-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SMfhlwaxqYGuwgYJwlE8kwXr2et1aUozt9k7FvoPlmEXJUUEos1B8CpsmaeFtaxB rrZa/fbS4g8qsusz+u+p1w== 0000950129-04-008930.txt : 20041112 0000950129-04-008930.hdr.sgml : 20041111 20041112135455 ACCESSION NUMBER: 0000950129-04-008930 CONFORMED SUBMISSION TYPE: T-3 PUBLIC DOCUMENT COUNT: 11 FILED AS OF DATE: 20041112 DATE AS OF CHANGE: 20041112 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NABORS INDUSTRIES INC CENTRAL INDEX KEY: 0000798943 STANDARD INDUSTRIAL CLASSIFICATION: DRILLING OIL & GAS WELLS [1381] IRS NUMBER: 930711613 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: T-3 SEC ACT: 1939 Act SEC FILE NUMBER: 022-28761 FILM NUMBER: 041138003 BUSINESS ADDRESS: STREET 1: 515 W GREEN RD STE 1200 CITY: HOUSTON STATE: TX ZIP: 77067 BUSINESS PHONE: 2818740035 MAIL ADDRESS: STREET 1: 515 W GREEN RD STE 1200 CITY: HOUSTON STATE: TX ZIP: 77067 FORMER COMPANY: FORMER CONFORMED NAME: ANGLO ENERGY INC DATE OF NAME CHANGE: 19890316 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NABORS INDUSTRIES LTD CENTRAL INDEX KEY: 0001163739 STANDARD INDUSTRIAL CLASSIFICATION: DRILLING OIL & GAS WELLS [1381] IRS NUMBER: 980363970 STATE OF INCORPORATION: D0 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: T-3 SEC ACT: 1939 Act SEC FILE NUMBER: 022-28761-01 FILM NUMBER: 041138004 BUSINESS ADDRESS: STREET 1: 2ND FLOOR INT'L TRADING CENTER STREET 2: WARRENS, P.O. BOX 905E CITY: ST. MICHAEL BARBADOS STATE: D0 ZIP: 0000 BUSINESS PHONE: 2464219471 MAIL ADDRESS: STREET 1: 2ND FLOOR INT'L TRADING CENTER STREET 2: WARRENS, P.O. BOX 905E CITY: ST. MICHAEL BARBADOS STATE: D0 ZIP: 0000 T-3 1 h19780t3tv3.txt NABORS INDUSTRIES LTD. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM T-3 FOR APPLICATION FOR QUALIFICATION OF INDENTURE UNDER THE TRUST INDENTURE ACT OF 1939 NABORS INDUSTRIES, INC. (ISSUER) NABORS INDUSTRIES LTD. (GUARANTOR) (Name of Applicant)
515 WEST GREENS ROAD 2ND FL. INTERNATIONAL TRADING CENTRE SUITE 1200 WARRENS HOUSTON, TEXAS 77067 ST. MICHAEL, BARBADOS TELEPHONE: (281) 874-0035 TELEPHONE: (246) 421-9471 (Address and Phone Number of Nabors Industries, Inc.'s (Address and Phone Number of Nabors Industries Principal Executive Offices) Ltd.'s Principal Executive Offices)
SECURITIES TO BE ISSUED UNDER THE INDENTURE TO BE QUALIFIED TITLE OF CLASS AMOUNT -------------- ------ Series B Zero Coupon Senior Exchangeable Up to a maximum aggregate principal Notes Due 2023 amount of $700,000,000 Approximate Date Of Proposed Public Offering: AS PROMPTLY AS POSSIBLE AFTER THE EFFECTIVE DATE OF THIS APPLICATION FOR QUALIFICATION BRUCE M. TATEN VICE PRESIDENT AND GENERAL COUNSEL NABORS CORPORATE SERVICES, INC. 515 WEST GREENS ROAD SUITE 1200 HOUSTON, TEXAS 77067 TELEPHONE: (281) 874-0035 (Name and Address of Agent for Service) WITH A COPY TO: RONALD C. BARUSCH, ESQ. SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP 1440 NEW YORK AVENUE, N.W. WASHINGTON, DC 20005-2111 (202) 371-7000 Applicant hereby amends this Application for Qualification on such date or dates as may be necessary to delay its effectiveness until: (i) the 20th day after the filing of an amendment which specifically states that it shall supersede this Application for Qualification, or (ii) such date as the Securities and Exchange Commission, acting pursuant to Section 307(c) of the Trust Indenture Act of 1939, may determine upon the written request of the Applicant. GENERAL 1. GENERAL INFORMATION. (a) Form of organization: Nabors Industries, Inc. (the "Issuer") and Nabors Industries Ltd. (the "Guarantor" or "Nabors") are both corporations. (b) State or other sovereign power under the laws of which organized: The Issuer is incorporated under the laws of the State of Delaware and the Guarantor is organized under the laws of Bermuda. 2. SECURITIES ACT EXEMPTION APPLICABLE. Pursuant to the terms and subject to the conditions set forth in the Offering Circular, dated November 12, 2004 (the "Offering Circular"), and the accompanying Letter of Transmittal, dated November 12, 2004, the Issuer is offering (the "Exchange Offer") to exchange the Issuer's Series B Zero Coupon Senior Exchangeable Notes Due 2023 (the "New Securities") for the Issuer's Zero Coupon Senior Exchangeable Notes Due 2023 (the "Old Securities"). The complete terms of the Exchange Offer are contained in the Offering Circular and related documents incorporated by reference herein to Exhibits T3E.1 through T3E.6. The New Securities will be issued under the indenture (the "New Indenture") to be qualified by this Application for Qualification on Form T-3 (this "Application"). For more detailed information on the New Indenture, see Item 9 of this Application. The Issuer's obligations under the New Indenture will be guaranteed by Nabors. No tenders of Old Securities will be accepted before the effective date of this Application. The Exchange Offer is being made by the Issuer in reliance on an exemption from the registration requirements of the Securities Act of 1933, as amended, afforded by Section 3(a)(9) thereof. There have not been any sales of securities of the same class as the New Securities by the Issuer, nor are there any such other sales planned, by or through an underwriter at or about the time of the Exchange Offer. The Company has retained Georgeson Shareholder as the "Information Agent" and J.P. Morgan Trust Company, National Association as the "Exchange Agent" in connection with the Exchange Offer. The Information Agent and Exchange Agent will provide to the registered holders of the Old Securities (each a "Holder" and collectively, the "Holders") only information otherwise contained in the Offering Circular and related documents and general information regarding the mechanics of the exchange process. The Exchange Agent will provide the actual acceptance and exchange services with respect to the exchange of Old Securities for New Securities. Neither the Information Agent nor the Exchange Agent will solicit exchanges in connection with the Exchange Offer nor will they make recommendations as to acceptance or rejection of the Exchange 2 Offer. Both the Information Agent and Exchange Agent will be paid reasonable fees directly by the Issuer and/or the Guarantor for their services. Regular employees of the Issuer and the Guarantor, who will not receive additional compensation therefor, may provide information concerning the Exchange Offer to the Holders. No Holder has made or will be requested to make any cash payment in connection with the Exchange Offer other than payment of any applicable taxes, in accordance with the terms of the Offering Circular. AFFILIATIONS 3. AFFILIATES. Furnish a list or diagram of all affiliates of the applicant and indicate the respective percentages of voting securities or other bases of control. (a) For purposes of this Application only, the officers and directors of each applicant named in response to Item 4 hereof may be deemed affiliates of such applicant by virtue of the positions held by such persons with such applicant. (b) The following list sets forth the affiliates of the Issuer and the Guarantor as of the date of this Application (note that jurisdictions of incorporation or organization are set forth in parenthesis and the term "owns" indicates 100% ownership of all voting securities unless another percentage is noted): NABORS INDUSTRIES LTD. OWNS: Nabors Malta Holding Company Ltd. (Bermuda), which owns: Nabors Malta Ltd. (100% Ordinary A shares) Nabors Malta Holding Company 2 Ltd. (Bermuda) Nabors Drilling International II Limited (Bermuda), which owns: Nabors Drilling (Labuan) Corporation (Labuan) Ramshorn International Limited (Bermuda) Nabors Holdings Ltd. (Bermuda) Nabors US Holdings Inc. (Delaware), which owns: Nabors Acquisition Corp. VIII (Delaware) Nabors International Finance Inc. (Delaware), which owns: Nabors Industries, Inc., which owns: Nabors Alaska Services Corp. (Alaska), which owns Peak Southwest L.L.C. (Alaska) Maple Leaf Financial Services, Inc. (Delaware), which owns: Red Deer Financial Services, L.L.C. (Delaware) (90%) Yellow Deer Investments Corp. (Nevada), which owns: Nabors Drilling USA, LP (Delaware) (99% LPI) NDUSA Holdings Corp. (Delaware), which owns Nabors Drilling USA, LP (Delaware) (1% GPI), which owns: Nabors Alaska Drilling Inc. (100% Common Stock, 20% A Pref., 90% B Pref.), which owns: Nabors Gull Corp. (Delaware), which owns: Peak Services USA Ltd. (Texas LP) (99% LPI)
3 Peak USA Energy Services, Ltd. (Texas LP) (99% LPI) Nabors Shipping Company (Delaware) Nabors Acquisition Corp. IV (Delaware) Ramshorn Investments, Inc. (Delaware) Oak Leaf Investments, Inc. (Delaware), which owns: Nabors International Holdings Ltd. (Bermuda), which owns: Nabors Drilling Canada ULC (Nova Scotia), which owns: 3064297 Nova Scotia Company (Nova Scotia), which owns: Nabors Exchangeco (Canada) Inc. (Canada), which owns Nabors Drilling Limited (Canada) (Class B and C Common) Nabors Drilling Limited (Canada) (Class A Common), which owns: 3064297 Nova Scotia Company (Nova Scotia) (100% Class B Pref.) Blue Door LLC (Delaware) Ryan Energy Technologies (Alberta Partnership) (65.36% GPI), which owns: Nabors Canada LP (Alberta) (92.98% LPI), which owns: Nabors Alaska Drilling, Inc. (Alaska) (80% Class A Pref., 10% Class B Pref.) 5148 N.W.T. Ltd. (NWT) Nabors Canada ULC (Nova Scotia), which owns: Nabors Canada LP (Alberta) (7.02% GPI) Core Fabrication Inc. (Alberta) Petroquest Limited (Cyprus), which owns: Angio Stavropol Petroleum Limited (Cyprus), which owns: ASTA Partnership (Russia) (55%) Quest Energy Services Limited (United Kingdom) Angio Stavropol Oil Company Limited (Cyprus), which owns: ASTA-R Partnership (Russia) (55%) Ryan Energy Technologies International, Inc. (Barbados) Ryan Energy Technologies de Venezuela, C.A. (Venezuela) Bonus International Services Ltd. (Bermuda), which owns: Bonus Holdings Inc. (BVI), which owns: Bonus Well Servicing Australia Pty Ltd. (Australia), which owns: Bonus Well Servicing Australia (W.A.) Pty Ltd. (Australia) 6041540 Canada Inc. (Canada), which owns: Blue Deer LLC (Delaware) Acorn Holdings II ULC (Nova Scotia) Nabors Holding I, ULC (Nova Scotia), which owns: A H Finance Limited Partnership (Alberta) (99.9% GPI), which owns: Nabors Drilling Limited (Canada) (Class H Common Shares) Nabors Capital Ltd. (Delaware) Nabors Corporate Services, Inc. (Delaware), which owns: SOL Insurance Limited (Bermuda) Serendipity Investments, Ltd. (Delaware) Ryan Energy Technologies USA, Inc. (Delaware), which owns: Data Wise Solutions Inc. (Delaware) Canrig Drilling Technology Ltd. (Delaware) Epoch Well Services, Inc. (Delaware), which owns: Epoch Well Services Canada Ltd. (Canada) Nabors Energy Services (Britain) Limited (England) Nabors Maritime Holdings Inc. (Delaware), which owns: Nabors US Finance LLC (Delaware) Nabors Holding Company (Delaware) (94.95%), which owns: Pool Company (Delaware), which owns: Pool International (Trinidad) Limited (Trinidad & Tobago) Nabors Mexico Inc. (Delaware) Nabors Offshore Corporation (Delaware) Pool International, Inc. (Texas), which owns: Pool Alaska, Inc. (Delaware) Pool Well Services Co. (Delaware), which owns: PCNV, Inc. (Nevada), which owns: Pool Company Texas Ltd. (Texas) (99% PI) Nabors International Inc. (Delaware), which owns: Nabors Yemen, Ltd. (Delaware)
4 Loffland Brothers Company of Canada (Delaware), which owns: Loffland Brothers de Venezuela, C.A. (Venezuela) Nabors Management Ltd. (Bermuda), which owns: Nabors Drilling International Limited (Bermuda), which owns: Integrated Oilfield Services, Ltd. (Bermuda) Sundowner Offshore International (Bermuda) Limited (Bermuda), which owns: Nabors Offshore Americas S.a r.l. (Luxembourg), which owns: Nabors Perforaciones de Mexico, S. de R.L. de C.V. (Mexico) (1%) Nabors Employer Services Mexico, S. de R.L. de C.V. (Mexico) (1%) Nabors Luxembourg S.a r.l. (Luxembourg) Nabors Offshore Netherlands B.V. (Netherlands), which owns: Nabors Perforaciones de Mexico, S. de R.L. de C.V. (Mexico) (99%) Nabors Employer Services Mexico, S. de R.L. de C.V. (Mexico) (99%) Sea Mar Mexico, S. de R.L. de C.V. (Mexico) (49%) Pool International Argentina, S.A. (Argentina) Pool International Ltd. (Cayman Islands), which owns: Pool International (Malaysia) Sdn. Bhd. (Malaysia) (49%) International Sea Drilling Ltd. (Cayman Islands), which owns: Integrated Oilfield Equipment, Ltd. (Bermuda)
MANAGEMENT AND CONTROL 4. DIRECTORS AND EXECUTIVE OFFICERS. List the names and complete mailing addresses of all directors and executive officers of the applicant and all persons chosen to become directors and executive officers. Indicate all offices held or to be held by each person named. Nabors Industries Ltd. The names of the directors and executive officers of the Guarantor are set forth below. The mailing address for each of the directors and executive officers is 2nd Fl. International Trading Centre, Warrens, St. Michael, Barbados.
Name Title - ------------------- -------------------------------------------------------------- Eugene M. Isenberg Director, Chairman & Chief Executive Officer Alexander M. Knaster Director James L. Payne Director Anthony G. Petrello Director, Deputy Chairman, President & Chief Operating Officer Hans W. Schmidt Director Myron M. Sheinfeld Director Jack Wexler Director Martin J. Whitman Director Bruce P. Koch Vice President & Chief Financial Officer Daniel McLachlin Vice President - Administration & Secretary
5 Nabors Industries, Inc. The names of the directors and executive officers of the Issuer are set forth below. The mailing address for each of the directors and executive officers is 515 West Greens Road, Suite 1200, Houston, Texas 77067.
Name Title - -------------------- -------------------------------------------------- Malcolm Calkins Director Eugene M. Isenberg Chairman Bruce P. Koch Vice President - Finance & Chief Financial Officer Christopher Papouras Director & Secretary Anthony G. Petrello Director, President & Chief Operating Officer
5. PRINCIPAL OWNERS OF VOTING SECURITIES. Furnish the following information as to each person owning 10 percent or more of the voting securities of the applicant. Nabors Industries Ltd. As of October 31, 2004, Nabors believes that the following person owns more than 10 percent of Nabors' voting securities:
Title of Class Amount Owned Percentage of Voting Name and Complete Mailing Address Owned (Number of Shares) Securities Owned - --------------------------------- --------------- ------------------ -------------------- AXA Financial Inc. Common Stock 17,190,304(1) 11.5%(2) 1290 Avenue of the Americas New York, NY 10104
Nabors Industries, Inc. As of the date of this Application, Nabors International Finance Inc. ("Nabors International") owns 100% of the voting securities of the Issuer and the Guarantor owns 100% of the voting securities of Nabors International. UNDERWRITERS 6. UNDERWRITERS. - ---------- (1) Based solely on the information contained in the Schedule 13G of AXA Financial Inc. filed with the Securities and Exchange Commission on June 30, 2004, the shares listed include (i) 17,047,399 shares beneficially owned by Alliance Capital Management L.P., (ii) 142,905 shares beneficially owned by Equitable Life Assurance Society, and AXA has sole voting power with respect to 7,256,534 shares and sole dispositive power with respect to 17,172,594 shares. (2) Calculation based on 149,511,119 shares outstanding and entitled to vote on October 31, 2004. 6 Give the name and complete mailing address of (a) each person who, within three years prior to the date of filing this application, acted as an underwriter of any securities of the obligor which were outstanding on the date of filing this application, and (b) each proposed principal underwriter of the securities proposed to be offered. As to each person specified in (a), give the title of each class of securities underwritten. (a) The following chart sets forth the name and mailing address of each person who, within three years prior to the date of filing this Application, acted as an underwriter of Nabors' or the Issuer's securities and the title of each security underwritten:
Underwriter's Name and Mailing Address Security (or Securities) Underwritten - -------------------------------------- ---------------------------------------------------- Citigroup Global Markets Inc. o Zero Coupon Senior Exchangeable Notes Due 388 Greenwich Street 2023 of the Issuer New York, NY 10013 o Guarantee by Nabors (Related to Zero Coupon Senior Exchangeable Notes Due 2023) Morgan Stanley & Co. Incorporated o Zero Coupon Convertible Senior Debentures 1585 Broadway Due 2021 New York, NY 10036 Lehman Brothers Inc. o 5.375% Senior Notes Due 2012 of the Issuer 745 Seventh Avenue o Guarantee Related to 5.375% Senior Notes Due New York, NY 10019 2012 by Nabors o Guarantee Related to 4.875% Senior Notes Due 2009 by Nabors and the Issuer
(b) There are no underwriters of the securities proposed to be offered in the Exchange Offer. CAPITAL SECURITIES 7. CAPITALIZATION. (a) Furnish the following information as to each authorized class of securities of the applicant. As of October 31, 2004, Nabors and the Issuer had the following securities outstanding: 7
Title of Class Amount Authorized Amount Outstanding - ---------------------------------------------------------- ------------------ -------------------------- Common Shares issued by Nabors 400,000,000 shares 149,511,119 Preferred Shares issued by Nabors 25,000,000 shares 1 special voting preferred share Common Stock issued by the Issuer 1,000 shares 10 shares Zero Coupon Convertible Senior Debentures Due 2021, issued $1,381,200,000 $1,200,200,000 by the Issuer Zero Coupon Senior Exchangeable Notes Due 2023, issued by $700,000,000 $700,000,000 the Issuer 4.875% Senior Notes Due 2009, issued by Nabors Holding I, $225,000,000 $225,000,000 ULC(3) 5.375% Senior Notes Due 2012, issued by the Issuer $275,000,000 $275,000,000 Exchangeable Shares of Nabors Exchangeco (Canada) Inc.(4) Unlimited 245,982 shares
(b) Give a brief outline of the voting rights of each class of voting securities referred to in paragraph (a) above. Holders of Nabors' common shares, par value $0.001 per share, are entitled to one vote for each share registered in such holder's name. Nabors' special voting preferred share, par value $0.001, has been issued to Computershare Trust Company of Canada, as trustee under a voting and exchange trust agreement among Nabors, Nabors Exchangeco (Canada) Inc., a Canadian corporation and an indirect subsidiary of Nabors and such trustee. The special voting preferred share was issued in connection with Nabors' acquisition of Enserco Energy Services Company Inc. and Ryan Energy Technologies Inc., both Canadian corporations. Nabors Exchangeco shares are exchangeable for Nabors' common shares, at each holder's option, on a one-for-one basis and are listed on the Toronto Stock Exchange. Additionally, these exchangeable shares have essentially identical rights as Nabors' common shares, including but not limited to voting rights and the right to receive dividends, if any. Except as otherwise required by law, Nabors' memorandum of association or Nabors' bye-laws, the one special voting preferred share will possess a number of votes for the election of directors and on all other matters submitted to a vote of Nabors' shareholders equal to the number of outstanding exchangeable shares of Nabors Exchangeco from time to time not owned by Nabors or any entity controlled by Nabors. The holders of Nabors' common shares and the holder of the special voting preferred shares will vote together as a single class on all matters on which holders of Nabors' common shares are eligible to vote. As of October 29, 2004, there were 245,982 exchangeable shares of Nabors Exchangeco issued and outstanding not owned by Nabors or any entity controlled by Nabors. - ---------- (3) Nabors and the Issuer unconditionally guaranteed the 4.875% senior notes due 2009 issued by Nabors Holding I, ULC, an indirect, wholly owned subsidiary of Nabors and the Issuer. (4) Exchangeable for Nabors' common shares on a one-for-one basis. 8 Holders of the Issuer's common stock, par value $0.01 per share, are entitled to one vote for each share held by such holder. INDENTURE SECURITIES 8. ANALYSIS OF INDENTURE PROVISIONS. Insert at this point the analysis of indenture provisions required under Section 305(a)(2) of the Trust Indenture Act of 1939, as amended. New Securities The New Securities will be issued under a new indenture (the "New Indenture"), by and among the Issuer, the Guarantor, and J.P. Morgan Trust Company, National Association as trustee (the "Trustee"). The following is a general description of certain provisions of the New Indenture, and the description is qualified in its entirety by reference to the Form of Indenture Relating to the New Securities filed as Exhibit T3C.1 hereto. All capitalized and otherwise undefined terms shall have the meanings ascribed to them in the New Indenture. (a) Event of Default Under the New Indenture, events of default are defined as: (1) a default in the payment of the Principal Amount, Redemption Price, Purchase Price or a Fundamental Change Purchase Price on any New Security, where such default continues for a period of ten days; (2) a default in the payment of accrued Contingent Interest, if any, or Additional Amounts, if any, or a Make-Whole Premium, if any, on any New Security, where such default continues for a period of 30 days; (3) the Issuer or the Guarantor's failure for 20 days to deliver cash or a combination of cash and Nabors' common shares (including cash in lieu of fractional shares) when required to be delivered following the exchange of a New Security; (4) the Issuer or the Guarantor's failure to comply with any of its other agreements in the New Securities or the New Indenture upon the receipt by the Issuer of notice of the default by the Trustee or by holders of not less than 25% in aggregate Principal Amount of the New Securities then outstanding, where the Issuer and the Guarantor fail to cure the default within 90 days after receipt of the notice; 9 (5) certain events of the Issuer or the Guarantor's bankruptcy or insolvency; or (6) the failure to keep the Guarantor's full and unconditional guarantee in place. The Trustee will give notice to holders of the New Securities of any continuing Default known to the Trustee within 90 days after the Trustee becomes aware of such Default; provided that, except in the case of a Default as described in clauses (1) and (2) above, the Trustee may withhold notice if it determines in good faith that withholding the notice is in the interests of the holders. (b) Authentication and Delivery of the New Securities and Application of Proceeds. The New Securities shall be executed on behalf of the Issuer by one Officer of the Issuer. The signature of an Officer may be manual or facsimile. No security shall be entitled to any benefit under the New Indenture or be valid or obligatory for any purpose unless there appears on such security a certificate of authentication substantially in the form provided in the New Indenture duly executed by the Trustee by manual signature of an authorized signatory, and such certificate upon any security shall be conclusive evidence, and the only evidence, that such security has been duly authenticated and delivered under the New Indenture. The Trustee shall authenticate and deliver securities (i) for original issue in an aggregate Principal Amount up to $700,000,000 upon a Company Order without any further action by the Issuer, and (ii) any amount of additional New Securities specified by the Issuer after the Issue Date, in each case, upon a written order of the Issuer signed by one Officer of the Issuer; provided, however, that no additional New Securities may be issued or guaranteed if a Default or Event of Default shall have occurred and be continuing. The aggregate Principal Amount of New Securities outstanding at any time may not exceed the aggregate Principal Amount of New Securities authorized for issuance by the Issuer pursuant to one or more written orders of the Issuer, except as provided in Section 2.07 of the New Indenture. Subject to the foregoing, the aggregate principal amount of New Securities that may be issued under the New Indenture shall not be limited. There will be no proceeds resulting from the issuance of the New Securities. (c) Release of Property Subject to Lien 10 Not applicable. (d) Satisfaction and Discharge When (i) the Issuer delivers to the Trustee all outstanding New Securities (other than securities replaced pursuant to Section 2.07 of the New Indenture) for cancellation or (ii) all outstanding New Securities have become due and payable and the Issuer deposits with the Trustee cash and/or securities, as permitted by the terms of the New Indenture, sufficient to pay at Stated Maturity the Principal Amount of all outstanding New Securities (other than Securities replaced pursuant to Section 2.07 of the New Indenture), and if in either case the Issuer pays all other sums payable by the Issuer, then the New Indenture shall, subject to Section 7.07 thereof, cease to be of further effect. The Trustee shall join in the execution of a document prepared by the Issuer acknowledging satisfaction and discharge of the New Indenture on demand of the Issuer accompanied by an Officers' Certificate and Opinion of Counsel and at the cost and expense of the Issuer. (e) Evidence of Compliance with Conditions and Covenants The Issuer and the Guarantor shall each deliver to the Trustee, within 120 days after the end of each fiscal year of the Issuer, an Officers' Certificate in which one of the two Officers signing such certificate is either the Chief Executive Officer, Chief Financial Officer or Chief Accounting Officer of the Issuer or the Guarantor, as applicable, stating whether or not to the knowledge of the signers thereof the Issuer or the Guarantor, as applicable, is in default in the performance and observance of any of the terms, provisions and conditions of the New Indenture (without regard to any period of grace or requirement of notice provided thereunder) and, if the Issuer or the Guarantor, as applicable, shall be in default, specifying all such defaults and the nature and status thereof of which the signers may have knowledge. The Issuer and the Guarantor will deliver to the Trustee, as soon as possible and in any event within five days, upon becoming aware of any default or any Event of Default, an Officers' Certificate specifying with particularity such default or Event of Default and further stating what action the Issuer and the Guarantor has taken, is taking or proposes to take with respect thereto. 9. OTHER OBLIGORS. Give the name and complete mailing address of any person, other than the applicant, who is an obligor upon indentured securities. None. 11 CONTENTS OF APPLICATION FOR QUALIFICATION This Application comprises: (a) Pages numbered 1 to 16, consecutively; (b) The statement of eligibility and qualification of the Trustee under the New Indenture to be qualified on Form T-1 (filed herewith as Exhibit 25.1); and (c) The following exhibits, in addition to those filed as part of the statement of eligibility and qualification of the Trustee: (i) Exhibit T3A.1 - Restated Certificate of Incorporation of the Issuer (incorporated by reference to Exhibit 3.3 to the Guarantor's Registration Statement on Form S-4 (Registration No. 333-100492-01) filed with the Securities and Exchange Commission (the "Commission") on October 11, 2002). (ii) Exhibit T3A.2 - Memorandum of Association of the Guarantor (incorporated by reference to Annex II to the proxy statement/prospectus included in the Guarantor's Registration Statement on Form S-4 (Registration No. 333-76198) filed with the Commission on May 10, 2002, as amended). (iii) Exhibit T3B.1 - Restated By-Laws of the Issuer (incorporated by reference to Exhibit 3.4 to the Guarantor's Registration Statement on Form S-4 (Registration No. 333-100492-01) filed with the Commission on October 11, 2002). (iv) Exhibit T3B.2 - Amended and Restated By-Laws of the Guarantor (incorporated by reference to Annex III to the proxy statement/prospectus included in the Guarantor's Registration Statement on Form S-4 (Registration No. 333-76198) filed with the Commission on May 10, 2002, as amended). (v) Exhibit T3C.1* - Form of Indenture Relating to the New Securities, by and among the Issuer, the Guarantor and the Trustee. (vi) Exhibit T3D - Not applicable. (vii) Exhibit T3E.1* - Offering Circular, dated as of November 12, 2004. (viii) Exhibit T3E.2* - Letter of Transmittal, dated as of November 12, 2004. 12 (ix) Exhibit T3E.3* - Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees, dated as of November 12, 2004. (x) Exhibit T3E.4* - Letter to Clients, dated as of November 12, 2004. (xi) Exhibit T3E.5* - Notice of Guaranteed Delivery, dated as of November 12, 2004. (xii) Exhibit T3E.6* - Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. (xiii) Exhibit T3E.7* - Press Release of Nabors Industries Ltd., dated November 12, 2004. (xiv) Exhibit T3F* - Cross reference sheet showing the location in the New Indenture of the provisions inserted therein pursuant to Sections 310 through 318(a), inclusive, of the Trust Indenture Act of 1939. (xv) Exhibit 25.1* - Form T-1 Qualifying J.P. Morgan Trust Company, National Association as Trustee under the Indenture to be Qualified. - ---------- * Filed herewith. 13 SIGNATURE Pursuant to the requirements of the Trust Indenture Act of 1939, the applicant, Nabors Industries, Inc., a corporation organized and existing under the laws of the State of Delaware, has duly caused this application to be signed on its behalf by the undersigned, thereunto duly authorized, and its seal to be hereunto affixed and attested, all in the city of Houston, and state of Texas, on November 12, 2004. (SEAL) NABORS INDUSTRIES, INC. By: /s/ Bruce P. Koch --------------------------------------- Name: Bruce P. Koch Title: Vice President - Finance & Chief Financial Officer Attested By: /s/ Christopher Papouras -------------------------- Name: Christopher Papouras Title: Secretary 14 SIGNATURE Pursuant to the requirements of the Trust Indenture Act of 1939, the applicant, Nabors Industries Ltd., a corporation organized and existing under the laws of Bermuda, has duly caused this application to be signed on its behalf by the undersigned, thereunto duly authorized, and its seal to be hereunto affixed and attested, all in St. Michael, Barbados, on November 12, 2004. (SEAL) NABORS INDUSTRIES LTD. By: /s/ Daniel McLachlin ---------------------------------------- Name: Daniel McLachlin Title: Vice President - Administration & Secretary Attested By: /s/ Daniel McLachlin -------------------------- Name: Daniel McLachlin Title: Vice President - Administration & Secretary 15 EXHIBIT INDEX
EXHIBIT DESCRIPTION - ------------------- ---------------------------------------------------- Exhibit T3A.1 Restated Certificate of Incorporation of the Issuer (incorporated by reference to Exhibit 3.3 to the Guarantor's Registration Statement on Form S-4 (Registration No. 333-100492-01) filed with the Securities and Exchange Commission (the "Commission") on October 11, 2002). Exhibit T3A.2 Memorandum of Association of the Guarantor (incorporated by reference to Annex II to the proxy statement/prospectus included in the Guarantor's Registration Statement on Form S-4 (Registration No. 333-76198) filed with the Commission on May 10, 2002, as amended). Exhibit T3B.1 Restated By-Laws of the Issuer (incorporated by reference to Exhibit 3.4 to the Guarantor's Registration Statement on Form S-4 (Registration No. 333-100492-01) filed with the Commission on October 11, 2002). Exhibit T3B.2 Amended and Restated Bye-Laws of the Guarantor (incorporated by reference to Annex III to the proxy statement/prospectus included in the Guarantor's Registration Statement on Form S-4 (Registration No. 333-76198) filed with the Commission on May 10, 2002, as amended). Exhibit T3C.1* Form of Indenture Relating to the New Securities, by and among the Issuer, the Guarantor and the Trustee. Exhibit T3E.1* Offering Circular, dated as of November 12, 2004. Exhibit T3E.2* Letter of Transmittal, dated as of November 12, 2004. Exhibit T3E.3* Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees, dated as of November 12, 2004. Exhibit T3E.4* Letter to Clients, dated as of November 12, 2004. Exhibit T3E.5* Notice of Guaranteed Delivery, dated as of November 12, 2004. Exhibit T3E.6* Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. Exhibit T3E.7* Press Release of Nabors Industries Ltd., dated November 12, 2004. Exhibit T3F* Cross reference sheet showing the location in the New Indenture of the provisions inserted therein pursuant to Sections 310 through 318(a), inclusive, of the Trust Indenture Act of 1939. Exhibit 25.1* Form T-1 Qualifying J.P. Morgan Trust Company, National Association as Trustee under the Indenture to be Qualified.
- ---------- * Filed herewith. 16 EX-99.T3C.1 2 h19780t3exv99wt3cw1.txt FORM OF INDENTURE NABORS INDUSTRIES, INC., as Issuer NABORS INDUSTRIES LTD., as Guarantor SERIES B ZERO COUPON SENIOR EXCHANGEABLE NOTES DUE 2023 ---------------- INDENTURE Dated as of December [ ], 2004 ---------------- J.P. MORGAN TRUST COMPANY, NATIONAL ASSOCIATION, as Trustee ---------------- CROSS REFERENCE TABLE*
TIA INDENTURE SECTION SECTION - ------- ------- 310 (a)(1)............................................................ 7.10 (a)(2)............................................................ 7.10 (a)(3)............................................................ N.A.** (a)(4)............................................................ N.A. (b)........................................................... 7.08; 7.10 (c)........................................................... N.A. 311 (a)........................................................... 7.11 (b)........................................................... 7.11 (c)........................................................... N.A. 312 (a)........................................................... 2.05 (b)........................................................... 13.03 (c)........................................................... 13.03 (d)........................................................... 7.06 313 (a)........................................................... 7.06 (b)(1)............................................................ N.A. (b)(2)............................................................ 7.06 (c)........................................................... 13.02 (d)........................................................... 7.06 314 (a)........................................................... 4.02; 13.02 (b)........................................................... N.A. (c)(1)............................................................ 13.04 (c)(2)............................................................ 13.04 (c)(3)............................................................ N.A. (d)........................................................... N.A. (e)........................................................... 13.05 (f)........................................................... 4.03 315 (a)........................................................... 7.01 (b)........................................................... 7.05; 13.02 (c)........................................................... 7.01 (d)........................................................... 7.01 (e)........................................................... 6.11 316 (a) (last sentence).......................................... 2.08 (a)(1)(A)......................................................... 6.05 (a)(1)(B)......................................................... 6.04 (a)(2)............................................................ N.A. (b)........................................................... 6.07 317 (a)(1)............................................................ 6.08 (a)(2)............................................................ 6.09 (b)........................................................... 2.04 318 (a)........................................................... 13.01
* Note: This Cross Reference Table shall not, for any purpose, be deemed to be part of the Indenture. ** Note: N.A. means Not Applicable. TABLE OF CONTENTS
PAGE ---- ARTICLE 1. DEFINITIONS AND INCORPORATION BY REFERENCE............................................ 1 SECTION 1.01. DEFINITIONS............................................................. 1 SECTION 1.02. OTHER DEFINITIONS....................................................... 6 SECTION 1.03. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT........................................................... 7 SECTION 1.04. RULES OF CONSTRUCTION................................................... 8 ARTICLE 2. THE SECURITIES........................................................................ 8 SECTION 2.01. FORM AND DATING......................................................... 8 SECTION 2.02. EXECUTION AND AUTHENTICATION............................................ 9 SECTION 2.03. REGISTRAR, PAYING AGENT AND EXCHANGE AGENT.............................. 10 SECTION 2.04. PAYING AGENT TO HOLD CASH AND SECURITIES IN TRUST................................................................ 10 SECTION 2.05. HOLDER LISTS............................................................ 11 SECTION 2.06. EXCHANGE AND REGISTRATION OF TRANSFER OF SECURITIES; RESTRICTIONS ON TRANSFERS; DEPOSITARY....................... 11 SECTION 2.07. REPLACEMENT SECURITIES.................................................. 15 SECTION 2.08. OUTSTANDING SECURITIES; DETERMINATIONS OF HOLDERS' ACTION......................................................... 16 SECTION 2.09. TEMPORARY SECURITIES.................................................... 17 SECTION 2.10. CANCELLATION............................................................ 17 SECTION 2.11. PERSONS DEEMED OWNERS................................................... 17 SECTION 2.12. CUSIP NUMBERS........................................................... 18 ARTICLE 3. REDEMPTION AND REPURCHASES............................................................ 18 SECTION 3.01. RIGHT TO REDEEM; NOTICES TO TRUSTEE..................................... 18 SECTION 3.02. SELECTION OF SECURITIES TO BE REDEEMED.................................. 18 SECTION 3.03. NOTICE OF REDEMPTION.................................................... 19 SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION.......................................... 20 SECTION 3.05. DEPOSIT OF REDEMPTION PRICE............................................. 20 SECTION 3.06. SECURITIES REDEEMED IN PART............................................. 21 SECTION 3.07. [RESERVED].............................................................. 21 SECTION 3.08. REPURCHASE OF SECURITIES AT OPTION OF THE HOLDER........................ 21 SECTION 3.09. REPURCHASE AT OPTION OF THE HOLDER UPON A FUNDAMENTAL CHANGE............ 23 SECTION 3.10. EFFECT OF REPURCHASE NOTICE OR FUNDAMENTAL CHANGE REPURCHASE NOTICE................................................ 25 SECTION 3.11. DEPOSIT OF PURCHASE PRICE OR FUNDAMENTAL CHANGE PURCHASE PRICE................................................... 26 SECTION 3.12. SECURITIES REPURCHASED IN PART.......................................... 26 SECTION 3.13. COVENANT TO COMPLY WITH SECURITIES LAWS UPON REPURCHASE OF SECURITIES... 26
i SECTION 3.14. REPAYMENT TO THE COMPANY................................................ 27 ARTICLE 4. COVENANTS............................................................................. 27 SECTION 4.01. PAYMENT OF SECURITIES................................................... 27 SECTION 4.02. FINANCIAL INFORMATION; SEC REPORTS...................................... 28 SECTION 4.03. COMPLIANCE CERTIFICATE.................................................. 28 SECTION 4.04. FURTHER INSTRUMENTS AND ACTS............................................ 29 SECTION 4.05. MAINTENANCE OF OFFICE OR AGENCY......................................... 29 SECTION 4.06. EXISTENCE............................................................... 29 SECTION 4.07. [RESERVED].............................................................. 29 SECTION 4.08. REGISTRATION RIGHTS..................................................... 30 SECTION 4.09. PAYMENT OF ADDITIONAL AMOUNTS........................................... 30 SECTION 4.10. CONTINGENT DEBT TAX TREATMENT........................................... 32 SECTION 4.11. CALCULATION OF TAX ORIGINAL ISSUE DISCOUNT.............................. 32 ARTICLE 5. SUCCESSOR CORPORATION................................................................. 33 SECTION 5.01. WHEN THE COMPANY AND THE GUARANTOR MAY MERGE OR TRANSFER ASSETS................................................ 33 SECTION 5.02. SUCCESSORS SUBSTITUTED.................................................. 34 ARTICLE 6. DEFAULTS AND REMEDIES................................................................. 34 SECTION 6.01. EVENTS OF DEFAULT....................................................... 34 SECTION 6.02. ACCELERATION............................................................ 35 SECTION 6.03. OTHER REMEDIES.......................................................... 36 SECTION 6.04. WAIVER OF PAST DEFAULTS................................................. 36 SECTION 6.05. CONTROL BY MAJORITY..................................................... 36 SECTION 6.06. LIMITATION ON SUITS..................................................... 36 SECTION 6.07. RIGHTS OF HOLDERS TO RECEIVE PAYMENT.................................... 37 SECTION 6.08. COLLECTION SUIT BY TRUSTEE.............................................. 37 SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM........................................ 37 SECTION 6.10. PRIORITIES.............................................................. 38 SECTION 6.11. UNDERTAKING FOR COSTS................................................... 38 SECTION 6.12. WAIVER OF STAY, EXTENSION OR USURY LAWS................................. 39 ARTICLE 7. TRUSTEE............................................................................... 39 SECTION 7.01. DUTIES OF TRUSTEE....................................................... 39 SECTION 7.02. RIGHTS OF TRUSTEE....................................................... 40 SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE............................................ 42 SECTION 7.04. TRUSTEE'S DISCLAIMER.................................................... 42 SECTION 7.05. NOTICE OF DEFAULTS...................................................... 42 SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS........................................... 42 SECTION 7.07. COMPENSATION AND INDEMNITY.............................................. 43 SECTION 7.08. REPLACEMENT OF TRUSTEE.................................................. 44 SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER............................................. 44 SECTION 7.10. ELIGIBILITY; DISQUALIFICATION........................................... 45
ii SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY................................................................. 45 ARTICLE 8. DISCHARGE OF INDENTURE................................................................ 45 SECTION 8.01. DISCHARGE OF LIABILITY ON SECURITIES.................................... 45 SECTION 8.02. REPAYMENT TO THE COMPANY................................................ 46 ARTICLE 9. AMENDMENTS............................................................................ 46 SECTION 9.01. WITHOUT CONSENT OF HOLDERS.............................................. 46 SECTION 9.02. WITH CONSENT OF HOLDERS................................................. 47 SECTION 9.03. COMPLIANCE WITH TRUST INDENTURE ACT..................................... 47 SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS, WAIVERS AND ACTIONS............................................................. 48 SECTION 9.05. NOTATION ON OR EXCHANGE OF SECURITIES................................... 48 SECTION 9.06. TRUSTEE TO SIGN SUPPLEMENTAL INDENTURES................................. 48 SECTION 9.07. EFFECT OF SUPPLEMENTAL INDENTURES....................................... 48 ARTICLE 10. GUARANTEE OF SECURITIES.............................................................. 48 SECTION 10.01. UNCONDITIONAL GUARANTEE............................................... 48 SECTION 10.02. EXECUTION AND DELIVERY OF NOTATION OF GUARANTEE............................................................. 51 ARTICLE 11. EXCHANGE............................................................................. 51 SECTION 11.01. EXCHANGE PRIVILEGE.................................................... 51 SECTION 11.02. EXCHANGE PROCEDURE.................................................... 54 SECTION 11.03. FRACTIONAL SHARES..................................................... 55 SECTION 11.04. TAXES ON EXCHANGE..................................................... 55 SECTION 11.05. PAYMENT UPON EXCHANGE................................................. 56 SECTION 11.06. ADJUSTMENT FOR CHANGE IN CAPITAL STOCK................................ 60 SECTION 11.07. ADJUSTMENT FOR RIGHTS OR WARRANTS..................................... 60 SECTION 11.08. ADJUSTMENT FOR OTHER DISTRIBUTIONS.................................... 61 SECTION 11.09. [RESERVED]............................................................ 63 SECTION 11.10. WHEN ADJUSTMENT MAY BE DEFERRED....................................... 63 SECTION 11.11. NOTICE OF ADJUSTMENT.................................................. 63 SECTION 11.12. VOLUNTARY CHANGE...................................................... 63 SECTION 11.13. NOTICE OF CERTAIN TRANSACTIONS........................................ 64 SECTION 11.14. EFFECT OF RECLASSIFICATION, CONSOLIDATION, MERGER OR TRANSFER.................................................... 64 SECTION 11.15. COMPANY DETERMINATION FINAL........................................... 66 SECTION 11.16. TRUSTEE'S ADJUSTMENT DISCLAIMER....................................... 66 SECTION 11.17. SIMULTANEOUS ADJUSTMENTS.............................................. 67 SECTION 11.18. SUCCESSIVE ADJUSTMENTS................................................ 67 SECTION 11.19. RIGHTS ISSUED IN RESPECT OF COMMON SHARES ISSUED UPON EXCHANGE.................................................. 67 SECTION 11.20. GENERAL CONSIDERATIONS................................................ 68
iii ARTICLE 12. CONTINGENT INTEREST.................................................................. 68 SECTION 12.01. GENERAL............................................................... 68 SECTION 12.02. DEFAULTED CONTINGENT INTEREST; INTEREST RIGHTS PRESERVED.............. 68 ARTICLE 13. MISCELLANEOUS........................................................................ 70 SECTION 13.01. TRUST INDENTURE ACT................................................... 70 SECTION 13.02. NOTICES............................................................... 70 SECTION 13.03. COMMUNICATION BY HOLDERS WITH OTHER HOLDERS........................... 71 SECTION 13.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT............................................................. 71 SECTION 13.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION......................... 72 SECTION 13.06. SEPARABILITY CLAUSE................................................... 72 SECTION 13.07. RULES BY TRUSTEE, PAYING AGENT, EXCHANGE AGENT AND REGISTRAR......................................................... 72 SECTION 13.08. GOVERNING LAW......................................................... 72 SECTION 13.09. NO RECOURSE AGAINST OTHERS............................................ 72 SECTION 13.10. RECORD DATE FOR VOTE OR CONSENT OF SECURITYHOLDERS....................................................... 73 SECTION 13.11. [RESERVED.]........................................................... 73 SECTION 13.12. SUCCESSORS............................................................ 73 SECTION 13.13. MULTIPLE ORIGINALS.................................................... 73 EXHIBIT A FORM OF SECURITY EXHIBIT B PROJECTED PAYMENT SCHEDULE ANNEX I REGISTRATION RIGHTS OF HOLDERS
iv INDENTURE, dated as of December [ ], 2004, among Nabors Industries, Inc., a Delaware corporation (the "COMPANY"), Nabors Industries Ltd., a Bermuda exempted company (the "GUARANTOR"), and J.P. Morgan Trust Company, National Association, a national banking association, as trustee (the "TRUSTEE"). Each party agrees as follows for the benefit of the other parties and for the equal and ratable benefit of the Holders of the Company's Series B Zero Coupon Senior Exchangeable Notes Due 2023: ARTICLE 1. DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.01. DEFINITIONS. "AFFILIATE" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "control," when used with respect to any specified Person, means the power to direct or cause the direction of the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "AGENT" means any Registrar or Paying Agent. "AMEX" means the American Stock Exchange. "BANKRUPTCY LAW" means Title 11, United States Code, or any similar Federal or state law or any similar Bermudan or other foreign law for the relief of debtors. "BOARD OF DIRECTORS" means either the board of directors of the Company or the Guarantor, as specified, or any duly authorized committee of such board. "BUSINESS DAY" means each day of the year on which banking institutions are not required or authorized to close in The City of New York, Houston, Texas, Chicago, Illinois, the State of Ohio or the city in which the Corporate Trust Office is located. "COMMON SHARES" means any capital stock of any class of the Guarantor which has no preference in respect of dividends or of amounts payable in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Guarantor and which is not subject to redemption by the Guarantor. Subject to the provisions of Section 11.14 hereof, however, shares issuable upon exchange of the Securities shall include only Common Shares, par value of US $0.001 per share, of the Guarantor as such class of shares exists on the date of this Indenture or shares of any class or classes resulting from any reclassification or reclassifications thereof and which have no preference in respect of dividends or of amounts payable in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Guarantor and which are not subject to redemption by the Guarantor; PROVIDED that if at any time there shall be more 1 than one such resulting class, the shares of each such class then so issuable pursuant to the terms hereof shall be substantially in the proportion which the total number of shares of such class resulting from all such reclassifications bears to the total number of shares of all such classes resulting from all such reclassifications. "COMPANY" means the party named as the "Company" in the first paragraph of this Indenture until a successor replaces it pursuant to the applicable provisions of this Indenture and, thereafter, shall mean such successor. The foregoing sentence shall likewise apply to any subsequent such successor or successors. "COMPANY REQUEST" or "COMPANY ORDER" means a written request or order signed in the name of the Company by its Chairman of the Board, a Vice Chairman, the Chief Executive Officer, its President or a Vice President, and by its Treasurer, an Assistant Treasurer, its Controller, an Assistant Controller, its Corporate Secretary or an Assistant Corporate Secretary, and delivered to the Trustee. "CONTINGENT INTEREST" shall have the meaning assigned to such term in paragraph 10 of the Securities. "CONTINGENT INTEREST PAYMENT DATE" shall have the meaning assigned to such term in paragraph 10 of the Securities. "CONTINGENT INTEREST RECORD DATE" shall have the meaning assigned to such term in paragraph 10 of the Securities. "CORPORATE TRUST OFFICE" means the designated office of the Trustee at which at any particular time its corporate trust business shall be principally administered, which office is, at the date as of which this Indenture is dated, located at Institutional Trust Services, 600 Travis Street, Suite 1150, Houston, Texas 77002-3009. "CUSTODIAN" shall mean the Trustee, as custodian with respect to the Securities in global form, or any successor entity thereto. "DEFAULT" means any event which is, or after notice or passage of time or both would be, an Event of Default. "DEPOSITARY" means, with respect to the Securities issuable or issued in whole or in part in global form, the Person specified in Section 2.06 as the Depositary with respect to the Securities, until a successor shall have been appointed and become such pursuant to the applicable provisions of this Indenture, and thereafter, "Depositary" shall mean or include such successor. "DOLLARS" or "$" means the lawful currency of the United States of America. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC promulgated thereunder. 2 "EX-DIVIDEND DATE" means the first date upon which a sale of the Common Shares will not automatically transfer the right to receive a distribution described in subparagraph (i) of the last paragraph of Section 11.01 hereof from the seller of the Common Shares to its buyer. "FUNDAMENTAL CHANGE" means the occurrence of any transaction or event in connection with which all or substantially all Common Shares shall be exchanged for, converted into, acquired for or constitute solely the right to receive (whether by means of an exchange offer, liquidation, tender offer, consolidation, merger, combination, reclassification, recapitalization or otherwise) any form of consideration which is not all or substantially all common stock listed (or, upon consummation of or immediately following such transaction or event, which will be listed) on a United States national securities exchange or approved for quotation on the Nasdaq National Market or any similar United States system of automated dissemination of quotations of securities prices. "GUARANTOR" means the party named as the "Guarantor" in the first paragraph of this Indenture until a successor replaces it pursuant to the applicable provisions of this Indenture, and thereafter "Guarantor" shall mean such successor. The foregoing sentence shall likewise apply to any subsequent such successor or successors. "HOLDER" means a Person in whose name a Security is registered on the Registrar's books. "INDENTURE" means this Indenture, as amended or supplemented from time to time in accordance with the terms hereof. "ISSUE DATE" of any Security means December [ ], 2004. "LEGAL HOLIDAY" is any day other than a Business Day. If any specified date (including a date for giving notice) is a Legal Holiday, the action shall be taken on the next succeeding date that is not a Legal Holiday, and to the extent applicable no Contingent Interest, if any, shall accrue for the intervening period. "MARKET PRICE" means, as of any Repurchase Date or date of determination, the average of the Sale Prices of the Common Shares for the five Trading Day period ending on the third Business Day prior to the applicable Repurchase Date or date of determination (if the third Business Day prior to the applicable Repurchase Date or date of determination is a Trading Day or, if it is not a Trading Day, then on the last Trading Day prior to such third Business Day), appropriately adjusted to take into account the occurrence, during the period commencing on the first of such Trading Days during such five Trading Day period and ending on such Repurchase Date or date of determination, of any event described in Section 11.06, 11.07 or 11.08 hereof; subject, however, to the conditions set forth in Sections 11.09 and 11.10 hereof. "NASDAQ NATIONAL MARKET" means the electronic inter-dealer quotation system operated by the Nasdaq Stock Market, Inc., a subsidiary of the National Association of Securities Dealers, Inc. "NON-U.S. PERSON" means a Person that is not a U.S. Person. 3 "OFFICER" means the Chairman of the Board, any Vice Chairman, the Chief Executive Officer, the President, any Vice President, the Chief Financial Officer, the Chief Accounting Officer, the Treasurer, the Controller or the Secretary or any Assistant Treasurer or Assistant Secretary of a Person or any other individual designated by that Person as an "Officer." "OFFICERS' CERTIFICATE" means a written certificate signed in the name of a Person by two Officers of a Person, one of whom must be the Person's Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer or Vice President. "OPINION OF COUNSEL" means a written opinion containing the information specified in Sections 13.04 and 13.05, from legal counsel who is acceptable to the Trustee. The counsel may be an employee of, or counsel to, the Company or the Trustee. "ORIGINAL INDENTURE" means the Indenture dated as of June 10, 2003 by and among the Company, the Guarantor and the trustee named therein, which sets forth the terms of the Company's Zero Coupon Senior Exchangeable Notes Due 2023. "ORIGINAL SECURITIES" means the Company's Zero Coupon Senior Exchangeable Notes Due 2023 issued pursuant to the Original Indenture. "PERSON" means any individual, corporation, partnership, limited liability company, exempted company, joint venture, incorporated or unincorporated association, joint-stock company, trust, unincorporated organization, or government or any agency or political subdivision thereof or other entity of any kind. "PRINCIPAL" or "PRINCIPAL AMOUNT" of a Security means the principal amount as set forth on the face of such Security, or on Schedule A thereto in the case of a Security in global form. "REDEMPTION DATE" means a date specified for redemption of the Securities in accordance with the terms of the Securities and Section 3.01 of this Indenture. "REDEMPTION PRICE" shall have the meaning set forth in paragraph 5 of the Securities. "REGULATION S" means Regulation S as promulgated under the Securities Act. "RULE 144" means Rule 144 as promulgated under the Securities Act. "RULE 144A" means Rule 144A as promulgated under the Securities Act. "SALE PRICE OF THE COMMON SHARES" means, on any date, the closing sale price per share, or if no closing sale price is reported, the average bid and asked prices or, if more than one in either case, the average of the average bid and average asked prices, on such date as reported in transactions for the principal U.S. securities exchange on which the Common Shares are traded or, if the Common Shares are not listed on a U.S. national or regional stock exchange, as reported by the Nasdaq National Market, in each case without reference to after-hours or extended market trading. If the Common Shares are not listed for trading on a U.S. national or 4 regional securities exchange and not reported by the Nasdaq National Market on the relevant date, the "sale price" shall be the last quoted bid price for Common Shares in the over-the-counter market on the relevant date as reported by the National Quotation Bureau or similar organization. If the Common Shares are not so quoted, the "sale price" will be the average of the mid-point of the last bid and asked prices for the Common Shares on the relevant date from each of at least three nationally recognized independent investment banking firms selected by the Company for this purpose. "SEC" or "COMMISSION" means the Securities and Exchange Commission or any successor entity. "SECURITIES" means the Company's Series B Zero Coupon Senior Exchangeable Notes Due 2023. "SECURITIES ACT" means the Securities Act of 1933, as amended, and the rules and regulations of the SEC promulgated thereunder. "STATED MATURITY," when used with respect to any Security, means the date specified in such Security as the fixed date on which an amount equal to the Principal of such Security is due and payable. "TAXES" means any tax, duty, levy, impost, assessment or other governmental charge of whatever nature imposed or levied by or on behalf of the Government of Bermuda or of any province or territory thereof or by an authority or agency therein or thereof having the power to tax, including any interest, penalties or other charges in respect thereof. "TAX ORIGINAL ISSUE DISCOUNT" means the amount of ordinary interest income on a Security that must be accrued as original issue discount for United States Federal income tax purposes pursuant to U.S. Treasury Regulation Section 1.1275-4. "TIA" means the Trust Indenture Act of 1939, as amended, as in effect on the date of this Indenture, except as provided in Section 9.03. "TRADING DAY" means a day during which trading in securities generally occurs on the AMEX or, if the applicable security is not listed on the AMEX, on the principal other national or regional securities exchange on which the applicable security is then listed or, if the applicable security is not listed on a national or regional securities exchange, on the Nasdaq National Market, or if the applicable security is not quoted on the Nasdaq National Market, on the principal other market on which the applicable security is then traded. "TRADING PRICE PER $1,000 PRINCIPAL AMOUNT OF SECURITIES" or "TRADING PRICE" means, on any Trading Day, the average of the secondary market bid quotations (expressed as Dollars per $1,000 Principal Amount of Securities) obtained by the Trustee for $5,000,000 principal amount of Securities at approximately 3:30 p.m., New York City time, on such Trading Day from three independent nationally recognized securities dealers selected by the Company; provided that if at least three such bids cannot reasonably be obtained by the Trustee, but two bids are obtained, then the average of the two bids shall be used, and if only one such bid can reasonably be obtained by the Trustee, one bid shall be used; and provided 5 further that if the Trustee cannot reasonably obtain at least one such bid, then for purposes of evaluating the 95% Trading Exception, the Trading Price per $1,000 Principal Amount of Securities for such Trading Day shall be deemed to be less than 95% of the product of (i) the Exchange Rate in effect as of such Trading Day and (ii) the Sale Price of the Common Shares on such Trading Day. "TRUST OFFICER" means the officer in the Institutional Trust Services department of the Trustee having direct responsibility for administration of this Indenture. "TRUSTEE" means the party named as the "Trustee" in the first paragraph of this Indenture until a successor replaces it pursuant to the applicable provisions of this Indenture and, thereafter, shall mean such successor. The foregoing sentence shall likewise apply to any subsequent such successor or successors. "U.S. PERSON" has the meaning specified in Regulation S. "VOTING STOCK" means stock of any class or classes, however designated, having ordinary voting power for the election of a majority of the board of directors of a corporation, other than stock having such power only by reason of the occurrence of a contingency. SECTION 1.02. OTHER DEFINITIONS.
