Arrangement and completion of the transactions contemplated by the Arrangement Agreement, including costs relating to obtaining required approvals and compensation change in control payments. TESCO and Nabors have incurred legal, advisory and financial services fees in connection with the process of negotiating and evaluating the terms of the Arrangement. Additional significant unanticipated costs may be incurred in the course of coordinating the businesses of TESCO and Nabors after completion of the Arrangement. Even if the Arrangement is not completed, TESCO and Nabors will need to pay certain costs relating to the Arrangement incurred prior to the date the Arrangement was abandoned, such as legal, accounting, financial advisory, filing and printing fees. Such costs may be significant. If the Arrangement Agreement is terminated under the circumstances specified in the Arrangement Agreement, TESCO may be required to pay Nabors a termination fee of $8 million, depending on the circumstances surrounding the termination.

Demands will be placed on TESCO and Nabors as a result of the Arrangement.

As a result of the pursuit and completion of the Arrangement, significant demands will be placed on the managerial, operational and financial personnel and systems of TESCO and Nabors. The future operating results of TESCO and Nabors will be affected by the ability of their respective officers and key employees to manage changing business conditions and to implement and expand their respective operational and financial controls and reporting systems in response to the Arrangement.

The termination of the Arrangement Agreement could negatively impact TESCO.

If the Arrangement is not completed for any reason, including as a result of Securityholders failing to approve the Arrangement proposal, the ongoing business of TESCO may be adversely affected and, without realizing any of the anticipated benefits of having completed the Arrangement, TESCO would be subject to a number of risks, including that TESCO may experience negative reactions from the financial markets, including a decline of its Common Share price (which may reflect a market assumption that the Arrangement will be completed); TESCO may experience negative reactions from the investment community, its customers, regulators and employees and other partners in the business community; TESCO may be required to pay certain costs relating to the Arrangement, whether or not the Arrangement is completed; and matters relating to the Arrangement will have

 

17


Table of Contents

required substantial commitments of time and resources by TESCO management, which would otherwise have been devoted to day-to-day operations and other opportunities that may have been beneficial to TESCO had the Arrangement not been contemplated.

If the Arrangement Agreement is terminated and the Board seeks another business combination, Shareholders cannot be certain that TESCO will find a party willing to offer equivalent or more attractive consideration than the Arrangement consideration Shareholders would receive from Nabors in the Arrangement. If the Arrangement Agreement is terminated under the circumstances specified in the Arrangement Agreement, TESCO may be required to pay Nabors a termination fee of $8 million, depending on the circumstances surrounding the termination. See the section entitled “The Arrangement Agreement—Termination of the Arrangement Agreement” for a more complete discussion of the circumstances under which the Arrangement Agreement could be terminated and when the Company Termination Fee and expense reimbursement may be payable by TESCO.

Except in specified circumstances, if the Arrangement is not completed by February 14, 2018, subject to extension in specified circumstances, either TESCO or Nabors may choose not to proceed with the Arrangement.

Either TESCO or Nabors may terminate the Arrangement Agreement if the Arrangement has not been completed by February 14, 2018, subject to extension to April 15, 2018 in the circumstances specified in the Arrangement Agreement. However, this right to terminate the Arrangement Agreement will not be available to TESCO or Nabors if the failure of such party to perform any of its obligations under the Arrangement Agreement has been the cause of or resulted in the failure of the Arrangement to be completed on or before such time. For more information, see the section entitled “The Arrangement Agreement—Termination of the Arrangement Agreement”.

Future changes to U.S., Canadian and foreign tax laws could adversely affect Nabors.

The U.S. Congress, the Canadian House of Commons, the Organization for Economic Co-operation and Development, and other government agencies in jurisdictions where TESCO and Nabors do business have been focused on issues related to the taxation of multinational corporations. Specific attention has been paid to “base erosion and profit shifting,” where payments are made between affiliates from a jurisdiction with high tax rates to a jurisdiction with lower tax rates. As a result, the tax laws in the United States, Canada and other countries in which TESCO and Nabors do business could change on a prospective or retroactive basis, and any such change could adversely affect TESCO or Nabors (or both).

Resales of Nabors Shares following the Arrangement may cause the market value of Nabors Shares to decline.

Nabors expects that it will issue up to approximately [●] Nabors Shares to acquire the Common Shares under the Arrangement. The issuance of these new shares and the sale of additional shares that may become eligible for sale in the public market from time to time could have the effect of depressing the market value for Nabors Shares. The increase in the number of Nabors Shares may lead to sales of such Nabors Shares or the perception that such sales may occur, either of which may adversely affect the market for, and the market value of, Nabors Shares.

TESCO and Nabors may be targets of securities class action and derivative lawsuits which could result in substantial costs and may delay or prevent the Arrangement from being completed.

Securities class action lawsuits and derivative lawsuits are often brought against companies that have entered into Arrangement Agreements. Even if the lawsuits are without merit, defending against these claims can result in substantial costs and divert management’s time and resources. Additionally, if a plaintiff is successful in obtaining an injunction prohibiting consummation of the Arrangement, that injunction may delay or prevent the Arrangement from being completed.

 

18


Table of Contents

Risks Related to Nabors

Nabors’ business is and will be subject to certain risks. For a discussion of the business of Nabors and of some important factors to consider in connection with its business, see the documents appended hereto as Annex F, G, H, and I, including the risk factors described in Part I, Item 1A of Nabors’ Annual Report on Form 10-K for the year ended December 31, 2016, as updated by subsequent Quarterly Reports on Form 10-Q, and referred to in the section entitled “Where You Can Find Additional Information” for information relating to Nabors.

 

19


Table of Contents

THE COMPANIES

TESCO

TESCO was organized under the laws of Alberta, Canada on December 1, 1993 through the amalgamation of Shelter Oil and Gas Ltd., Coexco Petroleum Inc., Forewest Industries Ltd. and Tesco Corporation. TESCO is a global leader and provider of highly engineered technology-based solutions for drilling, servicing, and completion of wells for the upstream energy industry. The Company seeks to improve the way wells are drilled by delivering safer and more efficient solutions that add value by reducing the costs of drilling for, and producing, oil and natural gas. TESCO’s operations consist of top drives and automated pipe handling equipment sales and rentals; aftermarket sales and services; and tubular services, including related products and accessories sales.

TESCO’s principal executive offices are located at 11330 Clay Road, Suite 350, Houston, Texas, 77041 United States of America, its telephone is (713) 359-7000 and its website is www.tescocorp.com. The information contained in, or that can be accessed through, TESCO’s website is not incorporated by reference in this proxy statement and you should not consider information contained on TESCO’s website as part of this proxy statement. For additional information about TESCO, see “Where You Can Find Additional Information” in this proxy statement.

Nabors

Nabors owns and operates the world’s largest land-based drilling rig fleet and is a leading provider of offshore platform drilling rigs in the U.S. and multiple international markets. Nabors also provides advanced wellbore placement services, drilling software and performance tools, drilling equipment and innovative technologies throughout the world’s most significant oil and gas markets. In today’s performance-driven environment, Nabors believes it is well positioned to seamlessly integrate downhole hardware, surface equipment and software solutions into its AC rig designs. Leveraging its advanced drilling automation capabilities, Nabors’ highly skilled workforce continues to set new standards for operational excellence and transform the industry.

The completion of the Arrangement will reinforce Nabors’ position as a leading rig equipment and drilling automation provider through the combination of Canrig, Nabors’ rig equipment division, with TESCO’s rig equipment manufacturing, rental and aftermarket service business.

Furthermore, the integration of TESCO’s tubular services technology and third-party top drive services, which operate in numerous key regions globally, into Nabors’ business will create an immediate global scale for Nabors Drilling Solutions and enable Nabors to provide customers more fit-for-purpose products, services and solutions. This expanded capability will in turn enable Nabors to further improve operational efficiency, accelerate and scale its development of new and innovative equipment on its new generations of rigs as well as upgrade older classes of rigs.

Nabors’ principal executive offices are located at Crown House, 4 Par-La-Ville Road, Second Floor, Hamilton, HM08, Bermuda, its telephone is (441) 292-1510, and its website is www.nabors.com. The information contained in, or that can be accessed through, Nabors’ website is not incorporated by reference in this proxy statement and you should not consider information contained on Nabors’ website as part of this proxy statement. For additional information about Nabors, see “Where You Can Find Additional Information” in this proxy statement.

A more detailed description of the business of Nabors is included in the Annual Report on Form 10-K for the year ended December 31, 2016 in Annex F to this proxy statement.

 

20


Table of Contents

Financial Information and Management’s Discussion and Analysis

Financial information relating to Nabors before the completion of the Arrangement is contained in Annex F, G, H and I of this proxy statement. Corresponding management’s discussion and analysis for each financial period is contained in Annex F, G, and H of this proxy statement.

Nabors Maple Acquisition Ltd.

Nabors Maple Acquisition Ltd. (Nabors Maple) is a direct wholly-owned subsidiary of Nabors. Nabors Maple was formed on August 11, 2017 for the purpose of acquiring all of the issued and outstanding Common Shares by way of the Plan of Arrangement, with Nabors Maple continuing as a wholly-owned subsidiary of Nabors. Nabors Maple has not carried on any activities other than in connection with the Arrangement Agreement.

 

21


Table of Contents

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF TESCO

The following table presents selected historical consolidated financial data of TESCO. The data as of, and for the years ended, December 31, 2016, 2015, 2014, 2013 and 2012 is derived from TESCO’s audited consolidated financial statements for those periods. The data as of, and for the six months ended, June 30, 2017 and 2016 is derived from TESCO’s unaudited condensed, consolidated financial statements for those periods.

The information in the following table is only a summary and is not indicative of the results of future operations of TESCO. You should read the following information together with TESCO’s Annual Report on Form 10-K for the year ended December 31, 2016, TESCO’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2017 and the other information that TESCO has filed with the SEC under its profile at www.sec.gov/edgar.

 

    Unaudited Six Months
Ended
June 30,
    Years Ended December 31,  
    2017     2016     2016     2015     2014     2013     2012  
    (US dollars in millions, except per share amounts)  

Summary of operations

             

Operating revenues

  $ 76.887     $ 69.039     $ 134.737     $ 279.738     $ 542.991     $ 524.865     $ 553.153  

Net income (loss)

    (25.800     (75.710     (117.928     (133.754     21.436       35.284       50.177  

Per share data

             

Basic earnings (loss)

    (0.55     (1.90     (2.73     (3.43     0.54       0.90       1.30  

Diluted earnings (loss)

    (0.55     (1.90     (2.73     (3.43     0.53       0.89       1.28  

Dividends declared

    —         —         —         0.20       0.15       —         —    

Balance sheet data

             

Total assets

    324.442       379.795       344.279       421.694       619.266       634.675       585.6  

Long term obligations (including capital leases)

    2.066       3.042       1.986       3.827       14.437       10.511       11.045  

 

22


Table of Contents

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF NABORS

The following table presents selected historical consolidated financial data of Nabors. The data as of, and for the years ended, December 31, 2016, 2015, 2014, 2013 and 2012 is derived from Nabors’ audited consolidated financial statements for those periods. The data as of, and for the six months ended, June 30, 2017 and 2016 is derived from Nabors’ unaudited condensed consolidated financial statements for those periods. Nabors’ Annual Report on Form 10-K for the year ended December 31, 2016 is appended to this proxy statement as Annex F. Nabors’ Quarterly Report on Form 10-Q for the interim period ended June 30, 2017 is also appended to this proxy statement as Annex G and which, in the opinion of management, includes all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the results for the unaudited interim periods.

The selected balance sheet data as of June 30, 2016 is derived from Nabor’s unaudited interim financial information not appended or incorporated by reference in this proxy statement. The selected consolidated operating data for the years ended December 31, 2013 and 2012 and the selected consolidated balance sheet data as of December 31, 2014, 2013 and 2012 are derived from Nabors’ consolidated financial statements not appended to this proxy statement. These financial statements for the years ended December 31, 2014, 2013 and 2012 can be found under Nabors’ profile at www.sec.gov/edgar. The selected financial data has been recast to reflect certain discontinued operations as discussed in footnote (1) below. Nabors’ historical results are not necessarily indicative of future operating results.

 

    Unaudited Six Months
Ended
June 30,
    Years Ended December 31,  
    2017     2016     2016     2015     2014     2013     2012  
    (US dollars in millions, except per share amounts)  

Summary of operations

             

Operating revenues

  $ 1,193.905     $ 1,169.162     $ 2,227.839     $ 3,864.437     $ 6,804.197     $ 6,152.015     $ 6,843.051  

Net income (loss) attributable to Nabors

    (281.935     (582.944     (1,029.742     (372.675     (670.659     139.982       164.827  

Per share data

             

Basic earnings (loss)

    (0.99     (2.07     (3.64     (1.29     (2.28     0.47       0.57  

Diluted earnings (loss)

    (0.99     (2.07     (3.64     (1.29     (2.28     0.47       0.56  

Dividends declared

    0.12       0.12       0.24       0.24       0.24       0.16       —    

Balance sheet data

             

Total assets

    8,092.458       8,656.305       8,187.015       9,537.840       11,862.923       12,137.749       12,631.867  

Long term obligations (including capital leases)

    4,143.113       4,065.432       4,110.286       4,237,523       5,393.678       4,798,022       5,497.335  

 

(1) All periods present the operating activities of most of Nabors’ wholly owned oil and gas businesses, previously held equity interests in oil and gas joint ventures in Canada and Colombia, aircraft logistics operations and construction services as discontinued operations.

 

23


Table of Contents

COMPARATIVE PER SHARE DATA

The following table sets forth selected historical and unaudited pro forma combined per share information of Nabors and TESCO.

Historical Per Share Information of Nabors and TESCO. The historical per share information of each of Nabors and TESCO below is derived from the audited financial statements for the year ended December 31, 2016 for each such company. The historical per share information as of, and for the six months ended, June 30, 2017 is derived from each of Nabors’ and TESCO’s unaudited condensed consolidated financial statements for those periods.

Pro Forma Combined Per Share Information of Nabors and TESCO. The unaudited pro forma combined per share information of Nabors and TESCO below gives effect to the Arrangement and assumes that 0.68 of a Nabors Share has been issued in exchange for each issued and outstanding Common Share. The unaudited pro forma combined per share information of Nabors does not purport to represent the actual results of operations that Nabors would have achieved had the companies been combined during these periods or to project the future results of operations that Nabors may achieve after the Arrangement. The equivalent TESCO amounts are calculated by multiplying the pro forma amounts by the exchange ratio of 0.68.

Generally. You should read the following information in conjunction with the selected historical financial information included elsewhere in this proxy statement and the historical financial statements of Nabors and TESCO and related notes that are included or incorporated by reference into this proxy statement, as applicable. See “Selected Historical Consolidated Financial Data of Nabors” and “Where You Can Find Additional Information” in this proxy statement.

 

     TESCO
Historical
     Nabors
Historical
     Pro
Forma
Combined
    Equivalent
TESCO
 

Earnings per share for the six months ended June 30, 2017:

          

Basic

   $ (0.55    $ (0.99    $ (0.97   $ (0.66

Diluted

   $ (0.55    $ (0.99    $ (0.97   $ (0.66

Earnings per share for the year ended December 31, 2016:

          

Basic

   $ (2.73    $ (3.64    $ (3.65   $ (2.48

Diluted

   $ (2.73    $ (3.64    $ (3.65   $ (2.48

Book value per share as of June 30, 2017(1)

   $ 6.13      $ 11.04      $ 10.60 (2)    $ 7.21  

Dividends declared per common share:

          

Six months ended June 30, 2017

   $      $ 0.12      $ 0.12     $ 0.08  

Year ended December 31, 2016

   $      $ 0.24      $ 0.24     $ 0.16  

 

(1) Calculated as total equity divided by weighted-average number of common shares outstanding.
(2) Assumes a per share price of Nabors of $6.80, the closing share price of Nabors on August 11, 2017, the last full trading day prior to the public announcement of the signing of the Arrangement Agreement, for purposes of determining the number of Nabors Shares.

 

24


Table of Contents

COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND INFORMATION

The table below sets forth, for the periods indicated, the per share high and low sales prices for Nabors Shares as reported on the NYSE and for the Common Shares as reported on the NASDAQ. Numbers have been rounded to the nearest whole cent.

 

     Nabors
Shares
NYSE
     TESCO
Common
Shares NASDAQ
 
     High      Low      High      Low  
     (in US$)      (in US$)  

Quarterly information for the past two years and subsequent quarters

           

2017

           

Third Quarter (through [September 13, 2017])

     8.70        6.18        4.93        3.78  

Second Quarter

     14.28        7.16        8.10        3.70  

First Quarter

     18.40        11.89        9.65        7.25  

2016

           

Fourth Quarter

     17.68        11.01        9.65        6.50  

Third Quarter

     12.33        8.46      8.22        6.21  

Second Quarter

     11.21        7.61        9.77        5.72  

First Quarter

     9.84        4.93        9.10        5.13  

2015

           

Fourth Quarter

     12.33        7.47        9.00        6.63  

Third Quarter

     14.43        8.94        10.96        7.01  

Second Quarter

     16.99        13.70        13.28        10.86  

First Quarter

     14.09        9.96        13.12        9.53  

Annual information for the past five calendar years

           

2016

     17.68        4.93      9.77        5.13  

2015

     16.99        7.47      13.28      6.63  

2014

     30.24        9.91        22.50        11.53  

2013

     18.33        14.34        20.12        11.05  

2012

     22.73        12.40        16.88        8.70

The above table shows only historical data. The data may not provide meaningful information to Securityholders in determining whether to approve the Arrangement. Securityholders are urged to obtain current market quotations for the Common Shares and Nabors Shares and to review carefully the other information contained in, or incorporated by reference into, this proxy statement, when considering whether to approve the Arrangement. For more information, see the section entitled “Where You Can Find Additional Information.”

The following table presents the closing price per share of Nabors Shares on the NYSE and of the Common Shares on the NASDAQ on (a) August 11, 2017, the last full trading day prior to the public announcement of the signing of the Arrangement Agreement, and (b) [●], the last practicable trading day prior to the mailing of this proxy statement. This table also shows the implied value of the Arrangement consideration payable for each Common Share, which was calculated by multiplying the closing price of Nabors Shares on the NYSE on those dates by the exchange ratio of 0.68.

 

Date    Nabors
Shares
NYSE
    TESCO
Common
Shares
NASDAQ
    Equivalent value of Arrangement consideration
per share of TESCO stock based on price of
Nabors Shares on NYSE
 
     (US$)     (US$)     (US$)  

August 11, 2017

     6.80       3.90       4.62  

[●]

     [ ●]      [ ●]      [ ●] 

 

25


Table of Contents

Securityholders will not receive the Arrangement consideration until the Arrangement is completed, which may occur a substantial period of time after the Special Meeting, or not at all. There can be no assurance as to the trading prices of the Common Shares or Nabors Shares at the time of the completion of the Arrangement. The market prices of the Common Shares and Nabors Shares are likely to fluctuate prior to completion of the Arrangement and cannot be predicted. We urge you to obtain current market quotations for both the Common Shares and Nabors Shares.

The table below sets forth the dividends declared per Nabors Share and the dividends declared per Common Share for the periods indicated.

 

     Nabors      TESCO  
     (US$)      (US$)  

Six Months Ended June 30, 2017

     0.12        —    

Year Ended December 31,

     

2016

     0.24        —    

2015

     0.24        0.20  

2014

     0.24        0.15  

2013

     0.16        —    

2012

     —          —    

 

26


Table of Contents

SPECIAL MEETING OF THE SECURITYHOLDERS OF TESCO

General

This proxy statement is furnished in connection with the solicitation of proxies by TESCO management and the Board for use at the Special Meeting and any adjournments or postponements of the Special Meeting. TESCO intends to begin mailing this proxy statement, the attached Notice of Special Meeting of Securityholders and the accompanying proxy card on or about [●], 2017.

Date, Time and Place of the Special Meeting

The Special Meeting will be held on [date] at [time], at [location], Calgary, Alberta, Canada.

Matters to be Considered at the Special Meeting

At the Special Meeting, the following matter will be put before the Securityholders:

 

  1. Arrangement Resolution. To consider and, if deemed advisable, to pass the Arrangement Resolution, the full text of which is set forth in Annex B to this proxy statement, approving the Arrangement pursuant to Section 193 of the ABCA, all as more particularly described in this proxy statement (Proposal 1); and

In addition, Shareholders will be asked to vote on the following Proposal:

 

  2. Advisory Proposal Regarding Golden Parachute Compensation. To consider, solely on a non-binding, advisory basis, the agreements or understandings between TESCO’s named executive officers and TESCO and the related compensation that will or may be paid to its named executive officers in connection with the Arrangement, as disclosed pursuant to Item 402(t) of Regulation S-K in the “Golden Parachute Compensation” table and the related narrative disclosures in the section of this proxy statement entitled “Interests of Directors and Executive Officers in the Arrangement—Golden Parachute Compensation” (Proposal 2).

Each Option Holder and RSU Holder will be entitled to vote on Proposal 2 only in respect of that number of Common Shares held by such Option Holder or RSU Holder as of the Record Date.

Recommendation of the TESCO Board of Directors

The Board has unanimously approved the Arrangement Agreement and recommended that the Securityholders vote in favor of the proposal to approve the Arrangement Agreement. The Board made its determination after consultation with its legal and financial advisors and consideration of a number of factors described in the accompanying proxy statement. The Board recommends that Securityholders vote “FOR” approval of the proposal to approve the Arrangement and that Shareholders vote “FOR” approval of the Advisory Proposal Regarding Golden Parachute Compensation.

Record Date

The record date for determining the Securityholders entitled to receive notice of and to vote at the Special Meeting is []. Only Securityholders of record as of the close of business (Calgary time) on the Record Date are entitled to receive notice of and to vote at the Special Meeting.

The record date for Securityholders entitled to receive notice of and to vote at the Special Meeting will not change in respect of or as a consequence of any adjournment or postponement of the Special Meeting.

 

27


Table of Contents

Solicitation of Proxies

This proxy statement is furnished by management of TESCO in connection with the solicitation of proxies for use at the Special Meeting to be held on [date] at [time] at Calgary, Alberta, Canada, located at [address], and at any postponements or adjournments of the Special Meeting.

The solicitation of proxies by this proxy statement is being made by or on behalf of management of TESCO. It is expected that the solicitation will be made primarily by mail, but proxies may also be solicited by telephone, over the internet, in writing or in person.

Quorum

A quorum will be present if at least two persons are present, in person or by proxy, at the Special Meeting, together holding or representing 331/3% of the outstanding Common Shares, being shares of TESCO entitled to vote at the Special Meeting. If you have returned an instrument of proxy, including an instrument marked as an abstention, or if you hold your Common Shares in your own name as a holder of record and attend the Special Meeting in person, your Common Shares will be counted for the purpose of determining whether there is a quorum.

Persons Entitled to Vote and Principal Shareholders

Only registered Securityholders are entitled to vote at the Special Meeting. Each registered Securityholder has one vote for each Security held at the close of business (Calgary time) on the Record Date. As of the Record Date, there were [46,754,956] Common Shares, [565,136] Options and [1,460,148] RSUs outstanding.

To the knowledge of the directors and executive officers of TESCO, as at the date of this proxy statement, no person or corporation beneficially owns, or exercises control or direction over, directly or indirectly, more than 10% of the issued and outstanding TESCO Securities other than as set forth below:

 

Name

  No. of Common Shares
Beneficially Owned
    Percent of Common Shares(1)     Percent of Securities Entitled
to Vote on the Arrangement
Resolution (Proposal 1)
 

Wellington Management Group LLP

     

2880 Congress Street

     

Boston, MA 02210

    6,008,551 (2)      12.9     12.3

Blackrock, Inc.

     

55 East 52nd Street

     

New York, NY 10022

    5,521,293 (3)      11.8     11.3

T. Rowe Price Associates, Inc.

     

100 E. Pratt Street

     

Baltimore, MD 21202

    5,441,770 (4)      11.6     11.1

 

(1) Percentages calculated based on Common Shares issued and outstanding at September 11, 2017: 46,754,956.
(2) As reported on Schedule 13G/A as filed on February 9, 2017 with the SEC by Wellington Management Group LLP .
(3) As reported on Schedule 13G/A as filed on January 17, 2017 with the SEC by Blackrock Inc.
(4) As reported on Schedule 13G/A as filed on February 7, 2017 with the SEC by T. Rowe Price Associates Inc.

List of Registered Securityholders

As of the Record Date, TESCO has prepared or caused to be prepared a list of registered Securityholders entitled to receive notice of the Special Meeting and the number of Common Shares, Options and RSUs held by each

 

28


Table of Contents

such Securityholder. Only Securityholders whose names have been entered on the register of holders of Common Shares, Options or RSUs, respectively, as at the close of business (Calgary time) on the Record Date will be entitled to receive notice of and to vote at the Special Meeting provided that, to the extent a Shareholder transfers the ownership of any Common Shares after the Record Date and the transferee of those Common Shares produces properly endorsed Common Share certificates, or otherwise establishes ownership of such Common Shares and demands, not later than 10 days before the Special Meeting, to be included on the list of Securityholders entitled to vote at the Special Meeting, such transferee will be entitled to vote those Common Shares at the Special Meeting. For a period commencing ten (10) days after the Record Date, a complete list of Securityholders entitled to vote at the Special Meeting will be available for inspection during ordinary business hours at TESCO’s headquarters at 11330 Clay Road, Suite 350, Houston, Texas, 77041 United States of America, and at TESCO’s offices in Calgary at 5616 - 80th Avenue SE, Calgary, Alberta, T2C 4N5, Canada, by Securityholders of record for proper purposes, or at the Special Meeting.

Registered Securityholders

Voting

How to Vote and Deadline for Voting. Registered Securityholders have a choice of voting over the Internet, by telephone, or by using a proxy card.

 

    Internet. Access the Internet voting site at www.proxyvote.com. Follow the on-screen instructions and be sure to have the control number listed on your proxy card, voter instruction form, or notice. Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 p.m. (Eastern time) the day before the date set for the holding of the Special Meeting or any adjournment thereof. TESCO may refuse to recognize any instrument of proxy received after that time.

 

    Telephone. Dial toll free 1-800-690-6903 from any touch-tone telephone. Follow the voice prompts and be sure to have the control number listed on your proxy card, voter instruction form, or notice available when you call. Use any touch-tone telephone to transmit your voting instructions up until 11:59 p.m. (Eastern time) the day before the date set for the holding of the Special Meeting or any adjournment thereof. TESCO may refuse to recognize any instrument of proxy received after that time.

 

    Mail. Simply mark, sign, date, and return the proxy card to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717 Unites States of America. Your proxy card mailed in should be received not less than 24 hours (excluding Saturdays, Sundays and holidays) before the time set for the holding of the Special Meeting or any adjournment thereof. TESCO may refuse to recognize any instrument of proxy received after that time. A postage-prepaid envelope has been provided for your convenience if you wish to vote your proxy by mail.

 

    Proxy Card. If you received a notice and wish to vote by proxy card, you can receive a full set of materials at no charge through one of the following methods. Please have available your control number listed on your proxy card, voter instruction form, or notice.

 

    by Internet: www.proxyvote.com

 

    by Phone: 1-800-690-6903

 

    by E-mail: sendmaterial@proxyvote.com

 

    If requesting material by email, send a blank email with the company name and control number in the subject line. No other requests, instructions, or other inquiries should be included with your email requesting materials.

Proxies Submitted but not Voted. Securities for which proxies have been executed will be voted as specified in the proxies. If no specification is made, the Securities will be voted FOR each of the proposals described in the Notice of Meeting.

 

29


Table of Contents

Revocation of Proxies. Proxies may be revoked at any time prior to the exercise thereof either: (a) by depositing an instrument in writing executed by the Securityholder or by the Securityholder’s attorney authorized in writing either (i) at the registered office of TESCO at any time up to and including the last business day preceding the date of the Special Meeting, or any adjournment thereof, at which the proxy is to be used, or (ii) with the chair of the Special Meeting on the day of the Special Meeting or any adjournment thereof, or (b) in any other manner permitted by law.

Voting Procedures and Tabulations. Votes may be cast for or against each of the proposals described in the Notice of Meeting. If you abstain or otherwise withhold your vote for a given proposal, your vote will not be counted for or against that proposal. An abstention or broker non-vote will not be counted as a vote cast and will not affect the outcome of the vote for any given proposal.

Appointment of Proxyholders. A proxy is a document that authorizes someone else to attend the Special Meeting and cast the votes for a registered Securityholder. Registered Securityholders are being sent a form of proxy for the Special Meeting permitting them to appoint a person to attend and act as proxyholder at the Special Meeting.

The nominees for proxyholder named on the instrument of proxy are officers of TESCO. Each Securityholder has the right to appoint an alternative proxyholder, who need not be a Securityholder, to attend and act on the Securityholder’s behalf at the Special Meeting instead of the nominees set forth in the enclosed instrument of proxy. To exercise such right, either the names of the nominees set forth on the instrument of proxy should be crossed out (such deletion to be initialed by the person or officer signing the instrument of proxy) and the name of the Securityholder’s appointee should be legibly printed in the blank space provided for that purpose in the enclosed instrument of proxy, or another appropriate form of proxy should be completed. The accompanying instrument of proxy confers discretionary authority upon the persons named therein with respect to amendments or variations to matters identified in the Notice of Meeting and with respect to other matters which may properly come before the Special Meeting or any adjournment thereof. At the time of printing this proxy statement, our Board and management know of no such amendments, variations, or other matters to come before the Special Meeting other than the matters referred to in the Notice of Meeting. If any other business or amendments or variations to the matters identified in the Notice of Meeting properly come before the Special Meeting then the persons named in the enclosed instrument of proxy will vote on such matters in accordance with their best judgment.

Beneficial Shareholders

If your Common Shares are not registered in your name but in the name of an intermediary (typically a bank, trust company, securities dealer or broker, or a clearing agency in which an intermediary participates), then you are a non-registered, or “beneficial,” Shareholder. If you are a Beneficial Shareholder, you can vote your Common Shares by proxy through your intermediary or at the Special Meeting if you appoint yourself as proxy. Shareholders who are beneficial owners of Common Shares registered in the name of a broker, custodian, nominee or other intermediary who wish to dissent, should be aware that only the registered owner of such Common Shares is entitled to dissent. If you wish to exercise dissent rights, you should review the requirements summarized in this proxy statement carefully and consult with legal counsel. See “Dissenters’ Rights” beginning on page 55 of this proxy statement.

Voting through Intermediaries. A Beneficial Shareholder who does not vote by Internet will usually be given a voting instruction form by their intermediary which must be submitted by the Beneficial Shareholder in accordance with the instructions provided by the intermediary. In such case, you cannot use the Internet voting procedures described above and must follow the intermediary’s instructions (which in some cases may allow the completion of the voting instruction form by telephone or on the intermediary’s own Internet website). Occasionally, a Beneficial Shareholder may be given a form of proxy that has been signed by the intermediary and which is restricted to the number of shares owned by the Beneficial Shareholder but is otherwise not completed. This form of proxy does not need to be signed by the Beneficial Shareholder. In this case, you can

 

30


Table of Contents

complete the form of proxy and vote by mail or facsimile only, in the same manner as described above. In all cases, Beneficial Shareholders should carefully follow the instructions provided by the intermediary.

Voting in Person. A Beneficial Shareholder who receives a form of proxy or a voting instruction form from their intermediary and who wishes to attend and vote at the Special Meeting in person (or have another person attend and vote on their behalf), should strike out the proxyholders named in the form of proxy and insert the Beneficial Shareholder’s (or such other person’s) name in the blank space provided or, in the case of a voting instruction form, follow the corresponding instructions provided by the intermediary.

Attendance at the Special Meeting

On the day of the Special Meeting, each Securityholder will be required to present (i) a valid picture identification such as a driver’s license or passport, and (ii) proof that you are a holder of Securities as of the Record Date. You may be denied admission if you do not. Seating will begin at [●] and the Special Meeting will begin at [●].

 

31


Table of Contents

THE ARRANGEMENT

This section of the proxy statement describes the various aspects of the Arrangement and related matters. This section may not contain all of the information that is important to you. You should carefully read this entire proxy statement and the documents incorporated by reference into this proxy statement, including the full text of the Arrangement Agreement, a copy of which is attached to this proxy statement as Annex C, including the Plan of Arrangement attached to the Arrangement Agreement as Schedule A thereto, for a more complete understanding of the Arrangement. In addition, important business and financial information about each of TESCO and Nabors is included in or incorporated by reference into this proxy statement, as applicable. For a listing of the documents incorporated by reference into this proxy statement, see the section entitled “Where You Can Find Additional Information.”

Transaction Structure

The following discussion summarizes the material terms of the proposed Arrangement, does not purport to be complete, and is qualified in its entirety by reference to the Arrangement Agreement and Plan of Arrangement attached to this proxy statement as Annex C and Schedule A to Annex C, respectively.

Pursuant to the Plan of Arrangement, commencing at the Effective Time, each of the following events shall occur and shall be deemed to occur consecutively in the following order, each occurring five minutes following completion of the previous event without any further authorization, act or formality:

 

(a) Each Dissent Share shall be transferred by the Dissenting Shareholders to Nabors Maple (free and clear of any Liens) in accordance with, and for the consideration contemplated in, the Plan of Arrangement;

 

(b) All outstanding, unexpired Options will be accelerated, cancelled, and exchanged for the right to receive the Option Consideration, provided that each Option with an exercise price that is equal to or greater than the Market Value will be cancelled for no consideration;

 

(c) All outstanding RSUs will vest and be cancelled in exchange for the right to receive the RSU Consideration;

 

(d) The following shall occur:

 

  (i) Each Common Share (other than any Dissent Share) shall be transferred to Nabors Maple (free and clear of any Liens);

 

  (ii) In respect of each Common Share transferred in paragraph (d)(i) above, Nabors shall issue 0.68 of a Nabors Share (the Share Consideration) to each Shareholder; and

 

  (iii) Nabors Maple shall issue to Nabors that number of common shares of Nabors Maple equal in value to the aggregate Share Consideration (based on a value of $1.00 per share) as consideration for Nabors having issued the Share Consideration and there shall be added to the stated capital account maintained by Nabors Maple for its common shares an amount equal to the fair market value of the Share Consideration issued by Nabors;

 

(e) With respect to each Common Share transferred in accordance with paragraphs (a) or (d) above:

 

  (i) The registered holder thereof shall cease to be the registered holder of such Common Share and shall cease to have any rights in respect of such Common Share and the name of such registered holder shall be removed from the register of Shareholders as of the time of transfer prescribed in the Plan of Arrangement;

 

  (ii) The registered holder thereof shall be deemed to have executed and delivered all consents, releases, assignments and waivers, statutory or otherwise, required to transfer such Common Share; and

 

  (iii) Nabors Maple will be the holder of all of the issued and outstanding Common Shares as of the time of transfer prescribed in the Plan of Arrangement and the central securities register of TESCO shall be revised accordingly and Nabors Maple shall be entitled to all of the rights and privileges attached to the Common Shares; and

 

32


Table of Contents
(f) The transfers, exchanges, issuances and terminations provided for above will be deemed to occur on the Effective Date, notwithstanding that certain procedures related thereto may not be completed until after the Effective Date.

Background to the Arrangement

TESCO’s management and the Board regularly review and assess TESCO’s long-term strategic plan and prospects. As part of this ongoing process, TESCO’s management and the Board regularly evaluate cash flow forecasts, earnings forecasts and strategic alternatives relating to TESCO’s businesses, including numerous discussions with third parties. As discussed below, over the past two years, TESCO has had various contacts with Nabors related to a potential acquisition. During this time period, TESCO has also had various commercial contacts and conversations with Nabors unrelated to an acquisition and unrelated to this Arrangement. Those commercial contacts are not all discussed below.

In late August and early September of 2015, Mr. Fernando Assing, President and Chief Executive Officer of TESCO, and Anthony G. Petrello, Nabors’ Chairman, President and Chief Executive Officer, exchanged correspondence and held an introductory dinner meeting. This meeting was scheduled as part of several meetings by Mr. Assing with other industry chief executive officers to build a strong business network for TESCO.

On August 14, 2015, Karim Rashid of Intrepid Financial Partners (Intrepid), the financial advisor to Nabors in the Arrangement, reached out to Mr. Assing to establish contact and introduce himself. Mr. Rashid has had a long-standing relationship with Mr. Petrello of Nabors.

On November 18, 2015, Mr. Rashid requested a meeting between himself and Hugh McGee III of Intrepid, and Mr. Assing and Brian Kelly, then Deputy General Counsel of TESCO. The purpose of the meeting was to explore the potential synergies of a combination between Nabors and TESCO. Mr. Assing advised Intrepid that while TESCO was not actively marketing the company, it would be open to having conversations so as to have a better idea of the level of Nabors’ interest that Messrs. Assing and Kelly could communicate to the Board.

On December 14, 2015, Messrs. McGee and Rashid of Intrepid had a lunch meeting with Mr. Assing and Christopher Boone, the Senior Vice President and Chief Financial Officer of TESCO, to further discuss the potential combination with Nabors. After communication with Michael Sutherlin, the Chairman of TESCO, TESCO agreed to proceed with drafting a mutual short-term Nondisclosure Agreement between Nabors and TESCO. The short-term Nondisclosure Agreement was negotiated during December, 2015 and was executed on January 5, 2016.