DEFINED TERM IN SECTION - ----- ----------- "ADDITIONAL AMOUNTS"......................................................................... 4.09 "ALTERNATIVE CONSIDERATION".................................................................. 11.05(b) "APPLICABLE PRICE"........................................................................... 11.05(b) "CASH"....................................................................................... 3.08(a) "CLEARSTREAM"................................................................................ 2.06(c) "COMPANY NOTICE"............................................................................. 3.08(c) "COMPANY NOTICE DATE"........................................................................ 3.08(b) "DEFAULTED CONTINGENT INTEREST".............................................................. 12.02 "DETERMINATION DATE"......................................................................... 11.05(a) "DISTRIBUTED SECURITIES"..................................................................... 11.08(a) "EFFECTIVE DATE"............................................................................. 11.05(b) "EUROCLEAR".................................................................................. 2.06(c) "EVENT OF DEFAULT"........................................................................... 6.01 "EXCHANGE AGENT"............................................................................. 2.03 "EXCHANGE DATE".............................................................................. 11.02 "EXCHANGE PRICE"............................................................................. 11.01 "EXCHANGE PROPERTY".......................................................................... 11.14(b) "EXCHANGE PROPERTY VALUE".................................................................... 11.14(c) "EXCHANGE PROPERTY WEIGHTED AVERAGE PRICE"................................................... 11.14(c) "EXCHANGE RATE".............................................................................. 11.01
6 "EXCHANGE VALUE"............................................................................. 11.05(a) "EXCLUDED HOLDER"............................................................................ 4.09 "EXPIRATION TIME"............................................................................ 11.08(a) "FUNDAMENTAL CHANGE PURCHASE PRICE".......................................................... 3.09(f) "FUNDAMENTAL CHANGE REPURCHASE DATE"......................................................... 3.09(a) "FUNDAMENTAL CHANGE REPURCHASE NOTICE"....................................................... 3.09(b) "FUNDAMENTAL CHANGE REPURCHASE RIGHT"........................................................ 3.09(a) "GUARANTEE".................................................................................. 10.01(a) "INDENTURE OBLIGATIONS"...................................................................... 10.01(a) "LAST ORIGINAL SECURITY MEASUREMENT DATE".................................................... 11.01 "MAKE-WHOLE PREMIUM"......................................................................... 11.05(b) "NET EXCHANGE PROPERTY AMOUNT"............................................................... 11.14(d) "NET SHARE AMOUNT"........................................................................... 11.05(a) "NET SHARES"................................................................................. 11.05(a) "95% TRADING EXCEPTION"...................................................................... 11.01 "NOTICE OF DEFAULT".......................................................................... 6.01 "OFFER CONSIDERATION"........................................................................ 11.08(c) "PAYING AGENT"............................................................................... 2.03 "PRINCIPAL RETURN"........................................................................... 11.05(a) "PURCHASE PRICE"............................................................................. 3.08(a) "PURCHASED SHARES"........................................................................... 11.08(c) "REGISTRAR".................................................................................. 2.03 "REPURCHASE DATE"............................................................................ 3.08(a) "REPURCHASE NOTICE".......................................................................... 3.08(a) "RESTRICTED SECURITIES"...................................................................... 2.06(c) "RESTRICTED SECURITY LEGEND"................................................................. 2.06(c) "SPECIAL CONTINGENT INTEREST RECORD DATE".................................................... 12.02 "STOCK PRICE CAP"............................................................................ 11.05(b) "STOCK PRICE THRESHOLD"...................................................................... 11.05(b) "TEN DAY WEIGHTED AVERAGE PRICE"............................................................. 11.05(a) "TERRITORY".................................................................................. 4.09 "TRIGGER EVENT".............................................................................. 11.19 "VOLUME WEIGHTED AVERAGE PRICE".............................................................. 11.05(a)
SECTION 1.03. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT. Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by reference in and made a part of this Indenture. The following TIA terms used in this Indenture have the following meanings: "Commission" means the SEC. "Indenture Securities" means the Securities and the Guarantee. 7 "Indenture Security Holder" means a Holder. "Indenture to be Qualified" means this Indenture. "Indenture Trustee" or "Institutional Trustee" means the Trustee. All other TIA terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rules have the meanings assigned to them by such definitions. SECTION 1.04. RULES OF CONSTRUCTION. Unless the context otherwise requires: (1) a term has the meaning assigned to it; (2) an accounting term not otherwise defined has the meaning assigned to it in accordance with generally accepted accounting principles in the United States of America as in effect from time to time; (3) "or" is not exclusive; (4) "including" means including, without limitation; (5) the term "merger" includes a statutory compulsory share exchange and a conversion of a corporation into a limited liability company, a partnership or other entity and vice versa; (6) references to statutes, rules or regulations include any successor statute, rule or regulation, as the case may be; (7) the masculine gender includes the feminine and the neuter; and (8) words in the singular include the plural, and words in the plural include the singular. ARTICLE 2. THE SECURITIES SECTION 2.01. FORM AND DATING. Other than as provided in Section 2.06, the Securities, any notations thereon relating to the Guarantee and the Trustee's certificate of authentication for the Securities shall be substantially in the form of EXHIBIT A, which is a part of this Indenture. In addition to such legends as may be required by Section 2.06, the Securities may have notations, legends or endorsements required by law, stock exchange rule or usage, PROVIDED that any such notation, legend or endorsement required by usage is in a form acceptable to the Company. The Company shall provide any such notations, legends or endorsements to the Trustee in writing. Each Security shall be dated the date of its authentication. 8 Any Security in global form shall represent such of the outstanding Securities as shall be specified therein and shall provide that it shall represent the aggregate amount of outstanding Securities from time to time endorsed thereon and that the aggregate amount of outstanding Securities represented thereby may from time to time be increased or reduced to reflect transfers or exchanges permitted hereby. Any endorsement of a Security in global form to reflect the amount of any increase or decrease in the amount of outstanding Security represented thereby shall be made by the Trustee or the Custodian, at the direction of the Trustee, in such manner and upon instructions given by the Holder of such Security in accordance with this Indenture. Payment of Principal Amount, Redemption Price, Purchase Price, Fundamental Change Purchase Price, Additional Amounts, if any, or Contingent Interest, if any, on any Security in global form shall be made to the Holder of such Security. SECTION 2.02. EXECUTION AND AUTHENTICATION. The Securities shall be executed on behalf of the Company by one Officer of the Company. The signature of an Officer on the Securities may be manual or facsimile. Securities bearing the manual or facsimile signatures of individuals who were at any time the proper Officers of the Company shall bind the Company, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Securities or did not hold such offices at the date of authentication of such Securities. No Security shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such Security a certificate of authentication substantially in the form provided for herein duly executed by the Trustee by manual signature of an authorized signatory, and such certificate upon any Security shall be conclusive evidence, and the only evidence, that such Security has been duly authenticated and delivered hereunder. The Trustee shall authenticate and deliver Securities (i) for original issue in an aggregate Principal Amount of up to $700,000,000 upon a Company Order without any further action by the Company, and (ii) any amount of additional Securities specified by the Company after the Issue Date, in each case, upon a written order of the Company signed by one Officer of the Company; provided, however, that no additional Securities may be issued or guaranteed if a Default or Event of Default shall have occurred and be continuing. Such order shall specify the amount of the Securities to be authenticated and the date of original issue thereof. In authenticating such Securities, the Trustee shall be entitled to receive, and shall be entitled to rely upon, an Opinion of Counsel substantially to the effect that such Securities, when authenticated and delivered by the Trustee and issued by the Company in the manner and subject to any conditions specified in such Opinion of Counsel, will constitute valid and legally binding obligations of the Company enforceable in accordance with their terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles. The aggregate Principal Amount of Securities outstanding at any time may not exceed the aggregate Principal Amount of Securities authorized for issuance by the Company pursuant to one or more written orders of the Company, except as provided in Section 2.07. Subject to the 9 foregoing, the aggregate principal amount of Securities that may be issued under this Indenture shall not be limited. The Trustee may appoint an authenticating agent acceptable to the Company to authenticate Securities. Unless limited by the terms of such appointment, an authenticating agent may authenticate Securities whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as an Agent to deal with the Company, the Guarantor or any of their respective Affiliates. SECTION 2.03. REGISTRAR, PAYING AGENT AND EXCHANGE AGENT. The Company shall maintain an office or agency where Securities may be presented for registration of transfer or for exchange ("REGISTRAR"), an office or agency where Securities may be presented for purchase or payment ("PAYING AGENT") and an office or agency where Securities may be presented for exchange pursuant to Article 11 hereof ("EXCHANGE AGENT"). The Registrar shall keep a register of the Securities and of their transfer and exchange. The Company may have one or more co-registrars, one or more additional paying agents and one or more additional exchange agents. The term Paying Agent includes any additional paying agent. The term Exchange Agent includes any additional exchange agent, including any named in accordance with the provisions hereof. The Company shall enter into an appropriate agency agreement with any Registrar, Paying Agent, Exchange Agent or co-registrar (if not the Trustee or an Affiliate of the Trustee). The agreement shall implement the provisions of this Indenture that relate to such agent and the relevant Security. The Company shall notify the Trustee of the name and address of any such agent. If the Company fails to maintain a Registrar, Paying Agent or Exchange Agent, the Trustee shall act as such and shall be entitled to appropriate compensation therefor pursuant to Section 7.07 hereof. The Company, the Guarantor or an Affiliate of the Company or the Guarantor may act as Paying Agent, Registrar, Exchange Agent or co-registrar. The Company initially appoints the Trustee as Registrar, Exchange Agent and Paying Agent in connection with the Securities. SECTION 2.04. PAYING AGENT TO HOLD CASH AND SECURITIES IN TRUST. Except as otherwise provided herein, prior to 10:00 a.m., New York City time, on each due date of payments in respect of any Security, the Company shall deposit with the Paying Agent cash or securities sufficient to make such payments when such payments are due. The Company shall require the Paying Agent (if not the Trustee) to agree in writing that the Paying Agent shall hold in trust for the benefit of Holders or the Trustee all cash and securities held by the Paying Agent for the making of payments in respect of the Securities and shall notify the Trustee of any default by the Company in making any such payment. At any time during the continuance of any such default, the Paying Agent shall, upon the written request of the Trustee, forthwith pay to the Trustee all cash and securities so held in trust. If the Company, the 10 Guarantor or an Affiliate of the Company or the Guarantor acts as Paying Agent, it shall segregate the cash and securities held by it as Paying Agent and hold it as a separate trust fund. The Company at any time may require the Paying Agent to pay all cash and securities held by it to the Trustee and to account for any funds and securities disbursed by it. Upon doing so, the Paying Agent shall have no further liability for such cash or securities. SECTION 2.05. HOLDER LISTS. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Holders. If the Trustee is not the Registrar, the Company shall cause to be furnished to the Trustee at least semiannually on May 26 and November 26 a listing of Holders dated within ten days of the date on which the list is furnished and at such other times as the Trustee may request in writing a list, in such form and as of such date as the Trustee may reasonably require, of the names and addresses of Holders. SECTION 2.06. EXCHANGE AND REGISTRATION OF TRANSFER OF SECURITIES; RESTRICTIONS ON TRANSFERS; DEPOSITARY. (a) Upon surrender for registration of transfer of any Security at any office or agency of the Company designated as Registrar or co-registrar pursuant to Section 2.03 hereof and satisfaction of the requirements for such transfer set forth in this Section 2.06, the Company shall execute, and the Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Securities of any authorized denominations and of a like aggregate Principal Amount and bearing such restrictive legends as may be required by this Indenture. Securities may be exchanged for a like aggregate Principal Amount of Securities of other authorized denominations. Securities to be exchanged shall be surrendered at any office or agency to be maintained by the Company designated as Registrar or co-registrar pursuant to Section 2.03 hereof and the Company shall execute and register, and the Trustee shall authenticate and deliver in exchange therefor, the Security or Securities which the Holder making the exchange shall be entitled to receive, bearing registration numbers not contemporaneously outstanding. All Securities presented for registration of transfer or for exchange into like Securities, repurchase, redemption or exchange pursuant to Article 11 hereof or payment shall (if so required by the Company, the Trustee, the Registrar or any co-registrar) be duly endorsed by, or be accompanied by a written instrument or instruments of transfer in form satisfactory to the Company and the Trustee, duly executed by the Holder or such Holder's attorney duly authorized in writing. No service charge shall be charged to the Holder for any exchange for like Securities or registration of transfer of Securities, but the Company may require payment of a sum sufficient to cover any tax, assessments or other governmental charges that may be imposed in connection therewith. 11 None of the Company, the Trustee, the Registrar or any co-registrar shall be required to exchange for like Securities or register a transfer of (a) any Securities for a period of 15 days next preceding the mailing of notice of Securities to be redeemed, or (b) any Securities or portions thereof selected or called for redemption, or (c) any Securities or portion thereof surrendered for exchange pursuant to Article 11 hereof, or (d) any Securities or portion thereof surrendered for repurchase or redemption (and not withdrawn) pursuant to Section 3.08 or 3.09 hereof, respectively. All Securities issued upon any transfer or exchange for like Securities shall be valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture as the Securities surrendered upon such exchange or transfer. (b) So long as the Securities are eligible for book-entry settlement with the Depositary, or unless otherwise required by law, all Securities that are so eligible may be represented by a Security in global form registered in the name of the Depositary or the nominee of the Depositary, except as otherwise specified below. The transfer and exchange of beneficial interests in such Security in global form shall be effected through the Depositary in accordance with this Indenture and the procedures of the Depositary therefor. Any Security in global form may be endorsed with or have incorporated in the text thereof such legends or recitals or changes not inconsistent with the provisions of this Indenture as may be required by the Custodian, the Depositary or by the National Association of Securities Dealers, Inc. or to comply with any applicable law or any regulation or with the rules and regulations of any securities exchange or automated quotation system upon which the Securities may be listed or traded or to conform with any usage with respect thereto, or to indicate any special limitations or restrictions to which any particular Securities are subject. (c) Every Security that bears or is required under this Section 2.06(c) to bear the Restricted Securities Legend (together with any Common Shares issued upon exchange of the Securities and required to bear the legend set forth in Section 2.06(d), collectively, the "RESTRICTED SECURITIES") shall be subject to the restrictions on transfer set forth in this Section 2.06(c) (including those set forth in the legend set forth below) unless such restrictions on transfer shall be waived by written consent of the Company, and the Holder of each such Transfer Restricted Security, by such Holder's acceptance thereof, agrees to be bound by all such restrictions on transfer. As used in Sections 2.06(c) and 2.06(d), the term "transfer" encompasses any sale, pledge, transfer or other disposition whatsoever of any Restricted Security. Until transferred under Rule 144(k) under the Securities Act (or any successor provision), any certificate evidencing such Security (and all securities issued in exchange therefor or substitution thereof, other than Common Shares issued upon exchange or repurchase thereof, which shall bear the legend set forth in Section 2.06(d) if applicable) shall bear a legend in substantially the form set forth on the face of the Security in EXHIBIT A (the "RESTRICTED SECURITY LEGEND"), unless such Security has been sold pursuant to a registration statement that has been declared effective under the Securities Act (and which continues to be effective at the time of such transfer), or unless otherwise agreed by the Company in writing, with written notice thereof to the Trustee. 12 Any Security (or security issued in exchange or substitution therefor) as to which the conditions for removal of the Restricted Security Legend have been satisfied may, upon surrender of such Security for exchange to the Registrar in accordance with the provisions of this Section 2.06, be exchanged for a new Security or Securities, of like tenor and aggregate Principal Amount, which shall not bear the Restricted Security Legend required by this Section 2.06(c). Notwithstanding any other provisions of this Indenture (other than the provisions set forth in Section 2.06(b) and in this Section 2.06(c)), a Security in global form may not be transferred as a whole or in part except by the Depositary to a nominee of the Depositary or by a nominee of the Depositary to the Depositary or another nominee of the Depositary or by the Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary. The Depositary shall be a clearing agency registered under the Exchange Act. The Company initially appoints The Depository Trust Company to act as Depositary. Initially, one or more Securities in global form shall be issued to the Depositary, registered in the name of Cede & Co., as the nominee of the Depositary, and deposited with the Custodian for Cede & Co. Each Security in global form, to the extent that it represents the interests of Non-U.S. Persons, will be held by Cede & Co. for the accounts of designated agents on behalf of the Euroclear System ("EUROCLEAR") and Clearstream Banking, Societe Anonyme ("CLEARSTREAM"). If at any time the Depositary for Security in global form notifies the Company that it is unwilling or unable to continue as Depositary for such Security, the Company may appoint a successor Depositary with respect to such Security. If a successor Depositary is not appointed by the Company within ninety (90) days after the Company receives such notice, the Company will execute, and the Trustee, upon receipt of an Officers' Certificate for the authentication and delivery of Securities, will authenticate and deliver, Securities in certificated or definitive form, in aggregate Principal Amount equal to the Principal Amount of the Security in global form, in exchange for such Security in global form. Securities in certificated form issued in exchange for all or a part of a Security in global form pursuant to this Section 2.06 shall be registered in such names and in such authorized denominations as the Depositary, pursuant to instructions from its direct or indirect participants or otherwise, shall instruct the Trustee. Upon execution and authentication, the Trustee shall deliver such Securities in certificated form to the persons in whose names such Securities in certificated form are so registered. At such time as all interests in a Security in global form have been redeemed, exchanged pursuant to Article 11 hereof, canceled or repurchased or exchanged for Securities in certificated form, or transferred to a transferee who receives Securities in certificated form, such Security in global form shall, upon receipt thereof, be canceled by the Trustee in accordance with standing procedures and instructions existing between the Depositary and the Custodian. At any time prior to such cancellation, if any interest in a Security in global form is exchanged for Securities in certificated form, redeemed, exchanged pursuant to Article 11 hereof, repurchased or canceled, the Principal Amount of the Security in global form shall, in accordance with the standing procedures and instructions existing between the Depositary and the Custodian, be appropriately reduced and an endorsement shall be made on such Security in global form, by the Trustee or the Custodian, at the direction of the Trustee, to reflect such reduction. 13 (d) Until transferred under Rule 144(k) under the Securities Act (or any successor provision), any certificate representing Common Shares issued upon exchange of any Security shall bear a legend in substantially the following form, unless such Common Shares have been originally issued upon exchange of Securities or sold pursuant to a registration statement that has been declared effective under the Securities Act (and which continues to be effective at the time of such issuance or sale), or unless otherwise agreed by the Company in writing with written notice thereof to the transfer agent for the Common Shares: THE COMMON SHARES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS, AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U. S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. THE HOLDER HEREOF AGREES THAT UNTIL THE EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO SALES OF THE SECURITY EVIDENCED HEREBY UNDER RULE 144(k) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION), (1) IT WILL NOT RESELL OR OTHERWISE TRANSFER THE COMMON SHARES EVIDENCED HEREBY WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OF, U. S. PERSONS EXCEPT (A) TO NABORS INDUSTRIES LTD. OR TO NABORS INDUSTRIES, INC. OR ANY SUBSIDIARY THEREOF, (B) TO A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT), (C) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a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k) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION). AS USED HEREIN, THE TERMS "UNITED STATES" AND "U. S. PERSON" HAVE THE MEANING GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT. Any such Common Shares as to which such restrictions on transfer shall have expired in accordance with their terms or as to which the conditions for removal of the foregoing legend set forth therein have been satisfied may, upon surrender of the certificates representing such Common Shares for exchange in accordance with the procedures of the transfer agent for the Common Shares, be exchanged for a new certificate or certificates for a like number of Common Shares, which shall not bear the restrictive legend required by this Section 2.06(d). (e) Any Security that, prior to the expiration of the holding period applicable to sales thereof under Rule 144(k) under the Securities Act, is purchased or owned by the Company, the Guarantor or any Affiliate of the Company or the Guarantor may not be resold by the Guarantor, the Company or such Affiliate unless registered under the Securities Act or resold pursuant to an exemption from the registration requirements of the Securities Act in a transaction which results in such Security no longer being "restricted securities" (as defined under Rule 144). (f) Each Holder of a Security agrees to indemnify the Guarantor, the Company and the Trustee against any liability that may result from the transfer, exchange or assignment of such Holder's Security in violation of any provision of this Indenture and/or applicable United States Federal or state securities laws or foreign securities laws. The Trustee shall have no obligation or duty to monitor, determine or inquire as to compliance with any restrictions on transfer imposed under this Indenture or under applicable law with respect to any transfer of any interest in any Security (including any transfers between or among Depositary participants or beneficial owners of interests in a Security in global form) other than to require delivery of such certificates and other documentation or evidence as are expressly required by, and to do so if and when expressly required by the terms of, this Indenture, and to examine the same to determine substantial compliance as to form with the express requirements hereof. SECTION 2.07. REPLACEMENT SECURITIES. If (a) any mutilated Security is surrendered to the Trustee, or (b) the Company and the Trustee receive evidence to their satisfaction of the destruction, loss or theft of any Security, and there is delivered to the Trustee such security or indemnity as may be required by it to save the Company and the Trustee harmless, then, in the absence of notice to the Company or the Trustee that such Security has been acquired by a bona fide purchaser, the Company shall execute and, upon its written request, the Trustee shall authenticate and deliver, in exchange for any such mutilated Security or in lieu of any such destroyed, lost or stolen Security, a new Security of like tenor and Principal Amount, bearing a number not contemporaneously outstanding. In case any such mutilated, destroyed, lost or stolen Security has become or is about to become due and payable, or is about to be repurchased or redeemed by the Company pursuant to 15 Article 3 hereof, or exchanged pursuant to Article 11 hereof, the Company in its discretion may, instead of issuing a new Security, pay, repurchase or redeem such Security, or the Guarantor may issue the underlying securities, as the case may be. Upon the issuance of any new Securities under this Section 2.07, the Company may, as a condition to such issuance, require the payment of a sum sufficient to cover any tax, assessment or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith. Every new Security issued pursuant to this Section 2.07 in lieu of any mutilated, destroyed, lost or stolen Security shall constitute an original additional contractual obligation of the Company, whether or not the mutilated destroyed, lost or stolen Security shall be at any time enforceable by anyone, and shall be entitled to all benefits of this Indenture equally and proportionately with any and all other Securities duly issued hereunder. The provisions of this Section 2.07 are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities. SECTION 2.08. OUTSTANDING SECURITIES; DETERMINATIONS OF HOLDERS' ACTION. Securities outstanding at any time are all the Securities authenticated by the Trustee except for those canceled by it, those delivered to it for cancellation, those paid pursuant to Section 4.01 hereof, those exchanged pursuant to Article 11 hereof, those replaced or paid pursuant to Section 2.07 hereof and those described in this Section 2.08 as not outstanding. A Security does not cease to be outstanding because the Company or an Affiliate thereof holds the Security; PROVIDED, HOWEVER, that in determining whether the Holders of the requisite Principal Amount of Securities have given or concurred in any request, demand, authorization, direction, notice, consent or waiver hereunder, Securities owned by the Company or any Affiliate of the Company shall be disregarded and deemed not to be outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Securities which the Trust Officer actually knows to be so owned shall be so disregarded unless written notice of such ownership is received by the Trustee at the Corporate Trust Office of the Trustee in accordance with Section 13.02 hereof and such notice references the Securities and this Indenture. Subject to the foregoing, only Securities outstanding at the time of such determination shall be considered in any such determination (including determinations pursuant to Articles 6 and 9 hereof). If a Security is replaced pursuant to Section 2.07, it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Security is held by a bona fide purchaser. If the Paying Agent holds, in accordance with this Indenture, by 10:00 a.m., New York City time, on a Redemption Date, or on the Business Day following a Repurchase Date or a Fundamental Change Repurchase Date, or on Stated Maturity, cash or securities, if permitted hereunder, sufficient to pay all Securities payable on that date, then on and after that date such 16 Securities shall cease to be outstanding and Additional Amounts, if any, and Contingent Interest, if any, on such Securities shall cease to accrue; PROVIDED, that, if such Securities are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture or provision therefor satisfactory to the Trustee has been made. If a Security is exchanged in accordance with Article 11 hereof, then from and after such exchange such Security shall cease to be outstanding and Additional Amounts, if any, and Contingent Interest, if any, shall cease to accrue on such Security. SECTION 2.09. TEMPORARY SECURITIES. Pending the preparation of definitive Securities, the Company may execute, and upon Company Order the Trustee shall authenticate and deliver, temporary Securities which are printed, lithographed, typewritten, mimeographed or otherwise produced, in any authorized denomination, substantially of the tenor of the definitive Securities in lieu of which they are issued and with such appropriate insertions, omissions, substitutions and other variations as the officers executing such Securities may determine, as conclusively evidenced by their execution of such Securities. If temporary Securities are issued, the Company shall cause definitive Securities to be prepared without unreasonable delay. After the preparation of definitive Securities, the temporary Securities shall be exchangeable for definitive Securities upon surrender of the temporary Securities at the office or agency of the Company designated for such purpose pursuant to Section 2.03 hereof, without charge to the Holder. Upon surrender for cancellation of any one or more temporary Securities, the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor a like Principal Amount of definitive Securities of authorized denominations. Until so exchanged, the temporary Securities shall in all respects be entitled to the same benefits under this Indenture as definitive Securities. SECTION 2.10. CANCELLATION. All Securities surrendered for payment, purchase, exchange, redemption or registration of transfer or exchange for the Securities shall, if surrendered to any Person other than the Trustee, be delivered to the Trustee and shall be promptly canceled by it. The Company may at any time deliver to the Trustee for cancellation any Securities previously authenticated and delivered hereunder which the Company may have acquired in any manner whatsoever, and all Securities so delivered shall be promptly canceled by the Trustee. The Company may not issue new Securities to replace Securities it has paid for or delivered to the Trustee for cancellation or that any Holder has exchanged pursuant to Article 11 hereof. No Securities shall be authenticated in lieu of or in exchange for any Securities canceled as provided in this Section 2.10, except as expressly permitted by this Indenture. All canceled Securities held by the Trustee shall be disposed of by the Trustee in accordance with its customary procedures. SECTION 2.11. PERSONS DEEMED OWNERS. Prior to due presentment of a Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name such Security is registered as the owner of such Security for the purpose of receiving payment of 17 Principal Amount, Redemption Price, Purchase Price, Fundamental Change Purchase Price, Additional Amounts, if any, and Contingent Interest, if any, in respect thereof, for the purpose of exchange and for all other purposes whatsoever, whether or not such Security be overdue, and none of the Company, the Guarantor, the Trustee or any agent of the Company, the Guarantor or the Trustee shall be affected by notice to the contrary. SECTION 2.12. CUSIP NUMBERS. The Company in issuing the Securities may use CUSIP numbers (if then generally in use), and, if so, the Trustee shall use CUSIP numbers in notices of redemption as a convenience to Holders; PROVIDED, that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Securities or as contained in any notice of redemption and that reliance may be placed only on the other identification numbers printed on the Securities, and any such redemption shall not be affected by any defect in or omission of such numbers. The Company will promptly notify the Trustee of any change in the CUSIP numbers. ARTICLE 3. REDEMPTION AND REPURCHASES SECTION 3.01. RIGHT TO REDEEM; NOTICES TO TRUSTEE. The Company, at its option, may redeem the Securities in accordance with the provisions of paragraphs 5 and 7 of the Securities. If the Company elects to redeem Securities pursuant to paragraph 5 of the Securities, it shall notify the Trustee in writing of the Redemption Date, the Principal Amount of Securities to be redeemed and the Redemption Price. The Company shall give the notice to the Trustee provided for in this Section 3.01 in the case of any redemption of the Securities, at least 20 days before the Redemption Date unless a shorter notice shall be satisfactory to the Trustee. The Company may, upon at least 30 days' notice given to the Holders, on one or more occasions, elect to extend the period during which the Company cannot redeem any of the Securities pursuant to paragraph 5 of the Securities. Such extension period will be as designated in such notice of extension. Each such election, once made, shall be irrevocable. SECTION 3.02. SELECTION OF SECURITIES TO BE REDEEMED. If less than all the Securities held in definitive form are to be redeemed pursuant to Section 3.01, the Trustee shall select the definitive Securities to be redeemed pro rata or by lot or by another method the Trustee considers fair and appropriate (as long as such method is not prohibited by the rules of any securities exchange or quotation system on which the Securities are then listed or quoted). The Trustee shall make the selection at least 18 days, but not more than 65 days, before the Redemption Date from outstanding definitive Securities not previously called for redemption. The Trustee may select for redemption portions of the Principal Amount of Securities that have denominations larger than $1,000. Securities and portions of them the Trustee selects shall be in Principal Amounts of $1,000 or an integral multiple of $1,000. Except as expressly stated otherwise, provisions of this Indenture that apply to definitive Securities 18 called for redemption also apply to portions of definitive Securities called for redemption. The Trustee shall notify the Company promptly of the definitive Securities or portions of definitive Securities to be redeemed. Any interest in a Security held in global form by and registered in the name of the Depositary or its nominee to be redeemed in whole or in part will be redeemed in accordance with the procedures of the Depositary. If any Security selected for partial redemption is exchanged in part before termination of the exchange right with respect to the portion of the Security so selected, the exchanged portion of such Security shall be deemed (so far as may be) to be the portion selected for redemption. Securities which have been exchanged during a selection of Securities to be redeemed may be treated by the Trustee as outstanding for the purpose of such selection. SECTION 3.03. NOTICE OF REDEMPTION. At least 15 days but not more than 60 days before a Redemption Date, the Company shall mail a notice of redemption by first-class mail, postage prepaid, to each Holder of Securities to be redeemed. The notice shall identify the Securities to be redeemed and shall state: (1) the Redemption Date; (2) the Redemption Price; (3) the Exchange Rate; (4) the name and address of the Paying Agent and Exchange Agent; (5) that Securities called for redemption may be exchanged at any time before the close of business on the last Trading Day prior to the Redemption Date; (6) that Holders who want to exchange Securities must satisfy the requirements set forth in paragraph 9 of the Securities; (7) that Securities called for redemption must be surrendered to the Paying Agent to collect the Redemption Price; (8) if fewer than all the outstanding Securities are to be redeemed, the certificate numbers and Principal Amounts of the particular Securities to be redeemed; (9) that Additional Amounts, if any, Contingent Interest, if any, and overdue interest, if any, on Securities called for redemption will cease to accrue on and after the Redemption Date; and (10) the CUSIP number or numbers for the Securities called for redemption. 19 The notice, if mailed in the manner herein provided, shall be conclusively presumed to have been duly given, whether or not the Holder receives such notice. In any case, failure to give such notice by mail or any defect in the notice to the Holder of any Security designated for redemption as a whole or in part shall not affect the validity of the proceedings for the redemption of any other Security. At the Company's request, the Trustee shall give the notice of redemption in the Company's name and at the Company's expense. SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION. Once notice of redemption is given, pursuant to Section 3.03 hereof, Securities called for redemption become due and payable on the Redemption Date and at the Redemption Price stated in the notice, together with Additional Amounts, if any, accrued and unpaid Contingent Interest, if any, and overdue interest, if any, except for Securities which are exchanged in accordance with the terms of this Indenture; PROVIDED that if the Redemption Date falls after a Contingent Interest Record Date and on or prior to the corresponding Contingent Interest Payment Date, then the Contingent Interest payable on such Contingent Interest Payment Date shall be paid to the holders of record of the Securities on the applicable Contingent Interest Record Date instead of the holders surrendering the Securities for redemption. Upon the later of the Redemption Date or the date such Securities are surrendered to the Paying Agent, such Securities shall be paid at the Redemption Price stated in the notice. SECTION 3.05. DEPOSIT OF REDEMPTION PRICE. By 10 a.m., New York City time, on the Redemption Date, the Company shall deposit with the Paying Agent (or if the Company or an Affiliate of the Company is the Paying Agent, shall segregate and hold in trust) cash sufficient to pay the Redemption Price of all Securities to be redeemed on that date other than Securities or portions of Securities called for redemption which prior thereto have been delivered by the Company to the Trustee for cancellation or have been exchanged pursuant to Article 11 hereof, together with Additional Amounts, if any, accrued and unpaid Contingent Interest, if any, and overdue interest, if any, subject to the proviso at the end of Section 3.04. On or after the Redemption Date (unless the Company shall default in the payment of the Securities at the Redemption Price), Additional Amounts, if any, Contingent Interest, if any, and overdue interest, if any, on the Securities or portion of Securities called for redemption shall cease to accrue and such Securities shall cease after the close of business on the Trading Day immediately preceding the Redemption Date to be exchangeable pursuant to Article 11 hereof and, except as provided in Section 8.02 hereof, to be entitled to any benefit or security under this Indenture, and the Holders thereof shall have no right in respect of such Securities except the right to receive the Redemption Price, and accrued and unpaid Contingent Interest, if any, Additional Amounts, if any, and overdue interest, if any, to (but excluding) the Redemption Date. The Paying Agent shall as promptly as practicable return to the Company any money, with interest, if any, thereon, not required for that purpose because of exchange of Securities. If such money is then held by the Company in trust and is not required for such purpose, it shall be discharged from such trust. 20 SECTION 3.06. SECURITIES REDEEMED IN PART. Upon surrender of a Security that is redeemed in part, the Company shall execute and the Trustee shall authenticate and deliver to the Holder a new Security in an authorized denomination equal in Principal Amount to the unredeemed portion of the Security surrendered. SECTION 3.07. [RESERVED] SECTION 3.08. REPURCHASE OF SECURITIES AT OPTION OF THE HOLDER. (a) GENERAL. Securities shall be repurchased by the Company in U.S. legal tender ("CASH") pursuant to paragraph 6 of the Securities as of June 15, 2008, June 15, 2013 and June 15, 2018 (each, a "REPURCHASE DATE"), at the purchase price specified therein (the "PURCHASE PRICE"), together with accrued and unpaid Contingent Interest, if any, Additional Amounts, if any, and overdue interest, if any, at the option of the Holder thereof, upon: (1) delivery to the Paying Agent by the Holder of a written notice of purchase (a "REPURCHASE NOTICE") at any time from the opening of business on the date that is 20 Business Days prior to a Repurchase Date until the close of business on such Repurchase Date, stating: (A) the certificate number of any Security in certificated form which the Holder will deliver to be repurchased; (B) the portion of the Principal Amount of the Security which the Holder will deliver to be repurchased, which portion must be $1,000 in Principal Amount or a multiple thereof; and (C) that such Security shall be repurchased as of the Repurchase Date pursuant to the terms and conditions specified in paragraph 6 of the Securities and in this Indenture, and (2) delivery of such Security to the Paying Agent prior to, on or after the Repurchase Date (together with all necessary endorsements) at the offices of the Paying Agent, such delivery being a condition to receipt by the Holder of the Purchase Price therefor; PROVIDED, HOWEVER, that such Purchase Price shall be so paid pursuant to this Section 3.08 only if the Security so delivered to the Paying Agent shall conform in all respects to the description thereof in the related Repurchase Notice. The Company shall purchase from the Holder thereof, pursuant to this Section 3.08, a portion of a Security if the Principal Amount of such portion is $1,000 or an integral multiple of $1,000. Provisions of this Indenture that apply to the purchase of all of a Security also apply to the repurchase of such portion of such Security. Any purchase by the Company contemplated pursuant to the provisions of this Section 3.08 shall be consummated by the delivery of the consideration to be received by the Holder promptly following the later of the Repurchase Date and the time of delivery of the Security. 21 Notwithstanding anything herein to the contrary, any Holder delivering to the Paying Agent the Repurchase Notice contemplated by this Section 3.08(a) shall have the right at any time prior to the close of business on the Repurchase Date to withdraw such Repurchase Notice by delivery of a written notice of withdrawal to the Paying Agent in accordance with Section 3.10 hereof. The Paying Agent shall promptly notify the Company of the receipt by it of any Repurchase Notice or written notice of withdrawal thereof. (b) REPURCHASE WITH CASH. The Purchase Price of Securities in respect of which a Repurchase Notice pursuant to Section 3.08(a) has been given shall be paid by the Company with cash equal to the aggregate Purchase Price of such Securities. The Company Notice as provided in Section 3.08(c) shall be sent to Holders (and to beneficial owners as required by applicable law) not less than 20 Business Days (the "COMPANY NOTICE DATE") prior to the Repurchase Date. (c) COMPANY NOTICE. The Company's notices shall be sent to the Holders (and to beneficial owners as required by applicable law) in the manner provided in Section 13.02 hereof at the time specified in Section 3.08(b) hereof (each, a "COMPANY NOTICE"). Such Company Notices shall include a form of Repurchase Notice to be completed by a Holder and shall state: (i) the Purchase Price and Exchange Rate; (ii) the name and address of the Paying Agent and the Exchange Agent; (iii) that Securities as to which a Repurchase Notice has been given may be exchanged only if the applicable Repurchase Notice has been withdrawn in accordance with the terms of this Indenture; (iv) that Securities must be surrendered to the Paying Agent to collect payment; (v) that the Purchase Price for any Security as to which a Repurchase Notice has been given and not withdrawn will be paid promptly following the later of the Repurchase Date and the time of surrender of such Security as described in clause (iv) above; (vi) the procedures the Holder must follow under this Section 3.08; (vii) briefly, the exchange rights of the Securities; and (viii) the procedures for withdrawing a Repurchase Notice. At the Company's request, the Trustee shall give the Company Notice in the Company's name and at the Company's expense; PROVIDED, HOWEVER, that, in all cases, the text of the Company Notice shall be prepared by the Company. 22 (d) PROCEDURE UPON PURCHASE. At or before 10:00 a.m., New York City time, on the Business Day following the Repurchase Date, the Company shall deposit with the Paying Agent cash sufficient to pay the aggregate Purchase Price in respect of the Securities to be repurchased pursuant to this Section 3.08, plus accrued and unpaid Contingent Interest, if any, Additional Amounts, if any, and overdue interest, if any, to (but excluding) the Repurchase Date. SECTION 3.09. REPURCHASE AT OPTION OF THE HOLDER UPON A FUNDAMENTAL CHANGE. (a) In the event any Fundamental Change (as defined below) shall occur, each Holder of Securities shall have the right (the "FUNDAMENTAL CHANGE REPURCHASE RIGHT"), at the Holder's option, to require the Company to repurchase any or all of such Holder's Securities (or portions thereof that are integral multiples of $1,000 of Principal Amount), on a date selected by the Company (the "FUNDAMENTAL CHANGE REPURCHASE DATE"), which Fundamental Change Repurchase Date shall be no later than 35 Trading Days and no earlier than 20 Trading Days after the date the Fundamental Change Repurchase Notice (as defined below) is mailed in accordance with Section 3.09(b) and in no event prior to the date on which the Fundamental Change occurs, at a price payable in cash (the "FUNDAMENTAL CHANGE PURCHASE PRICE") equal to the Principal Amount plus accrued and unpaid Contingent Interest, if any, Additional Amounts, if any, and overdue interest, if any, to, but excluding, the Fundamental Change Repurchase Date; PROVIDED that if such Fundamental Change Repurchase Date falls after a Contingent Interest Record Date and on or prior to the corresponding Contingent Interest Payment Date, then the Contingent Interest payable on such Contingent Interest Payment Date shall be paid to the holders of record of the Securities on the applicable Contingent Interest Record Date instead of to the holders surrendering the Securities for repurchase. (b) The Company, or at its request (which must be received by the Trustee at least three Business Days prior to the date the Trustee is requested to give such notice as described below) the Trustee in the name of and at the expense of the Company, shall mail to all Holders of record of the Securities a notice (a "FUNDAMENTAL CHANGE REPURCHASE NOTICE") of the occurrence of a Fundamental Change and of the repurchase right arising as a result thereof on or before the 30th day after the occurrence of such Fundamental Change. The Company shall deliver a copy of the Fundamental Change Repurchase Notice to the Trustee. Each Fundamental Change Repurchase Notice shall state: (i) the events causing the Fundamental Change; (ii) the date of such Fundamental Change; (iii) the Fundamental Change Repurchase Date; (iv) the last date on which a Holder may exercise its Fundamental Change Repurchase Right pursuant to this Section 3.09; (v) the Fundamental Change Purchase Price; 23 (vi) the names and addresses of the Paying Agent and the Exchange Agent; (vii) a description of the procedures which a Holder must follow to exercise its Fundamental Change Repurchase Right; (viii) the following additional information with respect to a Holder's right to exchange the Securities pursuant to Article 11 hereof: (A) the Exchange Rate and any adjustments to the Exchange Rate that will result from the Fundamental Change; (B) the Make-Whole Premium, if any, payable pursuant to Section 11.05(b) hereof if a Holder exchanges the Securities following such Fundamental Change and whether such Make-Whole Premium will be payable in cash, Common Shares or Alternative Consideration or any combination thereof; and (C) if a Make-Whole Premium is payable by the Company pursuant to Section 11.05 hereof, that a Make-Whole Premium shall be paid by the Company on the Fundamental Change Repurchase Date to Holders of Securities who have exchanged their Securities during the period beginning on (and including) the date on which the Company gives the Fundamental Change Repurchase Notice pursuant to this Section 3.09(b) and ending on (and including) the Fundamental Change Repurchase Date; (ix) that Securities with respect to which an Option to Elect Repurchase Upon a Fundamental Change is given by a Holder may be exchanged pursuant to Article 11 only if such Option to Elect Repurchase Upon a Fundamental Change has been withdrawn in accordance with Section 3.10; and (x) the CUSIP number or numbers, as the case may be, of the Securities. No failure of the Company to give a Fundamental Change Notice shall limit any Holder's right to exercise a Fundamental Change Repurchase Right. (c) For a Security to be so repurchased at the option of the Holder, the Paying Agent must receive such Security with the form entitled "Option to Elect Repurchase Upon a Fundamental Change" on the reverse thereof duly completed, together with such Security duly endorsed for transfer, no later than the close of business on the Business Day immediately preceding the Fundamental Change Repurchase Date. All questions as to the validity, eligibility (including time of receipt) and acceptance of any Security for repurchase shall be determined by the Company, whose determination shall be final and binding. 24 SECTION 3.10. EFFECT OF REPURCHASE NOTICE OR FUNDAMENTAL CHANGE REPURCHASE NOTICE. Upon receipt by the Company of the Repurchase Notice or Option to Elect Repurchase Upon a Fundamental Change specified in Section 3.08(a) hereof or Section 3.09(c) hereof, as applicable, the Holder of the Security in respect of which such Repurchase Notice or Option to Elect Repurchase Upon a Fundamental Change, as the case may be, was given shall (unless such Repurchase Notice or Option to Elect Repurchase Upon a Fundamental Change is withdrawn as specified in the following two paragraphs) thereafter be entitled to receive solely the Purchase Price or Fundamental Change Purchase Price, as the case may be, with respect to such Security, including accrued and unpaid Contingent Interest, if any, Additional Amounts, if any, and overdue interest, if any. Such Purchase Price or Fundamental Change Purchase Price, including accrued and unpaid Contingent Interest, if any, Additional Amounts, if any, and overdue interest, if any, subject to the proviso at the end of Section 3.09(a), shall be paid to such Holder promptly following the later of (x) the Repurchase Date or the Fundamental Change Repurchase Date, as the case may be, with respect to such Security (provided the conditions in Section 3.08(a) hereof or Section 3.09(c) hereof, as applicable, have been satisfied) and (y) the time of delivery of such Security to the Paying Agent by the Holder thereof in the manner required by Section 3.08(a) hereof or Section 3.09(c) hereof, as applicable. Securities in respect of which a Repurchase Notice or Option to Elect Repurchase Upon a Fundamental Change, as the case may be, has been given by the Holder thereof may not be exchanged pursuant to Article 11 hereof on or after the date of the delivery of such Repurchase Notice (or Option to Elect Repurchase Upon a Fundamental Change, as the case may be), unless such Repurchase Notice (or Option to Elect Repurchase Upon a Fundamental Change, as the case may be) has first been validly withdrawn as specified in the following two paragraphs. A Repurchase Notice or Option to Elect Repurchase Upon a Fundamental Change, as the case may be, may be withdrawn by means of a written notice of withdrawal delivered to the office of the Paying Agent at any time prior to the close of business on the Repurchase Date or the Fundamental Change Repurchase Date, as the case may be, to which it relates specifying: (1) the name of the Holder, (2) a statement that the Holder is withdrawing its election to require the Company to repurchase its Securities, (3) the certificate number of any certificated Security in respect of which such notice of withdrawal is being submitted, (4) the Principal Amount of the Security with respect to which such notice of withdrawal is being submitted, and (5) the Principal Amount, if any, of such Security which remains subject to the original Repurchase Notice or Option to Elect Repurchase Upon a Fundamental Change, as 25 the case may be, and which has been or will be delivered for purchase or redemption by the Company. There shall be no repurchase of any Securities pursuant to Section 3.08 hereof or repurchase pursuant to Section 3.09 hereof if there has occurred (prior to, on or after, as the case may be, the giving, by the Holders of such Securities, of the required Repurchase Notice or Option to Elect Repurchase Upon a Fundamental Change, as the case may be) and is continuing an Event of Default (other than a default in the payment of the Purchase Price or Fundamental Change Purchase Price, as the case may be, with respect to such Securities). SECTION 3.11. DEPOSIT OF PURCHASE PRICE OR FUNDAMENTAL CHANGE PURCHASE PRICE. At or before 10 a.m., New York City time, on the Business Day following a Repurchase Date or a Fundamental Change Repurchase Date, as the case may be, the Company shall deposit with the Trustee or with the Paying Agent (or, if the Company or an Affiliate of the Company is acting as the Paying Agent, shall segregate and hold in trust as provided in Section 2.04 hereof) an amount of cash sufficient to pay the aggregate Purchase Price or Fundamental Change Purchase Price, as the case may be, of all the Securities or portions thereof which are to be purchased as of such Repurchase Date or Fundamental Change Repurchase Date, as the case may be, including accrued and unpaid Contingent Interest, if any, and Additional Amounts, if any, and overdue interest, if any. SECTION 3.12. SECURITIES REPURCHASED IN PART. Any Security that is to be repurchased only in part shall be surrendered at the office of the Paying Agent (with, if the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or such Holder's attorney duly authorized in writing) and the Company shall execute and the Trustee shall authenticate and deliver to the Holder of such Security, without service charge, a new Security or Securities, of any authorized denomination as requested by such Holder in aggregate Principal Amount equal to, and in exchange for, the portion of the Principal Amount of the Security so surrendered which is not repurchased. SECTION 3.13. COVENANT TO COMPLY WITH SECURITIES LAWS UPON REPURCHASE OF SECURITIES. In connection with any repurchase of Securities under Section 3.08 or 3.09 hereof, the Company shall (i) comply with Rule 13e-4 (which term, as used herein, includes any successor provision thereto) under the Exchange Act, if applicable, (ii) file the related Schedule 13E-4 (or any successor schedule, form or report) under the Exchange Act, if applicable, and (iii) otherwise comply with all Federal and state securities laws so as to permit the rights and obligations under Sections 3.08 and 3.09 to be exercised in the time and in the manner specified in Sections 3.08 and 3.09. 26 SECTION 3.14. REPAYMENT TO THE COMPANY. The Trustee and the Paying Agent shall return to the Company any cash that remains unclaimed as provided in paragraph 14 of the Securities, together with interest, if any, thereon, held by them for the payment of a Purchase Price or Fundamental Change Purchase Price, as the case may be, including Contingent Interest, if any, and Additional Amounts, if any; PROVIDED, HOWEVER, that to the extent that the aggregate amount of cash deposited by the Company pursuant to Section 3.11 hereof exceeds the aggregate Purchase Price or Fundamental Change Purchase Price, as the case may be, of the Securities or portions thereof which the Company is obligated to repurchase as of the Repurchase Date or Fundamental Change Repurchase Date, as the case may be, including Contingent Interest, if any, and Additional Amounts, if any, then promptly after the Business Day following the Repurchase Date or Fundamental Change Repurchase Date, as the case may be, the Trustee and the Paying Agent shall return any such excess to the Company together with interest, if any, thereon. ARTICLE 4. COVENANTS SECTION 4.01. PAYMENT OF SECURITIES. The Company shall promptly pay or cause to be paid all payments in respect of the Securities on the dates and in the manner provided in the Securities or pursuant to this Indenture. Principal Amount, Redemption Price, Purchase Price, Fundamental Change Purchase Price, Contingent Interest, if any, and Additional Amounts, if any, shall be considered paid on the applicable date due or, in the case of a Purchase Price or Fundamental Change Purchase Price, on the Business Day following the applicable Repurchase Date or Fundamental Change Repurchase Date, as the case may be, if by 10:00 a.m., New York City time, on such date the Trustee or the Paying Agent holds, in accordance with this Indenture, cash or securities, if permitted hereunder, sufficient to pay all such amount then due. The Company shall pay interest on overdue amounts at the rate set forth in paragraph 1 of the Securities and it shall pay interest on overdue interest at the same rate compounded semiannually (to the extent that the payment of such interest shall be legally enforceable), which interest on overdue interest shall accrue from the date such amounts became overdue. 27 SECTION 4.02. FINANCIAL INFORMATION; SEC REPORTS. The Guarantor will deliver to the Trustee (a) as soon as available and in any event within 120 days after the end of each fiscal year of the Guarantor (i) a consolidated balance sheet of the Guarantor and its subsidiaries as of the end of such fiscal year and the related consolidated statements of operations, stockholders' equity and cash flows for such fiscal year, all reported on by an independent public accountant of nationally recognized standing and (ii) a report containing a management's discussion and analysis of the financial condition and results of operations and a description of the business and properties of the Guarantor and (b) as soon as available and in any event within 60 days after the end of each of the first three quarters of each fiscal year of the Guarantor (i) an unaudited consolidated financial report for such quarter and (ii) a report containing a management's discussion and analysis of the financial condition and results of operations of the Guarantor; PROVIDED that the foregoing shall not be required for any fiscal year or quarter, as the case may be, with respect to which the Guarantor files or expects to file with the Trustee an annual report or quarterly report, as the case may be, pursuant to the third paragraph of this Section 4.02. At any time when neither the Guarantor nor the Company is subject to either Section 13 or 15(d) of the Exchange Act, the Guarantor and the Company shall at the request of any Holder (or holders of Common Shares issued upon exchange of the Securities) provide to such Holder (or holders of such Common Shares) and any prospective purchaser designated by such Holders (or holders of such Common Shares), as the case may be, such information, if any, required by Rule 144A(d)(4) under the Securities Act. The Guarantor shall file with the Trustee, within 15 days after it files such annual and quarterly reports, information, documents and other reports with the SEC, copies of its annual report and of the information, documents and other reports (or copies of such portions of any of the foregoing as the SEC may by rules and regulations prescribe) which the Guarantor is required to file with the SEC pursuant to Section 13 or 15(d) of the Exchange Act. Delivery of such reports, information and documents to the Trustee is for informational purposes only and the Trustee's receipt of such shall not constitute constructive notice of any information contained therein or determinable from the information contained therein, including the Guarantor's and the Company's compliance with any of its covenants hereunder (as to which the Trustee is entitled to rely exclusively on Officers' Certificates). SECTION 4.03. COMPLIANCE CERTIFICATE. The Company and the Guarantor shall each deliver to the Trustee, within 120 days after the end of each fiscal year of the Company, an Officers' Certificate in which one of the two Officers signing such certificate is either the Chief Executive Officer, Chief Financial Officer or Chief Accounting Officer of the Company or the Guarantor, as applicable, stating whether or not to the knowledge of the signers thereof the Company or the Guarantor, as applicable, is in default in the performance and observance of any of the terms, provisions and conditions of this Indenture (without regard to any period of grace or requirement of notice provided hereunder) and, if the Company or the Guarantor, as applicable, shall be in default, specifying all such defaults and the nature and status thereof of which the signers may have knowledge. 28 The Company and the Guarantor will deliver to the Trustee, as soon as possible and in any event within five days, upon becoming aware of any default or any Event of Default, an Officers' Certificate specifying with particularity such Default or Event of Default and further stating what action the Company and the Guarantor has taken, is taking or proposes to take with respect thereto. Any notice required to be given under this Section 4.03 shall be delivered to the Trustee at its Corporate Trust Office. SECTION 4.04. FURTHER INSTRUMENTS AND ACTS. Upon request of the Trustee, the Company and the Guarantor will execute and deliver such further instruments and do such further acts as may be reasonably necessary or proper to carry out more effectively the purposes of this Indenture. SECTION 4.05. MAINTENANCE OF OFFICE OR AGENCY. The Company will appoint in the Borough of Manhattan, The City of New York, an office or agency where Securities may be presented or surrendered for payment, where Securities may be surrendered for registration of transfer, exchange, purchase, redemption or exchange and where notices and demands to or upon the Company in respect of the Securities and this Indenture may be served. The office or agency of the Trustee in the Borough of Manhattan, The City of New York, which on the date hereof is located at J.P. Morgan Institutional Trust Services, GIS Unit Trust Window, 4 New York Plaza, 1st Floor, New York, New York 10004, shall be the office or agency for all of the aforesaid purposes unless the Company shall appoint some other office or agency for such purposes and shall give prompt written notice to the Trustee of the location, and any change in the location, of such other office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office. The Company may also from time to time designate one or more other offices or agencies where the Securities may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; PROVIDED, HOWEVER, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in the Borough of Manhattan, The City of New York, for such purposes. SECTION 4.06. EXISTENCE. Subject to Article 5 hereof, each of the Company and the Guarantor will do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence under the laws of its jurisdiction of incorporation and rights (charter and statutory); PROVIDED, HOWEVER, that neither the Company nor the Guarantor shall be required to preserve any such right if the Company or the Guarantor shall determine that the maintenance thereof is no longer desirable in the conduct of the business of the Company or the Guarantor and that the loss thereof is not disadvantageous in any material respect to the Holders. SECTION 4.07. [RESERVED] 29 SECTION 4.08. REGISTRATION RIGHTS. The Company and the Guarantor agree that the Holders (and any Person that has a beneficial interest in a Security) from time to time of Registrable Securities (as such term is defined in ANNEX I hereto) are entitled to the benefits of the terms and conditions set forth on ANNEX I hereto. By acceptance of any interest in a Security, each Holder consents and agrees for the benefit of the Company and the Guarantor to comply with the terms and conditions of ANNEX I hereto. SECTION 4.09. PAYMENT OF ADDITIONAL AMOUNTS. Unless otherwise required by Bermudan law, neither the Company nor the Guarantor will deduct or withhold from payments made with respect to the Securities and the Guarantee on account of any present or future Taxes. In the event that either the Company or the Guarantor is required to withhold or deduct on account of any Taxes due from any payment made under or with respect to the Securities or the Guarantee, as the case may be, the Company or the Guarantor, as the case may be, will pay such additional amounts ("ADDITIONAL AMOUNTS") as may be necessary so that the net amount received by each Holder of Securities will equal the amount that the Holder would have received if the Taxes had not been required to be withheld or deducted; PROVIDED that no Additional Amounts will be payable with respect to a payment made to a Holder (an "EXCLUDED HOLDER") to the extent: (i) that any Taxes would not have been so imposed but for the existence of any present or former connection between the Holder and Bermuda, other than the mere receipt of the payment, the acquisition, ownership or disposition of such Securities or the exercise or enforcement of rights under the Securities, the Guarantee or this Indenture; (ii) of any estate, inheritance, gift, sales, transfer or personal property Taxes imposed with respect to the Securities, except as described below or as otherwise provided in this Indenture; (iii) that any such Taxes would not have been imposed but for the presentation of the Securities, where presentation is required, for payment on a date more than 30 days after the date on which the payment became due and payable or the date on which payment thereof is duly provided for, whichever is later, except to the extent that the beneficiary or Holder thereof would have been entitled to Additional Amounts had the Securities been presented for payment on any date during such 30-day period; or (iv) that the Holder would not be liable or subject to such withholding or deduction of Taxes but for the failure to make a valid declaration of non-residence or other similar claim for exemption, if: (a) the making of the declaration or claim is required or imposed by statute, treaty, regulation, ruling or administrative practice of the relevant taxing authority as a precondition to an exemption from, or reduction in, the relevant Taxes; and (b) at least 60 days prior to the first payment with respect to which the Company or the Guarantor shall apply this clause (iv), the Company or the Guarantor shall have notified all Holders of the Securities in writing that they shall be required to provide this declaration or claim. The Company and the Guarantor shall also (i) withhold or deduct such Taxes as required; (ii) remit the full amount of Taxes deducted or withheld to the relevant taxing authority in accordance with all applicable laws; (iii) use reasonable efforts to obtain from each relevant taxing authority imposing the Taxes certified copies of tax receipts evidencing the payment of any Taxes deducted or withheld; and (iv) upon request, make available to the Holders of the Securities, within 60 days after the date the payment of any Taxes deducted or withheld is due pursuant to applicable law, certified copies of tax receipts evidencing such payment by the 30 Company or the Guarantor and, notwithstanding the Company's or the Guarantor's efforts to obtain the receipts, if the same are not obtainable, other evidence of such payments. In addition, the Company or the Guarantor will pay any stamp, issue, registration, documentary or other similar taxes and duties, including interest, penalties and additional amounts with respect thereto, payable in Bermuda or the United States, or any political subdivision or taxing authority of or in the foregoing with respect to the creation, issue, offering, enforcement, redemption or retirement of the Securities or the Guarantee. At least 30 days prior to each date on which any payment under or with respect to the Securities is due and payable, if the Company or the Guarantor becomes obligated to pay Additional Amounts with respect to such payment, the Company (or in respect of the Guarantee, the Guarantor) shall deliver to the Trustee an Officers' Certificate stating the fact that such Additional Amounts will be payable, and the amounts so payable and will set forth such other information as is necessary to enable the Trustee to pay such Additional Amounts to the Holders on the payment date. Whenever in this Indenture there is mentioned, in any context, the payment of Principal Amount, Redemption Price, Purchase Price, Fundamental Change Purchase Price, Contingent Interest, if any, or overdue interest, or any other amount payable on or with respect to any of the Securities, such mention shall be deemed to include mention of the payment of Additional Amounts provided for in this Section 4.09 to the extent that, in such context, Additional Amounts are, were or would be payable in respect thereof pursuant to the provisions of this Section 4.09 and express mention of the payment of Additional Amounts in those provisions hereof shall not be construed as excluding Additional Amounts in those provisions hereof where such express mention is not made (if applicable). If payments with respect of the Securities or the Guarantee become subject generally to the taxing jurisdiction of any Territory or any political subdivision or taxing authority thereof or therein having power to tax, other than or in addition to Bermuda or any political subdivision or taxing authority therein or thereof having power to tax, immediately upon becoming aware thereof the Company shall notify the Trustee of such event, and thereupon the Company or the Guarantor, as the case may be, shall be obligated to pay Additional Amounts in respect thereof on terms corresponding to the terms of the foregoing provisions of this Section 4.09 with the substitution for (or, as the case may be, in addition to) the references herein to Bermuda or any political subdivision or authority therein or thereof having power to tax of references to that other or additional Territory or any political subdivision or authority therein or thereof having power to tax to whose taxing jurisdiction such payments shall have become subject as aforesaid. The term "TERRITORY" means for this purpose any jurisdiction in which the Company or the Guarantor, as the case may be, is incorporated or in which it has its place of central management or central control. The obligations of the Company and the Guarantor under this Section 4.09 shall survive the termination of this Indenture and the payment of all amounts under or with respect to this Indenture and the Securities. 31 SECTION 4.10. CONTINGENT DEBT TAX TREATMENT. The Company agrees, and by acceptance of a Security or beneficial interest in a Security, each Holder and beneficial holder of the Security is deemed to have agreed, with respect to each of the matters set forth in (a) and (b) below, as follows: (a) Tax Treatment: (i) to treat the Securities as indebtedness of the Company for all tax purposes; (ii) to treat the Securities as indebtedness that is subject to the special regulations governing contingent payment debt instruments that are contained in U.S. Treasury Regulation section 1.1275-4; and (iii) to treat any payment to and receipt by a holder of Common Shares upon exchange of a Security as a contingent payment that may result in an adjustment under U.S. Treasury Regulation section 1.1275-4(b). (b) Comparable Yield and Projected Payment Schedule. Solely for purposes of applying U.S. Treasury Regulation section 1.1275-4 to the Securities: (i) for United States Federal Income Tax purposes, the Company shall accrue interest with respect to outstanding Securities as Tax Original Issue Discount according to the "noncontingent bond method," as set forth in U.S. Treasury Regulation section 1.1275-4(b); (ii) the Company has determined that the comparable yield as defined in U.S. Treasury Regulation section 1.1275-4(b)(4)(i), for the Securities is 5.53%, compounded semiannually; (iii) the Company has determined that the projected payment schedule, as defined in U.S. Treasury Regulation section 1.1275-4(b)(ii), for the Securities consists of the projected payment schedule referred to in (v) below; (iv) the Company acknowledges and agrees, and each Holder and any beneficial holder of Securities, by its acceptance of a Security or beneficial interest in a Security, shall be deemed to acknowledge and agree that (A) the projected payment schedule is determined on a basis of an assumption of linear growth of stock price, (B) the comparable yield and the projected payment schedule are not determined for any purpose other than for the purpose of applying U.S. Treasury Regulation section 1.1275-4(b) to the Securities and (C) the comparable yield and the projected payment schedule do not constitute a projection or representation regarding the actual amounts payable on the Securities; and (v) the projected payment schedule, as defined in U.S. Treasury Regulation section 1.1275-4(b)(4)(ii), for the Securities is set forth in EXHIBIT B hereto. SECTION 4.11. CALCULATION OF TAX ORIGINAL ISSUE DISCOUNT. 