On January 5, 2016, Messrs. Assing and Boone of TESCO met with Mr. Rashid of Intrepid to discuss the scope of the due diligence production by TESCO that would be appropriate in connection with these preliminary discussions regarding a potential combination, and the following day a due diligence call was held among Matt Barton, Vice President of Intrepid, Mr. Boone of TESCO, and Dennis Smith, Vice President (Corporate Development and Investor Relations) of Nabors.

On January 7, 2016, TESCO opened a limited data room to Nabors, which was populated with data pursuant to diligence requests from Intrepid and Nabors from January 8, 2016 through January 18, 2016.

On January 19, 2016, Messrs. Sutherlin, Assing, and Boone of TESCO, met at Intrepid’s offices with Mr. Petrello, William Restrepo, the Chief Financial Officer of Nabors and Messrs. McGee and Rashid of Intrepid. The parties then discussed the difficult market conditions, the industry needs, and the merits and value creation propositions of a potential combination for both TESCO and Nabors shareholders under this context. The parties agreed that Nabors would submit a proposal within a short period of time.

On January 28, 2016, members of TESCO management met internally to discuss both the potential combination with Nabors and other possible unrelated acquisition projects.

 

33


Table of Contents

Between February 1, 2016 and February 3, 2016, TESCO and Nabors extended their Nondisclosure Agreement for an additional period. On February 5, 2016, Nabors advised TESCO via Intrepid that initial due diligence was complete.

On February 22, 2016, Nabors terminated the proposed combination discussions.

From March through December 2016, TESCO conducted discussions with several other companies in the industry regarding possible combination opportunities. Some of these discussions began at TESCO’s initiation and others were initiated by other companies.

On December 19, 2016, Mr. Assing of TESCO and Mr. Petrello of Nabors had a meeting, as a result of an informal email exchange in late November regarding Nabors’ recent joint venture with Saudi Aramco, and again discussed the potential benefits of integrating TESCO’s technologies into Nabors’ rigs. They decided to extend the discussions to a broader management team. Mr. Petrello requested a summary of the subject technologies.

From December 22, 2016 through early January, 2017, Messrs. Assing and Petrello exchanged correspondence regarding the technologies and future meetings, which culminated in a meeting between members of TESCO and Nabors management teams on January 16, 2017 at the office of Nabors. On January 18, 2017, Mr. Assing met with Mr. Restrepo to follow up on action items from the January 16, 2017 meeting.

Discussions regarding the integration of TESCO technologies into Nabors’ rigs continued from January 2017 through early May, 2017.

On March 2, 2017, Mr. Restrepo of Nabors met with Elijio Serrano, a member of TESCO’s Board, and Mr. Assing at an energy conference for a casual meeting, where they also briefly discussed potential advantages of selecting TESCO as a casing running tools provider. On April 10, 2017, a meeting occurred between Mr. Assing of TESCO and John Yearwood, a member of Nabors’ board of directors. Their general discussion included discussions of Nabors potentially purchasing TESCO’s tubular services tools to integrate into Nabors’ rigs.

On May 15, 2017, Messrs. Assing and Sutherlin briefed the Board regarding the recent interest communicated by Nabors at various levels of the organization and the high level of commercial activity between the companies. Mr. Assing informed the Board of the various technical and commercial evaluations conducted by Nabors at that point, and of Nabors’ interest in TESCO technologies. He also discussed the upcoming meeting between Messrs. Assing and Sutherlin for TESCO and Messrs. Petrello and Restrepo for Nabors the following day.

On May 16, 2017, Messrs. Assing and Sutherlin met with Messrs. Petrello and Restrepo, and Mr. Petrello discussed Nabors’ renewed interest in a combination with TESCO. Mr. Sutherlin confirmed TESCO’s openness to discussing a potential proposal for a combination.

Between May 17, 2017 and May 19, 2017, TESCO and Nabors negotiated and executed another mutual Nondisclosure Agreement, and Nabors conveyed an initial due diligence request list to Mr. Kelly of TESCO.

On May 19, 2017, a due diligence meeting was held among Messrs. Assing, Boone, and Kelly from TESCO and Messrs. Restrepo, Smith, and Joseph Walker, then Senior Counsel, from Nabors. Between May 19, 2017 and May 31, 2017, TESCO produced diligence materials to a virtual data room. Subsequent due diligence communications occurred on June 1, 2, 14, 26, and 30, 2017. The general focus of these diligence efforts was related to corporate organization, senior management, certain contractual relationships, financial results and prospects, and operations.

During June, 2017 and simultaneously with the discussions with Nabors, TESCO was pursuing potential combination opportunities with two other companies.

 

34


Table of Contents

On June 2, 2017, Messrs. Boone and Kelly of TESCO met at the Hilton Houston North Hotel with Mr. Smith and Julia Wright, Vice President and General Counsel at Nabors. The parties discussed due diligence matters.

On June 30, 2017, Mr. Kelly of TESCO engaged Norton Rose Fulbright to instruct TESCO’s directors on their fiduciary duties.

On July 6, 2017, Nabors provided TESCO an offer letter with an exchange ratio of 0.62 of a Nabors Share for each Common Share.

On July 11, 2017, in light of the July 6, 2017 Nabors offer letter, a teleconference was held involving Richard Barker, Laurence Whittemore, Guy Sirkes and Kirk Sisco of J.P. Morgan Securities LLC (J.P. Morgan) and Messrs. Assing, Boone, Kelly and Sutherlin of TESCO, to discuss preliminary thoughts on the proposal and the possibility of approaching other potential counterparties who might have an interest in a strategic transaction with TESCO.

On July 12, 2017, the Board held a meeting during which it deliberated and considered the proposal from Nabors and endorsed continuing discussions with Nabors and exploring alternatives to the proposed combination. The Board engaged J.P. Morgan to analyze the Nabors offer. The Board instructed Messrs. Sutherlin, Assing, and J.P. Morgan to develop and contact a list of strategic companies to gauge potential interest in acquiring TESCO. Prior to J.P. Morgan’s engagement, J.P. Morgan disclosed that Dag Skattum, a member of Nabors’ board of directors, was an employee of one of J.P. Morgan’s affiliates. The Board considered this as part of its deliberations on retaining J.P. Morgan.

During July 2017, J.P. Morgan discussed with TESCO management a list of potential counterparties who had either previously contacted TESCO regarding a potential strategic transaction or who would potentially be interested in a strategic transaction with TESCO. Based on these conversations, J.P. Morgan, Mr. Sutherlin and TESCO management reached out to a select number of those counterparties that they believed would most likely be interested in exploring a potential transaction with TESCO. Discussions with alternative partners continued from July 13, 2017 through August 13, 2017. Based on these discussions, the Board determined it was in the Shareholders’ best interests not to further engage with these potential counterparties and to focus on negotiations with Nabors. At the time, none of these identified strategic companies had expressed an interest in acquiring TESCO in the near future.

On July 18, 2017, Messrs. Assing and Sutherlin and Messrs. Petrello and Restrepo met to discuss the valuation and synergies between the companies.

On July 19, 2017, Messrs. Restrepo, Smith, Bernardo Pettenatti, Senior Business Analyst (Corporate Development and Investor Relations), and Will Speicher, Project Manager (Corporate Development and Investor Relations), from Nabors and Messrs. Assing, Boone and Jacek Mucha, Vice President of Finance, from TESCO met at the offices of Nabors to discuss a presentation of synergies that had been prepared by J.P. Morgan.

On August 1, 2017, Mr. Rashid of Intrepid communicated to TESCO that Intrepid had been formally engaged by Nabors and discussed the timing for an updated proposal, and called on August 2, 2017 to further discuss timing of any potential transaction.

On August 2, 2017, Mr. Assing briefed Mr. Sutherlin and Doug Ramsay, a member of TESCO’s Board, regarding the proposed transaction. In addition, Messrs. Assing, Boone, Kelly and representatives from J.P. Morgan had a call to discuss the proposed transaction. On this date, Intrepid provided a draft Arrangement Agreement to TESCO management to substantiate Nabors’ readiness to discuss a transaction.

On August 3, 2017, the Board convened a meeting in Calgary, Alberta. The Board further deliberated and considered the proposal and discussed potential impacts of the proposed transaction on TESCO, including retention of employees pending completion of any such transaction, and Mr. Sutherlin instructed J.P. Morgan to communicate to Intrepid that the Board desired Nabors to improve its proposal, determining that 0.62 of a Nabors Share for each Common Share was insufficient. J.P. Morgan communicated this to Intrepid, reiterated the

 

35


Table of Contents

value proposition of the transaction, and informed Intrepid that the Board remained ready to consider a revised proposal should it decide to make one. Later that night, Intrepid conveyed a revised proposal of 0.66 of a Nabors Share for each Common Share.

On August 4, 2017, the Board reconvened and discussed the revised proposal and its key terms with J.P. Morgan. The Board also considered the continuing efforts by J.P. Morgan, Mr. Assing and Mr. Sutherlin to contact alternative companies regarding a potential combination with TESCO. At the conclusion of the meeting, Mr. Sutherlin instructed J.P. Morgan to call Mr. Rashid at Intrepid to communicate that the revised proposal needed to be further improved.

On August 5, 2017, the Board reconvened and instructed management to negotiate the Arrangement Agreement in case an acceptable proposal was received in the coming days.

On August 6, 2017, TESCO management presented reverse due diligence questions to Nabors via J.P. Morgan. From August 6, 2017 through August 13, 2017, the parties negotiated the Arrangement Agreement, including the Company Termination Fee and continued due diligence.

On August 9, 2017, the Board reconvened to consider the revised proposal of Nabors of 0.68 of a Nabors Share for each Common Share that had been communicated on August 8, 2017, following TESCO’s second quarter earnings release. The Board deemed that it was an acceptable offer to continue negotiations of the Arrangement Agreement.

On August 10, 2017, representatives of TESCO management, J.P. Morgan, and Norton Rose Fulbright met at the offices of J.P. Morgan with representatives of Nabors management and Intrepid to conduct further reverse due diligence.

On August 13, 2017, the Board convened to consider the Arrangement Agreement and Nabors’ proposal. TESCO management discussed the proposed transaction with the Board. J.P. Morgan then reviewed with the Board its financial analysis of the consideration provided for in the Arrangement Agreement and delivered to the Board its oral opinion, which was later confirmed by delivery of a written opinion dated August 13, 2017, to the effect that, as of such date and based upon and subject to the assumptions made, procedures followed, matters considered and limitations on the review undertaken by J.P. Morgan in preparing the opinion, the consideration to be paid to Shareholders in the proposed Arrangement was fair, from a financial point of view, to such holders, as more fully described below in the section “Opinion of TESCO’s Financial Advisor”. TESCO’s legal advisors then summarized the material terms of the Agreement with the Board and discussed the Board’s fiduciary duties with respect to TESCO. J.P. Morgan then left the meeting. Management, other than Mr. Assing, then exited the meeting, and the Board considered the Arrangement as a whole. Mr. Assing left the meeting and the independent members of the Board considered the Arrangement as a whole and further discussed the transaction and the process undertaken by TESCO with TESCO’s legal advisors and decided to approve the Arrangement. Mr. Assing re-joined the meeting and the Board further discussed the transactional process. Based on the advice of its legal and financial advisors and its own assessment of the transaction and the interests of Shareholders, the Board unanimously, both in an in camera session without management and with the full Board participating, (i) determined that the Arrangement is in the best interests of TESCO, (ii) determined that the Arrangement is fair to TESCO’s Shareholders, (iii) approved the Arrangement and TESCO entering into the Arrangement Agreement, and (iv) recommended that TESCO Securityholders vote in favor of the Arrangement. The Arrangement was considered by the full Board of TESCO, rather than a special committee, from the outset of the potential transaction; however, Fernando Assing, the President and Chief Executive Officer of TESCO, recused himself from a portion of each meeting where the Arrangement was discussed and the other members of the Board, each of whom is independent, held in camera sessions at each such meeting.

On the evening of August 13, 2017, TESCO and Nabors entered into the Arrangement Agreement and then publicly announced by press releases the execution of the Arrangement Agreement and ancillary documents the following morning on August 14, 2017.

 

36


Table of Contents

Board of Directors and Management of Nabors after the Arrangement

The directors and executive officers of Nabors upon consummation of the Arrangement are expected to continue to be the directors and executive officers of Nabors immediately prior to the closing of the Arrangement. Please see “The Companies—Nabors” in this proxy statement for a list of such directors and officers.

Recommendation of the Board

After considering, among other things, the Fairness Opinion, the advice of its financial and legal advisors, and the ability of TESCO or the Board to accept a Superior Proposal, the Board has unanimously concluded that the Arrangement is in the best interests of TESCO, that the Arrangement is fair to the Shareholders, and has unanimously approved the Arrangement and entry into the Arrangement Agreement. Accordingly, the Board of Directors unanimously recommends that Securityholders vote “FOR” the Arrangement Resolution.

Reasons for the Arrangement

TESCO

The Board reviewed and considered a significant amount of information and considered a number of factors relating to the Arrangement with the benefit of analysis from TESCO’s senior management and analysis from its financial and legal advisors. The following is a summary of the principal reasons for the conclusion by the Board that the Arrangement is in the best interests of TESCO and is fair to Shareholders, for the determination of the Board to approve the Arrangement and enter into the Arrangement Agreement, and for the recommendation of the Board that Securityholders vote “FOR” the Arrangement Resolution:

 

    Significant Premium. The Arrangement values the Common Shares at $4.62 per share based on Nabors closing share price of $6.80 on the New York Stock Exchange on August 11, 2017 (the last trading day on the NYSE prior to execution of the Arrangement Agreement). This represents a premium of 19% to TESCO’s closing price on the NASDAQ Stock Market on the same date, and represents a premium of 30% to TESCO’s enterprise value based on TESCO’s June 30, 2017 cash balance. The Board believed a fixed share price ratio would provide the maximum potential upside as opposed to cash consideration at this stage of the market, and based on the historical relative stock patterns, including the market consensus of stock price upside potential.

 

    Continued Upside Participation by Shareholders. Shareholders, through their 10% ownership of Nabors following consummation of the Arrangement, will continue to participate in the value and any upside associated with Nabors’ business and the synergies of the combination with TESCO, including Nabors’ expanded platform and stronger and broader offering of complementary rig equipment, product lines and tubular services.

 

    Liquidity of Consideration. Shareholders will receive Nabors Shares, a stock with a higher average daily trading volume, which will provide the Shareholders with access to more liquidity for their holdings.

 

    Risk Mitigation and Stock Price Down Side Protection. The combined entity presents a potentially more resilient business to weather deteriorating market conditions including a potential softening of the North American drilling market and offshore activity.

 

    Robust and Extensive Process. The Arrangement is the result of an active and extensive review process conducted under the supervision of the Board, which received advice from experienced financial advisors and legal counsel throughout the course of the process. This process included direct consultation with various potential buyers about their potential interest in TESCO. Those potential buyers were identified by legacy relationships, prior inquiries to management, market space participation, potential for synergy extraction, and strategic and technological fitness.

 

   

Review of Strategic Alternatives. The review of the strategic options included the consideration of various potential scenarios arising from market trends and consensus by various knowledgeable parties,

 

37


Table of Contents
 

generally pointing to a lower-for-longer market direction. Cash consumption and access to credit in all those cases were critical considerations. Potential for delayed activity, pricing stagnation, and cost escalation were also critical considerations. This process included direct consultation with multiple potential buyers about their potential interest in TESCO. Those potential buyers were identified by legacy relationships, prior inquiries to management, market space participation, potential for synergy extraction, and strategic and technological fitness. However, those potential buyers, at the time did not express an interest in acquiring TESCO in the near future.

 

    Participation in Nabors’ Dividend. Shareholders who retain the Nabors Shares they receive in connection with the Arrangement will have the opportunity to participate in any future Nabors dividends.

 

    Negotiated Transaction. The Arrangement Agreement is the result of an arm’s length negotiation process and includes terms and conditions that are reasonable in the judgment of the Board.

 

    Fairness Opinion. The oral opinion of J.P. Morgan delivered to the Board, which was confirmed by delivery of a written opinion dated August 13, 2017, to the effect that, as of such date and based upon and subject to the assumptions made, procedures followed, matters considered and limitations on the review undertaken by J.P. Morgan in preparing the opinion, the consideration to be paid to the Shareholders in the proposed Arrangement was fair, from a financial point of view, to such holders, as more fully described in the section titled “—Opinion of TESCO’s Financial Advisor” beginning on page 44. The full text of the written opinion of J.P. Morgan, dated August 13, 2017, which sets forth, among other things, the assumptions made, procedures followed, matters considered and limitations on the review undertaken in rendering the opinion, is attached as Annex E to this proxy statement.

 

    Ability to Respond to Unsolicited Superior Proposals. Under the terms of the Arrangement Agreement, the Board is able to respond to unsolicited bona fide written proposals that, having regard for all of its terms, and conditions of such a proposal, if consummated in accordance with its terms, are reasonably likely to lead to a Superior Proposal and which meet the other conditions set forth in the Arrangement Agreement.

 

    Securityholder Approval. The Arrangement must be approved by not less than two-thirds of the votes cast on the Arrangement Resolution at the Special Meeting by Securityholders present in person or by proxy and entitled to vote at the Special Meeting.

 

    Regulatory Approval. The Arrangement must be approved by the Court, which will consider, among other things, the substantive and procedural fairness and reasonableness of the Arrangement to Shareholders. The Arrangement Agreement also contains a condition precedent that all Regulatory Approvals shall be obtained prior to closing.

 

    Dissent Rights. The terms of the Interim Order and the Plan of Arrangement provide that any registered holder of Common Shares who opposes the Arrangement may, upon compliance with certain conditions, exercise Dissent Rights and, if ultimately successful, receive the fair value of the Dissent Shares in accordance with the Arrangement.

The Board also considered certain potentially negative factors in its deliberations concerning the Arrangement, including but not limited to the following:

 

    Fixed Exchange Ratio. The fact that the Arrangement consideration to Shareholders is a fixed exchange ratio of 0.68 of a Nabors Share for each Common Share, which could adversely affect Shareholders as a result of a decrease in the trading price of Nabors Shares during the pendency of the Arrangement and the fact that the Arrangement Agreement does not provide TESCO with a price-based termination right or other similar protection. The Board determined that this structure was appropriate and the risk acceptable in view of factors such as the Board’s review of the relative intrinsic values and potential financial performance of the combined company, as well the opportunity Shareholders have as a result of the fixed exchange ratio to benefit from any increase in the trading price of Nabors Shares between the announcement and completion of the Arrangement;

 

38


Table of Contents
    Closing Risk. The risks and contingencies relating to the announcement and pendency of the Arrangement and the risks and costs to TESCO if the closing of the Arrangement is not timely or if the Arrangement does not close at all, relationships with employees and third parties, including customers, and the effect a public announcement of termination of the Arrangement Agreement may have on the trading price of Common Shares.

 

    Nabors Share Price Volatility. The risk that Nabors’ share price could be impacted following the announcement and closing of the Arrangement and the risk that Nabors’ share price may be volatile during this interim period based on its historic volatility.

 

    Nabors Leverage. The fact that TESCO has no debt and that as of June 30, 2017 Nabors had long term debt of over $3.7 billion, which subjects Shareholders to certain risks related to Nabors’ leverage ratio. These risks were discussed in comparison with TESCO’s existing risks related to the long term market environment for TESCO’s business and Nabors’ capacity to service their long term debt.

 

    Reaction by Some TESCO Customers. The potential that some significant TESCO customers will see the combination of the TESCO and Nabors businesses as a potential competitor rather than a continuing potential vendor.

 

    Distraction from Strategic Opportunities. The risk of diverting TESCO’s management focus, employee attention and resources from other strategic opportunities and from operational matters while working to complete the Arrangement.

 

    Deal Costs. The substantial transaction costs to be incurred in connection with the Arrangement.

The Board also considered a variety of risks and other potentially negative factors concerning the Arrangement. The foregoing summary of the information considered by the Board is not, and is not intended to be, exhaustive. In view of the wide variety of factors and information considered in connection with its evaluation of the Arrangement, the Board did not find it practicable to, and therefore did not, quantify or otherwise attempt to assign any relative weight to each specific factor or item of information considered in reaching their conclusions and recommendations. In addition, individual members of the Board may have given different weights to different factors or items of information.

Certain Prospective Financial Information Prepared by Nabors

Nabors does not as a matter of course make public forecasts as to future performance, earnings or other results among other reasons because of the unpredictability of the assumptions and estimates underlying such forecasts. However, in connection with TESCO’s due diligence review of Nabors, Nabors presented certain prospective, unaudited financial information regarding its business, which is referred to as the “Nabors Business Management Case”, to TESCO. The Nabors Business Management Case was also provided to TESCO’s financial advisor for use in connection with its financial analysis and the Fairness Opinion. The Nabors Business Management Case contains certain internal financial forecasts regarding Nabors’ anticipated future operations for fiscal years 2017-2019. A summary of the Nabors Business Management Case is set forth below.

 

     2H 2017      2018      2019  
     (in millions)  

Revenue

   $ 1,462      $ 3,370      $ 4,000  

EBITDA*

   $ 332      $ 1,050      $ 1,400  

Cash Flow from Operations

   $ 230      $ 720      $ 970  

Capital Expenditures

   $ 250      $ 560      $ 670  

 

* Earnings before interest, taxes, depreciation and amortization, excluding non-recurring integration, severance and retention expenses. EBITDA is a non-GAAP financial measure and should not be considered as an alternative to net income (loss) or cash flow data prepared in accordance with GAAP.

 

39


Table of Contents
  EBITDA as used in the unaudited prospective information set forth above does not correspond to the definition of Adjusted EBITDA that Nabors reports regularly. Accordingly, these financial measures cannot and should not be compared to Nabors’ regularly reported figures.

The Nabors Business Management Case was not prepared with a view toward public disclosure, nor was it prepared with a view toward compliance with published guidelines of the SEC or the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of financial forecasts or GAAP. The prospective financial information included here in this proxy above has been prepared by, and is the responsibility of, Nabors’ management. PricewaterhouseCoopers LLP has not examined, compiled or otherwise applied procedures to the financial forecasts presented herein and, accordingly, does not express an opinion or any other form of assurance on them. The reports of PricewaterhouseCoopers LLP included or incorporated by reference in this proxy statement relate to the historical financial data of Nabors. They do not extend to prospective financial information and should not be read to do so. The summary of the Nabors Business Management Case is included in this proxy statement because the Nabors Business Management Case was provided by Nabors to TESCO and its financial advisors in connection with the Arrangement.

The Nabors Business Management Case was based on numerous variables and assumptions that are inherently uncertain and beyond the knowledge and control of the management of Nabors. Important factors that may affect actual results and cause the Nabors Business Management Case not to be achieved include, but are not limited to, risks and uncertainties relating to the Nabors business (including its ability to achieve strategic goals, objectives and targets over applicable periods), industry performance, the regulatory environment, general business and economic conditions, foreign exchange rates, commodity pricing and other factors described under “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” in this proxy statement. The Nabors Business Management Case is subjective in many respects and also reflects assumptions as to certain business decisions that are subject to change. As a result, actual results may differ materially from those contained in the Nabors Business Management Case. Accordingly, there can be no assurance that the Nabors Business Management Case will be realized. The Nabors Business Management Case covers multiple years and the forecasts contained therein by their nature become less predictive with each succeeding year.

In preparing the Nabors Business Management Case, Nabors’ management made assumptions and estimates regarding, among other things, continued increase in activity levels of drilling in the United States, Canada and other key international markets, including continuing to increase the penetration levels of Nabors’ Drilling Solutions business across these markets, pricing improvements and dayrate increases for its rigs and services, and the commencement of operations for Nabors’ joint venture in Saudi Arabia.

Underlying these assumptions was a commodity price environment, oil prices in particular, that would be conducive to support the projected activity levels and pricing levels for Nabors’ services. These assumptions may not prove to be accurate and the projected results may not be realized, and actual results may differ from those reflected in the Nabors Business Management Case.

The inclusion of this summary of the Nabors Business Management Case in this proxy statement should not be regarded as an indication that any of Nabors, Nabors Maple, TESCO or any of their respective affiliates, advisors or other representatives considered or now consider the internal financial forecasts to be predictive of actual future results or events, and the Nabors Business Management Case should not be relied upon as such. The Nabors Business Management Case was prepared by the management of Nabors based on information available at the time of preparation. None of Nabors, Nabors Maple, TESCO or any of their respective officers, directors, partners, affiliates, advisors or other representatives can give you any assurance that actual results will not materially differ from the Nabors Business Management Case, and neither Nabors, Nabors Maple nor TESCO undertakes any obligation to update or otherwise revise or reconcile the Nabors Business Management Case to reflect circumstances existing after the date the internal financial forecasts were generated or to reflect the occurrence of future events even if any or all of the assumptions underlying the Nabors Business Management Case are shown to be in error. Nabors and Nabors Maple do not intend to make publicly available any update or

 

40


Table of Contents

other revision to the Nabors Business Management Case. None of Nabors, Nabors Maple or their respective officers, directors, partners, affiliates, advisors or other representatives has made or makes any representation to any Securityholder or other person regarding the Nabors Business’s ultimate performance compared to the information contained in the Nabors Business Management Case or that forecasted results will be achieved. Nabors, Nabors Maple and TESCO have made no representation to TESCO, in the Arrangement Agreement or otherwise, concerning the Nabors Business Management Case.

This summary of the Nabors Business Management Case is not included in this proxy statement to induce any Securityholder to vote in favor of approval of the Arrangement and should not be relied upon for such purpose.

Nabors

As a part of Nabors’ strategy to automate the drilling process and use the rig as the delivery mechanism for services to operators, Nabors explored the market for casing running tools that could provide immediate scale and automation opportunities. In addition, Nabors sought ways to improve its rig equipment business and improve its offerings and services to the market. As a result, Nabors began the process that resulted in the execution and delivery of the Arrangement Agreement, which includes Nabors Maple acquiring the business of TESCO and thereafter combining the TESCO business with Nabors, resulting in Shareholders being issued 0.68 of a Nabors Share for each outstanding Common Share and upon consummation of the Arrangement, Shareholders owning approximately 10% of the outstanding Nabors Shares.

The Nabors board of directors (the Nabors Board) believes that the Arrangement will accomplish a number of important business objectives for Nabors, as well as provide enhanced opportunities for the resulting combined company. These important business objectives include:

 

    the Arrangement will combine Canrig, Nabors’ rig equipment division, with TESCO’s rig equipment manufacturing, rental and aftermarket service business to enhance Nabors’ position as a leading worldwide player in drilling equipment and performance software;

 

    the Arrangement is expected to immediately enhance Nabors Drilling Solutions’ operations through TESCO’s operation of a tubular services business in numerous key regions globally;

 

    the Arrangement will enhance Nabors’ financial position through substantial anticipated commercial and operation synergies;

 

    the Arrangement will bring experienced TESCO management, employees and technology into Nabors’ operations; and

 

    the Arrangement will allow Nabors to offer customers more fit-for-purpose products, services and solutions and enable Nabors to further improve operational efficiency, accelerate and scale its development of new and innovative equipment on its new generations of rigs as well as upgrade older classes of rigs for a new age of drilling.

In reaching its decision to unanimously approve the Arrangement, the Nabors Board consulted with members of Nabors’ management and Nabors’ financial and legal advisors, and considered a wide variety of additional factors in favor of the Arrangement, including, but not limited to:

 

    the potential value to Nabors shareholders of the 100% interest in TESCO that Nabors Maple will own after the consummation of the Arrangement, including value resulting from (i) the strategic and competitive benefits of combining TESCO with Nabors and (ii) the potential cost reductions attributable to efficiencies and synergies to be realized by combining TESCO with Nabors such as facility integration, supply chain optimization and revenue enhancement. The Nabors Board understood that there are risks and uncertainties associated with the realization and maintenance of value, including the risk factors described in “Risk Factors” herein as well as uncertain general economic and market conditions;

 

41


Table of Contents
    the expectation that the Arrangement will enable Nabors to leverage TESCO’s international presence and operations, and accelerate its growth in new markets, which would directly benefit Nabors’ shareholders through Nabors’ ownership of TESCO;

 

    the ability of Nabors to acquire all of the issued and outstanding Common Shares in exchange for common shares of Nabors in lieu of any cash outlay and at a stock price valuing the Common Shares at $4.62 per share; and

 

    the other terms and conditions of the Arrangement Agreement that are summarized in this proxy statement.

The Nabors Board also considered certain countervailing factors during its deliberations that did not favor the Arrangement, including the following:

 

    while the Arrangement is expected to be completed, there is no assurance that all conditions to the parties’ obligations to complete the Arrangement will be satisfied or waived, including receipt of certain regulatory approvals, and as a result, it is possible that the Arrangement might not be consummated;

 

    risks relating to integrating TESCO’s operations with Nabors’ current operations and their potential effects on the value of the Nabors Shares to be received by Shareholders in the Arrangement;

 

    substantial transaction costs to be incurred in connection with the Arrangement;

 

    business uncertainty pending consummation of the Arrangement could have an adverse impact on the ability to attract, retain and motivate key personnel;

 

    the effect of acquiring the TESCO business on Nabors’ future earnings per share and cash from operating activities pending the closing of the Arrangement; and

 

    risks of the type and nature described under the section of this proxy statement entitled “Risk Factors”.

The above discussion is not intended to be exhaustive. In view of the variety of factors and the amount of information considered, the Nabors Board did not find it practicable to, and did not make specific assessments of, quantify or otherwise assign relative weights to, the specific factors considered in reaching its determination. In addition, the Nabors Board did not undertake to make any specific determination as to whether any particular factor, or any aspect of any particular factor, was favorable or unfavorable to its ultimate determination, and individual members of the Nabors Board may have given different weights to different factors. This explanation of the factors considered by the Nabors Board is in part forward-looking in nature and, therefore, should be read in light of the factors discussed in the sections of this proxy statement entitled “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors.”

Certain Prospective Financial Information Prepared by TESCO

TESCO does not as a matter of course make public forecasts as to future performance, earnings or other results among other reasons because of the unpredictability of the assumptions and estimates underlying such forecasts. However, in connection with Nabors’ due diligence review of TESCO, TESCO presented certain prospective, unaudited financial information regarding its business, which is referred to as the “TESCO Business Management Case”, to Nabors. The TESCO Business Management Case also was provided to Nabors’ financial advisors, Intrepid, for use in connection with its financial analysis. The TESCO Business Management Case contains certain internal financial forecasts regarding TESCO’s anticipated future operations for fiscal years 2017-2018. These projections were produced during the middle of the second quarter of 2017, and take into

 

42


Table of Contents

account actual first quarter financial results. A summary of the TESCO Business Management Case is set forth below.

 

     2017E      2018E  
     (US dollars in millions)  

Revenue—Base Case

   $ 172.7      $ 222.2  

EBITDA—Base Case

   $ (19.5    $ 2.5  

Revenue—Growth Case(1)

   $ 172.1      $ 262.6  

EBITDA—Growth Case(1)

   $ (19.4    $ 22.0  

 

* EBITDA is defined as earnings before interest, taxes, depreciation and amortization.
(1) TESCO management provided a growth case scenario for 2017 and 2018. This growth case was contingent upon and assumes favorable market conditions and takes into account other assumptions related to successful entry into several offshore contracts for tubular services and additional product sales.

The TESCO Business Management Case was not prepared with a view toward public disclosure, nor was it prepared with a view toward compliance with published guidelines of the SEC or the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of financial forecasts or GAAP. The prospective financial information included in this proxy above has been prepared by, and is the responsibility of, TESCO’s management. Ernst & Young LLP has not examined, compiled or otherwise applied procedures to the financial forecasts presented herein and, accordingly, does not express an opinion or any other form of assurance on them. The reports of Ernst & Young LLP incorporated by reference in this proxy statement relate to the historical financial data of TESCO. They do not extend to the prospective financial information and should not be read to do so. The summary of the TESCO Business Management Case is included in this proxy statement because the TESCO Business Management Case was provided by TESCO to Nabors and J.P. Morgan in connection with the Arrangement and readers are cautioned that such information may not be appropriate for other purposes.

The TESCO Business Management Case was based on numerous variables and assumptions that are inherently uncertain and beyond the knowledge and control of the management of TESCO. Important factors that may affect actual results and cause the TESCO Business Management Case not to be achieved include, but are not limited to, risks and uncertainties relating to the TESCO business (including its ability to achieve strategic goals, objectives and targets over applicable periods), industry performance, the regulatory environment, general business and economic conditions, foreign exchange rates, commodity pricing and other factors described under “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” in this proxy statement. The TESCO Business Management Case is subjective in many respects and also reflects assumptions as to certain business decisions that are subject to change. As a result, actual results may differ materially from those contained in the TESCO Business Management Case. Accordingly, there can be no assurance that the TESCO Business Management Case will be realized. The TESCO Business Management Case covers multiple years and the forecasts contained therein by their nature become less predictive with each succeeding year.

In preparing the TESCO Business Management Case, TESCO’s management made assumptions and estimates regarding, among other things,

 

    Commodity price (oil and gas) trends, volatility, and resulting potential activity fluctuations;

 

    Market trends, including rig technology evolution and technology adoption;

 

    Competitive landscape, including competitor positions, pricing power, cost escalations, market share potential for land work, offshore work, domestic and international markets;

 

    Use of cash, including limited access to credit;

 

43


Table of Contents
    Organic and inorganic growth potential; and

 

    Execution risks, including hiring and retention of talent, service quality, product quality, safety, and geo-political changes.

TESCO’s management assumptions were generally based on internally developed conclusions, information from clients and information gathered through established industry sources, including market analysis. These assumptions may not prove to be accurate and the projected results may not be realized, and actual results may differ from those reflected in the TESCO Business Management Case.

The inclusion of this summary of the TESCO Business Management Case in this proxy statement should not be regarded as an indication that any of TESCO, Nabors, Nabors Maple or any of their respective affiliates, advisors or other representatives considered or now consider the internal financial forecasts to be predictive of actual future results or events, and the TESCO Business Management Case should not be relied upon as such. The TESCO Business Management Case was prepared by the management of TESCO based on information available at the time of preparation. None of TESCO, Nabors, Nabors Maple or any of their respective officers, directors, partners, affiliates, advisors or other representatives can give you any assurance that actual results will not materially differ from the TESCO Business Management Case, and neither TESCO, Nabors nor Nabors Maple undertakes any obligation to update or otherwise revise or reconcile the TESCO Business Management Case to reflect circumstances existing after the date the internal financial forecasts were generated or to reflect the occurrence of future events even if any or all of the assumptions underlying the TESCO Business Management Case are shown to be in error. TESCO does not intend to make publicly available any update or other revision to the TESCO Business Management Case. None of TESCO or its officers, directors, partners, affiliates, advisors or other representatives has made or makes any representation to any Securityholder or other person regarding TESCO business’s ultimate performance compared to the information contained in the TESCO Business Management Case or that forecasted results will be achieved. TESCO, Nabors and Nabors Maple have made no representation to Nabors or Nabors Maple, in the Arrangement Agreement or otherwise, concerning the TESCO Business Management Case.

This summary of the TESCO Business Management Case is not included in this proxy statement to induce any Securityholder to vote in favor of approval of the Arrangement and should not be relied upon for such purpose.

Opinion of TESCO’s Financial Advisor

Pursuant to an engagement letter dated July 12, 2017, TESCO retained J.P. Morgan as its financial advisor in connection with the proposed Arrangement.

At the meeting of the Board on August 13, 2017, J.P. Morgan rendered its oral opinion to the Board that, as of such date and based upon and subject to the factors and assumptions set forth in its opinion, the consideration to be paid to Shareholders in the proposed Arrangement was fair, from a financial point of view, to such Shareholders. J.P. Morgan has confirmed its August 13, 2017 oral opinion by delivering its written opinion to the Board, dated August 13, 2017, that, as of such date, the consideration to be paid to Shareholders in the proposed Arrangement was fair, from a financial point of view, to such Shareholders. The full text of the written opinion of J.P. Morgan dated August 13, 2017, which sets forth the assumptions made, matters considered and limits on the review undertaken, is attached as Annex E to this proxy statement and is incorporated herein by reference. The summary of the opinion of J.P. Morgan set forth in this proxy statement is qualified in its entirety by reference to the full text of such opinion. Securityholders are urged to read the opinion in its entirety. J.P. Morgan’s written opinion was addressed to the Board (in its capacity as such) in connection with and for the purposes of its evaluation of the proposed transaction, was directed only to the consideration to be paid to Shareholders in the Arrangement and did not address any other aspect of the Arrangement. J.P. Morgan expressed no opinion as to the fairness of the consideration to the holders of any other class of securities, creditors or other constituencies of TESCO or as to the underlying decision by TESCO to engage in the proposed Arrangement. The issuance of J.P.

 

44


Table of Contents

Morgan’s opinion was approved by a fairness committee of J.P. Morgan. The opinion does not constitute a recommendation to any Securityholder of TESCO as to how such Securityholder should vote with respect to the proposed Arrangement or any other matter.

In arriving at its opinions, J.P. Morgan, among other things:

 

  (a) reviewed the Arrangement Agreement;

 

  (b) reviewed certain publicly available business and financial information concerning TESCO and Nabors and the industries in which they operate;

 

  (c) compared the proposed financial terms of the Arrangement with the publicly available financial terms of certain transactions involving companies J.P. Morgan deemed relevant and the consideration received for such companies;

 

  (d) compared the financial and operating performance of TESCO and Nabors with publicly available information concerning certain other companies J.P. Morgan deemed relevant and reviewed the current and historical market prices of the Common Shares and Nabors Shares and certain publicly traded securities of such other companies;

 

  (e) reviewed certain internal financial analyses and forecasts prepared by the managements of TESCO and Nabors relating to their respective businesses, as well as the estimated amount and timing of cost savings and related expenses and synergies expected to result from the Arrangement (the Synergies); and

 

  (f) performed such other financial studies and analyses and considered such other information as J.P. Morgan deemed appropriate for the purposes of its opinion.

In addition, J.P. Morgan held discussions with certain members of the management of TESCO and Nabors with respect to certain aspects of the Arrangement, and the past and current business operations of TESCO and Nabors, the financial condition and future prospects and operations of TESCO and Nabors, the effects of the Arrangement on the financial condition and future prospects of TESCO and Nabors, and certain other matters J.P. Morgan believed necessary or appropriate to its inquiry.

In giving its opinion, J.P. Morgan relied upon and assumed the accuracy and completeness of all information that was publicly available or was furnished to or discussed with J.P. Morgan by TESCO and Nabors or otherwise reviewed by or for J.P. Morgan, and J.P. Morgan did not independently verify (and did not assume responsibility or liability for independently verifying) any such information or its accuracy or completeness. J.P. Morgan did not conduct or was not provided with any valuation or appraisal of any assets or liabilities, nor did J.P. Morgan evaluate the solvency of TESCO or Nabors under any applicable laws relating to bankruptcy, insolvency or similar matters. In relying on financial analyses and forecasts provided to J.P. Morgan or derived therefrom, including the Synergies, J.P. Morgan assumed that they were reasonably prepared based on assumptions reflecting the best currently available estimates and judgments by management as to the expected future results of operations and financial condition of TESCO and Nabors to which such analyses or forecasts relate. J.P. Morgan expressed no view as to such analyses or forecasts (including the Synergies) or the assumptions on which they were based. J.P. Morgan also assumed that the Arrangement will have the tax consequences described in this proxy statement and in discussions with representatives of TESCO, and that the other transactions contemplated by the Arrangement Agreement will be consummated as described in the Arrangement Agreement and this proxy statement. J.P. Morgan also assumed that the representations and warranties made by TESCO and Nabors in the Arrangement Agreement and the related agreements were and will be true and correct in all respects material to its analysis. J.P. Morgan is not a legal, regulatory or tax expert and relied on the assessments made by advisors to TESCO with respect to such issues. J.P. Morgan further assumed that all material governmental, regulatory or other consents and approvals necessary for the consummation of the Arrangement will be obtained without any adverse effect on TESCO or Nabors or on the contemplated benefits of the Arrangement.

 

45


Table of Contents

J.P. Morgan’s opinion was necessarily based on economic, market and other conditions as in effect on, and the information made available to J.P. Morgan as of, the date of such opinion. J.P. Morgan’s opinion noted that subsequent developments may affect J.P. Morgan’s opinion, and that J.P. Morgan does not have any obligation to update, revise, or reaffirm such opinion. J.P. Morgan’s opinion is limited to the fairness, from a financial point of view, of the consideration to be received by Shareholders in the proposed Arrangement, and J.P. Morgan has expressed no opinion as to the fairness of any consideration to the holders of any other class of securities, creditors or other constituencies of TESCO or the underlying decision by TESCO to engage in the Arrangement. Furthermore, J.P. Morgan expressed no opinion with respect to the amount or nature of any compensation to any officers, directors or employees of any party to the proposed Arrangement, or any class of such persons relative to the consideration in the proposed Arrangement or with respect to the fairness of any such compensation. J.P. Morgan expressed no opinion as to the price at which Common Shares or Nabors Shares will trade at any future time.

The terms of the Arrangement Agreement, including the consideration, were determined through arm’s length negotiations between TESCO and Nabors, and the decision to enter into the Arrangement Agreement was solely that of the Board. J.P. Morgan’s opinion and financial analyses were only one of the many factors considered by the Board in its evaluation of the proposed Arrangement and should not be viewed as determinative of the views of the Board or management with respect to the proposed Arrangement or the consideration.

In accordance with customary investment banking practice, J.P. Morgan employed generally accepted valuation methodology in rendering its opinion to the Board on August 13, 2017, and contained in the presentation delivered to the Board on such date in connection with the rendering of such opinion and does not purport to be a complete description of the analyses or data presented by J.P. Morgan. Some of the summaries of the financial analyses include information presented in tabular format. The tables are not intended to stand alone, and in order to more fully understand the financial analyses used by J.P. Morgan, the tables must be read together with the full text of each summary. Considering the data set forth below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of J.P. Morgan’s analyses.

Public Trading Multiples. Using publicly available information, J.P. Morgan compared selected financial data of TESCO with similar data for selected publicly traded companies engaged in businesses which J.P. Morgan judged to be analogous to TESCO. The companies selected by J.P. Morgan were as follows:

 

    Frank’s International, Inc.

 

    Newpark Resources, Inc.

 

    Flotek Industries, Inc.

 

    TETRA Technologies, Inc.

 

    Parker Drilling Company

 

    Independence Contract Drilling, Inc.

These companies were selected, among other reasons, because they are publicly traded companies with operations and businesses that, for purposes of J.P. Morgan’s analysis, may be considered similar to those of TESCO. However, certain of these companies may have characteristics that are materially different from those of TESCO. The analyses necessarily involve complex considerations and judgments concerning differences in financial and operational characteristics of the companies involved and other factors that could affect the selected companies differently than they would affect TESCO.

Using publicly available information, J.P. Morgan calculated, for each selected company, the ratio of the company’s firm value (calculated as the equity value of the applicable company’s common shares on a fully diluted basis, plus debt and minority interest, less cash) to the consensus equity research analyst estimate for the

 

46


Table of Contents

company’s EBITDA (calculated as earnings before interest, tax, depreciation and amortization) for the year ending December 31, 2019 (the 2019E FV/EBITDA).

Based on the results of this analysis, J.P. Morgan selected a multiple reference range for 2019E FV/EBITDA of 3.0x–6.0x. After applying such ranges to the projected EBITDA of TESCO for the year ending December 31, 2019 based on projections by TESCO’s management, the analysis indicated the following implied per share equity value range for the Common Shares, rounded to the nearest one quarter US dollar:

 

Implied Per Share Equity Value

 

Low

   High  

$3.50

   $ 5.50  

The range of implied per share equity value for Common Shares was compared to TESCO’s closing share price of $3.90 on August 11, 2017 and the implied offer price of $4.62 per Common Share at an exchange ratio of 0.68 of a Nabors Share for each Common Share.

Discounted Cash Flow Analysis. J.P. Morgan conducted a discounted cash flow analysis for the purpose of determining an implied fully diluted equity value per Common Share. A discounted cash flow analysis is a method of evaluating an asset using estimates of the future unlevered cash flows generated by the asset and taking into consideration the time value of money with respect to those cash flows by calculating their “present value”. The “unlevered free cash flows” refers to a calculation of the future cash flows generated by an asset without including in such calculation any debt servicing costs. Specifically, unlevered free cash flow for this purpose represents EBITDA less taxes, capital expenditures, increases in net working capital and certain other one-time cash expenses, as applicable. “Present value” refers to the current value of the cash flows generated by the asset, and is obtained by discounting those cash flows back to the present using a discount rate that takes into account macro-economic assumptions and estimates of risk, the opportunity cost of capital and other appropriate factors. “Terminal value” refers to the present value of all future cash flows generated by the asset for periods beyond the projections period.

J.P. Morgan calculated the unlevered free cash flows that TESCO is expected to generate during fiscal years 2017 through 2022 based upon financial projections prepared by the management of TESCO. J.P. Morgan also calculated a range of terminal values of TESCO at the end of the five-year period ending 2022 by applying a perpetual growth rate ranging from 0.0% to 2.0% of the unlevered free cash flow of TESCO during the terminal period of the projections. The unlevered free cash flows and the range of terminal asset values were then discounted to present values using a range of discount rates from 11.5% to 14.5%, which were chosen by J.P. Morgan based upon J.P. Morgan’s analysis of the capital structures and costs of equity and debt of TESCO and its publicly traded comparable companies.

Based on the foregoing, this analysis indicated the following implied per share equity value ranges for Common Shares on a stand-alone basis:

 

Implied Per Share Equity Value

 

Low

   High  

$4.00

   $ 5.75  

The range of implied per share equity value for Common Shares was compared to TESCO’s closing share price of $3.90 on August 11, 2017 and the implied offer price of $4.62 per Common Share at an exchange ratio of 0.68 of a Nabors Share for each Common Share.

Miscellaneous. The foregoing summary of certain material financial analyses does not purport to be a complete description of the analyses or data considered by J.P. Morgan. The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. J.P. Morgan believes that

 

47


Table of Contents

the foregoing summary and its analyses must be considered as a whole and that selecting portions of the foregoing summary and these analyses, without considering all of its analyses as a whole, could create an incomplete view of the processes underlying the analyses and its opinion. As a result, the ranges of valuations resulting from any particular analysis or combination of analyses described above were merely utilized to create points of reference for analytical purposes and should not be taken to be the view of J.P. Morgan with respect to the actual value of TESCO. The order of analyses described does not represent the relative importance or weight given to those analyses by J.P. Morgan. In arriving at its opinion, J.P. Morgan did not attribute any particular weight to any analyses or factors considered by it and did not form an opinion as to whether any individual analysis or factor (positive or negative), considered in isolation, supported or failed to support its opinion. Rather, J.P. Morgan considered the totality of the factors and analyses performed in determining its opinion.

Analyses based upon forecasts of future results are inherently uncertain, as they are subject to numerous factors or events beyond the control of the parties and their advisors. Accordingly, forecasts and analyses used or made by J.P. Morgan are not necessarily indicative of actual future results, which may be significantly more or less favorable than suggested by those analyses. Moreover, J.P. Morgan’s analyses are not and do not purport to be appraisals or otherwise reflective of the prices at which businesses actually could be acquired or sold. None of the selected companies reviewed as described in the above summary is identical to TESCO. However, the companies selected were chosen because they are publicly traded companies with operations and businesses that, for purposes of J.P. Morgan’s analyses, may be considered similar to those of TESCO.

As a part of its investment banking business, J.P. Morgan and its affiliates are continually engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, investments for passive and control purposes, negotiated underwritings, secondary distributions of listed and unlisted securities, private placements, and valuations for corporate and other purposes. J.P. Morgan was selected to advise TESCO with respect to the Arrangement on the basis of, among other things, such experience and its qualifications and reputation in connection with such matters and its familiarity with TESCO and the industries in which it operates.

J.P. Morgan received a flat fee from TESCO of $1.0 million at the time J.P. Morgan delivered its opinion. TESCO has agreed to pay J.P. Morgan an additional approximately 2.125% of the consideration payable upon the closing of the Arrangement, less the $1 million opinion fee. In addition, TESCO has agreed to reimburse J.P. Morgan for its expenses incurred in connection with its services, including the fees and disbursements of counsel, and will indemnify J.P. Morgan against certain liabilities arising out of J.P. Morgan’s engagement. During the two years preceding the date of J.P. Morgan’s opinion, J.P. Morgan and its affiliates have not had material commercial or investment banking relationships with TESCO or Nabors. In addition, J.P. Morgan and its affiliates hold, on a proprietary basis, less than 1% of each of the outstanding Common Shares and outstanding Nabors Shares. In the ordinary course of their businesses, J.P. Morgan and its affiliates may actively trade the debt and equity securities of TESCO or Nabors for their own accounts or for the accounts of customers and, accordingly, they may at any time hold long or short positions in such securities. Dag Skattum, an employee of one of J.P. Morgan’s affiliates, serves as a member of the Board of Directors of Nabors. Mr. Skattum did not participate in the preparation of the Fairness Opinion and is not a member of the fairness committee of J.P. Morgan that approved the opinion.

Treatment of Options and RSUs

Subject to the terms and conditions of the Arrangement Agreement and pursuant to the Plan of Arrangement, each Option that is outstanding immediately prior to the Effective Time will be fully vested and exercisable pursuant to the provisions of the applicable Company Stock Incentive Plan and award agreements, by virtue of the Arrangement and without any further action by Nabors, Nabors Maple, TESCO or the holder of that Option, and will be cancelled in consideration for the right to receive the Option Consideration, provided that each Option with an exercise price that is equal to or more than the Market Value will be cancelled for no consideration.

 

48


Table of Contents

Each RSU that is outstanding immediately prior to the Effective Time will be fully vested pursuant to the provisions of the applicable Company Stock Incentive Plan and award agreements, by virtue of the Arrangement and without any further action by Nabors, Nabors Maple, TESCO or the holder of that RSU, and shall be cancelled in consideration for the right to receive the RSU Consideration. Each outstanding RSU that is subject to a performance-based vesting requirement will become fully vested and converted as provided above based upon the number of units at the “target” level of performance applicable to such award.

Procedure for Surrendering TESCO Common Share Certificates

Deposit of Share Consideration

On the Effective Date, Nabors shall deposit or cause to be deposited with the Transfer Agent, for the benefit of the Shareholders entitled to receive Nabors Shares, share certificates or, at Nabors’ option, evidence of shares in book-entry form, representing Nabors Shares in such denominations as the Transfer Agent may reasonably specify.

Exchange Procedures

Nabors has designated Computershare Trust Company, N.A. to act as transfer agent hereunder (Transfer Agent) for the purpose of exchanging certificates that immediately prior to the Effective Time represented Common Shares and Common Shares represented by book-entry shares for the Share Consideration.

A Letter of Transmittal will be mailed to each person who was a registered Shareholder holding Common Shares in certificated form on the Record Date. Upon surrender by such registered Shareholder to the Transfer Agent of a Common Shares certificate, together with the Letter of Transmittal, duly completed and validly executed in accordance with the instructions thereto, and such other documents as may be required pursuant to such instructions, such Shareholder shall be entitled to receive in exchange therefor the number of Nabors Shares into which such Shareholder’s Common Shares represented by such Shareholder’s properly surrendered Common Shares certificates were converted in accordance with the Arrangement Agreement.

Registered Shareholders holding book-entry shares will not be required to deliver any certificates or a Letter of Transmittal to the Transfer Agent, as their book-entry shares will be automatically cancelled and converted by the Transfer Agent into the right to receive the number of Nabors Shares to which they are entitled to receive under the Arrangement. Non-registered or Beneficial Shareholders holding Common Shares through a nominee such as a broker or dealer, should carefully follow any instructions provided to by such nominee.

Option Holders and RSU Holders will not receive certificates representing Common Shares and will not be required to deliver any such certificates or a Letter of Transmittal to the Transfer Agent in order to receive the amount in cash they are entitled to receive pursuant to the Arrangement.

Lost Certificates

In the event any certificate which immediately prior to the Effective Time represented one or more outstanding Common Shares that were transferred pursuant to the Arrangement shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the Shareholder claiming such certificate to be lost, stolen or destroyed, the Transfer Agent shall deliver in exchange for the lost, stolen or destroyed certificate the applicable Share Consideration payable in respect of the Common Shares represented by the certificate deliverable in accordance with such Shareholder’s Letter of Transmittal. When authorizing such payment in exchange for any lost, stolen or destroyed certificate, the Shareholder to whom such consideration is to be delivered shall as a condition precedent to the delivery of such consideration, give a bond satisfactory to the Transfer Agent (acting reasonably) in a customary amount as indemnity against any claim that may be made against it with respect to the certificate alleged to have been lost, stolen or destroyed.

 

49


Table of Contents

Fractional Shares

No fractional Nabors Shares shall be issued upon the surrender of Common Share certificates for exchange, and any such fractional share interests to which a former Shareholder would otherwise have been entitled will not entitle such former Shareholder to vote or to any other rights of a holder of Nabors Shares. In lieu of any such fractional Nabors Shares, each former Shareholder otherwise entitled to fractional Nabors Shares shall receive the nearest whole number of Nabors Shares. For greater certainty, where such fractional interest is greater than or equal to 0.5, the number of Nabors Shares to be issued shall be rounded up to the nearest whole number of Nabors Shares and where such fractional interest is less than 0.5, the number of Nabors Shares to be issued shall be rounded down to the nearest whole number of Nabors Shares.

Court Approval of the Arrangement

Interim Order

On [●], 2017, the Court granted the Interim Order directing the calling of the Special Meeting and prescribing the conduct of the Meeting and other matters. A copy of the Interim Order is attached as Annex D to this proxy statement.

Final Order

An arrangement under the ABCA requires Court approval. Subject to the terms of the Arrangement Agreement, and if the Arrangement Resolution is approved by the Securityholders at the Special Meeting in the manner required by the Interim Order, TESCO will make an application to the Court for the Final Order.

The application for the Final Order approving the Arrangement is scheduled for [●], 2017 at [●] a.m. (Calgary time), or as soon thereafter as counsel may be heard, at the Calgary Courts Centre, 601 – 5th Street S.W., Calgary, Alberta.

At the hearing, any Securityholder and any other interested party who wishes to participate or to be represented or to present evidence or argument may do so, subject to filing with the Court and serving upon TESCO a notice of intention to appear together with any evidence or materials that such party intends to present to the Court on or before 5:00 p.m. (Calgary time) on [●], 2017. Service of such notice shall be effected by service upon the solicitors for TESCO: c/o Norton Rose Fulbright Canada LLP, Suite 3700, 400 – Third Avenue S.W., Calgary Alberta T2P 4H2, Attention: Steven H. Leitl. See the “Notice of Originating Application” included in this proxy statement.

The Company has been advised by its Canadian counsel, Norton Rose Fulbright Canada LLP, that the Court has broad discretion under the ABCA when making orders with respect to plans of arrangements and that the Court will consider, among other things, the fairness and reasonableness of the Arrangement, both from a substantive and a procedural point of view. The Court may approve the Arrangement either as proposed or as amended in any manner the Court may direct, subject to compliance with such terms and conditions, if any, as the Court thinks fit. Depending upon the nature of any required amendments, TESCO or Nabors Maple may determine not to proceed with the Arrangement.

Listing of Nabors Shares

The Nabors Shares are listed on the NYSE under the symbol “NBR”. It is Nabors’ intention to rely upon the exemption from registration provided by Section 3(a)(10) of the U.S. Securities Act with respect to the issuance of Nabors Shares pursuant to the Arrangement Agreement. Section 3(a)(10) exempts from registration the offer and sale of a security which is issued in specified exchange transactions where, among other things, the terms and conditions of such issuance and exchange are approved, after a hearing upon the fairness of such terms and conditions at which all persons to whom it is proposed to issue securities in such exchange have the right to appear, by a court or governmental authority expressly authorized by law to grant such approval.

 

50


Table of Contents

Following the consummation of the Arrangement, the Nabors Shares issued pursuant to the Arrangement will be listed on the NYSE, subject to official notice of issuance.

Delisting and Deregistration of TESCO Common Shares

It is expected that the Common Shares will be delisted from the NASDAQ and deregistered under the U.S. Exchange Act promptly following consummation of the Arrangement.

The Common Shares are currently listed on the NASDAQ under the symbol “TESO”. If permitted by applicable laws, Nabors intends to delist the Common Shares from the NASDAQ with effect from the Effective Date or as soon thereafter as practicable and to apply for a decision for TESCO to cease to be a reporting issuer under the securities laws of each jurisdiction of Canada in which TESCO is a reporting issuer.

If the Arrangement is completed, TESCO’s obligations to file or furnish reports under the U.S. Exchange Act will be terminated.

Regulatory Approvals Required for the Arrangement

The consummation of the Arrangement is conditioned upon and requires, subject to waiver, various regulatory approvals. These include, but may not be limited to, the approval of the Interim and Final Orders by the Court of the Queen’s Bench of Alberta, the necessary listing approvals of the NYSE and clearances under the Competition Act and the HSR Act and other foreign regulatory bodies. Any failure to obtain these approvals, clearances or consents or any additional approval or consent requirements could delay the Effective Date or prevent the completion of the Arrangement. There can be no assurance that any regulatory consents or approvals that are determined to be required will be obtained by the Outside Date for the Arrangement, which is February 14, 2018, subject to extension to April 15, 2018 in limited circumstances set forth in the Arrangement Agreement.

Stock Exchange Approvals

Nabors will file a Supplemental Listing Application covering the Nabors Shares to be issued to Shareholders. It is a condition of the Arrangement that the NYSE shall have approved these shares for listing on the NYSE, subject to official notice of issuance of these shares.

Competition Act Approval (Canada)

Part IX of the Competition Act requires that the parties to certain classes of transactions provide prescribed information to the Commissioner where the applicable thresholds set out in sections 109 and 110 of the Competition Act are exceeded and no exemption applies (Notifiable Transactions).

Subject to certain limited exemptions, a Notifiable Transaction cannot be completed until the parties to the transaction have each submitted the information prescribed pursuant to Subsection 114(1) of the Competition Act (a Notification) to the Commissioner and the applicable waiting period has expired or been terminated early by the Commissioner.

The waiting period is 30 days after the day on which the parties to the Notifiable Transaction have both submitted their respective Notifications, provided that, before the expiry of this period, the Commissioner has not notified the parties that he requires additional information that is relevant to the Commissioner’s assessment of the transaction pursuant to Subsection 114(2) of the Competition Act (a Supplementary Information Request). If the Commissioner of Competition provides the parties with a Supplementary Information Request, then the Notifiable Transaction cannot be completed until 30 days after compliance with such Supplementary Information Request, provided that there is no order issued by the Competition Tribunal in effect prohibiting completion at the relevant time. A Notifiable Transaction may be completed before the end of the applicable waiting period if

 

51


Table of Contents

the Commissioner issues an advance ruling certificate (an ARC) or notifies the parties that he does not, at that time, intend to challenge the transaction by making an application under section 92 of the Competition Act (a No Action Letter). In that case, the Commissioner will reserve the right to challenge the transaction before the Competition Tribunal at any time within one year of the transaction being completed.

Alternatively, or in addition to filing Notifications, the parties to a Notifiable Transaction may apply to the Commissioner for an ARC which may be issued by the Commissioner in respect of a proposed transaction if he is satisfied that there are not sufficient grounds on which to apply to the Competition Tribunal for an order challenging the transaction under Section 92 of the Competition Act, or for a No Action Letter.

Whether or not a merger is subject to notification under Part IX of the Competition Act, the Commissioner can apply to the Competition Tribunal for a remedial order under section 92 of the Competition Act at any time before the merger has been completed or, if completed, within one year after it was substantially completed, provided that, subject to certain exceptions, the Commissioner did not issue an ARC in respect of the merger. On application by the Commissioner under section 92 of the Competition Act, the Competition Tribunal may, where it finds that the merger prevents or lessens, or is likely to prevent or lessen, competition substantially, order that the merger not proceed or, if completed, order its dissolution or the disposition of some of the assets or shares involved in the merger; in addition to, or in lieu thereof, with the consent of the person against whom the order is directed and the Commissioner, the Competition Tribunal may order a person to take any other action. The Competition Tribunal is prohibited from issuing a remedial order where it finds that the merger or proposed merger has brought or is likely to bring about gains in efficiency that will be greater than, and will offset, the effects of any prevention or lessening of competition that will result or is likely to result from the merger and that the gains in efficiency would not likely be attained if the order were made. Where the Commissioner brings an application under section 92 of the Competition Act, he may also bring an application to enjoin closing of a proposed merger pending the Competition Tribunal’s disposition of the Commissioner’s section 92 application.

The transactions contemplated by the Arrangement Agreement are a Notifiable Transaction. [TESCO and Nabors] [each filed their respective Notifications and requested that the Commissioner issue an ARC or No Action Letter on September [], 2017] [expect to each file their respective Notifications, and the Parties intend to submit a request to the Commissioner for an ARC or, in the alternative, a No Action Letter, shortly after the date of this proxy statement].

Hart Scott-Rodino Antitrust Improvements Act of 1976

Under the HSR Act and related rules, the Arrangement may not be completed until notifications have been given and information furnished to the Federal Trade Commission and to the Antitrust Division of the Department of Justice, which is referred to as the Antitrust Division, and all statutory waiting period requirements have been satisfied. The HSR Act provides for an initial 30-calendar-day statutory waiting period following the necessary filings by the parties to a merger, unless the Federal Trade Commission and Antitrust Division terminate the waiting period early or extend it by issuing a request for additional documents and information (a Second Request). TESCO and Nabors filed Notification and Report Forms with the Federal Trade Commission and the Antitrust Division on August 31, 2017.

At any time before or after completion of the Arrangement, the Federal Trade Commission or the Antitrust Division could take any action under federal antitrust laws that it deems necessary or desirable in the public interest, including seeking to enjoin completion of the Arrangement or seeking divestiture of substantial assets of TESCO or the TESCO business or the imposition of other remedies. In addition, the U.S. state attorney generals could take action under state antitrust laws as they deem necessary or desirable in the public interest, including, without limitation, seeking to enjoin the completion of the Arrangement or permitting completion subject to regulatory concessions or conditions. The Arrangement could also be the subject of challenges by private parties under federal and state antitrust laws.

 

52


Table of Contents

There can be no assurance that a challenge to the Arrangement on antitrust grounds will not be made or, if such a challenge is made, that it would not be successful.

Challenges by Governmental and Other Entities.

Notwithstanding the approval of the arrangement by the Court, there can be no assurance that any other governmental or other entities will not challenge the arrangement on antitrust or competition grounds and, if such a challenge is made, there can be no assurance as to its result.

U.S. Securities Law Matters

Exemption from U.S. Registration

The Nabors Shares to be issued to Shareholders pursuant to the Arrangement are not expected to be registered under the U.S. Securities Act. Such securities are expected instead to be issued in reliance upon the exemption provided by Section 3(a)(10) of the U.S. Securities Act. Section 3(a)(10) exempts securities issued in exchange for one or more bona fide outstanding securities, where the terms and conditions of such issuance and exchange are approved, after a hearing upon the fairness of such terms and conditions at which all persons to whom it is proposed to issue securities in such exchange will have the right to appear, by any court, or by any official or agency of the United States, or by any state or territorial banking or insurance commission or other governmental authority expressly authorized by law to grant such approval. The staff of the SEC has stated in Revised Staff Legal Bulletin No. 3A (July 18, 2008) that the term “any court” in Section 3(a)(10) includes a foreign court. If the Arrangement Resolution is approved by TESCO Securityholders, TESCO will make an application for the Final Order. At the hearing of the application for the Final Order, the Court will consider and make a determination concerning the fairness of the terms and conditions of the Arrangement, including the consideration to be received by Securityholders. The Court will be advised at the hearing of the application for the Final Order that if the terms and conditions of the Plan of Arrangement are approved by the Court, the Nabors Shares issued under the Arrangement will not be registered under the U.S. Securities Act pursuant to the Section 3(a)(10) exemption.

Restrictions on Sales of Nabors Shares Received in the Arrangement

All Nabors Shares received by Shareholders in the Arrangement will be freely tradable for purposes of the U.S. Securities Act and the Exchange Act, except for Nabors Shares received by any Shareholder who is or becomes an affiliate of Nabors after completion of the Arrangement.

Canadian Securities Law Matters

Status under Canadian Securities Laws

TESCO is a reporting issuer in each of the ten provinces and the Yukon territory of Canada. The Common Shares currently trade on the NASDAQ. If the Arrangement is completed, TESCO will be a wholly-owned subsidiary of Nabors and Nabors intends to have the Common Shares delisted from the NASDAQ on or promptly following the Effective Date. Following the Effective Date, applications will be made to applicable Securities Authorities to have TESCO cease to be a reporting issuer in all jurisdictions of Canada in which it is currently a reporting issuer, thus terminating TESCO’s reporting obligations in Canada following completion of the Arrangement.

Nabors is not currently a reporting issuer in any jurisdiction in Canada. Upon completion of the Arrangement, Nabors will become a reporting issuer in each of the jurisdictions of Canada in which TESCO is currently a reporting issuer by virtue of the completion of the Arrangement with TESCO.

Pursuant to NI 71-102, Nabors will be generally exempt from Canadian statutory financial and other continuous and timely reporting requirements, including the requirement for insiders of Nabors to file reports with respect to

 

53


Table of Contents

trades of Nabors securities, provided Nabors complies with the requirements of U.S. Securities Laws and U.S. market requirements in respect of all financial and other continuous and timely reporting matters and Nabors files with the relevant Canadian securities regulatory authorities copies of its documents filed with the SEC under the U.S. Exchange Act.

Distribution and Resale of Nabors Shares under Canadian Securities Laws

The distribution of the Nabors Shares pursuant to the Arrangement will constitute a distribution of securities which is exempt from the prospectus requirements of Canadian securities legislation. The Nabors Shares received pursuant to the Arrangement will not be legended and may be resold through registered dealers in Canada provided: (i) that Nabors is a reporting issuer in a jurisdiction of Canada for the four months immediately preceding the trade (pursuant to Section 2.9 of NI 45-102, upon completion of the Arrangement Nabors will be deemed for this purpose to have been a reporting issuer from the time that TESCO became a reporting issuer), (ii) the trade is not a “control distribution” as defined in NI 45-102, (iii) no unusual effort is made to prepare the market or to create a demand for the Nabors Shares, (iv) no extraordinary commission or consideration is paid to a person or company in respect of such sale, and (v) if the selling securityholder is an insider or officer of Nabors, such selling securityholder has no reasonable grounds to believe that Nabors is in default of applicable Canadian securities laws.

Each Shareholder is urged to consult his or her professional advisors to determine the applicable restrictions under Canadian securities laws to trades in Nabors Shares.

MI 61-101

TESCO is subject to the provisions of Multilateral Instrument 61-101—Protection of Minority Security Holders in Special Transactions (MI 61-101). MI 61-101 is intended to regulate insider bids, issuer bids, business combinations and related party transactions to ensure equality of treatment among securityholders, generally by requiring enhanced disclosure, minority securityholder approval, and, in certain instances, independent valuations and approval and oversight of certain transactions by a special committee of independent directors.

Under the terms of the Plan of Arrangement, a Shareholder will receive 0.68 of a Nabors Share for each Common Share. Pursuant to MI 61-101, unless certain exceptions apply, the Arrangement may be considered a “business combination” in respect of TESCO pursuant to MI 61-101 since the interest of a holder of a Common Share may be terminated without the holder’s consent. Accordingly, unless no related party of TESCO is entitled to receive a “collateral benefit” (as defined in MI 61-101) in connection with the Arrangement, the transaction would be considered a “business combination” and subject to minority approval requirements.

If “minority approval” is required, MI 61-101 would require that, in addition to the approval of the TESCO Arrangement Resolution by not less than 662/3% of the votes cast by the Securityholders present in person or by proxy at the Special Meeting, the Arrangement would also require the approval of a simple majority of the votes cast by Shareholders, excluding votes by “related parties” (as defined in MI 61-101) who receive a “collateral benefit” as a consequence of the Arrangement.

However, the minority approval requirements of MI 61-101 do not apply to certain transactions in which a related party beneficially owns, or exercises control or direction over, less than 1% of the outstanding equity securities or to certain transactions in which an independent committee of directors has determined, acting in good faith, that the value of the benefits received by a related party, net of any offsetting costs to the related party, is less than 5% of the value the related party expects to receive pursuant to the transaction, provided the independent committee’s determination is disclosed in the disclosure document for the transaction.

As stated elsewhere in this proxy statement under the heading “Interests of Directors and Executive Officers”, certain current officers of TESCO will receive compensation in the form of severance payments and payments

 

54


Table of Contents

resulting from accelerated vesting and cancellation of Options and RSUs, as applicable, in connection with completion of the Arrangement. TESCO has determined that these payments, either alone or together, are not a “collateral benefit” for the purposes of MI 61-101 since: (i) the benefit is not conferred for the purpose, in whole or in part, of increasing the value of the consideration paid to the related party for their Common Shares; (ii) the benefit is not, by its terms, conditional on the related party supporting the Arrangement in any manner; (iii) full particulars of the benefit have been disclosed in this proxy statement under the heading “[●]”; and (iv) each of the related parties receiving the benefit exercised control or direction over, or beneficially owned, less than 1% of the outstanding Common Shares, as at the date of the Arrangement Agreement.

Accordingly, the Arrangement is not considered to be a “business combination” in respect of TESCO, and as a result, no “minority approval” is required for the TESCO Arrangement Resolution. In addition, since the Arrangement does not constitute a business combination, no formal valuation is required for the Arrangement under MI 61-101.

Dissenters’ Rights

The following description of the rights of Dissenting Shareholders is not a comprehensive statement of the procedures to be followed by a Dissenting Shareholder who seeks payment of the fair value of his or her Common Shares and is qualified in its entirety by reference to the full text of the Interim Order, a copy of which is attached to this proxy statement as Annex D and the full text of Section 191 of the ABCA, which is attached to this proxy statement as Annex J, and the Plan of Arrangement, a copy of which is attached to this proxy statement as Schedule “A” to Annex C.

Pursuant to the Interim Order, Dissenting Shareholders are given rights analogous to rights of dissenting shareholders under the ABCA, as modified by the Interim Order and the Plan of Arrangement. A Shareholder who intends to exercise his or her Dissent Rights should carefully consider and comply with the provisions of Section 191 of the ABCA, as modified by the Interim Order and the Plan of Arrangement. Failure to comply with the provisions of that section, as so modified by the Interim Order and the Plan of Arrangement, and to adhere to the procedures established therein may result in the loss of all Dissent Rights. The Court hearing the application for the Final Order has the discretion to alter the Dissent Rights described herein based on the evidence presented at such hearing.

Under the Interim Order, each registered Shareholder is entitled, in addition to any other rights a registered Shareholder may have, to dissent and to be paid by Nabors Maple the fair value of the Common Shares held by such Shareholder determined as of the close of business on the last Business Day before the Meeting. A registered Shareholder may dissent only with respect to all of the Common Shares held by such Shareholder.

A Dissenting Shareholder must send to TESCO a written objection to the Arrangement Resolution, which written objection must be received by TESCO c/o Norton Rose Fulbright Canada LLP, Suite 3700, 400 – Third Avenue S.W., Calgary, Alberta, T2P 4H2, Attention: Steven H. Leitl, by no later than 4:00 p.m. (Eastern time) on [●], 2017, the day that is two Business Days immediately preceding the date of the Meeting (as it may be adjourned or postponed from time to time). Additionally, a Dissenting Shareholder must, no later than the date on which it delivers its objection, send the certificates representing the Dissent Shares to TESCO or its transfer agent. No Shareholder who has voted the Common Shares in favour of the Arrangement Resolution shall be entitled to exercise Dissent Rights with respect to the Arrangement, but Shareholders are not required to expressly vote against the Arrangement in order to exercise Dissent Rights. A vote against the Arrangement does not constitute an exercise of Dissent Rights and does not constitute or satisfy notice requirements under Alberta law. A registered Shareholder may not exercise Dissent Rights in respect of only a portion of such Shareholder’s Common Shares, but may exercise Dissent Rights only with respect to all of the Common Shares held by the Shareholder.

An application may be made to the Court by Nabors Maple or by a Dissenting Shareholder after the approval of the Arrangement Resolution to fix the fair value of the Dissenting Shareholder’s Common Shares. If such an

 

55


Table of Contents

application to the Court is made by either Nabors Maple or a Dissenting Shareholder, Nabors Maple must, unless the Court otherwise orders, send to each Dissenting Shareholder a written offer to pay such Dissenting Shareholder an amount considered by the board of directors of Nabors Maple to be the fair value of the Common Shares held by such Dissenting Shareholder. The offer, unless the Court otherwise orders, will be sent to each Dissenting Shareholder at least 10 days before the date on which the application is returnable, if Nabors Maple is the applicant, or within 10 days after Nabors Maple is served with notice of the application, if a Dissenting Shareholder is the applicant. The offer must be made on the same terms to each Dissenting Shareholder and must be accompanied by a statement showing how the fair value was determined.

A Dissenting Shareholder may make an agreement with Nabors Maple for the purchase of the Dissenting Shareholders’ Common Shares by Nabors Maple, in the amount of Nabors Maple’s offer or otherwise, at any time before the Court pronounces an order fixing the fair value of the Common Shares.

A Dissenting Shareholder is not required to give security for costs in respect of an application and, except in special circumstances, will not be required to pay the costs of the application or appraisal. On the application, the Court will make an order under subsection 191(13) of the ABCA fixing the fair value of the Common Shares of all Dissenting Shareholders who are parties to the application, giving judgment in that amount against Nabors Maple and in favour of each of those Dissenting Shareholders, and fixing the time within which Nabors Maple must pay that amount to the Dissenting Shareholders. The Court may in its discretion allow a reasonable rate of interest on the amount payable to each Dissenting Shareholder calculated from the date on which the Dissenting Shareholder ceases to have any rights as a Shareholder under the ABCA until the date of payment.

On the Arrangement becoming effective, or upon the making of an agreement between Nabors Maple and the Dissenting Shareholder as to the payment to be made to the Dissenting Shareholder, or the pronouncement of a Court order, whichever occurs first, the Dissenting Shareholder will cease to have any rights as a Shareholder other than the right to be paid the fair value of such Shareholder’s Common Shares in the amount agreed to between Nabors Maple and the Shareholder or in the amount of the judgment, as the case may be. Until one of these events occurs, the Shareholder may withdraw its dissent, or if the Arrangement has not yet become effective TESCO may rescind the Arrangement Resolution, and in either event the dissent proceedings in respect of that Shareholder will be discontinued.

All Common Shares held by registered Shareholders who exercise their Dissent Rights in respect of their Common Shares will, if the Shareholders are ultimately entitled to be paid the fair value thereof, be deemed to be transferred to Nabors Maple, without any further act or formality on its part, free and clear of any Liens, in exchange for a debt claim against Nabors Maple for the fair value of such Common Shares, which fair value, notwithstanding anything to the contrary to section 191 of the ABCA, shall be determined as of the close of business on the Business Day before the Arrangement Resolution was approved. If such Shareholders ultimately are not entitled, for any reason, to be paid fair value for such Common Shares, they shall be deemed to have participated in the Arrangement on the same basis as a non-dissenting holder of Common Shares.