32 The Company shall file with the Trustee promptly at the end of each calendar year (i) a written notice specifying the amount of Tax Original Issue Discount (including daily rates and accrual periods) accrued on outstanding Securities as of the end of such year and (ii) such other specific information relating to such Tax Original Issue Discount as may then be relevant under the Internal Revenue Code of 1986, as amended from time to time. ARTICLE 5. SUCCESSOR CORPORATION SECTION 5.01. WHEN THE COMPANY AND THE GUARANTOR MAY MERGE OR TRANSFER ASSETS. (a) The Company shall not consolidate with or merge into any other Person or convey, transfer or lease its properties and assets substantially as an entirety to any Person, unless: (i) the Person (if other than the Company) formed by such consolidation or into which the Company is merged or the Person which acquires by conveyance, transfer or lease the properties and assets of the Company substantially as an entirety shall be a corporation, limited liability company, partnership or trust organized and validly existing under the laws of the United States or any State thereof or the District of Columbia, and shall expressly assume by an indenture supplemental hereto, executed and delivered to the Trustee in form reasonably satisfactory to the Trustee, the due and punctual payment of the Principal Amount, Redemption Price, Purchase Price, Fundamental Change Purchase Price, Make-Whole Premium, if any, Contingent Interest, if any, Additional Amounts, if any, and overdue interest, if any, on the Securities, according to their tenor, and the due and punctual performance of all of the covenants and obligations of the Company under the Securities and this Indenture, and shall have provided for exchange rights in accordance with this Indenture; (ii) immediately after giving effect to such transaction, no Default or Event of Default shall have occurred and be continuing; and (iii) the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger, conveyance, transfer or lease and, if a supplemental indenture is required in connection with such transaction, such supplemental indenture, comply with this Article 5 and that all conditions precedent herein provided for relating to such transaction have been satisfied. (b) The Guarantor shall not consolidate with or merge into any other Person or convey, transfer or lease its properties and assets substantially as an entirety to any Person unless: (i) the Person (if other than the Guarantor) formed by such consolidation or into which the Guarantor is merged or the Person which acquires by conveyance or transfer, or which leases, the properties and assets of the Guarantor substantially as an entirety shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, in form reasonably satisfactory to the Trustee, the due and punctual payment of all obligations in respect of the Guarantee and the performance of every covenant of this Indenture on the part of the Guarantor to be performed or observed; 33 (ii) immediately after giving effect to such transaction, no Default or Event of Default shall have occurred and be continuing; and (iii) the Guarantor has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger, conveyance, transfer or lease and, if a supplemental indenture is executed in connection with such transaction, such supplemental indenture comply with this Article 5 and that all conditions precedent herein provided for relating to such transaction have been complied with. SECTION 5.02. SUCCESSORS SUBSTITUTED. Upon any consolidation of the Company or Guarantor with, or merger of the Company or Guarantor into, any other Person, or any conveyance, transfer or lease of the properties and assets of the Company or the Guarantor substantially as an entirety in accordance with Section 5.01, the successor Person formed by such consolidation or into which the Company or the Guarantor is merged or to which such conveyance, transfer or lease is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company or the Guarantor, as the case may be, under this Indenture with the same effect as if such successor Person had been named as the Company or the Guarantor, as the case may be, herein, and thereafter, except in the case of a lease to another Person, the predecessor Person shall be relieved of all obligations and covenants under this Indenture and the Securities. ARTICLE 6. DEFAULTS AND REMEDIES SECTION 6.01. EVENTS OF DEFAULT. An "EVENT OF DEFAULT" occurs if: (1) there is a default in the payment of the Principal Amount, Redemption Price, Purchase Price or a Fundamental Change Purchase Price on any Security when the same becomes due and payable at its Stated Maturity, upon redemption, upon declaration, when due for repurchase by the Company or otherwise, and such default continues for a period of ten days; (2) there is a default in the payment of Contingent Interest, if any, Additional Amounts, if any, or a Make-Whole Premium, if any, on any Security when it becomes due and payable, and such default continues for a period of 30 days; (3) failure of the Company or the Guarantor to perform or comply with the provisions of Section 11.02 hereof, and such failure continues for a period of 20 days; (4) the Company or the Guarantor fails to comply with any of its agreements or covenants in the Securities or this Indenture (other than those referred to in clauses (1) through (3) above and those set forth in Section 4.08 and ANNEX I hereof) and such failure continues for 90 days after receipt by the Company of a Notice of Default; (5) a decree or order by a court having jurisdiction in the premises shall have been entered adjudging the Company or the Guarantor a bankrupt or insolvent, or approving as 34 properly filed a petition seeking reorganization of the Company or the Guarantor under any Bankruptcy Law, and such decree or order shall have continued undischarged and unstayed for a period of 90 consecutive days; or a decree or order of a court having jurisdiction in the premises of the appointment of a receiver or liquidator or trustee or assignee in bankruptcy or insolvency of the Company or the Guarantor or of its property, or for the winding-up or liquidation of its affairs, shall have been entered, and such decree or order shall have remained in force undischarged and unstayed of a period of 90 consecutive days; (6) the Company or the Guarantor shall institute proceedings to be adjudicated a voluntary bankrupt, or shall consent to the filing of a bankruptcy proceeding against it, or shall file a petition or answer or consent seeking reorganization under any Bankruptcy Law, or shall consent to the filing of any such petition, or shall consent to the appointment of a receiver or liquidator or trustee or assignee in bankruptcy or insolvency of it or of its property or shall make an assignment for the benefit of creditors, or shall admit in writing its inability to pay its debts generally as they become due; or (7) the Guarantee ceases to be in full force and effect or becomes unenforceable or invalid or is declared null and void (other than in accordance with the terms of the Guarantee) or the Guarantor denies or disaffirms its obligations under the Guarantee. A Default under clause (4) above is not an Event of Default until the Trustee notifies the Company, or the Holders of at least 25% in aggregate Principal Amount of the Securities at the time outstanding notify the Company and the Trustee, of the Default and neither the Company nor the Guarantor cures such Default (and such Default is not waived) within the time specified in clause (4) above after actual receipt of such notice (a "NOTICE OF DEFAULT"). Any such notice must specify the Default, demand that it be remedied and state that such notice is a Notice of Default. SECTION 6.02. ACCELERATION. If an Event of Default (other than an Event of Default specified in Section 6.01(5) or (6) hereof) occurs and is continuing, the Trustee by notice to the Company, or the Holders of at least 25% in aggregate Principal Amount of the Securities at the time outstanding by notice to the Company and the Trustee, may declare the Principal Amount, Make-Whole Premium, if any, and Contingent Interest, if any, Additional Amounts, if any, accrued and unpaid to the date of declaration on all the Securities to be immediately due and payable. Upon such a declaration, such Principal Amount and Contingent Interest, if any, and Additional Amounts, if any, shall become and be due and payable immediately. If an Event of Default specified in Section 6.01(5) or (6) hereof occurs and is continuing, the Principal Amount and Contingent Interest, if any, and Additional Amounts, if any, accrued and unpaid to the date of such occurrence on all the Securities shall become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holders. The Holders of a majority in aggregate Principal Amount of the Securities at the time outstanding, by notice to the Company and the Trustee (and without notice to any other Holder), may rescind an acceleration and its consequences if the rescission would not conflict with any judgment or decree and if all existing Events of Default have been cured or waived except nonpayment of the Principal Amount that has become due solely as a result of acceleration and if all amounts due to the Trustee under Section 7.07 hereof 35 have been paid. No such rescission shall affect any subsequent or other Default or Event of Default or impair any consequent right. SECTION 6.03. OTHER REMEDIES. If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of all amounts due on the Securities or to enforce the performance of any provision of the Securities or this Indenture. The Trustee may maintain a proceeding even if the Trustee does not possess any of the Securities or does not produce any of the Securities in the proceeding. A delay or omission by the Trustee or any Holder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of, or acquiescence in, the Event of Default. No remedy is exclusive of any other remedy. All available remedies are cumulative. SECTION 6.04. WAIVER OF PAST DEFAULTS. The Holders of a majority in aggregate Principal Amount of the Securities at the time outstanding, by notice to the Company and the Trustee (and without notice to any other Holder), may waive an existing Default or Event of Default and its consequences except (1) an Event of Default described in Section 6.01(1) or (2) hereof, (2) a Default in respect of a provision that under Section 9.02 hereof cannot be amended without the consent of each Holder affected or (3) a Default that constitutes a failure to exchange any Security in accordance with the terms of Article 11 hereof. When a Default or Event of Default is waived, it is deemed cured, but no such waiver shall extend to any subsequent or other Default or Event of Default or impair any consequent right. SECTION 6.05. CONTROL BY MAJORITY. The Holders of a majority in aggregate Principal Amount of the Securities at the time outstanding may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or of exercising any trust or power conferred on the Trustee. However, the Trustee may refuse to follow any direction that conflicts with any law or this Indenture or that the Trustee determines in good faith is unduly prejudicial to the rights of other Holders or would involve the Trustee in personal liability unless the Trustee is offered indemnity reasonably satisfactory to it. SECTION 6.06. LIMITATION ON SUITS. A Holder may not pursue any remedy with respect to this Indenture or the Securities unless: (1) the Holder gives to the Company and the Trustee written notice stating that an Event of Default is continuing; (2) the Holders of at least 25% in aggregate Principal Amount of the Securities at the time outstanding make a written request to the Trustee to pursue the remedy; 36 (3) such Holder or Holders offer to the Trustee reasonable security or indemnity against any loss, liability or expense satisfactory to the Trustee; (4) the Trustee does not comply with the request within 60 days after receipt of the notice, the request and the offer of security or indemnity; and (5) the Holders of a majority in aggregate Principal Amount of the Securities at the time outstanding do not give the Trustee a direction inconsistent with the request during such 60 day period. A Holder may not use this Indenture to prejudice the rights of any other Holder or to obtain a preference or priority over any other Holder. SECTION 6.07. RIGHTS OF HOLDERS TO RECEIVE PAYMENT. Notwithstanding any other provision of this Indenture, the right of any Holder to receive payment of the Principal Amount, Redemption Price, Purchase Price, Fundamental Change Purchase Price, Contingent Interest, if any, Additional Amounts, if any, overdue interest, if any, and Make-Whole Premium, if any, in respect of the Securities held by such Holder, on or after the respective due dates expressed in the Securities, to exchange the Securities in accordance with Article 11, or to bring suit for the enforcement of any such payment on or after such respective dates or the right to exchange the Securities in accordance with Article 11, shall not be impaired or affected adversely without the consent of each such Holder. SECTION 6.08. COLLECTION SUIT BY TRUSTEE. If an Event of Default described in Section 6.01(1) or (2) hereof occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against the Company for the whole amount owing with respect to the Securities and the amounts provided for in Section 7.07 hereof. SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM. In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Company, the Guarantor or any other obligor upon the Securities or the property of the Company, of the Guarantor or of such other obligor or their creditors, the Trustee (irrespective of whether the Principal Amount, Redemption Price, Purchase Price, Fundamental Change Purchase Price, Contingent Interest, if any, Additional Amounts, if any, or overdue interest, if any, in respect of the Securities shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Trustee shall have made any demand on the Company or the Guarantor for the payment of any such amount) shall be entitled and empowered, by intervention in such proceeding or otherwise: (a) to file and prove a claim for the whole amount of the Principal Amount, Redemption Price, Purchase Price, Fundamental Change Purchase Price, Contingent Interest, if any, Additional Amounts, if any, or overdue interest, if any, and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including 37 any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and of the Holders allowed in such judicial proceeding, and (b) to collect and receive any money or other property payable or deliverable on any such claims and to distribute the same; and any custodian, receiver, assignee, trustee, liquidator, sequestrator or similar official in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07 hereof. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Securities or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claims of any Holder in any such proceeding. SECTION 6.10. PRIORITIES. If the Trustee collects any money pursuant to this Article 6, it shall pay out the money in the following order: FIRST: to the Trustee for amounts due under Section 7.07 hereof; SECOND: to Holders for amounts due and unpaid on the Securities for the Principal Amount, Redemption Price, Purchase Price, Fundamental Change Purchase Price, Contingent Interest, if any, or Additional Amounts, if any, or overdue interest, if any, as the case may be, ratably, without preference or priority of any kind, according to such amounts due and payable on the Securities; and THIRD: the balance, if any, to the Company. The Trustee may fix a proposed record date and payment date for any payment to Holders pursuant to this Section 6.10 and shall notify the Company in writing with respect to such proposed record date and payment date. At least 15 days before such record date, the Company (or the Trustee at the request of the Company) shall mail to each Holder and the Trustee a notice that states the record date, the payment date and amount to be paid. SECTION 6.11. UNDERTAKING FOR COSTS. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court in its discretion may require the filing by any party litigant (other than the Trustee) in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees and expenses, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section 6.11 does not apply to a suit by the Trustee, any suit by a Holder for the enforcement of the 38 payment of the Principal Amount, Redemption Price, Purchase Price, Fundamental Change Purchase Price, Contingent Interest, if any, or Additional Amounts, if any, or overdue interest, if any, on or after the due date expressed in such Security or to any suit for the enforcement of the right to exchange the Security pursuant to Article 11, or a suit by Holders of more than 10% in aggregate Principal Amount of the Securities at the time outstanding. SECTION 6.12. WAIVER OF STAY, EXTENSION OR USURY LAWS. The Company covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law or any usury or other law wherever enacted, now or at any time hereafter in force, which would prohibit or forgive the Company from paying all or any portion of the Principal Amount, Redemption Price, Purchase Price or Fundamental Change Purchase Price in respect of Securities, Contingent Interest, if any, or Additional Amounts, if any, or any overdue interest on any such amounts, as contemplated herein, or which may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such laws and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. ARTICLE 7. TRUSTEE SECTION 7.01. DUTIES OF TRUSTEE. (a) If an Event of Default has occurred and is continuing, the Trustee shall exercise the rights and powers vested in it by this Indenture and use the same degree of care and skill in its exercise as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. (b) Except during the continuance of an Event of Default: (1) the Trustee need perform only those duties that are specifically set forth in this Indenture and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (2) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, in the case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture. This Section 7.01(b) shall be in lieu of Section 315(a) of the TIA and such Section 315(a) is hereby expressly excluded from this Indenture, as permitted by the TIA. 39 (c) The Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act or its own willful misconduct, except that: (1) this paragraph (c) does not limit the effect of paragraph (b) of this Section 7.01; (2) the Trustee shall not be liable for any error of judgment made in good faith by a Trust Officer unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and (3) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.05 hereof. Subparagraphs (c)(1),(2) and (3) shall be in lieu of Sections 315(d)(1), 315(d)(2) and 315(d)(3) of the TIA and such Sections 315(d)(1), 315(d)(2) and 315(d)(3) are hereby expressly excluded from this Indenture, as permitted by the TIA. (d) Every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b), (c) and (e) of this Section 7.01. (e) The Trustee may refuse to perform any duty or exercise any right or power or extend or risk its own funds or otherwise incur any financial liability unless it receives indemnity reasonably satisfactory to it against any loss, liability or expense. (f) Money held by the Trustee in trust hereunder need not be segregated from other funds except to the extent required by law. SECTION 7.02. RIGHTS OF TRUSTEE. Subject to Section 7.01: (a) The Trustee may conclusively rely on any document reasonably believed by it to be genuine and to have been signed or presented by the proper Person. The Trustee need not investigate any fact or matter stated in the document. (b) Before the Trustee acts or refrains from acting, it may require a Company Order, an Officers' Certificate or an Opinion of Counsel. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on a Company Order, Officers' Certificate or Opinion of Counsel. (c) The Trustee may act through agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care. (d) The Trustee shall not be liable for any action it takes or omits to take in good faith which it believes to be authorized or within its rights or powers. 40 (e) The Trustee may consult with counsel selected by it and any advice or Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken or suffered or omitted by it hereunder in good faith and in accordance with such advice or Opinion of Counsel. (f) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture, unless the Holders shall have offered to the Trustee reasonable security or indemnity reasonably satisfactory to it against the costs, expenses and liabilities which may be incurred therein or thereby. (g) The Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company and the Guarantor during normal business hours at reasonable frequencies, personally or by agent or attorney at the sole cost of the Company and the Guarantor and shall incur no liability or additional liability of any kind by reason of such inquiry or investigation. (h) The Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Trustee shall not be responsible for any negligent act on the part of any agent or attorney appointed with due care by it hereunder. (i) The Trustee shall not be deemed to have notice of any Default or Event of Default unless a Trust Officer of the Trustee has actual knowledge thereof or unless written notice of any event which is in fact such a default is received by the Trustee at the Corporate Trust Office of the Trustee in accordance with Section 13.02 hereof, and such notice references the Securities and this Indenture. In the absence of such notice, the Trustee may conclusively assume that no such Default or Event of Default exists. (j) The rights, privileges, protections, immunities and benefits given to the Trustee, including, without limitation, its right to be indemnified, are extended to, and shall be enforceable by, the Trustee in each of its capacities hereunder, and to each agent, custodian and other Person employed to act hereunder. (k) The Trustee shall be under no obligation to expend or risk its own funds or to exercise, at the request or direction of any of the Holders, any of the rights or powers vested in it by this Indenture pursuant to this Indenture. (l) The Trustee is not required to give any bond or surety with respect to the performance of its duties or the exercise of its powers under this Indenture. (m) In the event the Trustee receives inconsistent or conflicting requests or indemnity from two or more groups of Holders of Securities, each representing less than a majority in principal amount of the Securities Outstanding, the Trustee, in its sole discretion, may determine what action, if any, shall be taken. 41 (n) The Trustee's immunities and protections from liability and its right to indemnification in connection with the performance of its duties under this Indenture shall extend to the Trustee's officers, directors, agents, attorneys and employees. Such immunities and protections, together with the Trustee's right to compensation, shall survive the Trustee's resignation or removal, the discharge of this Indenture and the final payment of the Securities. (o) The permissive right of the Trustee to take the actions permitted by this Indenture shall not be construed as an obligation or duty to do so. (p) Except for information provided by the Trustee concerning the Trustee, the Trustee shall have no responsibility for any information in any offering memorandum or other disclosure material distributed with respect to the Securities, and the Trustee shall have no responsibility for compliance with any state or federal securities in connection with the Securities. SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE. The Trustee in its commercial banking or any other capacity may become the owner or pledgee of Securities and may otherwise deal with the Company, the Guarantor or their Affiliates with the same rights it would have if it were not Trustee. Any Paying Agent, Registrar, Exchange Agent or co-registrar may do the same with the like rights. However, the Trustee must comply with Sections 7.10 and 7.11 hereof. SECTION 7.04. TRUSTEE'S DISCLAIMER. The Trustee makes no representation as to the validity or adequacy of this Indenture or the Securities; it shall not be accountable for the Company's use of the proceeds from the Securities; and it shall not be responsible for any statement in the offering memorandum for the Securities or in this Indenture or the Securities (other than its certificate of authentication), the acts of a prior Trustee hereunder, or the determination as to which beneficial owners are entitled to receive any notices hereunder. SECTION 7.05. NOTICE OF DEFAULTS. If a Default occurs and is continuing and if it is actually known by a Trust Officer or if written notice of any event which is in fact such a default is received by the Trustee at the Corporate Trust Office of the Trustee in accordance with Section 13.02 hereof, and such notice references the Securities and this Indenture, the Trustee shall give to each Holder notice of the Default within 90 days after it is actually known to a Trust Officer. Except in the case of a Default described in Section 6.01(1) or (2) hereof, the Trustee may withhold the notice if and so long as a committee of its Trust Officers in good faith determines that withholding the notice is in the interests of Holders. The second sentence of this Section 7.05 shall be in lieu of the proviso to Section 315(b) of the TIA and such provision is hereby expressly excluded from this Indenture, as permitted by the TIA. The Trustee shall not give notice of a Default pursuant to Section 6.01(4) until at least 90 days have passed since its occurrence. SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS. 42 Within 60 days after each May 1, beginning with the May 1 following the date of this Indenture, the Trustee shall mail to each Holder a brief report dated as of such May 1 that complies with TIA Section 313(a), if required by such Section 313(a). The Trustee also shall comply with TIA Section 313(b). A copy of each report at the time of its mailing to Holders shall be filed with the SEC and each securities exchange on which the Securities are listed. The Company agrees to promptly notify the Trustee whenever the Securities become listed on any securities exchange and of any delisting thereof. SECTION 7.07. COMPENSATION AND INDEMNITY. The Company agrees: (a) to pay to the Trustee from time to time such compensation as the Company and the Trustee shall from time to time agree in writing for all services rendered by it hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); (b) to reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Indenture (including the compensation and the expense, advances and disbursements of its outside agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence or bad faith; and (c) to indemnify the Trustee for, and to hold it harmless against, any and all loss, damage, claims, liability or expense (including taxes other than taxes based upon, measured by, or determined by the income of the Trustee) incurred without negligence or bad faith on its part, arising out of or in connection with the acceptance or administration of this trust, including the costs and expenses of defending itself against any claim (whether asserted by the Company, any Holder or any other Person) or liability in connection with the exercise or performance of any of its powers or duties hereunder. To secure the Company's payment obligations in this Section 7.07, the Trustee shall have a lien prior to the Securities on all money or property held or collected by the Trustee, except that held in trust to pay the Principal Amount, Redemption Price, Purchase Price, Fundamental Change Purchase Price, Contingent Interest, if any, Additional Amounts, if any, or overdue interest, if any, as the case may be, on particular Securities. The Company's payment obligations pursuant to this Section 7.07 shall survive the discharge of this Indenture. When the Trustee incurs expenses after the occurrence of a Default specified in Section 6.01(5) or (6), the expenses are intended to constitute expenses of administration under any Bankruptcy Law. 43 SECTION 7.08. REPLACEMENT OF TRUSTEE. The Trustee may resign by so notifying the Company; PROVIDED, HOWEVER, that no such resignation shall be effective until a successor Trustee has accepted its appointment pursuant to this Section 7.08. The Holders of a majority in aggregate Principal Amount of the Securities at the time outstanding may remove the Trustee by so notifying the Trustee and may appoint a successor Trustee. The Company shall remove the Trustee if: (1) the Trustee fails to comply with, or ceases to be eligible under, Section 7.10 hereof; (2) the Trustee is adjudged bankrupt or insolvent; (3) a receiver or public officer takes charge or control of the Trustee or its property or affairs; or (4) the Trustee otherwise in the Company's reasonable judgment becomes incapable of acting. If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company shall promptly appoint, by resolution of its Board of Directors, a successor Trustee. Every successor Trustee appointed hereunder shall execute, acknowledge and deliver to the Company and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee; but, on the request of the Company or the successor Trustee, such retiring Trustee shall, upon payment of its charges, execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder, subject to the lien provided for in Section 7.07 hereof. Upon request of any such successor Trustee, the Company shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all such rights, powers and trusts. No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be eligible under this Article. If a successor Trustee does not take office within 30 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company or the Holders of a majority in aggregate Principal Amount of the Securities at the time outstanding may petition any court of competent jurisdiction for the appointment of a successor Trustee at the expense of the Company. If the Trustee fails to comply with Section 7.10 hereof, any Holder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER. 44 If the Trustee consolidates with, merges or converts into, or transfers all or substantially all its corporate trust business (including the trust created by this Indenture) or assets to, another corporation, bank, banking association or trust company, the resulting, surviving or transferee corporation bank, banking association or trust company, without any further act shall be the successor Trustee hereunder, PROVIDED such corporation shall be otherwise eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto. As soon as practicable, the successor Trustee shall give written notice of its succession to the Company. In case any Securities shall have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Securities so authenticated with the same effect as if such successor Trustee had itself authenticated such Securities. SECTION 7.10. ELIGIBILITY; DISQUALIFICATION. The Trustee shall at all times satisfy the requirements of TIA Sections 310(a)(1) and 310(b). The Trustee shall have a combined capital and surplus of at least $50,000,000 (or if the Trustee is a member of a bank holding company system, its bank holding company shall have a combined capital and surplus of at least $50,000,000) as set forth in its most recent published annual report of conditions. Nothing herein contained shall prevent the Trustee from filing with the SEC the application referred to in the penultimate paragraph of TIA Section 310(b). If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section 7.10, it shall correct such ineligibility or resign immediately in the manner and with the effect specified in this Article 7. SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY. The Trustee shall comply with TIA Section 311(a), excluding any creditor relationship listed in TIA Section 311(b). A Trustee who has resigned or been removed shall be subject to TIA Section 311(a) to the extent indicated therein. ARTICLE 8. DISCHARGE OF INDENTURE SECTION 8.01. DISCHARGE OF LIABILITY ON SECURITIES. When (i) the Company delivers to the Trustee all outstanding Securities (other than Securities replaced pursuant to Section 2.07 hereof) for cancellation or (ii) all outstanding Securities have become due and payable and the Company deposits with the Trustee cash and/or securities, as permitted by the terms hereof, sufficient to pay at Stated Maturity the Principal Amount of all outstanding Securities (other than Securities replaced pursuant to Section 2.07 hereof), and if in either case the Company pays all other sums payable hereunder by the Company, then this Indenture shall, subject to Section 7.07 hereof, cease to be of further effect. The Trustee shall join in the execution of a document prepared by the Company acknowledging satisfaction and discharge of this Indenture on demand of the Company accompanied by an Officers' Certificate and Opinion of Counsel and at the cost and expense of the Company. 45 SECTION 8.02. REPAYMENT TO THE COMPANY. The Trustee and the Paying Agent shall return to the Company upon written request any money or securities held by them for the payment of any amount with respect to the Securities that remains unclaimed for six months; PROVIDED, HOWEVER, that the Trustee or such Paying Agent, before being required to make any such return, shall, in the event that the Securities are no longer held in global form, at the expense of the Company cause to be published once in a newspaper of general circulation in The City of New York or mail to each such Holder notice that such money or securities remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such publication or mailing, any unclaimed money or securities then remaining will be returned to the Company. After return to the Company, Holders entitled to the money or securities must look to the Company for payment as general creditors unless an applicable abandoned property law designates another Person. In the absence of a written request from the Company to return unclaimed funds to the Company, the Trustee shall from time to time deliver all unclaimed funds to or as directed by applicable escheat authorities, as determined by the Trustee in its sole discretion, in accordance with the customary practices and procedures of the Trustee. Any unclaimed funds held by the Trustee pursuant to this section shall be held uninvested and without any liability for interest. ARTICLE 9. AMENDMENTS SECTION 9.01. WITHOUT CONSENT OF HOLDERS. The Company, the Guarantor and the Trustee may amend this Indenture and the Securities without the consent of any Holder: (1) to cure any ambiguity or to correct or supplement any provision contained herein or in any supplemental indenture which may be defective or inconsistent with any other provision contained herein or in any supplemental indenture, PROVIDED that, in any case, such change shall not materially adversely affect the interests of the Holders; (2) to provide for the assumption of the Company's or the Guarantor's obligations to the Holders of the Securities in case of a merger or consolidation or conveyance, transfer or lease of the Company's or the Guarantor's properties and assets substantially as an entirety; (3) to provide for uncertificated Securities in addition to or in place of certificated Securities so long as such uncertificated Securities are in registered form for purposes of the Internal Revenue Code of 1986, as amended; (4) to make any change that does not adversely affect the right of any Holder; or (5) to make any change to comply with the TIA, or any amendment thereto, or to comply with any requirement of the SEC in connection with the qualification, if any, of this Indenture under the TIA. 46 SECTION 9.02. WITH CONSENT OF HOLDERS. The Company, the Guarantor and the Trustee, with the written consent of the Holders of at least a majority in aggregate Principal Amount of the Securities at the time outstanding, may amend this Indenture or the Securities. However, without the consent of each Holder affected, an amendment to this Indenture or the Securities may not: (1) make any change to the Principal Amount of Securities whose Holders must consent to an amendment; (2) make any change to the manner or rate of accrual in connection with Contingent Interest, if any, Additional Amounts, if any, or overdue interest, if any, reduce the rate of overdue interest referred to in paragraph 1 of the Securities or extend the time for payment of Contingent Interest, if any, Additional Amounts, if any, or overdue interest, if any, on any Security; (3) reduce the Principal Amount of or extend the Stated Maturity of any Security; (4) reduce the Redemption Price, Purchase Price or Fundamental Change Purchase Price of any Security; (5) make any Security payable in money or securities other than that stated in the Security; (6) reduce the Make-Whole Premium; (7) make any change in Section 6.04 or 6.07 hereof or this Section 9.02, except to increase the percentage of Holders referenced in Section 6.04 or 6.07 hereof or this Section 9.02, as applicable; (8) make any change that adversely affects the right of Holders to exchange any Security; or (9) make any change that adversely affects the right of Holders to require the Company to repurchase the Securities, or the right to require the Company to repurchase the Securities upon a Fundamental Change, in accordance with the terms thereof and this Indenture. It shall not be necessary for the consent of the Holders under this Section 9.02 to approve the particular form of any proposed amendment, but it shall be sufficient if such consent approves the substance thereof. After an amendment under this Section 9.02 becomes effective, the Company shall mail to each Holder a notice briefly describing the amendment. SECTION 9.03. COMPLIANCE WITH TRUST INDENTURE ACT. 47 Every supplemental indenture executed pursuant to this Article 9 shall comply with the TIA as then in effect, if then required to so comply. SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS, WAIVERS AND ACTIONS. Until an amendment, waiver or other action becomes effective, a consent to it or any other action by a Holder of a Security is a continuing consent by the Holder and every subsequent Holder of that Security or portion of the Security that evidences the same obligation as the consenting Holder's Security, even if notation of the consent, waiver or action is not made on the Security. However, any such Holder or subsequent Holder may revoke the consent, waiver or action as to such Holder's Security or portion of the Security if the Trustee receives the notice of revocation before the date the amendment, waiver or action becomes effective. After an amendment, waiver or action becomes effective, it shall bind every Holder. SECTION 9.05. NOTATION ON OR EXCHANGE OF SECURITIES. Securities authenticated and delivered after the execution of any supplemental indenture pursuant to this Article 9 may, and shall if required by the Trustee, bear a notation in form approved by the Trustee as to any matter provided for in such supplemental indenture. If the Company shall so determine, new Securities so modified as to conform, in the opinion of the Trustee and the Board of Directors of the Company, to any such supplemental indenture may be prepared and executed by the Company and authenticated and delivered by the Trustee in exchange for outstanding Securities. SECTION 9.06. TRUSTEE TO SIGN SUPPLEMENTAL INDENTURES. The Trustee shall sign any supplemental indenture authorized pursuant to this Article 9 if the amendment does not adversely affect the rights, duties, liabilities or immunities of the Trustee. If it does, the Trustee may, but need not, sign such supplemental indenture. In signing such amendment the Trustee shall be entitled to receive, and (subject to the provisions of Section 7.01 hereof) shall be fully protected in relying upon, an Officers' Certificate of the Company and an Opinion of Counsel stating that such amendment is authorized or permitted by this Indenture. SECTION 9.07. EFFECT OF SUPPLEMENTAL INDENTURES. Upon the execution of any supplemental indenture under this Article 9, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Securities theretofore or thereafter authenticated and delivered hereunder shall be bound thereby. ARTICLE 10. GUARANTEE OF SECURITIES SECTION 10.01. UNCONDITIONAL GUARANTEE. (a) For value received, the Guarantor hereby fully, irrevocably, unconditionally and absolutely guarantees to the Holders and to the Trustee the due and punctual 48 payment of the principal of, Make-Whole Premium, if any, Additional Amounts, if any, and Contingent Interest, if any, on the Securities and all other amounts due and payable under this Indenture and the Securities by the Company (including, without limitation, all costs and expenses (including reasonable legal fees and disbursements) incurred by the Trustee or the Holders in connection with the enforcement of this Indenture, the Securities and the Guarantee) (collectively, the "INDENTURE OBLIGATIONS"), when and as such principal, Additional Amounts, if any, Contingent Interest, if any, and such other amounts shall become due and payable, whether at the Stated Maturity, upon redemption or repurchase or by declaration of acceleration or otherwise, according to the terms of the Securities and this Indenture. The guarantee by the Guarantor set forth in this Article 10 is referred to herein as the "GUARANTEE." Without limiting the generality of the foregoing, the Guarantor's liability shall extend to all amounts that constitute part of the Indenture Obligations and would be owed by the Company under this Indenture and the Securities but for the fact that they are unenforceable, reduced, limited, impaired, suspended or not allowable due to the existence of a bankruptcy, reorganization or similar proceeding involving the Company. (b) Failing payment when due of any amount guaranteed pursuant to the Guarantee, for whatever reason, the Guarantor will be obligated to pay the same immediately to the Trustee, without set-off or counterclaim or other reduction whatsoever (whether for taxes, withholding or otherwise). The Guarantee is intended to be a general, unsecured, senior obligation of the Guarantor and will rank pari passu in right of payment with all indebtedness of the Guarantor that is not, by its terms, expressly subordinated in right of payment to the Guarantee. The Guarantor hereby agrees that its obligations hereunder shall be full, irrevocable, unconditional and absolute, irrespective of the validity, regularity or enforceability of the obligations and liabilities of any other obligor with respect to the Securities, the Guarantee or this Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder with respect to any provisions hereof or thereof with respect to the same, the recovery of any judgment against the Company, or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of the Guarantor. The Guarantor hereby agrees that in the event of a default in payment of the principal of, Additional Amounts, if any, or Contingent Interest, if any, on the Securities or any other amounts payable under this Indenture and the Securities by the Company, whether at the Stated Maturity, upon redemption or repurchase or by declaration of acceleration or otherwise, legal proceedings may be instituted by the Trustee on behalf of the Holders or, subject to Section 6.06, by the Holders, on the terms and conditions set forth in this Indenture, directly against the Guarantor to enforce the Guarantee without first proceeding against the Company. (c) To the fullest extent permitted by applicable law, the obligations of the Guarantor under this Article 10 shall be as aforesaid full, irrevocable, unconditional and absolute and shall not be impaired, modified, discharged, released or limited by any occurrence or condition whatsoever, including, without limitation, (i) any compromise, settlement, release, waiver, renewal, extension, indulgence or modification of, or any change in, any of the obligations and liabilities of any other obligor with respect to the Securities contained in any of the Securities or this Indenture, (ii) any impairment, modification, release or limitation of the liability of the Company, the Guarantor or any of their respective estates in bankruptcy, or any remedy for the enforcement thereof, resulting from the operation of any present or future provision of any applicable Bankruptcy Law, as amended, or other statute or from the decision of 49 any court, (iii) the assertion or exercise by the Company, the Guarantor or the Trustee of any rights or remedies under any of the Securities or this Indenture or its delay in or failure to assert or exercise any such rights or remedies, (iv) the assignment or the purported assignment of any property as security for any of the Securities, including all or any part of the rights of the Company or the Guarantor under this Indenture, (v) the extension of the time for payment by the Company or the Guarantor of any payments or other sums or any part thereof owing or payable under any of the terms and provisions of any of the Securities or this Indenture or of the time for performance by the Company or the Guarantor of any other obligations under or arising out of any such terms and provisions or the extension or the renewal of any thereof, (vi) the modification or amendment (whether material or otherwise) of any duty, agreement or obligation set forth in this Indenture of any other obligor with respect to the Securities, (vii) the voluntary or involuntary liquidation, dissolution, sale or other disposition of all or substantially all of the assets, marshaling of assets and liabilities, receivership, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization, arrangement, composition or readjustment of, or other similar proceeding affecting, either the Company or the Guarantor or any of their respective assets, or the disaffirmance of any of the Securities, the Guarantee or this Indenture in any such proceeding, (viii) the release or discharge of the Company or the Guarantor from the performance or observance of any agreement, covenant, term or condition contained in any of such instruments by operation of law, (ix) the unenforceability of any of the obligations of any of the other obligors under the Securities, the Guarantee or this Indenture, (x) any change in the name, business, capital structure, corporate existence, or ownership of the Company or the Guarantor, or (xi) any other circumstance which might otherwise constitute a defense available to, or a legal or equitable discharge of, a surety or the Guarantor. (d) The Guarantor hereby (i) waives diligence, presentment, demand of payment, notice of acceptance, filing of claims with a court in the event of the merger, insolvency or bankruptcy of the Company or the Guarantor, and all demands and notices whatsoever, (ii) acknowledges that any agreement, instrument or document evidencing the Guarantee may be transferred and that the benefit of its obligations hereunder shall extend to each holder of any agreement, instrument or document evidencing the Guarantee without notice to them and (iii) covenants that its Guarantee will not be discharged except by complete performance of the Guarantee or of the obligations guaranteed thereby. The Guarantor further agrees that if at any time all or any part of any payment theretofore applied by any Person to the Guarantee is, or must be, rescinded or returned for any reason whatsoever, including, without limitation, the insolvency, bankruptcy or reorganization of the Guarantor, the Guarantee shall, to the extent that such payment is or must be rescinded or returned, be deemed to have continued in existence notwithstanding such application, and the Guarantee shall continue to be effective or be reinstated, as the case may be, as though such application had not been made. (e) The Guarantor shall be subrogated to all rights of the Holders and the Trustee against the Company in respect of any amounts paid by the Guarantor pursuant to the provisions of this Indenture; PROVIDED, HOWEVER, that the Guarantor shall not be entitled to enforce or to receive any payments arising out of, or based upon, such right of subrogation with respect to any of the Securities until all of the Securities and the Guarantee thereof shall have been paid in full or discharged. 50 (f) A director, officer, employee or stockholder, as such, of the Guarantor shall not have any liability for any obligations of the Guarantor under this Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. (g) No failure to exercise and no delay in exercising, on the part of the Trustee or the Holders, any right, power, privilege or remedy under this Article 10 and the Guarantee shall operate as a waiver thereof, nor shall any single or partial exercise of any rights, power, privilege or remedy preclude any other or further exercise thereof, or the exercise of any other rights, powers, privileges or remedies. The rights and remedies herein provided for are cumulative and not exclusive of any rights or remedies provided in law or equity. Nothing contained in this Article 10 shall limit the right of the Trustee or the Holders to take any action to accelerate the maturity of the Securities pursuant to Article 6 or to pursue any rights or remedies hereunder or under applicable law. SECTION 10.02. EXECUTION AND DELIVERY OF NOTATION OF GUARANTEE. To further evidence the Guarantee, the Guarantor hereby agrees that on the date of this Indenture a notation of the Guarantee may be endorsed on each Security authenticated and delivered by the Trustee and executed by either manual or facsimile signature of an Officer of the Guarantor. The Guarantor hereby agrees that the Guarantee shall remain in full force and effect notwithstanding any failure to endorse on each Security a notation relating to the Guarantee thereof. If an Officer of a Guarantor whose signature is on this Indenture or a Security no longer holds that office, or if any other or additional Person shall have become a "Guarantor" hereunder in accordance with Section 5.01 hereof, at the time the Trustee authenticates such Security or at any time thereafter, the Guarantor's Guarantee of such Security shall be valid nevertheless. The delivery of any Security by the Trustee, after the authentication thereof hereunder, shall constitute due delivery of the Guarantee set forth in this Indenture on behalf of the Guarantor and each other Person which may at such time constitute the "Guarantor" hereunder. ARTICLE 11. EXCHANGE SECTION 11.01. EXCHANGE PRIVILEGE. A Holder of a Security may exchange, in accordance with this Article 11, such Security for cash and, if applicable, Common Shares prior to the close of business on the Business Day immediately preceding June 15, 2023 (unless earlier redeemed or repurchased), but only upon the occurrence of one of the events set forth in this Section 11.01. Upon such exchange, a Holder will be entitled to receive the consideration set forth in this Article 11 based upon the exchange rate (the "EXCHANGE RATE") set forth in paragraph 9 in the Securities, subject to adjustment as herein set forth. The "EXCHANGE PRICE" in effect at any time shall be equal to $1,000 divided by the Exchange Rate. 51 A Holder may exchange a portion of the Principal Amount of a Security if the portion is $1,000 or an integral multiple of $1,000. Provisions of this Indenture that apply to exchange of all of a Security also apply to exchange of a portion of a Security. The Securities shall be exchangeable only during the period specified in paragraph 9 of the Securities and only: (i) (A) during any calendar quarter of the Company ending prior to July 1, 2008, for which the Sale Price of the Common Shares exceeded 120% of the Exchange Price for at least 20 Trading Days in the 30 consecutive Trading Day period ending on the last Trading Day of the preceding calendar quarter or (B) during any calendar quarter of the Company beginning on or after July 1, 2008, for which the Sale Price of the Common Shares exceeded 110% of the Exchange Price for at least 20 Trading Days in the 30 consecutive Trading Day period ending on the last Trading Day of the preceding calendar quarter (it being understood for purposes of this Section 11.01 that the Exchange Price in effect at the close of business on each of the 30 consecutive Trading Days shall be used); (ii) as described below after the occurrence of the 95% Trading Exception; (iii) if such Security has been called for redemption, at any time on or after the date the notice of redemption has been given until the close of business on the Business Day immediately preceding the Redemption Date; or (iv) as described below after the occurrence of any of the specified corporate transactions described below. The Company shall, within the first five Business Days of each calendar quarter, determine whether the Securities shall be exchangeable during such calendar quarter as a result of the occurrence of an event specified in clause (i) above, and, if the Securities shall be so exchangeable, the Company shall promptly deliver to the Trustee written notice thereof. Whenever the Securities shall become exchangeable pursuant to this Section 11.01, the Company or, at the Company's request, the Trustee in the name and at the expense of the Company, shall notify the Holders of the event triggering such exchangeability in the manner provided in Section 13.02. If the Issue Date occurs during a calendar quarter in which the Original Securities are exchangeable pursuant to the first clause (i)(A) in Section 11.01 of the Original Indenture, then the Securities shall be exchangeable pursuant to clause (i)(A) above for the remainder of such calendar quarter. If the Issue Date occurs during the 30 consecutive Trading Day period ending on the last Trading Day of any calendar quarter, each Trading Day occurring during such 30 Trading Day period and on or prior to the Issue Date shall be considered in determining whether the condition for exchangeability set forth in clause (i)(A) above has been met. Exchange after the Occurrence of the 95% Trading Exception. Securities may be surrendered for exchange during the five Business Day period (but only to the extent such five Business Day period occurs during the period specified in paragraph 9 of the Securities) immediately after any ten consecutive Trading Day period in which the 52 Trading Price per $1,000 Principal Amount of Securities, as determined following a request by a Holder according to the procedures described below, for each day of such ten Trading Day period was less than 95% of the product of the Sale Price of the Common Shares and the Exchange Rate as of such Trading Day (the "95% TRADING EXCEPTION"); PROVIDED, HOWEVER, Securities may not be surrendered for exchange pursuant to the 95% Trading Exception and such exchange privilege shall not apply if the average of the Sale Prices of the Common Shares for such ten consecutive Trading Day period is greater than (x) the then applicable Exchange Price but less than (y) (i) 120% of such Exchange Price until June 15, 2008, or (ii) 110% of such Exchange Price from and after June 15, 2008. If the Issue Date occurs during a period in which the Original Securities are exchangeable pursuant to the paragraph following the heading "Exchange after the Occurrence of the 95% Trading Exception" in Section 11.01 of the Original Indenture, then the Securities shall be exchangeable pursuant to the preceding paragraph for the remainder of the five Business Day period during which the Original Securities would have been exchangeable pursuant to the paragraph following the heading "Exchange after the Occurrence of the 95% Trading Exception" in Section 11.01 of the Original Indenture had they not been exchanged for Securities on the Issue Date. If the Trading Price per $ 1,000 Principal Amount of Original Securities on the Trading Day prior to the Issue Date (the "LAST ORIGINAL SECURITY MEASUREMENT DAY") was less than ninety-five percent (95%) of the product of Sale Price and the Exchange Rate in effect on such Trading Day, then the Last Original Security Measurement Day, and any of the four previous Trading Days on which the Trading Price per $1,000 Principal Amount of Original Securities was less than ninety-five percent (95%) of the product of Sale Price and the Exchange Rate in effect on such Trading Day, will be deemed to be Trading Days on which the Trading Price per $1,000 principal amount of the Securities was less than ninety-five percent (95%) of the product of the Sale Price and the then current Exchange Rate for purposes of determining whether the condition for exchangeability set forth in the preceding paragraph has been met. In connection with any exchange pursuant to the 95% Trading Exception, the Trustee shall not have any obligation to determine the Trading Price unless the Company has requested such determination, and the Company shall have no obligation to make such request unless a Holder provides the Company with reasonable evidence that the 95% Trading Exception will apply. At such time, the Company shall instruct the Trustee to determine the Trading Price beginning on the next Trading Day and on each successive Trading Day until the Trading Price per $1,000 Principal Amount of Securities is greater than or equal to 95% of the product of the Sale Price of a Common Share and the Exchange Rate as of such Trading Day. Exchange after the Occurrence of Specified Corporation Transactions. If: (i) (A) the Guarantor distributes to all holders of its Common Shares rights or warrants entitling them (for a period expiring within 45 days after the record date for the determination of the stockholders entitled to receive such distribution) to subscribe for or purchase Common Shares at a price per share less than the Sale Price of the Common Shares on the Trading Day immediately preceding the date such distribution is first publicly announced by 53 the Guarantor, or (B) the Guarantor distributes to all holders of its Common Shares, assets, debt securities or rights to purchase its securities, where the value of such distribution per Common Share, as determined by the Board of Directors of the Guarantor, exceeds 15% of the Sale Price of the Common Shares on the Trading Day immediately preceding the date such distribution is first publicly announced by the Guarantor, then, in either case, the Securities may be surrendered for exchange at any time on or after the date that the Company gives notice of such distribution to the Holders, which shall be not less than 20 Business Days prior to the Ex-Dividend Date for such distribution, until the earlier of the close of business on the Business Day immediately preceding, but not including, the Ex-Dividend Date or the date the Company publicly announces that such distribution will not take place (but only to the extent such period occurs during the period specified in paragraph 9 of the Securities); PROVIDED that the Holder of a Security may not exchange such Security pursuant to this provision if the Holder will otherwise participate in such distribution without exchange; or (ii) the Guarantor proposes to engage in a transaction described in clause (ii) of the first sentence of Section 11.14 hereof that is not a Fundamental Change, then the Securities may be surrendered for exchange, if during the period specified in paragraph 9 of the Securities, at any time from and after the date 15 days prior to the announced anticipated effective date of the transaction and ending on and including the date five days after the consummation of the transaction. The Guarantor's Board of Directors shall determine the anticipated effective date of any transaction described in clause (ii) of the first sentence of Section 11.14 hereof and such determination shall be conclusive and binding on the Holders and shall be publicly announced by the Guarantor and posted on its web site or notified to the Holders by the Guarantor or, at the Guarantor's request, the Trustee in the name and at the expense of the Guarantor, in either case, not later than two Business Days prior to such 15th day; or (iii) a Fundamental Change occurs, then the Securities may be surrendered for exchange at any time during the period beginning on and including the date on which the Company issued the Fundamental Change Repurchase Notice pursuant to Section 3.01 (b) hereof and ending on and including the Fundamental Change Repurchase Date for such Fundamental Change. SECTION 11.02. EXCHANGE PROCEDURE. To exchange a Security a Holder must satisfy the requirements in paragraph 9 of the Securities. As soon as practicable following the date (the "EXCHANGE DATE") on which the Holder satisfies all such requirements, the Company shall deliver to the Holder through the Exchange Agent (i) cash in the amount of Principal Return (as hereinafter provided), (ii) at the Company's option (A) cash in the Net Share Amount, if any, (B) certificate(s) for the number of Net Shares issuable upon exchange, as provided in paragraph 9 of the Securities, if any, or (C) as provided pursuant to Section 11.05(a)(2), a combination of cash and certificate(s) for the number of Net Shares issuable upon exchange, as provided in paragraph 9 of the Securities, if any, and 54 (iii) that amount of cash payable, if any, in lieu of any fractional share. A Holder of Securities is not entitled to any rights of a holder of Common Shares until such Holder has exchanged its Securities, and then only if Common Shares are issuable upon such exchange. Upon exchange of a Security, such Holder shall no longer be a Holder of such Security. No payment on the Securities or adjustment of the Exchange Rate will be made for dividends on or other distributions with respect to any Common Shares except as provided in this Article 11. On exchange of a Security, that portion of accrued and unpaid Contingent Interest, if any, and Additional Amounts, if any, to the Exchange Date with respect to the exchanged Security shall be deemed to be canceled, extinguished and forfeited, through delivery of the Principal Return and, if applicable, cash in the Net Share Amount or Net Shares (together with the cash payment, if any, in lieu of fractional shares) in exchange for the Security being exchanged pursuant to the provisions hereof. If a Holder exchanges more than one Security at the same time, the Principal Return and, if applicable, cash in the Net Share Amount or Net Shares issuable upon such exchange shall be based on the total Principal Amount of the Securities exchanged. Upon surrender of a Security that is exchanged in part, the Company shall execute, and the Trustee shall authenticate and deliver to the Holder, a new Security in an authorized denomination equal in Principal Amount to the unexchanged portion of the Security surrendered. If the last day on which a Security may be exchanged is a Legal Holiday in a place where an Exchange Agent is located, the Security may be surrendered to that Exchange Agent on the next succeeding day that it is not a Legal Holiday. SECTION 11.03. FRACTIONAL SHARES. The Guarantor will not issue a fractional Common Share upon exchange of a Security or in connection with payment of the Make-Whole Premium. Instead the Company will deliver cash for the current market value of the fractional share. The current market value of a fractional share shall be determined to the nearest 1/10,000th of a share by multiplying the last reported Sale Price of the Common Shares on the last Trading Day prior to the Exchange Date (or the Trading Day immediately preceding the relevant Fundamental Change Repurchase Date in the case of the Make-Whole Premium) by the fractional amount and rounding the product to the nearest whole cent. SECTION 11.04. TAXES ON EXCHANGE. If a Holder exchanges a Security, the Company shall pay any documentary, stamp or similar issue or transfer tax due on the issue of any Common Shares upon the exchange. However, the Holder shall pay any such tax which is due because the Holder requests the shares to be issued in a name other than the Holder's name. The Exchange Agent may refuse to deliver the certificates representing the Common Shares being issued in a name other than the Holder's name until the Exchange Agent receives a sum sufficient to pay any tax which will be due because the shares are to be issued in a name other than the Holder's name. Nothing herein shall preclude any tax withholding required by law or regulations. 55 SECTION 11.05. PAYMENT UPON EXCHANGE. (a) Subject to certain exceptions described in Section 11.05(b) and except as provided below, Holders surrendering Securities for exchange will be entitled to receive, per $1,000 principal amount of Securities, cash and, if applicable, Common Shares, the aggregate value of which (the "EXCHANGE VALUE") will be equal to the product of: (i) the Exchange Rate then in effect; and (ii) the average of the daily Volume Weighted Average Price (as defined below) of Common Shares for each of the ten consecutive Trading Days (appropriately adjusted to take into account the occurrence during such period of stock splits, stock dividends and similar events) beginning on the second Trading Day immediately following the day the Securities are surrendered for exchange (the "TEN DAY WEIGHTED AVERAGE PRICE"). The "Volume Weighted Average Price" per Common Share on any Trading Day will be the volume weighted average price on the AMEX or, if the Common Shares are not listed on the AMEX, on the principal exchange or over-the-counter market on which the Common Shares are then listed or traded, from 9:30 a.m. to 4:00 p.m. (New York City time) on that Trading Day as displayed by Bloomberg (or if such volume weighted average price is not available, the market value of one share on such Trading Day as the Company determines in good faith using a volume weighted method). The Exchange Value of the Securities exchanged will be paid and delivered to the exchanging Holders as follows: (1) a cash amount (the "PRINCIPAL RETURN") equal to the lesser of (i) the aggregate Exchange Value of the Securities to be exchanged or (ii) the aggregate Principal Amount of the Securities to be exchanged; (2) if the aggregate Exchange Value of the Securities to be exchanged is greater than the Principal Return, an amount, payable at the option of the Company in (i) cash, (ii) whole shares ("NET SHARES"), determined as set forth below, or (iii) a combination of cash and Net Shares, determined as set forth below, equal to such aggregate Exchange Value less the Principal Return (the "NET SHARE AMOUNT"); and (3) if the Company elects to pay any portion of the Net Share Amount in Net Shares pursuant to Section 11.05(a)(2), an amount in cash in lieu of any fractional Common Shares determined as provided in Section 11.03 hereof. The number of Net Shares to be paid will be determined by dividing (x) the Net Share Amount, minus any cash paid in respect of the Net Share Amount, by (y) the relevant Ten Day Weighted Average Price. The Exchange Value, Principal Return, Net Share Amount and the number of Net Shares will be determined by the Company at the end of the ten consecutive Trading Day period beginning on the second Trading Day immediately following the day the Securities are surrendered for exchange (the "DETERMINATION DATE"). 56 (b) In the event a Fundamental Change occurs prior to June 15, 2008, and a Holder surrenders the Securities for exchange pursuant to Section 11.01 hereof during the period beginning on the date on which the Company issued the Fundamental Change Repurchase Notice pursuant to Section 3.09(b) hereof and ending on the Fundamental Change Repurchase Date in connection with such Fundamental Change, to the extent required pursuant to this Article 11, the Holder will receive, in addition to the payment of the Exchange Value of the Securities as provided in Section 11.05(a), a Make-Whole Premium, if any, as described below. The Make-Whole Premium payable to a Holder may be paid, at the Company's option, in (i) cash, (ii) Common Shares, or (iii) the same form of consideration which the Common Shares are exchanged for, converted into, acquired for or constitutes solely the right to receive, as a result of the transaction or transactions constituting the Fundamental Change, assuming that the holder of such Common Shares would not have exercised any rights of election that such would have as a holder of Common Shares to select a particular form of consideration (the "ALTERNATIVE CONSIDERATION"), or in any combination of cash, Common Shares or Alternative Consideration. The Make-Whole Premium shall be paid on the Business Day immediately following the relevant Fundamental Change Repurchase Date. If the Company elects to pay the Make-Whole Premium in whole or in part in Common Shares, the value of its Common Shares to be delivered in respect of the Make-Whole Premium shall be deemed to be equal to the average Sale Price of the Common Shares over the ten Trading Day period ending on the Trading Day immediately preceding the Fundamental Change Repurchase Date. Notwithstanding the foregoing, in no event shall the value of each Common Share be deemed to be equal to less than 50% of the Applicable Price used to determine the amount of the Make-Whole Premium. If the Company elects to pay the Make-Whole Premium in whole or in part in Common Shares, the Company shall not issue any fractional shares but shall instead pay an amount in cash in lieu of any fractional Common Share determined as provided in Section 11.03 hereof. If the Company elects to pay the Make-Whole Premium in whole or in part in Alternative Consideration, such Alternative Consideration shall be valued as follows: (i) if all or a portion of such Alternative Consideration consists of securities that are traded on a U.S. national securities exchange or approved for quotation on the Nasdaq National Market or any similar system of automated dissemination of quotations of securities prices, such securities shall have a value equal to 98.0% of the average of the closing price or last sale price, as applicable, for the 10 consecutive Trading Days ending on, and excluding, the Trading Day immediately preceding the Fundamental Change Repurchase Date; (ii) if all or a portion of such Alternative Consideration consists of securities (other than securities referred to in the immediately preceding clause (i)), assets or property (other than cash), such securities, assets or property shall be valued based on 98.0% of the average of the fair market value of such securities, assets or property, as determined by two independent, nationally recognized investment banks selected by the Trustee; and 57 (iii) if all or a portion of such Alternative Consideration consists of cash, 100% of such cash. The make-whole premium (the "MAKE-WHOLE PREMIUM") will be equal to an amount that is derived by multiplying each $1,000 Principal Amount of Securities by a specified percentage. Such percentage will be determined by reference to the table below and will be based on the date on which the Fundamental Change becomes effective (the "EFFECTIVE DATE") and the price (the "APPLICABLE PRICE") paid per Common Share in the transaction constituting the Fundamental Change. If holders of Common Shares receive only cash in the Fundamental Change, the Applicable Price shall be the cash amount paid per share. In all other cases, the Applicable Price shall be the average of the Sale Price of Common Shares for the five Trading Days up to but not including the Effective Date. The following table sets forth the percentages to be used to determine the Make-Whole Premium to be paid by the Company. The Applicable Prices set forth in the first column of the table below, the Stock Price Threshold (as hereinafter defined) and the Stock Price Cap (as hereinafter defined) will be adjusted as of any date on which the Exchange Rate is adjusted. The adjusted Applicable Prices, Stock Price Threshold and Stock Price Cap will equal the Applicable Prices, Stock Price Threshold and Stock Price Cap, respectively, applicable immediately prior to such adjustment, multiplied by a fraction, the numerator of which is the Exchange Rate immediately prior to the adjustment giving rise to the adjustment and the denominator of which is the Exchange Rate as so adjusted. MAKE-WHOLE PREMIUM (% OF THE PRINCIPAL AMOUNT)
EFFECTIVE DATE -------------------------------------------------------- DECEMBER 13, JUNE 15, JUNE 15, JUNE 15, JUNE 15, APPLICABLE PRICE 2004 2005 2006 2007 2008 - ---------------- ------------ -------- -------- -------- -------- $ 50.00........................................ 26.02 25.85 25.85 26.24 28.67 $ 55.00........................................ 22.36 22.00 21.45 20.85 21.54 $ 60.00........................................ 19.18 18.66 17.65 16.21 14.41 $ 65.00........................................ 16.41 15.78 14.43 12.35 7.28 $ 70.00........................................ 14.02 13.30 11.71 9.24 0.14 $ 75.00........................................ 11.96 11.19 9.46 6.78 0.00 $ 80.00........................................ 10.18 9.38 7.59 4.90 0.00 $ 85.00........................................ 8.64 7.85 6.05 3.48 0.00 $ 90.00........................................ 7.32 6.54 4.80 2.43 0.00 $ 95.00........................................ 6.19 5.43 3.78 1.66 0.00 $100.00........................................ 5.22 4.50 2.95 1.10 0.00 $105.00........................................ 4.38 3.70 2.28 0.71 0.00 $110.00........................................ 3.66 3.03 1.74 0.44 0.00 $115.00........................................ 3.04 2.46 1.31 0.25 0.00 $120.00........................................ 2.52 1.99 0.97 0.13 0.00 $125.00........................................ 2.06 1.59 0.70 0.05 0.00 $130.00........................................ 1.68 1.25 0.49 0.01 0.00 ----- ----- ----- ----- -----