Persons who are beneficial owners of Common Shares registered in the name of a broker, custodian, nominee or other intermediary who wish to dissent, should be aware that only the registered owner of such Common Shares is entitled to dissent. Accordingly, a beneficial owner of Common Shares desiring to exercise its right of dissent must make arrangements for the Common Shares beneficially owned by such Shareholder to be registered in its name prior to the time the written objection to the Arrangement Resolution is required to be received by TESCO or, alternatively, make arrangements for the registered holder of Common Shares to dissent on the Shareholder’s behalf.

Accounting Treatment

Nabors prepares its financial statements in accordance with GAAP. The Arrangement will be accounted for by applying the acquisition method, which requires the identification of the acquirer, the determination of the

 

56


Table of Contents

acquisition date, the recognition and measurement, at fair value, of the identifiable assets acquired, liabilities assumed and any noncontrolling interest in the consolidated subsidiaries of the acquiree and recognition and measurement of goodwill or a gain from a bargain purchase. The accounting guidance for business combinations, referred to as ASC 805, provides that in a business combination involving the exchange of equity interests, the entity issuing the equity interests is usually the acquirer; however, all pertinent facts and circumstances must be considered, including the relative voting rights of the shareholders of the constituent companies in the combined entity, the composition of the board of directors and senior management of the combined company, the relative size of the company and the terms of the exchange of equity interests in the business combination, including payment of a premium.

Based on the fact that Nabors is the entity issuing the equity securities, that upon completion of the Arrangement it is estimated that current Nabors shareholders will own approximately 90% of the combined company and former TESCO Shareholders will own approximately 10% of the combined company, that Nabors’ board members and senior management will represent the majority of the board and senior management of the combined company, and based on the terms of the Arrangement, with TESCO Shareholders receiving a premium (as of the trading day immediately preceding the Arrangement Agreement) over the fair market value of their Shares on such date, Nabors is considered the acquirer for accounting purposes. Therefore, Nabors will recognize and measure, at fair value, the identifiable assets acquired, liabilities assumed and any noncontrolling interests in the consolidated subsidiaries of TESCO and Nabors will recognize and measure goodwill and any gain from a bargain purchase, in each case and if necessary, upon completion of the Arrangement.

Certain U.S. Federal Income Tax Consequences

The following discussion describes the anticipated material U.S. federal income tax consequences to U.S. Holders (defined below) of the Arrangement and of the ownership and disposition of Nabors Shares following the Arrangement. The discussion is applicable to a U.S. Holder that has held Common Shares as capital assets within the meaning of Section 1221 of the Code, and will hold Nabors Shares as capital assets following the Arrangement.

Except where noted, this discussion does not deal with holders that are subject to special rules, such as the following:

 

    brokers or dealers in securities or currencies;

 

    traders in securities that elect to use a mark-to-market method of accounting for their securities holdings;

 

    persons liable for the alternative minimum tax;

 

    banks, financial institutions, underwriters or insurance companies;

 

    tax-exempt entities, qualified retirement plans, individual retirement accounts, or other tax-deferred accounts;

 

    former citizens or long-term residents of the United States;

 

    entities or arrangements that are treated as partnerships for U.S. federal income tax purposes and investors in such partnerships;

 

    real estate investment trusts and regulated investment companies;

 

    grantor trusts or S corporations;

 

    persons holding Common Shares or Nabors Shares as part of a hedging, integrated, conversion or constructive sale transaction or a straddle;

 

    persons owning or who have owned (directly, indirectly or constructively) 10% or more of the voting shares of TESCO;

 

57


Table of Contents
    holders of Options or RSUs;

 

    persons who received their Common Shares, or, after the Arrangement, Nabors Shares, through the exercise of options or otherwise as compensation or through a tax-qualified retirement plan;

 

    except as specifically described below, U.S. Holders of Common Shares that will own (directly, indirectly or constructively) 5% or more of either the total voting power or the total value of Nabors Shares immediately after the Arrangement (5% Transferee Shareholders); or

 

    persons whose “functional currency” is not the U.S. dollar.

U.S. Holders that are subject to special provisions under the Code, including U.S. Holders described immediately above, should consult their tax advisors regarding the tax consequences of the Arrangement and the ownership and disposition of Nabors Shares.

In addition, the following discussion is based on the provisions of the Code, U.S. Treasury regulations, rulings and judicial decisions issued under the Code as of the date of this proxy statement. These authorities may be repealed, revoked or modified, possibly with retroactive effect, so as to result in U.S. federal income tax consequences different from those discussed below. Neither TESCO nor Nabors has requested a ruling from the Internal Revenue Service (IRS) or a legal opinion from U.S. counsel with respect to any of the U.S. federal income tax consequences of the Arrangement or any of the other matters discussed herein and, as a result, there can be no assurance that the IRS will not disagree with or challenge any of the conclusions described below, or that such conclusions, if challenged, will be upheld by a court.

As used in this discussion, a “U.S. Holder” means a beneficial owner of Common Shares or, after the Arrangement, Nabors Shares who is for U.S. federal income tax purposes:

 

    a citizen or resident of the United States;

 

    a corporation or other entity taxable as a corporation created or organized in or under the laws of the United States, any state thereof or the District of Columbia;

 

    an estate that is subject to U.S. federal income tax on its income, regardless of source; or

 

    a trust that (A) is subject to the primary jurisdiction of a court within the United States and the control of one or more U.S. persons with respect to all of its substantial decisions, or (B) has a valid election in effect under applicable Treasury regulations to be treated as a U.S. person.

If a partnership (including any entity treated as a partnership for U.S. federal income tax purposes) holds Common Shares and will hold Nabors Shares after the Arrangement, the tax treatment of a partner will depend upon the status of the partner and the activities of the partnership. Partners of a partnership holding such stock should consult their own tax advisors with respect to the U.S. federal tax treatment of the Arrangement and of holding Nabors Shares.

This discussion is for general information purposes only and does not contain a detailed description of all the U.S. federal income tax consequences to U.S. Holders in light of their particular circumstances. Further, this discussion does not address the effects of any state, local or non-U.S. tax laws, or other U.S. federal tax consequences, such as U.S. federal estate or gift tax consequences or the consequences related to the Medicare tax on net investment income. In addition, this discussion does not address U.S. Holders whose Common Shares (or after the Arrangement, Nabors Shares) constitute “taxable Canadian property” (as defined in the Income Tax Act (Canada)) at the time of exchange or that are otherwise subject to Canadian tax with respect to such stock.

U.S. Holders are urged to consult their own tax advisors concerning the U.S. federal income tax consequences of the Arrangement and the ownership or disposition of Nabors Shares in light of their particular circumstances, as well as any consequences arising under the laws of any other taxing jurisdiction. This discussion is not intended to be, and should not be construed as, legal or tax advice with respect to any U.S. Holder.

 

58


Table of Contents

Treatment of the Arrangement

The Arrangement has not been structured to achieve a particular treatment for U.S. federal income tax purposes, and TESCO and Nabors have no obligation to structure the Arrangement in a manner that is tax-free to U.S. Holders. As structured, the Arrangement may qualify as a tax-deferred reorganization under the provisions of Section 368(a) of the Code. However, qualification of the Arrangement as a reorganization depends on the resolution of issues and facts that will not be known until or after the date of the Arrangement. For example, depending on the circumstances, the provision of cash by Nabors or Nabors Maple to fund payments to U.S. Holders exercising dissenters’ appraisal rights or certain other payments, could cause the Arrangement to fail to qualify as a reorganization. Because the integration of the businesses of TESCO and Nabors may be a complex process, the details of which have not yet been determined, TESCO cannot state with certainty at this time that any transactions that might prevent the Arrangement from qualifying as a reorganization will not occur. In addition, the provisions of the Code that govern reorganizations are extremely complex, and are based on typical acquisition and other transaction structures effected under U.S. law. Because the Arrangement will be carried out pursuant to Canadian laws which differ from the relevant U.S. laws, it is not certain that the U.S. tax authorities would apply the reorganization rules to them in the same manner they would to U.S. transactions. As a result of the foregoing considerations, TESCO is not able to provide a higher degree of certainty regarding the qualification of the Arrangement as a reorganization for U.S. federal income tax purposes. The following sections describe the U.S. federal income tax consequences that should be applicable to a U.S. Holder (i) if the Arrangement qualifies as a reorganization and (ii) if the Arrangement does not qualify as a reorganization.

Arrangement Qualifies as a Reorganization

Provided the Arrangement qualifies as a reorganization, except for certain 5% Shareholders described below and subject to the discussion under “—Passive Foreign Investment Company Considerations” below relating to the possible application of the passive foreign investment company (PFIC) rules, a U.S. Holder will not recognize gain or loss upon the exchange of Common Shares for Nabors Shares in the Arrangement. The aggregate basis of the Nabors Shares received for Common Shares in the Arrangement will be equal to the basis of the Common Shares exchanged. The holding period of the Nabors Shares received in exchange for the Common Shares in the Arrangement will include the holding period of the Common Shares exchanged. If a U.S. Holder acquired different blocks of Common Shares at different times and at different prices, the U.S. Holder’s tax basis and holding period in the Nabors Shares received will be determined by reference to each block of Common Shares surrendered. U.S. Holders that hold Common Shares with differing bases or holding periods are urged to consult their tax advisors as to the determination of the bases and holding periods of the Nabors Shares received in the Arrangement.

A U.S. Holder that owns, actually or constructively, at least 5% of the total voting power or the total value of the Nabors Shares immediately after the Arrangement will qualify for non-recognition of gain, as described above, only if such U.S. Holder files with the IRS a “gain recognition agreement,” as defined in the Treasury regulations promulgated under Section 367(a) of the Code. In addition, each such U.S. Holder will be required to file certain annual information statements with its U.S. federal income tax returns for each of the first five full taxable years following the taxable year of the Arrangement. Each such U.S. Holder is urged to consult its tax advisor concerning the decision to file a gain recognition agreement, the procedures to be followed in connection with that filing, and other applicable requirements and considerations.

Arrangement Does Not Qualify as a Reorganization

If the Arrangement does not qualify as a reorganization, a U.S. Holder that exchanges its Common Shares for Nabors Shares will recognize gain or loss equal to the difference between the fair market value of the Nabors Shares received and the U.S. Holder’s adjusted tax basis in the Common Shares exchanged.

Subject to the discussion under “—Passive Foreign Investment Company Considerations” below relating to the possible application of the PFIC rules, such gain or loss will be capital gain or loss and will be long-term capital

 

59


Table of Contents

gain or loss if the U.S. Holder’s holding period for the Common Shares exceeds the applicable holding period (currently one year). Long-term capital gains of non-corporate U.S. Holders, including individuals, currently are subject to reduced rates of U.S. federal income taxation. Any gain or loss recognized by a U.S. Holder generally should be treated as U.S. source income or loss for U.S. foreign tax credit purposes. The deductibility of capital losses is subject to complex limitations under the Code.

A U.S. Holder’s aggregate tax basis in the shares of Nabors Shares received will be the fair market value of those shares on the date the U.S. Holder receives them. The U.S. Holder’s holding period for Nabors Shares received in the Arrangement will begin on the day after the date the U.S. Holder receives those shares.

Dissenters’ Rights

Regardless of whether the Arrangement qualifies as a reorganization, a U.S. Holder that properly exercises dissenters’ appraisal rights with respect to Common Shares will recognize taxable capital gain or loss based upon the difference between the amount of cash received by such U.S. Holder and the U.S. Holder’s tax basis in the Common Shares exchanged. Subject to the discussion under “—Passive Foreign Investment Company Considerations” below relating to the possible application of the PFIC rules, such gain or loss will be capital gain or loss and will be long-term capital gain or loss if the U.S. Holder’s holding period for the Common Shares exceeds the applicable holding period (currently one year). Long-term capital gains of non-corporate U.S. Holders, including individuals, currently are subject to reduced rates of U.S. federal income taxation. Any gain or loss realized by a U.S. Holder generally should be treated as U.S. source income or loss for U.S. foreign tax credit purposes. The deductibility of capital losses is subject to complex limitations under the Code.

Records and Reporting Requirements

If the Arrangement qualifies as a reorganization, a U.S. Holder that is a “significant holder” within the meaning of U.S. Treasury regulations Section 1.368-3(c)(1) will be required to attach a statement to its U.S. federal income tax return for the year in which the Arrangement occurs that contains the information listed in U.S. Treasury regulations Section 1.368-3(b), including the U.S. Holder’s tax basis in its Common Shares and the fair market value of the U.S. Holder’s Common Shares immediately before they were exchanged for Nabors Shares. A “significant holder” includes a holder of TESCO securities with a tax basis in such securities of $1 million or more or a holder of at least 5% (by vote or value) of the total outstanding shares of TESCO.

All U.S. Holders should keep records regarding the number, basis and fair market value of their Common Shares exchanged for Nabors Shares. All U.S. Holders should consult their own tax advisors regarding any record-keeping and reporting requirements applicable to them in respect of the Arrangement.

Ownership and Disposition of Nabors Shares

Distributions

Subject to the discussion under “—Passive Foreign Investment Company Considerations” below, the gross amount of distributions paid to a U.S. Holder with respect to Nabors Shares will be treated as dividend income to the extent paid out of Nabors’ current or accumulated earnings and profits, as determined under U.S. federal income tax principles. Dividend income will be includible in gross income on the day it is actually or constructively received by the U.S. Holder. These dividends will not be eligible for the dividends received deduction allowed to corporations under the Code in respect of dividends received from U.S. corporations, and generally will be treated as a foreign source dividend and as “passive income” for U.S. foreign tax credit purposes. To the extent amounts paid with respect to Nabors Shares exceed Nabors’ current and accumulated earnings and profits, those amounts will instead be treated first as a tax-free return of capital to the extent of the U.S. Holder’s tax basis in the Nabors Shares, and thereafter as capital gain. Nabors does not expect to maintain calculations of its earnings and profits under U.S. federal income tax principles; therefore, U.S. Holders should expect that the entire amount of any distribution generally will be reported as dividend income.

 

60


Table of Contents

Subject to the discussion under “—Passive Foreign Investment Company Considerations” below, non-corporate U.S. Holders, including individuals, are subject to reduced rates of U.S. federal income taxation on “qualified dividend income” of certain foreign corporations, provided certain holding period requirements are satisfied. Qualified dividend income includes dividends paid on stock of a foreign corporation that is readily tradable on an established securities market in the United States. Nabors Shares to be received in the Arrangement will be traded on the New York Stock Exchange. Therefore, dividends paid to a non-corporate U.S. Holder with respect to Nabors Shares should constitute qualified dividend income for U.S. federal income tax purposes, provided that such non-corporate U.S. Holder meets certain holding period requirements and Nabors is not a “passive foreign investment company” in the taxable year of the distribution or the preceding tax year. U.S. Holders should consult their own tax advisors regarding the availability of the reduced U.S. federal income tax rate on dividends in their particular circumstances.

Sale or Other Disposition of Nabors Shares

Subject to the discussion under “—Passive Foreign Investment Company Considerations” below, a U.S. Holder will recognize taxable gain or loss on any sale or other taxable disposition of Nabors Shares in an amount equal to the difference between the amount realized for the Nabors Shares and such U.S. Holder’s tax basis in the Nabors Shares. The gain or loss will be capital gain or loss, and will be long-term capital gain or loss if the U.S. Holder’s holding period for the Nabors Shares exceeds the applicable holding period (currently one year) at the time of sale or other disposition. Long-term capital gains of non-corporate U.S. Holders, including individuals, currently are subject to reduced rates of U.S. federal income taxation. The deductibility of capital losses is subject to limitations. Capital gain or loss recognized by a U.S. Holder on Nabors Shares generally will be treated as U.S. source income or loss for U.S. foreign tax credit purposes.

Passive Foreign Investment Company Considerations

Special, unfavorable U.S. federal income tax rules will apply to U.S. Holders that have held Common Shares or will hold Nabors Shares if TESCO or Nabors has been or is a PFIC at any time during which the U.S. Holder has held or holds Common Shares or Nabors Shares. Such rules may change the treatment of distributions on and dispositions of Nabors Shares described above and the treatment of the exchange of Common Shares pursuant to the Arrangement. A non-U.S. corporation is classified as a PFIC for U.S. federal income tax purposes in any taxable year if (i) at least 75% of its gross income is “passive” income or (ii) at least 50% of the gross value of its assets (based on an average of the quarterly values of the assets) is attributable to assets that produce passive income or are held for the production of passive income. “Passive income” includes, for example, dividends, interest, certain rents and royalties, certain gains from the sale of stock and securities, and certain gains from commodities transactions.

TESCO believes that it is unlikely that it was a PFIC for the fiscal year ended December 31, 2016 or will be a PFIC for its current fiscal year, based on the expected composition of its income and assets. TESCO has not made a determination whether it was a PFIC for any taxable year ending prior to December 31, 2016. Further, Nabors believes that it was not a PFIC for its fiscal year ended December 31, 2016, and intends to continue its operations in such a manner that it will not become a PFIC in the future. However, because the PFIC determination is made annually after the end of the taxable year and the application of the PFIC rules is not entirely clear, no assurances can be made regarding the determination of the PFIC status of TESCO or Nabors in the current or any future taxable year. U.S. Holders should consult their own tax advisors regarding the U.S. federal income tax consequences applicable to their own tax situation.

If the Arrangement qualifies as a reorganization and TESCO has been a PFIC at any time during the holding period of a U.S. Holder, assuming that Nabors is not a PFIC in the taxable year of the Arrangement, as expected, and a U.S. Holder of Common Shares has not made certain elections with respect to TESCO, such a U.S. Holder may recognize gain (but not loss) upon the exchange of its Common Shares for Nabors Shares pursuant to the Arrangement. The gain will be equal to the difference between the fair market value of Nabors Shares received

 

61


Table of Contents

and the U.S. Holder’s adjusted tax basis in the Common Shares exchanged and will be taxed in the manner described below. If the Arrangement does not qualify as a reorganization and TESCO has been a PFIC at any time during the holding period of a U.S. Holder, such U.S. Holder will be taxed in the manner described below on any gain recognized.

If Nabors is a PFIC at any time during the holding period of a U.S. Holder, gain on disposition of Nabors Shares and any distribution in excess of 125% of the average of the annual distributions on Nabors Shares received by the U.S. Holder during the preceding three years or the U.S. Holder’s holding period (whichever is shorter) will be subject to the PFIC rules. In addition, if Nabors is a PFIC for the taxable year in which a dividend is paid or the preceding year, such dividends will not be eligible for reduced rates of U.S. federal income taxation as described above under “—Ownership and Disposition of Nabors Shares—Distributions.”

In each case described in the preceding two paragraphs, in the absence of certain elections, the gain and any excess distributions would be allocated ratably to each day of the U.S. Holder’s holding period for the Common Shares or Nabors Shares (as applicable). Amounts allocated to the current taxable year and to any taxable years before TESCO or Nabors (as applicable) became a PFIC would be treated as ordinary income in the U.S. Holder’s current taxable year. In addition, amounts allocated to each other taxable year beginning with the taxable year that TESCO or Nabors (as applicable) became a PFIC would be taxed at the highest rate in effect for that taxable year on ordinary income. The tax would be subject to an interest charge at the rate applicable to underpayments of income tax. If a U.S. Holder owned or owns Common Shares or Nabors Shares, as applicable, in any year in which TESCO or Nabors was or is a PFIC, the U.S. Holder will be required to file IRS Form 8621 (or any other form subsequently specified by the U.S. Department of the Treasury) with the U.S. Holder’s U.S. federal income tax return.

U.S. Holders are encouraged to consult their own tax advisors with respect to the U.S. federal income tax consequences applicable to their own tax situations.

Information Reporting and Backup Withholding Tax

In general, information reporting requirements will apply to dividends received by U.S. Holders of Nabors Shares and the proceeds received on the disposition of Nabors Shares effected within the United States (and, in certain cases, outside the United States), in each case, other than U.S. Holders that are exempt recipients (such as corporations). Backup withholding (currently at a rate of 28%) may apply to such amounts if the U.S. Holder fails to provide an accurate taxpayer identification number (generally on an IRS Form W-9 provided to the paying agent or the U.S. Holder’s broker) or is otherwise subject to backup withholding. Backup withholding is not an additional U.S. federal tax. Any amounts withheld under the backup withholding tax rules generally will be allowed as a refund or credit against a U.S. Holder’s U.S. federal income tax liability, if any, provided the U.S. Holder furnishes required information to the IRS in a timely manner.

Under U.S. federal income tax law, certain categories of U.S. Holders must file information returns with respect to their investment in, or involvement in, a foreign corporation. For example, U.S. return disclosure obligations (and related penalties) are imposed on individuals who are U.S. Holders that hold certain specified foreign financial assets in excess of certain thresholds. The definition of specified foreign financial assets includes not

only financial accounts maintained in foreign financial institutions, but also, unless held in accounts maintained by a financial institution, any stock or security issued by a non-U.S. person, any financial instrument or contract held for investment that has an issuer or counterparty other than a U.S. person, and any interest in a foreign entity. U.S. Holders may be subject to these reporting requirements unless their shares are held in an account at certain financial institutions. Penalties for failure to file certain of these information returns are substantial. U.S. Holders should consult their own tax advisors regarding the requirements of filing information returns, including, without limitation, the requirement to file an IRS Form 8938.

 

62


Table of Contents

Certain Canadian Federal Income Tax Consequences of the Arrangement

The following summary describes the principal Canadian federal income tax considerations generally applicable under the Income Tax Act (Canada) (Tax Act) to a beneficial owner of Common Shares who disposes of Common Shares for Nabors Shares pursuant to the Arrangement and who for purposes of the Tax Act and at all relevant times (i) deals at arm’s length with TESCO; (ii) is not affiliated with TESCO; and (iii) holds Common Shares, and will hold any Nabors Shares received under the Arrangement, as capital property (each such beneficial owner, a Holder). Generally, Common Shares and Nabors Shares will be capital property to a Holder provided the Holder does not hold the Common Shares and/or Nabors Shares in the course of carrying on a business or as part of an adventure or concern in the nature of trade.

This summary is based on the current provisions of the Tax Act and on the current administrative policies and assessing practices of the Canada Revenue Agency published in writing and publicly available prior to the date hereof. This summary takes into account all specific proposals to amend the Tax Act publicly announced by or on behalf of the Minister of Finance (Canada) prior to the date hereof (the Proposed Amendments) and assumes that all Proposed Amendments will be enacted in the form proposed. However, no assurances can be given that the Proposed Amendments will be enacted as proposed, or at all. This summary does not otherwise take into account or anticipate any changes in law or administrative policy or assessing practice whether by legislative, regulatory, administrative or judicial action nor does it take into account tax legislation or considerations of any province, territory or foreign jurisdiction, which may differ from those discussed herein.

This summary is not applicable to a Holder: (i) that is a “financial institution” or a “specified financial institution”, (ii) an interest in which is a “tax shelter investment”, (iii) that reports its “Canadian tax results” in a currency other than Canadian currency, or (iv) that enters into, with respect to any of their Common Shares, a “derivative forward agreement”, each as defined in the Tax Act. Such Holders should consult their own tax advisors. In addition, this summary does not address all issues that may be relevant to Holders who acquired their Common Shares under an employee stock option plan or other equity based employment compensation arrangement. Any such Holders should consult their own tax advisors.

This summary is of a general nature only and is not, and is not intended to be, legal or tax advice to any particular Shareholder. This summary is not exhaustive of all Canadian federal income tax considerations. Accordingly, all Shareholders should consult their own tax advisors having regard to their own particular circumstances.

Holders Resident in Canada

This portion of the summary is generally applicable to a Holder who, at all relevant times, for purposes of the Tax Act and any applicable income tax treaty convention, is, or is deemed to be, resident in Canada (a Resident Holder). Certain Resident Holders may be entitled to make or may have already made the irrevocable election permitted by subsection 39(4) of the Tax Act, the effect of which may be to deem to be capital property any Common Shares (and all other “Canadian Shares”, as defined in the Tax Act) owned by such Resident Holder in the taxation year in which the election is made and in all subsequent taxation years. Nabors Shares are not Canadian securities for the purposes of the subsection 39(4) election and therefore, such election will not apply to Nabors Shares.

Disposition of Common Shares under the Arrangement

A Resident Holder who transfers its Common Shares to Nabors Maple under the Arrangement for Nabors Shares will be considered to have disposed of such Common Shares for proceeds of disposition equal to the fair market value at the Effective Time of any Nabors Shares acquired by such Resident Holder on the exchange. As a result, the Resident Holder will generally realize a capital gain (or a capital loss) to the extent that the proceeds of disposition, net of any reasonable costs of disposition, exceed (or are less than) the adjusted cost base to the Resident Holder of such Common Shares.

 

63


Table of Contents

For a description of the tax treatment of capital gains and losses, see “Holders Resident in Canada – Taxation of Capital Gains and Capital Losses” below.

The cost to a Resident Holder of Nabors Shares acquired on the exchange will be equal to the fair market value of Nabors Shares at the Effective Time, and will generally be averaged with the adjusted cost base of all other Nabors Shares held at that time by the Resident Holder as capital property for the purposes of determining the adjusted cost base of each Nabors Share held by the Resident Holder.

Dissenting Resident Holders of Common Shares

A Resident Holder who validly exercises dissent rights in respect of the Arrangement and is entitled to be paid the fair value of their Common Shares by Nabors Maple (a Dissenting Resident Holder) will realize a capital gain (or a capital loss) to the extent that such payment (other than any portion thereof that is interest) exceeds (or is less than) the aggregate of the adjusted cost base of the Common Shares to the dissenting Resident Holder and any reasonable costs of the disposition. See “Holders Resident in Canada—Taxation of Capital Gains and Capital Losses” below. A Dissenting Resident Holder will be required to include in computing its income any interest awarded by a court in connection with the Arrangement.

Taxation of Capital Gains and Capital Losses

Generally, a Resident Holder is required to include in computing its income for a taxation year one-half of the amount of any capital gain (a taxable capital gain) realized in the year. Subject to and in accordance with the provisions of the Tax Act, a Resident Holder is required to deduct one-half of the amount of any capital loss (an allowable capital loss) realized in a taxation year from taxable capital gains realized by the Resident Holder in the year. Allowable capital losses in excess of taxable capital gains for the year may be carried back and deducted in any of the three preceding taxation years or carried forward and deducted in any subsequent taxation year against net taxable capital gains realized in such years.

The amount of any capital loss realized by a Resident Holder that is a corporation on the disposition of a Common Share may be reduced by the amount of any dividends received (or deemed to be received) by the Resident Holder on such share to the extent and under the circumstances described in the Tax Act. Similar rules may apply where a Common Share is owned by a partnership or trust of which a corporation is a member or beneficiary. Such Resident Holders should consult their own advisors.

Capital gains realized by individuals and certain trusts may give rise to a liability for alternative minimum tax under the Tax Act.

Dividends on Nabors Shares

A Resident Holder will be required to include in computing income for a taxation year the amount of dividends, if any, received or deemed to be received in respect of Nabors Shares. Such dividends will not be subject to the gross-up and dividend tax credit rules under the Tax Act normally applicable to taxable dividends received by an individual by a taxable Canadian corporation. A Resident Holder that is a corporation will generally not be entitled to deduct the amount of such dividends in computing its taxable income.

A Resident Holder may be entitled to claim a foreign tax credit in respect of foreign taxes withheld in respect of a dividend paid to it by Nabors subject to and in accordance with specific rules in the Tax Act.

Currency Conversion

In general, amounts relevant to the computation of income under the Tax Act are required to be reported in Canadian dollars. Any such amount that is expressed or denominated in a currency other than Canadian dollars,

 

64


Table of Contents

including dividends paid on Nabors Shares, adjusted cost base and proceeds of disposition of Nabors Shares must be converted into Canadian dollars using the relevant exchange rate determined in accordance with the Tax Act on the relevant day or such other rate of exchange acceptable to the Minister of National Revenue (Canada).

Resident Holders should consult their own tax advisors regarding the availability of a foreign tax credit or deduction regarding their particular circumstances.

Refundable Tax

A Resident Holder that is, throughout the relevant taxation year, a “Canadian-controlled private corporation” (as defined in the Tax Act) may be liable to pay a refundable tax on certain investment income, including amounts in respect of taxable capital gains.

Eligibility for Investment

Provided that Nabors Shares are listed on a “designated stock exchange” within the meaning of the Tax Act (which includes the NYSE) at the Effective Time of the Arrangement, Nabors Shares to be issued under the Arrangement will, at the Effective Time of the Arrangement, be qualified investments under the Tax Act for a trust governed by a registered retirement savings plan (RRSP), a registered retirement income fund (RRIF), a registered education savings plan (RESP), a registered disability savings plan (RDSP), a deferred profit sharing plan, or a tax free savings account (TFSA).

Notwithstanding that Nabors Shares may be qualified investments for a trust governed by an RRSP, RRIF or a TFSA, the annuitant under an RRSP or RRIF or the holder of a TFSA may be subject to a penalty tax if such Nabors Shares are “prohibited investments” for the RRSP, RRIF or TFSA within the meaning of the Tax Act. Nabors Shares will generally not be a “prohibited investments” provided that the annuitant under the RRSP or RRIF or the holder of the TFSA, as the case may be, deals at arm’s length with Nabors for purposes of the Tax Act and does not have a “significant interest” (as defined in the Tax Act) in Nabors. The draft legislative proposals released on September 8, 2017 included Proposed Amendments to extend the application of the “prohibited investments” rules to investments held by RDSPs and RESPs, applicable to investments acquired, and transactions occurring, after March 22, 2017. Assuming these Proposed Amendments are enacted as proposed, notwithstanding that Nabors Shares may be qualified investments for a trust governed by an RDSP or an RESP, the holder of an RDSP or the subscriber of an RESP will be subject to a penalty tax if Nabors Shares are a prohibited investment for the RDSP or RESP. There can be no assurances that these Proposed Amendments will be enacted or that they will be enacted as proposed.

Shareholders who will hold Nabors Shares received under the Arrangement in their RDSP, RESP, RRIF, RRSP or TFSA are urged to consult their own tax advisors regarding their particular circumstances.

Holders Not Resident in Canada

This portion of the summary is generally applicable to a Holder who, at all relevant times, for purposes of the Tax Act and any applicable income tax treaty convention, is not, and is not deemed to be, resident in Canada and does not use or hold, and is not deemed to use or hold, the Common Shares or Nabors Shares received under the Arrangement in a business carried on in Canada (a Non-Resident Holder). In addition, this discussion does not apply to an insurer who carries on an insurance business in Canada and elsewhere or an authorized foreign bank (as defined in the Tax Act).

Disposition of Common Shares under the Arrangement

A Non-Resident Holder will not be subject to tax under the Tax Act on any capital gain realized on a disposition of Common Shares pursuant to the Arrangement (or be entitled to recognize any capital loss) unless, at the

 

65


Table of Contents

Effective Time of the Arrangement, the Common Shares are “taxable Canadian property” (as defined in the Tax Act) to the Non-Resident Holder and are not “treaty protected property” (as defined in the Tax Act) of the Non-Resident Holder. In the event a Common Share is or is deemed to be taxable Canadian property but not treaty-protected property to a Non-Resident Holder, the Canadian tax consequences of the Non-Resident Holder realizing a capital gain on the disposition of such Common Share under the Arrangement will generally be as described above under the heading “Holders Resident in Canada—Disposition of Common Shares under the Arrangement”.

Provided that the Common Shares are listed on a designated stock exchange (which includes the NASDAQ) at the time such Common Shares are transferred to Nabors Maple pursuant to the Arrangement, a Common Share generally will not constitute taxable Canadian property of a Non-Resident Holder at that time unless at any time during the 60-month period immediately preceding that time: (a) 25% or more of the issued shares of any class or series of TESCO’s capital stock were owned by one or any combination of (i) the Non-Resident Holder, (ii) persons not dealing at arm’s length with the Non-Resident Holder, or (iii) partnerships in which the Non-Resident Holder or a person not dealing at arm’s length with the Non-Resident Holder held a membership interest, directly or indirectly through one or more partnerships; and (b) more than 50% of the fair market value of Common Shares was derived directly or indirectly from one or any combination of real or immovable property situated in Canada, Canadian resource properties, timber resource properties, or any option in respect of, or interest in, any such property, whether or not such property exists. A Common Share held by a Non-Resident Holder can also be deemed to be taxable Canadian property in certain circumstances set out in the Tax Act.

Even if the Common Shares are taxable Canadian property to a Non-Resident Holder, a taxable capital gain resulting from the disposition of Common Shares will not be included in computing the Non-Resident Holder’s income for the purposes of the Tax Act if the Common Shares constitute “treaty-protected property”. Common Shares owned by a Non-Resident Holder will generally be treaty-protected property if the gain from the disposition of such Common Shares would, because of an applicable income tax treaty, be exempt from tax under the Tax Act.

In the event a Common Share constitutes or is deemed to constitute taxable Canadian property but not treaty-protected property to a Non-Resident Holder, the tax consequences of the Non-Resident Holder realizing a capital gain or capital loss on the disposition of such Common Share under the Arrangement will generally be as described above under the heading “Holders Resident in Canada—Disposition of Common Shares under the Arrangement”.

Non-Resident Holders whose Common Shares are, or may be, taxable Canadian property should consult their own tax advisors with respect to the Canadian federal tax consequences to them of disposing of Common Shares pursuant to the Arrangement, including any resulting Canadian reporting obligations.

Dissenting Non-Resident Holders

A Non-Resident Holder of Common Shares who validly exercises dissent rights and receives a cash payment from Nabors Maple pursuant to the Arrangement will be considered to have disposed of such shares for proceeds of disposition equal to the amount of the cash payment (excluding interest received, if any). To the extent that such proceeds of disposition exceed (or are exceeded by) the sum of the adjusted cost base to the Non-Resident Holder of the Common Shares and any reasonable costs of disposition, such Non-Resident Holder will realize a capital gain (or a capital loss) equal to the amount of the difference. See “Holders Not Resident in Canada—Disposition of Common Shares under the Arrangement” above for a discussion of the treatment of capital gains and capital losses realized by a Non-Resident Holder under the Tax Act. Interest paid or payable to a dissenting Non-Resident Holder by Nabors Maple should generally not be subject to Canadian withholding tax.

 

66


Table of Contents

THE ARRANGEMENT AGREEMENT

The following is a summary of the material terms and conditions of the Arrangement Agreement and the Plan of Arrangement. The description in this section and elsewhere in this proxy statement is qualified in its entirety by reference to the complete text of the Arrangement Agreement, a copy of which is attached as Annex C, including the Plan of Arrangement attached to the Arrangement Agreement as Schedule A thereto. All capitalized terms used herein but not otherwise defined have the meanings set forth in the Arrangement Agreement and the Plan of Arrangement. This summary does not purport to be complete and may not contain all of the information about the Arrangement Agreement that is important to you. We encourage you to read the Arrangement Agreement and the Plan of Arrangement carefully and in its entirety because it is the legal document that governs the Arrangement.

The Arrangement

Under the terms of the Arrangement, Shareholders will receive, in exchange for each Common Share transferred to Nabors Maple Acquisition Ltd. (Nabors Maple), 0.68 of a Nabors Share (the Share Consideration) from Nabors. Nabors Maple will issue a number of its common shares, equal in value to the aggregate Share Consideration that Nabors issued to Shareholders, to Nabors as consideration for having issued the Share Consideration. In addition, each Option that is outstanding immediately prior to the Effective Time will be fully vested and exercisable and shall be cancelled in consideration for the right to receive the Option Consideration, provided that each Option with an exercise price that is equal to or more than the Market Value will be cancelled for no consideration. Each RSU that is outstanding immediately prior to the Effective Time will be fully vested and will be cancelled in consideration for the right to receive the RSU Consideration. Each outstanding RSU that is subject to a performance-based vesting requirement will become fully vested and converted as provided for in the immediately foregoing sentence based upon the number of units at the “target” level of performance applicable to such award.

Closing and Effective Time of the Arrangement

Pursuant to the Arrangement Agreement, the closing of the Arrangement will take place at 10:00 a.m., New York time, on the second business day after the satisfaction or waiver of the conditions to the Arrangement or at such other time and place as may be agreed to by the parties, subject to the terms of the Arrangement Agreement, unless otherwise agreed upon by TESCO, Nabors and Nabors Maple, upon the Articles of Arrangement being filed with the Registrar appointed under Section 263 of the ABCA. However, the Articles of Arrangement shall not be sent to the Registrar pursuant to the ABCA, for endorsement and filing by the Registrar, except as contemplated by the Arrangement Agreement and with the prior written consent of Nabors and Nabors Maple (which consent shall not in any way diminish or limit Nabors’ or Nabors Maple’s obligation to consummate the Arrangement). The Articles of Arrangement will implement the Plan of Arrangement.