The exact Applicable Price and Effective Dates may not be as set forth in the table, in which case, if the Applicable Price is between two Applicable Prices 58 in the table or the Effective Date is between two Effective Dates on the table (or both), the relevant percentages will be determined by straight line interpolation between the percentages set forth for the higher and lower Applicable Prices and the two Effective Dates based on a three hundred sixty five (365) day year (or both). If the Applicable Price is greater than $130.00 per share (the "STOCK PRICE CAP") (subject to adjustment), no Make-Whole Premium will be paid. If the Applicable Price is less than or equal to $50.00 per share (the "STOCK PRICE THRESHOLD") (subject to adjustment), no Make-Whole Premium will be paid. If a Fundamental Change has occurred, a calculation agent (who may be the trustee), appointed from time to time by the Company, shall, on behalf of and on request by the Company, calculate (A) the Applicable Price, and (B) the Make-Whole Premium with respect to such Applicable Price, based on the Effective Date specified by the Company, and shall deliver its calculation of the Applicable Price and Make-Whole Premium to the Company and the Trustee within three Business Days of the request by the Company or the Trustee. In addition, the calculation agent shall, on behalf of and upon request by the Company or the Trustee make the determinations described in [the fifth paragraph] of this Section 11.05(b) above and deliver its calculations to the Company or the Trustee by 9:00 p.m., New York City time, on the day prior to the Fundamental Change Repurchase Date. The Company, or at the Company's request, the Trustee in the name and at the expense of the Company, (X) shall notify the Holders of the Applicable Price and Make-Whole Premium per $1,000 principal amount of Securities with respect to a Fundamental Change as part of the Fundamental Change Repurchase Notice and (Y) shall notify the Holders, by registered first-class mail, sent promptly upon the opening of business on the Fundamental Change Repurchase Date of the number of Common Shares or the amount of cash or Alternative Consideration, as the case may be, to be paid in respect of the Make-Whole Premium in connection with such Fundamental Change, in the manner provided in this Indenture, and the Company shall also publicly announce such information. Any notice so given shall be conclusively presumed to have been duly given, whether or not the Holder receives such notice. The Company shall verify, in writing, all calculations made by the calculation agent pursuant to this Section 11.05. On or prior to the Business Day immediately following the Fundamental Change Repurchase Date, the Company shall deposit with the Trustee or with one or more paying agents a number of Common Shares or the amount of cash or Alternative Consideration, or a consideration thereof, as the case may be, sufficient to pay the Make-Whole Premium with respect to all Securities to be exchanged in connection with such Fundamental Change; PROVIDED that if such deposit is made on the Business Day immediately following the Fundamental Change Repurchase Date it must be received by the Trustee or paying agent, as the case may be, by 12:00 p.m., New York City time, on such date. Payment of the Make-Whole Premium for Securities surrendered for exchange within the period described in the first paragraph of this Section 11.05(b), shall be made promptly following the Fundamental Change Repurchase Date by mailing checks in respect of cash (or if the Securities are represented by a 59 Global Security, by wire transfer of immediately available funds to the Depositary or its nominee) and otherwise delivering entitlements to securities, other assets or property for the amount payable to the Holders of such Securities entitled thereto as they shall appear in the register kept by the Registrar. SECTION 11.06. ADJUSTMENT FOR CHANGE IN CAPITAL STOCK. In case the Guarantor shall (i) pay a dividend, or make a distribution, in Common Shares, on its Common Shares, (ii) subdivide its outstanding Common Shares into a greater number of shares, or (iii) combine its outstanding Common Shares into a smaller number of shares, the Exchange Rate in effect immediately prior thereto shall be adjusted so that the same shall equal the Exchange Rate determined by multiplying the Exchange Rate in effect immediately prior to the occurrence of such event by a fraction of which the numerator shall be the number of Common Shares outstanding immediately after such event and the denominator shall be the number of Common Shares outstanding immediately prior to such event. If any dividend or distribution of the type described in clause (i) above is not so paid or made, the Exchange Rate shall again be adjusted to the Exchange Rate which would then be in effect if such dividend as distribution had not been declared. An adjustment made pursuant to this Section 11.06 shall become effective immediately after the record date in the case of a dividend and shall become effective immediately after the effective date in the case of a subdivision or combination. SECTION 11.07. ADJUSTMENT FOR RIGHTS OR WARRANTS. In case the Guarantor shall issue rights or warrants to all holders of its Common Shares entitling them (for a period expiring within 45 days after the record date mentioned below) to subscribe for or purchase Common Shares at a price per share less than the Market Price per Common Share at the record date for the determination of shareholders entitled to receive such rights or warrants, the Exchange Rate in effect immediately prior thereto shall be adjusted so that the same shall equal the Exchange Rate determined by multiplying the Exchange Rate in effect immediately prior to the date of issuance of such rights or warrants by a fraction of which the numerator shall be the number of Common Shares outstanding on the date of issuance of such rights or warrants plus the number of additional Common Shares offered to holders of Common Shares for subscription or purchase, and of which the denominator shall be the number of Common Shares outstanding on the date of issuance of such rights or warrants plus the number of Common Shares which the aggregate offering price of the total number of shares so offered would purchase at such Market Price. Such adjustment shall be made successively whenever any such rights or warrants are issued, and shall become effective immediately after the opening of business on the day following the record date for the determination of the shareholders entitled to receive such rights or warrants. To the extent that Common Shares are not delivered after the expiration of such rights or warrants, the Exchange Rate shall be readjusted to the Exchange Rate which would then be in effect had the adjustments made upon the issuance of such rights or warrants been made on the basis of delivery of only the number of Common Shares actually delivered. If such rights or warrants are not so issued, the Exchange Rate shall again be adjusted to be the Exchange Rate which would then be in effect if such record date for the determination of shareholders entitled to receive such rights or warrants had not been fixed. In determining whether any rights or warrants entitle the holders to subscribe for or purchase Common Shares at less than such Market Price of such Common Shares, and in determining the aggregate offering 60 price of such Common Shares, there shall be taken into account any consideration received by the Guarantor for such rights or warrants, the value of such consideration, if other than cash, to be determined by the Guarantor's Board of Directors. SECTION 11.08. ADJUSTMENT FOR OTHER DISTRIBUTIONS. (a) In case the Guarantor shall distribute to all holders of its Common Shares (excluding any distribution in connection with the liquidation, dissolution or winding up of the Guarantor, whether voluntary or involuntary) any shares of any class of capital stock of the Guarantor (other than Common Shares), or evidences of indebtedness of the Guarantor or of assets (other than cash and other than dividends, distributions or rights or warrants to subscribe for or purchase any of its securities referred to in Section 11.07 hereof) (any of the foregoing hereinafter in this Section 11.08(a) called the "DISTRIBUTED SECURITIES"), then, the Exchange Rate shall be adjusted so that the same shall equal the Exchange Rate determined by multiplying the Exchange Rate in effect immediately prior to the date of such distribution by a fraction of which the numerator shall be the Market Price per Common Share on the record date mentioned below, and the denominator shall be the Market Price per Common Share on such record date less the fair market value on such record date (as determined by the Guarantor's Board of Directors, whose determination shall be conclusive, and described in a certificate filed with the Trustee) of the Distributed Securities so distributed applicable to one Common Share. Such adjustment shall become effective immediately after the record date for the determination of shareholders entitled to receive such distribution. Notwithstanding the foregoing, in the event that the then fair market value (as so determined) of the portion of the Distributed Securities so distributed applicable to one Common Share is equal to or greater than the Market Price of the Common Shares on the record date, in lieu of the foregoing adjustment, upon exchange of any Securities thereafter, the provisions of Section 11.14 shall apply to such exchange mutatis mutandis; PROVIDED that for such application, any references in such provisions to the "Exchange Property" shall be deemed references to a unit composed of (a) the number of Common Shares equal to the Exchange Rate immediately prior to the relevant distribution and (b) the amount of Distributed Securities such Holder would have received had such Holder held a number of Common Shares equal to the Exchange Rate immediately prior to the relevant distribution. In the event that such distribution is not so paid or made, the Exchange Rate shall again be adjusted to the Exchange Rate which would then be in effect if such distribution had not been declared. If the Guarantor's Board of Directors determines the fair market value of any distribution for purposes of this Section 11.08(a) by reference to the actual or when issued trading market for any securities, it must in doing so consider the prices in such market over the same period used in computing the Market Price of the Common Shares. 61 (b) In case the Guarantor shall, by dividend or otherwise, distribute to all holders of its Common Shares cash (excluding any dividend or distribution in connection with the liquidation, dissolution or winding up of the Guarantor, whether voluntary or involuntary), then, in such case, the Exchange Rate shall be increased so that the same shall equal the Exchange Rate determined by multiplying the Exchange Rate in effect immediately prior to the record date by a fraction of which the numerator shall be such Market Price of the Common Shares and the denominator shall be the Market Price of the Common Shares on the record date less the amount of cash so distributed (and not excluded as provided above) applicable to one Common Share, such increase to be effective immediately prior to the opening of business on the day following the record date; PROVIDED, HOWEVER, that in the event that the portion of the cash so distributed applicable to one Common Share is equal to or greater than the Market Price of the Common Shares on the record date, in lieu of the foregoing adjustment, upon exchange of any Securities thereafter, the provisions of Section 11.14 shall apply to such exchange mutatis mutandis; PROVIDED, FURTHER, that for such application, any references in such provisions to the "Exchange Property" shall be deemed references to a unit composed of (a) the number of Common Shares equal to the Exchange Rate immediately prior to the relevant distribution and (b) the amount of cash such holder would have received had such holder held a number of Common Shares equal to the Exchange Rate immediately prior to the relevant distribution. If such dividend or distribution is not so paid or made, the Exchange Rate shall again be adjusted to be the Exchange Rate which would then be in effect if such dividend or distribution had not been declared. (c) In case a tender or exchange offer made by the Guarantor or any subsidiary of the Guarantor shall expire and such tender or exchange offer (as amended as of the expiration thereof) shall require the payment to common shareholders of consideration per Common Share, expressed as an amount per Common Share validly tendered or exchanged, and not withdrawn, pursuant to such tender offer or exchange offer (the "OFFER CONSIDERATION") having a fair market value (as determined by the Guarantor's Board of Directors, whose determination shall be conclusive and set forth in a certificate filed with the Trustee) that as of the last time (the "EXPIRATION TIME") tenders or exchanges may be made pursuant to such tender or exchange offer exceeds the Market Price per Common Share, then the Exchange Rate shall be increased so that the same shall equal the Exchange Rate determined by multiplying the Exchange Rate in effect immediately prior to the Expiration Time by a fraction of which the numerator shall be the sum of (i) the product of (A) the Offer Consideration and (B) the number of Common Shares validly tendered or exchanged (and not withdrawn), and accepted for purchase, pursuant to such tender offer or exchange offer (such Common Shares the "PURCHASED SHARES") and (ii) the product of (A) the Market Price per Common Share as of the Expiration Time and (B) an amount equal to (i) the number of Common Shares outstanding as of the Expiration Time (including all Purchased Shares) less (ii) the Purchased Shares, and the denominator shall be the product of (i) the number of Common Shares outstanding as of the Expiration Time (including all Purchased Shares) and (ii) the Market Price per Common Share as of the Expiration Time. The adjustment to the Exchange Rate set forth above shall become effective immediately prior to the opening for business on the day following the Expiration Time. If the Guarantor or such subsidiary making such tender or exchange offer is obligated to purchase shares pursuant to any such tender or exchange offer, but the Guarantor or such subsidiary is permanently prevented by applicable law from effecting any such purchases 62 or all such purchases are rescinded, the Exchange Rate shall again be adjusted to be the Exchange Rate that would then be in effect if the tender or exchange offer had not been made. (d) Notwithstanding Sections 11.08(b) and (c), in no event shall the Exchange Rate as adjusted pursuant to Sections 11.08(b) and (c) exceed 22.3964 per $1,000 Principal Amount of Securities (as such Exchange Rate may be adjusted on a proportional basis for any adjustment made pursuant to Sections 11.06, 11.07 or 11.08 (a)). SECTION 11.09. [RESERVED.] SECTION 11.10. WHEN NO ADJUSTMENT REQUIRED. No adjustment need be made for rights to purchase Common Shares pursuant to a Guarantor plan for reinvestment of dividends or interest. No adjustment need be made for a change in the par value or no par value of the Common Shares. To the extent the Securities become exchangeable for cash, assets, property or securities (other than capital stock of the Guarantor), no adjustment need be made thereafter as to the cash, assets, property or such securities. Interest will not accrue on the cash. SECTION 11.11. NOTICE OF ADJUSTMENT. Whenever the Exchange Rate is adjusted, the Company shall promptly mail to Holders a notice of the adjustment. The Company shall file with the Trustee and the Exchange Agent such notice. The certificate shall, absent manifest error, be conclusive evidence that the adjustment is correct. Neither the Trustee nor any Exchange Agent shall be under any duty or responsibility with respect to any such certificate except to exhibit the same to any Holder desiring inspection thereof. SECTION 11.12. VOLUNTARY CHANGE. The Guarantor may make such increases or decreases, in one or more increments, in the Exchange Rate, in addition to those required by Sections 11.06, 11.07 and 11.08 hereof, as the Guarantor's Board of Directors considers to be advisable to avoid or diminish any income tax to holders of Common Shares or rights to purchase Common Shares resulting from any dividend or distribution of stock (or rights to acquire stock) or from any event treated as such for income tax purposes. To the extent permitted by applicable law, the Guarantor may from time to time increase, in one or more increments, the Exchange Rate by any amount for any period of time if the period is at least 20 Business Days, the increase is irrevocable during the period and the Guarantor's Board of Directors shall have made a determination that such increase would be in the best interests of the Guarantor, which determination shall be conclusive. Subsequent to any such increase, the Guarantor may from time to time lower the Exchange Rate to any rate that is not lower than the Exchange Rate that would have been applicable had any such increase not occurred, if the Guarantor's Board of Directors has determined that the decrease would be in the Guarantor's best interests. Whenever the Exchange Rate is changed pursuant to this Section 11.12, the Company shall mail to Holders and file with the Trustee and the Exchange Agent a 63 notice of such increase. The Company shall mail such notice at least seven days before the date the increased or decreased Exchange Rate takes effect. The notice shall state the increased or decreased Exchange Rate and the period it will be in effect. SECTION 11.13. NOTICE OF CERTAIN TRANSACTIONS. If: (1) the Guarantor makes any distribution or dividend that would require an adjustment in the Exchange Rate pursuant to Section 11.06, 11.07 or 11.08 hereof; or (2) the Guarantor takes any action that would require a supplemental indenture pursuant to Section 11.14 hereof; or (3) there is a liquidation, dissolution or winding-up of the Guarantor; then the Company shall mail to Holders and file with the Trustee and the Exchange Agent a notice stating the proposed record date for a dividend or distribution or the proposed effective date of a subdivision, combination, reclassification, consolidation, merger, conveyance , transfer, lease, dissolution, liquidation or winding-up. The Company shall file and mail the notice at least ten days before such date. Failure to file or mail the notice or any defect in it shall not affect the validity of the transaction. SECTION 11.14. EFFECT OF RECLASSIFICATION, CONSOLIDATION, MERGER OR TRANSFER. If any of the following events occur, namely (i) any reclassification or change of the outstanding Common Shares (other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of a split, subdivision or combination), (ii) any consolidation, merger or combination of the Guarantor with another Person as a result of which holders of Common Shares shall be entitled to receive stock, securities or other property or assets (including cash) with respect to or in exchange for such Common Shares, or (iii) any conveyance, transfer or lease of the properties and assets of the Guarantor as, or substantially as, an entirety to any other Person as a result of which holders of Common Shares shall be entitled to receive stock, securities or other property or assets (including cash) with respect to or in exchange for such Common Shares, then: (a) the Company and the Guarantor or the successor or purchasing Person, as the case may be, shall execute with the Trustee a supplemental indenture (which shall comply with the Trust Indenture Act as in force at the date of execution of such supplemental indenture if such supplemental indenture is then required to so comply) providing for the exchange and settlement of the Securities as set forth in this Indenture. Such supplemental indenture shall provide for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Article. If, in the case of any such reclassification, change, consolidation, merger, combination, conveyance, transfer or lease, the Exchange Property includes shares of stock or other securities and assets of a Person other than the successor or purchasing Person, as the case may be, in such reclassification, change, consolidation, merger, combination, conveyance, transfer or lease, then such supplemental indenture shall also 64 be executed by such other Person and shall contain such additional provisions to protect the interests of the Holders of the Securities as the Company's Board of Directors shall reasonably consider necessary by reason of the foregoing, including to the extent required by the Company's Board of Directors and practicable the provisions providing for the repurchase rights set forth in Article 3 herein. (b) Notwithstanding the provisions of Section 11.05(a), the Exchange Value with respect to each $1,000 principal amount of Securities exchanged following the effective date of any such transaction shall be calculated (as provided in clause (d) below) based on the kind and amount of shares of stock and other securities or property or assets (including cash) received upon such reclassification, change, consolidation, merger, combination, conveyance, transfer or lease by a holder of Common Shares holding, immediately prior to the transaction, a number of Common Shares equal to the Exchange Rate immediately prior to such transaction (the "EXCHANGE PROPERTY") assuming such holder of Common Shares did not exercise his rights of election, if any, as to the kind or amount of securities, cash or other property receivable upon such consolidation, merger, statutory exchange, conveyance, transfer or lease. (c) The Exchange Value in respect of any Securities exchanged following the effective date of any such transaction shall be equal to the average of the daily values of the Exchange Property pertaining to such Securities as determined in the next sentence (the "EXCHANGE PROPERTY VALUE") for each of the ten consecutive Trading Days (appropriately adjusted to take into account the occurrence during such period of stock splits and similar events) beginning on the later of (A) the second Trading Day immediately following the day the Securities are tendered for exchange and (B) the effective date of such transaction (the "EXCHANGE PROPERTY WEIGHTED AVERAGE PRICE"). For the purpose of determining the value of any Exchange Property: (i) Any shares of common stock of the successor or purchasing Person or any other Person that are included in the Exchange Property shall be valued as set forth in Section 11.05 as if such shares were "Common Shares"; and (ii) Any other property (other than cash) included in the Exchange Property shall be valued in good faith by the Company's Board of Directors or by a AMEX member firm selected by the Company's Board of Directors. (d) The Company shall deliver such Exchange Value to Holders of Securities so exchanged as follows: (i) An amount equal to the Principal Return, determined as set forth in Section 11.05(a)(ii)(1); and (ii) If the Exchange Value of the Securities so exchanged is greater than the Principal Return, an amount of Exchange Property, cash, or any combination thereof, determined as set forth below, equal to such aggregate Exchange Value less the Principal Return (the "NET EXCHANGE PROPERTY AMOUNT"). 65 The amount of Exchange Property to be delivered shall be determined by dividing the Net Exchange Property Amount, minus any cash paid by the Company in respect of the Net Exchange Property Amount by the Exchange Property Weighted Average Price. If the Exchange Property includes more than one kind of property, the amount of Exchange Property of each kind to be delivered shall be in the proportion that the Exchange Property Value of such kind of Exchange Property bears to the Exchange Property Value of all the Exchange Property. If the foregoing calculations would require the Company to deliver a fractional share or unit of Exchange Property to a Holder of Securities being exchanged, the Company shall deliver cash in lieu of such fractional share or unit based on its Exchange Property Weighted Average Price. (e) Notwithstanding clauses (b), (c) and (d) above, if the Securities are tendered for exchange prior to the effective date of any such transaction pursuant to Section 11.05(b) above, and the Principal Return and Net Shares, if any, have been determined as of the effective date of such transaction, then the Company shall (i) pay the Principal Return in cash and (ii) instead of delivering Net Shares, if applicable, deliver an amount of Exchange Property that a holder of Common Shares, holding, immediately prior to the transaction, a number of Common Shares equal to the Net Shares, would receive, assuming such holder of Common Shares did not exercise his rights of election, if any, as to the kind or amount of securities, cash or other property receivable upon such consolidation, merger, statutory exchange, conveyance, transfer or lease, cash, or a combination thereof at the Company's option. If the foregoing calculations would require the Company to deliver a fractional share or unit of Exchange Property to a Holder of Securities being exchanged, the Company shall deliver cash in lieu of such fractional share or unit based on the Exchange Property Value (as so determined). (f) [Reserved.] (g) The Company shall cause notice of the execution of such supplemental indenture to be mailed to each Holder of Securities, at his address appearing on the Securities register provided for in this Indenture, within twenty (20) days after execution thereof. Failure to deliver such notice shall not affect the legality or validity of such supplemental indenture. (h) The above provisions of this Section shall similarly apply to successive reclassifications, changes, consolidations, mergers, combinations, sales and conveyances. (i) If this Section applies, none of Sections 11.06, 11.07 nor 11.08 hereof apply. SECTION 11.15. COMPANY DETERMINATION FINAL. Any determination that the Company or its Board of Directors or the Guarantor or its Board of Directors must make pursuant to Section 11.03, 11.06, 11.07, 11.08, 11.09, 11.10, 11.12, 11.14 or 11.17 hereof shall be conclusive in the absence of manifest error. SECTION 11.16. TRUSTEE'S ADJUSTMENT DISCLAIMER. The Trustee has no duty to determine when an adjustment under this Article 11 should be made, how it should be made or what it should be. The Trustee has no duty to determine whether 66 a supplemental indenture under Section 11.14 hereof need be entered into or whether any provisions of any supplemental indenture are correct. The Trustee shall not be accountable for and makes no representation as to the validity or value of any securities or assets issued upon exchange of Securities. The Trustee shall not be responsible for the Company's or the Guarantor's failure to comply with this Article 11, and shall not be deemed to have knowledge of any adjustment unless and until it shall have received a notice of adjustment pursuant to Section 11.11 hereof. Each Exchange Agent (other than the Company or one of its Affiliates) shall have the same protection under this Section 11.16 as the Trustee. SECTION 11.17. SIMULTANEOUS ADJUSTMENTS. In the event that this Article 11 requires adjustments to the Exchange Rate under more than one of Section 11.06, 11.07, 11.08(a) or 11.08(b) hereof, and the record dates for the distributions giving rise to such adjustments shall occur on the same date, then such adjustments shall be made by applying, first, the provisions of Section 11.08(a) hereof, second, the provisions of Section 11.08(b) hereof, third, the provisions of Section 11.06 hereof and, fourth, the provisions of Section 11.07 hereof, PROVIDED that no adjustment shall be made more than once pursuant to any such individual Section. SECTION 11.18. SUCCESSIVE ADJUSTMENTS. After an adjustment to the Exchange Rate under this Article 11, any subsequent event requiring an adjustment under this Article 11 shall cause an adjustment to the Exchange Rate as so adjusted. SECTION 11.19. RIGHTS ISSUED IN RESPECT OF COMMON SHARES ISSUED UPON EXCHANGE. Notwithstanding any other provision hereof, in the event that the Guarantor implements a shareholders' rights plan, such rights plan shall provide that upon exchange of the Securities the Holders will receive, in addition to the Common Shares issuable upon such exchange, if any, such rights, whether or not such rights have separated from the Common Shares at the time of such exchange. Rights or warrants distributed by the Guarantor to all holders of Common Shares entitling the holders thereof to subscribe for or purchase shares of the Guarantor's capital stock (either initially or under certain circumstances), which rights or warrants, until the occurrence of a specified event or events ("TRIGGER EVENT"): (i) are deemed to be transferred with such Common Shares, (ii) are not exercisable, and (iii) are also issued in respect of future issuances of Common Shares, shall not be deemed distributed for purposes of Section 11.08(a) hereof until the occurrence of the earliest Trigger Event. In addition, in the event of any distribution of rights or warrants, or any Trigger Event with respect thereto, that shall have resulted in an adjustment to the Exchange 67 Rate under Section 11.08(a) hereof, (1) in the case of any such rights or warrants which shall all have been redeemed or repurchased without exercise by any holders thereof, the Exchange Rate shall be readjusted upon such final redemption or repurchase to give effect to such distribution or Trigger Event, as the case may be, as though it were a cash distribution, equal to the per share redemption or repurchase price received by a holder of Common Shares with respect to such rights or warrants (assuming such holder had retained such rights or warrants), made to all holders of Common Shares as of the date of such redemption or repurchase, and (2) in the case of any such rights or warrants all of which shall have expired without exercise by any holder thereof, the Exchange Rate shall be readjusted as if such issuance had not occurred. SECTION 11.20. GENERAL CONSIDERATIONS. Whenever successive adjustments to the Exchange Rate are called for pursuant to this Article 11, such adjustments shall be made to the Market Price as may be necessary or appropriate to effectuate the intent of this Article 11 and to avoid unjust or inequitable results as determined in good faith by the Guarantor's Board of Directors. ARTICLE 12. CONTINGENT INTEREST SECTION 12.01. GENERAL. (a) The Securities shall provide for payment of Contingent Interest in certain circumstances as specified in paragraph 10 of the Securities. (b) Holders of Securities at the close of business on a Contingent Interest Record Date will receive payment of Contingent Interest, payable on the corresponding Contingent Interest Payment Date notwithstanding the exchange of such Securities at any time after the close of business on such Contingent Interest Record Date. Securities surrendered for exchange by a Holder during the period from the close of business on any Contingent Interest Record Date to the opening of business on the immediately following Contingent Interest Payment Date must be accompanied by payment of an amount equal to the Contingent Interest that the Holder is to receive on the Securities; PROVIDED, HOWEVER, that no such payment need be made if (1) the Company has specified a Redemption Date that is after a Contingent Interest Record Date and on or prior to the immediately following Contingent Interest Payment Date, (2) the Company has specified a Fundamental Change Repurchase Date following a Fundamental Change that is during such period or (3) any overdue Contingent Interest exists at the time of exchange with respect to such Securities to the extent of such overdue Contingent Interest. (c) In the event that any date on which Contingent Interest or any other amount is payable on a Security is not a Business Day, then a payment of the amount payable on such date will be made on the next succeeding day which is a Business Day and (without any interest or other payment in respect of any such delay) with the same force and effect as if made on the date the payment was originally payable. SECTION 12.02. DEFAULTED CONTINGENT INTEREST; INTEREST RIGHTS PRESERVED. 68 Except as otherwise specified with respect to the Securities, any Contingent Interest on any Security that is payable, but is not punctually paid or duly provided for, within 30 days following any Contingent Interest Payment Date (herein called "DEFAULTED CONTINGENT INTEREST") shall forthwith cease to be payable to the registered Holder thereof on the relevant Contingent Interest Record Date by virtue of having been such Holder, and such Defaulted Contingent Interest may be paid by the Company, at its election in each case, as provided in clause (1) or (2) below: (1) The Company may elect to make payment of any Defaulted Contingent Interest to the Persons in whose names the Securities are registered at the close of business on a special record date (herein called "SPECIAL CONTINGENT INTEREST RECORD DATE") for the payment of such Defaulted Contingent Interest, which shall be fixed in the following manner. The Company shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each Security and the date of the proposed payment (which shall not be less than 20 days after such notice is received by the Trustee), and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Contingent Interest or shall make arrangements satisfactory to the Trustee for such deposit on or prior to the date of proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Contingent Interest as in this clause provided. Thereupon the Trustee shall fix a Special Contingent Interest Record Date for the payment of such Defaulted Contingent Interest which shall be not more than 15 days and not less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Company of such Special Contingent Interest Record Date and, in the name and at the expense of the Company, shall cause notice of the proposed payment of such Defaulted Contingent Interest and the Special Contingent Interest Record Date therefor to be mailed, first-class postage prepaid, to each Holder of Securities at his address as it appears on the list of Holders maintained pursuant to Section 2.05 hereof not less than ten days prior to such Special Contingent Interest Record Date. The Trustee may, in its discretion, in the name and at the expense of the Company, cause a similar notice to be published at least once in an Authorized Newspaper in each place of payment, but such publications shall not be a condition precedent to the establishment of such Special Contingent Interest Record Date. Notice of the proposed payment of such Defaulted Contingent Interest and the Special Record Date therefor having been mailed as aforesaid, such Defaulted Contingent Interest shall be paid to the persons in whose names the Securities are registered at the close of business on such Special Contingent Interest Record Date and shall no longer be payable pursuant to the following clause (2). (2) The Company may make payment of any Defaulted Contingent Interest on the Securities in any other lawful manner not inconsistent with the requirements of any securities exchange on which such Securities may be listed, and upon such notice as may be required by such exchange, if, after notice given by the Company to the Trustee of the proposed payment pursuant to this clause, such manner of payment shall be deemed practicable by the Trustee. 69 Subject to the foregoing provisions of this Section and Section 2.07 hereof, each Security delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Security shall carry the rights to Contingent Interest accrued and unpaid, and to accrue, which were carried by such other Security. ARTICLE 13. MISCELLANEOUS SECTION 13.01. TRUST INDENTURE ACT. This Indenture is hereby made subject to, and shall be governed by, the provisions of the TIA required to be part of and to govern indentures qualified under the TIA; PROVIDED, HOWEVER that this Section 13.01 shall not require this Indenture or the Trustee to be qualified under the TIA prior to the time such qualification is in fact required under the terms of the TIA, nor shall it constitute any admission or acknowledgment by any party that any such qualification is required prior to the time such qualification is in fact required under the terms of the TIA. If any provision hereof limits, qualifies or conflicts with another provision hereof which is required to be included in an indenture qualified under the TIA, such required provision shall control. SECTION 13.02. NOTICES. Any request, demand, authorization, notice, waiver, consent or communication shall be in writing in the English language and delivered in Person or mailed by first class mail, postage prepaid, addressed as follows or transmitted by facsimile transmission (confirmed by overnight courier) to the following facsimile numbers: if to the Company: Nabors Industries, Inc. c/o Nabors Corporate Services, Inc. 515 West Greens Road, Suite 1200 Houston, Texas 77067 Attn: General Counsel Telephone Number: (281) 874-0035 Facsimile Number: (281) 775-8431 if to the Guarantor: Nabors Industries Ltd. 2nd Fl., International Trading Centre P.O. Box 905E Warrens St. Michael, Barbados Attn: Vice President-Administration Telephone Number: (246) 421-9471 Facsimile Number: (246) 421-9472 70 if to the Trustee: J.P. Morgan Trust Company, National Association Institutional Trust Services 600 Travis Street, Suite 1150 Houston, Texas 77002-3009 Telephone Number: (713) 216-5651 Facsimile Number: (713) 216-6590 Each of the Company, the Guarantor or the Trustee by notice to the others may designate additional or different addresses for subsequent notices or communications. Notices to the Trustee shall be effective only upon receipt. Any notice or communication given to a Holder shall be mailed to the Holder, by first class mail, postage prepaid, at the Holder's address as it appears on the registration books of the Registrar and shall be sufficiently given if so mailed within the time prescribed. Failure to mail a notice or communication to a Holder or any defect in it shall not affect its sufficiency with respect to other Holders. If a notice or communication is mailed in the manner provided above, it is duly given, whether or not received by the addressee. If the Company or the Guarantor mails a notice or communication to the Holders, it shall mail a copy to the Trustee and each Registrar, Paying Agent, Exchange Agent or co-registrar. SECTION 13.03. COMMUNICATION BY HOLDERS WITH OTHER HOLDERS. Holders may communicate pursuant to TIA Section 312(b) with other Holders with respect to their rights under this Indenture or the Securities. The Company, the Guarantor, the Trustee, the Registrar, the Paying Agent, the Exchange Agent and anyone else shall have the protection of TIA Section 312(c). SECTION 13.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT. Upon any request or application by the Company or the Guarantor to the Trustee to take any action under this Indenture, the Company or the Guarantor shall furnish to the Trustee: (1) an Officers' Certificate stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with; and (2) an Opinion of Counsel stating that, in the opinion of such counsel, all such conditions precedent have been complied with. 71 SECTION 13.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION. Each Officers' Certificate or Opinion of Counsel with respect to compliance with a covenant or condition provided for in this Indenture shall include: (1) a statement that each individual making such Officers' Certificate or Opinion of Counsel has read such covenant or condition; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such Officers' Certificate or Opinion of Counsel are based; (3) a statement that, in the opinion of each such individual, he or she has made such examination or investigation as is necessary to enable him or her to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement that, in the opinion of such individual, such covenant or condition has been complied with. SECTION 13.06. SEPARABILITY CLAUSE. In case any provision in this Indenture or in the Securities shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. SECTION 13.07. RULES BY TRUSTEE, PAYING AGENT, EXCHANGE AGENT AND REGISTRAR. The Trustee may make reasonable rules for action by or a meeting of Holders. The Registrar, Exchange Agent and the Paying Agent may make reasonable rules for their functions. SECTION 13.08. GOVERNING LAW. THE LAWS OF THE STATE OF NEW YORK SHALL GOVERN THIS INDENTURE AND THE SECURITIES. SECTION 13.09. NO RECOURSE AGAINST OTHERS. A director, officer, employee or stockholder, as such, of the Company or the Guarantor shall not have any liability for any obligations of the Company or the Guarantor under the Securities, the Guarantee or this Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Security, each Holder shall waive and release all such liability. The waiver and release shall be part of the consideration for the issue of the Securities. 72 SECTION 13.10. RECORD DATE FOR VOTE OR CONSENT OF SECURITYHOLDERS. The Company may set a record date for purposes of determining the identity of Holders entitled to vote or consent to any action by vote or consent authorized or permitted under this Indenture, which record date shall be the later of ten days prior to the first solicitation of such vote or consent or the date of the most recent list of Holders furnished to the Trustee pursuant to Section 2.05 prior to such solicitation. If a record date is fixed, those Persons who were Holders at such record date (or their duly designated proxies), and only those Persons, shall be entitled to take such action by vote or consent or to revoke any vote or consent previously given, whether or not such Persons continue to be Holders after such record date. SECTION 13.11. [RESERVED.] SECTION 13.12. SUCCESSORS. All agreements of the Company and the Guarantor in this Indenture and the Securities shall bind their respective successors. All agreements of the Trustee in this Indenture shall bind its successor. SECTION 13.13. MULTIPLE ORIGINALS. The parties may sign any number of copies (including by facsimile) of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. One signed copy is enough to prove this Indenture. (SIGNATURE PAGE FOLLOWS) 73 IN WITNESS WHEREOF, the undersigned, being duly authorized, have executed this Indenture on behalf of the respective parties hereto as of the date first written above. NABORS INDUSTRIES, INC. By:______________________________________ Name: Title: NABORS INDUSTRIES LTD. By:______________________________________ Name: Title: J.P. MORGAN TRUST COMPANY, NATIONAL ASSOCIATION, as Trustee By:______________________________________ Name: Title: 74 EXHIBIT A [FORM OF FACE OF SECURITY] FOR PURPOSES OF SECTIONS 1273 AND 1275 OF THE INTERNAL REVENUE CODE, THIS SECURITY IS A CONTINGENT PAYMENT DEBT INSTRUMENT AND WILL ACCRUE ORIGINAL ISSUE DISCOUNT AT THE ISSUER'S "COMPARABLE YIELD" FOR UNITED STATES FEDERAL INCOME TAX PURPOSES. PURSUANT TO SECTION 4.10 OF THE INDENTURE, THE COMPANY AGREES, AND BY ACCEPTANCE OF A BENEFICIAL OWNERSHIP INTEREST IN THE SECURITY, EACH BENEFICIAL HOLDER OF THE SECURITIES WILL BE DEEMED TO HAVE AGREED, FOR UNITED STATES FEDERAL INCOME TAX PURPOSES, (i) TO TREAT THE SECURITIES AS INDEBTEDNESS THAT IS SUBJECT TO THE CONTINGENT PAYMENT DEBT INSTRUMENT REGULATIONS UNDER SECTION 1.1275-4 OF THE UNITED STATES TREASURY REGULATIONS (THE "CPDI REGULATIONS"), AND, FOR PURPOSES OF THE CPDI REGULATIONS, TO TREAT THE FAIR MARKET VALUE OF COMMON SHARES RECEIVED BY A BENEFICIAL HOLDER UPON ANY EXCHANGE OF THE SECURITIES AS A CONTINGENT PAYMENT AND (ii) TO BE BOUND BY THE COMPANY'S DETERMINATION OF THE "COMPARABLE YIELD" AND "PROJECTED PAYMENT SCHEDULE" WITHIN THE MEANING OF THE CPDI REGULATIONS, WITH RESPECT TO THE SECURITIES AND TO ACCRUE ORIGINAL ISSUE DISCOUNT AT THE COMPARABLE YIELD AS DETERMINED BY THE COMPANY. THE COMPANY'S DETERMINATION OF THE "COMPARABLE YIELD" IS 5.53% PER ANNUM, COMPOUNDED SEMIANNUALLY. THE PROJECTED PAYMENT SCHEDULE, DETERMINED BY THE COMPANY, IS ATTACHED TO THE INDENTURE AS ANNEX 1. YOU MAY OBTAIN THE AMOUNT OF ORIGINAL ISSUE DISCOUNT, ISSUE DATE, COMPARABLE YIELD AND PROJECTED PAYMENT SCHEDULE FOR THE SECURITY BY TELEPHONING THE COMPANY'S TREASURY DEPARTMENT AT (281) 874-0035 OR SUBMITTING A WRITTEN REQUEST FOR SUCH INFORMATION TO: NABORS INDUSTRIES, INC., 515 W. GREENS ROAD, SUITE 1200, HOUSTON, TEXAS 77067, ATTENTION: TREASURY DEPARTMENT. [FORM OF LEGEND FOR GLOBAL SECURITY] UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFERS, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. A-1 TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFER IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF. [RESTRICTED SECURITY LEGEND] THIS NOTE HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS, AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U. S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. THE HOLDER HEREOF AGREES THAT UNTIL THE EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO SALES OF THIS NOTE UNDER RULE 144(k) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION), (1) IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS NOTE WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OF, U. S. PERSONS EXCEPT (A) TO NABORS INDUSTRIES LTD. OR TO NABORS INDUSTRIES, INC. OR ANY SUBSIDIARY THEREOF, (B) TO A QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT), (C) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a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k) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION). AS USED HEREIN, THE TERMS "UNITED STATES" AND "U. S. PERSON" HAVE THE MEANING GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT. A-3 NABORS INDUSTRIES, INC. SERIES B ZERO COUPON SENIOR EXCHANGEABLE NOTE DUE 2023 No. Issue Date: December [ ], 2004 Principal Amount: $ CUSIP: [ ](1) Nabors Industries, Inc., a Delaware corporation, promises to pay to ______________________ or registered assigns, on June 15, 2023 the Principal Amount of __________________________________ Dollars ($________________) [or such greater or lesser Principal Amount as may be shown on Schedule A hereto].(2) This Security shall not bear interest except as specified on the other side of this Security. This Security is exchangeable as specified on the other side of this Security. Additional provisions of this Security are set forth on the other side of this Security. Unless the certificate of authentication hereon has been executed by the Trustee referred to on the reverse hereof by manual signature, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose. IN WITNESS WHEREOF, Nabors Industries, Inc. has caused this instrument to be duly executed. NABORS INDUSTRIES, INC. By:__________________________________ Name:________________________________ Title:_______________________________ Dated:___________________ ____________ (1) For Restricted Securities only; otherwise, [ ]. (2) For inclusion in the global Security only. A-4 TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the Securities referred to in the within-mentioned Indenture. J.P. Morgan Trust Company, National Association, as Trustee By_______________________________ Authorized Signatory Date of authentication: ______________ A-5 [FORM OF REVERSE SIDE OF SECURITY] NABORS INDUSTRIES, INC. SERIES B ZERO COUPON SENIOR EXCHANGEABLE NOTE DUE 2023 1. INTEREST This Security shall not bear interest except as specified in this paragraph or in paragraph 10 hereof. If the Principal Amount hereof or any portion of such Principal Amount is not paid when due (whether upon acceleration pursuant to Section 6.02 of the Indenture, upon the date set for payment of the Redemption Price pursuant to paragraph 5 hereof, upon the date set for payment of a Purchase Price or Fundamental Change Purchase Price pursuant to paragraph 6 hereof or upon the Stated Maturity of this Security), or if Contingent Interest, if any, due hereon is not paid when due in accordance with paragraph 10 hereof, then in each such case the overdue amount shall bear interest at the rate of 1.0% per annum, compounded semiannually (to the extent that the payment of such interest shall be legally enforceable), which interest shall accrue from the date such overdue amount was due to the date payment of such amount, including interest thereon, has been made or duly provided for. All such interest shall be payable on demand. 2. METHOD OF PAYMENT Subject to the terms and conditions of the Indenture, the Company will make payments in respect of the Securities to the Persons entitled thereto. Holders must surrender Securities to the Paying Agent to collect payments in respect of the Principal Amount of the Securities. The Company will make all cash payments due on the Securities (i) by wire transfer of immediately available funds with respect to Securities held in book-entry form or Securities held in certificated form with an aggregate Principal Amount in excess of $2,000,000 whose Holder has requested such method of payment and provided wire transfer instructions to the Paying Agent or (ii) by check payable in such money mailed to a Holder's registered address with respect to any other certificated Securities. The Company will pay cash amounts due on the Securities in money of the United States that at the time of payment is legal tender for payment of public and private debts. 3. PAYING AGENT, EXCHANGE AGENT AND REGISTRAR Initially, J.P. Morgan Trust Company, National Association, a national banking association (the "TRUSTEE"), will act as Paying Agent, Exchange Agent and Registrar. The Company may appoint and change any Paying Agent, Exchange Agent, Registrar or co-registrar without notice, other than notice to the Trustee. The Company, the Guarantor or any of their Subsidiaries or Affiliates may act as Paying Agent, Exchange Agent, Registrar or co-registrar. 4. INDENTURE The Company issued the Securities under an Indenture (the "INDENTURE"), dated as of December [ ], 2004, among the Company, the Guarantor and the Trustee. Capitalized terms used herein and not defined herein A-6 have the meanings ascribed thereto in the Indenture. The Securities are subject to all such terms, and Holders are referred to the Indenture for a statement of those terms. The Securities are general unsecured obligations of the Company, and are fully and unconditionally guaranteed as to payment by the Guarantor as provided in Article 10 of the Indenture and as evidenced by the notation of Guarantee endorsed hereon. The Indenture does not limit the indebtedness issued thereunder or other indebtedness of the Company or the Guarantor, whether secured or unsecured. 5. REDEMPTION AT THE OPTION OF THE COMPANY No sinking fund is provided for the Securities. The Securities are redeemable as a whole, or from time to time in part, at any time at the option of the Company at the Principal Amount plus accrued and unpaid Contingent Interest, if any, and Additional Amounts, if any, and overdue interest, if any, provided that the Securities are not redeemable prior to June 15, 2008. The Company may, upon at least 30 days' notice to the Holders, on one or more occasions, elect to extend the period in which it cannot redeem the Securities. 6. REPURCHASE BY THE COMPANY AT THE OPTION OF THE HOLDER; REPURCHASE AT THE OPTION OF THE HOLDER UPON A FUNDAMENTAL CHANGE (a) Subject to the terms and conditions of the Indenture, the Company shall become obligated to repurchase, at the option of the Holder, all or any portion of the Securities held by such Holder on June 15, 2008, June 15, 2013 and June 15, 2018 at a Purchase Price equal to the Principal Amount thereof, together with accrued and unpaid Contingent Interest, if any, Additional Amounts, if any, and overdue interest, if any, upon delivery of a Repurchase Notice containing the information set forth in the Indenture, at any time during the period from the opening of business on the date that is 20 Business Days prior to such Repurchase Date until the close of business on such Repurchase Date and upon delivery of the Securities to the Paying Agent by the Holder as set forth in the Indenture. Securities in denominations larger than $1,000 of Principal Amount may be repurchased in part, but only in integral multiples of $1,000 of Principal Amount. (b) Subject to the terms and conditions of the Indenture, in the event any Fundamental Change shall occur, each Holder of Securities shall have the right, at the Holder's option, to require the Company to repurchase any or all of such Holder's Securities (or portions thereof that are integral multiples of $1,000 of Principal Amount), on a date selected by the Company (the "Fundamental Change Repurchase Date"), which date is no later than 35 Trading Days and no earlier than 20 Trading Days after the date notice of the Fundamental Change is mailed in accordance with the Indenture and in no event prior to the date on which the Fundamental Change occurs, at a price, payable in cash equal to the Principal Amount plus accrued and unpaid Contingent Interest, if any, Additional Amounts, if any, and overdue interest, if any to, but excluding, the Fundamental Change Repurchase Date. A-7 Within 30 days after the occurrence of a Fundamental Change, the Company shall mail, or cause to be mailed, notice of the occurrence of such Fundamental Change to each Holder. Such notice shall include, among other things, a description of the procedures which a Holder must follow to exercise its Fundamental Change Repurchase Right. For a Security to be so repurchased at the option of the Holder, the Paying Agent must receive such Security with the form entitled "Option to Elect Repurchase Upon a Fundamental Change" on the reverse thereof duly completed, together with such Security duly endorsed for transfer, no later than the close of business on the Business Day immediately preceding the Fundamental Chance Repurchase Date. All questions as to the validity, eligibility (including time of receipt) and acceptance of any Security for repurchase shall be determined by the Company, whose determination shall be final and binding. (c) If cash sufficient to pay a Purchase Price or Fundamental Change Purchase Price, as the case may be, of all Securities or portions thereof to be repurchased as of the Repurchase Date or the Fundamental Change Repurchase Date, as the case may be, is deposited with the Paying Agent by 10:00 a.m., New York City time, on the Business Day following the Repurchase Date or the Fundamental Change Repurchase Date, as the case may be, Contingent Interest, if any, Additional Amounts, if any, and overdue interest, if any, cease to accrue on such Securities (or portions thereof) on and after such date, and the Holder thereof shall have no other rights as such (other than the right to receive the Purchase Price or Fundamental Change Purchase Price, as the case may be, upon surrender of such Security). 7. NOTICE OF REDEMPTION AT THE OPTION OF THE COMPANY Notice of redemption at the option of the Company will be mailed at least 15 days but not more than 60 days before the Redemption Date to each Holder of Securities to be redeemed at the Holder's registered address. If money sufficient to pay the Redemption Price of all Securities (or portions thereof) to be redeemed on the Redemption Date is deposited with the Paying Agent by 10:00 a.m., New York City time, on the Redemption Date, on and after such date Contingent Interest, if any, Additional Amounts, if any, and overdue interest, if any, cease to accrue on such Securities or portions thereof. Securities in denominations larger than $1,000 of Principal Amount may be redeemed in part but only in multiples of $1,000 of Principal Amount. 8. RANKING The Securities and the Guarantee rank equally in contractual right of payment with all of the other existing and future unsubordinated indebtedness of the Company and the Guarantor, respectively. 9. EXCHANGE Subject to the next two succeeding sentences, a Holder of a Security may exchange this Security for cash and, if applicable, Common Shares prior to the close of business on the Business Day immediately preceding June 15, 2023 (unless earlier redeemed or repurchased), but only upon the occurrence of one of the four events set forth in Section 11.01 of the Indenture. If this Security is called for redemption, the Holder may exchange it at any time before the close of the last Trading Day prior to the Redemption Date. A Security in respect of which a Holder A-8 has delivered a notice of exercise of the option to require the Company to repurchase such Security or to repurchase such Security in the event of a Fundamental Change may be exchanged only if the notice of exercise is withdrawn in accordance with the terms of the Indenture. In the event a Fundamental Change occurs prior to June 15, 2008, and a Holder surrenders the Securities for exchange pursuant to Section 11.01 of the Indenture during the period beginning on (and including) the date on which the Company issued the Fundamental Change Repurchase Notice pursuant to Section 3.01(b) of the Indenture and ending on (and including) the Fundamental Change Repurchase Date in connection with such Fundamental Change, to the extent required pursuant to Article 11 of the Indenture, the Holder will receive, in addition to the payment of the Exchange Value of the Securities as provided in Section 11.05(a) of the Indenture, a Make-Whole Premium, if any, as described in the Indenture. The Make-Whole Premium payable to a Holder may be paid, at the Company's option, in (i) cash, (ii) Common Shares, or (iii) the same form of consideration which the Common Shares are exchanged for, converted into, acquired for or constitutes solely the right to receive, as a result of the transaction or transactions constituting the Fundamental Change, assuming that the holder of such Common Shares would not have exercised any rights of election that such would have as a holder of Common Shares to select a particular form of consideration (the "ALTERNATIVE CONSIDERATION"), or in any combination of cash, Common Shares or Alternative Consideration. If the Company elects to pay the Make-Whole Premium in whole or in part in Common Shares or Alternative Consideration, such Common Shares and Alternative Consideration shall be valued as provided in the Indenture. The make-whole premium (the "MAKE-WHOLE PREMIUM") will be equal to an amount that is derived by multiplying each $1,000 Principal Amount of Securities by a specified percentage. Such percentage will be determined by reference to the table in Section 11.05 of the Indenture and subject to the terms and conditions set forth in the Indenture. The initial Exchange Rate is 14.2653 Common Shares per $1,000 Principal Amount, subject to adjustment in certain events described in the Indenture. The Company will deliver cash or a check in lieu of any fractional Common Share if Common Shares are issued upon such exchange. To exchange this Security a Holder must (1) complete and manually sign the exchange notice on the back of this Security (or complete and manually sign a facsimile of such notice) and deliver such notice to the Exchange Agent, (2) complete and manually sign the exchange notice to the Company on the back of this Security (or complete and manually sign a facsimile of such notice) and deliver such notice to the Company, (3) surrender this Security to the Exchange Agent, (4) furnish appropriate endorsements and transfer documents if required by the Exchange Agent, the Company or the Trustee, (5) pay any transfer or similar tax, if required, and (6) if required by Section 12.01 of the Indenture, pay funds equal to the Contingent Interest payable on the next Contingent Interest Payment Date. A Holder may exchange a portion of this Security if the Principal Amount of such portion is $1,000 or an integral multiple of $1,000. No payment or adjustment will be made for dividends on the Common Shares except as provided in the Indenture. Except as provided in Section 12.01 of the Indenture, on exchange of this Security, that portion of accrued but unpaid A-9 Contingent Interest, if any, and Additional Amounts, if any, to the Exchange Date with respect to the exchanged portion of this Security shall be deemed canceled, extinguished and forfeited through the delivery of the Principal Return and, if applicable, cash in the Net Share Amount or Net Shares (together with any cash payment, if any, in lieu of fractional shares) in exchange for the portion of this Security being exchanged pursuant to the terms hereof. 10. CONTINGENT INTEREST (a) The Company will pay Contingent Interest ("CONTINGENT INTEREST") to the Holders of the Securities in respect of any six-month interest period from June 15 to December 14 or December 15 to June 14 commencing on or after June 15, 2008 for which the average Trading Price of a Security for the applicable five Trading Day reference period equals or exceeds 120% of $1,000 per $1,000 Principal Amount of Securities as of the day immediately preceding the first day of the applicable six-month interest period. The "five Trading Day reference period" means the five Trading Days ending on the second Trading Day immediately preceding the relevant six-month interest period. For any six-month interest period in respect of which Contingent Interest is payable, the Contingent Interest payable on each Security shall equal 0.185% of the Principal Amount of the Security. Any Contingent Interest will be payable on the June 15 or December 15 (each a "CONTINGENT INTEREST PAYMENT DATE") immediately following the relevant six-month interest period to the Persons in whose names the Securities are registered at the close of business on the June 1 or December 1 (each a "CONTINGENT INTEREST RECORD DATE") immediately preceding the applicable Contingent Interest Payment Date, except that Contingent Interest payable upon redemption or repurchase will be paid to the Person to whom the Principal Amount is payable unless the Redemption Date or Repurchase Date or Fundamental Change Repurchase Date, as the case may be, is a Contingent Interest Payment Date. Contingent Interest will be computed on the basis of a 360-day year composed of twelve 30-day months. Upon determination that Holders will be entitled to receive Contingent Interest which may become payable, the Company shall notify the Holders. In connection with providing such notice, the Company will issue a press release and publish a notice containing information regarding the Contingent Interest determination in a newspaper of general circulation in The City of New York or publish such information on the Company's then existing Web site or through such other public medium as the Company shall determine. (b) Except as otherwise specified with respect to the Securities, any Contingent Interest on any Security that is payable, but is not punctually paid or duly provided for, on any Contingent Interest Payment Date (herein called "DEFAULTED CONTINGENT INTEREST") shall forthwith cease to be payable to the Holder thereof on the relevant Contingent Interest Record Date by virtue of having been such Holder, and such Defaulted Contingent Interest may be paid by the Company as provided for in Section 12.02 of the Indenture. (c) Contingent Interest shall cease to accrue on the Securities after declaration of acceleration of the Securities as provided in Section 6.02 of the Indenture. A-10 11. EXCHANGE ARRANGEMENT ON CALL FOR REDEMPTION Any Securities called for redemption, unless surrendered for exchange before the close of business on the last Trading Day prior to the Redemption Date, may be deemed to be purchased from the Holders of such Securities at an amount not less than the Redemption Price, by one or more investment bankers or other purchasers who may agree with the Company or the Guarantor to purchase such Securities from the Holders, to exchange them pursuant to the terms hereof and to make payment for such Securities to the Trustee in trust for such Holders. 12. DENOMINATIONS; TRANSFER; EXCHANGE The Securities are in registered form, without coupons, in denominations of $1,000 of Principal Amount and integral multiples of $1,000. A Holder may transfer or exchange Securities in accordance with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. The Registrar need not transfer or exchange any Securities selected for redemption (except, in the case of a Security to be redeemed in part, the portion of the Security not to be redeemed) or any Securities in respect of which a Repurchase Notice or Fundamental Change Repurchase Notice has been given and not withdrawn (except, in the case of a Security to be purchased in part, the portion of the Security not to be purchased) or any Securities for a period of 15 days before the mailing of notice of Securities to be redeemed. 13. PERSONS DEEMED OWNERS The registered holder of this Security may be treated as the owner of this Security for all purposes. 14. UNCLAIMED MONEY OR SECURITIES The Trustee and the Paying Agent shall return to the Company upon written request any money or securities held by them for the payment of any amount with respect to the Securities that remains unclaimed for six months, provided, however, that the Trustee or such Paying Agent, before being required to make any such return, shall in the event that the Securities are no longer held in global form, at the expense of the Company cause to be published once in a newspaper of general circulation in The City of New York or mail to each such Holder notice that such money or securities remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such publication or mailing, any unclaimed money or securities then remaining will be returned to the Company. After return to the Company, Holders entitled to the money or securities must look to the Company for payment as general creditors unless an applicable abandoned property law designates another Person. 15. AMENDMENT; WAIVER Subject to certain exceptions set forth in the Indenture, (i) the Indenture or the Securities may be amended with the written consent of the Holders of at least a majority in aggregate Principal Amount of the Securities at the time outstanding and (ii) certain Defaults and Events of A-11 Defaults may be waived with the consent of the Holders of a majority in aggregate Principal Amount of the Securities at the time outstanding. Subject to certain exceptions set forth in the Indenture, without the consent of any Holder, the Company, the Guarantor and the Trustee may amend the Indenture or the Securities to cure any ambiguity, defect or inconsistency, or to provide for the assumption of the Company's or the Guarantor's obligations to the Holders of the Securities in case of a merger or consolidation or sale of all or substantially all of the Company's or the Guarantor's assets; to provide for uncertificated Securities in addition to or in place of certificated Securities; or to make any change that does not adversely affect the rights of any Holder or to comply with any requirement of the SEC in connection with the qualification of the Indenture under the TIA. 16. DEFAULTS AND REMEDIES Under the Indenture, Events of Default include (i) the Company defaults in the payment of the Principal Amount, Redemption Price, Purchase Price or a Fundamental Change Purchase Price on any Security when the same becomes due and payable at its Stated Maturity, upon redemption, upon declaration, when due for repurchase by the Company or otherwise, and such default continues for ten days; (ii) the Company defaults in the payment of Contingent Interest, if any, or Additional Amounts, if any, and such default continues for 30 days; (iii) failure of the Company or the Guarantor to perform or comply with the provisions of Section 11.02 of the Indenture, and such failure continues for a period of 20 days; (iv) the Company or the Guarantor fails to comply with any of its agreements or covenants in this Security or the Indenture (other than those referred to in clauses (i) through (iii) above) and such failure continues for 90 days after receipt by the Company of a Notice of Default; (v) certain events of bankruptcy or insolvency as set forth in the Indenture; and (vi) the failure to keep the Guarantee in place. If an Event of Default occurs and is continuing, the Trustee, or the Holders of at least 25% in aggregate Principal Amount of the Securities at the time outstanding, may declare all the Securities to be due and payable immediately. Certain events of bankruptcy or insolvency are Events of Default which will result in the Securities being declared due and payable immediately upon the occurrence of such Events of Default. Holders may not enforce the Indenture or the Securities except as provided in the Indenture. The Trustee may refuse to enforce the Indenture or the Securities unless it receives reasonable indemnity or security. Subject to certain limitations, Holders of a majority in aggregate Principal Amount of the Securities at the time outstanding may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders notice of any continuing Default (except a Default in payment of amounts specified in clause (i) and (ii) above) if it determines that withholding notice is in their interests. 17. TRUSTEE DEALINGS WITH THE COMPANY The Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Securities and may otherwise deal with and collect obligations owed to it by the Company, the Guarantor or their Affiliates and may otherwise deal with the Company, the Guarantor or their Affiliates with the same rights it would have if it were not Trustee. 18. NO RECOURSE AGAINST OTHERS A-12 A director, officer, employee or stockholder, as such, of the Company or the Guarantor shall not have any liability for any obligations of the Company or the Guarantor under the Securities, the Guarantee or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Security, each Holder waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Securities. 19. AUTHENTICATION This Security shall not be valid until an authorized signatory of the Trustee manually signs the Trustee's Certificate of Authentication on the other side of this Security. 20. ABBREVIATIONS Customary abbreviations may be used in the name of a Holder or an assignee, such as TEN COM (=tenants in common), TENANT (=tenants by the entireties), JT TEN (=joint tenants with right of survivorship and not as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors Act). 21. REGISTRATION RIGHTS The Holders of Restricted Securities are entitled to the benefits set forth in ANNEX I to the Indenture relative to registration of the Securities. 22. GOVERNING LAW THE LAWS OF THE STATE OF NEW YORK SHALL GOVERN THE INDENTURE AND THIS SECURITY. 23. INDENTURE TO CONTROL In case of any conflict between the provisions of this Security and the Indenture, the provisions of the Indenture shall control. The Company will furnish to any Holder upon written request and without charge a copy of the Indenture. Requests may be made to: Nabors Industries, Inc. 515 West Greens Road, Suite 1200 Houston, Texas 77067 Attention: Legal Department A-13 [FORM OF NOTATION ON SECURITY RELATING TO GUARANTEE] Guarantor (which term includes any successor Person in such capacity under the Indenture), has fully, unconditionally and absolutely guaranteed, to the extent set forth in the Indenture and subject to the provisions in the Indenture, the due and punctual payment of the Principal Amount, Contingent Interest, if any, and Additional Amounts, if any, on these Securities and all other amounts due and payable under the Indenture and these Securities by the Company. The obligations of the Guarantor to the Holders of Securities and to the Trustee pursuant to the Guarantee and the Indenture are expressly set forth in Article 10 of the Indenture and reference is hereby made to the Indenture for the precise terms of the Guarantee. Guarantor: NABORS INDUSTRIES LTD. By: ------------------------------------ Name: Title: A-14 [FORM OF EXCHANGE NOTICE] EXCHANGE NOTICE TO THE EXCHANGE AGENT To: Nabors Industries, Inc. Nabors Industries Ltd. c/o Exchange Agent The undersigned registered holder of this Security hereby irrevocably exercises the option to exchange this Security, or portion hereof (which is $1,000 Principal Amount (as defined in the Indenture to which this Security is subject) or an integral multiple thereof) below designated, in accordance with the terms of the Indenture referred to in this Security, and directs that the consideration issuable and deliverable upon such exchange, together with any check in payment for fractional shares, if any, and any Securities representing any unexchanged Principal Amount hereof, be issued and delivered to the registered holder hereof unless a different name has been indicated below. If shares or any portion of this Security not exchanged are to be issued in the name of a Person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto. Dated: ---------------------------------------- ---------------------------------------- Signature(s) Fill in for payment of cash or other property, registration of shares if to be delivered, and Securities if to be issued other than to and in the name of the registered holder: - --------------------------------------- (Name) - --------------------------------------- (Street Address) - --------------------------------------- (City, State and Zip Code) Please print name and address Principal Amount to be exchanged (if less than all): $_________,000 Social Security or Other Taxpayer Identification Number: ____________ A-15 [FORM OF EXCHANGE NOTICE] CONFIRMING EXCHANGE NOTICE TO BE SENT TO THE COMPANY To: Nabors Industries, Inc. Nabors Industries Ltd. The undersigned registered holder of this Security hereby irrevocably exercises the option to exchange this Security, or portion hereof (which is $1,000 Principal Amount (as defined in the Indenture to which this Security is subject) or an integral multiple thereof) below designated in accordance with the terms of the Indenture referred to in this Security, and directs that the consideration issuable and deliverable upon such exchange, together with any check in payment for fractional shares, if any, and any Securities representing any unexchanged Principal Amount hereof, be issued and delivered to the registered holder hereof unless a different name has been indicated below. If shares or any portion of this Security not exchanged are to be issued in the name of a Person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto. Dated: ---------------------------------------- ---------------------------------------- Signature(s) Fill in for payment of cash or other property, registration of shares if to be delivered, and Securities if to be issued other than to and in the name of the registered holder: - ---------------------------------------- (Name) - ---------------------------------------- (Street Address) - ---------------------------------------- (City, State and Zip Code) Please print name and address Principal Amount to be exchanged (if less than all): $_________,000 Social Security or Other Taxpayer Identification Number: ____________ A-16 [FORM OF OPTION TO ELECT REPURCHASE UPON A FUNDAMENTAL CHANGE] To: Nabors Industries, Inc. The undersigned registered holder of this Security hereby acknowledges receipt of a notice from Nabors Industries, Inc. (the "COMPANY") as to the occurrence of a Fundamental Change with respect to the Company and requests and instructs the Company to repurchase this Security, or the portion hereof (which is $1,000 Principal Amount (as defined in the Indenture to which this Security is subject) or an integral multiple thereof) below designated, in accordance with the terms of the Indenture referred to in this Security. Dated --------------------------------- Signature(s) Principal Amount to be exchanged (if less than all): $_________,000 Social Security or Other Taxpayer Identification Number: ____________ A-17 TRANSFER NOTICE This Transfer Notice relates to $__________ Principal Amount (as defined in the Indenture to which the referenced Securities are subject) of the Series B Zero Coupon Senior Exchangeable Notes Due 2023 of Nabors Industries, Inc., a Delaware corporation, held by ____________ (the "TRANSFEROR"). (I) or (we) assign and transfer this Security to - -------------------------------------------------------------------------------- (Print or type assignee's name, address and zip code) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (Insert assignee's social security or tax I.D. no.) and irrevocably appoint _______________________________ agent to transfer this Security on the books of the Company. The agent may substitute another to act for him. Your Signature: ----------------------------------------------------------------- (Sign exactly as your name appears on the other side of this Security) Date: --------------------------------------------------------------------- Signature Guarantee:(3) --------------------------------------------------- In connection with any transfer of any of the Securities evidenced by this certificate occurring prior to the date that is two years after the later of the date of original issuance of such Securities and the last date, if any, on which such Securities were owned by the Company or any Affiliate of the Company, the undersigned confirms that such Securities are being transferred: CHECK ONE BOX BELOW - -------- 3 Signature must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Registrar which requirements include membership or participation in the Security Transfer Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Registrar in addition to or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. A-18 (1) [ ] to Nabors Industries Ltd., Nabors Industries, Inc. or any subsidiary thereof; or (2) [ ] pursuant to and in compliance with Rule 144A under the Securities Act of 1933; or (3) [ ] pursuant to and in compliance with Regulation S under the Securities Act of 1933; or (4) [ ] pursuant to another available exemption from the registration requirements of the Securities Act of 1933 provided by Rule 144 thereunder; or (5) [ ] pursuant to an effective registration statement under the Securities Act of 1933. Unless one of the boxes is checked, the Trustee will refuse to register any of the Securities evidenced by this certificate in the name of any person other than the registered holder thereof; provided, however, that if box (3) or (4) is checked, the Trustee may require, prior to registering any such transfer of the Securities such legal opinions, certifications and other information as it has reasonably requested to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act of 1933. ---------------------------------------- Signature ---------------------------------------- Date ---------------------------------------- Signature Guarantee(4) - -------- 4 Signature must be guaranteed by a commercial bank, trust company or member firm of the New York Stock Exchange. A-19 TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED. The undersigned represents and warrants that it is purchasing this Security for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a "qualified institutional buyer" within the meaning of Rule 144A under the Securities Act of 1933, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Company as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon the undersigned's foregoing representations in order to claim the exemption from registration provided by Rule 144A. Dated: --------------------------------------------- [Signature of executive officer of purchaser] Name: ------------------------------------- Title: ------------------------------------- A-20 [FORM OF SCHEDULE FOR ENDORSEMENTS ON GLOBAL SECURITY TO REFLECT CHANGES IN PRINCIPAL AMOUNT] SCHEDULE A Changes to Principal Amount of Global Security
PRINCIPAL AMOUNT OF SECURITIES BY WHICH THIS GLOBAL SECURITY IS TO BE REDUCED OR INCREASED, AND REASON FOR REDUCTION OR REMAINING PRINCIPAL AMOUNT DATE INCREASES OF THIS GLOBAL SECURITY NOTATION MADE BY - ----------------------------------------------------------------------------------------------------------