Conditions to Closing

Mutual Conditions Precedent

TESCO, Nabors and Nabors Maple are not required to complete the Arrangement unless each of the following conditions is satisfied, which conditions may only be waived, in whole or in part, by the mutual consent of TESCO, Nabors and Nabors Maple:

 

  (a) the Requisite Approval shall have been obtained at the Special Meeting in accordance with the Interim Order;

 

  (b) the Interim Order and the Final Order have been obtained on terms consistent with the Arrangement Agreement, and have not been set aside or modified in a manner unacceptable to TESCO or Nabors acting reasonably, on appeal or otherwise;

 

67


Table of Contents
  (c) no Governmental Entity has enacted, issued, promulgated, enforced or entered any Law (whether temporary, preliminary or permanent) which is then in effect and has the effect of making the Arrangement illegal or otherwise preventing or prohibiting consummation of the Arrangement;

 

  (d) the Regulatory Approvals have been obtained (or the applicable waiting periods, including extensions thereof, shall have expired);

 

  (e) the Nabors Shares issuable pursuant to the Arrangement shall be approved for listing on the NYSE, subject to official notice of issuance; and

 

  (f) the Nabors Shares to be issued pursuant to the Arrangement have been allotted by the Nabors Board conditional only on completion of the Arrangement and such Nabors Shares shall be exempt from the registration requirements of the U.S. Securities Act pursuant to Section 3(a)(10) thereof or another available exemption.

Conditions Precedent to the Obligations of Nabors and Nabors Maple

The obligation of Nabors and Nabors Maple to complete the Arrangement is subject to the fulfillment of each of the following conditions, which conditions are for the exclusive benefit of Nabors and Nabors Maple and may be waived by Nabors and Nabors Maple in whole or in part at any time:

 

  (a) all covenants of TESCO under the Arrangement Agreement to be performed or complied with on or before the Effective Time which have not been waived by Nabors shall have been duly performed or complied with by TESCO in all material respects;

 

  (b) as to the representations and warranties of TESCO:

 

  a. the representations and warranties of TESCO set forth in Sections 3.1(b)(i)-(iii) (capital structure) and 3.1(l) (absence of certain changes) of the Arrangement Agreement shall be true and correct in all respects (other than de minimis inaccuracies) as of the date of the Arrangement Agreement and as of the Effective Time as if made at and as of such time (except for representations and warranties made only as of a specified date, which shall be true and correct other than in de minimis respects as of the specified date);

 

  b. the representations and warranties of TESCO set forth in Sections 3.1(a) (organization, standing and power), 3.1(b)(iv) (issuances and repurchases of securities), 3.1(c)(i) (authority), 3.1(i)(ii) (certain agreements), 3.1(m) (board approval), 3.1(n) (vote required of the company stockholders) and 3.1(w) (brokers or finders) shall be true and correct in all material respects as of the date of the Arrangement Agreement and as of the Effective Time as if made at and as of such time (except for representations and warranties made only as of a specified date, which shall be true and correct as of the specified date); and

 

  c. the remaining representations and warranties of TESCO (other than those discussed above) shall be true and correct (disregarding all qualifications and exceptions contained therein regarding materiality or Material Adverse Effect), in each case as of the date of the Arrangement Agreement and as of the Effective Time as if made at and as of such time (except that any such representation and warranty that by its terms speaks specifically as of another date shall be true and correct as of such date), except in the case where the failures of these other representations and warranties to be so true and correct, in the aggregate, have not had, and would not reasonably be expected to have, a Material Adverse Effect on TESCO;

 

  (c) TESCO delivers a certificate addressed to Nabors and Nabors Maple dated as of the Effective Date, signed on behalf of TESCO by the chief executive officer and chief financial officer of TESCO, confirming the satisfaction of the conditions set forth above as of the Effective Date; and

 

  (d) since the date of the Arrangement Agreement, there shall not have occurred any Event that has had or would be reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on TESCO.

 

68


Table of Contents

Conditions Precedent to the Obligations of TESCO

The obligation of TESCO to complete the Arrangement is subject to the fulfillment of each of the following conditions, which conditions are for the exclusive benefit of TESCO and may be waived by TESCO:

 

  (a) all covenants of Nabors and Nabors Maple under the Arrangement Agreement to be performed or complied with on or before the Effective Time which have not been waived by TESCO shall have been duly performed or complied with by Nabors and Nabors Maple in all material respects;

 

  (b) as to the representations and warranties of Nabors:

 

  a. the representations and warranties of Nabors set forth in Sections 3.2(b)(i)-(iii) (capital structure) and 3.2(l) (absence of certain changes) of the Arrangement Agreement shall be true and correct other than in de minimis respects, as of the date of the Arrangement Agreement and as of immediately prior to the Effective Time as if made at and as of such time (except for representations and warranties made only as of a specified date, which shall be true and correct other than in de minimis respects only as of the specified date);

 

  b. the representations and warranties of Nabors set forth in Sections 3.2(c)(i) (authority), 3.2(m) (board approval) and 3.2(n) (vote required of Nabors Maple shareholders) shall be true and correct in all material respects as of the date of the Arrangement Agreement and as of immediately prior to the Effective Time as if made at and as of such time (except for representations and warranties made only as of a specified date, which shall be true and correct in all material respects only as of the specified date); and

 

  c. the remaining representations and warranties of Nabors contained in the Arrangement Agreement (other than those discussed above) (disregarding all qualifications and exceptions contained therein regarding materiality and Material Adverse Effect) shall be true and correct, in each case as of the date of the Arrangement Agreement and as of immediately prior to the Effective Time as if made at and as of such time (except that any such representation and warranty that by its terms speaks specifically as of another date shall be true and correct as of such date), except in the case where the failures of any of these other representations and warranties to be so true and correct, in the aggregate, have not had, and would not reasonably be expected to have, a Material Adverse Effect on Nabors;

 

  (c) Nabors and Nabors Maple shall have delivered a certificate addressed to TESCO dated as of the Effective Date, signed on behalf of Nabors and Nabors Maple by their respective chief executive officers and chief financial officers, confirming the satisfaction of the conditions set forth above as of the Effective Date; and

 

  (d) since the date of the Arrangement Agreement, there shall not have occurred any Event that has had or would reasonably be likely to have, individually or in the aggregate a Material Adverse Effect on Nabors.

Representations and Warranties

TESCO and Nabors have each provided certain customary representations and warranties in the Arrangement Agreement. Many of TESCO’s representations and warranties are qualified by reference to a Material Adverse Effect on TESCO. In addition, all of TESCO’s representations and warranties are qualified by reference to the disclosure letter provided to Nabors and by reference to TESCO’s public disclosure since January 1, 2017 (excluding disclosure on risk factors and forward-looking information). Similarly, the representations and warranties provided by Nabors are qualified by reference to the disclosure letter provided to TESCO and Nabors’ public disclosure since January 1, 2017 (excluding disclosure on risk factors and forward-looking information).

The representations and warranties made by the Parties were made by and to TESCO and Nabors, as applicable, for the purposes of the Arrangement Agreement (and not to other parties such as Securityholders) and are subject

 

69


Table of Contents

to qualifications and limitations agreed to by the Parties in connection with negotiating and entering into the Arrangement Agreement. In addition, these representations and warranties were made as of specified dates, may be subject to a contractual standard of materiality different from what may be viewed as material to Securityholders, or may have been used for the purpose of allocating risk between the Parties instead of establishing such matters as facts. Moreover, information concerning the subject matter of the representations and warranties, which do not purport to be accurate as of the date of this proxy statement, may have changed since the date of the Arrangement Agreement.

Neither Party’s representations and warranties survive closing of the Arrangement and, accordingly, neither Party would be entitled to seek indemnification for breaches of representations and warranties that are discovered following closing. However, breaches of representations and warranties that are discovered prior to closing may, in certain limited circumstances, permit a Party to not proceed with the Arrangement.

Definition of “Material Adverse Effect”

Many of the representations and warranties in the Arrangement Agreement are qualified by “Material Adverse Effect.” In addition, there are separate standalone conditions to completion of the Arrangement relating to the absence of any event, occurrence, development or state of circumstances or facts from the date of the Arrangement Agreement to the Effective Time of the Arrangement which, individually or in the aggregate, has had a Material Adverse Effect on the other party. “Material Adverse Effect” is defined in Annex A—Glossary of Terms.

Covenants and Conduct of Business Pending the Arrangement

The Arrangement Agreement provides that, until the Effective Time of the Arrangement or the termination of the Arrangement Agreement, TESCO and its Subsidiaries will conduct its and their businesses in the ordinary course, consistent with past practice, and will, among other things, use commercially reasonable efforts to preserve intact its and their present business organizations, maintain their rights, franchises, licenses and other authorizations issued by Governmental Entities and preserve their relationships with employees, customers, suppliers and others having business dealings with them to the end that their goodwill and ongoing businesses shall not be impaired in any material respect prior to the closing of the Arrangement. In addition to this general covenant, TESCO has also agreed to certain specific covenants, which, among other things, restrict the ability of TESCO to issue Common Shares (or securities convertible into Common Shares), declare dividends or distributions, encumber or sell assets (other than in the ordinary course of business), reorganize, amalgamate or merge with any other Person, amend, modify or terminate certain material contracts, grant increases in compensation or severance entitlements, incur or guarantee any additional indebtedness or make capital expenditures, in each case, where applicable, subject to certain thresholds and/or exceptions.

No Solicitation by TESCO

Except as expressly provided in the Arrangement Agreement, TESCO may not, directly or indirectly, through any officer, director, employee, representative (including any financial or other advisor) or agent of TESCO or of any of its Subsidiaries (collectively, Representatives):

 

  (a) initiate, solicit, knowingly encourage or knowingly facilitate any inquiries regarding, or the making of any proposal or offer, relating to any Acquisition Proposal;

 

  (b) have any discussions with or provide any confidential information or data relating to TESCO or any of its Subsidiaries to any Person relating to an Acquisition Proposal, or engage in any negotiations concerning an Acquisition Proposal, except under certain limited circumstances; or

 

  (c)

approve, recommend, execute or enter into, or propose to approve, recommend, execute or enter into, any letter of intent, agreement in principle, merger agreement, asset purchase or share exchange

 

70


Table of Contents
  agreement, option agreement or other agreement related to any Acquisition Proposal (other than an Acceptable Confidentiality Agreement entered into pursuant to the terms and conditions of the Arrangement Agreement) or propose or agree to do any of the foregoing. However, this shall not prevent TESCO or the Board, directly or indirectly, through any officer, employee or Representative, from informing any Person that TESCO is a party to the Arrangement Agreement and referring such Person to this requirement set forth therein.

For purposes of the discussion above, the term “Acquisition Proposal” has the meaning set forth in the “Glossary of Terms” attached as Annex A to this proxy statement.

Change in Recommendation

Notwithstanding any other provision of the Arrangement Agreement, at any time following the date of the Arrangement Agreement, TESCO may make a Company Change in Recommendation in order to enter into a binding written agreement with respect to a Superior Proposal in response to an unsolicited bona fide written Acquisition Proposal by any person, only if prior to doing so:

 

  (a) the Requisite Approval has not been obtained;

 

  (b) TESCO has complied with the requirements of Section 5.3 of the Arrangement Agreement (non-solicitation covenants) in all material respects;

 

  (c) the Board, after consultation with its financial advisors and outside legal counsel, has determined in good faith that such Acquisition Proposal constitutes a Superior Proposal and, after consultation with its outside legal counsel, has determined in good faith that failure to take such action would be inconsistent with the fiduciary duties of the directors of TESCO under applicable law;

 

  (d) TESCO has notified Nabors in writing at least four Business Days in advance, of its intention to effect such action (including a copy of the relevant proposed transaction agreements and a copy of any financing commitments relating thereto), provided that such notice shall have to be given again (but shall be limited to two Business Days in advance) in the event of any revision to the financial terms or other material terms of such Superior Proposal;

 

  (e) prior to taking such action, TESCO has, and has caused its financial and legal advisors to, negotiate with Nabors in good faith to enable Nabors to propose in writing revisions to the terms and conditions of the Arrangement Agreement such that such Acquisition Proposal would no longer constitute a Superior Proposal; and

 

  (f) following the end of such notice period, the Board has considered in good faith any changes to the Arrangement Agreement proposed in writing by Nabors, and has determined in good faith, after consultation with its financial advisors and outside legal counsel, that notwithstanding such proposed changes, such Acquisition Proposal remains a Superior Proposal.

Termination of the Arrangement Agreement

The Arrangement Agreement may be terminated at any time prior to the Effective Time:

 

  (a) by mutual written agreement of TESCO and Nabors;

 

  (b) by either TESCO or Nabors, if:

 

  (i) any Governmental Entity of competent jurisdiction has issued an order, decree, ruling or injunction permanently restraining, enjoining or otherwise prohibiting the Arrangement, and such order, decree, ruling or injunction has become final and non-appealable; provided, however, that this right of termination will not be available to any party whose failure to comply with the Arrangement Agreement has been the cause of, or resulted in, such action;

 

71


Table of Contents
  (ii) the Arrangement has not been consummated on or before the Outside Date, provided that if as of February 14, 2018 (the Outside Date) the Arrangement has not been completed due to the failure to obtain Regulatory Approvals, then the Outside Date shall be extended to April 15, 2018, except that this right to terminate the Arrangement Agreement will not be available to any Party whose failure to comply with the provisions of the Arrangement Agreement has been the cause of, or resulted in, the failure of the Effective Time to occur by such Outside Date; or

 

  (iii) the Requisite Approval has not been obtained after a vote of the Securityholders at the Special Meeting.

 

  (c) by Nabors, if:

 

  (i) the Board, or any committee thereof: (1) fails to make or publicly withdraws, qualifies or modifies, or publicly proposes to withdraw, qualify or modify, in any manner adverse to Nabors, its recommendation to Securityholders that they vote in favor of the Arrangement Resolution, (2) fails to include in the proxy statement the Board’s recommendation to the Securityholders that they vote in favor of the Arrangement Resolution, (3) takes any action with respect to any tender offer or exchange offer for Common Shares (including by disclosing that it is taking no position with respect to the acceptance of such tender offer or exchange offer by the Securityholders) other than a recommendation against such offer that reaffirms the Board’s recommendation to the Securityholders that they vote in favor of the Arrangement Resolution, or (4) adopts, approves or recommends, or publicly proposes to adopt, approve or recommend any letter of intent, agreement, commitment or agreement in principle with respect to any Acquisition Proposal ((1), (2), (3) and (4) collectively a Company Change in Recommendation);

 

  (ii) TESCO breaches its obligations under Section 5.3 of the Arrangement Agreement (non-solicitation covenants); or

 

  (iii) there shall have been a breach of any of the covenants or agreements, or a failure to be true of any of the representations or warranties set forth in the Arrangement Agreement on the part of TESCO, which breach, or failure to be true, either individually or in the aggregate, would result in, if occurring or continuing on the Effective Date, the failure of Nabors’ conditions precedent that all of TESCO’s covenants shall have been performed in all material respects and all of TESCO’s representations and warranties shall be true, in the manner set forth in the Arrangement Agreement, and such breach or failure has not been cured by the earlier of 15 days following written notice thereof to TESCO or the Outside Date, or by its nature, cannot be cured within such time period; however, this right of termination will not be available to Nabors if Nabors is itself then in breach of its representations, warranties or covenants such as would result in any of the conditions precedent to the obligations of TESCO that were referenced in this paragraph not being satisfied.

 

  (d) by TESCO, if:

 

  (i) there shall have been a breach of any of the covenants or agreements, or a failure to be true of any of the representations or warranties set forth in the Arrangement Agreement on the part of Nabors, which breach, or failure to be true, either individually or in the aggregate, would result in, if occurring or continuing on the Effective Date, the failure of TESCO’s conditions precedent that all of Nabors’ covenants shall have been performed in all material respects and all of Nabors’ representations and warranties shall be true, in the manner set forth in the Arrangement Agreement, and such breach or failure has not been cured by the earlier of 15 days following written notice thereof to Nabors or the Outside Date, or by its nature, cannot be cured within such time period; however, this right of termination will not be available to TESCO if TESCO is itself then in breach of its representations, warranties or covenants such as would result in any of the conditions precedent to the obligations of Nabors that were referenced in this paragraph not being satisfied; or

 

72


Table of Contents
  (ii) at any time prior to the Special Meeting, in order to enter into a binding written agreement with respect to a Superior Proposal, provided that TESCO has complied in all material respects with its obligations under Section 5.3 of the Arrangement Agreement (non-solicitation covenants), and subject to the payment of the termination fees due under the Arrangement Agreement, in accordance with the terms and at the times specified therein.

Termination Fee Payable by TESCO

If a Company Termination Fee Event occurs, TESCO shall pay Nabors a termination fee in the amount of $8,000,000 (the Company Termination Fee). For the purposes of the Arrangement Agreement, “Company Termination Fee Event” means the termination of the Arrangement Agreement:

 

  (a) by Nabors as a result of a Company Change in Recommendation or TESCO breaching its covenants under Section 5.3 of the Arrangement Agreement (non-solicitation covenants);

 

  (b) by TESCO in order to enter into a binding written agreement for a Superior Proposal;

 

  (c) by either Party if (i) the Requisite Approval was not obtained and (ii) at any time after the date of the Arrangement Agreement and at or before the date of the Special Meeting, an Acquisition Proposal shall have been made or publicly announced or communicated to the Board and still be pending at the time the Arrangement Agreement is terminated or have been withdrawn less than 10 days prior to the date of such termination and (iii) within 12 months of the date of such termination, TESCO or any of its Subsidiaries enters into any definitive agreement with respect to, or consummates any Acquisition Proposal (provided that, for purposes of this termination provision, any reference to “15%” in the definition of Acquisition Proposal shall be deemed to be a reference to “50%”); and

 

  (d) by either Party if (i) the Arrangement has not been completed by the Outside Date or by Nabors if TESCO breaches any of its covenants, representations or warranties under the Arrangement Agreement and (ii) at any time after the date of the Arrangement Agreement and before such termination an Acquisition Proposal shall have been publicly announced and still be pending at the time of such termination or have been withdrawn less than 10 days prior to the date of such termination and (iii) within 12 months of the date of such termination, TESCO or any of its Subsidiaries enters into any definitive agreement with respect to, or consummates any Acquisition Proposal (provided that, for purposes of this termination provision, any reference to “15%” in the definition of Acquisition Proposal shall be deemed to be a reference to “50%”).

Covenant to Hold the Special Meeting

Subject to the receipt of the Interim Order, TESCO will convene and conduct the Special Meeting in accordance with the Interim Order, its charter documents and applicable Law as soon as reasonably practicable (and TESCO has agreed to use reasonable efforts to cause the Special Meeting to occur by the date that is 40 days from the date of the Interim Order). TESCO will, in consultation with and subject to the approval of Nabors, fix and publish the Record Date for the purposes of determining the Securityholders entitled to receive notice of and vote at the Special Meeting. TESCO will not adjourn, postpone or cancel (or propose or permit the adjournment, postponement or cancellation of) the Special Meeting without Nabors’ prior written consent (such consent not to be unreasonably withheld or delayed), except (i) in the case of adjournment, as required by Law, or (ii) as otherwise permitted under the Arrangement Agreement.

Reasonable Best Efforts Covenants

Subject to the Arrangement Agreement, TESCO and Nabors have agreed to use their reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable under the Arrangement Agreement and applicable laws, rules and regulations to consummate the Arrangement and the other transactions contemplated by the Arrangement Agreement as soon as practicable after the date of

 

73


Table of Contents

the Arrangement Agreement and in no event after the Outside Date. This would include preparing and filing as promptly as practicable all documentation to effect all necessary applications, notices, filings and other documents and to obtain as promptly as practicable all authorizations, consents, orders or approvals of, or declarations or filings with, and all expirations of waiting periods required from, any Governmental Entity, including pursuant to the HSR Act, the Competition Act, and all other consents, waivers, orders, approvals, permits, rulings, authorizations and clearances necessary or advisable to be obtained from any third party in order to consummate the Arrangement or any of the other transactions contemplated by the Arrangement Agreement. TESCO and Nabors have also agreed to cooperate with respect to such filings and consents, and in the event of any objections, actions or proceedings pursuant to Section 5.2 of the Arrangement Agreement (reasonable best efforts), each of TESCO and Nabors have agreed to use its reasonable best efforts to resolve any such objections, actions or proceedings so as to permit the consummation of the Arrangement, including agreeing to sell, swap, hold separate or otherwise dispose of or conduct its or its subsidiaries’ business or assets in a specified manner, or selling, swapping, holding separate or otherwise disposing of or conducting its or its subsidiaries’ business or asset in a specified manner, which would resolve such objections, actions or proceedings such that the Arrangement could reasonably likely be consummated by the Outside Date. Notwithstanding the foregoing or any other provision in the Arrangement Agreement, neither party is required to take any actions that are not conditional on the consummation of the Arrangement or that would be reasonably likely to materially adversely affect Nabors or its subsidiaries, whether individually or taken as a whole, or TESCO or its subsidiaries, whether individually or taken as a whole, after the Effective Date.

Amendments; Waivers

Subject to the provisions of the Interim Order, the Plan of Arrangement and applicable Laws, the Arrangement Agreement and the Plan of Arrangement may, at any time and from time to time before or after the holding of the Special Meeting but not later than the Effective Time, be amended by a mutual written agreement signed by each of the Parties, without further notice to or authorization on the part of the Securityholders, and any such amendment may without limitation:

 

  (a) change the time for performance of any of the obligations or acts of the Parties;

 

  (b) waive any inaccuracies or modify any representation or warranty contained in the Arrangement Agreement or in any document delivered pursuant to the Arrangement Agreement;

 

  (c) waive compliance with or modify any of the covenants contained in the Arrangement Agreement and waive or modify performance of any of the obligations of the Parties; and

 

  (d) waive compliance with or modify any mutual conditions precedent contained in the Arrangement Agreement.

Additionally, any Party may, subject to the terms and conditions of the Arrangement Agreement (a) extend the time for performance of any of the obligations or acts of the other Party, (b) waive compliance with any of the other Party’s agreements or the fulfillment of any conditions to its own obligations, or (c) waive inaccuracies in any of the other Party’s representations or warranties contained in the Arrangement Agreement or in any document delivered by the other Party; provided, however, that any such extension or waiver is required to be in writing and signed on behalf of such Party and, unless otherwise provided, be limited to the specific breach or condition waived.

Expenses

Whether or not the Arrangement is consummated, all costs and expenses incurred in connection with the Arrangement Agreement and the transactions contemplated thereby will be paid by the party incurring such expense, except as otherwise provided in “—Termination Fee Payable by TESCO” above and except the filing fees paid to any Governmental Entities with respect to the transactions contemplated thereby pursuant to the HSR Act, the Competition Act or any Merger Control Law, which will be paid by Nabors.

 

74


Table of Contents

INTERESTS OF DIRECTORS AND EXECUTIVE OFFICERS IN THE ARRANGEMENT

In considering the Board’s recommendation that you vote to approve the Arrangement Resolution, you should be aware that aside from their respective interests as Shareholders, TESCO’s directors and executive officers have interests in the Arrangement that may be different from, or in addition to, those of Shareholders generally. Members of the Board were aware of and considered these interests, among other matters, in evaluating and negotiating the Arrangement Agreement and the Arrangement, and in recommending to Securityholders that the Arrangement Agreement be approved. For more information, see the sections entitled “The Arrangement—Background to the Arrangement” and “The Arrangement—TESCO’s Reasons for the Arrangement; Recommendation of the Board.” These interests are described in more detail below.

Interest of Directors

The nonemployee directors of the Board have interests in the Arrangement that differ from Shareholders only to the extent that: (i) the outstanding RSUs held by such directors will vest and be cancelled in exchange for a cash payment equal to the RSU Consideration; (ii) the Options held by such directors will be accelerated, cancelled, and exchanged for a cash payment equal to the Option Consideration, however all options are out-of-the-money as of [September 11, 2017]; and (iii) Nabors or Nabors Maple will provide ongoing indemnification and coverage for a period of six years following the closing of the Arrangement as described below.

Treatment of Outstanding Equity Awards

At the Effective Time, all outstanding, unexpired Options to purchase Common Shares will be accelerated, cancelled, and exchanged for a cash payment equal to the Option Consideration. Each Option with an exercise price per share that is equal to or greater than the Market Value will be cancelled for no consideration. At the Effective Time, all outstanding RSUs will vest and be cancelled in exchange a cash payment equal to the RSU Consideration.

The following table sets forth, as of [September 11, 2017], the number of Common Shares subject to equity awards that are currently held by TESCO’s executive officers and directors.

 

Equity Awards Vesting or Being Cancelled in Connection with the Arrangement  

Name

   Number of Options(1)      Number of RSUs      Total Value of Options and
RSUs ($)(1)
 

Directors

 

Michael W. Sutherlin

     22,900        35,500        157,265  

John P. Dielwart

     6,000        26,968        119,468  

R. Vance Milligan

     27,500        26,968        119,468  

Douglas R. Ramsay

     —          15,800        69,994  

Rose M. Robeson

     —          24,134        106,914  

Elijio V. Serrano

     6,000        26,968        119,468  

Named Executive Officers(2)

        

Fernando R. Assing

     290,100        409,901        1,815,861  

Christopher L. Boone

     76,000        128,968        571,328  

John T. Gatlin

     —          60,000        265,800  

Michael J. Niedermaier

     23,800        42,701        189,165  

Executive Officers(3)

        

Nicholas Mawford

     28,468        37,668        166,869  

Roy McNiven

     25,468        40,334        178,680  

Douglas Greening

     22,000        41,001        181,634  

Brian T. Kelly

     —          22,834        101,155  

 

(1)

Assumes a Market Value of $[4.43], which represents 0.68 multiplied by $[6.52], which was the closing price of a Nabors Share on September [8], 2017, which is the last trading day prior to an assumed Effective

 

75


Table of Contents
  Date of [September 11, 2017] (Assumed Market Value). As of [September 11, 2017], all Options were out-of-the-money, using the Assumed Market Value, and if the Arrangement had been completed on that date would have been cancelled for no consideration. Therefore, the “Total Value” shown in the table above does not attribute any value to out-of-the-money Options, since Options will be cancelled for no consideration as their exercise price per share is equal to or greater than the Assumed Market Value. For RSUs, the “Total Value” represents an amount equal to the number of unvested RSUs (including performance-based restricted stock units) held by the NEOs as of [September 11, 2017], multiplied by the Assumed Market Value. As a result, the “Total Value” shown is calculated by multiplying the number of RSUs vesting by the Assumed Market Value.
(2) This table does not include any information with respect to Messrs. Irausquin or Sloan, former named executive officers, who were not serving as executive officers as of the entry into the Arrangement Agreement and are not receiving any compensation related to the Arrangement that is different from that of other Shareholders.

Severance Payments

Employment Agreements

TESCO is currently party to an employment agreement with each of Messrs. Assing, Boone, and Gatlin. For details of the employment agreements and the change of control provisions contained in each such employment agreement, see the section titled “Potential Payments Upon Termination or Change of Control” of Annex K to this proxy statement.

Pursuant to their respective employment agreements, Messrs. Assing, Boone, and Gatlin would only be due payments upon a change of control if their employment is terminated by TESCO other than for cause, disability or death, or if the executive terminates his employment for good reason, in each case within 12 months following such change of control. In other words, their employment agreements contain so-called “double-trigger” change of control clauses. To receive the benefits upon a change of control, the affected NEO must pay any debts owed to TESCO and must execute a release of liability in favor of TESCO against any future employment-related claims.

Retention Payments

Messrs. Niedermaier, Mawford, McNiven, Greening, and Kelly are parties to retention incentive letters pursuant to which each is eligible to receive a payment in exchange for his continued employment with TESCO through a change of control. TESCO entered into these retention incentive letters with each of these officers in connection with the Arrangement. The agreements provide for a total of approximately $200,000 in retention payments for all of these officers combined, less all applicable taxes and withholdings, pursuant to the following terms (the Retention Payment):

 

    Continued employment after closing. Subject to the officer’s continued employment with TESCO through the 30th day following the close of the Arrangement, he will be entitled to receive the Retention Payment.

 

    Termination without cause. In the event the officer’s employment is terminated without cause following the closing of the Arrangement, but prior to the 30th day following the close of the Arrangement, then, subject to the officer’s execution and non-revocation of a general release of claims in favor of TESCO and Nabors, he will be entitled to receive the Retention Payment within sixty days following the date of such termination.

Golden Parachute Compensation

In accordance with Item 402(t) of Regulation S-K, the tables below present the estimated amounts of compensation that each NEO could receive that are based on or otherwise relate to the Arrangement. This

 

76


Table of Contents

compensation is referred to as “golden parachute” compensation by the applicable SEC disclosure rules, and in this section we use such term to describe the Arrangement-related compensation that could be payable to TESCO’s NEOs. This Arrangement-related compensation is the subject of the Advisory Proposal Regarding Golden Parachute Compensation described in Proposal 2 of this proxy statement.

The table below sets forth the amount of payments and benefits that each of TESCO’s NEOs would receive, or would be eligible to receive, in connection with the Arrangement, assuming that the Arrangement was consummated and each NEO experienced a qualifying termination within 12 months following the closing of the Arrangement. The amounts below are based on assumptions that may or may not actually occur or be accurate on the relevant date. These assumptions are described in the footnotes to the table. As a result of the foregoing assumptions, the actual amounts, if any, to be received by an NEO may materially differ from the amounts set forth below.

 

Golden Parachute Compensation(1)  

Name

   Cash ($)     Equity (Options and
RSUs) ($)(2)
     Other ($)     Total ($)  

Fernando R. Assing(3)

     2,862,114 (4)      1,815,861              4,677,975  

Christopher L. Boone

     1,602,787 (4)      571,328        28,948 (6)      2,203,063  

John T. Gatlin(3)

     1,105,000 (4)      265,800              1,370,800  

Michael J. Niedermaier

     25,000 (5)      189,165              214,165  

 

(1) This table does not include any information with respect to Messrs. Irausquin or Sloan, who were not serving as executive officers as of the entry into the Arrangement Agreement and are not receiving any compensation related to the Arrangement that is different from that of other Shareholders.
(2) The value shown does not attribute any value to Options, since as of [September 11, 2017], all Options were out-of-the-money, using the Assumed Market Value, and if the Arrangement had been completed on that date would have been cancelled for no consideration. For RSUs, the figure presented represents an amount equal to the number of unvested RSUs (including performance-based restricted stock units) held by the NEOs as of [September 11, 2017], multiplied by the Assumed Market Value. Such amounts represent so-called “single-trigger” change of control benefits, per the terms of the applicable award agreements.
(3) Per the terms of Messrs. Assing’s and Gatlin’s employment agreements, certain of the payments and benefits which would be subject to Section 280G of the Code and the excise tax imposed by Section 4999 of the Code, will be reduced consistent with the requirements of Section 409A, as necessary so that no portion thereof shall be subject to the excise tax imposed by Section 4999 of the Code.
(4) Messrs. Assing, Boone, and Gatlin would only be entitled to change of control payments if their employment was terminated for good reason by the executive or without cause by TESCO within 12 months after a change of control (i.e., such amounts represent so-called “double trigger” change of control benefits).

 

    

In accordance with the employment agreements in the event of a qualifying termination following a change of control: Mr. Assing would receive three times the sum of annual base salary and target short term incentive program award; Mr. Boone would receive two times the sum of his annual base salary and maximum short term incentive program award; and Mr. Gatlin would receive two times the sum of his annual base salary and target short term incentive program award. The following table shows, for each of Messrs. Assing, Boone, and Gatlin, the amount of annual base salary and short term incentive program award component of these cash amounts (on an annualized basis). For a more detailed discussion of the

 

77


Table of Contents
  terms and conditions applicable to the payments shown below, see the section titled “Potential Payments Upon Termination or Change of Control” of Annex K to this proxy statement.

 

Name

   Annual Base Salary
Severance
     Short Term
Incentive Program
Award
 
     ($)      ($)  

Fernando R. Assing

     477,019        477,019  

Christopher L. Boone

     333,914        467,480  

John T. Gatlin

     325,000        227,500  

 

(5) Mr. Niedermaier is a party to a retention incentive letter, the terms of which are described in the section above. This payment is considered a “single trigger” change of control benefit.
(6) Mr.  Boone is entitled to a lump sum payment equal to the cost of 18 months COBRA coverage.

Indemnification and Insurance

Pursuant to the terms of the Arrangement Agreement, Nabors or Nabors Maple will provide TESCO’s directors and executive officers certain ongoing indemnification and coverage for a period of six years following the closing of the Arrangement under directors’ and officers’ liability insurance policies that are no less favorable in the aggregate than the policies maintained by TESCO.

Executive Compensation

For details of plan and non-plan compensation awarded to the NEOs and TESCO’s compensation programs, generally, see “Executive Compensation” attached as Annex K to this proxy statement.

 

78


Table of Contents

INDEBTEDNESS OF DIRECTORS AND EXECUTIVE OFFICERS

Under our bylaws, TESCO may not make any personal loan or extension of credit to a director or officer. As of the date hereof, no director or executive officer, or any associate of any such director or executive officer is or has been, at any time since January 1, 2016, indebted to TESCO, nor is or has, at any time since January 1, 2016, any indebtedness of such persons been the subject of a guarantee, support agreement, letter of credit or other similar arrangement or understanding provided by TESCO or any of its subsidiaries.

 

79


Table of Contents

DESCRIPTION OF NABORS CAPITAL STOCK

The following description of the terms of Nabors’ capital stock is a summary only and is qualified by reference to the relevant provisions of Nabors’ amended and restated bye-laws and memorandum of association.

Authorized Capital Stock

Under the Nabors amended and restated bye-laws, Nabors’ authorized capital stock consists of 800,000,000 shares of common stock, par value $0.001 (the Nabors Shares), and 25,000,000 shares of preferred stock, par value $0.001.

Description of Common Stock

Common Stock Outstanding. As of August 10, 2017, (A) there were 335,562,365 shares of Nabors common stock issued and outstanding, (B) 4,471,461 shares of Nabors common stock were subject to issuance upon the vesting or settlement of parent equity awards, 4,404,045 of which are subject to issuance upon the exercise or payment of outstanding parent equity awards which consist of options to purchase or acquire Nabors common stock, and (C) 6,837,824 shares of Nabors common stock remained available for future issuance under the Nabors employee benefit plans.

The outstanding shares of Nabors common stock are duly authorized, validly issued, fully paid and nonassessable.

Voting Rights. Each holder of Nabors common stock is entitled to one vote for each share of Nabors common stock held of record on the applicable record date on all matters submitted to a vote of shareholders.

Nabors’ bye-laws do not provide for cumulative voting. Except as specifically provided in Nabors’ bye-laws or in the Bermuda Act, any action to be taken by the shareholders at any meeting at which a quorum is in attendance shall be decided by a majority of the issued shares present in person or represented by proxy and entitled to vote thereat.

There are no limitations imposed by Bermuda law or Nabors’ bye-laws on the right of shareholders who are not Bermuda residents to hold or vote their Nabors common shares.

Dividend Rights. Holders of Nabors common stock are entitled to receive such dividends as may be declared from time to time by the Nabors’ board of directors at its discretion out of funds legally available therefor, subject to, among other things, future earnings, general financial condition and liquidity, success in business activities, capital requirements and general business conditions in addition to legal requirements.

Redemption and Conversion. Nabors common shares will not be convertible into shares of any other class or series or be subject to redemption by the holder of the common shares.

Stock Exchange Listing

The Nabors Shares are listed on the NYSE under the trading symbol “NBR.” It is a condition to the Arrangement that the Nabors Shares issuable in connection with the Arrangement be approved for listing on the NYSE, subject to official notice of issuance.

Changes to Rights of a Class or Series

Subject to the Bermuda Act, the rights attached to any class or series of shares of Nabors, unless otherwise provided by the terms of that class or series, may be altered or abrogated by a resolution passed at a separate

 

80


Table of Contents

general meeting of the holders of shares of that class, voting in person or by proxy and representing at least a majority of the issued shares of that class entitled to vote. Every holder of shares of the relevant class shall be entitled on a poll to one vote for each share held by such holder and any holder of shares of the relevant class present in person or by proxy may demand a poll. Outstanding shares will not be deemed to be varied by the creation or issue of shares that rank in any respect prior to or equivalent with those shares.

Quorum for General Meetings

The holders of a majority of the shares issued and outstanding and entitled to vote shall be present in person or represented by proxy in order to constitute a quorum to hold a general meeting of the shareholders.

Rights upon Liquidation

Holders of Nabors common stock are entitled to share pro rata, upon any liquidation, dissolution or winding up of Nabors, in all remaining assets available for distribution to shareholders after payment of or provision for Nabors’ liabilities and the liquidation preference of any outstanding Nabors preferred stock.

The liquidator may deduct from the amount payable in respect of those common shares any liabilities the holder has to or with Nabors. The assets received by the holders of Nabors common shares in a liquidation may consist in whole or in part of property. That property is not required to be of the same kind for all shareholders.

Sinking Fund

Nabors’ common shares have no sinking fund provisions.

Liability for Further Calls or Assessments

The shares of Nabors common stock issued pursuant to the Arrangement will be duly authorized, validly issued, fully paid and nonassessable.

Preemptive Rights

Holders of Nabors common stock have no preemptive rights to purchase, subscribe for or otherwise acquire any unissued or treasury shares or other securities.

Repurchase Rights

The board of directors may, at its discretion, authorize the purchase by Nabors of its own shares of any class, at any price (whether at par or above or below par), as long as such purchase is made in accordance with the provisions of the Bermuda Act.

Transfer Agent and Registrar

Computershare Trust Company is the transfer agent and registrar for Nabors common stock.

Description of Preferred Stock

Preferred Stock Outstanding. As of the date of this proxy statement/prospectus, no shares of Nabors preferred stock were issued and outstanding.

Blank Check Preferred Stock. Under the Nabors amended and restated bye-laws, the Nabors board of directors has the authority, without shareholder approval, to create one or more classes or series within a class of preferred

 

81


Table of Contents

stock, to issue shares of preferred stock in such class or series up to the maximum number of shares of the relevant class or series of preferred stock authorized, and to determine the preferences, rights, privileges and restrictions of any such class or series, including the dividend rights, voting rights, the rights and terms of redemption, the rights and terms of conversion, liquidation preferences, the number of shares constituting any such class or series and the designation of such class or series.

Anti-Takeover Provisions

Nabors’ bye-laws have provisions that could have an anti-takeover effect. They include an “advance notice” provision which places time limitations on shareholders’ nominations of directors and submission of proposals for consideration at an annual general meeting. These provisions are intended to enhance the likelihood of continuity and stability in the composition of the board of directors and in the policies formulated by the board of directors and to encourage negotiations with the board of directors in transactions that may involve an actual or potential change of control of Nabors.

The bye-laws provide that Nabors’ directors can be removed from office prior to the expiration of their term only for cause by the affirmative vote of the holders of a majority of the voting power of Nabors on the relevant record date. The board of directors does not have the power to remove directors. As long as a quorum of directors remains and is present, vacancies on the board of directors may be filled by a majority vote of the remaining directors. Any general meeting can authorize the board of directors to fill any vacancy left unfilled at a general meeting. Each of these provisions can delay a shareholder from obtaining majority representation on the board of directors.

The bye-laws also provide that the board of directors will consist of not less than five nor more than eighteen persons, the exact number to be set from time to time by the affirmative vote of a majority of the directors then in office. Accordingly, the board of directors, and not the shareholders, has the authority to determine the number of directors and could delay any shareholder from obtaining majority representation on the board of directors by enlarging the board of directors and filling the new vacancies with its own nominees.

The bye-laws of Nabors provide that at any annual general meeting, only such business shall be conducted as shall have been brought before the meeting by or at the direction of the board of directors (or any duly authorized committee thereof), by any shareholder who complies with certain procedures set forth in the bye-laws or by any shareholder pursuant to the valid exercise of the power granted under the Bermuda Act.

For business to be properly brought before an annual general meeting by a shareholder in accordance with the terms of the bye-laws the shareholder must have given timely notice thereof in proper written form to the Secretary of Nabors and satisfied all requirements under applicable rules promulgated by the Securities and Exchange Commission. To be timely for consideration at the annual general meeting, a shareholder’s notice must be received by the Secretary at Nabors’ principal executive offices and its registered office in Bermuda not less than 60 days nor more than 90 days prior to the anniversary date of the immediately preceding annual general meeting, provided that in the event that the annual general meeting is called for a date that is not within 30 days before or after such anniversary date, not later than the 10th day following the day on which such notice of the date of the annual general meeting was mailed or public disclosure of the date of the annual general meeting was made, whichever occurs first. In order for a shareholder to nominate directors in connection with an annual general meeting of shareholders, a shareholder’s notice of his intention to make such nominations must be received in proper written form as specified in the bye-laws of Nabors by the Secretary of Nabors within the time limits described above.

Subject to the terms of any other class of shares in issue, any action required or permitted to be taken by the holders of Nabors’ common shares must be taken at a duly called annual or special general meeting of shareholders unless taken by written consent of all holders of common shares. Under the bye-laws, special

 

82


Table of Contents

general meetings may be called at any time by the board of directors or when requisitioned by shareholders pursuant to the provisions of the Bermuda Act. The Bermuda Act currently permits shareholders holding 10% of the shares of a company entitled to vote at general meeting to requisition a special general meeting.

The board of directors is authorized, without obtaining any vote or consent of the holders of any class or series of shares unless expressly provided by the terms of issue of a class or series, to from time to time issue any authorized and unissued shares on such terms and conditions as it may determine. For example, the board of directors could authorize the issuance of preferred shares with terms and conditions that could discourage a takeover or other transaction that holders of some or a majority of the Nabors common shares might believe to be in their best interests or in which holders might receive a premium for their shares over the then market price of the shares.

 

83


Table of Contents

COMPARISON OF SHAREHOLDER RIGHTS

Pursuant to the Arrangement, Shareholders will receive shares in the common stock of Nabors, a company incorporated under the Companies Act 1981 of Bermuda (Bermuda Act), and Nabors Maple will acquire all of the issued and outstanding Common Shares. TESCO is a corporation incorporated under the ABCA. Nabors’ corporate affairs are governed by its memorandum of association and bye-laws and by the Bermuda Act.

The following table is a summary of certain provisions of the ABCA and the Bermuda Act, and applicable provisions of the constating documents of TESCO and Nabors, respectively. This summary is not a comprehensive review of the two statutes. Reference should be made to the full text of both statutes and the regulations thereunder for particulars of any differences between them. Shareholders should consult their legal or other professional advisors with regard to the implications of the share exchange contemplated under the Arrangement Agreement, which may be of importance to them.

 

     ABCA Shareholder Rights    Bermuda Act Shareholder Rights
Charter Documents of a Corporation    Under the ABCA, a corporation’s charter documents consist of “articles”, which must include at a minimum and amongst other requirements, the name of the corporation, the classes and maximum number of shares the corporation is authorized to issue, any share transfer restrictions, the number of directors (or the minimum or maximum number of directors) and any restrictions on the business the corporation may carry on, and “by-laws,” which regulate the business or affairs of the corporation. The articles are filed with the Registrar under the ABCA and records containing the articles and the by-laws are maintained at the corporation’s office.   

Under the Bermuda Act, the memorandum of association (the memorandum) of every company must state the name of the company; in the case of a company limited by shares that the liability of its members is limited; the objects of the company or that its objects are unrestricted; the secondary name of the company (if any); the names, addresses and nationalities of the persons who subscribe their names to the memorandum and which of them, if any, has Bermudian status; whether the company is to be an exempted company; the company’s maximum landholding powers in relation to land in Bermuda; and the period, if any, fixed for the duration of the company, or the event, if any, on the occurrence of which the company is to be dissolved.

 

In the case of a company limited by shares the memorandum must also state the amount of share capital with which the company proposes to be registered and the division thereof into shares of a fixed amount; and that the persons who subscribe their names to the memorandum agree to take such number of shares of the company as may be allotted to them, and that they agree to satisfy such calls as may be made on them by the directors, provisional directors or promoters in respect of the shares allotted to them.

 

Shareholders are referred to as members in the Bermuda Act.

 

84


Table of Contents
     ABCA Shareholder Rights    Bermuda Act Shareholder Rights
Amendments to the Charter Documents of a Corporation   

Under the ABCA, the articles of a corporation may be amended by special resolution being a resolution passed by a majority of not less than two-thirds of the votes cast by the shareholders who voted on that resolution or signed by all the shareholders entitled to vote on that resolution.

 

In certain specified circumstances holders of a class or series of shares are entitled to vote separately as a class or series on a proposal to amend the articles, whether or not such class or series of shares otherwise carry the right to vote.

 

Under the ABCA, directors may, by resolution, make, amend or repeal by-laws, and are required to submit a by-law or an amendment or a repeal of a by-law to the shareholders at the next shareholder meeting for approval by ordinary resolution being a resolution passed by a majority of the votes cast by shareholders who voted on that resolution or signed by all the shareholders entitled to vote on that resolution.

  

Under the Bermuda Act, a company may, by resolution passed at a general meeting of members of which due notice has been given, alter the provisions of its memorandum.

 

The altered memorandum must be filed with the Registrar of Companies (the ROC) and becomes effective when registered by the ROC.

 

An application may be made to the Court for an alteration to the memorandum of a company to be annulled and where such an application is made the alteration shall not have effect except in so far as it is confirmed by the Court.

 

Under the Bermuda Act, the administration of every company shall be regulated by bye-laws.

 

The memorandum is filed with the ROC but the bye-laws are not.

 

Directors of a company may after its registration amend the bye-laws but any such amendment shall be submitted to a general meeting of the company, and shall become operative only to such extent as they are approved at such meeting.

 

The Nabors bye-laws provide that such approval must include the holders of a majority of the issued shares entitled to vote.

 

At any general meeting of a company any question proposed for consideration shall be decided on a simple majority of votes or by such majority as the bye-laws of the company may prescribe.

 

The Nabors bye-laws provide that, except as otherwise provided in the bye-laws and subject to applicable law, that majority is a majority of shares present in person or by proxy and entitled to vote.

Authorized Share Capital    Under the ABCA shares of a corporation are required to be in registered form and be without nominal or par value.    The Bermuda Act requires shares of a Bermuda company to be issued with par value.

 

85


Table of Contents
     ABCA Shareholder Rights    Bermuda Act Shareholder Rights
  

The authorized capital of TESCO is an unlimited number of Common Shares, an unlimited number of First Preferred Shares, issuable in series, and an unlimited number of Second Preferred Shares, issuable in series.

 

As at [September 11, 2017], there were [46,754,956] Common Shares, and no First Preferred Shares or Second Preferred Shares outstanding.

  

The authorized capital of Nabors is 800,000,000 Nabors Shares with a par value of $0.001 per Nabors Share and 25,000,000 Preferred Shares, issuable in one or more classes or series, with a par value of $0.001 per Preferred Share.

 

As at [September 11], 2017, there were (A) [335,550,377] Nabors Shares issued and outstanding, (B) [4,488,634] Nabors Shares subject to issuance upon the vesting or settlement of parent equity awards, [4,400,468] of which are subject to issuance upon the exercise or payment of outstanding parent equity awards which consist of options to purchase or acquire Nabors Shares, and (C) [6,829,062] Nabors Shares available for future issuance under the Nabors employee benefit plans]. As at [September 11], 2017, no shares of Nabors Preferred Shares were issued and outstanding.

Directors   

Under the ABCA a company must have at least one director, and if it is a public company, it must have at least three directors (at least two of whom are not officers or employees of the corporation or its affiliates). The TESCO articles provide that TESCO must have a minimum of three directors and a maximum of nine.

 

Generally, shareholders of a corporation shall, by ordinary resolution at the first meeting of shareholders and at each succeeding annual meeting at which an election of directors is required, elect directors to hold office for a term expiring not later than the close of the next annual meeting of shareholders following the election.

 

  

Under the Bermuda Act, the affairs of a company shall be managed by at least one director who shall be a person elected in the first place at the statutory meeting and thereafter elected or appointed by the members at each annual general meeting of the company or in such other manner and for such term as may be provided in the bye-laws.

 

A maximum number of directors may be determined by the members at a general meeting of the company or in such other manner as may be provided in the bye-laws. Where a maximum number of directors has been determined, a general meeting of a company may authorise the directors of the company to elect or appoint on their behalf a person or persons to act as additional directors up to such maximum.

 

The Nabors bye-laws provide for a board of not less than five directors and not more than eighteen directors.

 

86


Table of Contents
     ABCA Shareholder Rights    Bermuda Act Shareholder Rights
      In addition, only persons who are nominated in accordance with the Nabors bye-laws are eligible for election as directors.
Director Residency Requirements    Under the ABCA at least 1/4 of the directors of a corporation must be resident Canadians.   

Under the Bermuda Act, there is no residency requirement for directors.

 

However, under the Bermuda Act each exempted company (a company that does not comply with the Bermuda Act requirements of a local company and is stated in its memorandum to be an exempted company) shall have (i) a minimum of one director, other than an alternate director, who is ordinarily resident in Bermuda; or (ii) a secretary that is an individual or a company ordinarily resident in Bermuda; or (iii) a resident representative that is an individual or a company ordinarily resident in Bermuda.

Duty of Care of Directors and Officers    Directors and officers of an ABCA corporation in discharging their duties are required to act honestly and in good faith with a view to the best interests of the corporation, and exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances.    Officers of a Bermuda company exercising their powers and discharging their duties are required to act honestly and in good faith with a view to the best interests of the company, and exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances. Under the Bermuda Act an officer includes a director.
Conflict of Interest of Directors and Officers    Subject to certain specified exceptions, under the ABCA, a director or officer who is (or has a material interest in) a party to a material contract or transaction is required to disclose such interest and, in the case of a director, not vote on any resolution to approve the contract or transaction.    Under the Bermuda Act, a director shall be deemed not to be acting honestly and in good faith if he fails to disclose at the first opportunity, at a meeting of directors or by writing to the directors (i) his interest in any material contract or proposed material contract with the company or any of its subsidiaries; or (ii) his material interest in any person that is a party to a material contract or proposed material contract with the company or any of its subsidiaries.
Director Liability    Under the ABCA, directors of a corporation who vote for or consent to a resolution authorizing the issue of a share for consideration other than    Under the Bermuda Act, an auditor or officer may be liable jointly and severally (to any person for damages arising out of the performance of any

 

87


Table of Contents
     ABCA Shareholder Rights    Bermuda Act Shareholder Rights
  

money are jointly and severally liable to the corporation to make good any amount by which the consideration received by the corporation is less than the fair equivalent of the money that the corporation would have received if the share had been issued for money on the date of the resolution.

 

A director is not liable under the foregoing if the director proves that the director did not know and could not reasonably have known that the share was issued for consideration less than the fair equivalent of the money that the corporation would have received if the share been issued for money.

 

Directors of a corporation who vote for or consent to certain resolutions authorizing payments or distributions contrary to specified provisions of the ABCA are jointly and severally liable to restore to the corporation any amounts so paid and the value of any property so distributed, and not otherwise recovered by the corporation.

  

function as such auditor or officer as contemplated by the Bermuda Act) only if it is proved that he knowingly engaged in fraud or dishonesty.

 

In any case other than fraud or dishonesty, the liability of the auditor or officer shall be determined as follows:

 

(a) the Court shall determine the percentage of responsibility of the plaintiff, of each of the defendants, and of each of the other persons alleged by the parties to have caused or contributed to the loss of the plaintiff. In considering the percentages of responsibility, the Court shall consider both the nature of the conduct of each person and the nature and extent of the causal relationship between the conduct and the loss claimed by the plaintiff;

 

(b) the liability of the auditor or officer, as the case may be, shall be equal to the total loss suffered by the plaintiff multiplied by the auditor’s or officer’s percentage of responsibility as determined under paragraph (a).

Indemnification of Directors    Under the ABCA, except in respect of an action by or on behalf of the corporation or body corporate to procure a judgment in its favour, a corporation may indemnify a director or officer of the corporation, a former director or officer of the corporation or a person who acts or acted at the corporation’s request as a director or officer of a body corporate of which the corporation is or was a shareholder or creditor, and the director’s or officer’s heirs and legal representatives against all costs, charges and expenses, including an amount paid to settle an action or satisfy a judgment, reasonably incurred by the director or officer in respect of any civil, criminal or administrative action or proceeding in which the director or officer is made a   

Pursuant to the Bermuda Act, a company may in its bye-laws or in any contract or arrangement between the company and any officer, or any person employed by the company as auditor, exempt such officer or person from any rule of law in respect of any negligence, default, breach of duty or breach of trust of which the officer or person may be guilty in relation to the company or any subsidiary thereof (exemption from liability).

 

Any provision relating to an exemption from liability in relation to any liability which by virtue of any rule of law would otherwise attach to any officer or person employed as auditor in respect of any fraud or dishonesty of which he may be guilty

 

88


Table of Contents
     ABCA Shareholder Rights    Bermuda Act Shareholder Rights
  

party by reason of being or having been a director or officer of that corporation or body corporate, if (i) the director or officer acted honestly and in good faith with a view to the best interests of the corporation, and (ii) in the case of a criminal or administrative action or proceeding that is enforced by a monetary penalty, the director or officer had reasonable grounds for believing that the director’s or officer’s conduct was lawful.

 

Under the ABCA, a corporation may also, with the approval of the Court indemnify a person referred to above in respect of an action by or on behalf of the corporation or body corporate to procure a judgment in its favour, to which the person is made a party by reason of being or having been a director or an officer of the corporation or body corporate, against all costs, charges and expenses reasonably incurred by the person in connection with such action if the person fulfills the conditions set out in clauses (i) and (ii) above.

 

A person referred to in paragraph one above is entitled to indemnity from the corporation in respect of all costs, charges and expenses reasonably incurred by the person in connection with the defense of any civil, criminal or administrative action or proceeding to which the person is made a party by reason of being or having been a director or officer of the corporation or body corporate, if the person seeking indemnity (a) was substantially successful on the merits in the person’s defence of the action or proceeding, (b) fulfills the conditions set out in clauses (i) and (ii) above, and (c) is fairly and reasonably entitled to indemnity.

  

in relation to the company shall be void.

 

The Nabors bye-laws contain a broad indemnity for officers, to the fullest extent permitted by applicable law.

Removal of Directors    Under the ABCA and subject to certain limited exceptions, the shareholders of a corporation may by ordinary resolution at a special    Under the Bermuda Act, subject to its bye-laws the members of a company may at a special general meeting called for that purpose remove a

 

89


Table of Contents
     ABCA Shareholder Rights    Bermuda Act Shareholder Rights
  

meeting remove any director or directors from office.

 

If the holders of any class or series of shares of a corporation have an exclusive right to elect one or more directors, a director so elected may only be removed by an ordinary resolution at a meeting of the shareholders of that class or series.

  

director, provided that notice of such meeting is served on the director concerned not less than fourteen (14) days before the meeting and he shall be entitled to be heard at such meeting.

 

The Nabors bye-laws provide that such removal may only be for cause, and requires the affirmative vote of a majority of the outstanding shares entitled to vote at the meeting.

Directorship Vacancies   

Under the ABCA, subject to the articles or a unanimous shareholder agreement, a quorum of directors may fill a vacancy among the directors, except a vacancy resulting from an increase in the number or minimum number of directors, or from a failure to elect the number or minimum number of directors required by the articles.

 

If there is not a quorum of directors, or if there has been a failure to elect the number or minimum number of directors required by the articles, the directors then in office shall call a special meeting of shareholders to fill the vacancy and, if they fail to call a meeting or if there are no directors then in office, the meeting may be called by any shareholder.

 

If the holders of any class or series of shares of a corporation or any other class of persons have an exclusive right to elect one or more directors and a vacancy occurs among those directors, only the remaining directors elected by that class or series may fill the vacancy, except a vacancy resulting from an increase in the number or minimum number of directors for that class or series, or from a failure to elect the number or minimum number of directors for that class or series. If there are no such remaining directors, any holder of shares of that class or series or any member of that other class of persons

  

Under the Bermuda Act, vacancy created by the removal of a director at a special general meeting may be filled at that meeting by the election of another director in his place or in the absence of any such election by the other directors. Pursuant to the Nabors bye-laws, a resolution at such general meeting to fill the vacancy requires the affirmative vote of a majority of the outstanding shares entitled to vote at the meeting.

 

As long as a quorum of directors remains in office, unless a company’s bye-laws otherwise provide, a vacancy on the board may be filled by the remaining directors.

 

 

 

90


Table of Contents
     ABCA Shareholder Rights    Bermuda Act Shareholder Rights
  

may call a meeting of those shareholders or those persons for the purpose of filling the vacancy.

 

Pursuant to the articles of TESCO, the directors may, between annual general meetings, appoint one or more additional directors of TESCO to serve until the next annual general meeting, but the number of additional directors shall not at any time exceed 1/3 of the number of directors who held office at the expiration of the last annual general meeting of TESCO.

  
Quorum of Directors’ Meetings    Under the ABCA, subject to the articles or by-laws, a majority of the number of directors appointed constitutes a quorum at any meeting of directors.   

Under the Bermuda Act, the minimum number of directors a company must have is one.

 

Any company may in its bye-laws regulate the quorum at meetings of directors. The Nabors’ bye-laws provide that the quorum for board meetings is the greater of two directors and one-third of the total number of directors then in office (except as otherwise provided in the bye-laws or by applicable law).

Registered Office    Under the ABCA, a corporation shall at all times have a registered office in Alberta.    Under the Bermuda Act, a company shall at all times have a registered office in Bermuda.
Corporate Records   

Under the ABCA, a corporation shall prepare and maintain its corporate records at its records office.

 

Unless the directors designate a separate records office, the registered office of a corporation is also its records office.

 

  

The Bermuda Act requires certain records to be kept at the registered office of the company including the register of members, the register of directors and officers, minutes of general meetings of members, and minutes of meetings of directors.

 

Under the Bermuda Act, every company must also keep proper records of account with respect to its business activities at the registered office of the company or at such other place as the directors think fit and such records of account shall at all times be open to inspection by the directors or a resident representative.

 

Where the records of account are kept at some place outside Bermuda, there shall be kept at the office of the

 

91


Table of Contents
     ABCA Shareholder Rights    Bermuda Act Shareholder Rights
  

A corporation may keep all or any of its corporate records and accounting records at a place outside Alberta only if (a) the records are available for examination, by means of a computer terminal or other technology, during regular office hours at the registered office or any other place in Alberta designated by the directors, and (b) the corporation provides the technical assistance to facilitate an examination referred to in clause (a).

 

 

   company in Bermuda such records as will enable the directors or a resident representative to ascertain with reasonable accuracy the financial position of the company at the end of each three-month period, except that where the company is listed on an appointed stock exchange, there shall be kept such records as will enable the directors or a resident representative to ascertain with reasonable accuracy the financial position of the company at the end of each six month period.
Requisition of Shareholders’ Meetings   

Under the ABCA the registered holders or beneficial owners of not less than 5% of the issued shares of a corporation that carry the right to vote at a meeting sought to be held may requisition the directors to call a meeting of the shareholders for the purposes stated in the requisition, but the beneficial owners of shares do not thereby acquire the direct right to vote at the meeting that is the subject of the requisition.

 

Subject to certain exceptions, if the directors do not call a shareholders’ meeting within 21 days after receiving the requisition, any registered holder or beneficial owner of shares who signed the requisition may call the meeting.

  

Under the Bermuda Act, the directors of a company, notwithstanding anything in its bye-laws shall, on the requisition of members of the company holding at the date of the deposit of the requisition not less than one-tenth of such of the paid-up capital of the company as at the date of the deposit carrying the right of voting at general meetings of the company, or, in the case of a company not having a share capital, members of the company representing not less than one-tenth of the total voting rights of all the members having at the said date a right to vote at general meetings of the company, forthwith proceed duly to convene a special general meeting of the company.

 

If the directors do not within twenty-one days from the date of the deposit of the requisition proceed duly to convene a meeting, the requisitionists, or any of them representing more than one half of the total voting rights of all of them, may themselves convene a meeting, but any meeting so convened shall not be held after the expiration of three months from the said date.

Place of Shareholders’ Meetings   

Under the ABCA, meetings of shareholders must be held at the place within Alberta provided in the by-laws or, in the absence of such provision, at the place within Alberta that the directors determine.

 

  

Under the Bermuda Act, there is no requirement that general meetings be held in Bermuda.

 

A company may, by resolution of the company in a general meeting, elect to dispense with the holding of annual general meetings.

 

92


Table of Contents
     ABCA Shareholder Rights    Bermuda Act Shareholder Rights
  

Notwithstanding the above, a meeting of shareholders of a corporation may be held outside Alberta if all the shareholders entitled to vote at that meeting so agree.

 

The articles of TESCO allow for shareholder meetings to be held at any place within Canada or in the U.S. cities of Houston, Texas or New York, New York.

  

 

In any year in which an annual general meeting would be required to be held but for an election as above to dispense with its holding, and in which no general meeting has been held, any member or members of the company may, by notice to the company not later than three months before the end of the year, require the holding of an annual general meeting in that year.

Record Date for Shareholders’ Meetings   

For the purpose of determining shareholders entitled to receive notice of or vote at a meeting of shareholders, the directors may fix in advance a date as the record date for that determination of shareholders, but that record date shall not precede by more than 50 days or by less than 21 days the date on which the meeting is to be held.

 

If no record date is fixed, (a) the record date for the determination of shareholders entitled to receive notice of a meeting of shareholders shall be the close of business on the last business day preceding the day on which the notice is sent, or if no notice is sent, the day on which the meeting is held.

   The Bermuda Act does not provide for record dates for meetings of shareholders, but a company’s bye-laws can make provision for such record dates.
Notice of Shareholders’ Meetings    Under the ABCA, notice of the time and place of a meeting of shareholders must be provided not less than 21 days and not more than 50 days before the meeting to each shareholder entitled to vote at the meeting, to each director, and to the auditor of the corporation.   

Under the Bermuda Act, notwithstanding any provision in the bye-laws at least five days’ notice shall be given of a general meeting of a company, other than an adjourned meeting. The Nabors bye-laws provide that not less than ten days nor more than sixty days’ notice of a general meeting shall be given (unless a different period is required by applicable law).

 

A general meeting shall, notwithstanding that it is called by shorter notice be deemed to have been duly called if it is so agreed (a) in the case of an annual general meeting, by all the members entitled to attend and vote and (b) in the case of any other

 

93


Table of Contents
     ABCA Shareholder Rights    Bermuda Act Shareholder Rights
     

general meeting, by a majority of the members having a right to attend and vote at the meeting, being a majority together holding not less than ninety-five per cent in nominal value of the shares giving a right to attend and vote at the meeting, or, in the case of a company not having a share capital, together representing not less than ninety-five per cent of the total voting rights at that meeting of all the members.

 

Notwithstanding the above Bermuda Act provisions, a reporting issuer in any province of Canada is required to provide at least 21 days’ notice of a shareholders meeting pursuant to NI 54-101.

Quorum for Meetings of Shareholders   

Pursuant to the TESCO bylaws, a quorum of shareholders shall be at least two persons present or deemed to be present, each being a shareholder entitled to vote thereat or a duly appointed proxyholder for such a shareholder, and together holding or representing 33 13% of the outstanding Common Shares of TESCO entitled to vote at the meeting.

 

If a quorum is present at the opening of a meeting of shareholders, the shareholders present may, unless the by-laws otherwise provide, proceed with the business of the meeting, notwithstanding that a quorum is not present throughout the meeting.

   Under the Bermuda Act, where the bye-laws so provide, a general meeting of the members of a company may be held with only one individual present if the requirement for a quorum is satisfied and, where a company has only one shareholder or only one holder of any class of shares, the shareholder present in person or by proxy constitutes a general meeting. The Nabors bye-laws provide that, except as otherwise required by the bye-laws or applicable law, the quorum for general meetings is the presence in person or by proxy of a majority of the issued and outstanding shares entitled to vote.
Shareholder Proposals    Under the ABCA, a registered holder of shares entitled to vote at an annual meeting of shareholders, or a beneficial holder of shares, may submit to the corporation notice of any matter related to the business or affairs of the corporation that the registered holder or beneficial owner of shares proposes to raise at the meeting (proposal), and discuss at the meeting any matter in respect of which the registered holder or beneficial owner    The Bermuda Act provides that members, as set forth below, may at their own expense (unless the company otherwise resolves), require a company to: (i) give notice to all members entitled to receive notice of the annual general meeting of any resolution that may properly be moved and is intended to be moved at the next annual general meeting; and/or (ii) circulate to all members entitled to receive notice of any general meeting a statement in

 

94


Table of Contents
     ABCA Shareholder Rights    Bermuda Act Shareholder Rights
  

of shares would have been entitled to submit a proposal.

 

A corporation that solicits proxies shall set out the proposal in the management information circular or attach the proposal to it.

 

A corporation is not required to comply with the above if (i) the proposal is not submitted to the corporation at least 90 days before the anniversary of the date of the previous annual meeting of shareholders, (ii) it clearly appears that the proposal has been submitted primarily for the purpose of enforcing a personal claim or redressing a personal grievance against the corporation, its directors, officers or security holders or any of them, or primarily for the purpose of promoting general economic, political, racial, religious, social or similar causes, (iii) the corporation, at the request of the registered holder or beneficial owner of shares, included a proposal in a management proxy circular relating to a meeting of shareholders held within 2 years preceding the receipt of the request, and the requestor failed to present the proposal, in person or by proxy, at the meeting, (iv) substantially the same proposal was submitted to shareholders in a proxy circular within the last 2 years preceding the receipt of the request and the proposal was defeated, or (v) the right to request a proposal is being abused to secure publicity.

 

A proposal may include nominations for the election of directors if it is signed by one or more holders of shares representing in aggregate not less than 5% of the shares or 5% of the shares of a class of shares of the corporation entitled to vote at the meeting at which the proposal is to be presented.

 

Under the TESCO bylaws, a shareholder proposal is not permitted

   respect of any matter referred to in any proposed resolution or any business to be conducted at such general meeting. The number of members necessary for such a requisition is either: (x) any number of members representing not less than 5% of the total voting rights of all members entitled to vote at the meeting to which the requisition relates; or (y) not less than 100 members.

 

95


Table of Contents
     ABCA Shareholder Rights    Bermuda Act Shareholder Rights
   with respect to a special meeting and a shareholder proposing business to be brought before an annual meeting, including with respect to the nomination of any person for election to the Board, must comply with certain form requirements set out in the TESCO bylaws.   
Certain Voting Requirements   

Under the ABCA, certain extraordinary corporate actions, such as amalgamations, continuances, reorganizations, dissolution or liquidations (winding-ups), arrangements, the sale, lease or exchange of all or substantially all of the property of the corporation other than in the ordinary course of business, require approval by special resolution of the shareholders.

 

In addition, certain fundamental changes, such as amendment of the corporation’s articles, require approval by special resolution of the shareholders.

 

In certain instances, where the rights of the holders of a class or series of shares are affected by the alteration differently than those of the holders of other classes or series of shares, the alteration is also subject to approval by a special resolution passed by the holders of shares of each class or series so affected, whether or not they are otherwise entitled to vote.

 

 

  

Under the Bermuda Act, certain corporate actions require shareholder approval. These actions include the following.

 

Each share of an amalgamating or merging company carries the right to vote in respect of an amalgamation or merger whether or not it otherwise carries the right to vote. Unless the bye-laws otherwise provide, the resolution of the shareholders or class must be approved by a majority vote of three-fourths of those voting at such meeting and the quorum necessary for such meeting shall be two persons at least holding or representing by proxy more than one-third of the issued shares of the company or the class, as the case may be, and any holder of shares present in person or by proxy may demand a poll.

 

If a majority in number representing three-fourths in value of the members or class of members, as the case may be, present and voting either in person or by proxy at a court ordered meeting, agree to any compromise or arrangement, the compromise or arrangement shall if sanctioned by the Court, be binding on all the members or class of members, as the case may be, and also on the company or, in the case of a company in the course of being wound up, on the liquidator and contributories of the company.

 

Any amendment of a company’s bye-laws must be approved by a company’s members. In addition, other than certain alterations relating to a company’s capital, alterations of

 

96


Table of Contents
     ABCA Shareholder Rights    Bermuda Act Shareholder Rights
      its memorandum must be approved or authorised by its members in a general meeting. Certain alterations, such as dividing shares into classes, providing for non-voting shares and consolidating or subdividing shares can be authorised either by a general meeting or by the company’s bye-laws.
Rights of Dissent and Appraisal   

Under the ABCA, subject to specified exceptions, a holder of shares of any class of a corporation may dissent if the corporation resolves to:

 

a)      amend its articles to add, change or remove restrictions or constraining the issue or transfer of shares of that class;

 

b)      amend its articles to add, change or remove any restrictions on the business or businesses that the corporation may carry on;

 

c)      amend its articles to add or remove an express statement establishing the unlimited liability of the shareholders;

 

d)      amalgamate with another corporation (in specified instances);

 

e)      be continued under the laws of another jurisdiction; or

 

f)      sell, lease or exchange all or substantially all its property.

  

Under the Bermuda Act, rights of dissent and/or appraisal are available where the company:

 

a)      resolves to alter its memorandum;

 

b)      is the subject of one of the transactions described under the subheading “Compulsory Acquisition” below;

 

c)      resolves to amalgamate or merge;

 

d)      seeks to vary the rights of a class of shares; and

 

e)      resolves to confer power on a liquidator to receive shares or like interests as consideration for sale of the whole or part of the business or property of the company.

Compulsory Acquisition    Under the ABCA, if within the time limited in a take-over bid for its acceptance or within 120 days after the date of a take-over bid, whichever period is shorter, the bid is accepted by the holders of not less than 90% of the shares of any class of shares to which the take-over bid relates, other than shares of that class held at the date of the take-over bid by or on behalf of the offeror or an affiliate or associate of the offeror, the offeror is entitled, on the bid being so accepted and on complying with the relevant   

An acquiring party is generally able to acquire compulsorily the common shares of minority holders in the following ways:

 

a)      By a procedure under the Bermuda Act known as a “scheme of arrangement”. A scheme of arrangement could be effected by obtaining the agreement of the company and of holders of shares, representing in the aggregate a majority in number and at least 75% in value of the shareholders present and

 

97


Table of Contents
     ABCA Shareholder Rights    Bermuda Act Shareholder Rights
  

provisions of the ABCA, to acquire the shares of that class held by dissenting offerees.

 

An offeror may acquire shares held by a dissenting offeree by sending by registered mail within 60 days after the date of termination of the take-over bid and in any event within 180 days after the date of the take-over bid, an offeror’s notice to each dissenting offeree stating that (a) the offerees holding not less than 90% of the shares to which the bid relates have accepted the take-over bid, (b) the offeror is bound to take up and pay for or has taken up and paid for the shares of the offerees who accepted the take-over bid, and (c) a dissenting offeree is required to elect to transfer the offeree’s shares to the offeror on the terms on which the offeror acquired the shares of the offerees who accepted the take-over bid, or to demand payment of the fair value of the offeree’s shares by notifying the offeror within 20 days after the offeree receives the offeror’s notice.

 

  

voting at a court ordered meeting held to consider the scheme or arrangement. The scheme of arrangement must then be sanctioned by the Court. If a scheme of arrangement receives all necessary agreements and sanctions, upon the filing of the court order with the ROC in Bermuda, all holders of shares could be compelled to sell their shares under the terms of the scheme or arrangement.

 

b)      If the acquiring party is a company it may compulsorily acquire all the shares of a target company, by acquiring pursuant to a tender offer 90% of the shares or class of shares not already owned by, or by a nominee for, the acquiring party (the offeror), or any of its subsidiaries. If an offeror has, within four months after the making of an offer for all the shares or class of shares not owned by, or by a nominee for, the offeror, or any of its subsidiaries, obtained the approval of the holders of 90% or more of all the shares to which the offer relates, the offeror may, at any time within the two months beginning with the date on which the approval was obtained, require by notice any nontendering shareholder to transfer its shares on the same terms as the original offer. In those circumstances, nontendering shareholders will be compelled to sell their shares unless the Supreme Court of Bermuda (on application made within a one-month period from the date of the offeror’s notice of its intention to acquire such shares) orders otherwise.

 

c)      Where one or more parties holds not less than 95% of the shares or

 

98


Table of Contents
     ABCA Shareholder Rights    Bermuda Act Shareholder Rights
     

a class of shares of a company, such holder(s) may, pursuant to a notice given to the remaining shareholders or class of shareholders, acquire the shares of such remaining shareholders or class of shareholders. When this notice is given, the acquiring party is entitled and bound to acquire the shares of the remaining shareholders on the terms set out in the notice, unless a remaining shareholder, within one month of receiving such notice, applies to the Court for an appraisal of the value of their shares. This provision only applies where the acquiring party offers the same terms to all holders of shares whose shares being acquired.

Oppression Remedies   

Under the ABCA a “complainant” may apply to the Court for an order to rectify matters relating to oppression or unfairness.

 

A complainant means (i) a registered holder or beneficial owner, or a former registered holder or beneficial owner, of a security of a corporation or any of its affiliates, (ii) a director or an officer or a former director or officer of a corporation or of any of its affiliates, (iii) a creditor or (iv) any other person who, in the discretion of the Court, is a proper person to make such an application.

 

If, on an application, the Court is satisfied that in respect of a corporation or any of its affiliates:

 

a)      any act or omission of a corporation or its affiliates effects a result;

 

b)      the business or affairs of a corporation or its affiliates are or have been carried on or conducted in a manner; or

 

c)      the powers of the directors of the corporation or any of its affiliates

  

Any member of a company who complains that the affairs of the company are being conducted or have been conducted in a manner oppressive or prejudicial to the interests of some part of the members including such member, may make an application to court.

 

On such an application, the court may make such order as it sees fit, including an order for the purchase of the shares of any shareholder by other shareholders or by the company.

 

 

99


Table of Contents
     ABCA Shareholder Rights    Bermuda Act Shareholder Rights
  

are or have been exercised in a manner,

 

that is oppressive or unfairly prejudicial to, or that unfairly disregards the interests of any security holder, creditor, director or officer, the Court may make an order to rectify the matters complained of.

  
Shareholder Derivative Actions   

Under the ABCA a complainant may apply to the Court for permission to bring an action in the name and on behalf of the corporation or any of its subsidiaries, or intervene in an action to which a corporation or any of its subsidiaries is a party, for the purpose of prosecuting, defending or discontinuing the action on behalf of the corporation or subsidiary (Derivative Action).

 

No permission may be granted unless the Court is satisfied that (a) the complainant has given reasonable notice to the directors of the corporation or its subsidiary of the complainant’s intention to apply to the Court to bring a Derivative Action, if the directors of the corporation or its subsidiary do not bring, diligently prosecute, defend or discontinue the action (Reasonable Notice), (b) the complainant is acting in good faith, and (c) it appears to be in the interests of the corporation or its subsidiary that the action to be brought, persecuted or discontinued.

 

When all the directors of the corporation or its subsidiary have been named as defendants, Reasonable Notice is not required.

   Class actions and derivative actions are generally not available to shareholders under the Bermuda Act. The Bermuda courts, however, would ordinarily be expected to permit a shareholder to commence an action in the name of the company to remedy a wrong to the company where the act complained of is alleged to be beyond the corporate power of the company or illegal, or would result in the violation of the company’s memorandum or bye-laws. Furthermore, consideration would be given by a Bermuda court to acts that are alleged to constitute a fraud against the minority shareholders or, for instance, where an act requires the approval of a greater percentage of the company’s shareholders than that which actually approved it.