A-21 ANNEX I REGISTRATION RIGHTS OF HOLDERS 1. Definitions Capitalized terms used and not defined in this ANNEX I shall have the meanings ascribed to such terms in the Indenture. In addition, for the purposes of this ANNEX I only, the following terms shall have the following meanings: Amendment Effectiveness Deadline Date: See Section 2(d)(i). Amount of Registrable Securities: (a) With respect to Securities constituting Registrable Securities, the aggregate principal amount of all such Securities outstanding, (b) with respect to Underlying Shares constituting Registrable Securities, the aggregate number of such Underlying Shares that may be issuable from time to time pursuant to the terms of the Indenture and (c) with respect to combinations thereof, the sum of (a) and (b) for the relevant Registrable Securities. Board: The Board of Directors of the Guarantor. Business Day: Any day that is not a Saturday, Sunday or a day on which banking institutions in New York, Texas or Bermuda are authorized or required by law to be closed. Deferral Period: See Section 2(d). Depositary: The Depository Trust Company until a successor is appointed by the Company. Effectiveness Date: The 180th day after the Issue Date. Effectiveness Period: The period commencing on the date that the Initial Shelf Registration Statement is declared effective under the Securities Act and ending on the date that all Securities, related Guarantees and Underlying Shares have ceased to be Registrable Securities. Exchange Act: The Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC promulgated thereunder and any successor act, rules and regulations. Filing Date: The 90th day after the Issue Date. Holder: Any holder or owner of a beneficial interest in Registrable Securities. Indemnified Holder: See Section 6 hereof. Indemnified Person: See Section 6 hereof. Indemnifying Person: See Section 6 hereof. I-1 Initial Shelf Registration: See Section 2(a) hereof. NASD: The National Association of Securities Dealers, Inc. Notice and Questionnaire: A written notice delivered to the Company requesting the information necessary for the Company and the Guarantor to prepare a Registration Statement, as such notice may be amended by the Company to the extent necessary to ensure compliance with applicable law. Notice Holder: On any date, any Holder that has delivered a Notice and Questionnaire to the Company on or prior to such date. Prospectus: The prospectus included in any Registration Statement (including, without limitation, any prospectus subject to completion and a prospectus that includes any information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated under the Securities Act), as amended or supplemented by any prospectus supplement, and all other amendments and supplements to the Prospectus, including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such Prospectus. Registrable Securities: All Securities and all Underlying Shares upon original issuance thereof and at all times subsequent thereto until the earliest to occur of (i) a Registration Statement or Registration Statements covering such Securities and Underlying Shares having been declared effective by the SEC and remaining effective until such Securities and Underlying Shares having been disposed of or issued and sold, as the case may be, in accordance with such effective Registration Statement, (ii) such Securities and Underlying Shares having been sold in compliance with Rule 144 or (except with respect to affiliates of the Company within the meaning of the Securities Act) are eligible for sale in compliance with Rule 144(k), or (iii) such Securities and any Underlying Shares ceasing to be outstanding. Registration Statement: Any registration statement of the Company or the Guarantor that covers the Registrable Securities filed with the SEC pursuant to the provisions of this ANNEX I, including the Prospectus, amendments and supplements to such registration statement, including post-effective amendments, all exhibits and all material incorporated by reference or deemed to be incorporated by reference in such registration statement. Rule 144: Rule 144 promulgated under the Securities Act, as such Rule may be amended from time to time, or any similar rule (other than Rule 144A) or regulation hereafter adopted by the SEC providing for offers and sales of securities made in compliance therewith resulting in offers and sales by subsequent holders that are not affiliates of an issuer of such securities being free of the registration and prospectus delivery requirements of the Securities Act. Rule 144A: Rule 144A promulgated under the Securities Act, as such Rule may be amended from time to time, or any similar rule (other than Rule 144) or regulation hereafter adopted by the SEC. Rule 415: Rule 415 promulgated under the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the SEC. I-2 SEC: The Securities and Exchange Commission. Securities Act: The Securities Act of 1933, as amended, and the rules and regulations of the SEC promulgated thereunder and any successor act, rules and regulations. Shelf Registration: See Section 2(b) hereof. Shelf Registration Statement: See Section 2(b) hereof. Subsequent Shelf Registration: See Section 2(b) hereof. TIA: The Trust Indenture Act of 1939, as amended, and the rules and regulations of the SEC promulgated thereunder and any successor act, rules and regulations. Trustee: Has the meaning given such term in the Recitals. Underlying Shares: Means common shares of the Guarantor, par value $0.001 per share. 2. Shelf Registration (a) Shelf Registration. To the extent not prohibited by any applicable law or applicable interpretation of the staff of the SEC, the Company and the Guarantor shall use their respective reasonable best efforts to file with the SEC a Registration Statement or Registration Statements for an offering to be made on a continuous basis pursuant to Rule 415 (or, in the event Rule 415 shall not be available for any of the Registrable Securities for an offering to be made as permitted under the terms of the Securities and this Agreement, including the offering of the Underlying Shares upon the exchange of the Securities) for an offering covering all of the Registrable Securities (the "INITIAL SHELF REGISTRATION") on or prior to the Filing Date. The Initial Shelf Registration shall be on Form S-3 or another appropriate form permitting registration of such Registrable Securities for (i) in the case of the Securities constituting Registrable Securities, resale by Holders, and (ii) in the case of Underlying Shares constituting Registrable Securities, (x) the issuance and sale by the Guarantor, or (y) the resale by Holders, as the case may be, in each case in the manner or manners set forth in such Registration Statement and in Rule 415 (if such rule is available for the Initial Shelf Registration). The Company and the Guarantor shall use their respective reasonable best efforts to cause the Initial Shelf Registration to be declared effective under the Securities Act on or prior to the Effectiveness Date and to keep such Initial Shelf Registration continuously effective under the Securities Act until the expiration of the Effectiveness Period. To the extent permitted by applicable law and the interpretations of the staff of the SEC, the Initial Registration Statement may be terminated with respect to either the Securities or the Underlying Securities, as the case may be, on the date the Effectiveness Period expires. At the time the Initial Shelf Registration is declared effective, each Holder that became a Notice Holder on or prior to the date five (5) Business Days prior to such time of effectiveness shall be named as a selling securityholder in the Initial Shelf Registration Statement and the related Prospectus in such a manner as to permit such Holder to deliver such Prospectus to purchasers of Registrable Securities in accordance with applicable law. I-3 (b) Subsequent Shelf Registrations. If the Initial Shelf Registration or any Subsequent Shelf Registration ceases to be effective for any reason at any time during the Effectiveness Period (other than because of the sale of all of the securities registered thereunder), the Company and the Guarantor shall use their respective reasonable best efforts to obtain the prompt withdrawal of any order suspending the effectiveness thereof, and in any event shall within 15 days of such cessation of effectiveness amend the Initial Shelf Registration in a manner to obtain the withdrawal of the order suspending the effectiveness thereof, or file an additional "shelf" Registration Statement pursuant to Rule 415 covering all of the Registrable Securities (or, in the event Rule 415 shall not be available for any of the Registrable Securities, covering an offering to be made as permitted under the terms of the Securities and this Agreement, including the offering of the Underlying Shares upon exchange, repurchase or redemption of the Securities) (each, a "SUBSEQUENT SHELF REGISTRATION"). If a Subsequent Shelf Registration is filed, the Company and the Guarantor shall use their respective reasonable best efforts to cause the Subsequent Shelf Registration to be declared effective under the Securities Act as soon as practicable after such filing and to keep such Registration Statement continuously effective until the termination of the Effectiveness Period. As used herein the term "SHELF REGISTRATION" means the Initial Shelf Registration and any Subsequent Shelf Registration and the term "SHELF REGISTRATION STATEMENT" means any Registration Statement or Registration Statements filed in connection with a Shelf Registration. (c) Supplements and Amendments. The Company and the Guarantor shall promptly use their respective reasonable best efforts to supplement and amend the Shelf Registration if required by the rules, regulations or instructions applicable to the registration form used for such Shelf Registration, if required by the Securities Act, or if reasonably requested by the Holders of the majority in Amount of Registrable Securities covered by such Registration Statement. (d) Notice Holders. Each Holder agrees that if such Holder wishes to sell Registrable Securities pursuant to a Shelf Registration Statement and related Prospectus, it will do so only in accordance with this Section 2(d) and Section 4. Following the date that the Initial Shelf Registration Statement is declared effective, each Holder wishing to sell Registrable Securities pursuant to a Shelf Registration Statement and related Prospectus agrees to deliver a Notice and Questionnaire to the Company at least three (3) Business Days prior to any intended distribution of Registrable Securities under the Shelf Registration Statement. The Guarantor shall promptly provide a Notice and Questionnaire to any Holder requesting the same; provided that neither the Guarantor nor the Company shall be under any obligation to circulate Notice and Questionnaires generally to Holders. Each Holder who elects to sell Registrable Securities pursuant to a Shelf Registration Statement agrees by submitting a Notice and Questionnaire to the person specified therein, it will be bound by the terms and conditions of the Notice and Questionnaire and the terms of the Indenture set forth in this ANNEX I. From and after the date the Initial Shelf Registration Statement is declared effective, the Company shall, as promptly as practicable after the date a Notice and Questionnaire is delivered to the address specified in the Notice and Questionnaire, and in any event upon the later of (x) ten (10) Business Days after such date or (y) ten (10) Business Days after the expiration of any period in which the Guarantor and the Company shall have suspended the effectiveness of the Shelf Registration Statement pursuant to Section 3(b) hereof (each, a "DEFERRAL PERIOD") in effect when the Notice and Questionnaire is delivered or put into effect within ten (10) Business Days of such delivery date: I-4 (i) if required by applicable law, file with the SEC a post-effective amendment to the Shelf Registration Statement or prepare and, if required by applicable law, file a supplement to the related Prospectus or a supplement or amendment to any document incorporated therein by reference or file any other required document so that the Holder delivering such Notice and Questionnaire is named as a selling securityholder in the Shelf Registration Statement and the related Prospectus in such a manner as to permit such Holder to deliver such Prospectus to purchasers of the Registrable Securities in accordance with applicable law and, if the Company and the Guarantor shall file a post-effective amendment to the Shelf Registration Statement, use its best efforts to cause such post-effective amendment to be declared effective under the Securities Act as promptly as is practicable, but in any event by the date (the "AMENDMENT EFFECTIVENESS DEADLINE DATE") that is forty-five (45) days after the date such post-effective amendment is required by this clause to be filed; (ii) provide such Holder copies of any documents filed pursuant to Section 2(d)(i); and (iii) notify such Holder as promptly as practicable after the effectiveness under the Securities Act of any post-effective amendment filed pursuant to Section 2(d)(i); provided, that if such Notice and Questionnaire is delivered during a Deferral Period, the Company shall so inform the Holder delivering such Notice and Questionnaire and shall take the actions set forth in clauses (i), (ii) and (iii) above upon expiration of the Deferral Period in accordance with Section 3(b). Notwithstanding anything contained herein to the contrary, (i) neither the Company nor the Guarantor shall be under any obligation to name any Holder that is not a Notice Holder as a selling securityholder in any Registration Statement or related Prospectus and (ii) the Amendment Effectiveness Deadline Date shall be extended by up to ten (10) Business Days from the expiration of a Deferral Period if such Deferral Period shall be in effect on the Amendment Effectiveness Deadline Date. 3. Registration Procedures In connection with the filing of any Registration Statement or Registration Statements pursuant to Section 2 hereof, the Company and the Guarantor shall effect such registrations to permit the sale of the securities covered thereby in accordance with the intended method or methods of disposition thereof, and pursuant thereto and in connection with any Registration Statement filed by the Company or the Guarantor hereunder the Company and the Guarantor shall: (a) Prepare and file with the SEC on or prior to the Filing Date, a Registration Statement or Registration Statements as prescribed by Section 2 hereof, and use their reasonable best efforts to cause each such Registration Statement(s) to become effective and remain effective as provided herein. Neither the Company nor the Guarantor shall file any Registration Statement or Prospectus or any amendments or supplements thereto if the Notice Holders of a majority in Amount of Registrable Securities covered by such Registration Statement or, in the case of the Initial Shelf Registration Statement, the Initial Purchaser, shall reasonably object. I-5 (b) Prepare and file with the SEC such amendments and post-effective amendments to each Shelf Registration, as may be necessary to keep such Registration Statement continuously effective for its Effectiveness Period; cause the related Prospectus to be supplemented by any Prospectus supplement required by applicable law, and as so supplemented to be filed pursuant to Rule 424 (or any similar provisions then in force) promulgated under the Securities Act; and comply with the provisions of the Securities Act and the Exchange Act applicable to it with respect to the disposition of all securities covered by such Registration Statement as so amended or in such Prospectus as so supplemented except as provided in Section 3(b). (c) Notify the Notice Holders promptly (but in any event within two Business Days), (i) when a Prospectus or any prospectus supplement or post-effective amendment has been filed, and, with respect to a Registration Statement or any post-effective amendment, when the same has become effective under the Securities Act (including in such notice a written statement that any Notice Holder may, upon request, obtain, at the sole expense of the Company, one conformed copy of such Registration Statement or post-effective amendment including financial statements and schedules, documents incorporated or deemed to be incorporated by reference and exhibits), (ii) of the issuance by the SEC of any stop order suspending the effectiveness of a Registration Statement or of any order preventing or suspending the use of any preliminary Prospectus or the initiation of any proceedings for that purpose, (iii) of the happening of any event, the existence of any condition or any information becoming known that makes any statement made in such Registration Statement or related Prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires the making of any changes in or amendments or supplements to such Registration Statement, Prospectus or documents so that, in the case of the Registration Statement, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and that in the case of the Prospectus, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, (iv) of the Company's determination that a post-effective amendment to a Registration Statement would be appropriate, or (v) that the effectiveness of the Shelf Registration Statement is suspended pursuant to Section 3(b) hereof. (d) Use their reasonable best efforts to prevent the issuance of any order suspending the effectiveness of a Registration Statement or of any order preventing or suspending the use of a Prospectus and, if any such order is issued, to use its reasonable best efforts to obtain the withdrawal of any such order at the earliest possible moment. (e) If requested, furnish to each Notice Holder, at the sole expense of the Company, one conformed copy of the Registration Statement or Registration Statements and each post-effective amendment thereto, including financial statements and schedules, and, if requested, all documents incorporated or deemed to be incorporated therein by reference and all exhibits. (f) Deliver to each Holder, at the sole expense of the Company, as many copies of the Prospectus (including each form of preliminary Prospectus) and each amendment or I-6 supplement thereto and any documents incorporated by reference therein as such Persons may reasonably request; and, subject to the second paragraph of Section 4 hereof, the Company and the Guarantor hereby consent to the use of such Prospectus and each amendment or supplement thereto by the Notice Holders in connection with the offering and sale of the Registrable Securities covered by such Prospectus and any amendment or supplement thereto in the manner set forth therein. (g) Prior to any public offering of Registrable Securities, to use their reasonable best efforts to register or qualify, to the extent required by applicable law, and to cooperate with the Notice Holders in connection with the registration or qualification (or exemption from such registration or qualification) of such Registrable Securities or offer and sale under the securities or Blue Sky laws of such jurisdictions within the United States as any Notice Holder may reasonably request in writing; keep each such registration or qualification (or exemption therefrom) effective during the period such Registration Statement is required to be kept effective and do any and all other acts or things reasonably necessary or advisable to enable the disposition in such jurisdictions of the Registrable Securities covered by the applicable Registration Statement; provided further, however, that neither the Company nor the Guarantor shall be required to (A) qualify generally to do business in any jurisdiction where it is not then so qualified, (B) take any action that would subject it to general service of process in any such jurisdiction where it is not then so subject or (C) subject itself to taxation in excess of a nominal dollar amount in any such jurisdiction where it is not then so subject. (h) Cooperate with each Notice Holder to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be sold, which certificates shall not bear any restrictive legends (unless required by applicable law) and shall be in a form eligible for deposit with the Depositary; and enable such Registrable Securities to be in such denominations and registered in such names as such Notice Holder may reasonably request. (i) Use their reasonable best efforts to cause the Registrable Securities covered by any Shelf Registration Statement to be registered with or approved by such other governmental agencies or authorities as may be reasonably necessary to enable the Notice Holder or Notice Holders thereof to consummate the disposition of such Registrable Securities, except as may be required solely as a consequence of the nature of such Notice Holder's business, in which case the Company and the Guarantor will cooperate in all reasonable respects with the filing of such Registration Statement and the granting of such approvals. (j) Upon the occurrence of any event contemplated by Section 3(c)(ii), 3(c)(iii) or 3(c)(iv) hereof, as promptly as practicable prepare and (subject to Section 3(a) hereof) use their reasonable best efforts to file with the SEC, at the expense of the Company and the Guarantor, a supplement or post-effective amendment to the Registration Statement or a supplement to the related Prospectus or any document incorporated or deemed to be incorporated therein by reference, or file any other required document so that, as thereafter delivered to the purchasers of the Registrable Securities being sold thereunder, any such Prospectus will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. I-7 (k) Prior to the effective date of the Initial Registration Statement, (i) provide the Trustee with certificates for the Securities in a form eligible for deposit with the Depositary and (ii) provide a CUSIP number for the Securities. (l) Prior to the effective date of the Initial Registration Statement relating to the Underlying Shares, provide a CUSIP number for the Underlying Shares. (m) Comply with all applicable rules and regulations of the SEC and make generally available to its securityholders earning statements (which need not be audited) satisfying the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder (or any similar rule promulgated under the Securities Act) for a 12-month period commencing on the first day of the first fiscal quarter of the Guarantor commencing after the effective date of a Registration Statement, which statements shall be made available no later than 45 days after the end of any 12-month period or 90 days after the end of any 12-month period if such period is a fiscal year of the Guarantor. (n) Cooperate with each Notice Holder of the Registrable Securities covered by any Registration Statement and their counsel in connection with any filings required to be made with the NASD, including, if the Conduct Rules of the NASD or any successor thereto as amended from time to time so require, engaging a "qualified independent underwriter" ("QIU") as contemplated therein and otherwise applying the provisions of this ANNEX I to such QIU as though it were a participating underwriter. (o) Cause the Indenture to be qualified under the TIA not later than the effective date of the first Registration Statement relating to the Securities; and in connection therewith, cooperate with the Trustee and the Notice Holders to effect such changes to the Indenture as may be required for the Indenture to be so qualified in accordance with the terms of the TIA; and execute, and use their reasonable best efforts to cause the Trustee to execute, all documents as may be required to effect such changes and all other forms and documents required to be filed with the SEC to enable the Indenture to be so qualified in a timely manner. (p) Use their reasonable best efforts to take all other steps necessary or advisable to effect the registration of the Registrable Securities covered by a Registration Statement or Registration Statements, as contemplated hereby. 4. Holder's Obligations Each Holder agrees, by acquisition of the Registrable Securities, that no Holder shall be entitled to sell any of such Registrable Securities pursuant to a Registration Statement or to receive a Prospectus relating thereto, unless such Holder has furnished the Company and the Guarantor with a Notice and Questionnaire as required pursuant to Section 2(d) hereof (including the information required to be included in such Notice and Questionnaire) and the information set forth in the next sentence. Each Notice Holder agrees promptly to furnish to the Company all information required to be disclosed in order to make the information previously furnished to the Company and the Guarantor by such Notice Holder not misleading and any other information regarding such Notice Holder and the distribution of such Registrable Securities as the Company and or the Guarantor may from time to time reasonably request. Any sale of any Registrable I-8 Securities by any Holder shall constitute a representation and warranty by such Holder that the information relating to such Holder and its plan of distribution is as set forth in the Prospectus delivered by such Holder in connection with such disposition, that such Prospectus does not as of the time of such sale contain any untrue statement of a material fact relating to or provided by such Holder or its plan of distribution and that such Prospectus does not as of the time of such sale omit to state any material fact relating to or provided by such Holder or its plan of distribution necessary to make the statements in such Prospectus, in the light of the circumstances under which they were made, not misleading. Each Holder agrees by acquisition of its Registrable Securities that, upon actual receipt of any notice from the Company and the Guarantor of the happening of any event of the kind described in Section 3(c)(ii), 3(c)(iii) or 3(c)(iv) hereof, or of a Deferral Period pursuant to Section 2(b) hereof, such Holder will forthwith discontinue disposition of such Registrable Securities covered by such Registration Statement or Prospectus until such Holder's receipt of the copies of the supplemented or amended Prospectus contemplated by Section 3(j) hereof, or until it is advised in writing by the Company and the Guarantor that the use of the applicable Prospectus may be resumed, and has received copies of any amendments or supplements thereto. Notwithstanding anything to the contrary contained herein, neither the Company nor the Guarantor shall have any liability for any incremental expenses incurred as a result of an underwritten offering of any Registrable Securities. 5. Registration Expenses (a) All fees and expenses incident to the performance of or compliance with this ANNEX I by the Company and the Guarantor shall be borne by the Company and the Guarantor. Notwithstanding anything in this ANNEX I to the contrary, each Holder shall pay all underwriting discounts and brokerage commissions with respect to any Registrable Securities sold by it and be solely responsible for any and all fees and disbursements of counsel of such Holder with respect to the Registrable Securities and continue with the obligations of Holders set forth in this ANNEX I. 6. Indemnification The Company and the Guarantor, jointly and severally, agree to indemnify and hold harmless (i) each Notice Holder, (ii) each Person, if any, who controls (within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act) any Notice Holder (any of the Persons referred to in this clause (ii) being hereinafter referred to as a "controlling person"), and (iii) the respective officers, directors, partners, employees, representatives and agents of the Notice Holders (including predecessor Notice Holders) or any controlling person (any person referred to in clause (i), (ii) or (iii) may hereinafter be referred to as an "Indemnified Holder"), from and against any and all losses, claims, damages, liabilities and judgments (including, without limitation, reasonable legal fees and other expenses incurred in connection with any suit, action or proceeding or any claim asserted) caused by any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement or Prospectus, or any amendment or supplement thereto or any related preliminary Prospectus, or caused by any omission or alleged omission to state therein a material fact required to be stated therein or I-9 necessary to make the statements therein not misleading, except insofar as such losses, claims, damages or liabilities are caused by any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with information relating to any Indemnified Holder furnished to the Company or the Guarantor in writing by such Indemnified Holder expressly for use in therein; provided, however, neither the Company nor the Guarantor shall be liable to any Indemnified Holder under the indemnity agreement of this paragraph with respect to any preliminary Prospectus to the extent that any such loss, claim, damage, liability, judgment or expense of such Indemnified Holder results from the fact that such Indemnified Holder sold Registrable Securities under a Registration Statement to a Person as to whom it shall be established that there was not sent or given, at or prior to the written confirmation of such sale, a copy of the Prospectus (or of the preliminary Prospectus as then amended or supplemented if the Company or the Guarantor shall have furnished such Indemnified Holder with such amendment or supplement thereto on a timely basis), in any case where such delivery is required by applicable law and the loss, claim, damage, liability or expense of such Indemnified Holder results from an untrue statement or omission of a material fact contained in the preliminary Prospectus which was corrected in the Prospectus (or in the preliminary Prospectus as then amended or supplemented if the Company or the Guarantor shall have furnished such Indemnified Holder with such amendment or supplement thereto, as the case may be, on a timely basis). The Company and the Guarantor shall notify such Indemnified Holder promptly of the institution, threat or assertion of any claim, proceeding (including any governmental investigation) or litigation in connection with the matters addressed by this Agreement which involves the Company, the Guarantor or such Indemnified Holder. (a) Each Holder agrees, severally and not jointly, to indemnify and hold harmless the Company and the Guarantor, each of their respective directors, officers and each Person who controls the Company or the Guarantor within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act to the same extent as the foregoing indemnity from the Company and the Guarantor to each Holder, but only with reference to such losses, claims, damages or liabilities which are caused by any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with information relating to a Holder furnished to the Company or the Guarantor in writing by such Holder expressly for use in any Registration Statement or Prospectus, or any amendment or supplement thereto or any related preliminary Prospectus. If any suit, action, proceeding (including any governmental or regulatory investigation), claim or demand shall be brought or asserted against any Person in respect of which indemnity may be sought pursuant to either of the two preceding paragraphs, such Person (the "INDEMNIFIED PERSON") shall promptly notify the Person or Persons against whom such indemnity may be sought (each an "INDEMNIFYING PERSON") in writing, and such Indemnifying Person, upon request of the Indemnified Person, shall retain counsel reasonably satisfactory to the Indemnified Person to represent the Indemnified Person and any others entitled to indemnification pursuant to this Section 6 that the Indemnifying Person may designate in such proceeding and shall pay the fees and expenses of such counsel related to such proceeding. In any such proceeding, the Indemnifying Person shall be able to participate in such proceeding and, to the extent that it so elects, jointly with any other similarly situated Indemnifying Person, to assume the defense thereof, subject to the right of the Indemnified Person to be separately I-10 represented and to direct its own defense if the named parties to any such proceeding include both the Indemnified Person and the Indemnifying Person and the Indemnified Person has been advised by counsel that representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. In any such proceeding, any Indemnified Person shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such Indemnified Person unless (i) such Indemnifying Person and the Indemnified Person shall have mutually agreed to the contrary or (ii) the named parties in any such proceeding (including any impleaded parties) include an Indemnifying Person and an Indemnified Person and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. It is understood that an Indemnifying Person shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the fees and expenses of more than one separate firm (in addition to any local counsel) for all Indemnified Persons, and that all such fees and expenses shall be reimbursed as they are incurred. Any such separate firm for the Indemnified Holders shall be designated in writing by the Holders of the majority in Amount of Registrable Securities, and any such separate firm for the Company, its directors, respective officers and such control Persons of the Company shall be designated in writing by the Company, and any such separate firm for the Guarantor, its directors, respective officers and such control Persons of the Guarantor shall be designated in writing by the Guarantor. The Indemnifying Person shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there be a final judgment for the plaintiff, such Indemnifying Person agrees to indemnify any Indemnified Person from and against any loss or liability by reason of such settlement or judgment. No Indemnifying Person shall, without the prior written consent of the Indemnified Person, effect any settlement of any pending or threatened proceeding in respect of which any Indemnified Person is or could have been a party and indemnity could have been sought hereunder by such Indemnified Person, unless such settlement includes an unconditional release of such Indemnified Person from all liability on claims that are the subject matter of such proceeding. If the indemnification provided for in the first and second paragraphs of this Section 6 is unavailable to an Indemnified Person or insufficient in respect of any losses, claims, damages or liabilities referred to therein, then each Indemnifying Person under such paragraph, in lieu of indemnifying such Indemnified Person thereunder, shall contribute to the amount paid or payable by such Indemnified Person as a result of such losses, claims, damages or liabilities (i) in such proportion as is appropriate to reflect the relative benefits received by the Indemnifying Person on the one hand and the Indemnified Person on the other hand pursuant to the Purchase Agreement or from the offering of the Registrable Securities pursuant to any Shelf Registration or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Indemnifying Person on the one hand and the Indemnified Person on the other in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The relative benefits received by the Company and the Guarantor shall be deemed to be equal to the total net proceeds from the initial offering and sale of the Registrable Securities to which such losses, claims, damages or liabilities relate. The relative benefits received by any Holder shall be deemed to be equal to the value of receiving registration rights under this Annex for the Registrable Securities. The relative fault of the parties shall be determined by reference to, I-11 among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or the Guarantor or such Indemnified Holder and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. Each of the Company, the Guarantor and Notice Holders agree that it would not be just and equitable if contribution pursuant to this Section 6 were determined by pro rata allocation or by any other method of allocation that does not take account of the equitable considerations referred to in the immediately preceding paragraph. The amount paid or payable by an Indemnified Person as a result of the losses, claims, damages and liabilities referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses incurred by such Indemnified Person in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 6, in no event shall any Holder be required to contribute any amount in excess of the amount by which the net proceeds received by such Holder from the sale of the Registrable Securities pursuant to a Shelf Registration Statement exceeds the amount of damages which such Holder would have otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. The remedies provided for in this Section 6 are not exclusive and shall not limit any rights or remedies that may otherwise be available to any indemnified party at law or in equity. The indemnity and contribution agreements contained in this Section 6 shall remain operative and in full force and effect regardless of (i) any termination of this ANNEX I or the discharge of the Indenture, (ii) any investigation made by or on behalf of any Holder or any Person controlling any Holder or by or on behalf of the Company or the Guarantor, their respective officers or directors or any other Person controlling any of the Company or the Guarantor and (iii) acceptance of and payment for any of the Registrable Securities. 7. Rules 144 and 144A The Company and the Guarantor covenant that they will file the reports required to be filed by them under the Securities Act and the Exchange Act, if any, in a timely manner in accordance with the requirements of the Securities Act and the Exchange Act and, for so long as any Registrable Securities remain outstanding, if at any time neither the Company nor the Guarantor are not required to file such reports, they will, upon the request of any Holder, make available such information necessary to permit sales pursuant to Rule 144A. The Company and the Guarantor further covenant that, for so long as any Registrable Securities remain outstanding, they will use their reasonable best efforts to take such further action as any Holder may reasonably request in writing, all to the extent required from time to time to enable such holder to sell Securities without registration under the Securities Act within the limitation of the exemptions provided by (a) Rule 144(k) and Rule 144A, or (b) any similar rule or regulation hereafter adopted by the SEC. Notwithstanding the foregoing, nothing in this Section 7 shall be I-12 deemed to require the Company or the Guarantor to register any of their securities pursuant to the Exchange Act. 8. Indenture to Control. In the event of any conflict between the terms of this Indenture (excluding this ANNEX I) and this ANNEX I, the terms of the Indenture shall control. I-13 EX-99.T3E.1 3 h19780t3exv99wt3ew1.txt OFFERING CIRCULAR DATED 11/12/2004 OFFERING CIRCULAR (NABORS LOGO) OFFER TO EXCHANGE SERIES B ZERO COUPON SENIOR EXCHANGEABLE NOTES DUE 2023 FOR ANY AND ALL OUTSTANDING ZERO COUPON SENIOR EXCHANGEABLE NOTES DUE 2023 (CUSIP NOS. 629568AK2 AND 629568AJ5 ISIN NOS. US629568AK22 AND US629568AJ58) OF NABORS INDUSTRIES, INC. GUARANTEED BY NABORS INDUSTRIES LTD. THE EXCHANGE OFFER WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON DECEMBER 10, 2004, UNLESS EXTENDED OR EARLIER TERMINATED BY US (THE "EXPIRATION DATE"). THE EXCHANGE OFFER Nabors Industries, Inc. ("Nabors Delaware") and its parent company, Nabors Industries Ltd. ("Nabors"), are offering to exchange Series B Zero Coupon Senior Exchangeable Notes Due 2023 of Nabors Delaware (the "New Securities"), guaranteed by Nabors, for all Zero Coupon Senior Exchangeable Notes Due 2023 of Nabors Delaware (the "Old Securities"), guaranteed by Nabors. Upon the terms and subject to the conditions set forth in this offering circular and the related Letter of Transmittal (which together constitute the "Exchange Offer"), each $1,000 principal amount of Old Securities that are validly tendered and not validly withdrawn will be exchanged for $1,000 principal amount of New Securities. We reserve the right to extend or terminate the Exchange Offer, in our sole and absolute discretion, which may be for any or no reason, and to otherwise amend the Exchange Offer in any respect. The Exchange Offer is open to all holders of Old Securities, and, as more fully explained in this offering circular, is subject to customary conditions, as well as a 50% minimum tender condition, all of which we and Nabors may waive. Tenders of Old Securities may be withdrawn at any time before 12:00 midnight, New York City time, on the Expiration Date. As used in this offering circular, references to "Nabors Delaware," "Company," "we," "our" and "us" refer to Nabors Industries, Inc. and not to its subsidiaries or to Nabors Industries Ltd. and references to "Nabors" refer to Nabors Industries Ltd. and not to its subsidiaries, in each case, except where the context otherwise requires or as otherwise indicated. --------------------- IMPORTANT Any holder desiring to tender all or any portion of such holder's Old Securities must cause the exchange agent to receive a timely confirmation of a book-entry transfer of Old Securities into the exchange agent's account at The Depository Trust Company, New York, New York, pursuant to the procedures for book-entry transfer described herein, prior to the Expiration Date. ANY HOLDER OF OLD SECURITIES WHO DESIRES TO TENDER OLD SECURITIES BUT CANNOT COMPLY WITH THE PROCEDURES FOR BOOK-ENTRY TRANSFER DESCRIBED IN THIS OFFERING CIRCULAR ON A TIMELY BASIS MAY TENDER SUCH OLD SECURITIES BY FOLLOWING THE PROCEDURES FOR GUARANTEED DELIVERY SET FORTH IN THE SECTION OF THIS OFFERING CIRCULAR ENTITLED "THE EXCHANGE OFFER -- PROCEDURES FOR EXCHANGE -- GUARANTEED DELIVERY PROCEDURES." THIS OFFERING CIRCULAR AND THE ACCOMPANYING LETTER OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION THAT SHOULD BE READ BEFORE ANY DECISION IS MADE WITH RESPECT TO THE EXCHANGE OFFER. YOU MUST MAKE YOUR OWN DECISION CONCERNING THESE MATTERS. YOU SHOULD CAREFULLY CONSIDER THE INCOME TAX CONSEQUENCES OF ACCEPTING THE EXCHANGE OFFER. SEE "CERTAIN MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS." NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR THIS TRANSACTION, PASSED UPON THE MERITS OR FAIRNESS OF THIS TRANSACTION, OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS OFFERING CIRCULAR. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. The information agent for the Exchange Offer is Georgeson Shareholder and the exchange agent is J.P. Morgan Trust Company, National Association We and Nabors are not, and our respective boards of directors, employees, the exchange agent and the information agent are not, making any recommendation to you as to whether you should tender or refrain from tendering your Old Securities in the Exchange Offer. You must make the decision whether to tender your Old Securities and, if so, how many Old Securities to tender. YOU SHOULD CAREFULLY CONSIDER THE RISK FACTORS BEGINNING ON PAGE 15 OF THIS OFFERING CIRCULAR BEFORE DECIDING TO TENDER YOUR OLD SECURITIES The date of this offering circular is November 12, 2004. --------------------- WE ARE RELYING ON SECTION 3(a)(9) OF THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), TO EXEMPT THE EXCHANGE OFFER FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. WE ARE ALSO RELYING ON SECTION 18(b)(4)(C) OF THE SECURITIES ACT TO EXEMPT THE EXCHANGE OFFER FROM THE REGISTRATION AND QUALIFICATION REQUIREMENTS OF STATE SECURITIES LAWS. WE HAVE NO CONTRACT, ARRANGEMENT OR UNDERSTANDING RELATING TO, AND WILL NOT, DIRECTLY OR INDIRECTLY, PAY ANY COMMISSION OR OTHER REMUNERATION TO ANY BROKER, DEALER, SALESPERSON, AGENT OR ANY OTHER PERSON FOR SOLICITING TENDERS IN THE EXCHANGE OFFER. IN ADDITION NEITHER OUR FINANCIAL ADVISOR NOR ANY BROKER, DEALER, SALESPERSON, AGENT OR ANY OTHER PERSON, IS ENGAGED OR AUTHORIZED TO EXPRESS ANY STATEMENT, OPINION, RECOMMENDATION OR JUDGMENT WITH RESPECT TO THE RELATIVE MERITS AND RISKS OF THE EXCHANGE OFFER. --------------------- NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS WITH RESPECT TO THE MATTERS DESCRIBED IN THIS OFFERING CIRCULAR, OTHER THAN THOSE CONTAINED IN THIS OFFERING CIRCULAR (INCLUDING THE DOCUMENTS INCORPORATED BY REFERENCE INTO THIS OFFERING CIRCULAR). IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MAY NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY US. --------------------- THIS OFFERING CIRCULAR DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY TO ANY PERSON IN ANY JURISDICTION WHERE IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION. THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL TENDERS BE ACCEPTED FROM OR ON BEHALF OF, HOLDERS IN ANY JURISDICTION IN WHICH THE MAKING OR ACCEPTANCE OF THE EXCHANGE OFFER WOULD NOT BE IN COMPLIANCE WITH THE LAWS OF SUCH JURISDICTION. HOWEVER, WE MAY, IN OUR SOLE JUDGMENT, TAKE SUCH ACTION AS WE MAY DEEM NECESSARY TO EXTEND THE EXCHANGE OFFER TO HOLDERS IN SUCH JURISDICTION. --------------------- THIS OFFERING CIRCULAR IS SUBMITTED TO HOLDERS FOR INFORMATIONAL USE SOLELY IN CONNECTION WITH THEIR CONSIDERATION OF THE EXCHANGE OFFER DESCRIBED IN THIS OFFERING CIRCULAR. ITS USE FOR ANY OTHER PURPOSE IS NOT AUTHORIZED. --------------------- IN MAKING AN INVESTMENT DECISION, HOLDERS MUST RELY ON THEIR OWN EXAMINATION OF US AND NABORS AND THE TERMS OF THE EXCHANGE OFFER, INCLUDING THE MERITS AND RISKS INVOLVED. THE INFORMATION CONTAINED IN THIS OFFERING CIRCULAR IS CORRECT AS OF THE DATE HEREOF AND NEITHER THE DELIVERY OF THIS OFFERING CIRCULAR NOR THE CONSUMMATION OF ANY OF THE EXCHANGE OFFER SHALL CREATE THE IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AT ANY TIME AFTER THE DATE HEREOF. NABORS DELAWARE'S AND NABORS' BUSINESSES, FINANCIAL CONDITION, RESULTS OF OPERATIONS AND PROSPECTS MAY HAVE CHANGED SINCE THAT DATE. NO REPRESENTATION IS MADE TO ANY HOLDER REGARDING THE LEGALITY OF AN INVESTMENT IN THE NEW SECURITIES UNDER ANY APPLICABLE LEGAL INVESTMENT OR SIMILAR LAWS OR REGULATIONS. THE CONTENTS OF THIS OFFERING CIRCULAR ARE NOT TO BE CONSTRUED AS LEGAL, BUSINESS OR TAX ADVICE. HOLDERS SHOULD CONSULT THEIR OWN ATTORNEY, BUSINESS ADVISOR OR TAX ADVISOR AS TO LEGAL, BUSINESS OR TAX ADVICE WITH RESPECT TO THE EXCHANGE OFFER. ALL INQUIRIES RELATING TO THIS OFFERING CIRCULAR AND THE EXCHANGE OFFER SHOULD BE DIRECTED TO GEORGESON SHAREHOLDER, THE INFORMATION AGENT FOR THE EXCHANGE OFFER, AT ONE OF THE TELEPHONE NUMBERS OR THE ADDRESS LISTED ON THE BACK COVER PAGE OF THIS OFFERING CIRCULAR. QUESTIONS REGARDING THE PROCEDURES FOR TENDERING IN THE EXCHANGE OFFER AND REQUESTS FOR ASSISTANCE IN TENDERING YOUR OLD SECURITIES SHOULD BE DIRECTED TO J.P. MORGAN TRUST COMPANY, NATIONAL ASSOCIATION, THE EXCHANGE AGENT, AT THE TELEPHONE NUMBER OR THE ADDRESS LISTED ON THE BACK COVER PAGE OF THIS OFFERING CIRCULAR. REQUESTS FOR ADDITIONAL COPIES OF THIS OFFERING CIRCULAR, ANY DOCUMENTS INCORPORATED BY REFERENCE INTO THIS OFFERING CIRCULAR OR THE ENCLOSED LETTER OF TRANSMITTAL AND NOTICE OF GUARANTEED DELIVERY MAY BE DIRECTED TO EITHER THE INFORMATION AGENT OR THE EXCHANGE AGENT AT THE RESPECTIVE TELEPHONE NUMBERS AND ADDRESSES LISTED ON THE BACK COVER PAGE OF THIS OFFERING CIRCULAR. NOTICE TO NEW HAMPSHIRE RESIDENTS NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A LICENSE HAS BEEN FILED UNDER CHAPTER 421-B OF THE NEW HAMPSHIRE UNIFORM SECURITIES ACT WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT THAT A SECURITY IS EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN THE STATE OF NEW HAMPSHIRE CONSTITUTES A FINDING BY THE SECRETARY OF STATE OF NEW HAMPSHIRE THAT ANY DOCUMENT FILED UNDER CHAPTER 421-B IS TRUE, COMPLETE AND NOT MISLEADING. NEITHER ANY SUCH FACT NOR THE FACT THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE FOR A SECURITY OR A TRANSACTION MEANS THAT THE SECRETARY OF STATE OF NEW HAMPSHIRE HAS PASSED IN ANY WAY UPON THE MERITS OR QUALIFICATIONS OF, OR RECOMMENDED ii OR GIVEN APPROVAL TO, ANY PERSON, SECURITY, OR TRANSACTION. IT IS UNLAWFUL TO MAKE, OR CAUSE TO BE MADE, TO ANY PROSPECTIVE PURCHASER, CUSTOMER OR CLIENT ANY REPRESENTATION INCONSISTENT WITH THE PROVISIONS OF THIS PARAGRAPH. NOTICE TO UNITED KINGDOM RESIDENTS THE NEW SECURITIES WILL NOT BE OFFERED OR SOLD TO PERSONS IN THE UNITED KINGDOM, EXCEPT TO PERSONS WHOSE ORDINARY ACTIVITIES INVOLVE THEM IN ACQUIRING, HOLDING, MANAGING OR DISPOSING OF INVESTMENTS (AS PRINCIPAL OR AGENT) FOR THE PURPOSES OF THEIR BUSINESSES OR OTHERWISE IN CIRCUMSTANCES WHICH HAVE NOT RESULTED AND WILL NOT RESULT IN AN OFFER TO THE PUBLIC IN THE UNITED KINGDOM WITHIN THE MEANING OF THE PUBLIC OFFER OF SECURITIES REGULATIONS 1995. THIS OFFERING CIRCULAR MAY ONLY BE ISSUED OR PASSED ON, IN OR INTO THE UNITED KINGDOM TO A PERSON WHO IS OF A KIND DESCRIBED IN ARTICLE 11(3) OF THE FINANCIAL SERVICES ACT 1986 (INVESTMENT ADVERTISEMENTS) (EXCEPTIONS) ORDER 1996 OR IS A PERSON TO WHOM SUCH DOCUMENT MAY OTHERWISE LAWFULLY BE ISSUED OR PASSED ON. iii TABLE OF CONTENTS
PAGE ---- Summary Term Sheet.......................................... 1 Summary Description of the New Securities................... 6 Material Differences Between the Old Securities and the New Securities................................................ 11 Recent Developments......................................... 14 Risk Factors................................................ 15 Forward-Looking Information................................. 24 Ratio of Earnings to Fixed Charges.......................... 25 Price Range and Dividend History of Nabors' Common Shares... 26 Description of Nabors' Share Capital........................ 27 The Exchange Offer.......................................... 30 Description of the New Securities........................... 37 Certain Material United States Federal Income Tax Considerations............................................ 56 Independent Registered Public Accounting Firm............... 57 Where You Can Find More Information......................... 58 Incorporation by Reference.................................. 58
iv SUMMARY TERM SHEET The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information included elsewhere or incorporated by reference in this offering circular. Because this is a summary, it may not contain all the information that may be important to you. You should read the entire offering circular, as well as the information incorporated by reference herein, before making a decision whether to tender your Old Securities pursuant to the Exchange Offer. Q: Who is making the Exchange Offer? A: Nabors Delaware and Nabors are making the Exchange Offer. Nabors Delaware is a Delaware holding company and an indirect, wholly-owned subsidiary of Nabors. Prior to the corporate reorganization that was completed on June 24, 2002 which resulted in Nabors Delaware becoming wholly-owned by Nabors, Nabors Delaware was a publicly-traded corporation. Nabors Delaware was incorporated in Delaware on May 3, 1978. Our principal executive offices are located at 515 West Greens Road, Suite 1200, Houston, Texas 77067 and our telephone number at that address is (281) 874-0035. Nabors is the largest land drilling contractor in the world, with almost 600 land drilling rigs. We conduct oil, gas and geothermal land drilling operations in the United States Lower 48 states, Alaska, Canada, South and Central America, the Middle East, the Far East and Africa. Nabors also is one of the largest land well-servicing and workover contractors in the United States and Canada. We own approximately 700 land workover and well- servicing rigs in the United States, primarily in the southwestern and western United States, and approximately 210 land workover and well-servicing rigs in Canada. Nabors is a leading provider of offshore platform workover and drilling rigs, and owns 44 platform rigs, 19 jack-up units, and three barge rigs in the United States and multiple international markets. These rigs provide well-servicing, workover and drilling services. We have a 50% ownership interest in a joint venture in Saudi Arabia, which owns 17 rigs. To further supplement and complement Nabors' primary business, it offers a wide range of ancillary well-site services, including engineering, transportation, construction, maintenance, well logging, directional drilling, rig instrumentation, data collection and other support services, in selected domestic and international markets. Nabors' land transportation and hauling fleet includes approximately 240 rig and oilfield equipment hauling tractor-trailers, cranes, loaders and light-duty vehicles. Nabors maintains approximately 300 fluid hauling trucks, approximately 820 fluid storage tanks, ten saltwater disposal wells and other auxiliary equipment used in drilling, workover and well-servicing operations in the United States. In addition, Nabors time charters a fleet of 31 marine transportation and supply vessels, which provide transportation of drilling materials, supplies and crews for offshore operations primarily in the Gulf of Mexico. Nabors manufactures and leases or sells top drives for a broad range of drilling applications, directional drilling systems, rig instrumentation and data collection equipment and rig reporting software. Nabors has also made selective investments in oil and gas exploration, development and production activities. Nabors was formed as a Bermuda exempted company on December 11, 2001. Through predecessors and acquired entities, Nabors has been continuously operating in the drilling sector since the early 1900s. Nabors' principal executive offices are located at 2nd Fl. International Trading Centre, Warrens, St. Michael, Barbados and its telephone number at that address is (246) 421-9471. Q: What classes and amounts of securities are the subject of the Exchange Offer? A: Nabors Delaware and Nabors are offering to exchange $1,000 principal amount of New Securities for each $1,000 principal amount of Old Securities accepted for exchange. Q: Why are you making the Exchange Offer? A: We and Nabors are making the Exchange Offer principally to reduce the number of Old Securities outstanding and exchange them for the New Securities, which include the following features: additional anti-dilution protection for cash dividends and tender or exchange offers by Nabors or any of its subsidiaries at above-market prices, payment of a make-whole premium upon exchange in certain circumstances and the elimination 1 of the requirement of paying in Nabors' common shares upon an exchange when there is an event of default (and in certain other circumstances). In December 2003 the Financial Accounting Standards Board ("FASB") issued an Exposure Draft, "Earnings per Share -- an Amendment of FASB Statement No. 128," which would amend the computational guidance of Statement of Financial Accounting Standards No. 128 ("SFAS 128"), "Earnings per Share." The proposed statement would eliminate the provisions of SFAS 128 which permit an entity to rebut the presumption that instruments with the option of settling in either cash or shares will be settled in shares. This new statement as proposed would be effective for periods ending after December 15, 2004, but would require prior period earnings per share amounts presented for comparative purposes to be restated to conform to the provisions of the new requirements. If adopted, the proposed statement could result in a material dilution of Nabors' earnings per share, unless we are able to take action to address this recently proposed accounting pronouncement prior to year-end. The indenture for the Old Securities provides that where we have elected to pay cash upon an exchange, and such payment of cash is not permitted pursuant to the provisions of the indenture or otherwise, or an event of default under the existing indenture has occurred and is continuing, we would be required to provide Nabors' common shares to the holders of the Old Securities upon such exchange. Although the issuance of common shares under the indenture relating to the Old Securities is limited to a situation in which we are in default under such indenture (or restricted under other instruments) and a holder exercises his right to exchange, a situation which we view as remote, the currently proposed revision to SFAS 128 would require inclusion of the total number of common shares issuable upon exchange in Nabors' diluted earnings per share calculation. Accordingly, we are making the Exchange Offer to address the effect of the proposed revision to SFAS 128. Successful consummation of the Exchange Offer will result in a decrease in the principal amount of Old Securities outstanding and their replacement by an equal principal amount of New Securities outstanding (with the features described under "Description of the New Securities -- Exchange Rights of Holders of New Securities -- Payment Upon Exchange"). As a result, to the extent that the holders exchange the Old Securities for the New Securities, the number of Nabors' common shares required to be included in Nabors' diluted earnings per share calculation under the Exposure Draft would be reduced. Q: Does the success of the Exchange Offer depend on the participation of any minimum number of holders? A: Yes. The Exchange Offer is subject to a 50% minimum tender condition, which means that at least 50% of the aggregate principal amount outstanding of the Old Securities must have been validly tendered and not withdrawn. If this condition is not met, we and Nabors may terminate or amend the Exchange Offer at any time before the acceptance of the Old Securities for exchange. However, we and Nabors may waive this condition at any time, in whole or in part, in our and Nabors' sole discretion. Q: Who may participate in the Exchange Offer? A: All holders of Old Securities. Q: Has the board of directors of either Nabors Delaware or Nabors made a recommendation with respect to the Exchange Offer? A: Neither our board of directors nor Nabors' board of directors has made a recommendation with regard to whether or not you should tender your Old Securities in the Exchange Offer, and neither we nor Nabors has obtained a third-party determination that the Exchange Offer is fair to holders of the Old Securities. Accordingly, you must make your own determination as to whether to tender your Old Securities. In making your decision, we urge you to carefully read this document and the other documents to which we refer you in their entirety, including the discussions of risks and uncertainties set forth in the section of this offering circular entitled "Risk Factors." 2 Q: What risks should I consider in deciding whether or not to tender my Old Securities? A: In deciding whether to participate in the Exchange Offer, you should carefully consider the discussion of risks and uncertainties relating to the Exchange Offer, the New Securities and our and Nabors' business, including those described in the section of this offering circular entitled "Risk Factors." Q: Will the New Securities be listed for trading? A: There is no established trading market for the New Securities and the New Securities will not be listed on any securities exchange. Although the Old Securities are currently traded on PORTAL, and it is anticipated that the New Securities will be traded on PORTAL, there can be no assurance as to: (1) the liquidity of any market for the New Securities, (2) the ability of the holders to sell their New Securities, or (3) the prices at which holders of the New Securities would be able to sell their New Securities. The New Securities could trade at prices higher or lower than the Old Securities depending on many factors. If an active trading market does not develop, the market price and liquidity of the New Securities may be adversely affected. Q: What are the conditions to the Exchange Offer? A: The Exchange Offer is subject to certain customary conditions, as well as a 50% minimum tender condition, all of which we may waive. If any of these conditions is not satisfied, we will not be obligated to accept any Old Securities for exchange, regardless of whether they were properly tendered. In addition, we may decide to terminate the Exchange Offer for any reason or for no reason and not accept for exchange any Old Securities. See "The Exchange Offer -- Conditions to the Exchange Offer." Q: What will be the effect of the Exchange Offer on the trading market of the Old Securities that are not exchanged? A: If a significant number of Old Securities are exchanged in the Exchange Offer, the liquidity of the trading market for the Old Securities, if any, after the completion of the Exchange Offer may be substantially reduced. Any Old Securities exchanged will reduce the aggregate number of Old Securities outstanding. As a result, the Old Securities may trade at a discount to the price at which they would trade if the transactions contemplated by this offering circular were not consummated, subject to prevailing interest rates, the market for similar securities and other factors. We cannot assure you that an active market in the Old Securities will exist or be maintained and we cannot assure you as to the prices at which the Old Securities may be traded. Q: What are the United States federal income tax consequences to me of participating in the Exchange Offer? A: The United States federal income tax consequences of the Exchange Offer are unclear. We intend to take the position that the modifications to the Old Securities resulting from the exchange of Old Securities for New Securities should not constitute an "exchange" of the Old Securities for United States federal income tax purposes. Consistent with our position, the New Securities should be treated as a continuation of the Old Securities and there should be no United States federal income tax consequences to a holder who exchanges Old Securities for New Securities pursuant to the Exchange Offer. If, contrary to our position, the exchange constitutes an "exchange" for United States federal tax purposes, the tax consequences to you could materially differ. PLEASE SEE "CERTAIN MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS" ON PAGE 56. Q: Will the Company or Nabors receive any cash proceeds from the Exchange Offer? A: No. Neither we nor Nabors will receive any cash proceeds from the Exchange Offer. Old Securities that are validly tendered and exchanged pursuant to the Exchange Offer will be retired and canceled. Accordingly, our issuance of New Securities will not result in any cash proceeds to us or Nabors. Q: How long do I have to decide whether to tender? A: The Exchange Offer will expire at 12:00 midnight, New York City time, on December 10, 2004, unless extended or earlier terminated by us and Nabors. We and Nabors may extend the Expiration Date for the Exchange Offer for any reason. 3 Q: Can the Exchange Offer be extended or amended, and under what circumstances? A: Yes. We and Nabors can extend the Exchange Offer in our sole and absolute discretion, and we reserve the right to do so. During any extension of the Exchange Offer, Old Securities that were previously tendered will remain subject to the extended Exchange Offer. In addition, we expressly reserve the right to amend the Exchange Offer, if any of the events described in the section of this offering circular entitled "The Exchange Offer -- Conditions to the Exchange Offer" occurs or for any or no reason within our sole and absolute discretion. For more information regarding our right to extend or amend the Exchange Offer, please see the section of this offering circular entitled "The Exchange Offer -- Expiration Date; Extensions; Amendments." Q: How will I be notified if the Exchange Offer is extended or amended? A: Any extension or amendment to the Exchange Offer will be followed promptly by a public announcement thereof, which, in the case of an extension, will be made no later than 9:00 a.m., New York City time, on the business day after the Expiration Date. Q: How do I participate in the Exchange Offer? A: If you own Old Securities held through a broker or other third party, or in "street name," you will need to follow the instructions in the Letter of Transmittal on how to instruct them to tender the Old Securities on your behalf, as well as submit a Letter of Transmittal or Notice of Guaranteed Delivery, as the case may be, and the other agreements and documents described in the Letter of Transmittal. We will determine in our reasonable discretion whether any Old Securities have been validly tendered. Old Securities must be tendered by electronic transmission of acceptance through The Depository Trust Company's ("DTC") Automatic Tender Offer Program ("ATOP") procedures for transfer or by delivery of a signed Letter of Transmittal or Notice of Guaranteed Delivery pursuant to the instructions described in the Letter of Transmittal. Custodial entities that are participants in DTC must tender Old Securities through DTC's ATOP, by which the custodial entity and the beneficial owner on whose behalf the custodial entity is acting agree to be bound by the Letter of Transmittal. A Letter of Transmittal need not accompany tenders effected through ATOP. Please carefully follow the instructions contained in the Letter of Transmittal on how to tender your Old Securities. Q: When will I receive the New Securities in exchange for my Old Securities? A: We will accept all Old Securities validly tendered and not withdrawn as of the expiration of the Exchange Offer and will issue the New Securities promptly after expiration of the Exchange Offer, upon the terms and subject to the conditions in this offering circular and the Letter of Transmittal. We will accept Old Securities for exchange after the exchange agent has received a timely book-entry confirmation of transfer of Old Securities into the exchange agent's DTC account and a properly completed and executed Letter of Transmittal (or an "agent's message" if Old Securities are tendered through DTC's ATOP procedures). Holders of Old Securities who are unable to deliver timely confirmation of the book-entry tender of their Old Securities into the exchange agent's account at DTC and all other required documents must tender their Old Securities according to the guaranteed delivery procedures set forth in "The Exchange Offer -- Procedures for Exchange -- Guaranteed Delivery Procedures" section of this offering circular. Our oral or written notice of acceptance to the exchange agent will be considered our acceptance of the Old Securities tendered in the Exchange Offer. Q: What happens if my Old Securities are not accepted for exchange? A: If we decide for any reason not to accept any Old Securities for exchange, they will be returned without expense promptly after the expiration or termination of the Exchange Offer. Q: Can I withdraw my tender of Old Securities? A: Yes. Tenders of Old Securities may be withdrawn in writing at any time prior to 12:00 midnight, New York City time, on the Expiration Date of the Exchange Offer. See "The Exchange Offer -- Proper Execution and Delivery of Letter of Transmittal -- Withdrawal of Tenders." 4 Q: Will resales of the New Securities issued in the Exchange Offer be registered under the Securities Act? A: We will use our reasonable best efforts to file, within 90 days of the consummation of the Exchange Offer, a shelf registration statement relating to the resale of the New Securities and the Nabors' common shares issuable upon exchange thereof, if any, pursuant to the applicable indenture, and we will use our reasonable best efforts to cause such registration statement to become effective under the Securities Act within 180 days after the consummation of the Exchange Offer. You can obtain a Notice and Questionnaire to provide us and Nabors with the necessary information to be included as a "selling securityholder" in such registration statement by calling the information agent at the number on the back cover of this offering circular. However, if you hold Old Securities with the "unrestricted CUSIP" number (629568AK2), we believe that you are free to sell your Old Securities without additional registration under the Securities Act (unless you are an affiliate of us or Nabors) and, accordingly, you should also be free to sell any New Securities issued in exchange for such Old Securities without additional registration under the Securities Act. You should consult your legal advisor with respect to your particular circumstances. With respect to all New Securities, we and Nabors will take appropriate steps, including, to the extent required, filing one or more registration statements under the Securities Act, so that any Nabors' common shares issued upon exchange of the New Securities are registered under the Securities Act or exempt from registration under the Securities Act. Q: Whom can I talk to if I have questions about the Exchange Offer? A: If you have questions regarding the information in this offering circular or the Exchange Offer, you should contact the information agent. Georgeson Shareholder is the information agent for the Exchange Offer. Its address and telephone numbers are located in the section "The Exchange Offer -- Information Agent" and on the back cover of this offering circular. If you have questions regarding the procedures for tendering in the Exchange Offer or require assistance in tendering your Old Securities, please contact the information agent or the exchange agent. J.P. Morgan Trust Company, National Association is the exchange agent for the Exchange Offer. Its address and telephone numbers are located in the section "The Exchange Offer -- Exchange Agent" and on the back cover of this offering circular. Q: If the Exchange Offer is consummated but I do not tender my Old Securities, how will my rights be affected? A: If you do not exchange your Old Securities in the Exchange Offer, or if your Old Securities are not accepted for exchange, you will continue to hold your Old Securities and will be entitled to all the rights and subject to all the limitations applicable to the Old Securities. See above for possible effects of the Exchange Offer on the liquidity of the trading market for the Old Securities. See the section of this offering circular entitled "Recent Developments" for a description of recent amendments to the indenture relating to the Old Securities. Q: Who will pay the fees and expenses associated with the Exchange Offer? A: We and Nabors will pay all the fees and expenses of the Company, Nabors, the information agent and the exchange agent associated with the Exchange Offer. 5 SUMMARY DESCRIPTION OF THE NEW SECURITIES Securities Offered............Up to $700,000,000 aggregate principal amount at maturity of New Securities. Interest......................We will not pay interest on the New Securities unless we are obligated to pay contingent interest on the New Securities under the circumstances described in this offering circular. See "Description of the New Securities -- Contingent Interest." The New Securities will not accrete. Maturity Date.................June 15, 2023. Guarantee.....................Nabors has fully and unconditionally guaranteed the due and punctual payment of the principal, additional amounts, if any and contingent interest, if any, on the New Securities, the make-whole premium, if any, and any other of our obligations under the New Securities when and as they come due and payable, whether at maturity, upon redemption, by declaration of acceleration or otherwise, if we are unable to satisfy these obligations. The guarantee provides that, in the event of default in payment by us on the New Securities, the holders of the New Securities may institute legal proceedings directly against Nabors to enforce the guarantee without first proceeding against us. See "Description of the New Securities -- Guarantee." Ranking.......................The New Securities: - will be unsecured; - will be effectively junior in right of payment to any of our future secured debt; - will rank equally in right of payment with any of our existing and future unsubordinated debt; and - will be senior in right of payment to any of our future senior subordinated or subordinated debt. Contingent Interest...........We will make payments of interest, referred to in this offering circular as "contingent interest", during any six month period from June 15 to December 14 or from December 15 to June 14 commencing on or after June 15, 2008 for which the average trading price of the New Securities for each day of the applicable five trading day reference period equals or exceeds 120% of the principal amount of the New Security as of the day immediately preceding the first day of the applicable six-month interest period. The amount of contingent interest payable per New Security in respect of any six-month period will be equal to 0.185% of the principal amount of a New Security. The five trading day reference period means the five trading days ending on the second trading day immediately preceding the relevant six-month interest period. For more information about contingent interest, see "Description of the New Securities -- Contingent Interest." Exchange Rights of Holders of New Securities................You may exchange your New Securities prior to the close of business on the business day immediately preceding the final maturity date of the New Securities only under any of the following circumstances: - if the price of Nabors' common shares issuable upon exchange reaches specified thresholds described in this offering circular; 6 - at any time, subject to certain exceptions, during the five business-day period after any ten consecutive trading-day period in which the trading price per New Security for each day of the ten trading-day period was less than 95% of the product of the closing sale price of Nabors' common shares and the exchange rate of such New Securities; provided, however, you may not exchange your New Securities if the average closing sale price of Nabors' common shares for such ten consecutive trading-day period was between the then current exchange price on the New Securities and 120% thereof until June 15, 2008, and 110% thereafter, of the then current exchange price on the New Securities; - if we call the New Securities for redemption; or - upon the occurrence of specified corporate transactions or a Fundamental Change as described under "Description of the New Securities -- Exchange Rights of Holders of New Securities -- Exchange Upon Specified Corporate Transactions." Upon exchange of New Securities, we will deliver to the holder exchanging such securities: (i) cash (the "Principal Return") in an amount equal to the lesser of: - the aggregate exchange value of the New Securities to be exchanged, where the exchange value for each $1,000 principal amount of New Securities surrendered (the "Exchange Value") is equal to the product of: -- the exchange rate then in effect; and -- the average of the daily volume weighted average price of Nabors' common shares for each of the ten consecutive trading days (appropriately adjusted to take into account the occurrence during such period of stock splits, stock dividends and similar events) beginning on the second trading day immediately following the day the New Securities are surrendered for exchange (the "Ten Day Weighted Average Price"); or - the aggregate principal amount of such New Securities; (ii) if the aggregate Exchange Value of the New Securities to be exchanged is greater than the Principal Return, at the Company's option, cash, Nabors' common shares, or any combination thereof, with a value equal to the amount by which the aggregate Exchange Value exceeds the Principal Return (the "Net Share Amount"), with the number of shares (the "Net Shares") to be paid determined by dividing the Net Share Amount (less any portion of the Net Share Amount that the Company elects to pay in cash) by the Ten Day Weighted Average Price; and (iii) cash in lieu of any fractional share. The initial exchange rate for the New Securities is 14.2653 Nabors' common shares per $1,000 principal amount of New Securities. 7 Make-Whole Premium............If a Fundamental Change occurs prior to June 15, 2008, under certain circumstances, we will pay a make-whole premium to holders who exchange their New Securities at the time specified in the first paragraph of "Description of the New Securities -- Exchange Rights of Holders of New Securities -- Make-Whole Premium." The make-whole premium will be equal to a specified percentage of the principal amount of the New Securities surrendered for exchange. See "Description of the New Securities -- Exchange Rights of Holders of New Securities -- Payment Upon Exchange" and "-- Make-Whole Premium." We may pay the make-whole premium, at our option, in cash, Nabors' common shares or the same form of consideration which Nabors' common shares are exchanged for, converted into, acquired for or constitutes solely the right to receive, as a result of the transaction or transactions constituting the Fundamental Change (assuming that the holder of such Nabors' common shares would not have exercised any rights to select a particular form of consideration), or in any combination of such consideration, cash or Nabors' common shares. Adjustments to Exchange Rate..........................The exchange rate may be adjusted upon the occurrence of certain events, including the payment of any cash dividend or the payment of consideration for Nabors' common shares in excess of the market price for such shares pursuant to any tender or exchange offer by Nabors or any of its subsidiaries, subject to certain limitations. The exchange rate will not be adjusted for accrued and unpaid contingent interest or additional amounts. See "Description of the New Securities -- Exchange Rights of Holders of New Securities -- Adjustments to Exchange Rate." Generally, you will not receive any cash payment representing accrued and unpaid contingent interest upon exchange of the New Securities. Instead, contingent interest, if any, will be deemed cancelled, extinguished and forfeited upon exchange. New Securities called for redemption may be surrendered for exchange prior to the close of business on the business day immediately preceding the redemption date. Sinking Fund..................None. Optional Redemption...........We may not redeem the New Securities prior to June 15, 2008. On or after June 15, 2008, we may redeem some or all of the New Securities for a price equal to 100% of the principal amount of the New Securities to be redeemed, plus accrued and unpaid contingent interest, if any, and additional amounts owed, if any, to such redemption date. Repurchase at the Option of the Holder....................You have the right to require us to purchase all or any portion of your New Securities on June 15, 2008, June 15, 2013, and June 15, 2018. In each case, we will pay a purchase price, in cash, equal to 100% of the principal amount of the New Securities to be purchased plus accrued and unpaid contingent interest, if any, and additional amounts owed, if any, and overdue interest, if any, to such purchase date. See "Description of the New Securities -- Repurchase of New Securities at the Option of the Holder." Repurchase Upon a Fundamental Change........................If, prior to maturity, Nabors undergoes a Fundamental Change as defined in the indenture under which we will issue the New Securities, you will have the right, at your option, to require us to purchase any or all of your New 8 Securities for cash, or any portion of the principal amount thereof that is equal to $1,000 or an integral multiple of $1,000. The cash price we are required to pay is equal to 100% of the principal amount of the New Securities to be purchased plus accrued and unpaid contingent interest, if any, and additional amounts owed, if any, and overdue interest, if any, to, but excluding, the Fundamental Change repurchase date. No make-whole premium will be payable if you exercise the option to have your New Securities repurchased. See "Description of the New Securities -- Repurchase at the Option of the Holder Upon a Fundamental Change." Registration Rights...........The indenture relating to the New Securities provides that we and Nabors will use our reasonable best efforts to file, within 90 days of the consummation of the applicable Exchange Offer, a registration statement relating to the resale of the New Securities and the Nabors' common shares issuable upon exchange thereof, and we will use our reasonable best efforts to cause such registration statement to become effective under the Securities Act within 180 days after the consummation of the Exchange Offer. Under no circumstances, however, will we be obligated to pay liquidated damages or other penalties because of our failure to do so and our failure to do so will not constitute an event of default under the indenture relating to the New Securities. Use of Proceeds...............Neither we nor Nabors will receive any proceeds from the issuance of New Securities upon the exchange of Old Securities pursuant to the Exchange Offer. Trustee, Paying Agent and Exchange Agent................J.P. Morgan Trust Company, National Association. Risk Factors..................You should consider carefully all of the information set forth in this offering circular and, in particular, you should evaluate the specific factors set forth under "Risk Factors" beginning on page 15, before deciding whether to exchange your Old Securities. United States Federal Income Tax Considerations............The United States federal income tax consequences of the Exchange Offer and of the ownership and disposition of the New Securities are unclear. We intend to take the position that the modifications to the Old Securities resulting from the exchange of Old Securities for New Securities should not constitute an "exchange" of the Old Securities for United States federal income tax purposes. Consistent with our position, the New Securities should be treated as a continuation of the Old Securities and there should be no United States federal income tax consequences to a holder who exchanges Old Securities for New Securities pursuant to the Exchange Offer. If, contrary to our position, the exchange constitutes an "exchange" for United States federal income tax purposes, the tax consequences to you could materially differ. PLEASE SEE "CERTAIN MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS" ON PAGE 56. Governing Law.................The indenture and the New Securities are governed by, and construed in accordance with, the laws of the State of New York. Book-Entry Form...............The New Securities will be issued in book-entry form and will be represented by permanent global certificates deposited with, or on behalf of, The Depository Trust Company ("DTC") and registered in the name of a 9 nominee of DTC. Beneficial interests in any of the New Securities will be shown on, and transfers will be effected only through, records maintained by DTC or its nominee and any such interest may not be exchanged for certificated securities, except in limited circumstances. Trading.......................The New Securities will not be listed on any securities exchange or included in any automated quotation system. It is anticipated that the New Securities will be traded on PORTAL; however, no assurance can be given as to the liquidity of or trading market for the New Securities. The common shares of Nabors are listed on the American Stock Exchange under the symbol "NBR." 10 MATERIAL DIFFERENCES BETWEEN THE OLD SECURITIES AND THE NEW SECURITIES The material differences between the Old Securities and New Securities are illustrated in the table below. The table below is qualified in its entirety by the information contained in this offering circular and the documents governing the Old Securities and the New Securities. For a more detailed description of the New Securities, see "Description of the New Securities."
OLD SECURITIES NEW SECURITIES -------------- -------------- - ----------------------------------------------------------------------------------------------------------------- Securities; Issue Price $700,000,000 aggregate principal amount Up to $700,000,000 aggregate principal of Old Securities. amount of New Securities. - ----------------------------------------------------------------------------------------------------------------- On June 10, 2003, each Old Security was The issue price of each New Security issued at a price of $1,000 per Old will be deemed to be $1,000 per New Security and has a principal amount of Security, and each New Security has a $1,000. principal amount of $1,000. - ----------------------------------------------------------------------------------------------------------------- Settlement Upon Holders have the right to exchange Old Holders will have the right to exchange Exchange Securities, upon certain triggering New Securities upon certain triggering events, at the exchange rate then in events at the exchange rate then in effect. effect and, under certain circumstances, receive a make-whole premium as set forth below under "Description of the New Securities -- Exchange Rights of Holders of New Securities -- Make-Whole Premium." - ----------------------------------------------------------------------------------------------------------------- We and Nabors will make payment solely We and Nabors will be required to in cash for all Old Securities submitted deliver the following to the holder for exchange unless the "Full Cash exchanging such securities: Price" for an Old Security is greater than the principal amount of the Old (i) cash, for the "Principal Return," as Security, in which case, we will pay in defined in "Description of the New cash or with Nabors' common shares, Securities -- Exchange Rights of solely at our option, for such excess. Holders of New Securities -- Payment See "Recent Developments." Upon Exchange"; (ii) if the aggregate "Exchange Value" as defined in "Description of the New Securities -- Exchange Rights of Holders of New Securities -- Payment Upon Exchange" of the New Securities to be exchanged is greater than the Principal Return, cash in the amount of, or at the Company's option Nabors' common shares with a value equal to, such excess, or any combination thereof; and (iii) cash in lieu of any fractional share. - ----------------------------------------------------------------------------------------------------------------- If such payment of cash is not permitted No equivalent provision. pursuant to the provisions of the indenture relating to the Old Securities or any other agreement or instrument to which we are a party or by which we are bound or otherwise or an event of default under such indenture has occurred and is continuing, then we will be required to deliver Nabors' common shares (and cash in lieu of fractional shares) upon such exchange of such Old Securities (notwithstanding any notice of election to pay cash on such exchange).
11 OLD SECURITIES NEW SECURITIES ---------------------------------------- ---------------------------------------- - ----------------------------------------------------------------------------------------------------------------- Cash Dividend Protection; The exchange rate for the Old Securities The exchange rate for the New Securities De Minimis Exception will not be adjusted for quarterly cash generally will be adjusted for cash dividends on Nabors' common shares to dividends, with no exception for the extent that the aggregate cash quarterly cash dividends on Nabors' dividend per common share in any quarter common shares. See "Price Range and does not exceed the greater of: Dividend History of Nabors' Common Shares -- Dividend Policy." - the amount per common share of the immediately preceding quarterly cash dividend on the common shares in which an adjustment was not required; and - 4.5% of the average of the last reported sales price of the common shares during the ten trading days immediately prior to the date of declaration of the dividend. See "Price Range and Dividend History of Nabors' Common Shares -- Dividend Policy." - ----------------------------------------------------------------------------------------------------------------- The indenture relating to the Old The indenture relating to the New Securities does not provide for any Securities provides for an adjustment to adjustment to the exchange rate in the the exchange rate in the event Nabors or event Nabors or any of its subsidiaries any of its subsidiaries consummates a consummates a tender or exchange offer tender or exchange offer for Nabors' for Nabors' common shares for common shares for consideration in consideration in excess of the market excess of the market price of Nabors' price of Nabors' common shares. common shares as of the expiration of such tender or exchange offer for Nabors' common shares. - ----------------------------------------------------------------------------------------------------------------- The indenture relating to the Old The indenture relating to the New Securities does not contain a "cap" on Securities provides that in no event adjustments to the exchange rate. will the exchange rate, as adjusted for cash dividends and tender or exchange offers for Nabors' common shares for consideration in excess of the market price of Nabors' common shares as of the expiration of such tender or exchange offer, exceed 22.3964 (as such exchange rate may be adjusted for other dilutive events). - ----------------------------------------------------------------------------------------------------------------- No adjustment in the exchange rate for No equivalent provision. the Old Securities need be made unless the adjustment would require a change of at least 1% in the exchange rate, but adjustments that would otherwise be required will be deferred and taken into account in any subsequent adjustment.
12 OLD SECURITIES NEW SECURITIES - ----------------------------------------------------------------------------------------------------------------- Make-Whole Premium No provision. If a Fundamental Change occurs prior to June 15, 2008, under certain circumstances, we will pay a make-whole premium to holders who exchange their New Securities at the time specified in the first paragraph of "Description of the New Securities -- Exchange Rights of Holders of New Securities -- Make-Whole Premium." The make-whole premium, if any, will be equal to a specified percentage of the principal amount of the New Securities surrendered for exchange. See "Description of the New Securities -- Exchange Rights of Holders of New Securities -- Payment Upon Exchange" and "-- Make-Whole Premium." We may pay the make-whole premium, at our option, in cash, Nabors' common shares or the same form of consideration Nabors' common shares are exchanged for, converted into, acquired for or constitute solely the right to receive in the Fundamental Change, or any combination thereof. No make-whole premium will be paid if the "Applicable Price" as defined under "Description of the New Securities -- Exchange Rights of Holders of New Securities -- Make-Whole Premium" is less than or equal to $50.00 per share or if the Applicable Price exceeds $130.00 per share, subject to adjustment. No make-whole premium will be payable if you exercise the option to have your New Securities repurchased. See "Description of the New Securities -- Repurchase at the Option of the Holder Upon a Fundamental Change." - ----------------------------------------------------------------------------------------------------------------- Registration Rights Under the terms of the indenture The indenture relating to the New relating to the Old Securities, we and Securities provides that we and Nabors Nabors entered into a registration will use our reasonable best efforts to rights agreement providing that we would file, within 90 days of the consummation use all reasonable efforts to file a of the applicable Exchange Offer, a resale registration statement with registration statement relating to the respect to such securities. We filed a resale of the New Securities and the resale registration statement on Form Nabors' common shares issuable upon S-3 which became effective on August 21, exchange thereof, pursuant to the 2003, which continues to be effective as applicable indenture, and we will use of the date hereof. The registration our reasonable best efforts to cause rights agreement further provides that such registration statement to become if, after the resale registration effective under the Securities Act statement becomes effective, we and within 180 days after the consummation Nabors fail to keep it effective or of the Exchange Offer. Under no usable in accordance with, and during circumstances, however, will we be the periods specified in, the obligated to pay liquidated damages or registration rights agreement, then we other penalties because of our failure and Nabors will pay liquidated damages to do so, and our failure to do so will to all holders of Old Securities and to not constitute an event of default under all holders of common shares issued on the indenture relating to the New exchange, redemption or repurchase of Securities. the Old Securities equal to 0.25% per annum of the principal amount of such Old Securities and a comparable amount in the case of common shares until such failure is cured.