 

100


Table of Contents

PROPOSAL ONE—APPROVAL OF THE ARRANGEMENT RESOLUTION

TESCO, Nabors and Nabors Maple have agreed to the Arrangement, pursuant to which Nabors Maple will acquire all of the issued and outstanding Common Shares. Details of the Arrangement have been summarized in the sections captioned “The Arrangement”, “The Arrangement Agreement” and “Interests of Directors and Executive Officers in the Arrangement” on pages 32, 67 and 75, respectively, of this proxy statement. The board of directors of TESCO encourages you to carefully review these sections as well as the Arrangement Agreement attached as Annex C to this proxy statement.

We are asking our Securityholders to consider, pursuant to an the Interim Order, and if deemed advisable, to pass, with or without variation, the Arrangement Resolution, the full text of which is set forth in Annex B to this proxy statement, approving the Arrangement pursuant to Section 2.3 of the Arrangement Agreement and made pursuant to Section 193(4) of the ABCA. Accordingly, the board of directors of TESCO recommends that shareholders approve the Arrangement Resolution set forth in Annex B of this proxy statement.

This proposal must be approved by an affirmative approval of not less than two-thirds of the votes cast by the Securityholders present in person or represented by proxy at the Special Meeting and voting together as a single class.

The Board unanimously recommends that the Securityholders vote FOR the Arrangement Resolution.

 

101


Table of Contents

PROPOSAL TWO—NON-BINDING ADVISORY PROPOSAL REGARDING EXECUTIVE COMPENSATION RELATED TO THE ARRANGEMENT

Section 14A of the U.S. Exchange Act, and applicable SEC rules issued thereunder, which were enacted pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, require that TESCO provide Shareholders with the opportunity to vote to approve, on a non-binding, advisory basis, the payment of certain compensation to TESCO’s named executive officers that is based on or otherwise relates to the Arrangement.

The compensation that TESCO’s named executive officers may be entitled to receive from TESCO that is based on or otherwise relates to the Arrangement is summarized in the section captioned “Interests of Directors and Executive Officers in the Arrangement” beginning on page 75 of this proxy statement and in the “Golden Parachute Compensation” table and accompanying footnotes beginning of page 76 of this proxy statement. The board of directors of TESCO encourages you to carefully review the “golden parachute” compensation disclosed in this proxy statement, including in the table referenced above.

Pursuant to Section 14A of the Securities Exchange Act, we are asking our Shareholders to consider, solely on a non-binding, advisory basis, the agreements or understandings between TESCO’s named executive officers and TESCO and the related compensation that will or may be paid to its named executive officers in connection with the Arrangement. Accordingly, the board of directors of TESCO recommends that Shareholders approve the following resolution:

“RESOLVED, that the shareholders of TESCO hereby approve, on a non-binding, advisory basis, the compensation that will or may become payable to TESCO’s named executive officers that is based on or otherwise relates to the Arrangement as disclosed pursuant to Item 402(t) of Regulation S-K in the “Golden Parachute Compensation” table and the disclosures set forth in the section of the proxy statement entitled “Interests of Directors and Executive Officers in the Arrangement.”

This proposal must be approved by a majority of the votes cast by the Shareholders present in person or represented by proxy at the Special Meeting.

The vote on “golden parachute” compensation is a vote separate and apart from the Securityholder vote to approve the Arrangement Resolution and is not a condition to completion of the Arrangement. Accordingly, you may vote to approve the Arrangement Resolution and vote not to approve the “golden parachute” compensation proposal and vice versa. This proposal is merely a non-binding, advisory vote and will not be binding on TESCO, the Board, Nabors or the Nabors Board, regardless of whether the Arrangement Resolution is approved. Further, the underlying compensation agreements and understandings are contractual in nature and not by their terms subject to Shareholder approval. As a result, regardless of the outcome of the non-binding, advisory vote, if the Arrangement is completed, TESCO’s named executive officers will be eligible to receive the related compensation payments and benefits in accordance with the terms and conditions applicable to those payments and benefits.

The Board unanimously recommends that the Shareholders vote FOR the approval, on a non-binding, advisory basis of Arrangement-related compensation for TESCO’s named executive officers.

 

102


Table of Contents

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Listed in the following table and the notes thereto is certain information with respect to the beneficial ownership of our Common Shares and other equity securities as of September 11, 2017, by (i) the persons known to us to be the beneficial owners of five percent or more of our Common Shares, (ii) each of our current directors, (iii) each of our current named executive officers, and (iv) all of the aforementioned directors and NEOs together with our other executive officers (Messrs. Greening, McNiven, Mawford and Kelly) as a group.

To our knowledge, other than as set forth in the table below, there are no persons owning more than five percent of any class of our voting securities. Under the Board’s Minimum Equity Ownership Policy, our directors and certain executive officers are required to own Common Shares in order to align their interests with those of other shareholders. Ownership of Common Shares ties a portion of their net worth to TESCO’s share price and provides a continuing incentive for them to work toward superior long-term stock performance. The address for all of our directors and officers is c/o Tesco Corporation 11330 Clay Road, Suite 350, Houston, Texas, 77041 United States of America. Unless otherwise indicated, all shares are owned directly and the indicated person has sole voting and investment power. Percentages calculated are based on Shares Issued and Outstanding at [September 11, 2017: 46,754,956].

 

Name

   No. of Common Shares
Beneficially Owned
    Percent of Common Shares     Percent of Securities
Entitled to Vote on the
Arrangement Resolution
(Proposal 1)
 

Beneficial Owners of More than 5%

      

Wellington Management Group LLP

2880 Congress Street

Boston, MA 02210

     6,008,551 (2)      12.9     12.3

Blackrock, Inc.

55 East 52nd Street

New York, NY 10022

     5,521,293 (3)      11.8     11.3

T. Rowe Price Associates, Inc.

100 E. Pratt Street

Baltimore, MD 21202

     5,441,770 (4)      11.6     11.1

FMR LLC

245 Summer Street

Boston, MA 02210

     4,611,956 (5)      9.9     9.5

The Vanguard Group Inc.

100 Vanguard Blvd.

Malvern, PA 19355

     4,070,177 (6)      8.7     8.3

Dos Mil Doscientos Uno, S.L.

Ronda Universitat, 31 1-1

08007 Barcelona, Spain

     3,060,000 (7)      6.5     6.3

Dimensional Fund Advisors LP

Building One

6300 Bee Cave Road

Austin, TX 78746

     2,623,914 (8)      5.6     5.4

Balyasny Asset Management LLC

181 W. Madison Street, Suite 3600

Chicago, IL 60602

     2,495,043 (9)      5.3     5.1

 

103


Table of Contents

Name

   No. of Common Shares
Beneficially Owned
    Percent of Common Shares     Percent of Securities
Entitled to Vote on the
Arrangement Resolution
(Proposal 1)
 

Directors

      

Michael W. Sutherlin

     75,400 (10)      *       * (10) 

Fernando R. Assing

     313,740 (11)      *       1.7 %(11) 

John P. Dielwart

     15,513 (12)      *       * (12) 

R. Vance Milligan, Q.C., ICD.D

     65,331 (13)      *       * (13) 

Douglas R. Ramsay

     —         *       * (14) 

Rose M. Robeson

     4,166       *       * (15) 

Elijio V. Serrano

     18,334 (16)      *       * (16) 

Named Executive Officers

      

Christopher L. Boone

     68,337 (17)      *       * (17) 

John T. Gatlin

     —         *       * (18) 

Michael J. Niedermaier

     24,774 (19)      *       * (19) 

Michael E. Irausquin†

     3,416 (20)      *       * (20) 

Thomas B Sloan, Jr.†

     19,907 (21)      *       * (21) 

All directors and executive officers as a group (16 persons)

     689,526       1.5     3.7

 

(1) Percentages are based on 46,754,956 Common Shares issued and outstanding at September 11, 2017. For purposes of computing the percentage of outstanding Common Shares held by any individual listed in this table, any Common Shares that such person has the right to acquire pursuant to the exercise of a stock option and the settlement of RSUs that are exercisable or will vest within 60 days of September 11, 2017 are deemed to be outstanding, but are not deemed to be outstanding for the purpose of computing the percentage ownership of any other person. The symbol (*) denotes less than one percent (1%). The symbol (†) denotes officers or directors who are no longer serving as directors of officers of TESCO. Pursuant to the Plan of Arrangement, each Option and RSU that is outstanding immediately prior to the Effective Time will be settled in cash and not in Common Shares. See “The Arrangement—Treatment of Options and RSUs” for details.
(2) As reported on Schedule 13G/A as filed on February 9, 2017 with the SEC by Wellington Management Group LLP.
(3) As reported on Schedule 13G/A as filed on January 17, 2017 with the SEC by Blackrock Inc.
(4) As reported on Schedule 13G/A as filed on February 7, 2017 with the SEC by T. Rowe Price Associates Inc.
(5) As reported on Schedule 13G/A as filed on September 11, 2017 with the SEC by FMR LLC.
(6) As reported on Schedule 13G/A filed on February 10, 2017 with the SEC by The Vanguard Group Inc.
(7) As reported on Schedule 13G/A as filed on February 9, 2017 with the SEC by Dimensional Fund Advisors LP.
(8) As reported on Schedule 13G filed on February 1, 2017 with the SEC by Dos Mil Doscientos Uno, S.L.
(9) As reported on Schedule 13G as filed on February 14, 2017 with the SEC by Balyasny Asset Management LLC.
(10) Sutherlin. (i) Includes, for the purposes of the numbers of Common Shares Beneficially Owned referenced above, 52,500 Common Shares and 22,900 Common Shares issuable upon exercise of stock options that are exercisable or will vest within 60 days of September 11, 2017; (ii) includes, for purposes of the percent of Securities Entitled to Vote on the Arrangement Resolution (Proposal 1) above, 52,500 Common Shares, 22,900 Options and 35,500 RSUs.
(11) Assing. Mr. Assing is also an NEO. (i) Includes, for the purposes of the numbers of Common Shares Beneficially Owned referenced above, 117,640 Common Shares and 196,100 Common Shares issuable upon exercise of stock options that are exercisable or will vest within 60 days of September 11, 2017; (ii) includes, for purposes of the percent of Securities Entitled to Vote on the Arrangement Resolution (Proposal 1) above, 117,640 Common Shares, 290,100 Options and 409,900 RSUs.

 

104


Table of Contents
(12) Dielwart. (i) Includes, for the purposes of the numbers of Common Shares Beneficially Owned referenced above, 9,513 Common Shares and 6,000 Common Shares issuable upon exercise of stock options that are exercisable or will vest within 60 days of September 11, 2017; (ii) includes, for purposes of the percent of Securities Entitled to Vote on the Arrangement Resolution (Proposal 1) above, 9,513 Common Shares, 6,000 Options and 26,968 RSUs.
(13) Milligan. (i) Includes, for the purposes of the numbers of Common Shares Beneficially Owned referenced above, 37,831 Common Shares and 27,500 Common Shares issuable upon exercise of stock options that are exercisable or will vest within 60 days of September 11, 2017; (ii) includes, for purposes of the percent of Securities Entitled to Vote on the Arrangement Resolution (Proposal 1) above, 37,831 Common Shares, 27,500 Options and 26,968 RSUs.
(14) Ramsay. Includes, for purposes of the percent of Securities Entitled to Vote on the Arrangement Resolution (Proposal 1) above, 15,800 RSUs.
(15) Robeson. (i) Includes, for the purposes of the numbers of Common Shares Beneficially Owned referenced above, 4,166 Common Shares; (ii) includes, for purposes of the percent of Securities Entitled to Vote on the Arrangement Resolution (Proposal 1) above, 4,166 Common Shares and 24,134 RSUs.
(16) Serrano. (i) Includes, for the purposes of the numbers of Common Shares Beneficially Owned referenced above, 12,334 Common Shares and 6,000 Common Shares issuable upon exercise of stock options that are exercisable or will vest within 60 days of September 11, 2017; (ii) includes, for purposes of the percent of Securities Entitled to Vote on the Arrangement Resolution (Proposal 1) above, 12,334 Common Shares, 6,000 Options and 26,968 RSUs.
(17) Boone. (i) Includes, for the purposes of the numbers of Common Shares Beneficially Owned referenced above, 23,704 Common Shares and 44,633 Common Shares issuable upon exercise of stock options that are exercisable or will vest within 60 days of September 11, 2017; (ii) includes, for purposes of the percent of Securities Entitled to Vote on the Arrangement Resolution (Proposal 1) above, 23,704 Common Shares, 76,000 Options and 128,968 RSUs.
(18) Gatlin. Includes, for purposes of the percent of Securities Entitled to Vote on the Arrangement Resolution (Proposal 1) above 60,000 RSUs.
(19) Niedermaier. (i) Includes, for the purposes of the numbers of Common Shares Beneficially Owned referenced above, 11,574 Common Shares and 13,200 Common Shares issuable upon exercise of stock options that are exercisable or will vest within 60 days of September 11, 2017; (ii) includes, for purposes of the percent of Securities Entitled to Vote on the Arrangement Resolution (Proposal 1) above, 11,574 Common Shares, 23,800 Options and 42,701 RSUs.
(20) Irausquin. This is an estimate of the former named executive officer’s holdings, based solely on his publicly filed documentation.
(21) Sloan. This is an estimate of the former named executive officer’s holdings, based solely on his publicly filed documentation.

For purposes of this proxy statement a “beneficial owner” means any person who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise has or shares: (a) “voting power,” which includes the power to vote, or to direct the voting of, any class of our voting securities; and/or (b) “investment power,” which includes the power to dispose, or to direct the disposition of, any class of our voting securities.

 

105


Table of Contents

AUDITORS, TRANSFER AGENT AND REGISTRAR

The auditor of Nabors is PricewaterhouseCoopers LLP (PwC). PwC will continue to serve as Nabors’ auditor following the Arrangement.

The auditor of TESCO is Ernst & Young LLP.

A register of holders of the common shares is maintained by Conyers Corporate Services (Bermuda) Limited in Bermuda, and a branch register is maintained in the United States by Computershare Trust Company, N.A., which serves as branch registrar and transfer agent at its principal office and place of business at 250 Royall Street, Canton, Massachusetts, 02021. Computershare Trust Company, N.A. will continue to serve as the branch registrar and transfer agent for the Nabors Shares following the Arrangement.

Shareholders should contact the transfer agent, at the phone number or address listed below, if they have questions concerning transfer of ownership or other matters pertaining to their stock accounts.

Computershare Investor Services Inc.

Attn: Simon Law

Relationship Manager

100 University Avenue, 8th Floor

Toronto, Ontario M5J2Y1

Canada

Telephone: 1-800-564-6253

INTERESTS OF EXPERTS

The following persons or companies have prepared certain sections of this proxy statement and/or Annexes attached hereto as described below, or are named as having prepared or certified a report, statement or opinion in or incorporated by reference in this proxy statement.

 

Name of Expert

 

Nature of Relationship

J.P. Morgan Securities LLC   Authors responsible for the preparation of the Fairness Opinion

To the knowledge of TESCO, J.P. Morgan Securities LLC, its directors, officers, employees, associates and affiliates beneficially own, directly or indirectly, less than one percent (1%) of the securities of TESCO or any of its associates or affiliates, have not and will not receive any direct or indirect interest in the property of TESCO or any of its associates or affiliates, and are not expected to be elected, appointed or employed as a director, officer or employee of TESCO or any associate or affiliate thereof.

FUTURE SHAREHOLDER PROPOSALS

If the Arrangement Resolution is approved and the Arrangement is completed, TESCO will become an indirect, wholly-owned subsidiary of Nabors and, consequently, will not hold an annual meeting of shareholders in 2018. If the Arrangement Resolution is not approved or the Arrangement is not completed for any reason, TESCO intends to hold an annual meeting of shareholders in 2018 (such meeting, as applicable, our 2018 Annual Meeting).

To be eligible for inclusion in the proxy statement for our 2018 Annual Meeting, shareholder proposals must be received by our Corporate Secretary no later than the close of business on December 1, 2017. Proposals should be sent to the Board of Directors, c/o Corporate Secretary, Tesco Corporation at our principal executive offices located at 11330 Clay Road, Suite 350, Houston, Texas, 77041 United States of America.

 

106


Table of Contents

Under our bylaws, written notice of shareholder nominations to the Board of Directors and any other business proposed by a shareholder that is not to be included in the proxy statement must be delivered to TESCO’s Secretary not less than 60 nor more than 90 days prior to the anniversary of the preceding year’s annual meeting. Accordingly, any shareholder who wishes to have a nomination or other business considered at the 2018 Annual Meeting must deliver a written notice (containing the information specified in our bylaws regarding the shareholder and the proposed action) to TESCO’s Secretary between February 15, 2018 and March 17, 2018. SEC rules permit management to vote proxies in its discretion with respect to such matters if we advise shareholders how management intends to vote. A shareholder seeking to nominate a director for election at a special meeting of shareholders where the election of directors is properly on the agenda must give advance written notice to TESCO not earlier than the close of business on the ninetieth (90th) day prior to such special meeting and not later than the close of business on the later of: (1) the sixtieth (60th) day prior to such special meeting; or (2) the tenth (10th) day following the day on which TESCO first publicly announces the date of such special meeting.

HOUSEHOLDING OF PROXY MATERIALS

The SEC has adopted rules that permit companies and intermediaries such as brokers to satisfy delivery requirements for proxy statements and annual reports with respect to two or more stockholders sharing the same address by delivering a single proxy statement or annual report, as applicable, addressed to those stockholders. As permitted by the U.S. Exchange Act, only one copy of this proxy statement is being delivered to Securityholders residing at the same address, unless such Securityholders have notified TESCO of their desire to receive multiple copies of the proxy statement. This process, which is commonly referred to as “householding,” potentially provides extra convenience for stockholders and cost savings for companies.

If you have consented to “householding” but wish to receive separate annual reports and proxy statements in the future, notify TESCO’s Investor Relations by phone at 1-877-TESCO-77 or 1-713-359-7295, by e-mail at investor@tescocorp.com or by mail at Tesco Corporation, ATTN: Investor Relations, 1330 Clay Road, Suite 350, Houston, Texas, 77041 United States of America. You will be removed from the “householding” program within 30 days after TESCO receives your notice. If your household received a single mailing of this proxy statement and you would like to receive additional copies, TESCO’s Investor Relations can promptly handle that request for you as well. We will deliver promptly, upon written or oral request, additional copies of the proxy statement to a Securityholder at a shared address to which a single copy of the documents were delivered. Alternatively, if you are receiving multiple copies and wish to receive only single copies in the future, TESCO’s Investor Relations at the above addresses and numbers can assist you with that as well.

WHERE YOU CAN FIND ADDITIONAL INFORMATION

TESCO and Nabors each file annual, quarterly, and special reports, proxy statements, and other information with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. TESCO also files annual, quarterly, and special reports, proxy statements, and other information with Canadian securities regulatory authorities on SEDAR at www.sedar.com. You may read and copy any reports, statements, or other information that we or Nabors files at the SEC’s public reference rooms in Washington, D.C. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the Public Reference Rooms. Our public filings are also available to the public from commercial document retrieval services and on the website maintained by the SEC at http://www.sec.gov (which contains reports, proxy and information statements, and other information, regarding issuers that file electronically with the SEC), as well as at www.sedar.com. We make available on or through our website at www.tescocorp.com and Nabors makes available through its website at www.nabors.com free of charge, their respective annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, press releases, charters for the committees of their respective board of directors, their respective codes of conduct and other company information, including amendments to such documents as soon as reasonably

 

107


Table of Contents

practicable after such materials are electronically filed or furnished to the SEC or otherwise publicly released. Such information will also be furnished upon written request to us at our corporate headquarters.

Incorporation of Certain Documents by Reference

The SEC allows TESCO and Nabors to “incorporate by reference” information into this proxy statement. This means that TESCO and Nabors can disclose important information to you by referring you to another document filed separately with the SEC. The information incorporated by reference is considered to be a part of this proxy statement, except for any information that is superseded by information that is included directly in this proxy statement or incorporated by reference subsequent to the date of this proxy statement. For Canadian law purposes, there are no documents incorporated by reference into this proxy statement.

This proxy statement incorporates by reference the documents listed below that TESCO and Nabors have previously filed with the SEC, some of which are also attached as annexes to this proxy statement. They contain important information about the companies and their financial condition. The following documents, which were filed by the companies with the SEC, are incorporated by reference into this proxy statement (other than, in each case, documents or information deemed to have been furnished and not filed in accordance with SEC rules):

 

TESCO Filings with the SEC

(File No. 001-34090)

  

Period and/or Filing Date

Annual Report on Form 10-K    Fiscal year ended 2016 (filed March 3, 2017)
Definitive proxy statements on Form DEF 14A    Filed on March 27, 2017
Quarterly Report on Form 10-Q    First Quarter of 2017 (filed May 9, 2017)
Quarterly Report on Form 10-Q    Second Quarter of 2017 (filed August 8, 2017)
Current Report on Form 8-K*    Filed January 31, 2017; May 22, 2017; July 10, 2017; August 14, 2017*; and August 21, 2017.

Nabors Filings with the SEC

(File No. 001-32657)

  

Period and/or Filing Date

Annual Report on Form 10-K    Fiscal year ended 2016 (filed February 28, 2017)
Definitive proxy statements on Form DEF 14A    Filed on April 27, 2017
Quarterly Report on Form 10-Q    First Quarter of 2017 (filed April 28, 2017)
Quarterly Report on Form 10-Q    Second Quarter of 2017 (filed August 3, 2017)
Current Report on Form 8-K*    January 11, 2017; January 13, 2017; February 17, 2017; February 23, 2017*; March 6, 2017; May 4, 2017; June 9, 2017*; and August 16, 2017.

 

* Other than the portions of those documents not deemed to be filed (such as any information furnished pursuant to Item 2.02 or Item 7.01 of any current report on Form 8-K under the U.S. Exchange Act).

In accordance with SEC rules, all documents filed by TESCO and Nabors under Section 13(a), 13(c), 14 or 15(d) of the U.S. Exchange Act from the date of this proxy statement to the completion of the Special Meeting will also be deemed to be incorporated by reference into this proxy statement other than the portions of those documents not deemed to be filed. These documents include periodic reports, such as Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K (excluding any information furnished pursuant to Item 2.02 or Item 7.01 of any current report on Form 8-K under the U.S. Exchange Act), and proxy statements.

TESCO and Nabors also incorporate by reference the Arrangement Agreement attached to this proxy statement as Annex C.

Nabors has supplied all information contained in this proxy statement relating to Nabors, and TESCO has supplied all information contained in or incorporated by reference into this proxy statement relating to TESCO.

Any statement contained in a document incorporated or deemed to be incorporated by reference herein will be deemed to be modified or superseded for purposes of this proxy statement to the extent that a statement contained

 

108


Table of Contents

herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any such statement so modified or superseded will not be deemed, except as so modified or superseded, to constitute a part of this proxy statement.

You may also obtain copies of any document incorporated in this proxy statement, without charge, by requesting them in writing or by telephone from the appropriate company at the addresses below, or from the SEC through the SEC’s website at http://www.sec.gov. Securityholders and Nabors shareholders may request a copy of such documents by contacting:

 

Tesco Corporation

11330 Clay Road, Suite 350

Houston, Texas 77041

Attention: Investor Relations

Telephone: 1-713-359-7000

  

Nabors Industries, Ltd.

Crown House Second Floor

4 Par-la-Ville Road

Hamilton, HM08 Bermuda

Attention: Investor Relations

Telephone: 1-441-292-1510

In addition, you may obtain copies of any document incorporated in this proxy statement, without charge, by visiting the websites maintained by TESCO and Nabors at http://www.tescocorp.com and http://www.Nabors.com, respectively.

If you would like to request documents, please do so by [] to receive them before the Special Meeting. If you request any incorporated documents from us, we will mail them to you by first class mail, or another equally prompt means, within one business day after we receive your request.

TESCO and Nabors have not authorized anyone to give any information or make any representation about the Arrangement, the Special Meeting or TESCO and Nabors that is different from, or in addition to, that contained in this proxy statement or in any of the materials that TESCO and Nabors have included or incorporated by reference into this proxy statement. Therefore, if anyone does give you information of this sort, you should not rely on it. The information contained in this proxy statement is accurate only as of the date of this proxy statement unless the information specifically indicates that another date applies, and neither the mailing of this proxy statement to shareholders nor the issuance of Nabors Shares in the Arrangement should create any implication to the contrary.

Electronic Availability of Proxy Statement

We will be providing mailed copies of the proxy materials, which include instructions on how to access this proxy statement electronically and how to vote online. Additionally, we are making this proxy statement available to shareholders electronically via the Internet on TESCO’s webpage at the website at www.proxyvote.com.

Proxy Solicitation Costs

Solicitation of proxies is expected to commence on or about [●], 2017. TESCO will bear the cost of the solicitation. In addition to solicitation by mail, certain of the directors, officers, and regular employees of TESCO may, without extra compensation, solicit proxies by telephone, facsimile, electronic, written communication, and personal interview. We also have hired Alliance Advisors LLC to assist us in the distribution of proxy materials and the solicitation of votes described above. We will pay Alliance Advisors LLC a base fee of $20,000 plus customary costs and expenses for these services. The Company will make arrangements with brokerage houses, custodians, nominees, and other fiduciaries to send proxy materials to their principals, and TESCO will reimburse them for postage and clerical expenses.

 

109


Table of Contents

You should rely only on the information contained in this proxy statement to vote on each of the proposals set forth in this proxy statement. We have not authorized anyone to provide you with information that is different from what is contained in (or incorporated by reference into) this proxy statement. This proxy statement is dated [], 2017. You should not assume that the information contained in this proxy statement is accurate as of any later date.

Christopher L. Boone

By order of the Board of Directors,

Christopher L. Boone

Senior Vice President and Chief Financial Officer

[●], 2017

 

110


Table of Contents

ANNEX A

GLOSSARY OF TERMS

The following is a glossary of certain terms used in this proxy statement, including the Summary Information section hereof:

2018 Annual Meeting means an annual meeting of shareholders in 2018 that TESCO intends to hold if the Arrangement Resolution is not approved or the Arrangement is not completed for any reason;

5% Transferee Shareholders means U.S. Holders of Common Shares that will own (directly, indirectly or constructively) 5% or more of either the total voting power or the total value of the shares of Nabors immediately after the Arrangement;

ABCA means the Business Corporations Act (Alberta);

Acquisition Proposal means any inquiry regarding, or any proposal or offer relating to, any transaction (other than any transaction permitted or contemplated by the Arrangement Agreement) to effect (A) a merger, reorganization, share exchange, consolidation, business combination, recapitalization, liquidation, dissolution or similar transaction involving TESCO or any of its subsidiaries whose assets, taken together, constitute 15% or more of the consolidated assets (including stock of its subsidiaries) of TESCO and its subsidiaries, taken as a whole, based on fair market value, (B) any direct or indirect sale of, or tender or exchange offer for, TESCO’s voting securities, in one or a series of related transactions, that, if consummated, would result in any person (or the shareholders of such person) beneficially owning securities representing 15% or more of TESCO’s total voting power (or of the surviving parent entity in such transaction) or (C) any direct or indirect sale, lease, exchange, mortgage, pledge, license, transfer or other disposition, directly or indirectly, by merger, consolidation, sale of equity interests, share exchange, joint venture, business combination or otherwise, in one or a series of related transactions, of assets or businesses of TESCO or its subsidiaries constituting 15% or more of the consolidated assets or revenues of TESCO and its subsidiaries, taken as a whole (other than a proposal or offer made by Nabors or an affiliate thereof).

Arrangement means the proposed plan of arrangement under section 193 of the ABCA involving the acquisition by Nabors Maple of all of the issued and outstanding Common Shares of TESCO, a copy of which is attached as Schedule A to the Arrangement Agreement attached as Annex C to this proxy statement;

Arrangement Agreement means the Arrangement Agreement dated August 13, 2017, as it may be amended from time to time, by and among TESCO, Nabors and Nabors Maple, a copy of which is attached as Annex C to this proxy statement;

Arrangement Resolution means the form of arrangement resolution, a copy of which is attached as Annex B to this proxy statement;

Beneficial Owner means any person who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise has or shares: (a) “voting power,” which includes the power to vote, or to direct the voting of, any class of our voting securities; and/or (b) “investment power,” which includes the power to dispose, or to direct the disposition of, any class of our voting securities;

Beneficial Shareholder means a Shareholder whose Common Shares are not registered in the Shareholder’s name but in the name of an intermediary (typically a bank, trust company, securities dealer or broker, or a clearing agency in which an intermediary participates);

Bermuda Act means the Bermuda Companies Act 1981;

 

A-1


Table of Contents

Board means the board of directors of TESCO as the same is constituted from time to time;

Change of Control means (a) a change in ownership that occurs when one person or a group (as determined for the purposes of Internal Revenue Code Section 409A) acquires stock that, combined with stock previously owned, controls more than 50% of the value or voting power of the stock of TESCO (incremental increases in ownership by a person or group that already owns fifty percent (50%) of TESCO do not result in a change in ownership); (b) a change in effective control that occurs on the date that, during any 12-month period, either (x) any person or group acquires stock possessing more than 50% of the voting power of TESCO, or (y) the majority of the Board is replaced by persons whose appointment or election is not endorsed by a majority of the Board prior to the date of the appointment or election; or (c) a change in ownership of a substantial portion of the assets that occurs on the date that a person or a group acquires, during any 12-month period, assets of TESCO having a total gross fair market value equal to more than 50% of the total gross fair market value of all of TESCO’s assets; provided, however, that there is no change in control event under this subsection when there is a transfer to: (w) a Shareholder (immediately before the asset transfer) in exchange for or with respect to its stock; (x) an entity, 50 percent or more of the total value or voting power of which is owned, directly or indirectly, by TESCO immediately after the asset transfer; (y) a person, or more than one person acting as a group, that owns immediately after the asset transfer, directly or indirectly, 50 percent or more of the total value or voting power of all the outstanding stock of TESCO; or (z) an entity, at least 50 percent of the total value or voting power of which is owned, directly or indirectly, by a person described in item (y) within the meaning of Internal Revenue Code Section 409A. For the purposes of this paragraph, “gross fair market value” shall have the meaning as provided in Section 409A

Code means the U.S. Internal Revenue Code of 1986, as amended;

Collateral Benefit has the meaning set forth in MI 61-101;

Commissioner means the Commissioner of Competition appointed under subsection 7(1) of the Competition Act or his designee;

Company means Tesco Corporation;

Company Change in Recommendation has the meaning set forth in Section 7.2(d) of the Arrangement Agreement;

Company Stock Incentive Plans means, collectively, the Amended and Restated Company 2005 Incentive Plan, the Company 2017 Long-Term Incentive Plan and the Company Employee Stock Savings Plan;

Competition Act means the Competition Act (Canada);

Competition Act Approval means either: (a) the receipt of an advance ruling certificate pursuant to section 102 of the Competition Act in respect of the transactions contemplated by the Arrangement Agreement; or (b) both of (i) the expiry, waiver or termination of any applicable waiting periods under Part IX of the Competition Act and (ii) written confirmation shall have been received from the Commissioner that he does not, at that time, intend to make an application under Section 92 of the Competition Act in respect of the transactions contemplated by the Arrangement Agreement;

Competition Tribunal means the Competition Tribunal established under Subsection 3(1) of the Competition Tribunal Act (Canada);

Common Shares means the common shares, without par value, of TESCO;

 

A-2


Table of Contents

Company Termination Fee means a termination fee in the amount of $8,000,000 that TESCO shall pay Nabors if a Company Termination Fee Event occurs;

Company Termination Fee Event means for the purposes of the Arrangement Agreement, the termination of the Arrangement Agreement:

 

  (a) by Nabors as a result of a Company Change in Recommendation or TESCO breaching its covenants under Section 5.3 of the Arrangement Agreement (non-solicitation covenants);

 

  (b) by TESCO in order to enter into a binding written agreement for a Superior Proposal;

 

  (c) by either Party if (i) the Requisite Approval was not obtained and (ii) at any time after the date of the Arrangement Agreement and at or before the date of the Special Meeting, an Acquisition Proposal shall have been made or publicly announced or communicated to the Board and still be pending at the time the Arrangement Agreement is terminated or have been withdrawn less than 10 days prior to the date of such termination and (iii) within 12 months of the date of such termination, TESCO or any of its Subsidiaries enters into any definitive agreement with respect to, or consummates any Acquisition Proposal (provided that, for purposes of this termination provision, any reference to “15%” in the definition of Acquisition Proposal shall be deemed to be a reference to “50%”); and

 

  (d) by either Party if (i) the Arrangement has not been completed by the Outside Date or by Nabors if TESCO breaches any of its covenants, representations or warranties under the Arrangement Agreement and (ii) at any time after the date of the Arrangement Agreement and before such termination an Acquisition Proposal shall have been publicly announced and still be pending at the time of such termination or have been withdrawn less than 10 days prior to the date of such termination and (iii) within 12 months of the date of such termination, TESCO or any of its Subsidiaries enters into any definitive agreement with respect to, or consummates any Acquisition Proposal (provided that, for purposes of this termination provision, any reference to “15%” in the definition of Acquisition Proposal shall be deemed to be a reference to “50%”).;

Control Distribution has the meaning set forth in NI 45-102;

Court means the Court of Queen’s Bench of Alberta;

Dissent Rights means the rights of dissent with respect to Common Shares held by registered Shareholders pursuant to Section 191 of the ABCA, as modified by Plan of Arrangement and the Interim Order;

Dissent Shares means Common Shares held by a Dissenting Shareholder and in respect of which the Dissenting Shareholder has validly exercised Dissent Rights;

Dissenting Resident Holder means a Resident Holder who validly exercises dissent rights in respect of the Arrangement and is entitled to be paid the fair value of their Common Shares by Nabors Maple;

Dissenting Shareholder means a registered Shareholder who has duly exercised its Dissent Rights and has not withdrawn or been deemed to have withdrawn such exercise of Dissent Rights, but only in respect of Common Shares in respect of which Dissent Rights are validly exercised by such Shareholder;

Event means any event, occurrence, state of facts, circumstance, condition, effect or change;

Fairness Opinion means the oral opinion of J.P. Morgan delivered to the Board, which was confirmed by delivery of a written opinion dated August 13, 2017, to the effect that, as of such date and based upon and subject to the assumptions made, procedures followed, matters considered and limitations on the review undertaken by J.P. Morgan in preparing the opinion, the consideration to be paid to TESCO’s Shareholders in the proposed Arrangement was fair, from a financial point of view, to such holders, as more fully described in the section titled “Opinion of TESCO’s Financial Advisor”;

 

A-3


Table of Contents

Final Order means the final order of the Court approving the Arrangement;

Gain Recognition Agreement has the meaning set forth in the Treasury regulations promulgated under Section 367(a) of the Code.