13 RECENT DEVELOPMENTS On October 25, 2004, we and Nabors executed a supplemental indenture to the original indenture for the Old Securities. The supplemental indenture was effective as of the date of its execution and will remain effective with respect to the Old Securities whether or not the Exchange Offer is consummated. The supplemental indenture contains the following provisions and has the following effects on the original indenture: - The original indenture provides that we have the right to elect, by written notice to holders, to pay the purchase price in cash or Nabors' common shares, or any combination of cash and such common shares, when holders require us to repurchase all or a portion of the Old Securities at the holder's option. In the supplemental indenture, we have covenanted and agreed for the benefit of each holder that in any such notice we will in all such circumstances elect to pay the purchase price described above solely in cash. - The original indenture provides that upon an exchange of Old Securities, we have the right to elect, by written notice to holders, instead of delivering the number of Nabors' common shares to be delivered upon such exchange, to pay such holder, an amount of cash based on the value of such Nabors' common shares determined pursuant to the original indenture, or, at our option, a combination of cash and Nabors' common shares, provided that if payment of cash is not permitted pursuant to the provisions of the original indenture or any other agreement or instrument to which we are a party or by which we are bound or otherwise or an event of default under the original indenture has occurred and is continuing, then we will deliver Nabors' common shares upon such exchange (notwithstanding any notice of election to pay cash on such exchange). In the supplemental indenture, we have covenanted and agreed for the benefit of each holder of Old Securities that the written notice described in the first sentence of this paragraph will in all circumstances specify that we will make payment solely in cash for all Old Securities submitted for exchange unless the Full Cash Price for an Old Security is greater than the principal amount thereof, in which case we will (x) pay an amount in cash the percentage of the Full Cash Price equal to the quotient obtained by dividing the principal amount of such Old Security by the Full Cash Price for such Old Security, and (y) pay the remaining portion of the payment for such Old Securities in either, at our option, cash or Nabors' common shares. As used in the supplemental indenture, "Full Cash Price" means an amount equal to the average of the last reported sale price of a common share of Nabors for the five trading days beginning on the trading day immediately following the date on which we notify the holders of Old Securities that we have elected to pay cash in lieu of delivering Nabors' common shares with respect to all or part of such exchanges, multiplied by the exchange rate in effect on such notification date (which is the same formula included in the original indenture relating to the Old Securities for determining the amount of cash to be paid upon an exchange if we were to elect to pay cash upon such exchange instead of delivering Nabors' common shares). See "Material Differences Between the Old Securities and the New Securities -- Settlement Upon Exchange -- Old Securities." - Deleting in their entirety provisions in the original indenture that permitted us and Nabors, at our or Nabors' option, to enter into exchange arrangements with investment banks when we call the Old Securities for redemption. The supplemental indenture was entered into without the consent of holders of Old Securities pursuant to Section 9.01(4) of the original indenture, which permits amendments without the consent of holders to make any change that does not adversely affect the rights of any holder of Old Securities. We and Nabors entered into the supplemental indenture to reduce the instances in which Nabors' common shares may be issued under the terms of the Old Securities in order to reduce the potential impact of the proposed amendment to SFAS 128. The above description of the supplemental indenture is a summary only and is qualified in its entirety by reference to the supplemental indenture. Nabors filed a Current Report on Form 8-K on October 27, 2004, relating to the execution of the supplemental indenture (to which the supplemental indenture is attached as an exhibit), which is incorporated by reference. You may obtain a copy of such Current Report on Form 8-K and the supplemental indenture in the manner described under "Where You Can Find More Information." 14 RISK FACTORS You should carefully consider the risks described below before making a decision to exchange Old Securities for New Securities. The risks described below are not the only ones facing us or Nabors. Additional risks not presently known to us or that we currently deem immaterial may also impair our business operations. The business, financial condition or results of operations of Nabors or us could be materially adversely affected by any of these risks. The trading price of the New Securities, the Old Securities and Nabors' common shares could decline due to any of these risks, and you may lose all or part of your investment. This offering circular and the incorporated documents also contain forward-looking statements that involve risks and uncertainties. Our and Nabors' actual results could differ materially from those anticipated in these forward- looking statements as a result of certain factors, including the risks faced by us and Nabors described below and elsewhere in this offering circular. RISKS RELATING TO THE EXCHANGE OFFER NEITHER OUR BOARD OF DIRECTORS NOR NABORS' BOARD OF DIRECTORS HAS MADE A RECOMMENDATION WITH REGARD TO WHETHER OR NOT YOU SHOULD TENDER YOUR OLD SECURITIES IN THE EXCHANGE OFFER, AND NEITHER WE NOR NABORS HAS OBTAINED A THIRD-PARTY DETERMINATION THAT THE EXCHANGE OFFER IS FAIR TO HOLDERS OF THE OLD SECURITIES. Neither we nor Nabors is making a recommendation as to whether holders of the Old Securities should exchange them. Neither we nor Nabors has retained and neither of us intends to retain any unaffiliated representative to act solely on behalf of the holders of the Old Securities for purposes of negotiating the terms of the Exchange Offer or the New Securities and/or preparing a report concerning the fairness of the Exchange Offer. Neither we nor Nabors can assure holders of the Old Securities that the value of the New Securities received in the Exchange Offer will in the future equal or exceed the value of the Old Securities tendered and neither we nor Nabors takes a position as to whether you ought to participate in the Exchange Offer. THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE EXCHANGE OF THE OLD SECURITIES FOR THE NEW SECURITIES ARE UNCLEAR. The United States federal income tax consequences of the Exchange Offer are unclear. We intend to take the position that the modifications to the Old Securities resulting from the exchange of Old Securities for New Securities should not constitute an exchange of the Old Securities for United States federal income tax purposes. That position, however, is subject to uncertainty and could be challenged by the IRS. Consistent with our position, the New Securities should be treated as a continuation of the Old Securities and there should be no United States federal income tax consequences to a holder who exchanges Old Securities for New Securities pursuant to the Exchange Offer. If, contrary to our position, the exchange constitutes an "exchange" for United States federal income tax purposes, the tax consequences to you could materially differ. For example, under one possible alternative characterization, a holder could be required to recognize ordinary income in an amount equal to the excess of the fair market value of the New Securities received in the exchange over the holder's adjusted tax basis in the Old Securities (which excess is likely to be substantial in the case of a holder who purchased the Old Securities in the initial offering). See "Certain Material United States Federal Income Tax Considerations." RISKS RELATED TO THE OLD SECURITIES AND THE NEW SECURITIES THE MARKET PRICE OF THE NEW SECURITIES AND THE OLD SECURITIES COULD BE SIGNIFICANTLY AFFECTED BY THE MARKET PRICE OF NABORS' COMMON SHARES. We expect that the market price of the New Securities and the Old Securities could be significantly affected by the market price of Nabors' common shares. This may result in greater volatility in the market price of the New Securities and the Old Securities than would be expected for nonconvertible or nonexchangeable debt securities. The 15 market price of Nabors' common shares will likely continue to fluctuate in response to factors including the following, many of which are beyond our control: - quarterly fluctuations in Nabors' operating and financial results, - changes in financial estimates and recommendations by financial analysts, - changes in the ratings of the New Securities or our other securities or securities of Nabors, - developments related to litigation or regulatory proceedings involving us or Nabors, - fluctuations in the stock price and operating results of Nabors' competitors, - dispositions, acquisitions and financings, and - general conditions in the industries in which we and Nabors operate. In addition, the stock markets in general, including the American Stock Exchange, have experienced price and trading fluctuations. These fluctuations have resulted in volatility in the market prices of securities that often has been unrelated or disproportionate to changes in operating performance. These broad market fluctuations may affect adversely the market prices of the New Securities, the Old Securities and Nabors' common shares. WE MAY NOT HAVE SUFFICIENT FUNDS TO PAY THE PRINCIPAL RETURN UPON EXCHANGE OR TO PURCHASE THE NEW SECURITIES OR THE OLD SECURITIES UPON A FUNDAMENTAL CHANGE OR OTHER PURCHASE DATE AS REQUIRED BY THE RESPECTIVE INDENTURES GOVERNING THE NEW SECURITIES AND THE OLD SECURITIES. Upon exchange of the New Securities pursuant to the terms of the indenture relating to the New Securities, we will be required to pay cash in the amount of the "principal return" (as defined in the indenture governing the New Securities). In addition, on June 15, 2008, June 15, 2013, and June 15, 2018, holders of the New Securities and Old Securities may require us to purchase their securities for cash. Further, holders of the New Securities and Old Securities also may require us to purchase their securities upon a "Fundamental Change" as defined in the applicable indenture (with respect to New Securities, see "Description of the New Securities -- Repurchase at the Option of the Holder Upon a Fundamental Change"). A Fundamental Change also may constitute an event of default, and result in the acceleration of the maturity of our then existing indebtedness, under another indenture or other agreement. We cannot assure you that we would have sufficient financial resources, or would be able to arrange financing, to pay the required principal return or the purchase price of the New Securities or Old Securities exchanged or tendered by holders. Furthermore, the terms of our then existing indebtedness or other agreements may contain financial covenants or other provisions that could be violated by payment of the principal return or the repurchase of the New Securities. Failure by us to pay the principal return upon exchange or purchase the New Securities or Old Securities when required will result in an event of default with respect to the New Securities or Old Securities, as the case may be. ALTHOUGH THE NEW SECURITIES AND OLD SECURITIES ARE DESIGNATED AS SENIOR, YOUR RIGHT TO RECEIVE PAYMENT ON THE NEW SECURITIES OR OLD SECURITIES AND THE APPLICABLE GUARANTEE IS UNSECURED AND WILL BE EFFECTIVELY SUBORDINATED TO ANY EXISTING AND FUTURE SECURED DEBT OF NABORS DELAWARE, IN THE CASE OF NEW SECURITIES AND OLD SECURITIES, AND NABORS, IN THE CASE OF THE GUARANTEES, TO THE EXTENT OF THE VALUE OF THE COLLATERAL THEREFOR AND THE NEW SECURITIES AND OLD SECURITIES AND THE APPLICABLE GUARANTEE WILL BE EFFECTIVELY SUBORDINATED TO EXISTING AND FUTURE INDEBTEDNESS AND OTHER LIABILITIES OF OUR AND NABORS' SUBSIDIARIES. The New Securities and the Old Securities are general senior unsecured obligations and therefore will be effectively subordinated in right of payment to our existing or future secured indebtedness and Nabors' guarantee is effectively subordinated in right of payment to the claims of existing and future secured creditors of Nabors, in each case, to the extent of the collateral therefor. If we default on the New Securities or the Old Securities, or become bankrupt, liquidate or reorganize, any secured creditors could use their collateral to satisfy their secured indebtedness before you would receive any payment on the New Securities or the Old Securities. If the value of such collateral is not sufficient to pay any secured indebtedness in full, our secured creditors would share the value of our other assets, if any, with you and the holders of other claims against us which rank equally with the New Securities and the Old Securities. The guarantee of the New Securities and the guarantee of the Old Securities will have a similar ranking 16 with respect to secured indebtedness of Nabors as the New Securities and the Old Securities do with respect to our secured indebtedness. In addition, we derive substantially all our income from, and hold substantially all our assets through, our subsidiaries. As a result, we and Nabors will depend on distributions from our subsidiaries in order to meet our payment obligations under any debt securities, including the New Securities and the Old Securities and the guarantee and our other obligations. Accordingly, our and Nabors' rights to receive any assets of any subsidiary, and therefore the right of our and Nabors' creditors to participate in those assets, will be effectively subordinated to the claims of that subsidiary's creditors, including trade creditors. As of September 30, 2004, Nabors and its subsidiaries had approximately $2.0 billion of indebtedness, excluding intercompany indebtedness. IF YOU HOLD NEW SECURITIES OR OLD SECURITIES, YOU WILL NOT BE ENTITLED TO ANY RIGHTS WITH RESPECT TO NABORS' COMMON SHARES, BUT YOU WILL BE SUBJECT TO ALL CHANGES MADE WITH RESPECT TO NABORS' COMMON SHARES. If you hold New Securities or Old Securities, you will not be entitled to any rights with respect to Nabors' common shares (including, without limitation, voting rights and rights to receive any dividends or other distributions on Nabors' common shares), but you will be subject to all changes affecting the common shares. You will only be entitled to rights on the common shares if and when we deliver common shares to you upon exchange of your New Securities or the Old Securities and in limited cases under the exchange rate adjustments of the New Securities or the Old Securities. For example, in the event that an amendment is proposed to Nabors' memorandum of association or bye-laws requiring shareholder approval and the record date for determining the shareholders of record entitled to vote on the amendment occurs prior to delivery of the common shares, you will not be entitled to vote on the amendment, although you will nevertheless be subject to any changes in the powers, preferences or special rights of Nabors' common shares. THE NEW SECURITIES WILL NOT AND THE OLD SECURITIES DO NOT CONTAIN CERTAIN RESTRICTIVE COVENANTS, AND THERE IS LIMITED PROTECTION IN THE EVENT OF A FUNDAMENTAL CHANGE. The indenture under which the New Securities will be issued will not contain restrictive covenants that would protect you from several kinds of transactions that may adversely affect you. In particular, the indenture for the New Securities will not and the indenture for the Old Securities does not contain covenants that will limit our ability to pay dividends or make distributions on or redeem our capital stock or limit our ability to incur additional indebtedness and, therefore, protect you in the event of a highly leveraged transaction or other similar transaction. In addition, the requirement that we offer to repurchase the New Securities upon a Fundamental Change is limited to the transactions specified in the definition of a "Fundamental Change" in the applicable indenture. See "Description of the New Securities -- Repurchase at the Option of the Holder Upon a Fundamental Change." Accordingly, we could enter into certain transactions, such as acquisitions, refinancings or a recapitalization, that could affect our capital structure and the value of Nabors' common shares but would not constitute a "Fundamental Change." RISKS RELATED TO THE NEW SECURITIES WE CANNOT ASSURE THAT AN ACTIVE TRADING MARKET WILL DEVELOP FOR THE NEW SECURITIES. There is no established trading market for the New Securities and the New Securities will not be listed on any securities exchange. Although the Old Securities are currently traded on PORTAL and it is anticipated that the New Securities will be traded on PORTAL, there can be no assurance as to: (1) the liquidity of any market for the New Securities, (2) the ability of the holders to sell their New Securities, or (3) the prices at which holders of the New Securities would be able to sell their New Securities. The New Securities could trade at prices higher or lower than the Old Securities depending on many factors. If an active trading market does not develop, the market price and liquidity of the New Securities may be adversely affected. YOU ARE URGED TO CONSIDER THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF OWNING THE NEW SECURITIES AND THE NABORS' COMMON SHARES THAT MAY BE ISSUED UPON EXCHANGE OF THE NEW SECURITIES. We and Nabors intend to take the position that the exchange of Old Securities for New Securities should not constitute an "exchange" of the Old Securities for United States federal income tax purposes, and that the New 17 Securities should be treated as a continuation of the Old Securities and should continue to be subject to the same rules governing the treatment of contingent payment debt instruments as were applicable to the Old Securities. By participating in the Exchange Offer, each holder will be deemed to have agreed, pursuant to terms of the indenture for the New Securities, to treat the New Securities as subject to the rules that apply to contingent payment debt obligations and to continue to accrue interest in the same manner and amount as described in the offering memorandum relating to the Old Securities. Among other things, pursuant to those rules, a holder of the New Securities is required to accrue interest income on the New Securities for each year, in the amounts described in the offering memorandum relating to the Old Securities, regardless of whether the holder uses the cash or accrual method of tax accounting, and in excess of the accruals on the New Securities for non-tax purposes and any contingent interest payments actually received in that year. In addition, under the United States federal income tax laws, a United States holder will recognize ordinary income, if any, upon a sale, exchange, redemption or repurchase of the New Securities at a gain. In calculating such gain, the amount realized by a United States holder will include, in the case of an exchange, the amount of cash and the fair market value of any shares received. If, contrary to our position, the exchange constitutes an "exchange" for United States federal income tax purposes, the tax consequences to you could materially differ. Without regard to whether the exchange of Old Securities for New Securities constitutes an "exchange" for United States federal income tax purposes, if at any time Nabors makes a distribution of property to Nabors' shareholders that would be taxable to the shareholders as a dividend for United States federal income tax purposes and, in accordance with the anti-dilution provisions of the New Securities, the exchange rate of the New Securities is increased, such increase may be deemed to be the payment of a taxable dividend to holders of the New Securities. Holders are urged to consult their own tax advisors as to the United States federal, state, local or foreign income and other tax consequences of acquiring, owning and disposing of the New Securities and the cash and Nabors' common shares, if any, payable upon exchange of the New Securities. RESALES OF THE NEW SECURITIES AND THE NABORS' COMMON SHARES ISSUABLE UPON EXCHANGE OF THE NEW SECURITIES MAY BE SUBJECT TO LEGAL RESTRICTIONS. The New Securities and the Nabors' common shares into which the New Securities may be exchanged have not been registered under the Securities Act or any state securities laws. Unless they are registered, the New Securities and the Nabors' common shares issuable upon exchange thereof may not be offered or sold except pursuant to exemptions from registration. Although we will be required to use our reasonable best efforts to register the resale by holders of the New Securities and the Nabors' common shares issuable upon exchange thereof, a resale registration statement will not be available for at least some period of time after the initial consummation of the Exchange Offer with respect to the New Securities and may not be continuously available if it becomes effective. Furthermore, a holder of New Securities must take certain actions, including submitting a duly completed notice and questionnaire, and undertake certain obligations to be listed in a prospectus. If a holder is not listed in a prospectus related to an effective resale registration statement, the holder may be restricted in its ability to publicly resell New Securities. RISKS RELATED TO RETENTION OF THE OLD SECURITIES IF YOU DO NOT EXCHANGE YOUR OLD SECURITIES, THE OLD SECURITIES YOU RETAIN MAY BECOME LESS LIQUID AS A RESULT OF THE EXCHANGE OFFER. If a significant number of Old Securities are exchanged in the Exchange Offer, the liquidity of the trading market for the Old Securities, if any, after the completion of the Exchange Offer may be substantially reduced. Any Old Securities exchanged will reduce the aggregate number of Old Securities outstanding. As a result, the Old Securities may trade at a discount to the price at which they would trade if the transactions contemplated by this offering circular were not consummated, subject to prevailing interest rates, the market for similar securities and other factors. We cannot assure you that an active market in the Old Securities will exist or be maintained and we cannot assure you as to the prices at which the Old Securities may be traded. 18 RISKS RELATED TO OUR COMPANY'S AND NABORS' BUSINESSES FLUCTUATIONS IN OIL AND GAS PRICES COULD ADVERSELY AFFECT DRILLING ACTIVITY AND OUR AND NABORS' REVENUES, CASH FLOWS AND PROFITABILITY. The Company's and Nabors' operations are materially dependent upon the level of activity in oil and gas exploration and production. Both short-term and long-term trends in oil and gas prices affect the level of such activity. Oil and gas prices and, therefore, the level of drilling, exploration and production activity can be volatile. Worldwide military, political and economic events, including initiatives by the Organization of Petroleum Exporting Countries, may affect both the demand for, and the supply of, oil and gas. Weather conditions, governmental regulation (both in the United States and elsewhere), levels of consumer demand, the availability of pipeline capacity, and other factors beyond our and Nabors' control may also affect the supply of and demand for oil and gas. Fluctuations during the last few years in the demand and supply of oil and gas have contributed to, and are likely to continue to contribute to, price volatility. We and Nabors believe that any prolonged reduction in oil and gas prices would depress the level of exploration and production activity. This would likely result in a corresponding decline in the demand for our and Nabors' services and could have a material adverse effect on our and Nabors' revenues, cash flows and profitability. Lower oil and gas prices could also cause our and Nabors' customers to seek to terminate, renegotiate or fail to honor our and Nabors' drilling contracts; affect the fair market value of our and Nabors' rig fleet which in turn could trigger a writedown for accounting purposes; affect our and Nabors' ability to retain skilled rig personnel; and affect our and Nabors' ability to obtain access to capital to finance and grow our and Nabors' businesses. There can be no assurances as to the future level of demand for our and Nabors' services or future conditions in the oil and gas and oilfield services industries. OUR COMPANY AND NABORS OPERATE IN A HIGHLY COMPETITIVE INDUSTRY WITH EXCESS DRILLING CAPACITY, WHICH MAY ADVERSELY AFFECT OUR AND NABORS' RESULTS OF OPERATIONS. The oilfield services industry in which we and Nabors operate is very competitive. Contract drilling companies compete primarily on a regional basis, and competition may vary significantly from region to region at any particular time. Many drilling, workover and well-servicing rigs can be moved from one region to another in response to changes in levels of activity and provided market conditions warrant, which may result in an oversupply of rigs in an area. In many markets in which we and Nabors operate, the number of rigs available for use exceeds the demand for rigs, resulting in price competition. Most drilling and workover contracts are awarded on the basis of competitive bids, which also results in price competition. The land drilling market generally is more competitive than the offshore drilling market because there are larger numbers of rigs and competitors. Certain competitors are present in more than one of the regions in which we and Nabors operate, although no one competitor operates in all of these areas. In the United States Lower 48 states, there are several hundred competitors with smaller national, regional or local rig operations. In the Alaska market, we and Nabors have two principal competitors. In Canada and offshore, we and Nabors compete with several firms of varying size, many of which have more significant operations in those areas than the Company and Nabors. Internationally, we and Nabors compete directly with various competitors at each location where the Company and Nabors operate. We and Nabors believe that the market for land drilling and workover contracts will continue to be competitive for the foreseeable future. Certain of our and Nabors' competitors internationally and offshore may be better positioned in certain markets, allowing them to compete more effectively. THE NATURE OF OUR AND NABORS' OPERATIONS PRESENTS INHERENT RISKS OF LOSS THAT, IF NOT INSURED OR INDEMNIFIED AGAINST, COULD ADVERSELY AFFECT OUR AND NABORS' RESULTS OF OPERATIONS. Our and Nabors' operations are subject to many hazards inherent in the drilling, workover and well-servicing industries, including blowouts, cratering, explosions, fires, loss of well control, loss of hole, damaged or lost drilling equipment and damage or loss from inclement weather or natural disasters. Any of these hazards could result in personal injury or death, damage to or destruction of equipment and facilities, suspension of operations, environmental damage and damage to the property of others. Our and Nabors' offshore operations are also subject to the hazards of marine operations including capsizing, grounding, collision, damage from heavy weather or sea conditions and unsound ocean bottom conditions. In addition, our and Nabors' international operations are subject to risks of war, civil 19 disturbances or other political events. Generally, drilling contracts provide for the division of responsibilities between a drilling company and its customer, and we and Nabors seek to obtain indemnification from our respective customers by contract for certain of these risks. To the extent that we and Nabors are unable to transfer such risks to customers by contract or indemnification agreements, we and Nabors seek protection through insurance. However, there is no assurance that such insurance or indemnification agreements will adequately protect us and Nabors against liability from all of the consequences of the hazards described above. The occurrence of an event not fully insured or indemnified against, or the failure of a customer or insurer to meet its indemnification or insurance obligations, could result in substantial losses. In addition, there can be no assurance that insurance will be available to cover any or all of these risks, or, even if available, that it will be adequate or that insurance premiums or other costs will not rise significantly in the future, so as to make such insurance prohibitive. This is particularly of concern in the wake of the September 11, 2001, terrorist attacks, which adversely affected an already tightening insurance market. It is likely that we will face continued upward pressure in our and Nabors' upcoming insurance renewals, our and Nabors' premiums and deductibles will be higher, and certain insurance coverage either will be unavailable or more expensive than it has been in the past. Moreover, our and Nabors' insurance coverage generally provides that we and Nabors assume a portion of the risk in the form of an insurance coverage deductible. We and Nabors expect that we may choose to increase the levels of deductibles (and thus assume a greater degree of risk) from time to time in order to minimize the effect of insurance premium increases. THE PROFITABILITY OF OUR AND NABORS' INTERNATIONAL OPERATIONS COULD BE ADVERSELY AFFECTED BY WAR, CIVIL DISTURBANCE OR POLITICAL OR ECONOMIC TURMOIL. Our Company and Nabors derive a significant portion of business from international markets, including major operations in Canada, the Middle East, the Far East and South and Central America. These operations are subject to various risks, including the risk of war, civil disturbances and governmental activities, that may limit or disrupt markets, restrict the movement of funds or result in the deprivation of contract rights or the taking of property without fair compensation. In certain countries, our and Nabors' operations may be subject to the additional risk of fluctuating currency values and exchange controls. In the international markets in which we and Nabors operate, we and Nabors are subject to various laws and regulations that govern the operation and taxation of our and Nabors' businesses and the import and export of our and Nabors' equipment from country to country, the imposition, application and interpretation of which can prove to be uncertain. CHANGES TO OR NONCOMPLIANCE WITH GOVERNMENTAL REGULATION OR EXPOSURE TO ENVIRONMENTAL LIABILITIES COULD ADVERSELY AFFECT OUR AND NABORS' RESULTS OF OPERATIONS. The drilling of oil and gas wells is subject to various federal, state, local and foreign laws, rules and regulations. Our and Nabors' cost of compliance with these laws and regulations may be substantial. For example, federal law imposes specific design and operational standards on rigs and platforms. Failure to comply with these requirements could subject us and Nabors to substantial civil and criminal penalties as well as potential court injunctions. In addition, federal law imposes a variety of regulations on "responsible parties" related to the prevention of oil spills and liability for damages from such spills. As an owner and operator of onshore and offshore rigs and transportation equipment, we and Nabors may be deemed to be responsible parties under federal law. In addition, our and Nabors' well-servicing, workover and production services operations routinely involve the handling of significant amounts of waste materials, some of which are classified as hazardous substances. Our and Nabors' operations and facilities are subject to numerous state and federal environmental laws, rules and regulations, including, without limitation, laws concerning the containment and disposal of hazardous substances, oilfield waste and other waste materials, the use of underground storage tanks and the use of underground injection wells. We and Nabors generally require customers to contractually assume responsibility for compliance with environmental regulations. However, we and Nabors are not always successful in allocating to customers all of these risks nor is there any assurance that the customer will be financially able to bear those risks assumed. Our Company and Nabors employ personnel responsible for monitoring environmental compliance and arranging for remedial actions that may be required from time to time and also use outside experts to advise on and assist with its environmental compliance efforts. Costs that we and Nabors incur to investigate and remediate contaminated sites are expensed unless the remediation extends the useful lives of assets employed at the site. Remediation costs that 20 extend the useful lives of the assets are capitalized and amortized over the remaining useful lives of such assets. Liabilities are recorded when the need for environmental assessments and/or remedial efforts become known or probable and the cost can be reasonably estimated. Laws protecting the environment generally have become more stringent than in the past and are expected to continue to become more so. Violation of environmental laws and regulations can lead to the imposition of administrative, civil or criminal penalties, remedial operations, and in some cases injunctive relief. Such violations could also result in liabilities for personal injuries, property damage, and other costs and claims. Under the Comprehensive Environmental Response, Compensation and Liability Act, also known as CERCLA or Superfund, and related state laws and regulations, liability can be imposed jointly on the entire group of responsible parties or separately on any one of the responsible parties, without regard to fault or the legality of the original conduct on certain classes of persons that contributed to the release of a "hazardous substance" into the environment. Under CERCLA, such persons may be liable for the costs of cleaning up the hazardous substances that have been released into the environment and for damages to natural resources, and it is not uncommon for the neighboring land owners and other third parties to file claims for personal injury, property damage and recovery of response costs allegedly caused by the hazardous substances released into the environment. The Company and Nabors have been notified of their possible responsibility with respect to the cleanup of a federal national Priority list site and a state abandoned site, which were formerly operated by parties unrelated to us and Nabors as oilfield waste disposal facilities. In addition, we and Nabors have been named as a potentially responsible party with respect to the cleanup of three other sites, which were formerly operated by various parties unrelated to us and Nabors. We and Nabors believe that our respective cost to clean up each of these sites will be less than $100,000. Although at this time information regarding ours and Nabors' possible responsibility with respect to cleanup of the federal national priority list site and the state abandoned site has not been fully developed and it is not feasible to predict such outcome with certainty, we and Nabors are of the opinion that the ultimate resolution if these matters should not have a material adverse effect on our or Nabors' financial positions results of operations or cash flows. Changes in federal and state environmental regulations may also negatively impact oil and natural gas exploration and production companies, which in turn could have a material adverse effect on us and Nabors. For example, legislation has been proposed from time to time in Congress which would reclassify certain oil and natural gas production wastes as hazardous wastes, which would make the reclassified wastes subject to more stringent handling, disposal and clean-up requirements. If enacted, such legislation could dramatically increase operating costs for oil and natural gas companies and could reduce the market for our and Nabors' services by making many wells and/or oilfields uneconomical to operate. The Oil Pollution Act of 1990, as amended, contains provisions specifying responsibility for removal costs and damages resulting from discharges of oil into navigable waters or onto the adjoining shorelines. Among other requirements, this law requires owners and operators of vessels over 300 gross tons to provide the United States Coast Guard with evidence of financial responsibility to cover the costs of cleaning up oil spills from such vessels. Nabors believes it has provided satisfactory evidence of financial responsibility to the United States Coast Guard for all vessels over 300 tons. In addition, the Outer Continental Shelf Lands Act provides the federal government with broad discretion in regulating the leasing of offshore oil and gas production sites. Because Nabors' offshore support vessel operations rely on offshore oil and gas exploration and production, if the government were to exercise its authority under this law to restrict the availability of offshore oil and gas leases, such an action could have a material adverse effect on our and Nabors' offshore support vessel operations. In October 2004, the U.S. Congress passed and the President signed into law the American Jobs Creation Act of 2004. The Act did not impact the corporate reorganization completed by Nabors effective June 24, 2002, that made us a foreign entity. It is possible that future changes to tax laws (including tax treaties) could have an impact on our ability to realize the tax savings recorded to date as well as future tax savings as a result of our corporate reorganization, depending on any responsive action taken by Nabors. 21 PROPOSED COAST GUARD REGULATIONS AND ACTIONS COULD CURTAIL NABORS' ABILITY TO TIME CHARTER VESSELS IN UNITED STATES COASTWISE TRADE. Nabors' Sea Mar operations time charter supply vessels to offshore operators, primarily in U.S. waters. The vessels which operate in U.S. coastwise trade are owned by one of our financing company subsidiaries, but are operated and managed by a U.S. citizen-controlled company pursuant to long-term bareboat charters. Our Sea Mar operations charter the vessels from this U.S. operating company in connection with our own offshore activities in the Gulf of Mexico and in support of other offshore operators. As a result of recent legislation, beginning in August 2007, Sea Mar will no longer be able to use this arrangement to qualify vessels for employment in the U.S. coastwise trade. Accordingly, we will be required to restructure the arrangement, redeploy the vessels outside the United States, or sell the vessels by no later than such time. Under the proposed, but not yet final, regulations issued by the United States Coast Guard on February 4, 2004, Sea Mar's ability to use its current structure to operate vessels in U.S. coastwise trade would end on February 4, 2007. Additionally, on February 4, 2004, the United States Coast Guard notified us that it is considering an appeal of the United States Coast Guard's original issuance in June 2002 of the coastwise trade endorsements for the vessels bareboat chartered to the U.S. citizen qualified company. The coastwise trade endorsements on the documents of the vessels issued by the United States Coast Guard authorize the vessels to engage in the U.S. coastwise trade. If the appeal is decided against us, we could lose the ability to market the vessels for use in U.S. coastwise trade in accordance with that decision. As of September 30, 2004, the net assets of Sea Mar totaled approximately $162.3 million. During the three and nine months ended September 30, 2004, Sea Mar had income before income taxes totaling $.7 million and $.3 million, respectively. AS HOLDING COMPANIES, WE AND NABORS DEPEND ON OUR RESPECTIVE SUBSIDIARIES TO MEET OUR RESPECTIVE FINANCIAL OBLIGATIONS. As holding companies, we and Nabors have no significant assets other than the stock of our respective subsidiaries. In order to meet financial needs, we and Nabors rely exclusively on repayments of interest and principal on intercompany loans made by us and Nabors to our and Nabors' operating subsidiaries and income from dividends and other cash flow from such subsidiaries. There can be no assurance that our or Nabors' operating subsidiaries will generate sufficient net income to pay upstream dividends or cash flow to make payments of interest and principal to us or Nabors in respect of their intercompany loans. In addition, from time to time, our and Nabors' operating subsidiaries may enter into financing arrangements which may contractually restrict or prohibit such upstream payments to us and Nabors. There may also be adverse tax consequences associated with making dividend payments upstream. NABORS DOES NOT CURRENTLY INTEND TO PAY DIVIDENDS. Nabors has not declared or paid any cash dividends on its common shares since 1982. Nabors does not currently intend to pay any cash dividends on its common shares. However, Nabors notes that there have been recent positive industry trends, and changes in tax law providing more favorable treatment to dividends. As a result, Nabors can give no assurance that it will not reevaluate its position on dividends in the future. BECAUSE NABORS' OPTION, WARRANT AND CONVERTIBLE SECURITIES HOLDERS HAVE A CONSIDERABLE NUMBER OF COMMON SHARES AVAILABLE FOR ISSUANCE AND RESALE, SIGNIFICANT ISSUANCES OR RESALES IN THE FUTURE MAY ADVERSELY AFFECT THE MARKET PRICE OF NABORS' COMMON SHARES. As of November 9, 2004, there were 400,000,000 authorized Nabors' common shares, of which 149,513,859 shares were outstanding. In addition, 32,727,119 Nabors' common shares were reserved for issuance pursuant to option and employee benefit plans and 18,476,525 shares were reserved for issuance upon exchange or repurchase of the Old Securities. In addition, in connection with Nabors' Enserco and Ryan acquisitions, up to 245,823 Nabors' common shares could be issuable on exchange of the shares of Nabors Exchangeco (Canada) Inc. 22 Nabors also may sell up to $700 million of securities of various types in connection with a shelf registration statement declared effective on January 16, 2003 by the Securities and Exchange Commission. The sale, or availability for sale, of substantial amounts of Nabors' common shares in the public market, whether directly by Nabors or resulting from the exercise of warrants or options (and, where applicable, sales pursuant to Rule 144) or the issuance of common shares upon the exchange of Old Securities, would be dilutive to existing securityholders, could adversely affect the prevailing market price of Nabors' common shares and could impair Nabors' ability to raise additional capital through the sale of equity securities. Nabors is not restricted from issuing additional common shares during the life of either the Old Securities or the New Securities and, in doing so, has no obligation to consider your interests as a holder of Old Securities or New Securities for any reason. If Nabors issues additional common shares, it may materially and adversely affect the price of Nabors' common shares and, in turn, the price of the Old Securities or New Securities. PROVISIONS OF NABORS' ORGANIZATIONAL DOCUMENTS MAY DETER A CHANGE OF CONTROL TRANSACTION AND DECREASE THE LIKELIHOOD OF A SHAREHOLDER RECEIVING A CHANGE OF CONTROL PREMIUM. Nabors' board of directors is divided into three classes, with each class serving a staggered three year term. In addition, Nabors' board of directors has the authority to issue a significant amount of common shares and up to 25,000,000 preferred shares and to determine the price, rights (including voting rights), conversion ratios, preferences and privileges of the preferred shares, in each case without further vote or action by the holders of the common shares. Although Nabors has no present plans to issue preferred shares, the classified board and Nabors' board's ability to issue additional preferred shares may discourage, delay or prevent changes in control of Nabors that are not supported by Nabors' board, thereby possibly preventing certain of Nabors' shareholders from realizing a possible premium on their shares. In addition, the requirement in the New Securities to pay a make-whole premium in the form of an increase in the exchange rate in certain circumstances could have the effect of making a change in control of the Company more expensive. NABORS AND ITS SUBSIDIARIES HAVE A SUBSTANTIAL AMOUNT OF DEBT OUTSTANDING, WHICH COULD AFFECT NABORS' FINANCIAL POSITION AND PREVENT IT FROM FULFILLING ITS OBLIGATIONS. Nabors and its subsidiaries had approximately $2.0 billion in long-term debt outstanding at September 30, 2004, resulting in a funded debt to capital ratio of 0.42:1 and a net funded debt to capital ratio of 0.20:1 as of September 30, 2004. The funded debt to capital ratio is calculated by dividing funded debt by funded debt plus capital. Funded debt is defined as the sum of (1) short-term borrowings, (2) current portion of long-term debt and (3) long-term debt. Capital is defined as shareholders' equity. The net funded debt to capital ratio nets cash and cash equivalents and marketable and non-marketable securities ($1.3 billion as of September 30, 2004) against funded debt. This ratio is calculated by dividing net funded debt by net funded debt plus capital. Both of these ratios are a method for calculating the amount of leverage a company has in relation to its capital. Non-marketable securities consist of investments in overseas funds investing primarily in a variety of public and private U.S. and non-U.S. securities (including asset-backed securities and mortgage-backed securities, global structured asset securitizations, whole loan mortgages, and participations in whole loans and whole loan mortgages). These investments are classified as non-marketable because they do not have published fair values, and are recorded at cost in Nabors' consolidated balance sheets (the current portion is classified as non-marketable securities under current assets and the long-term portion is included as a component of other long-term assets). Nabors and its subsidiaries may still be able to incur substantially more debt. The terms of the indentures governing the Old Securities and the New Securities and the agreements governing Nabors' and its subsidiaries' other indebtedness permit additional borrowings and any such borrowings may be senior in right of payment to the Old Securities and the New Securities and the related guarantees. Nabors' and its subsidiaries' incurrence of additional debt could further exacerbate the risks described in this offering circular. 23 FORWARD-LOOKING INFORMATION This offering circular and the documents, incorporated in this offering circular by reference, contain forward-looking statements about our markets, demand for our products and services and our future results. Statements, such as these, that are not historical facts are "forward-looking statements" within the meaning of the safe harbor provisions of Section 27A of the Securities Act and Section 21E of the Securities Act of 1934. These forward-looking statements are based upon our analysis of currently available competitive, financial and economic data and our operating plans. They are inherently uncertain and investors should recognize that events and actual results could turn out to be significantly different from our expectations. By way of illustration, when used in this document, words such as "anticipate," "believe," "expect," "plan," "intend," "estimate," "project," "will," "should," "could," "may," "predict" and similar expressions are intended to identify forward-looking statements. You should consider the following key factors when evaluating these forward-looking statements: - fluctuations in worldwide prices of and demand for natural gas and oil; - fluctuations in levels of natural gas and oil exploration and development activities; - fluctuations in the demand for our and Nabors' services; - the existence of competitors, technological changes and developments in the oilfield services industry; - the existence of operating risks inherent in the oilfield services industry; - the existence of regulatory and legislative uncertainties; - the possibility of political instability, war or acts of terrorism in any of the countries in which we and Nabors do business; and - general economic conditions. Our and Nabors' businesses depend, to a large degree, on the level of spending by oil and gas companies for exploration, development and production activities. Therefore, a sustained increase or decrease in the price of natural gas or oil, which could have a material impact on exploration, development and production activities, could also materially affect our and Nabors' financial position, results of operations and cash flows. 24 RATIO OF EARNINGS TO FIXED CHARGES The Company, prior to June 24, 2002, the effective date of the reorganization of the Company under Nabors, a Bermuda company, and Nabors, after June 24, 2002, have calculated their ratio of earnings to fixed charges by dividing earnings by fixed charges. For purposes of calculating the ratio of earnings to fixed charges, earnings consist of pretax income from continuing operations less undistributed earnings from unconsolidated affiliates (net of dividends) plus amortization of capitalized interest and fixed charges (excluding capitalized interest). Fixed charges consist of interest incurred (whether expensed or capitalized), amortization of debt expense, and that portion of rental expense on operating leases deemed to be the equivalent of interest. The following table sets forth Nabors' ratio of earnings to fixed charges for each of the periods indicated: NABORS INDUSTRIES LTD. AND SUBSIDIARIES RATIO OF EARNINGS TO FIXED CHARGES
NINE MONTHS ENDED SEPTEMBER 30, YEAR ENDED DECEMBER 31 ------------- ------------------------------------- 2004 2003 2003 2002 2001 2000 1999 ----- ----- ----- ----- ----- ----- ----- Ratio (earnings divided by fixed charges before adjustments).............................................. 6.12x 2.99x 3.32x 2.90x 9.27x 6.50x 2.48x
25 PRICE RANGE AND DIVIDEND HISTORY OF NABORS' COMMON SHARES Nabors' common shares are traded on the American Stock Exchange under the symbol "NBR." The following table sets forth, for the periods indicated, the high and low sale price per share of Nabors' common shares, since the reorganization of Nabors as a Bermuda company, and the high and low sale price per share of Nabors Delaware's common stock, prior to the reorganization, in each case on the American Stock Exchange.
HIGH LOW ------- ------- 2002 -- NABORS DELAWARE First Quarter............................................... 43.00 26.98 Second Quarter (through June 25, 2002)...................... 49.98 36.00 2002 -- NABORS Second Quarter (from June 26, 2002 to June 30, 2002)........ 36.99 35.13 Third Quarter............................................... 37.63 26.14 Fourth Quarter.............................................. 39.30 29.79 2003 -- NABORS First Quarter............................................... 42.60 32.20 Second Quarter.............................................. 45.85 37.65 Third Quarter............................................... 40.50 33.87 Fourth Quarter.............................................. 42.52 35.76 2004 -- NABORS First Quarter............................................... 49.32 41.01 Second Quarter.............................................. 47.70 40.02 Third Quarter............................................... 47.87 41.25 Fourth Quarter (through November 11, 2004).................. 52.04 45.87
On November 11, 2004, the last sale price reported on the American Stock Exchange for Nabors' common shares was $48.23 per share. DIVIDEND POLICY Nabors has not declared or paid any cash dividends on its common shares since 1982. Nabors does not currently intend to pay any cash dividends on its common shares. However, Nabors notes that there have been recent positive industry trends, and changes in tax law providing more favorable treatment to dividends. As a result, Nabors can give no assurance that it will not reevaluate its position on dividends in the future. 26 DESCRIPTION OF NABORS' SHARE CAPITAL Nabors' authorized share capital consists of 425,000,000 shares of capital stock of which 400,000,000 are common shares, par value US$0.001 per share, and 25,000,000 are preferred shares, par value US$0.001 per share. The following summary is qualified in its entirety by the provisions of Nabors' Memorandum of Association, dated December 10, 2001 and Nabors' Amended and Restated Bye-Laws adopted on June 24, 2002, which are both publicly available. See "Where You Can Find More Information." As of November 9, 2004, there were 149,513,859 Nabors' common shares outstanding and one Nabors' special voting preferred share, par value US$0.001 per share, outstanding. No other shares of any class or series were outstanding as of November 9, 2004. COMMON SHARES Holders of Nabors' common shares are entitled to one vote on any question to be decided on a show of hands and one vote per common share on a poll on all matters submitted to a vote of the shareholders of Nabors. Except as specifically provided in Nabors' bye-laws or in The Companies Act 1981 (Bermuda), as amended (which we refer to as the Companies Act in this offering circular), any action to be taken by shareholders at any meeting at which a quorum is in attendance shall be decided by a majority of the issued shares present in person or represented by proxy and entitled to vote. There are no limitations imposed by Bermuda law or Nabors' bye-laws on the right of shareholders who are not Bermuda residents to hold or to vote their Nabors' common shares. Nabors' bye-laws do not provide for cumulative voting. A special meeting of shareholders may be called by Nabors' board of directors or as otherwise provided by the Companies Act and applicable law. Any action, except the removal of auditors and directors, required or permitted to be taken at any annual or special meeting of shareholders may be taken by unanimous resolution if the resolution is signed by each shareholder, or their proxy, entitled to vote on the matter. Holders of Nabors' common shares do not have a preemptive or preferential right to purchase any other securities of Nabors. Nabors' common shares have no sinking fund provision. PREFERRED SHARES The board of directors of Nabors is authorized, without further shareholder action, to issue from time to time up to 25,000,000 preferred shares in one or more classes or series, and fix for each such class or series such voting power, full or limited, or no voting power, and such designations, preferences and relative, participating, optional or other special rights and such qualifications, limitations or restrictions thereof, as are provided in the resolutions adopted by the board of directors providing for the issuance of such class or series. Nabors' board of directors in authorizing such class or series may provide that any such class or series may be: - subject to redemption at the option of Nabors or the holders, or both, at such time or times and at such price or prices; - entitled to receive dividends (which may be cumulative or non-cumulative) at such rates, on such conditions, and at such times, and payable in preference to, or in relation to, the dividends payable on any other class or classes or any other series; - entitled to such rights upon the dissolution of, or upon any distribution of the assets of, Nabors; or - convertible into, or exchangeable for, shares of any other class or classes of shares, or of any other series of the same or any other class or classes of shares, of Nabors at such price or prices or at such rates of exchange and with such adjustments; in each case, as set forth in the resolutions authorizing that class or series of preferred shares. A series of preferred shares, consisting of one share, has been designated as a special voting preferred share, having a par value of US$0.001 per share and a liquidation preference of US$0.01. The special voting preferred share has been issued to Computershare Trust Company of Canada, as trustee under a voting and exchange trust agreement among Nabors, Nabors Exchangeco (Canada) Inc., a Canadian corporation and an indirect subsidiary of Nabors and such trustee. The special voting preferred share was issued in connection with Nabors' acquisition of Enserco Energy 27 Services Company Inc. and Ryan Energy Technologies Inc., both Canadian corporations. Nabors Exchangeco shares are exchangeable for Nabors' common shares, at each holder's option, on a one-for-one basis and are listed on the Toronto Stock Exchange. Additionally, these exchangeable shares have essentially identical rights as Nabors' common shares, including but not limited to voting rights and the right to receive dividends, if any. Except as otherwise required by law, Nabors' memorandum of association or Nabors' bye-laws, the one special voting preferred share will possess a number of votes for the election of directors and on all other matters submitted to a vote of Nabors' shareholders equal to the number of outstanding exchangeable shares of Nabors Exchangeco from time to time not owned by Nabors or any entity controlled by Nabors. The holders of Nabors' common shares and the holder of the special voting preferred share will vote together as a single class on all matters on which holders of Nabors' common shares are eligible to vote. In the event of Nabors' liquidation, dissolution or winding-up, all outstanding exchangeable shares will automatically be exchanged for Nabors' common shares, and the holder of the special voting preferred share will not be entitled to receive any assets available for distribution to Nabors' shareholders (other than the US$0.01 liquidation preference). The holder of the special voting preferred share will not be entitled to receive dividends. At such time as the one special voting preferred share has no votes attached to it because there are no exchangeable shares outstanding not owned by Nabors or an entity controlled by Nabors, the special voting preferred share will be redeemed by Nabors for an amount equal to US$0.01 and canceled. TRANSFER AGENT AND REGISTRAR The transfer agent and registrar for Nabors' common shares is Equiserve. ANTI-TAKEOVER EFFECTS OF PROVISIONS OF NABORS' MEMORANDUM OF ASSOCIATION AND BYE-LAWS Nabors' bye-laws have provisions that could have an anti-takeover effect. In addition, Nabors' bye-laws include an "advance notice" provision which places time limitations on shareholders' nominations of directors and submission of proposals for consideration at an annual general meeting. These provisions are intended to enhance the likelihood of continuity and stability in the composition of the board of directors and in the policies formulated by the board of directors and to encourage negotiations with the board of directors in transactions that may involve an actual or potential change of control of Nabors. The bye-laws provide that Nabors' board of directors will be divided into three classes serving staggered three-year terms. Directors can be removed from office prior to the expiration of their term only for cause by the affirmative vote of the holders of a majority of the voting power of Nabors on the relevant record date. The board of directors does not have the power to remove directors. As long as a quorum of directors remains and is present, vacancies on the board of directors may be filled by a majority vote of the remaining directors. Any general meeting can authorize the board of directors to fill any vacancy left unfilled at a general meeting. Each of these provisions can delay a shareholder from obtaining majority representation on the board of directors. The bye-laws also provide that the board of directors will consist of not less than five nor more than eighteen persons, the exact number to be set from time to time by the affirmative vote of a majority of the directors then in office. Accordingly, the board of directors, and not the shareholders, has the authority to determine the number of directors and could delay any shareholder from obtaining majority representation on the board of directors by enlarging the board of directors and filling the new vacancies with its own nominees. The bye-laws of Nabors provide that at any annual general meeting, only such business shall be conducted as shall have been brought before the meeting by or at the direction of the board of directors, by any shareholder who complies with certain procedures set forth in the bye-laws or by any shareholder pursuant to the valid exercise of the power granted under the Companies Act. For business to be properly brought before an annual general meeting by a shareholder in accordance with the terms of the bye-laws the shareholder must have given timely notice thereof in proper written form to the Secretary of Nabors and satisfied all requirements under applicable rules promulgated by the 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 28 meeting was mailed or public disclosure of the date of the annual general meeting was made, whichever occurs first. In order for a shareholder to nominate directors in connection with an annual general meeting of shareholders, a shareholder's notice of his intention to make such nominations must be received in proper written form as specified in the bye-laws of Nabors by the Secretary of Nabors within the time limits described above. In addition, the Companies Act provides for a mechanism by which not less than 100 shareholders acting together or any number of shareholders representing not less than one twentieth of the voting power of a Bermuda company may properly propose a resolution for consideration at a general meeting of such company. Subject to the terms of any other class of shares in issue, any action required or permitted to be taken by the holders of Nabors' common shares must be taken at a duly called annual or special general meeting of shareholders unless taken by written resolution of all holders of common shares. Under the bye-laws, special general meetings may be called at any time by the board of directors or when requisitioned by shareholders pursuant to the provisions of the Companies Act. The Companies Act currently permits shareholders holding not less than 10% of the paid up shares of a company entitled to vote at a general meeting to requisition a special general meeting. The board of directors is authorized, without obtaining any vote or consent of the holders of any class or series of shares unless expressly provided by the terms of issue of a class or series, to from time to time issue any authorized and unissued shares on such terms and conditions as it may determine. For example, the board of directors could authorize the issuance of preferred shares with terms and conditions that could discourage a takeover or other transaction that holders of some or a majority of the Nabors' common shares might believe to be in their best interests or in which holders might receive a premium for their shares over the then market price of the shares. 29 THE EXCHANGE OFFER GENERAL The Exchange Offer is being made in reliance on the exemption from registration provided by Section 3(a)(9) of the Securities Act, has not been registered with the Securities and Exchange Commission, and in reliance on exemptions under state securities laws. Securities that are obtained in a Section 3(a)(9) exchange generally assume the same character (i.e., restricted or unrestricted) as the securities that have been surrendered. On June 10, 2003, we completed the original offering of Old Securities. The offering was made pursuant to Rule 144A under the Securities Act and not registered under the Securities Act. We filed a registration statement with the Securities and Exchange Commission covering resales of the Old Securities and the Nabors' common shares issuable upon exchange of the Old Securities that became effective on August 21, 2003. The indenture under which the New Securities will be issued provides that we will use our reasonable best efforts to file, within 90 days of the consummation of the Exchange Offer, a registration statement relating to the resale of the New Securities and the Nabors' common shares issuable upon exchange of the New Securities pursuant to the indenture, and to use our reasonable best efforts to cause such registration statement to become effective under the Securities Act within 180 days after the consummation of the Exchange Offer. SECURITIES SUBJECT TO THE EXCHANGE OFFER We and Nabors are offering, upon the terms and subject to the conditions set forth in this offering circular and the accompanying Letter of Transmittal, to exchange $1,000 principal amount of New Securities for each $1,000 principal amount of validly tendered and accepted Old Securities. We are offering to exchange all of the Old Securities. However, the Exchange Offer is subject to the conditions described in this offering circular. CONDITIONS TO THE EXCHANGE OFFER Notwithstanding any other provision of the Exchange Offer, we will not be required to accept for exchange any Old Securities tendered, and we may terminate or amend the Exchange Offer if, at any time before the acceptance of the Old Securities for exchange, any of the following events occurs: (i) At least 50% of the aggregate principal amount outstanding of the Old Securities has not been validly tendered and not withdrawn at the Expiration Date. (ii) Any action or event shall have occurred, failed to occur or been threatened, any action shall have been taken, or any statute, rule, regulation, judgment, order, stay, decree or injunction shall have been promulgated, enacted, entered, enforced or deemed applicable to the Exchange Offer, by or before any court or governmental, regulatory or administrative agency, authority or tribunal, which either: - challenges the making of the Exchange Offer or the exchange of Old Securities under the Exchange Offer or might, directly or indirectly, prohibit, prevent, restrict or delay consummation of, or might otherwise adversely affect in any material manner, the Exchange Offer or the exchange of Old Securities under the Exchange Offer, or - in our reasonable judgment, could materially adversely affect the business, condition (financial or otherwise), income, operations, properties, assets, liabilities or prospects of Nabors and its subsidiaries, taken as a whole, or would be material to holders of Old Securities in deciding whether to accept the Exchange Offer. (iii) (a) Trading generally shall have been suspended or materially limited on or by, as the case may be, either of the American Stock Exchange or the National Association of Securities Dealers, Inc.; (b) there shall have been any suspension or limitation of trading of any securities of Nabors on any exchange or in the over-the-counter market; (c) a general banking moratorium shall have been declared by federal or New York authorities; or (d) there shall have occurred any outbreak or escalation of major hostilities in which the United States is 30 involved, any declaration of war by Congress or any other substantial national or international calamity or emergency and the effect of any such outbreak, escalation, declaration, calamity or emergency has a reasonable likelihood to make it impractical or inadvisable to proceed with completion of the Exchange Offer. (iv) The Trustee with respect to the Old Securities shall have objected in any respect to, or taken any action that could in our reasonable judgment adversely affect the consummation of the Exchange Offer or the exchange of Old Securities under the Exchange Offer, or the Trustee or any holder of Old Securities shall have taken any action that challenges the validity or effectiveness of the procedures used by us in making the Exchange Offer or the exchange of the Old Securities under the Exchange Offer. All of the foregoing conditions are for our sole benefit and we and Nabors may assert them regardless of the circumstances giving rise to any condition (including any action or inaction by us or Nabors). We and Nabors also may waive any condition at any time, in whole or in part, in our and Nabors' sole discretion. Our or Nabors failure at any time to exercise any of the foregoing rights will not constitute a waiver of that right and each right is an ongoing right that we and Nabors may assert at any time. Any determination that we and Nabors make concerning an event, development or circumstance described or referred to above shall be conclusive and binding. Moreover, we are free to terminate the Exchange Offer for any reason or no reason, in our and Nabors' sole and absolute discretion, and not accept any Old Securities. If any of the foregoing conditions are not satisfied, we and Nabors may, at any time before the expiration of the Exchange Offer: (a) terminate the Exchange Offer and return all tendered Old Securities to the holders thereof; (b) modify, extend or otherwise amend the Exchange Offer and retain all tendered Old Securities until the Expiration Date, as may be extended, subject, however, to the withdrawal rights of holders (see "-- Expiration Date; Extensions; Amendments" and "-- Proper Execution and Delivery of Letter of Transmittal -- Withdrawal of Tenders" below); or (c) waive the unsatisfied conditions and accept at the expiration of the Exchange Offer all Old Securities tendered and not previously validly withdrawn. Except for the requirements of applicable United States federal and state securities laws, we know of no federal or state regulatory requirements to be complied with or approvals to be obtained by us in connection with the Exchange Offer which, if not complied with or obtained, would have a material adverse effect on us. EXPIRATION DATE; EXTENSIONS; AMENDMENTS The Expiration Date for the Exchange Offer is 12:00 midnight, New York City time, on December 10, 2004, unless the period for the Exchange Offer is extended, in which case, the Expiration Date shall mean the latest date and time to which the Exchange Offer is extended. We and Nabors reserve the right, in our sole discretion, to (1) extend the Exchange Offer, (2) terminate the Exchange Offer or (3) amend the Exchange Offer, by giving oral (promptly confirmed in writing) or written notice of such delay, extension, termination or amendment to the exchange agent. Any such extension, termination or amendment will be followed promptly by a public announcement thereof which, in the case of an extension, will be made no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date. If we make a material change in the terms of the Exchange Offer or the information concerning the Exchange Offer, or waive a material condition of the Exchange Offer, we will disseminate additional materials regarding the change and extend the Exchange Offer to the extent required by law. EFFECT OF TENDER Any valid tender by a holder of Old Securities that is not validly withdrawn prior to the Expiration Date of the Exchange Offer will constitute a binding agreement between that holder and us and Nabors upon the terms and subject to the conditions of this offering circular and the Letter of Transmittal. The acceptance of the Exchange Offer 31 by a tendering holder of Old Securities will constitute the agreement by that holder to deliver good and marketable title to the tendered Old Securities pursuant to the Exchange Offer, free and clear of all liens, charges, claims, encumbrances, interests and restrictions of any kind. ABSENCE OF DISSENTERS' RIGHTS Holders of the Old Securities do not have any appraisal or dissenters' rights under applicable law in connection with the Exchange Offer. ACCEPTANCE OF OLD SECURITIES FOR EXCHANGE The New Securities will be delivered in book-entry form on the settlement date which we anticipate will be promptly following the Expiration Date of the Exchange Offer, after giving effect to any extensions. We will be deemed to have accepted validly tendered Old Securities when, and if, we have given oral (promptly confirmed in writing) or written notice thereof to the exchange agent. Subject to the terms and conditions of the Exchange Offer, the issuance of New Securities will be recorded in book-entry form by the exchange agent on the date of the exchange upon receipt of such notice. The exchange agent will act as agent for tendering holders of the Old Securities for the purpose of receiving book-entry transfers of Old Securities in the exchange agent's account at The Depository Trust Company ("DTC"). If any validly tendered Old Securities are not accepted for any reason set forth in the terms and conditions of the Exchange Offer, including if Old Securities are validly withdrawn, such withdrawn Old Securities will be returned without expense to the tendering holder or such Old Securities will be credited to an account maintained at DTC designated by the DTC participant who so delivered such Old Securities, in either case, promptly after the expiration or termination of the Exchange Offer. PROCEDURES FOR EXCHANGE Old Securities tendered in the Exchange Offer must be in denominations of $1,000 principal amount and whole-number multiples of $1,000. If you hold Old Securities and wish to have such securities exchanged for New Securities, you must validly tender, or cause the valid tender of, your Old Securities using the procedures described in this offering circular and in the accompanying Letter of Transmittal. Only registered holders of Old Securities are authorized to tender the Old Securities. The procedures by which you may tender or cause to be tendered Old Securities will depend upon the manner in which the Old Securities are held, as described below. TENDER OF OLD SECURITIES HELD THROUGH A NOMINEE If you are a beneficial owner of Old Securities that are held of record by a custodian bank, depositary, broker, trust company or other nominee, and you wish to tender Old Securities in the Exchange Offer, you should contact the record holder promptly and instruct the record holder to tender the Old Securities on your behalf using one of the procedures described below. TENDER OF OLD SECURITIES THROUGH DTC Pursuant to authority granted by DTC, if you are a DTC participant that has Old Securities credited to your DTC account and thereby held of record by DTC's nominee, you may directly tender your Old Securities as if you were the record holder. Because of this, references herein to registered or record holders include DTC participants with Old Securities credited to their accounts. If you are not a DTC participant, you may tender your Old Securities by book-entry transfer by contacting your broker or opening an account with a DTC participant. Within two business days after the date of this offering circular, the exchange agent will establish accounts with respect to the Old Securities at DTC for purposes of the Exchange Offer. 32 Any participant in DTC may tender Old Securities by: (a) effecting a book-entry transfer of the Old Securities to be tendered in the Exchange Offer into the account of the exchange agent at DTC by electronically transmitting its acceptance of the Exchange Offer through DTC's Automated Tender Offer Program ("ATOP") procedures for transfer; if ATOP procedures are followed, DTC will then verify the acceptance, execute a book-entry delivery to the exchange agent's account at DTC and send an agent's message to the exchange agent. An "agent's message" is a message, transmitted by DTC to and received by the exchange agent and forming part of a book-entry confirmation, which states that DTC has received an express acknowledgment from a DTC participant tendering Old Securities that the participant has received and agrees to be bound by the terms of the Letter of Transmittal and that we and Nabors may enforce the agreement against the participant. DTC participants following this procedure should allow sufficient time for completion of the ATOP procedures prior to the Expiration Date of the applicable Exchange Offer; or (b) completing and signing the Letter of Transmittal according to the instructions and delivering it, together with any signature guarantees and other required documents, to the exchange agent at its address on the back cover page of this offering circular. With respect to option (a) above, the exchange agent and DTC have confirmed that, the Exchange Offer is eligible for ATOP. The Letter of Transmittal (or facsimile thereof), with any required signature guarantees and other required documents, or (in the case of book-entry transfer) an agent's message in lieu of the Letter of Transmittal, must be transmitted to and received by the exchange agent prior to the Expiration Date of the Exchange Offer at one of its addresses set forth on the back cover page of this offering circular. DELIVERY OF SUCH DOCUMENTS TO DTC DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT. GUARANTEED DELIVERY PROCEDURES If you desire to tender your Old Securities and you cannot complete the procedures for book-entry transfer through DTC, set forth above, on a timely basis, you may still tender your Old Securities if: - your tender is made through an eligible institution; - prior to the expiration date, the exchange agent received from the eligible institution a properly completed and duly executed Letter of Transmittal, or a facsimile of such Letter of Transmittal or an electronic confirmation pursuant to DTC's ATOP system and Notice of Guaranteed Delivery, substantially in the form provided by us, by facsimile transmission, mail or hand delivery, that: (1) sets forth the name and address of the holder of the Old Securities tendered; (2) states that the tender is being made thereby; and (3) guarantees that within three trading days after the Expiration Date a book-entry confirmation and any other documents required by the Letter of Transmittal, if any, will be deposited by the eligible institution with the exchange agent; and - book-entry confirmation and all other documents, if any, required by the Letter of Transmittal are received by the exchange agent within three trading days after the expiration date. LETTER OF TRANSMITTAL Subject to and effective upon the acceptance for exchange and exchange of New Securities for Old Securities tendered by a Letter of Transmittal, by executing and delivering a Letter of Transmittal (or agreeing to the terms of a Letter of Transmittal pursuant to an agent's message), a tendering holder of Old Securities: - irrevocably sells, assigns and transfers to or upon the order of Nabors Delaware and Nabors all right, title and interest in and to, and all claims in respect of or arising or having arisen as a result of the holder's status as a holder of the Old Securities tendered thereby; - waives any and all rights with respect to the Old Securities; 33 - releases and discharges Nabors, Nabors Delaware and the Trustee with respect to the Old Securities from any and all claims such holder may have, now or in the future, arising out of or related to the Old Securities, including, without limitation, any claims that such holder is entitled to participate in any redemption of the Old Securities; - represents and warrants that the Old Securities tendered were owned as of the date of tender, free and clear of all liens, charges, claims, encumbrances, interests and restrictions of any kind; - designates an account number of a DTC participant in which the New Securities are to be credited; and - irrevocably appoints the exchange agent the true and lawful agent and attorney-in-fact of the holder with respect to any tendered Old Securities, with full powers of substitution and revocation (such power of attorney being deemed to be an irrevocable power coupled with an interest) to cause the Old Securities tendered to be assigned, transferred and exchanged in the Exchange Offer. PROPER EXECUTION AND DELIVERY OF LETTER OF TRANSMITTAL If you wish to participate in the Exchange Offer, delivery of your Old Securities, signature guarantees and other required documents is your responsibility. Delivery is not complete until the required items are actually received by the exchange agent. If you mail these items, we recommend that you (1) use registered mail with return receipt requested, properly insured, and (2) mail the required items sufficiently in advance of the Expiration Date with respect to the Exchange Offer to allow sufficient time to ensure timely delivery. Except as otherwise provided below, all signatures on a Letter of Transmittal or a notice of withdrawal must be guaranteed by a recognized participant in the Securities Transfer Agents Medallion Program, the American Stock Exchange Medallion Signature Program or the Stock Exchange Medallion Program. Signatures on a Letter of Transmittal need not be guaranteed if: - the Letter of Transmittal is signed by a participant in DTC whose name appears on a security position listing of DTC as the owner of the Old Securities and the holder(s) has not completed the portion entitled "Special Issuance and Payment Instructions" on the Letter of Transmittal; or - the Old Securities are tendered for the account of an "Eligible Guarantor Institution" (defined in Instruction 3 of the Letter of Transmittal). WITHDRAWAL OF TENDERS Tenders of Old Securities may be withdrawn at any time prior to the expiration date of the Exchange Offer. Tenders of Old Securities may not be withdrawn at any time after such date unless the Exchange Offer is extended, in which case tenders of Old Securities may be withdrawn at any time prior to the expiration date, as extended. Beneficial owners desiring to withdraw Old Securities previously tendered should contact the DTC participant through which such beneficial owners hold their Old Securities. In order to withdraw Old Securities previously tendered, a DTC participant may, prior to the Expiration Date of the Exchange Offer, withdraw its instruction previously transmitted through ATOP by (1) withdrawing its acceptance through ATOP or (2) delivering to the exchange agent by mail, hand delivery or facsimile transmission, notice of withdrawal of such instruction. The notice of withdrawal must contain the name and number of the DTC participant. The method of notification is at the risk and election of the holder and must be timely received by the exchange agent. Withdrawal of a prior instruction will be effective upon receipt of the notice of withdrawal by the exchange agent. All signatures on a notice of withdrawal must be guaranteed by a recognized participant in the Securities Transfer Agents Medallion Program, the American Stock Exchange Medallion Signature Program or the Stock Exchange Medallion Program. However, signatures on the notice of withdrawal need not be guaranteed if the Old Securities being withdrawn are held for the account of an Eligible Guarantor Institution. A withdrawal of an instruction must be executed by a DTC participant in the same manner as such DTC participant's name appears on its transmission through ATOP to which such withdrawal relates. A DTC participant may withdraw a tender only if such withdrawal complies with the provisions described in this paragraph. 34 Withdrawals of tenders of Old Securities may not be rescinded and any Old Securities withdrawn will thereafter be deemed not validly tendered for purposes of the Exchange Offer. Properly withdrawn Old Securities, however, may be retendered by following the procedures described above at any time prior to the expiration date of the Exchange Offer. MISCELLANEOUS All questions as to the validity, form, eligibility (including time of receipt) and acceptance for exchange of any tender of Old Securities in connection with the Exchange Offer will be determined by us and Nabors, in our sole discretion, and such determination will be final and binding. We and Nabors reserve the absolute right to reject any and all tenders not in proper form or the acceptance for exchange of which may, in the opinion of our counsel, be unlawful. We and Nabors also reserve the absolute right to waive any defect or irregularity in the tender of any Old Securities in the Exchange Offer, and the interpretation by us of the terms and conditions of the Exchange Offer (including the instructions in the Letter of Transmittal) will be final and binding on all parties, provided that we and Nabors will not waive any condition to the offer with respect to an individual holder of Old Securities unless we waive that condition for all such holders. None of Nabors, Nabors Delaware, the exchange agent, the information agent or any other person will be under any duty to give notification of any defects or irregularities in tenders or incur any liability for failure to give any such notification. Tenders of Old Securities involving any irregularities will not be deemed to have been made until such irregularities have been cured or waived. Old Securities received by the exchange agent in connection with the Exchange Offer that are not validly tendered and as to which the irregularities have not been cured or waived will be returned by the exchange agent to the DTC participant who delivered such Old Securities by crediting an account maintained at DTC designated by such DTC participant promptly after the Expiration Date of the Exchange Offer or the withdrawal or termination of the Exchange Offer. TRANSFER TAXES We and Nabors will pay all transfer taxes, if any, applicable to the transfer and exchange of Old Securities to us and Nabors in the Exchange Offer. If transfer taxes are imposed for any other reason, the amount of those transfer taxes, whether imposed on the registered holder or any other persons, will be payable by the tendering holder. Other reasons transfer taxes could be imposed include: - if New Securities in book-entry form are to be registered in the name of any person other than the person signing the Letter of Transmittal; - if tendered Old Securities are registered in the name of any person other than the person signing the Letter of Transmittal; or - if satisfactory evidence of payment of or exemption from those transfer taxes is not submitted with the Letter of Transmittal, the amount of those transfer taxes will be billed directly to the tendering holder and/or withheld from any payments due with respect to the Old Securities tendered by such holder. EXCHANGE AGENT J.P. Morgan Trust Company, National Association has been appointed the exchange agent for the Exchange Offer. Any Letter of Transmittal, Notice of Guaranteed Delivery and all correspondence in connection with the Exchange Offer should be sent or delivered by each holder of Old Securities, or a beneficial owner's custodian bank, depositary, broker, trust company or other nominee, to the exchange agent at the address set forth on the back cover page of this offering circular. J.P. Morgan Trust Company, National Association and its affiliates maintain banking relationships with us and Nabors. 35 INFORMATION AGENT Georgeson Shareholder has been appointed as the information agent for the Exchange Offer. Questions concerning tender procedures and requests for additional copies of this offering circular or the Letter of Transmittal should be directed to the information agent at the address set forth on the back cover page of this offering circular. Holders of Old Securities may also contact their custodian bank, depositary, broker, trust company or other nominee for assistance concerning the Exchange Offer. FINANCIAL ADVISOR We have retained UBS Securities LLC ("UBS") as our exclusive financial advisor in connection with the Exchange Offer. We are paying UBS customary fees for its services and have agreed to indemnify UBS for certain liabilities. UBS's compensation is in no way contingent on the results or the success of the Exchange Offer. UBS has not been retained to, and will not, solicit acceptances of the Exchange Offer or make any recommendation with respect thereto. FEES AND EXPENSES We will bear the expenses of the Exchange Offer. We will pay the exchange agent and the information agent reasonable and customary fees for their services and will reimburse them for their reasonable out-of-pocket expenses. Such expenses include fees and expenses of the trustee, accounting and legal fees and printing costs, among others. Tendering holders of Old Securities will not be required to pay any expenses of soliciting tenders in the Exchange Offer. If, however, a tendering holder handles the transaction through its broker, dealer, commercial bank, trust company or other institution, such holder may be required to pay brokerage fees or commissions. The principal solicitation is being made by mail. However, additional solicitations may be made by telegraph, facsimile transmission, telephone or in person by our officers and other employees and the officers and employees of our affiliates. RECOMMENDATIONS OF THE BOARD OF DIRECTORS Neither we nor Nabors is making any recommendation regarding whether you should tender your Old Securities for exchange and accept New Securities offered in the Exchange Offer. You must make your own determination as to whether to tender your Old Securities for exchange. SOLICITATION The Exchange Offer is being made by us in reliance on the exemption from the registration requirements of the Securities Act, afforded by Section 3(a)(9) thereof. We therefore will not pay any commission or other remuneration to any broker, dealer, salesman or other person for soliciting tenders of the Old Securities. We have not retained any dealer, manager or other agent to solicit tenders with respect to the Exchange Offer. The exchange agent will mail solicitation materials on our behalf. Additional solicitation may be made by telephone, facsimile or in person by officers and regular employees of Nabors Delaware, Nabors and our subsidiaries. 36 DESCRIPTION OF THE NEW SECURITIES We will issue the New Securities under an indenture among us, Nabors, as guarantor, and J.P. Morgan Trust Company, National Association, as trustee, and references in this section to the indenture are references to such indenture. The following summarizes the material provisions of the New Securities and the indenture. The following summary is not complete and is subject to, and qualified by reference to, all of the provisions of the New Securities and the indenture. GENERAL We will issue up to $700,000,000 aggregate principal amount of the New Securities in exchange for the Old Securities in the Exchange Offer. The New Securities are scheduled to mature on June 15, 2023. The New Securities are our unsecured obligations, ranking equal in right of payment with all of our other senior unsecured indebtedness. There will be no periodic cash payments of interest on the New Securities, except as described under "-- Contingent Interest" and the New Securities will not accrete. The principal amount of each New Security is payable at the office or agency of the paying agent, initially the trustee, in the Borough of Manhattan, The City of New York, or any other office of the paying agent maintained for this purpose. New Securities may be presented for exchange at the office of the exchange agent. New Securities in certificated form may be presented for exchange for other New Securities or registration of transfer at the office of the registrar. Initially, the trustee will be the paying agent, the exchange agent and the registrar. We will not charge a service charge for any registration, transfer or exchange of New Securities. However, we may require the holder to pay for any tax, assessment or other governmental charge to be paid in connection with any registration, transfer or exchange of New Securities. Neither we, Nabors nor any of our subsidiaries are subject to any financial covenants under the indenture. In addition, neither we, Nabors nor any of our subsidiaries are restricted under the indenture from paying dividends, incurring debt or issuing or repurchasing our or Nabors' securities. You are not afforded protection under the indenture in the event of a highly leveraged transaction or a change in control of Nabors or us except to the extent described below under "-- Repurchase at the Option of the Holder Upon a Fundamental Change" and "-- Exchange Rights of Holders of New Securities -- Make-Whole Premium." GUARANTEE Nabors has fully and unconditionally guaranteed the due and punctual payment of the principal of, additional amounts, if any, and contingent interest, if any, on the New Securities, and the make-whole premium, if any, and any other obligations of ours under the New Securities when and as they become due and payable, whether at maturity, upon redemption, repurchase, by declaration of acceleration or otherwise, if we are unable to satisfy these obligations. Nabors' guarantee of our obligations under the New Securities is its unsecured and unsubordinated obligation and has the same ranking with respect to Nabors' indebtedness as the New Securities have with respect to our indebtedness. The guarantee provides that, in the event of a default in payment by us on the New Securities, the holders of the New Securities may institute legal proceedings directly against Nabors to enforce the guarantee without first proceeding against us. EXCHANGE RIGHTS OF HOLDERS OF NEW SECURITIES You may exchange any of your New Securities, in whole or in part, prior to the close of business on the business day immediately preceding the final maturity date of the New Securities (unless earlier redeemed or repurchased) and only under any of the following circumstances: - upon satisfaction of a sale price condition; - upon satisfaction of a trading price condition; - upon notice of redemption; or - upon specified corporate transactions or the occurrence of a Fundamental Change; 37 all as described below, provided that you may exchange your New Securities in part only if such part is $1,000 principal amount or an integral multiple of $1,000 principal amount. PAYMENT UPON EXCHANGE The amount of cash and, if applicable, the number of Nabors' common shares, for which New Securities may be exchanged is based on an initial exchange rate of 14.2653 common shares of Nabors per $1,000 principal amount of New Securities. Nabors will not issue fractional common shares upon exchange of New Securities. Instead, we will pay cash in lieu of a fractional share based on the "sale price" (as defined under "-- Exchange Rights of Holders of New Securities -- Exchange Upon Satisfaction of Sale Price Condition," below) of Nabors' common shares on the last trading day prior to the exchange date. The exchange rate will be adjusted as described under "-- Exchange Rights of Holders of New Securities -- Adjustments to Exchange Rate" below. The "exchange price" as of any day will equal $1,000 divided by the exchange rate on such date. To exchange your New Security you must: - complete and manually sign the exchange notice on the back of the New Security (or a facsimile of such exchange notice) and deliver it to the exchange agent; - surrender the New Security to the exchange agent; - if required, furnish appropriate endorsements and transfer documents; - pay any transfer or similar taxes; and - if required, pay funds equal to contingent interest payable on the next contingent interest payment date. Upon exchange of New Securities, a holder will not receive any cash payment of contingent interest, except as described in the immediately following paragraph. As a result, accrued but unpaid contingent interest, if any, and additional amounts, if any, attributable to the period from the most recent interest payment date to the exchange date will be deemed cancelled, extinguished and forfeited. Our delivery to the holder of the cash or combination of cash and Nabors' common shares for which the New Security is exchangeable and any cash payment of fractional shares will be deemed to satisfy our obligation to pay: - the principal amount of the New Security; and - accrued but unpaid contingent interest, if any, and additional amounts, if any, attributable to the period from the most recent interest payment date to the exchange date. Notwithstanding the preceding paragraph, if the exchange date occurs after a record date but prior to the next succeeding contingent interest payment date, holders of New Securities at the close of business on the record date will receive any contingent interest payable on such New Securities on the corresponding contingent interest payment date notwithstanding the exchange. Such New Securities, upon surrender for exchange, must be accompanied by funds equal to the amount of contingent interest payable on the New Securities so exchanged; provided that no such payment need be made if (1) we have specified a redemption date that is after a record date and on or prior to the next contingent interest payment date, (2) we have specified a purchase date following a Fundamental Change that is during such period or (3) any overdue contingent interest exists at the time of exchange with respect to such New Securities to the extent of such overdue contingent interest. Pursuant to the indenture, the date on which all of the requirements for delivery of the New Securities for exchange have been satisfied is the exchange date. 38 As soon as practicable following the exchange date, the Company will deliver to the holder, through the exchange agent: (i) cash (the "Principal Return") in an amount equal to the lesser of: - the aggregate exchange value of the New Securities to be exchanged, where the exchange value for each $1,000 principal amount of New Securities surrendered (the "Exchange Value") is equal to the product of: - the exchange rate then in effect; and - the average of the daily volume weighted average price of Nabors' common shares for each of the ten consecutive trading days (appropriately adjusted to take into account the occurrence during such period of stock splits, stock dividends and similar events) beginning on the second trading day immediately following the day the New Securities are surrendered for exchange (the "Ten Day Weighted Average Price"); and - the aggregate principal amount of such New Securities; (ii) if the aggregate Exchange Value of the New Securities to be exchanged is greater than the Principal Return, at the Company's option, cash, Nabors' common shares, or any combination thereof, equal to the amount by which the aggregate Exchange Value exceeds the Principal Return, (the "Net Share Amount"), with the number of shares (the "Net Shares") to be paid determined by dividing the Net Share Amount (less any portion of the Net Share Amount that the Company elects to pay in cash) by the Ten Day Weighted Average Price; and (iii) cash in lieu of any fractional shares. Each of the Exchange Value, Principal Return, Net Share Amount and the number of Net Shares will be determined by the Company at the end of the ten consecutive trading days beginning on the second trading day immediately following the day the New Securities are surrendered for exchange. EXCHANGE UPON SATISFACTION OF SALE PRICE CONDITION A holder may surrender any of its New Securities for exchange in any calendar quarter (and only during such calendar quarter) if the sale price of Nabors' common shares for at least 20 trading days during the period of 30 consecutive trading days ending on the last trading day of the previous calendar quarter is greater than or equal to 120% or, with respect to all calendar quarters beginning on or after July 1, 2008, 110% of the then applicable exchange price per share of the Nabors' common shares on such last trading day. The Company intends to complete the Exchange Offer during the fourth quarter of 2004 and the Old Securities are not exchangeable in the fourth quarter of 2004. However, if the New Securities are issued during a calendar quarter in which the Old Securities are exchangeable pursuant to the indenture relating to the Old Securities, then the New Securities shall be exchangeable for the remainder of such quarter. If the New Securities are issued during the 30 consecutive trading day period ending on the last trading day of any calendar quarter, each trading day occurring during such 30 trading day period and on or prior to the day the New Securities are issued shall be considered in determining whether the condition for exchangeability in the preceding paragraph have been met. The "sale price" of the Nabors' common shares means, on any date, the closing sale price per share (or if no closing sale price is reported, the average of the bid and asked prices or, if more than one, in either case, the average of the average bid and the average asked prices) on that date as reported in transactions for the principal United States securities exchange on which Nabors' common shares are traded or, if Nabors' common shares are not listed on a United States national or regional securities exchange, as reported by the Nasdaq National Market. The sale price will be determined without reference to after-hours or extended market trading. If Nabors' common shares are not listed for trading on a United States national or regional securities exchange and not reported by the Nasdaq National Market on the relevant date, the "sale price" will be the last quoted bid price for Nabors' common shares in the over-the-counter market on the relevant date as reported by the National Quotation Bureau or similar 39 organization. If Nabors' common shares are not so quoted, the "sale price" will be the average of the mid-point of the last bid and asked prices for Nabors' common shares on the relevant date from each of at least three nationally recognized independent investment banking firms selected by us for this purpose. "Trading day" means a day during which trading in securities generally occurs on the American Stock Exchange or, if Nabors' common shares are not then listed on the American Stock Exchange, on the principal other national or regional securities exchange on which such common shares are then listed or, if such common shares are not then listed on a national or regional securities exchange, on the Nasdaq National Market or, if such common shares are not then quoted on the Nasdaq National Market, on the principal other market on which such common shares are then traded. EXCHANGE UPON SATISFACTION OF TRADING PRICE CONDITION You may surrender your New Securities for exchange at any time prior to the business day immediately preceding the maturity date during the five business days immediately following any ten consecutive trading-day period in which the trading price per $1,000 principal amount of New Securities (as determined following a request by a holder of the New Securities in accordance with the procedures described below) for each day of that period was less than 95% of the product of the sale price of Nabors' common shares and the then applicable exchange rate; provided, however, you may not exchange your New Securities if the average sale price of the Nabors common shares for such ten consecutive trading-day period was between the then current exchange price on the New Securities and 120% thereof until June 15, 2008, and 110% thereafter, of the then current exchange price of the New Securities. If the New Securities are issued during a period in which the Old Securities are exchangeable pursuant to the indenture relating to the Old Securities, then the New Securities shall be exchangeable pursuant to the preceding paragraph for the remainder of the five business day period during which the Old Securities would have been exchangeable had they not been exchanged for New Securities. If the trading price per $1,000 principal amount of Old Securities on the trading day prior to the day the New Securities are issued (the "last original security measurement day") was less than ninety-five percent (95%) of the product of sale price and the exchange rate in effect on such trading day, then the last original security measurement day, and any of the four previous trading days on which the trading price per $1,000 principal amount of Old Securities was less than ninety-five percent (95%) of the product of sale price and the exchange rate in effect on such trading day, will be deemed to be trading days on which the trading price per $1,000 principal amount of the New Securities was less than ninety-five percent (95%) of the product of the sale price and the then current exchange rate for purposes of determining whether the condition for exchangeability set forth in the preceding paragraph has been met. The "trading price" of the New Securities on any date of determination means the average of the secondary market bid quotations per $1,000 principal amount of New Securities obtained by the trustee for $5,000,000 principal amount of the New Securities at approximately 3:30 p.m., New York City time, on such determination date from three independent nationally recognized securities dealers we select, provided that if three such bids cannot reasonably be obtained by the trustee, but two such bids are obtained, then the average of the two bids shall be used, and if only one such bid can reasonably be obtained by the trustee, this one bid shall be used. If the trustee cannot reasonably obtain at least one bid for $5,000,000 principal amount of the New Securities from a nationally recognized securities dealer, then the trading price per $1,000 principal amount of the New Securities will be deemed to be less than 95% of the product of the sale price of Nabors' common shares and the then applicable exchange rate. In connection with any exchange upon satisfaction of the above trading price condition, the trustee shall have no obligation to determine the trading price of the New Securities unless we have requested such determination; and we shall have no obligation to make such request unless you provide us with reasonable evidence that the trading price per $1,000 principal amount of the New Securities would be less than 95% of the product of the sale price of Nabors' common shares and the then applicable exchange rate; at which time, we shall instruct the trustee to determine the trading price of the New Securities beginning on the next trading day and on each successive trading day until the trading price is greater than or equal to 95% of the product of the sale price of Nabors' common shares and the then applicable exchange rate. 40 EXCHANGE UPON NOTICE OF REDEMPTION If we call any or all of the New Securities for redemption, holders may exchange New Securities at any time from the date the notice of redemption has been given until the close of business on the business day immediately preceding the redemption date, even if the New Securities are not otherwise exchangeable at such time. However, if a holder already has delivered a repurchase notice with respect to a New Security (described below under "-- Repurchase of New Securities at the Option of the Holder"), then the holder may not surrender the New Security for exchange until the holder has withdrawn the repurchase notice in accordance with the indenture. EXCHANGE UPON SPECIFIED CORPORATE TRANSACTIONS If Nabors elects to: - distribute to all holders of its common shares certain rights entitling them to purchase, for a period expiring within 45 days after the date of the distribution, common shares at less than the sale price of a common share on the trading day immediately preceding the declaration date of the distribution, or - distribute to all holders of its common shares its assets, debt securities or certain rights to purchase its securities, which distribution has a per share value as determined by its board of directors exceeding 15% of the sale price of a common share on the trading day immediately preceding the declaration date of the distribution, we must notify the holders of the New Securities at least 20 business days prior to the ex-dividend date for such distribution. Once we have given such notice, holders may surrender their New Securities for exchange at any time until the earlier of the close of business on the business day immediately prior to the ex-dividend date or our announcement that such distribution will not take place, even if the New Securities are not otherwise exchangeable at such time. No holder may exercise this right to exchange if the holder otherwise may participate in the distribution without exchange. The ex-dividend date is the first date upon which a sale of the common shares does not automatically transfer the right to receive the relevant distribution from the seller of the common shares to its buyer. In addition, if Nabors proposes to engage in a consolidation, merger or combination, as a result of which holders of Nabors common shares would be entitled to receive cash, securities or other properties or assets with respect to or in exchange for such common shares, a holder may surrender New Securities for exchange: - in the case of such a consolidation, merger, or combination that does not constitute a Fundamental Change, at any time from and after the date that is 15 days prior to the announced anticipated effective date of the transaction until five days after the actual effective date of such transaction; or - in the case of a Fundamental Change, at any time on or after the date on which Nabors issues a Fundamental Change Repurchase Notice described under "-- Repurchase at the Option of the Holder Upon a Fundamental Change" and on or before the Fundamental Change Repurchase Date described under "-- Repurchase at the Option of the Holder Upon a Fundamental Change" in connection with such Fundamental Change. If Nabors engages in certain reclassifications of its common shares or is a party to a consolidation, merger, combination or transfer, conveyance or lease of all or substantially all of its assets (regardless of whether the transaction constitutes a Fundamental Change) as a result of which holders of Nabors' common shares shall be entitled to receive cash, securities or other properties or assets with respect to or in exchange for such Common Shares, then after the effective date of the transaction, the Exchange Value and the Net Share Amount will be determined based on the kind and amount of consideration that would have been received pursuant to the transaction by a holder of a number of Nabors' common shares equal to the then applicable exchange rate. In addition, if holders exchange their New Securities following the effective date of the transaction, the Net Share Amount will be paid in cash, such consideration or any combination thereof. If the transaction also constitutes a Fundamental Change, as defined below, a holder can require us to purchase all or a portion of its New Securities as described below under "-- Repurchase at Option of the Holder Upon a Fundamental Change." 41 MAKE-WHOLE PREMIUM If a Fundamental Change occurs prior to June 15, 2008, and the New Securities are surrendered for exchange during the period beginning on the date on which we provide notice to holders of the Fundamental Change and ending on the date we select as the date on which the Company will repurchase the New Securities in connection with such Fundamental Change, then we will pay a make-whole premium, if any. The make-whole premium, if any, is equal to a specified percentage of the principal amount of the New Securities in respect of which the make-whole premium is payable. We will determine the specified percentage by reference to the table included in the indenture and set forth below, based on the date when the Fundamental Change becomes effective (the "Effective Date") and the price (the "Applicable Price") paid per Nabors' common share in the transaction constituting the Fundamental Change. If in the transaction constituting a Fundamental Change holders of Nabors' common shares receive solely cash, then the Applicable Price will be the cash amount paid per Nabors' common share in such transaction or series of transactions. Otherwise, the Applicable Price will be the average sale price of Nabors' common shares for the five consecutive trading days up to but not including the Effective Date of the Fundamental Change. The make-whole premium may be paid, at our option, in either: - the same form of consideration for which the Nabors' common shares are exchanged for, converted into, acquired for or constitutes solely the right to receive as a result of the Fundamental Change, if applicable, assuming that the holder would not have exercised any rights of election that such holder would have as a holder of Nabors' common shares to select a particular form of consideration (the "Alternative Consideration"); - Nabors' common shares; - cash; or - any combination of Alternative Consideration, Nabors' common shares and cash. If we elect to pay the make-whole premium in whole or in part in Nabors' common shares, the value of such Nabors' common shares shall be deemed to be equal to the average sale price of the Nabors' common shares over the ten trading day period ending on the trading day immediately preceding the date upon which we are required to repurchase the New Securities in connection with the relevant Fundamental Change. Notwithstanding the foregoing, in no event shall the value of each Nabors' common share be deemed to be equal to less than 50% of the Applicable Price used to determine the amount of the Make-Whole Premium. See "Description of the New Securities -- Repurchase at the Option of the Holder Upon a Fundamental Change." If we elect to pay the make-whole premium in whole or in part in Nabors' common shares, we will pay cash in lieu of any fractional common share determined as provided in the indenture. "Sale price" of Nabors' common shares has the meaning described under "Description of New Securities -- Exchange Rights of Holders of New Securities -- Exchange Upon Satisfaction of Sale Price Condition." If Alternative Consideration is paid, it shall be valued as follows: - if all or a portion of such Alternative Consideration consists of securities that are traded on a United States national securities exchange or approved for quotation on the Nasdaq National Market or any similar system, such securities shall have a value equal to 98% of the average of the closing price or last sale price, as applicable, for the ten consecutive trading days ending on, and excluding, the trading day immediately preceding the Fundamental Change repurchase date; - if all or a portion of such Alternative Consideration consists of securities (other than securities referred to in the immediately preceding bullet point), assets or property (other than cash), such securities, assets or property shall be valued based on 98% of the average of the fair market value of such securities, assets or property, as determined by two independent, nationally recognized investment banks selected by the trustee; and - if all or a portion of such Alternative Consideration consists of cash, 100% of such cash. 42 The following table sets forth the make-whole premium amounts as a percentage of the principal amount of the related New Securities. If an event occurs that requires an adjustment to the exchange rate, we will, on the date we must adjust the exchange rate, adjust each Applicable Price set forth in the first column of the table below by multiplying the Applicable Price in effect immediately before the adjustment by a fraction: - whose numerator is the exchange rate in effect immediately before the adjustment; and - whose denominator is the adjusted exchange rate. MAKE-WHOLE PREMIUM (% OF THE PRINCIPAL AMOUNT)
EFFECTIVE DATE -------------------------------------------------------- DECEMBER 13, JUNE 15, JUNE 15, JUNE 15, JUNE 15, APPLICABLE PRICE 2004 2005 2006 2007 2008 - ---------------- ------------ -------- -------- -------- -------- $ 50.00........................................ 26.02 25.85 25.85 26.24 28.67 $ 55.00........................................ 22.36 22.00 21.45 20.85 21.54 $ 60.00........................................ 19.18 18.66 17.65 16.21 14.41 $ 65.00........................................ 16.41 15.78 14.43 12.35 7.28 $ 70.00........................................ 14.02 13.30 11.71 9.24 0.14 $ 75.00........................................ 11.96 11.19 9.46 6.78 0.00 $ 80.00........................................ 10.18 9.38 7.59 4.90 0.00 $ 85.00........................................ 8.64 7.85 6.05 3.48 0.00 $ 90.00........................................ 7.32 6.54 4.80 2.43 0.00 $ 95.00........................................ 6.19 5.43 3.78 1.66 0.00 $100.00........................................ 5.22 4.50 2.95 1.10 0.00 $105.00........................................ 4.38 3.70 2.28 0.71 0.00 $110.00........................................ 3.66 3.03 1.74 0.44 0.00 $115.00........................................ 3.04 2.46 1.31 0.25 0.00 $120.00........................................ 2.52 1.99 0.97 0.13 0.00 $125.00........................................ 2.06 1.59 0.70 0.05 0.00 $130.00........................................ 1.68 1.25 0.49 0.01 0.00 ----- ----- ----- ----- -----
If the exact Applicable Price and Effective Date are not set forth in the table above, and if the actual Applicable Price is between two Applicable Prices listed in the table above or the actual Effective Date is between two Effective Dates listed in the table above (or both), we will determine the make-whole premium by straight-line interpolation between the make-whole premium percentages set forth for the two Applicable Prices, or for the two Effective Dates based on a 365-day year, or both, as applicable. If the actual Applicable Price is in excess of $130.00 per share (subject to adjustment in the same manner as the Applicable Prices as set forth above), we will not pay any make-whole premium; and If the actual Applicable Price is less than or equal to $50.00 per share (subject to adjustment in the same manner as the Applicable Prices as set forth above), we will not pay any make-whole premium. In addition, no make-whole premium will be payable to holders who do not exchange New Securities in accordance with the foregoing, including holders who exercise the option to have their New Securities repurchased. See "Description of the New Securities -- Repurchase at the Option of the Holder Upon a Fundamental Change." Our obligation to pay the make-whole premium could be considered a penalty, in which case the enforceability thereof would be subject to general principles of reasonableness of economic remedies. 43 ADJUSTMENTS TO EXCHANGE RATE The exchange rate is subject to adjustment in certain events under formulae as set forth in the indenture, including: (1) the issuance of Nabors' common shares as a dividend or distribution on the Nabors' common shares; (2) certain subdivisions and combinations of the Nabors' common shares; (3) the issuance to all holders of Nabors' common shares of certain rights or warrants to purchase common shares; (4) the distribution to all holders of Nabors' common shares of capital stock, other than Nabors' common shares, or evidences of Nabors' indebtedness or of assets. This includes securities other than Nabors' common shares, but excludes those rights, warrants, dividends and distributions referred to in clauses (1) and (3) above or paid in cash; (5) distributions consisting of cash, excluding any dividend or distribution in connection with the liquidation, dissolution or winding up of Nabors, whether voluntary or involuntary; and (6) Nabors or any of its subsidiaries makes distributions of cash or other consideration in respect of a tender or exchange offer for Nabors' common shares where such cash and the value of any such other consideration per Nabors' common share validly tendered or exchanged exceeds the market price (as defined in the indenture) of the Nabors common shares as of the last time which tenders or exchanges may be made pursuant to the tender or exchange offer. For purposes of the adjustment to the exchange rate described in clause (6) above, "market price of Nabors' common shares" means the average of the last reported sales prices for a Nabors common share for the five trading day period ending on the third business day prior to the date on which the tender or exchange offer expires. In no event shall the exchange rate as adjusted pursuant to clauses (5) and (6) above exceed 22.3964 per $1,000 principal amount of New Securities (as the exchange rate may be adjusted on a proportional basis for any adjustment made pursuant to clauses (1)-(4) above). The indenture provides that if Nabors implements a shareholders' rights plan, the rights plan must provide that upon exchange of the New Securities the holders will receive, in addition to the Nabors' common shares issuable upon exchange, the rights which would attach to the Nabors' common shares issuable upon exchange, regardless of whether the rights have separated from the Nabors' common shares at the time of exchange. Except as stated above, the exchange rate will not be adjusted for the issuance of Nabors' common shares or any securities exchangeable for Nabors' common shares or carrying the right to purchase any of the foregoing. In the case of: - any reclassification of the Nabors' common shares, or - a consolidation or merger involving Nabors or a sale or conveyance to another corporation of the property and assets of Nabors as an entirety or substantially as an entirety, in which holders of Nabors' common shares receive stock, other securities, other property, assets or cash for their common shares, upon exchange of New Securities following the effective date of such event, the Exchange Value and the Net Share Amount will be determined based on the kind and amount of consideration that would have been received pursuant to the transaction by a holder of a number of Nabors' common shares equal to the then applicable exchange rate. In addition, if a holder exchanges New Securities following the effective date of the transaction, the Net Share Amount will be paid in cash, such consideration or any combination thereof. In the event of a taxable distribution to holders of Nabors' common shares or in certain other circumstances requiring an adjustment to the exchange rate, the holders of New Securities may, in certain circumstances, be deemed to have received a distribution subject to United States federal income tax as a dividend. In certain other circumstances, the absence of an adjustment may result in a taxable dividend to the holders of Nabors' common shares. 44 Nabors from time to time may to the extent permitted by law increase the exchange rate by any amount for any period of at least 20 business days, if its board of directors has made a determination that the increase would be in Nabors' best interests. Subsequent to such increase, Nabors may from time to time lower the exchange rate to any rate that is not lower than the exchange rate that would have been applicable had such increase not occurred, if the board of directors has determined that the decrease would be in Nabors' best interests. For purposes of this paragraph, a determination by the board of directors will be conclusive. If Nabors increases or decreases the exchange rate, Nabors will give at least seven days' notice of the increase or decrease. Nabors may, at its option, make increases or decreases in the exchange rate, in addition to those described above, as Nabors' board of directors deems advisable to avoid or diminish any income tax to holders of Nabors' common shares resulting from any dividend or distribution of shares, or rights to acquire shares, or from any event treated as a dividend, distribution or a right to acquire common shares for income tax purposes. CONTINGENT INTEREST We will pay contingent interest to the holders of New Securities during any six-month period from June 15 to December 14 or from December 15 to June 14 commencing on or after June 15, 2008 for which the average trading price of a New Security (as described under "-- Exchange Rights of Holders of New Securities -- Exchange Upon Satisfaction of Trading Price Condition") for the applicable five trading day reference period equals or exceeds 120% of the principal amount of the New Security as of the day immediately preceding the first day of the applicable six-month interest period. The five trading day reference period means the five trading days ending on the second trading day immediately preceding the relevant six-month interest period. During any period when contingent interest shall be payable, the contingent interest payable per New Security in respect of any six-month period will equal 0.185% of the principal amount of a New Security. Any contingent interest will be payable on the June 15 or December 15 immediately following the relevant six-month interest period to the persons in whose names the New Securities are registered at the close of business on the June 1 or December 1 immediately preceding the applicable contingent interest payment date, except that contingent interest payable upon redemption or repurchase will be paid to the person to whom principal is payable unless the redemption date or repurchase date is a contingent interest payment date. Contingent interest will be computed on the basis of a 360-day year composed of twelve 30-day months. We will maintain an office in the Borough of Manhattan, The City of New York, for the payment of any additional amounts and contingent interest, which shall initially be an office or agency of the trustee. We may pay contingent interest either: - by check mailed to your address as it appears in the New Security register, provided that, if you are a holder with an aggregate principal amount in excess of $2.0 million, you will be paid, if you so elect in writing, according to the immediately following bullet point; or - by wire transfer of immediately available funds to an account maintained by you in the United States. We will notify the holders of the New Securities and provide appropriate public notice upon a determination that they will be entitled to receive contingent interest during a six-month interest period. REDEMPTION OF NEW SECURITIES AT OUR OPTION We may not redeem the New Securities prior to June 15, 2008. Beginning on June 15, 2008, we may redeem the New Securities for cash in whole or in part at any time, by giving by mail to holders of New Securities not less than 15 days' nor more than 60 days' notice of redemption prior to the redemption date for an amount in cash equal to (1) the sum of the principal amount of New Securities to be redeemed and (2) any accrued and unpaid contingent interest, if any, and additional amounts owed, if any, on such New Securities to the date of redemption. At the same time, we will provide public notice of redemption through certain financial news services. The New Securities will be redeemable in multiples of $1,000 original principal amount. No sinking fund is provided for the New Securities. We may, upon at least 30 days' notice given to the holders of New Securities, on one or more occasions, elect to extend the period during which we cannot redeem the New Securities. 45 Once notice of redemption is given, the New Securities called for redemption become due and payable on the redemption date and at the price as set forth in the preceding paragraph (including unpaid contingent interest); provided that if the redemption date falls after a contingent interest record date and on or prior to the corresponding contingent interest payment date, then the contingent interest payable on such contingent interest payment date shall be paid to the holders of record of the New Securities on the applicable contingent interest record date instead of the holders surrendering the New Securities for redemption. If less than all of the outstanding New Securities held in certificated form are to be redeemed, the trustee will select the New Securities held in certificated form to be redeemed in principal amounts of $1,000 or integral multiples thereof by lot, pro rata or by another method the trustee considers fair and appropriate. If a portion of a holder's certificated New Securities is selected for partial redemption and the holder exchanges a portion of its New Securities, the exchanged portion will be deemed to be the portion selected for redemption. New Securities registered in the name of The Depository Trust Company or its nominee will be redeemed as described under "-- Form and Denomination -- Global New Security; Book-Entry Form." REPURCHASE AT THE OPTION OF THE HOLDER UPON A FUNDAMENTAL CHANGE If a Fundamental Change occurs at any time prior to June 15, 2023, each holder will have the right, at the holder's option, to require us to repurchase any or all of the holder's New Securities. The New Securities may be repurchased in multiples of $1,000 principal amount. We will repurchase the New Securities at a price equal to the principal amount plus any accrued and unpaid contingent interest, if any, additional amounts owed, if any, and overdue interest, if any, to the repurchase date; provided that if such repurchase date falls after a contingent interest record date and on or prior to the corresponding contingent interest payment date, then the contingent interest payable on such contingent interest payment date shall be paid to the holders of record of the New Securities on the applicable contingent interest record date instead of the holders surrendering the New Securities for repurchase. On or before the 30th day after the occurrence of a Fundamental Change, we will mail to all holders of record of the New Securities, a notice of the occurrence of the Fundamental Change and of the resulting repurchase right. We also will deliver to the trustee a copy of the notice. To exercise the repurchase right, holders of New Securities must deliver, on a date selected by the Company (the "Fundamental Change Repurchase Date"), which date must be no earlier than 20 trading days after and no later than 35 trading days after the date of our notice of a Fundamental Change, the New Securities to be repurchased, duly endorsed for transfer, together with the form entitled "Option to Elect Repurchase Upon a Fundamental Change" on the reverse side of the New Securities duly completed, to us, or an agent designated by us. The Fundamental Change Repurchase Notice will state, among other matters: - the event(s) causing the Fundamental Change; - the date of the Fundamental Change; - the Fundamental Change Repurchase Date, which must be no earlier than 20 trading days after and no later than 35 trading days after the date of the Fundamental Change Repurchase Notice; - the last date upon which a holder may exercise its repurchase right; - the Fundamental Change purchase price; - the names and addresses of the paying agent and the exchange agent; - the following additional information with respect to a holder's right to exchange the New Securities: -- the exchange rate and any adjustments to the exchange rate that will result from the Fundamental Change and, -- the make-whole premium, if any, if a holder exchanges New Securities following receipt of such Fundamental Change Repurchase Notice and whether such make-whole premium will be payable in cash, Nabors' common shares or Alternative Consideration, or a combination thereof, 46 -- if a make-whole premium is payable by the Company, that a make-whole premium shall be paid by the Company on the Fundamental Change Repurchase Date to holders of New Securities who have exchanged their New Securities on or after the date on which the Company gives the Fundamental Change Repurchase Notice and on or before the Fundamental Change Repurchase Date; - that New Securities with respect to which a holder has elected its repurchase right may be exchanged only upon a withdrawal of such election in accordance with the terms of the indenture; and - the procedures which a holder must follow to exercise its repurchase right. We will pay the Fundamental Change purchase price in connection with such repurchase of New Securities as promptly as practicable following the later of the Fundamental Change Repurchase Date and the time of such New Security is surrendered to the paying agent, together with necessary endorsements. A "Fundamental Change" means the occurrence of any transaction or event in connection with which all or substantially all common shares of Nabors or any successor thereto will be exchanged for, converted into, acquired for or constitute solely the right to receive any form of consideration which is not all or substantially all common shares listed, or, upon consummation of or immediately following such transaction or event, which will be listed, on a United States national securities exchange or approved for quotation on the Nasdaq National Market or any similar United States system of automated dissemination of quotations of securities prices. To exercise the repurchase right, holders of New Securities must deliver, on or before the third day immediately preceding the Fundamental Change Repurchase Date, the New Securities to be repurchased, duly endorsed for transfer, together with the form entitled "Option to Elect Repurchase Upon a Fundamental Change" on the reverse side of the New Security duly completed, to us, or an agent designated by us. We will comply with the provisions of Rule 13e-4 and any other tender offer rules under the Securities Exchange Act which may then be applicable in connection with the repurchase of the New Securities in the event of a Fundamental Change. The repurchase rights of the holders of New Securities (and the requirement to pay a make-whole premium in the event of certain exchanges) could discourage a potential acquirer of Nabors. The Fundamental Change repurchase feature, however, is not the result of management's knowledge of any specific effort to obtain control of Nabors by any means or part of a plan by management to adopt a series of anti-takeover provisions. The term Fundamental Change is limited to specified transactions and may not include other events that might adversely affect our financial condition or the financial condition of Nabors. In addition, holders may not be protected by the requirement that we offer to repurchase the New Securities upon a Fundamental Change in the event of a highly leveraged transaction, reorganization, merger or similar transaction involving Nabors. No New Securities may be repurchased at the option of holders upon a Fundamental Change if there has occurred and is continuing an event of default described under "-- Events of Default; Notice and Waiver" below. However, New Securities may be repurchased if the event of default is in the payment of the Fundamental Change purchase price with respect to the New Securities. REPURCHASE OF NEW SECURITIES AT THE OPTION OF THE HOLDER On June 15, 2008, June 15, 2013, and June 15, 2018, we will be obligated to repurchase, at the option of the holder, all or any portion of the holder's New Securities for cash. The purchase price payable in respect of a New Security will be equal to the principal amount plus any accrued and unpaid contingent interest and additional amounts owed, if any, to the repurchase date. The holder's right to require us to repurchase New Securities is exercisable by delivery during the repurchase period of a written repurchase notice by the holder to the office of the paying agent. The paying agent will initially be the trustee. The repurchase period will begin at any time from the opening of business on the date that is 20 business days prior to the applicable repurchase date until the close of the business day on the applicable repurchase date. If the repurchase notice is withdrawn during the period, we will not be obligated to repurchase the New Securities. Our repurchase obligation will be subject to additional conditions set forth in the indenture. 47 The repurchase notice will state: (1) the certificate numbers of the New Securities to be delivered by the holder for repurchase by us; (2) the portion of the principal amount of New Securities to be repurchased, which must be $1,000 or in multiples of $1,000; and (3) that the New Securities are to be repurchased by us pursuant to the applicable provisions of the New Securities and the indenture. Any repurchase notice may be withdrawn by the holder by a written notice of withdrawal delivered to the paying agent prior to the close of business on the repurchase date. The notice of withdrawal will state the name of the holder, a statement that the holder is withdrawing its election to require us to repurchase its New Securities, the principal amount and the certificate numbers of the New Securities as to which the withdrawal notice relates and the principal amount, if any, which remains subject to the repurchase notice. We will give notice not less than 20 business days prior to the repurchase date to all holders at their addresses shown in the register of the registrar. We will also give notice to beneficial owners as required by applicable law. We will comply with the provisions of Rule 13e-4 and any other tender offer rules under the Securities Exchange Act which may then be applicable and will file a Schedule TO or any other schedule required under the Securities Exchange Act in connection with any offer by us to repurchase New Securities at the option of holders. Payment of the purchase price for a New Security for which a repurchase notice has been delivered and not withdrawn is conditioned upon book-entry transfer or delivery of the New Security, together with necessary endorsements, to the paying agent at its office in the Borough of Manhattan, The City of New York, or any other office of the paying agent, at any time after delivery of the repurchase notice. Payment of the purchase price for the New Security will be made promptly following the later of the repurchase date or the time of book-entry transfer or delivery of the New Security. If the paying agent holds money or securities sufficient to pay the purchase price of the New Security on the business day following the repurchase date, then, on and after the date, the New Security will cease to be outstanding and contingent interest, if any, on the New Securities, will cease to accrue. This will be the case whether or not book-entry transfer of the New Security is made or the New Security is delivered to the paying agent, and all other rights of the holder will terminate, other than the right to receive the purchase price upon delivery of the New Security. No New Securities may be repurchased if there has occurred, prior to, on or after the giving by the holders of the New Securities of the required repurchase notice, and is continuing an event of default described under "-- Events of Default; Notice and Waiver," other than a default in the payment of the purchase price with respect to the New Securities. MERGERS AND SALES OF ASSETS The indenture provides that neither we nor Nabors will consolidate with or merge into any other person or convey, transfer or lease our or its properties and assets substantially as an entirety to another person, unless, among other items: - in our case, the resulting surviving or transferee person, if other than us is organized and existing under the laws of the United States, any state thereof or the District of Columbia; - the successor person assumes all of our and/or Nabors' obligations, as applicable, under the New Securities and the indenture; and - neither we, Nabors nor the successor person will immediately thereafter be in default under the indenture. Upon the assumption of our and/or Nabors' obligations by a successor as described above, subject to certain exceptions, we and/or Nabors will be discharged from all obligations under the New Securities and the indenture. Certain of these transactions which would constitute a Fundamental Change would permit each holder to require us to repurchase their New Securities as described under "-- Repurchase at Option of the Holder Upon a Fundamental Change." 48 EVENTS OF DEFAULT; NOTICE AND WAIVER The indenture provides that, if an event of default specified in the indenture has happened and is continuing, either the trustee or the holders of not less than 25% in aggregate principal amount of the New Securities then outstanding may declare due and payable: - the principal amount of the New Securities; plus - contingent interest, if any, or additional amounts, if any, accrued and unpaid on the New Securities to the date of the declaration; plus - the make-whole premium, if any. In the case of certain events of bankruptcy or insolvency, the principal amount of the New Securities plus contingent interest, if any, and additional amounts, if any, on the New Securities, accrued and unpaid to the occurrence of the event, will automatically become and be immediately due and payable. Under certain circumstances, the holders of a majority in aggregate principal amount of the outstanding New Securities may rescind any acceleration with respect to the New Securities and its consequences. Interest will accrue at the rate of 1.0% per annum and be payable on demand upon a default in the payment of any redemption price or purchase price and, after acceleration, of the principal amount and accrued and unpaid contingent interest, if any, to the extent that payment of the interest is legally enforceable. Contingent interest, if any, will cease to accrue after declaration of acceleration. Under the indenture, events of default are defined as: (1) default in payment of: - the principal amount (if the default continues for 10 days), - accrued contingent interest, if any, or additional amounts, if any, on the New Securities or a make-whole premium, if any (if the default continues for 30 days), - redemption price (if the default continues for 10 days), or - purchase price or Fundamental Change purchase price (if the default continues for 10 days) with respect to any New Security when it becomes due and payable; (2) our failure for 20 days to deliver cash or a combination of cash and Nabors' common shares (including cash in lieu of fractional shares) when required to be delivered following the exchange of a New Security; (3) our or Nabors' failure to comply with any of our or their other agreements in the New Securities or the indenture upon the receipt by us of notice of the default by the trustee or by holders of not less than 25% in aggregate principal amount of the New Securities then outstanding and our failure to cure the default within 90 days after receipt by us of the notice; (4) certain events of our or Nabors' bankruptcy or insolvency; or (5) the failure to keep Nabors' full and unconditional guarantee in place. The trustee will give notice to holders of the New Securities of any continuing default known to the trustee within 90 days after the trustee becomes aware of such default; provided that, except in the case of a default as described in clause (1) above, the trustee may withhold notice if it determines in good faith that withholding the notice is in the interests of the holders. The holders of a majority in aggregate principal amount of the outstanding New Securities may direct the time, method and place of conducting any proceeding for any remedy available to the trustee or exercising any trust or power conferred on the trustee; provided that the direction may not conflict with any law or the indenture and will be subject to certain other limitations. Before proceeding to exercise any right or power under the indenture at the direction of the holders, the trustee will be entitled to receive from the holders reasonable security or indemnity satisfactory to it against the costs, expenses and liabilities incurred by it in complying with the direction. No holder of 49 any New Security will have any right to pursue any remedy with respect to the indenture or the New Securities unless: (1) the holder will have previously given us and the trustee written notice of a continuing event of default; (2) the holders of at least 25% in aggregate principal amount of the outstanding New Securities have made a written request to the trustee to pursue the remedy; (3) the holder or holders have offered to the trustee reasonable indemnity satisfactory to the trustee; (4) the holders of a majority in aggregate principal amount of the outstanding New Securities have not given the trustee a direction inconsistent with the request within 60 days after receipt of the request; and (5) the trustee has failed to comply with the request within the 60-day period. However, the right of any holder: (1) to receive payment of: - the principal amount, - accrued contingent interest, if any, or additional amounts, if any, on the New Securities or a make-whole premium, if any, - redemption price, - purchase price or Fundamental Change purchase price, - and any overdue interest, in respect of the New Securities held by such holder, on or after the respective due dates of such payments; (2) to institute suit for the enforcement of any payments or exchange; or (3) to exchange New Securities, will not be impaired or adversely affected without the holder's consent. The holders of at least a majority in aggregate principal amount of the outstanding New Securities may waive an existing default and its consequences, other than: - any default in any payment on the New Securities; - any default with respect to the exchange rights of the New Securities; or - any default in respect of certain covenants or provisions in the indenture which may not be modified without the consent of the holder of each New Security as described under "-- Modification." We will be required to furnish to the trustee annually a statement as to any default by us or Nabors in the performance and observance of our or Nabors' obligations under the indenture. MODIFICATION Modification and amendment of the indenture or the New Securities may be effected by us, Nabors and the trustee with the consent of the holders of not less than a majority in aggregate principal amount of the New Securities then outstanding. Notwithstanding the foregoing, no amendment may without the consent of each holder affected: (1) reduce the principal amount, redemption price, purchase price or make-whole premium or extend the stated maturity of any New Securities or alter the manner or rate of accrual of contingent interest or additional amounts or make any New Security payable in money or securities other than that stated in the New Securities; 50 (2) make any change to the principal amount of New Securities whose holders must consent to an amendment or any waiver under the indenture or modify the indenture provisions relating to amendments or waivers with respect to the payment of principal; (3) make any change that adversely affects the right to exchange any New Security or the right to require us to repurchase a New Security or the right to require us to repurchase a New Security upon a Fundamental Change; or (4) impair the right to institute suit for the enforcement of any payment with respect to, or exchange of, the New Securities. The indenture also provides for certain modifications of its terms without the consent of the holders. PAYMENT OF ADDITIONAL AMOUNTS Unless otherwise required by Bermudan law, neither we nor Nabors will deduct or withhold from payments made with respect to the New Securities and the guarantee on account of any present or future taxes, duties, levies, imposts, assessments or governmental charges of whatever nature imposed or levied by or on behalf of any political subdivisions or taxing authorities in Bermuda having the power to tax. In the event that either we or Nabors is required to withhold or deduct on account of any Bermudan taxes due from any payment made under or with respect to the New Securities or the guarantee, as the case may be, we or Nabors, as the case may be, will pay additional amounts so that the net amount received by each holder of New Securities will equal the amount that the holder would have received if the Bermudan taxes had not been required to be withheld or deducted. The amounts that we or Nabors are required to pay to preserve the net amount receivable by the holders of the New Securities are referred to as "additional amounts." Also, additional amounts will not be payable with respect to a payment made to a holder of the New Securities to the extent: - that any Bermudan taxes would not have been so imposed but for the existence of any present or former connection between the holder and Bermuda other than the mere receipt of the payment, the acquisition, ownership or disposition of such New Securities or the exercise or enforcement of rights under the New Securities, the guarantee or the indenture; - of any estate, inheritance, gift, sales, transfer or personal property taxes imposed with respect to the New Securities, except as described below or as otherwise provided in the indenture; - that any such Bermudan taxes would not have been imposed but for the presentation of the New Securities, where presentation is required, for payment on a date more than 30 days after the date on which the payment became due and payable or the date on which payment thereof is duly provided for, whichever is later, except to the extent that the beneficiary or holder thereof would have been entitled to additional amounts had the New Securities been presented for payment on any date during such 30-day period; or - that the holder would not be liable or subject to such withholding or deduction of Bermudan taxes but for the failure to make a valid declaration of non-residence or other similar claim for exemption, if: - the making of the declaration or claim is required or imposed by statute, treaty, regulation, ruling or administrative practice of the relevant taxing authority as a precondition to an exemption from, or reduction in, the relevant taxes; and - at least 60 days prior to the first payment date with respect to which we or Nabors shall apply this clause, we or Nabors shall have notified all holders of the New Securities in writing that they shall be required to provide this declaration or claim. We and Nabors will also: - withhold or deduct such Bermudan taxes as required; - remit the full amount of taxes deducted or withheld to the relevant taxing authority in accordance with all applicable laws; 51 - use reasonable efforts to obtain from each relevant taxing authority imposing the taxes certified copies of tax receipts evidencing the payment of any taxes deducted or withheld; and - upon request, make available to the holders of the New Securities, within 60 days after the date the payment of any taxes deducted or withheld is due pursuant to applicable law, certified copies of tax receipts evidencing such payment by us or Nabors and, notwithstanding our or Nabors' efforts to obtain the receipts, if the same are not obtainable, other evidence of such payments. In addition, we or Nabors will pay any stamp, issue, registration, documentary or other similar taxes and duties, including interest, penalties and additional amounts with respect thereto, payable in Bermuda or the United States or any political subdivision or taxing authority of or in the foregoing with respect to the creation, issue, offering, enforcement, redemption or retirement of the New Securities or the guarantee. If payments with respect to the New Securities or the guarantee become subject generally to the taxing jurisdiction of any Territory or any political subdivision or taxing authority having power to tax, other than or in addition to any political subdivision or taxing authority in Bermuda having the power to tax, immediately upon becoming aware thereof we will notify the trustee of such event, and we or Nabors, as the case may be, will pay additional amounts in respect thereof on terms corresponding to the terms of the foregoing provisions of this "Payment of Additional Amounts" section with the substitution for (or, as the case may be, in addition to) the references herein to any political subdivisions or taxing authority in Bermuda having the power to tax with references to that other or additional Territory or any political subdivision or taxing authority having the power to tax to whose taxing jurisdiction such payments shall have become subject as aforesaid. The term "Territory" means for this purpose any jurisdiction in which we or Nabors as the case may be, is incorporated or in which we or Nabors has our or its place of central management or central control. FORM AND DENOMINATION The New Securities are issuable in fully registered form, without coupons, in denominations of $1,000 principal amount and multiples of $1,000. We may not reissue a New Security that has matured or been exchanged, redeemed, repurchased by us at the option of a holder or otherwise canceled, except for the transfer, exchange or replacement of the New Security. GLOBAL NEW SECURITY; BOOK-ENTRY FORM. The New Securities will be issued in the form of one or more global New Securities (collectively, the "global New Security"). The global New Security will be deposited with, or on behalf of, The Depository Trust Company and registered in the name of Cede & Co., DTC's nominee. Except as set forth below, the global New Security may be transferred, in whole or in part, only to another nominee of DTC or to a successor of DTC or its nominee. Purchasers of the New Securities may hold their interests in the global New Security directly through DTC if the holder is a participant in DTC, or indirectly through organizations which are participants in DTC. Transfers between participants will be effected in the ordinary way in accordance with DTC rules and, if applicable, those of Euroclear Bank S.A./N.V., as operator of the Euroclear System ("Euroclear"), and Clearstream Banking, societe anonyme ("Clearstream"), and will be settled in same-day funds. The laws of some states require that certain persons take physical delivery of securities in definitive form. As a result, the ability to transfer beneficial interests in the global New Security to such persons may be limited. Persons who are not participants may beneficially own interests in the global New Security held by DTC only through participants, or certain banks, brokers, dealers, trust companies and other parties that clear through or maintain a custodial relationship with a participant, either directly or indirectly. So long as Cede & Co., as the nominee of DTC, is the registered owner of the global New Security, Cede & Co. for all purposes will be considered the sole holder of the global New Security. Except as provided below under "-- Form and Denomination -- Certificated New Securities," owners of beneficial interests in the global New Security will not be entitled to have certificates registered in their names. These owners will not receive or be entitled to receive physical delivery of certificates in definitive registered form and will not be considered the holders of the global New Security. Payment of the principal amount or the redemption price or the purchase price of New Securities represented by the global New Security will be made to Cede & Co., the nominee for DTC, as the registered owner of the global 52 New Security. Payments will be made by wire transfer of immediately available funds on the payment date. We, Nabors, the trustee and any paying agent will have no responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests in the global New Security. In addition, we, Nabors, the trustee and any paying agent will have no responsibility or liability for maintaining, supervising or reviewing any records relating to any beneficial ownership interests. We have been informed by DTC that, with respect to any payment of principal amount or the redemption price or the purchase price of New Securities represented by the global New Security, DTC's practice is to credit participants' accounts on the payment date. These payments will be in amounts proportionate to the participants' respective beneficial interests in the principal amount represented by the global New Security as shown on the records of DTC. DTC will not credit participants' accounts if DTC has reason to believe that it will not receive payment on the applicable payment date. Payments by participants to owners of beneficial interests in the principal amount represented by the global New Security held through participants will be the responsibility of the participants. This is currently the case with securities held for the accounts of customers registered in street name. Because DTC can only act on behalf of participants who in turn act on behalf of indirect participants and certain banks, the ability of a person having a beneficial interest in the principal amount represented by the global New Security to pledge its interest to persons or entities that do not participate in the DTC system, or otherwise take actions in respect of its interest, may be affected by the lack of physical certificates evidencing its interest. DTC has advised us as follows: DTC is a limited purpose trust company organized under the laws of the State of New York, a member of the Federal Reserve System, a clearing corporation within the meaning of the Uniform Commercial Code and a clearing agency registered pursuant to the provisions of Section 17A of the Securities Exchange Act. DTC was created to hold securities for its participants and to facilitate the clearance and settlement of securities transactions between participants through electronic book-entry changes to the accounts of its participants. This practice eliminates the need for physical movement of certificates. Participants include securities brokers and dealers, banks, trust companies and clearing corporations and may include certain other organizations. Some of the participants, or their representatives, together with other entities, own DTC. Indirect access to the DTC system is available to others such as banks, brokers, dealers and trust companies that clear through, or maintain a custodial relationship with, a participant, either directly or indirectly. Conveyance of notices and other communications by DTC to participants, by participants to indirect participants and indirect participants to beneficial owners will be governed by arrangements among them, subject to any statutory or regulatory requirements that may be in effect from time to time. Redemption notices will be sent to Cede & Co., as nominee of DTC. If less than all of the New Securities are being redeemed, DTC will reduce the amount of interest of each participant in the New Securities in accordance with its procedures. Transfers between participants in DTC will be effected in the ordinary way in accordance with DTC rules and will be settled in same-day funds. Transfers between participants in Euroclear and Clearstream will be effected in DTC in accordance with DTC rules on behalf of Euroclear or Clearstream, as the case may be, by its respective depositary; however, such cross-market transactions will require delivery of instruction to Euroclear or Clearstream, as the case may be, by the counterparty in such system in accordance with its rules and procedures and within its established deadlines (Brussels time). Euroclear or Clearstream, as the case may be, will, if the transaction meets its settlement requirements, deliver instructions to its respective depositary to take action to effect final settlement on its behalf by delivering or receiving interests in the global New Securities in DTC, and making or receiving payment in accordance with normal procedures for same-day funds settlement applicable to DTC. Euroclear participants and Clearstream participants may not deliver instructions directly to the depositaries for Euroclear or Clearstream. Because of time zone differences, the securities account of a Euroclear or Clearstream participant purchasing an interest in the global securities from a DTC participant will be credited during the securities settlement processing day (which must be a business day for Euroclear or Clearstream, as the case may be) immediately following the DTC settlement date, and such credit of any transactions involving interests in the global New Security settled during such processing day will be reported to the relevant Euroclear or Clearstream participant on such day. Cash received by Euroclear or Clearstream as a result of sales of interests in the global New Security by or through a Euroclear or Clearstream participant to a DTC participant will be received with value on the DTC settlement date, but will be 53 available in the relevant Euroclear or Clearstream cash account only as of the business day following settlement in DTC. We expect that DTC will take any action permitted to be taken by a holder of New Securities (including the presentation of New Securities for exchange as described below) only at the direction of one or more participants to whose account the DTC interests in the global New Security is credited and only in respect of such portion of the aggregate principal amount of the New Securities as to which such participant or participants has or have given such direction. However, if there is an event of default under the New Securities, DTC will exchange the global New Security for New Securities in definitive form, which it will distribute to its participants. Although we expect that DTC, Euroclear and Clearstream will agree to the foregoing procedures in order to facilitate transfers of interests in the global New Security among participants of DTC, Euroclear, and Clearstream, DTC, Euroclear and Clearstream are under no obligation to perform or continue to perform such procedures, and such procedures may be discontinued at any time. None of us, Nabors, the trustee, or any registrar, paying agent or exchange agent under the indenture will have any responsibility for the performance by DTC, Euroclear or Clearstream or their participants or indirect participants of their respective obligations under the rules and procedures governing their operations. If DTC is at any time unwilling to continue as a depositary for the global New Security and a successor depositary is not appointed by us within 90 days, we will issue New Securities in fully registered, definitive form in exchange for the global New Security. CERTIFICATED NEW SECURITIES. Certificated New Securities may be issued in exchange for New Securities represented by the global New Security if no successor depositary is appointed by us as set forth under "-- Form and Denomination -- Global New Security; Book-Entry Form." REGISTRATION RIGHTS The indenture provides that we will use our reasonable best efforts to file, within 90 days of the consummation of the Exchange Offer, a registration statement relating to the resale of the New Securities and the Nabors' common shares issuable upon exchange thereof, and to use our reasonable best efforts to cause such registration statement to become effective under the Securities Act within 180 days after the consummation of the Exchange Offer. Under no circumstances, however, will we be obligated to pay liquidated damages or other penalties because of our failure to do so and our failure to do so will not constitute an event of default under the indenture relating to the New Securities. You can obtain a Notice and Questionnaire to provide us and Nabors with the necessary information to be included as a "selling securityholder" in such registration statement by calling the information agent at the number on the back of this Offering Circular. However, if you hold Old Securities with the "unrestricted CUSIP" number (629568AK2), we believe that you are free to sell your Old Securities without additional registration under the Securities Act (unless you are an affiliate of us or Nabors) and, accordingly, you should also be free to sell any New Securities issued in exchange for such Old Securities without additional registration under the Securities Act. You should consult your legal, tax and other advisors with respect to your particular circumstances. INFORMATION CONCERNING THE TRUSTEE Nabors has appointed J.P. Morgan Trust Company, National Association, as trustee under the indenture, and as paying agent, exchange agent, registrar and custodian with regard to the New Securities. The trustee is one of a number of banks with which we, Nabors and our subsidiaries maintain ordinary banking relationships. GOVERNING LAW The indenture, the New Securities and the guarantee are governed by, and construed in accordance with, the laws of the State of New York. 54 CERTAIN BERMUDA LAW MATTERS Bermuda has exchange controls which apply to residents in respect of the Bermudan dollar. As an exempt company, Nabors is considered to be nonresident for such controls, consequently, there are no Bermuda governmental restrictions on Nabors' ability to make transfers and carry out transactions in all other currencies, including currency of the United States. There is no reciprocal tax treaty between Bermuda and the United States regarding withholding taxes. Under existing Bermuda law, there is no Bermuda income or withholding tax on dividends, if any, paid by Nabors to its shareholders. Furthermore, no Bermuda tax or other levy is payable on the sale or other transfer (including by gift or on the death of the shareholder) of Nabors' common shares (other than by shareholders resident in Bermuda). 55 CERTAIN MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS The following is a general summary of certain United States federal income tax considerations associated with the exchange of Old Securities for New Securities issued in the Exchange Offer. This summary is based upon current laws, regulations, rulings and judicial decisions all of which are subject to change, possibly with retroactive effect. This summary does not address all aspects of United States federal income taxation that may be relevant to particular holders of Old Securities or New Securities issued in the Exchange Offer. In addition, this summary does not address any aspect of state, local or foreign taxation. TAX CONSEQUENCES OF THE EXCHANGE The Company believes that the exchange of Old Securities for New Securities issued in the Exchange Offer should not be treated as an "exchange" for United States federal income tax purposes because the New Securities issued in the Exchange Offer should not be considered to differ materially in kind or extent from the Old Securities. Rather, New Securities issued in the Exchange Offer received by a holder should be treated as a continuation of Old Securities in the hands of such holder. As a result there should be no United States federal income tax consequences to holders exchanging Old Securities for New Securities issued in the Exchange Offer, and any exchanging holder of Old Securities should have the same tax basis and holding period in, treatment under the rules that govern contingent payment debt obligations, and original issue discount income in respect of, New Securities issued in the Exchange Offer as such holder had in Old Securities immediately prior to the exchange. By participating in the Exchange Offer, each holder will be deemed to have agreed, pursuant to terms of the indenture for the New Securities, to treat the New Securities as subject to the rules that apply to contingent payment debt obligations and to continue to accrue interest in the same manner and amount as described in the offering memorandum relating to the Old Securities. Prospective holders of New Securities issued in the Exchange Offer are urged to consult their tax advisors concerning the particular tax consequences of exchanging such holders' Old Securities for New Securities to be issued in the Exchange Offer, including the applicability and effect of any state, local or foreign income and other tax laws. A holder of Old Securities that does not participate in the Exchange Offer should have no U.S. federal income tax consequences as a result of the Exchange Offer. Without regard to whether the exchange of Old Securities for New Securities would constitute an "exchange" for United States federal income tax purposes, if at any time Nabors makes a distribution of property to Nabors' shareholders that would be taxable to the shareholders as a dividend for United States federal income tax purposes and, in accordance with the anti-dilution provisions of the New Securities, the exchange rate of the New Securities is increased, such increase may be deemed to be the payment of a taxable dividend to holders of the New Securities (which, as discussed in the offering memorandum relating to the Old Securities, is the same result that an increase in the exchange rate of the Old Securities may have to holders of the Old Securities). POSSIBLE ALTERNATIVE TAX CHARACTERIZATION OF THE EXCHANGE If, contrary to our position, the exchange of Old Securities for New Securities issued in the Exchange Offer were to be treated as an "exchange" for United States federal income tax purposes, the tax consequences to a holder could materially differ. A holder may be required to recognize gain (taxable as ordinary income) in an amount equal to the difference between the amount realized on the exchange and the holder's adjusted basis in the Old Securities surrendered. 56 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The consolidated financial statements incorporated in this offering circular by reference to the Annual Report on Form 10-K for the year ended December 31, 2003 have been audited by PricewaterhouseCoopers LLP, independent registered public accounting firm, as stated in their report incorporated herein by reference. With respect to the unaudited financial information of Nabors Industries Ltd. for the three-month periods ended March 31, 2004 and 2003, six-month periods ended June 30, 2004 and 2003, and nine-month periods ended September 30, 2004 and 2003, incorporated by reference in this offering circular, PricewaterhouseCoopers LLP reported that they have applied limited procedures in accordance with professional standards for a review of such information. However, their separate reports dated May 7, 2004, August 4, 2004, and November 3, 2004, incorporated by reference herein, state that they did not audit and they do not express an opinion on that unaudited financial information. Accordingly, the degree of reliance on their reports on such information should be restricted in light of the limited nature of the review procedures applied. 57 WHERE YOU CAN FIND MORE INFORMATION Nabors files annual, quarterly and current reports, proxy and information statements and other information with the Securities and Exchange Commission. We are not required to file such reports and materials with the Securities and Exchange Commission. You may read and copy materials that Nabors has filed with the Securities and Exchange Commission at the Securities and Exchange Commission public reference room at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549. Please call the Securities and Exchange Commission at 1-800-SEC-0330 for further information on the public reference room. Nabors' common shares are quoted on the American Stock Exchange under the symbol "NBR" and Nabors' Securities and Exchange Commission filings can also be read at: American Stock Exchange, 86 Trinity Place, New York, New York 10006. Nabors' Securities and Exchange Commission filings are also available to the public on the Securities and Exchange Commission's Internet website at http://www.sec.gov. Such filings are also available at Nabors' website at http://www.nabors.com. Website materials are not a part of this offering circular. INCORPORATION BY REFERENCE We incorporate by reference into this offering circular the documents listed below and any future filings Nabors makes with the Securities and Exchange Commission under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act, as amended prior to the Expiration Date of the Exchange Offer. The information incorporated by reference is an important part of this offering circular. Any statement in a document incorporated by reference into this offering circular will be deemed to be modified or superseded to the extent a statement contained in (1) this offering circular or (2) any other subsequently filed document that is incorporated by reference into this offering circular modifies or supersedes such statement. - Nabors' Annual Report on Form 10-K filed on March 15, 2004, for Nabors' fiscal year ended December 31, 2003; - Nabors' Quarterly Report on Form 10-Q for the quarter ended March 31, 2004 filed by Nabors on May 7, 2004 , Nabors' Quarterly Report on Form 10-Q for the quarter ended June 30, 2004 filed by Nabors on August 6, 2004; and Nabors' Quarterly Report on Form 10-Q for the quarter ended September 30, 2004 filed by Nabors on November 4, 2004; - Nabors' Current Reports on Form 8-K filed on September 20, 2004, October 26, 2004, October 27, 2004, and October 29, 2004; - The description of Nabors' common shares contained in Nabors' Registration Statement on Form S-4, filed on January 2, 2002, as amended by Pre-Effective Amendment No. 1, Pre-Effective Amendment No. 2, Pre- Effective Amendment No. 3 and Pre-Effective Amendment No. 4 to Form S-4, filed with the SEC on March 25, 2002, April 17, 2002, April 29, 2002, and May 10, 2002, respectively (Registration No. 333-76198). We will furnish without charge to you, upon written or oral request, a copy of any or all of the documents incorporated by reference herein, other than exhibits to such documents that are not specifically incorporated by reference therein. You should direct any requests for documents to Nabors at: 2nd Fl. International Trading Centre, Warrens, St. Michael, Barbados, Attention: Investor Relations, or by telephoning us at (246) 421-9471. We have appointed J.P. Morgan Trust Company, National Association, as the exchange agent and Georgeson Shareholder, as the information agent for the Exchange Offer. All inquiries relating to this offering circular and the transactions contemplated hereby, should be directed to the information agent at the telephone numbers and address set forth on the back cover of this offering circular. 58 FOR INFORMATION CONTACT: GEORGESON SHAREHOLDER LOGO 17 State Street, 10th Floor New York, NY 10004 Banks and Brokers Call: (212) 440-9800 All Others Call (Toll Free): (800) 325-5997 All completed Letters of Transmittal and agent's messages, should be directed to J.P. Morgan Trust Company, National Association as the exchange agent for the Exchange Offer at the address set forth below. All questions regarding the procedures for tendering in the Exchange Offer and requests for assistance in tendering your Old Securities should also be directed to the exchange agent at the following telephone numbers and address: DELIVERY TO: J.P. MORGAN TRUST COMPANY, NATIONAL ASSOCIATION EXCHANGE AGENT IF BY HAND OR OVERNIGHT COURIER: J.P. MORGAN TRUST COMPANY, NATIONAL ASSOCIATION INSTITUTIONAL TRUST SERVICES 2001 BRYAN STREET 9TH FLOOR DALLAS, TEXAS 75201 ATTN: FRANK IVINS PERSONAL & CONFIDENTIAL NABORS INDUSTRIES, INC. EXCHANGE OFFER IF BY REGULAR OR CERTIFIED MAIL: J.P. MORGAN TRUST COMPANY, NATIONAL ASSOCIATION INSTITUTIONAL TRUST SERVICES P. O. BOX 2320 DALLAS, TEXAS 75221-2320 ATTN: FRANK IVINS PERSONAL & CONFIDENTIAL NABORS INDUSTRIES, INC. EXCHANGE OFFER BY FACSIMILE TRANSMISSION (ELIGIBLE GUARANTOR INSTITUTIONS ONLY): (214) 468-6464 CONFIRM BY TELEPHONE: (800) 275-2048 DELIVERY OF A LETTER OF TRANSMITTAL OR AN AGENT'S MESSAGE TO AN ADDRESS OTHER THAN THE ADDRESS LISTED ABOVE OR TRANSMISSION OF INSTRUCTIONS BY FACSIMILE OTHER THAN AS SET FORTH ABOVE IS NOT VALID DELIVERY OF THE LETTER OF TRANSMITTAL OR AGENT'S MESSAGE. Request for additional copies of the offering circular, or Nabors' 2003 Annual Report on Form 10-K and other documents incorporated into this offering circular by reference, the Letter of Transmittal or the Notice of Guaranteed Delivery may be directed to the information agent or the exchange agent at the respective telephone numbers and addresses listed above. EX-99.T3E.2 4 h19780t3exv99wt3ew2.txt LETTER OF TRANSMITTAL LETTER OF TRANSMITTAL OFFER TO EXCHANGE SERIES B ZERO COUPON SENIOR EXCHANGEABLE NOTES DUE 2023 FOR ANY AND ALL OUTSTANDING ZERO COUPON SENIOR EXCHANGEABLE NOTES DUE 2023 (CUSIP NOS. 629568AK2 AND 629568AJ5 ISIN NOS. US629568AK22 AND US629568AJ58) OF NABORS INDUSTRIES, INC. GUARANTEED BY NABORS INDUSTRIES LTD. PURSUANT TO, AND SUBJECT TO THE TERMS AND CONDITIONS DESCRIBED IN, THE OFFERING CIRCULAR DATED NOVEMBER 12, 2004 THE EXCHANGE OFFER WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON DECEMBER 10, 2004, UNLESS EARLIER TERMINATED OR EXTENDED. The Exchange Agent for the Exchange Offer is: J.P. MORGAN TRUST COMPANY, NATIONAL ASSOCIATION By Hand or Overnight Delivery: J.P. Morgan Trust Company, National Association Institutional Trust Services 2001 Bryan Street, 9th floor Dallas, Texas 75201 Attn: Frank Ivins Personal & Confidential Nabors Industries, Inc. Exchange Offer If by Regular or Certified Mail: J.P. Morgan Trust Company, National Association Institutional Trust Services P.O. Box 2320 Dallas, Texas 75221-2320 Attn: Frank Ivins Personal & Confidential Nabors Industries, Inc. Exchange Offer By Facsimile Transmission: (214) 468-6464 For Confirmation by Telephone: (800) 275-2048 DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF THIS LETTER OF TRANSMITTAL VIA FACSIMILE TO A NUMBER OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE VALID DELIVERY. Capitalized terms used but not defined herein shall have the same meaning given them in the offering circular of Nabors Industries, Inc. (the "Company") and its parent company, Nabors Industries Ltd., a Bermuda exempted company ("Nabors" and together with the Company, the "Offerors"), dated November 12, 2004 (as may be amended and supplemented from time to time, the "Offering Circular"). This Letter of Transmittal ("Letter") need not be completed if (a) Zero Coupon Senior Exchangeable Notes Due 2023 of the Company (the "Old Securities"), guaranteed by Nabors, are being tendered by book-entry transfer to the account maintained by the Exchange Agent at The Depository Trust Company ("DTC") pursuant to the procedures set forth in the Offering Circular under "The Exchange Offer -- Procedures for Exchange" and (b) an "agent's message" is delivered to the Exchange Agent as described in the Offering Circular under "The Exchange Offer -- Procedures for Exchange -- Tender of Old Securities Through DTC." THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED. If Old Securities are registered in different names, a separate Letter of Transmittal must be submitted for each registered owner. See Instruction 2 below. This Letter relates to the offer (the "Exchange Offer") of the Offerors to exchange $1,000 principal amount of the Company's Series B Zero Coupon Senior Exchangeable Notes Due 2023 (the "New Securities"), guaranteed by Nabors, for each $1,000 principal amount of validly tendered and accepted outstanding Old Securities. The Exchange Offer is made upon the terms and subject to the conditions contained in the Offering Circular. All tenders of Old Securities pursuant to the Exchange Offer must be received by the Exchange Agent prior to 12:00 midnight, New York City time, on December 10, 2004 unless extended or earlier terminated by us (the "Expiration Date"). The Offerors will notify holders of the Old Securities of any extension by means of a press release or other public announcement prior to 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date. The Exchange Offer is subject to certain conditions precedent as set forth in the Offering Circular under the caption "The Exchange Offer -- Conditions to the Exchange Offer." This Letter is to be completed by a holder of Old Securities if a tender is to be made by book-entry transfer to the account maintained by the Exchange Agent at DTC pursuant to the procedures set forth in the Offering Circular under "The Exchange Offer -- Procedures for Exchange," but only if an agent's message is not delivered through DTC's Automated Tender Offer Program ("ATOP"). Tenders by book-entry transfer may also be made through ATOP. DTC participants that are accepting the Exchange Offer must transmit their acceptance to DTC through ATOP. DTC will then verify the acceptance and execute a book-entry delivery to the Exchange Agent's account at DTC. DTC will also send an agent's message to the Exchange Agent for its acceptance. The agent's message will state that DTC has received an express acknowledgment from the tendering holder of Old Securities, which acknowledgment will confirm that such holder of Old Securities received and agrees to be bound by, and makes each of the representations and warranties contained in, this Letter, and that the Offerors may enforce this Letter against such holder of Old Securities. Delivery of the agent's message by DTC will satisfy the terms of the Exchange Offer in lieu of execution and delivery of this Letter by the DTC participant identified in the agent's message. Accordingly, this Letter need not be completed by a holder tendering through ATOP. Holders of Old Securities who are unable to deliver confirmation of the book-entry tender of their Old Securities into the Exchange Agent's account at DTC and all other documents required by this Letter to the Exchange Agent on or prior to the Expiration Date must tender their Old Securities according to the guaranteed delivery procedures set forth in "The Exchange Offer -- Procedures for Exchange -- Guaranteed Delivery Procedures" section of the Offering Circular. DELIVERY OF DOCUMENTS TO DTC DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT. The undersigned has completed, executed and delivered this Letter to indicate the action the undersigned desires to take with respect to the Exchange Offer. 2 List below the Old Securities to which this Letter relates. If Old Securities are registered in different names, a separate Letter of Transmittal must be submitted for each registered owner. See Instruction 2 below.