Gross Fair Market Value has the meaning set forth in Section 409A of the Code;

Holder means a beneficial owner of Common Shares who disposes of Common Shares for Nabors Shares pursuant to the Arrangement and who for purposes of the Tax Act and at all relevant times (i) deals at arm’s length with TESCO; (ii) is not affiliated with TESCO; and (iii) holds Common Shares, and will hold any Nabors Shares received under the Arrangement, as capital property;

Householding means rules adopted by the SEC that permit companies and intermediaries such as brokers to satisfy delivery requirements for proxy statements and annual reports with respect to two or more stockholders sharing the same address by delivering a single proxy statement or annual report, as applicable, addressed to those stockholders;

HSR Act means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended;

Interim Order means the interim order of the Court contemplated by Section 2.3 of the Arrangement Agreement and made pursuant to Section 193(4) of the ABCA, in a form acceptable to Nabors and TESCO, each acting reasonably, providing for, among other things, the calling and holding of the Special Meeting, as the same may be amended by the Court with the consent of Nabors and TESCO, each acting reasonably;

Investment Power means the power to dispose, or to direct the disposition of, any class of our voting securities;

IRS means the United States Internal Revenue Service;

J.P. Morgan means J.P. Morgan Securities LLC;

Law or Laws means any domestic or foreign, federal, state, provincial or local law (statutory, common or otherwise), constitution, by-law, ordinance, principle of law and equity, rule, injunction, determination, award, treaty, convention, ordinance, code, rule, regulation, order, injunction, judgment, decree, ruling or other similar requirement enacted, adopted, promulgated or applied by a Governmental Entity, and any terms and conditions of any grant of approval, permission, authority or license of any Governmental Entity (including, for greater certainty, the Securities Laws), and the term “applicable” with respect to such Laws and in a context that refers to a Party, means such Laws as are binding upon or applicable to such Party and/or its Subsidiaries or their business, undertaking, property or securities and emanate from a Person having jurisdiction over the Party and/or its Subsidiaries or its or their business, undertaking, property or securities;

Market Value means 0.68 multiplied by the closing price of one common share of Nabors on the NYSE on the last trading day prior to the effective date of the Arrangement;

Material Adverse Effect means, with respect to TESCO, on the one hand, or Nabors, on the other hand, any Event that is material and adverse to the financial condition, businesses or results of operations of TESCO and its Subsidiaries taken as a whole (with respect to TESCO) or Nabors and its Subsidiaries taken as a whole (with respect to the Nabors), excluding any effect resulting from: (a) changes in the securities, credit or financial markets in the United States or elsewhere; (b) changes or events, affecting the industries in which it or they operate generally, including changes in market prices; (c) any change in applicable law, including any sanctions brought against any country by any other country or the interpretation thereof or the generally accepted accounting principles applicable to TESCO or Nabors, or the interpretation thereof; (d) any weather related or other force majeure event, including any outbreak of major hostilities in which the United States or Canada is

 

A-4


Table of Contents

involved or any act of terrorism within the United States or Canada or directed against their facilities or citizens wherever located; (e) any failure, in and of itself, to meet any internal or published projections or forecasts in respect of revenues, earnings or other financial or operating metrics (however, the facts or occurrences giving rise to or contributing to such failure may be taken into account in determining whether there has been or would reasonably be expected to be a Material Adverse Effect); (f) changes in the trading prices or trading volume of capital stock or debt instruments (however, the facts or occurrences giving rise to or contributing to such change in trading prices or trading volume may be taken into account in determining whether there has been or would reasonably be expected to be a Material Adverse Effect); or (g) changes or events occurring as a result of the announcement of the Arrangement Agreement and the transactions contemplated thereby, or any actions expressly required to be taken by the Arrangement Agreement or consented to in writing by Nabors (with respect to TESCO) or TESCO (with respect to the Nabors);

MI 61-101 means Multilateral Instrument 61-101—Protection of Minority Security Holders in Special Transactions;

Nabors Board means the board of directors of Nabors, as the same is constituted from time to time;

Nabors Maple means Nabors Maple Acquisition Ltd;

Nabors Shares means Nabors’ authorized capital stock of 800,000,000 shares of common stock, par value $0.001;

NASDAQ means the NASDAQ Stock Market;

Non-Resident Holder means a Holder who, at all relevant times, for purposes of the Tax Act and any applicable income tax treaty convention, is not, and is not deemed to be, resident in Canada and does not use or hold, and is not deemed to use or hold, the Common Shares or Nabors Shares received under the Arrangement in a business carried on in Canada;

NYSE means the New York Stock Exchange;

Option means each option to acquire Common Shares granted under any of TESCO’s Stock Incentive Plans or otherwise;

Option Consideration means an amount, if any, in cash per share, less any required tax withholdings, without interest, equal to (a) the excess of the Market Value per Common Share over the Option’s exercise price, multiplied by (b) the aggregate number of Common Shares subject to such Option immediately prior to the Effective Time;

Option Holders means holders of Options;

PFIC means passive foreign investment company;

Plan of Arrangement means the plan of arrangement of TESCO, the full text of which is set out in Schedule A to the Arrangement Agreement, and any amendments or variations to such plan made in accordance with Section 7.4 of the Arrangement Agreement or the Plan of Arrangement or upon the direction of the Court in the Final Order with the consent of Nabors and TESCO, each acting reasonably;

Present value means the current value of the cash flows generated by the asset, and is obtained by discounting those cash flows back to the present using a discount rate that takes into account macro-economic assumptions and estimates of risk, the opportunity cost of capital and other appropriate factors;

 

A-5


Table of Contents

Proposed Amendments means all specific proposals to amend the Tax Act publicly announced by or on behalf of the Minister of Finance (Canada) prior to the date hereof;

proxy statement means the notice of the Special Meeting and proxy statement, including all schedules, appendices and exhibits to such materials and enclosures with such materials, to be sent to the Securityholders in connection with the Special Meeting, as amended, supplemented or otherwise modified from time to time;

PwC means PricewaterhouseCoopers LLP;

Record Date means [];

Regulatory Approvals means any material approvals, decisions, clearances or confirmations that are required under Merger Control Laws or otherwise in order to complete the Arrangement;

Representatives has the meaning set forth under Section 5.1 of the Arrangement Agreement;

Requisite Approval means the requisite approval for the Arrangement Resolution, which shall be not less than two-thirds of the votes cast on the Arrangement Resolution by the Securityholders present in Person or represented by proxy at the Special Meeting and voting together as a single class;

Resident Holder means a Holder who, at all relevant times, for purposes of the Tax Act and any applicable income tax treaty convention, is, or is deemed to be, resident in Canada;

Restricted Stock Unit means each award of a right entitling the recipient to receive, upon vesting or settlement as applicable, TESCO Shares or a cash amount based on the value of TESCO Shares, including the right to receive such payment on a deferred basis, and including such awards referred to as performance stock units or otherwise based on the achievement of performance metrics;

RDSP means registered disability savings plan;

RESP means registered education savings plan;

RRIF means registered retirement income fund;

RRSP means registered retirement savings plan;

RSU means Restricted Stock Units (including performance-based Restricted Stock Units);

RSU Consideration means an amount in cash, less any required tax withholding, without interest, equal to (a) the Market Value per Common Share, multiplied by (b) the aggregate number of Common Shares underlying the RSUs immediately prior to the Effective Time;

RSU Holders means holders of RSUs;

SEC means the United States Securities and Exchange Commission;

Securities Laws means: (a) in Canada, the Securities Act, together with all other applicable provincial and territorial securities Laws, rules and regulations and published instruments and policies thereunder; (b) in the United States, the U.S. Exchange Act and the U.S. Securities Act, together with all other applicable state and local securities Laws, rules and regulations and published policies thereunder; and (c) the policies and rules of the NYSE and NASDAQ, as applicable;

 

A-6


Table of Contents

Securityholders means, collectively, the holders of Common Shares, Options and/or Restricted Stock Units;

Shareholders means the holders of Common Shares;

Share Consideration means 0.68 of a Nabors Share for each Common Share that Shareholders will receive from Nabors, pursuant to and under the terms of the Arrangement, in exchange for each Common Share transferred to Nabors Maple;

Significant Holder means a holder of Common Shares with a tax basis of $1 million or more or a holder of at least 5% (by vote or value) of the total outstanding stock of TESCO;

Special Meeting means the Special Meeting of Securityholders of TESCO, including any adjournment or postponement thereof, to be called and held on [●] at [●], at [●], Calgary, Alberta, Canada in accordance with the Interim Order to consider the Arrangement Resolution;

Superior Proposal means a bona fide written Acquisition Proposal that the Board determines in good faith, after consultation with its financial advisors and outside legal counsel, taking into account all legal, financial, regulatory, timing and other aspects of the proposal, all conditions contained therein and the Person making the proposal, is more favorable to the Shareholders, from a financial point of view, than the transactions contemplated by the Arrangement Agreement (after giving effect to any adjustments to the terms and provisions of the Arrangement Agreement committed to in writing by TESCO in response to such Acquisition Proposal); provided that, for purposes of this definition of “Superior Proposal,” the term “Acquisition Proposal” shall have the meaning assigned to it in the Arrangement Agreement, except that the reference to “15% or more” in the definition of “Acquisition Proposal” shall be deemed to be a reference to greater than 50%;

Synergies means certain internal financial analyses and forecasts prepared by the managements of TESCO and Nabors relating to their respective businesses, as well as the estimated amount and timing of cost savings and related expenses and synergies expected to result from the Arrangement;

Tax Act means the Income Tax Act (Canada);

Taxable Canadian Property has the meaning set forth in the Tax Act;

Terminal value means the present value of all future cash flows generated by the asset for periods beyond the projections period;

TESCO means Tesco Corporation;

TFSA means tax free savings account;

Transfer Agent means Computershare Trust Company, N.A.;

Unlevered Free Cash Flows means a calculation of the future cash flows generated by an asset without including in such calculation any debt servicing costs. Specifically, unlevered free cash flow for this purpose represents EBITDA less taxes, capital expenditures, increases in net working capital and certain other one-time cash expenses, as applicable;

U.S. Exchange Act means the United States Securities Exchange Act of 1934;

U.S. Holder means a beneficial owner of Common Shares or, after the Arrangement, Nabors Shares who is for U.S. federal income tax purposes: (a) a citizen or resident of the United States; (b) a corporation or other entity taxable as a corporation created or organized in or under the laws of the United States or any state thereof or the

 

A-7


Table of Contents

District of Columbia; (c) an estate that is subject to U.S. federal income tax on its income, regardless of source; or (d) a trust that (A) is subject to the primary jurisdiction of a court within the United States and the control of one or more U.S. persons with respect to all of its substantial decisions, or (B) has a valid election in effect under applicable Treasury regulations to be treated as a U.S. person;

U.S. Securities Act means the United States Securities Act of 1933; and

Voting Power means power to vote, or to direct the voting of, any class of our voting securities.

 

A-8


Table of Contents

ANNEX B

ARRANGEMENT RESOLUTION

 

1. The arrangement (as may be amended, supplemented or varied, the “Arrangement”) under Section 193 of the Business Corporations Act (Alberta) (the “ABCA”) involving Tesco Corporation (the “Company”), its securityholders, Nabors Industries Ltd. (“Parent”) and Nabors Maple Acquisition Ltd. (“AcquisitionCo”), all as more particularly described and set forth in the plan of arrangement (as may be amended, supplemented or varied, the “Plan of Arrangement”) attached to the Management Information Circular of the Company dated [●] (the “Circular”), is hereby authorized and approved.

 

2. The Arrangement Agreement dated effective August 13, 2017 among Parent, AcquisitionCo and the Company (as may be amended, supplemented or varied from time to time, the “Arrangement Agreement”), which includes the Plan of Arrangement, the full text of which is set out in Schedule A to the Arrangement Agreement, the actions of the directors of the Company in approving the Arrangement, the Arrangement Agreement and the Plan of Arrangement and the actions of the directors and officers of the Company in executing and delivering the Arrangement Agreement and the Plan of Arrangement and causing the performance by the Company of its obligations thereunder are hereby confirmed, ratified, authorized and approved.

 

3. The Company is hereby authorized to apply for a final order from the Court of Queen’s Bench of Alberta (the “Court”) to approve the Arrangement in accordance with and subject to the terms and conditions set forth in the Arrangement Agreement and the Plan of Arrangement.

 

4. Notwithstanding that this resolution has been passed (and the Arrangement authorized, approved and agreed) by the securityholders of the Company or that the Arrangement has been approved by the Court in accordance with the ABCA, the directors of the Company are hereby authorized and empowered without further approval of the securityholders of the Company (i) to amend, modify, supplement or vary the Arrangement Agreement or the Plan of Arrangement to the extent permitted by the Arrangement Agreement and the Plan of Arrangement, and (ii) subject to the terms and conditions of the Arrangement Agreement, not to proceed with the Arrangement.

 

5. Any one director or officer of the Company is hereby, authorized, empowered and directed, for and on behalf of the Company, to execute or cause to be executed, and to deliver or cause to be delivered all such documents, and to do or cause to be done all such acts and things as in such person’s determination may be necessary or desirable to give effect to the Arrangement in accordance with the Arrangement Agreement and the Plan of Arrangement (including the execution and delivery of articles of arrangement), such determination to be conclusively evidenced by the execution and delivery of such documents or the doing of such acts or things.


Table of Contents

ANNEX C

Execution Version

ARRANGEMENT AGREEMENT

dated as of August 13, 2017

by and among

NABORS INDUSTRIES LTD.

NABORS MAPLE ACQUISITION LTD.

-and-

TESCO CORPORATION

 

 


Table of Contents

TABLE OF CONTENTS

 

          Page  

ARTICLE I INTERPRETATION

     C-1  

Section 1.1

   Definitions      C-1  

Section 1.2

   Interpretation Not Affected by Headings      C-10  

Section 1.3

   Number and Gender      C-10  

Section 1.4

   Date for Any Action      C-10  

Section 1.5

   Currency      C-10  

Section 1.6

   Accounting Matters      C-10  

Section 1.7

   Knowledge      C-10  

Section 1.8

   Schedules      C-10  

Section 1.9

   Other Definitional and Interpretive Provisions      C-10  

ARTICLE II THE ARRANGEMENT

     C-11  

Section 2.1

   Arrangement      C-11  

Section 2.2

   AcquisitionCo      C-11  

Section 2.3

   Interim Order      C-11  

Section 2.4

   Company Meeting      C-12  

Section 2.5

   Company Circular      C-13  

Section 2.6

   Recommendation of Company Board      C-14  

Section 2.7

   Securities Law Compliance      C-14  

Section 2.8

   Final Order      C-14  

Section 2.9

   Court Proceedings      C-14  

Section 2.10

   Articles of Arrangement and Effective Date      C-15  

Section 2.11

   Payment of Consideration      C-15  

Section 2.12

   Announcement and Shareholder Communications      C-15  

Section 2.13

   List of Shareholders      C-16  

Section 2.14

   U.S. Securities Law Matters      C-16  

Section 2.15

   Treatment of Options      C-17  

Section 2.16

   Treatment of Restricted Stock Units      C-17  

Section 2.17

   Dissenting Shareholders      C-18  

ARTICLE III REPRESENTATIONS AND WARRANTIES

     C-18  

Section 3.1

   Representations and Warranties of the Company      C-18  

Section 3.2

   Representations and Warranties of Parent      C-30  

ARTICLE IV COVENANTS RELATING TO CONDUCT OF BUSINESS

     C-37  

Section 4.1

   Covenants of the Company      C-37  

Section 4.2

   Covenants of Parent      C-42  

ARTICLE V ADDITIONAL AGREEMENTS

     C-43  

Section 5.1

   Access to Information; Confidentiality      C-43  

Section 5.2

   Reasonable Best Efforts      C-43  

 

i


Table of Contents
          Page  

Section 5.3

   Acquisition Proposals      C-45  

Section 5.4

   Stock Exchange De-Listing      C-47  

Section 5.5

   Employee Benefits Plans      C-47  

Section 5.6

   Section 16 Matters      C-49  

Section 5.7

   Fees and Expenses      C-49  

Section 5.8

   Indemnification; Directors’ and Officers’ Insurance      C-49  

Section 5.9

   Stockholder Litigation      C-50  

Section 5.10

   Additional Agreements      C-50  

Section 5.11

   Exemption from the Registration Requirements of the U.S. Securities Act      C-51  

Section 5.12

   Privacy Issues      C-51  

Section 5.13

   Resignation Letters and Other Deliverables      C-52  

Section 5.14

   Notification of Certain Matters; Transaction Litigation.      C-52  

ARTICLE VI CONDITIONS

     C-53  

Section 6.1

   Mutual Conditions Precedent      C-53  

Section 6.2

   Conditions Precedent to the Obligations of Parent and AcquisitionCo      C-53  

Section 6.3

   Conditions Precedent to the Obligations of Company      C-54  

Section 6.4

   Satisfaction of Conditions      C-54  

Section 6.5

   Frustration of Conditions      C-55  

ARTICLE VII TERM, TERMINATION, AMENDMENT AND WAIVER

     C-55  

Section 7.1

   Term      C-55  

Section 7.2

   Termination      C-55  

Section 7.3

   Effect of Termination      C-56  

Section 7.4

   Amendment      C-57  

Section 7.5

   Waiver      C-57  

ARTICLE VIII GENERAL PROVISIONS

     C-58  

Section 8.1

   Non-Survival of Representations, Warranties and Agreements      C-58  

Section 8.2

   Notices      C-58  

Section 8.3

   Governing Law; Jurisdiction      C-59  

Section 8.4

   Injunctive Relief      C-60  

Section 8.5

   Time of Essence      C-60  

Section 8.6

   Entire Agreement, Binding Effect, Assignment and References      C-60  

Section 8.7

   No Liability      C-60  

Section 8.8

   Severability      C-60  

Section 8.9

   Counterparts, Execution      C-60  

 

ii


Table of Contents

ARRANGEMENT AGREEMENT

THIS ARRANGEMENT AGREEMENT is made as of August 13, 2017,

BETWEEN:

NABORS INDUSTRIES LTD., a Bermuda exempted company (“Parent”);

NABORS MAPLE ACQUISITION LTD., a corporation organized under the laws of Alberta, Canada (“AcquisitionCo”);

- and -

TESCO CORPORATION, a corporation organized under the laws of Alberta, Canada (the “Company”).

RECITALS:

WHEREAS AcquisitionCo proposes to acquire all of the issued and outstanding Company Shares (the “Acquisition”);

WHEREAS AcquisitionCo is a wholly-owned subsidiary of Parent;

WHEREAS the Parties intend to carry out the Acquisition by way of an arrangement under section 193 of the ABCA substantially on the terms and conditions set forth in the Plan of Arrangement (annexed hereto as Schedule A);

WHEREAS the Company Board has unanimously: (i) determined that the Arrangement is in the best interests of the Company; (ii) determined that the Arrangement is fair to the Company Shareholders; (iii) approved the Arrangement and the entering into of this Agreement; (iv) resolved to recommend that the Company Securityholders vote in favor of the Arrangement; and (v) approved each other Transaction Agreement to which the Company is a party; and

WHEREAS the Parties have entered into this Agreement to provide for the matters referred to in the foregoing recitals and for other matters relating to such transaction;

NOW THEREFORE THIS AGREEMENT WITNESSES THAT in consideration of the covenants and agreements herein contained and other good and valuable consideration (the receipt and sufficiency of which are hereby acknowledged), the Parties agree as follows:

ARTICLE I

INTERPRETATION

Section 1.1 Definitions. In this Agreement, unless the context otherwise requires:

2017 STIP” has the meaning set forth in Section 5.5(e);

ABCA” means the Business Corporation Act (Alberta);

Acquisition Proposal” has the meaning set forth in Section 5.3(a);

Acceptable Confidentiality Agreement” has the meaning set forth in Section 5.3(b)(i);

 

C-1


Table of Contents

affiliate” has the meaning set forth in the Securities Act;

Agreement” means this Arrangement Agreement, including all schedules annexed to this Arrangement Agreement, as the same may be amended, supplemented or otherwise modified from time to time in accordance with the terms hereof;

Arrangement” means the proposed arrangement under the ABCA on the terms and subject to the conditions set out in the Plan of Arrangement, subject to any amendments or variations to such arrangement made in accordance with Section 7.4 of this Agreement or Section 6.1 of the Plan of Arrangement or made at the direction of the Court in the Final Order (provided that any such amendment or variation is acceptable to both Parent and the Company, each acting reasonably);

Arrangement Resolution” means the special resolution of the Company Securityholders approving the Plan of Arrangement which is to be considered at the Company Meeting substantially in the form of Schedule B hereto;

Articles of Arrangement” means the articles of arrangement of the Company in respect of the Arrangement to be filed with the Registrar after the Final Order is made, which shall be in form and content satisfactory to Parent and the Company, each acting reasonably;

Authorization” means any authorization, order, permit, approval, grant, license, registration, consent, right, notification, condition, franchise, privilege, certificate, judgment, writ, injunction, award, determination, direction, decision, decree, by-law, rule or regulation, of, from or required by any Governmental Entity;

Bump Transactions” has the meaning set forth in Section 4.1(p);

Business Day” means any day, other than a Saturday, a Sunday or a day on which the banks in New York or Calgary are authorized by Law or executive order to be closed;

CCA” means the Competition Act, R.S.C. 1985, c. C-34;

CCA Clearance” means, if the Parties determine that the transactions contemplated hereby exceed the applicable thresholds under Part IX of the CCA, then either: (A) the receipt of an advance ruling certificate pursuant to section 102 of the CCA in respect of the transactions contemplated hereby; or (B) both of (i) the expiry, waiver or termination of any applicable waiting periods under Part IX of the CCA and (ii) written confirmation shall have been received from the Commissioner of Competition that he does not, at that time, intend to make an application under Section 92 of the CCA in respect of the transactions contemplated hereby;

Certificate of Arrangement” means the certificate of arrangement to be issued by the Registrar pursuant to Section 193 of the ABCA in respect of the Articles of Arrangement;

Code” means the U.S. Internal Revenue Code of 1986, as amended;

Company Acquisitions” has the meaning set forth in Section 4.1(e);

Company Affiliate Transaction” has the meaning set forth in Section 3.1(u);

Company Board” means the board of directors of the Company as the same is constituted from time to time;

Company Change in Recommendation” has the meaning set forth in Section 7.2(d);

 

C-2


Table of Contents

Company Circular” means the notice of the Company Meeting and accompanying management information circular, including all schedules, appendices and exhibits to such materials and enclosures with such materials, to be sent to the Company Securityholders in connection with the Company Meeting, as amended, supplemented or otherwise modified from time to time;

Company Contracts” has the meaning set forth in Section 3.1(i)(i);

Company Disclosure Letter” means the disclosure letter delivered by the Company to Parent as of the date of this Agreement;

Company Employee Benefit Plan” means any employee benefit plan, program, policy, practice, agreement, or other arrangement providing benefits to any current or former employee, consultant, officer or director of the Company or any of its Subsidiaries or any beneficiary or dependent thereof that is entered into, sponsored or maintained by the Company or any of its Subsidiaries or to which the Company or any of its Subsidiaries contributes or is obligated to contribute, whether or not written, including any health, medical, dental, vision care, drug, disability, accidental death and dismemberment insurance, life insurance, supplemental unemployment benefit and any employee welfare benefit plan within the meaning of Section 3(1) of ERISA (whether or not such plan is subject to ERISA), any employee pension benefit plan (both registered and non-registered) within the meaning of Section 3(2) of ERISA (whether or not such plan is subject to ERISA), and any post-retirement benefits, bonus, incentive, deferred compensation, vacation, overtime, insurance, stock purchase, stock option, equity award, equity-linked award, severance, employment, change of control or fringe benefit plan, program, policy, practice, agreement, or arrangement, but excluding each employee benefit plan, program, policy, practice, agreement, or other arrangement maintained and/or operated by a Governmental Entity and subject to the applicable Laws of any jurisdiction outside the United States and Canada;

Company Intellectual Property” has the meaning set forth in Section 3.1(p);

Company Meeting” means the special meeting of Company Securityholders, including any adjournment or postponement thereof, to be called and held after the date hereof in accordance with the Interim Order to consider the Arrangement Resolution;

Company Option” means each option to acquire Company Shares granted under any of the Company Stock Incentive Plans or otherwise;

Company Permitted Liens” has the meaning set forth in Section 3.1(o)(i);

Company Permits” has the meaning set forth in Section 3.1(f)(i);

Company Public Documents” means all publicly available reports, schedules, registration statements and other documents filed by the Company since January 1, 2017 with any applicable Securities Authority;

Company Qualified Plans” has the meaning set forth in Section 3.1(j)(iii);

Company Real Properties” has the meaning set forth in Section 3.1(o)(ii);

Company Real Property Leases” has the meaning set forth in Section 3.1(o)(iii);

Company Restricted Stock Unit” means each award of a right entitling the recipient to receive, upon vesting or settlement as applicable, Company Shares or a cash amount based on the value of Company Shares, including the right to receive such payment on a deferred basis, and including such awards referred to as performance stock units or otherwise based on the achievement of performance metrics;

 

C-3


Table of Contents

Company Securityholders” means, collectively, the holders of Company Shares, Company Options and/or Company Restricted Stock Units;

Company Shareholders” means the holders of Company Shares;

Company Shares” means the common shares, without par value, of the Company;

Company Stock Incentive Plans” means, collectively, the Amended and Restated Company 2005 Incentive Plan, the Company 2017 Long-Term Incentive Plan and the Company Employee Stock Savings Plan;

Company Termination Fee” has the meaning set forth in Section 7.3(b)(i);

Company Top Customers” has the meaning set forth in Section 3.1(t);

Confidentiality Agreement” means the confidentiality agreement between Parent and the Company, dated May 19, 2017;

Consideration” means the consideration payable to Company Shareholders for their Company Shares, calculated and payable in accordance with the Plan of Arrangement;

Continuing Employee” has the meaning set forth in Section 5.5(a);

Contract” means any contract, agreement, license, franchise, lease, arrangement, commitment, understanding, joint venture, partnership or other right or obligation (written or oral) to which a Party or any of its Subsidiaries is a party or by which it or any of its Subsidiaries is bound or affected or to which any of their respective properties or assets is subject;

Court” means the Court of Queen’s Bench of Alberta;

Depositary” means such Person as Parent and the Company may jointly appoint, each acting reasonably, to act as depositary in relation to the Arrangement;

Disclosed Personal Information” has the meaning set forth in Section 5.12(b);

Dissent Rights” means the rights of dissent in respect of the Arrangement described in the Plan of Arrangement;

Effective Date” means the date of the Articles of Arrangement, as filed with the Registrar;

Effective Time” has the meaning set forth in the Plan of Arrangement;

Environmental Claim” has the meaning set forth in Section 3.1(q)(ii);

Environmental Law” has the meaning set forth in Section 3.1(q)(i);

Environmental Permits” has the meaning set forth in Section 3.1(q)(i);

ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and the regulations promulgated thereunder;

ERISA Affiliate” means, with respect to any entity, trade or business, any other entity, trade or business that is a member of a group described in Section 414(b), (c), (m) or (o) of the Code or Section 4001(b)(1) of ERISA that includes the first entity, trade or business, or that is a member of the same “controlled group” as the first entity, trade or business pursuant to Section 4001(a)(14) of ERISA;

 

C-4


Table of Contents

Event” means any event, occurrence, state of facts, circumstance, condition, effect or change;

Existing D&O Policy” has the meaning set forth in Section 5.8(b);

Fairness Opinion” means the opinion of J.P. Morgan Securities LLC, dated the date of this Agreement and addressed to the Company Board, to the effect that, as of the date of such opinion, and subject to the qualifications, considerations, assumptions and limitations set forth therein, the Consideration to be received by the Company Shareholders pursuant to the Arrangement is fair, from a financial point of view, to the Company Shareholders;

Final Order means the final order of the Court pursuant to Section 193 of the ABCA, in a form acceptable to Parent and the Company, each acting reasonably, approving the Arrangement, as such order may be amended by the Court (with the consent of both Parent and the Company, each acting reasonably) at any time prior to the Effective Date or, if appealed, then, unless such appeal is withdrawn or denied, as affirmed or as amended (provided that any such amendment is acceptable to both Parent and the Company, each acting reasonably) on appeal;

GAAP” means generally accepted accounting principles in the United States;

Governmental Entity” means: (a) any multinational, federal, provincial, territorial, state, regional, municipal, local or other government, governmental or public department, central bank, court, tribunal, arbitral body, commission, board, ministry, bureau or agency, domestic or foreign; (b) except for the purposes of Section 6.1(c), any stock exchange; (c) any subdivision, agent, commission, board or authority of any of the foregoing; or (d) any quasi-governmental or private body, including any tribunal, commission, regulatory agency or self-regulatory organization, exercising any regulatory, antitrust, foreign investment, expropriation or taxing authority under or for the account of any of the foregoing;

Hazardous Materials” has the meaning set forth in Section 3.1(q)(iii);

HSR Act” has the meaning set forth in Section 3.1(c)(iii);

Indemnified Parties” has the meaning set forth in Section 5.8(a);

Infringe” has the meaning set forth in Section 3.1(p);

Insiders” means, with respect to a Person, those officers and directors of such Person who are subject to the reporting requirements of Section 16(a) of the U.S. Exchange Act and who are listed in the Section 16 Information;

Insurance Amount” has the meaning set forth in Section 5.8(b);

Interim Order” means the interim order of the Court contemplated by Section 2.3 of this Agreement and made pursuant to Section 193(4) of the ABCA, in a form acceptable to Parent and the Company, each acting reasonably, providing for, among other things, the calling and holding of the Company Meeting, as the same may be amended by the Court with the consent of Parent and the Company, each acting reasonably;

IRS” means the United States Internal Revenue Service;

Law” or “Laws” means any domestic or foreign, federal, state, provincial or local law (statutory, common or otherwise), constitution, by-law, ordinance, principle of law and equity, rule, injunction, determination, award, treaty, convention, ordinance, code, rule, regulation, order, injunction, judgment, decree, ruling or other similar requirement enacted, adopted, promulgated or applied by a Governmental Entity, and any terms and conditions

 

C-5


Table of Contents

of any grant of approval, permission, authority or license of any Governmental Entity (including, for greater certainty, the Securities Laws), and the term “applicable” with respect to such Laws and in a context that refers to a Party, means such Laws as are binding upon or applicable to such Party and/or its Subsidiaries or their business, undertaking, property or securities and emanate from a Person having jurisdiction over the Party and/or its Subsidiaries or its or their business, undertaking, property or securities;

Liens” means any hypothecations, mortgages, pledges, assignments, liens, charges, security interests, encumbrances, adverse rights or claims, other third party interests, deeds of trust, leases, licenses, conditions, covenants, restrictions, options to purchase or lease or otherwise acquire any interest, easements, encroachments, rights of way or other title defects, third party rights or encumbrances of any kind or nature, whether contingent or absolute, and any agreement, option, right or privilege (whether by Law, contract or otherwise) capable of becoming any of the foregoing;

Market Value” means 0.68 multiplied by the closing price of one Parent Share on the NYSE on the last trading day prior to the Effective Date;

Material Adverse Effect” means, with respect to the Company, on the one hand, or Parent, on the other hand, any Event that is material and adverse to the financial condition, businesses or results of operations of the Company and its Subsidiaries taken as a whole (with respect to the Company) or Parent and its Subsidiaries taken as a whole (with respect to the Parent); provided that, a “Material Adverse Effect” shall be deemed not to include any Event to the extent resulting from one or more of the following: (A) changes in prevailing economic or market conditions of the securities, credit or financial markets in the United States or elsewhere (except to the extent those changes have a disproportionate effect on the Company and its Subsidiaries taken as a whole (with respect to the Company) or Parent and its Subsidiaries taken as a whole (with respect to the Parent) relative to other similarly situated participants in the industries in which they operate), (B) changes or events, affecting the industries in which it or they operate generally, including changes in market prices (except to the extent those changes or events have a disproportionate effect on the Company and its Subsidiaries taken as a whole (with respect to the Company) or Parent and its Subsidiaries taken as a whole (with respect to the Parent) relative to other similarly situated participants in the industries in which they operate), (C) changes in GAAP applicable to the Company and its Subsidiaries taken as a whole (with respect to the Company) or Parent and its Subsidiaries taken as a whole (with respect to the Parent), (D) changes in laws, rules or regulations of general applicability or interpretations thereof by any Governmental Entity, including any sanctions brought against any country by any other country (in each case except to the extent those changes have a disproportionate effect on the Company and its Subsidiaries taken as a whole (with respect to the Company) or Parent and its Subsidiaries taken as a whole (with respect to the Parent) relative to other similarly situated participants in the industries in which they operate in the effected countries), (E) any weather-related or other force majeure event, including any outbreak of major hostilities in which the United States or Canada is involved or any act of terrorism within the United States or Canada or directed against their facilities or citizens wherever located (except to the extent those events have a disproportionate effect on the Company and its Subsidiaries taken as a whole (with respect to the Company) or Parent and its Subsidiaries taken as a whole (with respect to the Parent) relative to other similarly situated participants in the industries in which they operate), (F) any failure, in and of itself, by the Company and its Subsidiaries taken as a whole (with respect to the Company) or Parent and its Subsidiaries taken as a whole (with respect to the Parent) to meet any internal or published projections or forecasts in respect of revenues, earnings or other financial or operating metrics (it being understood that the facts or occurrences giving rise to or contributing to such failure may be taken into account in determining whether there has been or would reasonably be expected to be a Material Adverse Effect), (G) changes in the trading prices or trading volume of the Company’s capital stock or its debt instruments (with respect to the Company) or changes in the trading prices or trading volume of the Parent’s capital stock or its debt instruments (with respect to the Parent) (it being understood that the facts or occurrences giving rise to or contributing to such change in trading prices or trading volume may be taken into account in determining whether there has been or would reasonably be expected to be a Material Adverse Effect), or (H) changes or events occurring as a result of the announcement of this Agreement

 

C-6


Table of Contents

and the transactions contemplated hereby, or any actions expressly required to be taken by this Agreement or consented to in writing by Parent (with respect to the Company) or the Company (with respect to the Parent);

material fact” and “material change” have the meanings set forth in the Securities Act;

misrepresentation” has the meaning set forth in the Securities Act and, includes for the purposes of Securities Laws in the United States, any untrue statement of a material fact or omission to state any material fact required to be stated or necessary in order to make statements, in light of the circumstances under which they were made, not misleading;

MI 61-101” means Multilateral Instrument 61 - 101 - Protection of Minority Security Holders in Special Transactions;

NASDAQ” means the NASDAQ Stock Market;

New Plans” has the meaning set forth in Section 5.5(b);

Non-US Company Plan” has the meaning set forth in Section 3.1(j)(viii);

Merger Control Law” has the meaning set forth in Section 3.1(c)(iii);

NYSE” means the New York Stock Exchange;

Outside Date” has the meaning set forth in Section 7.2(c);

Parent Board” means the board of directors of Parent as the same is constituted from time to time;

Parent Contracts” has the meaning set forth in Section 3.2(i);

Parent Disclosure Letter” has the meaning set forth in Section 3.2;

Parent Employee Benefit Plan” means any employee benefit plan, program, policy, practice, agreement, or other arrangement providing benefits to any current or former employee, consultant, officer or director of Parent, AcquisitionCo or any other Subsidiary of Parent or any beneficiary or dependent thereof that is entered into, sponsored or maintained by any of Parent, AcquisitionCo or any other Subsidiary of Parent, whether or not written, including any health, medical, dental, vision care, drug, disability, accidental death and dismemberment insurance, life insurance, supplemental unemployment benefit and any employee welfare benefit plan within the meaning of Section 3(1) of ERISA (whether or not such plan is subject to ERISA), any employee pension benefit plan (both registered and non-registered) within the meaning of Section 3(2) of ERISA (whether or not such plan is subject to ERISA) and any post-retirement benefits, bonus, incentive, deferred compensation, vacation, overtime, insurance, stock purchase, stock option, equity award, equity-linked award, severance, employment, change of control or fringe benefit plan, program, policy, practice, agreement, or arrangement, but excluding each employee benefit plan, program, policy, practice, agreement, or other arrangement maintained and/or operated by a Governmental Entity and subject to the applicable Laws of any jurisdiction outside the United States and Canada;

Parent Equity Award” means an award of Parent Shares issued under any Parent Employee Benefit Plan, or the right to acquire Parent Shares pursuant to the terms of any Parent Employee Benefit Plan;

Parent Intellectual Property” has the meaning set forth in Section 3.2(p);

Parent Permitted Liens” has the meaning set forth in Section 3.2(o)(i);

 

C-7


Table of Contents

Parent Permits” has the meaning set forth in Section 3.2(f);

Parent Preferred Shares” means the shares of preferred stock, par value $0.001, of Parent;

Parent Public Documents” means all publicly available reports, schedules, registration statements and other documents filed by Parent since January 1, 2017 with any applicable Securities Authority;

Parent Qualified Plans” has the meaning set forth in Section 3.2(j)(ii);

Parent Real Properties” has the meaning set forth in Section 3.2(o)(i)i;

Parent Real Property Leases” has the meaning set forth in Section 3.2(o)(iii);

Parent Shareholders” means the holders of Parent Shares;

Parent Shares” means the shares of common stock, par value $0.001, of Parent;

Parent Title IV Plan” has the meaning set forth in Section 3.2(j)(ii);

Parties” means the Company and Parent, and “Party” means any of them;

Person” includes an individual, partnership, association, body corporate, trustee, executor, administrator, legal representative, government (including any Governmental Entity) or any other entity, whether or not having legal status;

Plan of Arrangement” means the plan of arrangement of the Company, substantially in the form of Schedule A hereto, and any amendments or variations to such plan made in accordance with Section 7.4 hereof or the Plan of Arrangement or upon the direction of the Court in the Final Order with the consent of Parent and the Company, each acting reasonably;

Pre-Acquisition Reorganization” has the meaning set forth in Section 4.1(p);

proceedings” has the meaning set forth in Section 3.1(h)(3);

Purchaser” means Parent or AcquisitionCo;

Registrar” means the registrar appointed under Section 263 of the ABCA;

Regulatory Approvals” means any material approvals, decisions, clearances or confirmations that are required under Merger Control Laws or otherwise in order to complete the Arrangement;

Representatives” has the meaning set forth under Section 5.1;

Requisite Approval” has the meaning set forth in Section 2.3(b);

SEC” means the United States Securities and Exchange Commission;

SEC Resolution Date” means the date on which the staff of the SEC advises the Company that it has no comments, or no further comments, with respect to the Company Circular;

Section 16 Information” means information accurate in all material respects regarding the Insiders of a Person, the number of shares of the capital stock held by each such Insider, and the number and description of options, stock appreciation rights, restricted shares and other stock-based awards held by each such Insider.

 

C-8


Table of Contents

Securities Act” means the Securities Act, R.S.A. 2000, c. S-4;

Securities Authorities” means the securities commissions and other securities regulatory authorities in each of the provinces and territories of Canada, the SEC and the applicable securities commissions and other securities regulatory authorities in each of the states and territories of the United States (as applicable), as well as the NYSE and NASDAQ;

Securities Laws” means:

(a) in Canada, the Securities Act, together with all other applicable provincial and territorial securities Laws, rules and regulations and published instruments and policies thereunder;

(b) in the United States, the U.S. Exchange Act and the U.S. Securities Act, together with all other applicable state and local securities Laws, rules and regulations and published policies thereunder; and

(c) the policies and rules of the NYSE and NASDAQ, as applicable;

Significant Subsidiary” means any Subsidiary of the Company or Parent, as the case may be, that constitutes a Significant Subsidiary of such party within the meaning of Rule 1-02 of Regulation S-X of the SEC;

Subsidiary” has the meaning set forth in the Securities Act;

Superior Proposal” means a bona fide written Acquisition Proposal that the Company Board determines in good faith, after consultation with its financial advisors and outside legal counsel, taking into account all legal, financial, regulatory, timing and other aspects of the proposal, all conditions contained therein and the Person making the proposal, is more favorable to the Company Shareholders, from a financial point of view, than the transactions contemplated by this