- --------------------------------------------------------------------------------------------------------------------------------- DESCRIPTION OF UNRESTRICTED OLD SECURITIES (CUSIP NO. 629568AK2) - --------------------------------------------------------------------------------------------------------------------------------- CERTIFICATE AGGREGATE PRINCIPAL NAMES(S) & ADDRESS(ES) OF REGISTERED HOLDERS(S) NUMBER(S)/ ACCOUNT AMOUNT OF PRINCIPAL AMOUNT (PLEASE FILL IN, IF BLANK) NUMBER(S)* OLD SECURITIES TENDERED** - --------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------- - ----------------------------------------------------------------- Total - --------------------------------------------------------------------------------------------------------------------------------- * Need not be completed by holders tendering by book-entry transfer. ** Unless otherwise indicated in this column, a holder will be deemed to have tendered ALL of the Old Securities represented by the securities indicated in column 2. Old Securities tendered hereby must be in denominations of principal amount of $1,000 or any integral multiple thereof. See Instruction 1 of the Letter of Transmittal. - ---------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------- DESCRIPTION OF RESTRICTED OLD SECURITIES (CUSIP NO. 629568AJ5) - --------------------------------------------------------------------------------------------------------------------------------- CERTIFICATE AGGREGATE PRINCIPAL NAMES(S) & ADDRESS(ES) OF REGISTERED HOLDERS(S) NUMBER(S)/ ACCOUNT AMOUNT OF PRINCIPAL AMOUNT (PLEASE FILL IN, IF BLANK) NUMBER(S)* OLD SECURITIES TENDERED** - --------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------- - ----------------------------------------------------------------- Total - --------------------------------------------------------------------------------------------------------------------------------- * Need not be completed by holders tendering by book-entry transfer. ** Unless otherwise indicated in this column, a holder will be deemed to have tendered ALL of the Old Securities represented by the securities indicated in column 2. Old Securities tendered hereby must be in denominations of principal amount of $1,000 or any integral multiple thereof. See Instruction 1 of the Letter of Transmittal. - ---------------------------------------------------------------------------------------------------------------------------------
3 PLEASE READ CAREFULLY THE ACCOMPANYING INSTRUCTIONS Ladies and Gentlemen: By execution hereof, the undersigned acknowledges that he or she has received the Offering Circular and this Letter of Transmittal, which together constitute the Exchange Offer, to exchange $1,000 principal amount of New Securities for each $1,000 principal amount of validly tendered and accepted Old Securities, on the terms and subject to the conditions of the Offering Circular. Upon the terms and subject to the conditions of the Exchange Offer, the undersigned hereby tenders to the Offerors the principal amount of Old Securities indicated above pursuant to the Exchange Offer. Subject to, and effective upon, the acceptance of Old Securities tendered hereby, by executing and delivering this Letter (or agreeing to the terms of this Letter pursuant to an agent's message) the undersigned: (i) irrevocably sells, assigns, and transfers to or upon the order of the Offerors all right, title and interest in and to, and all claims in respect of or arising or having arisen as a result of the undersigned's status as a holder of the Old Securities tendered thereby; (ii) waives any and all rights with respect to the Old Securities tendered; and (iii) releases and discharges the Offerors and the Trustee with respect to the Old Securities from any and all claims such holder may have, now or in the future, arising out of or related to the Old Securities. The undersigned acknowledges and agrees that the tender of Old Securities made hereby may not be withdrawn except in accordance with the procedures set forth in the Offering Circular. The undersigned represents and warrants that it has full power and authority to legally tender, exchange, assign and transfer the Old Securities tendered hereby and to acquire the New Securities issuable upon the exchange of such tendered Old Securities, and that, when and if the Old Securities tendered hereby are accepted for exchange, the Offerors will acquire good and unencumbered title to the tendered Old Securities, free and clear of all liens, restrictions, charges and encumbrances and not subject to any adverse claim or right. The undersigned also warrants that it will, upon request, execute and deliver any additional documents deemed by the Exchange Agent or the Offerors to be necessary or desirable to transfer ownership of such Old Securities on the account books maintained by DTC. The undersigned hereby irrevocably constitutes and appoints the Exchange Agent as the true and lawful agent and attorney-in-fact of the undersigned (with full knowledge that the Exchange Agent also acts as the agent of the Offerors) with respect to such Old Securities with full power of substitution to: (i) transfer ownership of such Old Securities on the account books maintained by DTC to, or upon the order of, the Offerors; (ii) present such Old Securities for transfer of ownership on the books of the Company; (iii) receive all benefits and otherwise exercise all rights of beneficial ownership of such Old Securities; and (iv) deliver, in book-entry form, the New Securities issuable upon acceptance of the Old Securities tendered hereby, together with any Old Securities not accepted in the Exchange Offer, to the DTC account designated herein by the undersigned, all in accordance with the terms and conditions of the Exchange Offer as described in the Offering Circular. The undersigned acknowledges that the Exchange Offer is being made in reliance upon Section 3(a)(9) of the Securities Act of 1933, as amended (the "Securities Act"), to exempt the Exchange Offer from the registration requirements of the Securities Act. The Exchange Offer is also, pursuant to Section 18(b)(4)(C) of the Securities Act, exempt from the registration and qualification requirements of state securities laws. We have no contract, arrangement or understanding relating to, and will not, directly or indirectly, pay any commission or other remuneration to any broker, dealer, salesperson, agent or any other person for soliciting tenders in the Exchange Offer. In addition neither our financial advisor nor any broker, dealer, salesperson, agent or any other person, is engaged or authorized to express any statement, opinion, recommendation or judgment with respect to the relative merits and risks of the Exchange Offer. All authority conferred or agreed to be conferred in this Letter shall survive the death or incapacity of the undersigned and all obligations of the undersigned hereunder shall be binding upon the successors, assigns, heirs, executors, administrators and legal representatives of the undersigned. The Exchange Offer is subject to certain conditions as set forth in the Offering Circular under the caption "The Exchange Offer -- Conditions to the Exchange Offer." The undersigned recognizes that as a result of these conditions 4 (which may be waived by the Offerors, in whole or in part, in the sole discretion of the Offerors, as more particularly set forth in the Offering Circular), the Offerors may not be required to accept all or any of the Old Securities tendered hereby. The undersigned understands that a valid tender of Old Securities is not made in acceptable form and risk of loss therefore does not pass until receipt by the Exchange Agent of this Letter (or an agent's message in lieu thereof) or a facsimile hereof, duly completed, dated and signed, together with all accompanying evidences of authority and any other required documents and signature guarantees in form satisfactory to the Offerors (which may delegate power in whole or in part to the Exchange Agent). All questions as to validity, form and eligibility of any tender of the Old Securities hereunder (including time of receipt) and acceptance of tenders and withdrawals of Old Securities will be determined by the Offerors in their sole judgment (which may delegate power in whole or in part to the Exchange Agent) and such determination shall be final and binding. Unless otherwise indicated in the "Special Issuance and Payment Instructions" box, the New Securities will be credited to the DTC account number specified above. In the event that the "Special Issuance and Payment Instructions" box is completed, the undersigned hereby understands and acknowledges that any Old Securities tendered but not accepted in the Exchange Offer will be issued in the name(s), and delivered by book-entry transfer to the DTC account number(s), indicated in such box. However, the undersigned understands and acknowledges that the Offerors have no obligation pursuant to the "Special Issuance and Payment Instructions" box to transfer any Old Securities from the name(s) of the registered holders thereof to the person indicated in such box, if the Offerors do not accept any Old Securities so tendered. The undersigned acknowledges and agrees that the Offerors and the Exchange Agent may, in appropriate circumstances, defer effecting transfer of Old Securities, and may retain such Old Securities, until satisfactory evidence of payment of transfer taxes payable on account of such transfer by the undersigned, or exemption therefrom, is received by the Exchange Agent. Your bank or broker can assist you in completing this form. The instructions included with this Letter must be followed. Questions and requests for assistance or for additional copies of the Offering Circular and this Letter may be directed to the Information Agent, whose address and telephone number appear on the final page of this Letter. See Instruction 7 below. 5 METHOD OF DELIVERY [ ] CHECK HERE IF TENDERED OLD SECURITIES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH DTC, AND COMPLETE THE FOLLOWING: Name of Tendering Institution - -------------------------------------------------------------------------------- Account Number - -------------------------------------------------------------------------------- Transaction Code Number - -------------------------------------------------------------------------------- SIGNATURE(S) OF HOLDER(S) OF OLD SECURITIES Must be signed by registered holder(s) of Old Securities exactly as such participant's name appears on a security position listing as the owner of Old Securities, or by person(s) authorized to become holder(s) by endorsements and documents transmitted with this Letter. If signing is by attorney, executor, administrator, trustee or guardian, agent or other person acting in a fiduciary or representative capacity, please set forth full title. See Instructions 2 & 3. Date ----------------------------------------------------------------------- Name(s) ----------------------------------------------------------------------- Capacity ----------------------------------------------------------------------- Address (Include Zip Code) - -------------------------------------------------------------------------------- DTC Account to which New Securities should be delivered - -------------------------------------------------------------------------------- Tax Identification or Social Security Number (See Instruction 8) - -------------------------------------------------------------------------------- Telephone Number (Include Area Code) - -------------------------------------------------------------------------------- 6 SPECIAL ISSUANCE AND PAYMENT INSTRUCTIONS (SEE INSTRUCTIONS 2 & 6) To be completed ONLY if Old Securities not accepted for exchange or New Securities are to be returned by credit to a DTC account number other than the account number specified above. Issue New Securities and/or unexchanged Old Securities to: Name - -------------------------------------------------------------------------------- DTC Account # - -------------------------------------------------------------------------------- Address (Including Zip Code) - -------------------------------------------------------------------------------- (TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER) (SEE INSTRUCTION 8) MEDALLION SIGNATURE GUARANTEE (SEE INSTRUCTIONS 2 & 3 BELOW) (CERTAIN SIGNATURES MUST BE GUARANTEED BY AN ELIGIBLE INSTITUTION) Name of Eligible Institution Guaranteeing Signatures - -------------------------------------------------------------------------------- Address (Including Zip Code) - -------------------------------------------------------------------------------- Telephone Number (Including Area Code) - -------------------------------------------------------------------------------- Authorized Signature - -------------------------------------------------------------------------------- Printed Name - -------------------------------------------------------------------------------- Title - -------------------------------------------------------------------------------- Date ------------------------------ 7 INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER 1. Delivery of Letter of Transmittal. To tender Old Securities in the Exchange Offer, book-entry transfer of the Old Securities into the Exchange Agent's account with DTC, as well as a properly completed and duly executed copy or manually signed facsimile of this Letter, or an agent's message in lieu of this Letter, and any other documents required by this Letter, must be received by the Exchange Agent, at its address set forth herein, prior to 12:00 midnight New York City time on the Expiration Date. Tenders of Old Securities in the Exchange Offer may be made prior to the Expiration Date in the manner described in the preceding sentence and otherwise in compliance with this Letter. Old Securities tendered hereby must be in denominations of principal amount of $1,000 or any integral multiple thereof. Unless otherwise indicated in the Letter of Transmittal, a holder will be deemed to have tendered ALL of the Old Securities represented by the securities listed in the tables entitled "Description of Unrestricted Old Securities" and "Description of Restricted Old Securities" in the Letter of Transmittal. THE METHOD OF DELIVERY OF THIS LETTER, AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT, INCLUDING DELIVERY THROUGH DTC AND ANY ACCEPTANCE OF AN AGENT'S MESSAGE TRANSMITTED THROUGH DTC'S AUTOMATED TENDER OFFER PROGRAM, IS AT THE ELECTION AND RISK OF THE TENDERING HOLDER OF OLD SECURITIES. IF SUCH DELIVERY IS MADE BY MAIL, IT IS SUGGESTED THAT THE HOLDER USE PROPERLY INSURED, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED AND THAT SUFFICIENT TIME BE ALLOWED TO ASSURE TIMELY DELIVERY. NO ALTERNATIVE, CONDITIONAL OR CONTINGENT TENDERS OF OLD SECURITIES WILL BE ACCEPTED. EXCEPT AS OTHERWISE PROVIDED BELOW, DELIVERY WILL BE MADE WHEN ACTUALLY RECEIVED BY THE EXCHANGE AGENT. THIS LETTER AND ANY OTHER REQUIRED DOCUMENTS SHOULD BE SENT ONLY TO THE EXCHANGE AGENT, NOT TO THE OFFERORS OR DTC. Old Securities tendered pursuant to the Exchange Offer may be withdrawn at any time prior to 12:00 midnight New York City time on the Expiration Date, unless the Exchange Offer is extended, in which case tenders of Old Securities may be withdrawn under the conditions described in the Offering Circular under the caption "The Exchange Offer -- Expiration Date; Extensions; Amendments." In order to be valid, notice of withdrawal of tendered Old Securities must comply with the requirements set forth in the Offering Circular under the caption "The Exchange Offer -- Proper Execution and Delivery of Letter of Transmittal -- Withdrawal of Tenders." 2. Signatures on Letter of Transmittal, Powers and Endorsements. This Letter must be signed by or on behalf of the registered holder(s) of the Old Securities tendered hereby. The signature(s) on this Letter must be exactly the same as the name(s) that appear(s) on the security position listing of DTC in which such holder of Old Securities is a participant, without alteration or enlargement or any change whatsoever. IN ALL OTHER CASES, ALL SIGNATURES ON LETTERS OF TRANSMITTAL MUST BE GUARANTEED BY A MEDALLION SIGNATURE GUARANTOR. If any of the Old Securities tendered hereby are registered in the name of two or more holders, all such holders must sign this Letter. If this Letter or any Old Securities or powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and, unless waived by the Offerors, proper evidence satisfactory to the Offerors of its authority so to act must be submitted with this Letter. 3. Guarantee of Signatures. Except as otherwise provided below, all signatures on a letter of transmittal or a notice of withdrawal must be guaranteed by a recognized participant in the Securities Transfer Agents Medallion Program or the Stock Exchange Medallion Program. Signatures on this Letter need not be guaranteed if: - this Letter is signed by a participant in DTC whose name appears on a security position listing of DTC as the owner of the Old Securities and the holder(s) has not completed the portion entitled "Special Issuance and Payment Instructions" on the letter of transmittal; or - the Old Securities are tendered for the account of an Eligible Guarantor Institution (defined below). 8 If this Letter is not signed by the holder, the holder must transmit a separate, properly completed power with this Letter (in either case, executed exactly as the name(s) of the participant(s) appear(s) on such security position listing), with the signature on the endorsement or power guaranteed by a Medallion Signature Guarantor, unless such powers are executed by an Eligible Guarantor Institution (defined below). An Eligible Guarantor Institution (as defined in Rule 17Ad-15 promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act")), means: (i) Banks (as defined in Section 3(a) of the Federal Deposit Insurance Act); (ii) Brokers, dealers, municipal securities dealers, municipal securities brokers, government securities dealers, and government securities brokers, as those terms are defined under the Exchange Act; (iii) Credit unions (as that term is defined in Section 19b(l)(A) of the Federal Reserve Act); (iv) National securities exchanges, registered securities associations, and clearing agencies, as those terms are used under the Exchange Act; and (v) Savings associations (as that term is defined in Section 3(b) of the Federal Deposit Insurance Act). For a correction of name or a change in name which does not involve a change in ownership, you may proceed as follows: for a change in name by marriage, etc., this Letter should be signed, e.g., "Mary Doe, now by marriage, Mary Jones." For a correction in name, this Letter should be signed, e.g., "James E. Brown, incorrectly inscribed as J. E. Brown." In any such case, the signature on this Letter must be guaranteed as provided above, and the holder must complete the Special Issuance and Payment Instructions above. You should consult your own tax advisor as to possible tax consequences resulting from the issuance of New Securities, as described above, in a name other than that of the registered holder(s) of the tendered Old Securities. 4. Transfer Taxes. The Offerors will pay all transfer taxes, if any, applicable to the transfer and exchange of Old Securities to the Offerors in the Exchange Offer. If transfer taxes are imposed for any other reason, the amount of those transfer taxes, whether imposed on the registered holder or any other persons, will be payable by the tendering holder. Other reasons transfer taxes could be imposed include: - if New Securities in book-entry form are to be registered in the name of any person other than the person signing this Letter; or - if tendered Old Securities are registered in the name of any person other than the person signing this Letter. If satisfactory evidence of payment of or exemption from those transfer taxes is not submitted with the Letter, the amount of those transfer taxes will be billed directly to the tendering holder and/or withheld from any payments due with respect to the Old Securities tendered by such holder. 5. Validity of Tender; Irregularities. All questions as to validity, form and eligibility of any tender of the Old Securities hereunder will be determined by the Offerors, in their sole judgment (which may delegate power in whole or in part to the Exchange Agent), and such determination shall be final and binding. The Offerors reserve the right to waive any irregularities or defects in the tender of any Old Securities and its interpretations of the terms and conditions of this Letter (including these instructions) with respect to such irregularities or defects shall be final and binding. A tender will not be deemed to have been made until all irregularities have been cured or waived. 6. Special Issuance and Payment Instructions and Special Delivery Instructions. Indicate the name in which ownership of the New Securities on the DTC security listing position is to be recorded if different from the name of the person(s) signing this Letter. A Social Security Number will be required. 7. Additional Copies. Additional copies of this Letter may be obtained from the Information Agent at the address listed below. 8. Substitute Form W-9. You are required, unless an exemption applies, to provide the Exchange Agent with a correct Taxpayer Identification Number ("TIN"), generally the holder's social security number or employer identification number, and with certain other information, on Substitute Form W-9, which is provided herewith and to certify under penalties of perjury, that such TIN is correct and that you are not subject to backup withholding by 9 checking the box in Part 2 of the form. Failure to provide the information on the form may subject the holder (or other payee) to a penalty of $50 imposed by the Internal Revenue Service ("IRS") and a federal income tax backup withholding on the payment of the amounts due. The box in Part 3 of the form may be checked if you have not been issued a TIN and have applied for a number or intend to apply for a number in the near future. If the box in Part 3 is checked, the Exchange Agent will backup withhold on all payments until a TIN is provided to the Exchange Agent but not longer than 60 days, after which time the funds will be turned over to the IRS. 10 IF FURTHER INSTRUCTIONS ARE DESIRED, CONTACT THE INFORMATION AGENT: (GEORGESON SHAREHOLDER LOGO) 17 State Street, 10th Floor New York, NY 10004 Banks and Brokers Call: (212) 440-9800 All Others Call (Toll Free): (800) 325-5997 IMPORTANT TAX INFORMATION By participating in the Exchange Offer, each holder will be deemed to have agreed, pursuant to terms of the indenture for the New Securities, to treat the New Securities as subject to the rules that apply to contingent payment debt obligations and to continue to accrue interest in the same manner and amount as described in the offering memorandum relating to the Old Securities. See "Risk Factors -- Risks Relating to the New Securities" of the Offering Circular for further information. Under U.S. federal income tax law, a holder whose Old Securities are accepted for exchange is required by law to provide the Exchange Agent with such holder's correct TIN on Substitute Form W-9 and to certify that the TIN provided is correct (or that such holder is awaiting a TIN). If such holder is an individual, the TIN is his or her social security number. If the Exchange Agent is not provided with the correct TIN, the holder may be subject to a $50 penalty imposed by the Internal Revenue Service (the "IRS"). In addition, payments that are made to such holder may be subject to backup withholding. Certain holders (including, among others, all corporations and certain foreign individuals and entities) may be exempted from these backup withholding and reporting requirements. In order for a foreign individual to qualify as an exempt recipient, that holder must submit a statement, signed under penalties of perjury, attesting to that individual's exempt status (Form W-813EN). Such statements can be obtained from the Exchange Agent. Holders are urged to consult their own tax advisors to determine whether they are exempt from these backup withholding and reporting requirements. If backup withholding applies, the Exchange Agent may be required to backup withhold on any such payments made to the holder. Backup withholding is not an additional tax. Rather, the tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If backup withholding results in an overpayment of taxes, a refund may be obtained from the IRS. The Exchange Agent cannot refund amounts withheld by reason of backup withholding. WHAT NUMBER TO GIVE THE PAYING AGENT The holder is required to give the Exchange Agent the TIN, generally the social security number or employer identification number, of the record owner of the tendered Old Securities. If the Old Securities are in more than one name or are not in the name of the actual owner, consult the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 for additional guidelines on which number to report. If the holder has not been issued a TIN and has applied for a number or intends to apply for a number in the near future, he or she should check the box in Part 3 of the Substitute Form W-9, sign and date the Substitute Form W-9 and complete the Certificate of Awaiting Taxpayer Identification Number in order to avoid backup withholding. If the box in Part 3 is checked, the Exchange Agent will backup withhold on all payments until a TIN is provided to the Exchange Agent but not longer than 60 days, after which time the funds will be turned over to the IRS. 11 EX-99.T3E.3 5 h19780t3exv99wt3ew3.txt LETTER TO BROKERS, DEALERS, COMMERCIAL BANKS OFFER TO EXCHANGE SERIES B ZERO COUPON SENIOR EXCHANGEABLE NOTES DUE 2023 FOR ANY AND ALL OUTSTANDING ZERO COUPON SENIOR EXCHANGEABLE NOTES DUE 2023 (CUSIP NOS. 629568AK2 AND 629568AJ5 ISIN NOS. US629568AK22 AND US629568AJ58) OF NABORS INDUSTRIES, INC. GUARANTEED BY NABORS INDUSTRIES LTD. THE EXCHANGE OFFER WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON DECEMBER 10, 2004, UNLESS EARLIER TERMINATED OR EXTENDED. November 12, 2004 To Brokers, Dealers, Commercial Banks, Trust Companies and other Nominees: Nabors Industries, Inc. (the "Company") and its parent company, Nabors Industries Ltd., a Bermuda exempted company ("Nabors" and, together with the Company, the "Offerors") are offering to exchange ("Exchange Offer") $1,000 principal amount of Series B Zero Coupon Senior Exchangeable Securities Due 2023 of the Company (the "New Securities"), guaranteed by Nabors, for each $1,000 principal amount of validly tendered and accepted Zero Coupon Senior Exchangeable Notes Due 2023 of the Company (the "Old Securities"), guaranteed by Nabors. The Exchange Offer is made on the terms and is subject to the conditions set forth in the Offerors' offering circular dated November 12, 2004 (as may be amended or supplemented from time to time, the "Offering Circular") and the accompanying Letter of Transmittal. We are asking you to contact your clients for whom you hold Old Securities. For your use and for forwarding to those clients, we are enclosing copies of the Offering Circular, as well as a Letter of Transmittal and Notice of Guaranteed Delivery for the Old Securities. We are also enclosing a printed form of letter which you may send to your clients, with space provided for obtaining their instructions with regard to the Exchange Offer. WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. Georgeson Shareholder has been appointed the information agent (the "Information Agent") and J.P. Morgan Trust Company, National Association is the exchange agent (the "Exchange Agent") for the Exchange Offer. Any inquiries you may have with respect to the Exchange Offer should be addressed to the Information Agent or to the Exchange Agent, at the respective addresses and telephone numbers as set forth on the back cover of the Offering Circular. Additional copies of the enclosed materials may be obtained from the Information Agent. Very truly yours, Nabors Industries, Inc. Nabors Industries Ltd. NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU THE AGENT OF THE OFFERORS, THE EXCHANGE AGENT OR THE INFORMATION AGENT OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE EXCHANGE OFFER OTHER THAN THE DOCUMENTS ENCLOSED HEREWITH AND THE STATEMENTS CONTAINED THEREIN. WE WILL NOT PAY ANY FEES OR COMMISSION TO ANY BROKER OR DEALER OR TO ANY OTHER PERSONS (OTHER THAN THE FEES AND EXPENSES OF THE COMPANY, NABORS, THE EXCHANGE AGENT AND THE INFORMATION AGENT ASSOCIATED WITH THE EXCHANGE OFFER) IN CONNECTION WITH THE SOLICITATION OF TENDERS IN THE EXCHANGE OFFER. THE OFFERORS WILL PAY ALL TRANSFER TAXES PAYABLE ON TRANSFER AND EXCHANGE OF THE OLD SECURITIES TO THE OFFERORS, UNLESS AS OTHERWISE PROVIDED IN INSTRUCTION 4 IN THE ENCLOSED LETTER OF TRANSMITTAL. EX-99.T3E.4 6 h19780t3exv99wt3ew4.txt LETTER TO CLIENTS OFFER TO EXCHANGE SERIES B ZERO COUPON SENIOR EXCHANGEABLE NOTES DUE 2023 FOR ANY AND ALL OUTSTANDING ZERO COUPON SENIOR EXCHANGEABLE NOTES DUE 2023 (CUSIP NOS. 629568AK2 AND 629568AJ5 ISIN NOS. US629568AK22 AND US629568AJ58) OF NABORS INDUSTRIES, INC. GUARANTEED BY NABORS INDUSTRIES LTD. PURSUANT TO, AND SUBJECT TO THE TERMS AND CONDITIONS DESCRIBED IN, THE OFFERING CIRCULAR DATED NOVEMBER 12, 2004 THE EXCHANGE OFFER WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON DECEMBER 10, 2004, UNLESS EARLIER TERMINATED OR EXTENDED. November 12, 2004 To Our Clients: Nabors Industries, Inc. (the "Company") and its parent company, Nabors Industries Ltd., a Bermuda exempted company ("Nabors" and, together with the Company, the "Offerors") are offering to exchange (the "Exchange Offer") $1,000 principal amount of Series B Zero Coupon Senior Exchangeable Notes Due 2023 of the Company (the "New Securities"), guaranteed by Nabors, for each $1,000 principal amount of validly tendered and accepted Zero Coupon Senior Exchangeable Notes Due 2023 of the Company (the "Old Securities"), guaranteed by Nabors. The Exchange Offer is made on the terms and are subject to the conditions set forth in the Offerors' offering circular dated November 12, 2004 (as may be amended or supplemented from time to time, the "Offering Circular") and the accompanying Letter of Transmittal. The enclosed Offering Circular is being forwarded to you as the beneficial owner of Old Securities held by us for your account but not registered in your name. The accompanying Letter of Transmittal is furnished to you for informational purposes only and may not be used by you to tender Old Securities held by us for your account. A tender of such Old Securities may be made only by us as the registered holder and only pursuant to your instructions. Accordingly, we request instructions as to whether you wish us to tender and deliver the Old Securities held by us for your account. If you wish to have us do so, please so instruct us by completing, executing and returning to us the instruction form that appears below. INSTRUCTIONS The undersigned acknowledges receipt of your letter and the enclosed materials referred to therein relating to the Offeror's Exchange Offer with respect to the Old Securities. THIS WILL INSTRUCT YOU TO TENDER THE SPECIFIED PRINCIPAL AMOUNT AT MATURITY OF OLD SECURITIES INDICATED BELOW HELD BY YOU FOR THE ACCOUNT OF THE UNDERSIGNED PURSUANT TO THE TERMS AND CONDITIONS SET FORTH IN THE OFFERING CIRCULAR AND THE RELATED LETTER OF TRANSMITTAL. Zero Coupon Senior Exchangeable Notes Due 2023 CUSIP No. 629568AK2 Tender $ ------------------------------ (principal amount)* CUSIP No. 629568AJ5 Tender $ ------------------------------ (principal amount)* [ ] Please do not tender any Old Securities held by you for any account. Dated: ------------------------------, 2004 Signature(s): - -------------------------------------------------------------------------------- Print name(s) here: - -------------------------------------------------------------------------------- Print Address(es): - -------------------------------------------------------------------------------- Area Code and Telephone Number(s): - -------------------------------------------------------------------------------- Tax Identification or Social Security Number(s): - -------------------------------------------------------------------------------- My account number with you: - -------------------------------------------------------------------------------- - --------------- * Must be in denominations of $1,000 or any integral multiple thereof. 2 EX-99.T3E.5 7 h19780t3exv99wt3ew5.txt NOTICE OF GUARANTEED DELIVERY NOTICE OF GUARANTEED DELIVERY OFFER TO EXCHANGE SERIES B ZERO COUPON SENIOR EXCHANGEABLE NOTES DUE 2023 FOR ANY AND ALL OUTSTANDING ZERO COUPON SENIOR EXCHANGEABLE NOTES DUE 2023 (CUSIP NOS. 629568AK2 AND 629568AJ5 ISIN NOS. US629568AK22 AND US629568AJ58) OF NABORS INDUSTRIES, INC. GUARANTEED BY NABORS INDUSTRIES LTD. PURSUANT TO, AND SUBJECT TO THE TERMS AND CONDITIONS DESCRIBED IN THE OFFERING CIRCULAR DATED NOVEMBER 12, 2004 You must use this form, or a form substantially equivalent to this form, to accept the offer (the "Exchange Offer") of Nabors Industries, Inc. (the "Company") and its parent company, Nabors Industries Ltd., a Bermuda exempted company ("Nabors" and, together with the Company, the "Offerors") made pursuant to the offering circular dated November 12, 2004 (as may be amended and supplemented from time to time, the "Offering Circular") if the procedure for book-entry transfer cannot be completed on a timely basis or time will not permit all required documents to reach J.P. Morgan Trust Company, National Association, as exchange agent (the "Exchange Agent"), prior to 12:00 midnight, New York City time, on December 10, 2004, unless extended or earlier terminated by us (the "Expiration Date"). This form may be delivered or transmitted by facsimile transmission, mail or hand delivery to the Exchange Agent as set forth below. In addition, in order to utilize the guaranteed delivery procedure to tender outstanding Zero Coupon Senior Exchangeable Notes Due 2023 of the Company (the "Old Securities") pursuant to the Exchange Offer, a Letter of Transmittal (or facsimile thereof) or an electronic confirmation pursuant to The Depository Trust Company's Automated Tender Offer Program system, with any required signature guarantees and any other required documents must also be received by the Exchange Agent prior to 12:00 midnight, New York City time, on the Expiration Date. The Exchange Agent for the Exchange Offer is: J.P. MORGAN TRUST COMPANY, NATIONAL ASSOCIATION By Hand or Overnight Delivery: J.P. Morgan Trust Company, National Association Institutional Trust Services 2001 Bryan Street, 9th Floor Dallas, Texas 75201 Attn: Frank Ivins Personal & Confidential Nabors Industries, Inc. Exchange Offer If by Regular or Certified Mail: J.P. Morgan Trust Company, National Association Institutional Trust Services P.O. Box 2320 Dallas, Texas 75221-2320 Attn: Frank Ivins Personal & Confidential Nabors Industries, Inc. Exchange Offer By Facsimile Transmission: (214) 468-6464 For Confirmation by Telephone: (800) 275-2048 DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY. THIS FORM IS NOT TO BE USED TO GUARANTEE SIGNATURES. IF A SIGNATURE ON THE LETTER OF TRANSMITTAL IS REQUIRED TO BE GUARANTEED, SUCH SIGNATURE GUARANTEE MUST APPEAR IN THE APPLICABLE SPACE PROVIDED IN THE SIGNATURE BOX ON THE LETTER OF TRANSMITTAL. Ladies and Gentlemen: Upon the terms and conditions set forth in the Offering Circular and the accompanying Letter of Transmittal, the undersigned hereby tenders to the Offerors the principal amount of Old Securities set forth below pursuant to the guaranteed delivery procedure described in "The Exchange Offer -- Procedures for Exchange -- Guaranteed Delivery Procedures" section of the Offering Circular. The undersigned understands that tenders of Old Securities will be accepted only in authorized denominations. The undersigned understands that tenders of Old Securities pursuant to the Exchange Offer may not be withdrawn after 12:00 midnight, New York City time, on the Expiration Date. Tenders of Old Securities may be withdrawn as provided in the Offering Circular.
- --------------------------------------------------------------------------------------------------------------------------------- DESCRIPTION OF RESTRICTED OLD SECURITIES (CUSIP NO. 629568AK2) - --------------------------------------------------------------------------------------------------------------------------------- CERTIFICATE AGGREGATE PRINCIPAL NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) NUMBER(S)/ ACCOUNT AMOUNT OF PRINCIPAL AMOUNT (PLEASE FILL IN, IF BLANK) NUMBER(S)* OLD SECURITIES TENDERED** - --------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------- - ----------------------------------------------------------------- Total - --------------------------------------------------------------------------------------------------------------------------------- * For book-entry to The Depository Trust Company, please provide account number. ** Unless otherwise indicated in this column, a holder will be deemed to have tendered ALL of the Old Securities represented by the securities indicated in column 2. Old Securities tendered hereby must be in denominations of principal amount of $1,000 or any integral multiple thereof. See Instruction 1 of the Letter of Transmittal - ---------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------- DESCRIPTION OF UNRESTRICTED OLD SECURITIES (CUSIP NO. 629568AJ5) - --------------------------------------------------------------------------------------------------------------------------------- CERTIFICATE AGGREGATE PRINCIPAL NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) NUMBER(S)/ ACCOUNT AMOUNT OF PRINCIPAL AMOUNT (PLEASE FILL IN, IF BLANK) NUMBER(S)* OLD SECURITIES TENDERED** - --------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------- - ----------------------------------------------------------------- Total - --------------------------------------------------------------------------------------------------------------------------------- * For book-entry to The Depository Trust Company, please provide account number. ** Unless otherwise indicated in this column, a holder will be deemed to have tendered ALL of the Old Securities represented by the securities indicated in column 2. Old Securities tendered hereby must be in denominations of principal amount of $1,000 or any integral multiple thereof. See Instruction 1 of the Letter of Transmittal. - ---------------------------------------------------------------------------------------------------------------------------------
All authority herein conferred or agreed to be conferred shall survive the death or incapacity of the undersigned and every obligation of the undersigned hereunder shall be binding upon the heirs, executors, personal representatives, administrators, trustees in bankruptcy, successors and assigns of the undersigned. 2 PLEASE SIGN HERE X - ------------------------------------------------------------ --------------------------- X - ------------------------------------------------------------ --------------------------- SIGNATURE(S) OF OWNER(S) OR AUTHORIZED SIGNATORY DATE
Area Code and Telephone Number: ----------------------------------------------- MUST BE SIGNED BY THE HOLDER(S) OF OLD SECURITIES AS THEIR NAME(S) APPEAR(S) ON A SECURITY POSITION LISTING, OR BY PERSON(S) AUTHORIZED TO BECOME REGISTERED HOLDER(S) BY ENDORSEMENT AND DOCUMENTS TRANSMITTED WITH THIS NOTICE OF GUARANTEED DELIVERY. IF SIGNATURE IS BY A TRUSTEE, EXECUTOR, ADMINISTRATOR, GUARDIAN, ATTORNEY-IN-FACT, OFFICER OR OTHER PERSON ACTING IN A FIDUCIARY OR REPRESENTATIVE CAPACITY, SUCH PERSON MUST SET FORTH HIS OR HER FULL TITLE BELOW: PLEASE PRINT NAME(S) AND ADDRESS(ES) Name(s): - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Capacity: - -------------------------------------------------------------------------------- Address(es): ------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- DO NOT SEND OLD SECURITIES WITH THE FORM. OLD SECURITIES SHOULD BE SENT TO THE EXCHANGE AGENT TOGETHER WITH A PROPERLY COMPLETED AND DULY EXECUTED LETTER OF TRANSMITTAL. 3 EX-99.T3E.6 8 h19780t3exv99wt3ew6.txt GUIDELINES FOR CERTIFICATION OF TAXPAYER ID. NO. GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER FOR THE PAYEE (YOU) TO GIVE THE PAYER. -- Social security numbers have nine digits separated by two hyphens: i.e., 000-00-0000. Employee identification numbers have nine digits separated by only one hyphen: i.e., 00-0000000. The table below will help determine the number to give the payer. All "Section" references are to the Internal Revenue Code of 1986, as amended. "IRS" is the Internal Revenue Service.
------------------------------------------------------------------------------- GIVE THE SOCIAL SECURITY NUMBER FOR THIS TYPE OF ACCOUNT: OF -- ------------------------------------------------------------------------------- 1. Individual The Individual 2. Two or more individuals (joint The actual owner of the account account) or, if combined funds, the first individual on the account(1) 3. Custodian account of a minor The minor(2) (Uniform Gift to Minors Act) 4. a. The usual revocable savings The grantor-trustee(1) trust account (grantor is also trustee) b. So-called trust account that is The actual owner(1) not a legal or valid trust under state law 5. Sole proprietorship (or single- The owner(3) owner LLC) - ---------------------------------------------------------------------------------
------------------------------------------------------------------------------- GIVE THE EMPLOYER IDENTIFICATION NUMBER FOR THIS TYPE OF ACCOUNT: OF -- ------------------------------------------------------------------------------- 6. Sole proprietorship (or single- The owner(3) owner LLC) 7. A valid trust, estate, or pension The legal entity(4) trust 8. Corporate (or entity electing The corporation corporate status on Form 8832) 9. Association, club, religious, The organization charitable, educational, or other tax-exempt organization 10. Partnership (or multi-member LLC) The partnership 11. A broker or registered nominee The broker or nominee 12. Account with the Department of The public entity Agriculture in the name of a public entity (such as a state or local government, school district, or prison) that receives agricultural program payments - ---------------------------------------------------------------------------------
(1) List first and circle the name of the person whose number you furnish. If only one person on a joint account has a social security number, that person's number must be furnished. (2) Circle the minor's name and furnish the minor's social security number. (3) You must show your individual name, but you may also enter your business or "doing business as" name. You may use either your social security number or your employer identification number (if you have one). (4) List first and circle the name of the legal trust, estate, or pension trust. (Do not furnish the taxpayer identification number of the personal representative or trustee unless the legal entity itself is not designated in the account title.) NOTE: If no name is circled when there is more than one name, the number will be considered to be that of the first name listed. GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 OBTAINING A NUMBER If you don't have a taxpayer identification number or you don't know your number, obtain Form SS-5, Application for a Social Security Card, at the local Social Administration office, or Form SS-4, Application for Employer Identification Number, by calling 1 (800) TAX-FORM or from the IRS website at www.irs.gov, and apply for a number. PAYEES EXEMPT FROM BACKUP WITHHOLDING Payees specifically exempted from withholding include: - An organization exempt from tax under Section 501(a), an individual retirement account (IRA), or a custodial account under Section 403(b)(7), if the account satisfies the requirements of Section 401(f)(2). - The United States or a state thereof, the District of Columbia, a possession of the United States, or a political subdivision or instrumentality of any one or more of the foregoing. - An international organization or any agency or instrumentality thereof. - A foreign government and any political subdivision, agency or instrumentality thereof. Payees that may be exempt from backup withholding include: - A corporation. - A financial institution. - A dealer in securities or commodities required to register in the United States, the District of Columbia, or a possession of the United States. - A real estate investment trust. - A common trust find operated by a bank under Section 584(a). - An entity registered at all times during the tax year under the Investment Company Act of 1940. - A middleman known in the investment community as a nominee or custodian. - A futures commission merchant registered with the Commodity Futures Trading Commission. - A foreign central bank of issue. - A trust exempt from tax under Section 664 or described in Section 4947. Payments of dividends and patronage dividends generally exempt from backup withholding include: - Payments to nonresident aliens subject to withholding under Section 1441. - Payments to partnerships not engaged in a trade or business in the United States and that have at least one nonresident alien partner. - Payments of patronage dividends not paid in money. - Payments made by certain foreign organizations. - Section 404(k) payments made by an ESOP. Payments of interest generally exempt from backup withholding include: - Payments of interest on obligations issued by individuals. Note: You may be subject to backup withholding if this interest is $600 or more and you have not provided your correct taxpayer identification number to the payer. - Payments of tax-exempt interest (including exempt-interest dividends under Section 852). - Payments described in Section 6049(b)(5) to nonresident aliens. - Payments on tax-free covenant bonds under Section 1451. - Payments made by certain foreign organizations. - Mortgage interest paid to you. Certain payments, other than payments of interest, dividends, and patronage dividends, that are exempt from information reporting are also exempt from backup withholding. For details, see the regulations under sections 6041, 6041A, 6042, 6044, 6045, 6049, 6050A and 6050N. EXEMPT PAYEES DESCRIBED ABOVE MUST FILE FORM W-9 OR A SUBSTITUTE FORM W-9 TO AVOID POSSIBLE ERRONEOUS BACKUP WITHHOLDING. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" IN PART II OF THE FORM, SIGN AND DATE THE FORM, AND RETURN IT TO THE PAYER. PRIVACY ACT NOTICE -- Section 6109 requires you to provide your correct taxpayer identification number to payers, who must report the payments to the IRS. The IRS uses the number for identification purposes and may also provide this information to various government agencies for tax enforcement or litigation purposes. Payers must be given the numbers whether or not recipients are required to file tax returns. Payers must generally withhold at the then-applicable rate on taxable interest, dividends, and certain other payments to a payee who does not furnish a taxpayer identification number to payer. Certain penalties may also apply. PENALTIES (1) FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER. -- If you fail to furnish your taxpayer identification number to a payer, you are subject to a penalty of $50 for each such failure unless your failure is due to reasonable cause and not to willful neglect. (2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. -- If you make a false statement with no reasonable basis that results in no backup withholding, you are subject to a $500 penalty. (3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. -- Willfully falsifying certifications or affirmations may subject you to criminal penalties including fines and/or imprisonment. FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE SERVICE.
- --------------------------------------------------------------------------------------------------------------------- PAYER'S NAME: - --------------------------------------------------------------------------------------------------------------------- SUBSTITUTE PART 1 -- PLEASE PROVIDE YOUR NAME AND TIN IN THE BOX AT RIGHT AND CERTIFY BY SIGNING AND FORM W-9 DATING BELOW ----------------------------------------------------------------------------------------- DEPARTMENT OF THE TREASURY PART 2 -- Certification -- --------------------------------- INTERNAL REVENUE SERVICE Under penalty of perjury, I certify that: NAME PAYER'S REQUEST FOR (1) The number shown on this form is my correct --------------------------------- TAXPAYER IDENTIFICATION Taxpayer Identification Number (or I am waiting SOCIAL SECURITY NUMBER NUMBER (TIN) for a number to be issued to me), and OR (2) I am not subject to backup withholding because --------------------------------- (a) I am exempt from backup withholding, or (b) I EMPLOYER IDENTIFICATION NUMBER have not been notified by the Internal Revenue Service (the "IRS") that I am subject to backup withholding as a result of a failure to report all interest or dividends, or (c) the IRS has notified me that I am no longer subject to backup withholding, and (3) I am a U.S. person (including a U.S. resident alien). ---------------------------------- PART 3 -- [ ] Awaiting TIN ----------------------------------------------------------------------------------------- CERTIFICATE INSTRUCTIONS -- You must cross out item (2) above if you have been notified by the IRS that you are currently subject to backup withholding because of under-reporting interest or dividends on your tax return. However, if after being notified by the IRS that you were subject to backup withholding you received another notification from the IRS that you are no longer subject to backup withholding, do not cross out such item (2). ----------------------------------------------------------------------------------------- The Internal Revenue Service does not require your consent to any provision of this document other than the certifications required to avoid backup withholding. SIGN HERE Signature ------------------------------------------------------------------------------- Date ----------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING AT THE THEN-APPLICABLE RATE ON ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. YOU MUST COMPLETE THE FOLLOWING IF YOU CHECKED THE BOX IN PART 3 OF THE SUBSTITUTE FORM W-9. CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER I certify under penalties of perjury that a taxpayer identification number has not been issued to me, and either (1) I have mailed or delivered an application to receive a taxpayer identification number to the appropriate Internal Revenue Service Center or Social Security Administration Office, or (2) I intend to mail or deliver an application in the near future. I understand that if I do not provide a taxpayer identification number by the time of payment all reportable payments made to me will be subject to backup withholding at the then-applicable rate. Signature Date , 2004 - -------------------------------------------------- ---------------- EX-99.T3E.7 9 h19780t3exv99wt3ew7.txt PRESS RELEASE DATED NOVEMBER 12, 2004 PRESS RELEASE NABORS ANNOUNCES COMMENCEMENT OF OFFER TO EXCHANGE SERIES B ZERO COUPON SENIOR EXCHANGEABLE NOTES DUE 2023 FOR EXISTING NOTES DUE 2023 BRIDGETOWN, BARBADOS, November 12, 2004--Nabors Industries Ltd. (AMEX: NBR) ("Nabors") announced today that its subsidiary, Nabors Industries, Inc. ("NII"), will offer the holders of NII's Zero Coupon Senior Exchangeable Notes Due 2023 ("Old Notes") new Series B Zero Coupon Senior Exchangeable Notes Due 2023 ("New Notes"). The exchange offer will address the previously disclosed impact of a proposed revision to the accounting literature that would cause the Old Notes to be treated on an "as converted" basis for the purposes of calculating Nabors' diluted earnings per share. Further information about the proposed accounting change is contained in Nabors' third quarter Form 10-Q. Both the Old Notes and the New Notes are issued by NII and guaranteed by Nabors. In accordance with the terms and subject to the conditions of the exchange offer, Nabors and NII are offering to exchange $1,000 principal amount of New Notes for each $1,000 principal amount of Old Notes. The New Notes will have substantially similar terms to the Old Notes, except that the New Notes will contain additional anti-dilution protection for cash dividends and tender or exchange offers for Nabors' common shares by Nabors or any of its subsidiaries at above-market prices, and will provide for payment of a make-whole premium in certain circumstances upon exchange in connection with certain fundamental changes involving Nabors. In addition, the New Notes will eliminate the requirement (which created the accounting issue for the Old Notes) of paying in Nabors' common shares upon an exchange in certain situations (such as default). No payment will be made to holders in connection with the exchange of Old Notes for New Notes. The exchange offer will expire at 12:00 midnight, New York City time, on December 10, 2004, unless the offer is extended (as the same may be extended, the "expiration date"). The right to withdraw tendered Old Notes will also expire at 12:00 midnight, New York City time, on the expiration date. This press release is for informational purposes only and is not an offer to buy or the solicitation of an offer to sell the Old Notes, the New Notes or Nabors common shares. The offer is made only by means of the Offering Circular and the related Letter of Transmittal which are being sent to holders of Old Notes and have been filed with the Securities and Exchange Commission as a part of Nabors' and NII's Tender Offer Statement on Schedule TO. The Tender Offer Statement is available for no charge at the Securities and Exchange Commission's web site at www.sec.gov. Holders of Old Notes are encouraged to carefully review the offering documents which contain information material to their decision on whether or not to accept the exchange offer. Nabors and NII are not making any recommendation to holders of Old Notes as to whether or not they should tender any Old Notes pursuant to the exchange offer, and no one has been authorized by them to make any such recommendation. Holders must make their own decisions as to whether to accept the offer, and, if so, the principal amount of Old Notes to exchange. The exchange offer is exempt from the registration requirements of the Securities Act of 1933, as amended, pursuant to Section 3(a)(9) thereof. No commission or other remuneration will be paid or given, directly or indirectly, by Nabors or NII for solicitation of acceptance of the exchange offer. Additional information concerning the terms of the exchange offer and copies of the Offering Circular and related documents, which describe the exchange offer in greater detail, may be obtained from the Information Agent, Georgeson Shareholder Communications, Inc. The Exchange Agent for the Offer is J.P. Morgan Trust Company, National Association. Nabors is the largest land drilling contractor in the world, with almost 600 land drilling rigs. Nabors conducts oil, gas and geothermal land drilling operations in the U.S. lower 48 states, Alaska and Canada, and elsewhere, primarily in South and Central America, the Middle East and Africa. Nabors is also one of the largest land well-servicing and workover contractors in the United States and Canada. Nabors owns approximately 700 land workover and well-servicing rigs in certain other markets, including 210 rigs in Canada. Nabors also is a leading provider of offshore platform workover and drilling rigs. Nabors markets 44 platform, 19 jackup and three barge rigs in the Gulf of Mexico and other markets. These rigs provide well-servicing, workover and drilling services. To further supplement its primary business, Nabors offers a number of ancillary well-site services, including oilfield management, engineering, transportation, construction, maintenance, well logging and other support services, in selected domestic and international markets. The information above includes forward-looking statements within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934. Such forward-looking statements are subject to certain risks and uncertainties, as disclosed by Nabors from time to time in its filings with the Securities and Exchange Commission. As a result of these factors, Nabors' actual results may differ materially from those indicated or implied by such forward-looking statements. For further information, please contact Dennis A. Smith, Director of Corporate Development of Nabors Corporate Services, Inc. at (281) 775-8038. To request Investor Materials, call our corporate headquarters in St. Michael, Barbados at (246) 421-9471 or via email at dan.mclachlin@nabors.com. EX-99.T3F 10 h19780t3exv99wt3f.txt CROSS REFERENCE SHEET EXHIBIT T3F CROSS REFERENCE TABLE* TIA SECTION INDENTURE SECTION - ------------ ----------------- 3.10 (a)(1) .............................. 7.10 (a)(2) .............................. 7.10 (a)(3) .............................. N.A.** (a)(4) .............................. N.A. (b) .............................. 7.08; 7.10 (c) .............................. N.A. 3.11 (a) .............................. 7.11 (b) .............................. 7.11 (c) .............................. N.A. 3.12 (a) .............................. 2.05 (b) .............................. 13.03 (c) .............................. 13.03 (d) .............................. 7.06 3.13 (a) .............................. 7.06 (b)(1) .............................. N.A. (b)(2) .............................. 7.06 (c) .............................. 13.02 (d) .............................. 7.06 3.14 (a) .............................. 4.02; 13.02 (b) .............................. N.A. (c)(1) .............................. 13.04 (c)(2) .............................. 13.04 (c)(3) .............................. N.A. (d) .............................. N.A. (e) .............................. 13.05 (f) .............................. 4.03 3.15 (a) .............................. 7.01 (b) .............................. 7.05; 13.02 (c) .............................. 7.01 (d) .............................. 7.01 (e) .............................. 6.11 3.16 (a) (last sentence)............... 2.08 (a)(1)(A) .............................. 6.05 (a)(1)(B) .............................. 6.04 (a)(2) .............................. N.A. (b) .............................. 6.07 3.17 (a)(1) .............................. 6.08 (a)(2) .............................. 6.09 (b) .............................. 2.04 3.18 (a) .............................. 13.01 - ---------- * This cross reference table shall not be deemed to be part of the New Indenture. ** The term "N.A." as used in this table means "not applicable." EX-25.1 11 h19780t3exv25w1.txt FORM T-1 QUALIFYING J.P. MORGAN TRUST COMPANY SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM T-1 Statement of Eligibility Under the Trust Indenture Act of 1939 of a Corporation Designated to Act as Trustee J.P. MORGAN TRUST COMPANY, NATIONAL ASSOCIATION (Exact name of Trustee as specified in its charter) 95-4655078 (State of Incorporation if not a U.S. national bank) (I.R.S. Employer Identification No.) 1999 AVENUE OF THE STARS - FLOOR 26 LOS ANGELES, CALIFORNIA 90067 (Address of Principal Executive Offices) (Zip Code)
Thomas F. Godfrey Vice President and Assistant General Counsel J.P. Morgan Trust Company, National Association 1 Chase Manhattan Plaza, 25th Floor New York, New York 10081 Tel: (212) 552-2192 (Name, address and telephone number of agent for service) NABORS INDUSTRIES, INC. (ISSUER) NABORS INDUSTRIES LTD. (GUARANTOR) (Exact name of each Obligor as specified in its charter) DELAWARE 930711613 (State of Incorporation of Issuer) (I.R.S. Employer Identification No. of Issuer) 515 WEST GREENS ROAD, SUITE 1200 HOUSTON, TEXAS 77067 (Address of Principal Executive Offices of Issuer) (Zip Code of Issuer) BERMUDA 980363970 (State of Incorporation of Guarantor) (I.R.S. Employer Identification No. of Guarantor) 2ND FL. INTERNATIONAL TRADING CENTRE, WARRENS ST. MICHAEL, BARBADOS N/A (Address of Principal Executive Offices of Guarantor) (Zip Code of Guarantor)
SERIES B ZERO COUPON SENIOR EXCHANGEABLE NOTES DUE 2023 (Title of the Indenture Securities) GENERAL 1. GENERAL INFORMATION Furnish the following information as to the Trustee. (a) Name and address of each examining or supervising authority to which it is subject. Comptroller of the Currency, Washington, D.C. Board of Governors of the Federal Reserve System, Washington, D.C. (b) Whether it is authorized to exercise corporate trust powers. Yes. 2. AFFILIATIONS WITH THE OBLIGORS. If either Obligor is an affiliate of the Trustee, describe each such affiliation. None. NO RESPONSES ARE INCLUDED FOR ITEMS 3-14 OF THIS FORM T-1 BECAUSE NEITHER OBLIGOR IS IN DEFAULT AS PROVIDED UNDER ITEM 13. 15. FOREIGN TRUSTEE. Not Applicable. 16. LIST OF EXHIBITS. List below all exhibits filed as a part of this statement of eligibility and qualification. Exhibit 1. Articles of Association of the Trustee as Now in Effect (see Exhibit 1 to Form T-1 filed in connection with Form 8-K of the Southern California Water Company, dated December 7, 2001, which is incorporated by reference). Exhibit 2. Certificate of Authority of the Trustee to Commence Business (see Exhibit 2 to Form T-1 filed in connection with Registration Statement No. 333-41329 filed on Form S-3 by INMC Mortgage Holdings, Inc. on December 2, 1997, which is incorporated by reference). Exhibit 3. Authorization of the Trustee to Exercise Corporate Trust Powers (contained in Exhibit 2). 2 Exhibit 4. Existing By-Laws of the Trustee (see Exhibit 4 to Form T-1 filed in connection with Form 8-K of the Southern California Water Company, dated December 7, 2001, which is incorporated by reference). Exhibit 5. Not Applicable. Exhibit 6. The consent of the Trustee required by Section 321(b) of the Trust Indenture Act of 1939.* Exhibit 7. Report of Condition of the Trustee as of September 30, 2004.* Exhibit 8. Not Applicable. Exhibit 9. Not Applicable. * Filed herewith. 3 SIGNATURE Pursuant to the requirements of the Trust Indenture Act of 1939, the Trustee, J.P. Morgan Trust Company, National Association, an Association organized and existing under the laws of the United States, has duly caused this statement of eligibility and qualification to be signed on its behalf by the undersigned, thereunto duly authorized, and its seal to be hereunto affixed and attested, all in the City of Houston, and State of Texas, on the 12th day of November, 2004. J.P. MORGAN TRUST COMPANY, NATIONAL ASSOCIATION By: /s/ Mary Jane Henson -------------------------------- Name: Mary Jane Henson Title: Vice President 4 EXHIBIT 6 CONSENT In accordance with Section 321(b) of the Trust Indenture Act of 1939, the undersigned, J.P. MORGAN TRUST COMPANY, NATIONAL ASSOCIATION hereby consents that reports of examination of the undersigned by Federal, State, Territorial or District authorities may be furnished by such authorities to the Securities and Exchange Commission upon its request therefor. Dated: November 12, 2004 J.P. MORGAN TRUST COMPANY, NATIONAL ASSOCIATION By: /s/ Mary Jane Henson -------------------------------- Name: Mary Jane Henson Title: Vice President EXHIBIT 7 STATEMENT OF FINANCIAL CONDITION J.P. MORGAN TRUST COMPANY, NATIONAL ASSOCIATION AS OF SEPTEMBER 30, 2004
($000'S) ---------- ASSETS Cash and Due From Banks $ 28,672 Securities 145,134 Loans & Leases 110,847 Premises and Fixed Assets 11,202 Intangible Assets 384,284 Goodwill 201,011 Other Assets 45,941 --------- TOTAL ASSETS $927,091 LIABILITIES Deposits $ 94,426 Other Liabilities 55,575 --------- TOTAL LIABILITIES $150,001 EQUITY CAPITAL Common Stock $ 600 Surplus 701,587 Retained Earnings 74,903 --------- TOTAL EQUITY CAPITAL $777,090 TOTAL LIABILITIES AND EQUITY CAPITAL $927,091
- -------------------------------------------------------------------------------- To the best of the undersigned's determination, as of this date the above financial information is true and correct. J.P. MORGAN TRUST COMPANY, NATIONAL ASSOCIATION By: /s/ MARY JANE HENSON ---------------------- Name: Mary Jane Henson Title: Vice President Date: November 12, 2004 -----END PRIVACY-ENHANCED MESSAGE-----