Document:

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                                                                     EXHIBIT 4.2

                             NABORS HOLDINGS 1, ULC

                   $225,000,000 4.875% SENIOR NOTES DUE 2009

                         REGISTRATION RIGHTS AGREEMENT

                                                              New York, New York
                                                                 August 22, 2002

Lehman Brothers Inc.
745 Seventh Avenue
New York, New York 10019

Ladies and Gentlemen:

     Nabors Holdings 1, ULC, an unlimited liability company formed under the
Companies Act of Nova Scotia (the "Company"), proposes to issue and sell to
Lehman Brothers Inc. (the "Initial Purchaser"), upon the terms set forth in a
purchase agreement, dated August 22, 2002 (the "Purchase Agreement"),
$225,000,000 aggregate principal amount of its 4.875% Senior Notes due 2009 (the
"Notes") relating to the initial placement of the Notes (the "Initial
Placement"). The Notes will be unconditionally guaranteed (the "Guarantees"and
together with the Notes, the "Securities") on a senior basis by Nabors
Industries Ltd., a Bermuda company ("Nabors Bermuda") and Nabors Industries,
Inc., a Delaware corporation ("Nabors Delaware," and together with Nabors
Bermuda, the "Guarantors"). Concurrently with Initial Placement of the Notes,
Nabors Delaware, an indirect, wholly-owned subsidiary of Nabors Bermuda, is
offering an aggregate of $275,000,000 of its 5.375% Senior Notes due 2012,
guaranteed by Nabors Bermuda to Qualified Institutional Buyers under Rule 144A
(the "Concurrent Offering"). The consummation of the Initial Placement of the
Notes and the Concurrent Offering are not conditioned upon each other. To
satisfy a condition to the obligations of the Initial Purchaser under the
Purchase Agreement, the Company and the Guarantors agree with the Initial
Purchaser for the benefit of the holders from time to time of the Securities
(including the Initial Purchaser) and the New Securities (as defined herein)
(each a "Holder" and, together, the "Holders"), as follows:

          1.  Definitions.  Capitalized terms used herein without definition
     shall have their respective meanings set forth in the Purchase Agreement.
     As used in this Agreement, the following capitalized defined terms shall
     have the following meanings:

             "Act" shall mean the Securities Act of 1933, as amended, and the
        rules and regulations of the Commission promulgated thereunder.

             "Affiliate" of any specified Person shall have the same meaning as
        in Rule 501(b) of Regulation D of the Securities Act.

             "Broker-Dealer" shall mean any broker or dealer registered as such
        under the Exchange Act.

             "Business Day" shall mean any day other than a Saturday, a Sunday
        or a legal holiday or a day on which banking institutions or trust
        companies are authorized or obligated by law to close in New York City.

             "Closing Date" shall mean the date on which the Securities are
        initially issued.

             "Commission" shall mean the Securities and Exchange Commission.

             "Exchange Act" shall mean the Securities Exchange Act of 1934, as
        amended, and the rules and regulations of the Commission promulgated
        thereunder.
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             "Exchange Offer Registration Period" shall mean the 180-day period
        following the consummation of the Registered Exchange Offer, exclusive
        of any period during which any stop order shall be in effect suspending
        the effectiveness of the Exchange Offer Registration Statement, or such
        shorter period as will terminate when all New Securities held by
        Exchanging Dealers or Initial Purchaser have been sold pursuant thereto.

             "Exchange Offer Registration Statement" shall mean a registration
        statement of the Company and the Guarantors on an appropriate form under
        the Act with respect to the Registered Exchange Offer, all amendments
        and supplements to such registration statement, including post-effective
        amendments thereto, in each case including the Prospectus contained
        therein, all exhibits thereto and all material incorporated by reference
        therein.

             "Exchanging Dealer" shall mean any Holder (which may include the
        Initial Purchaser) that is a Broker-Dealer and elects to exchange for
        New Securities any Securities that it acquired for its own account as a
        result of market-making activities or other trading activities (but not
        directly from the Company or any Affiliate of the Company).

             "Holder" shall have the meaning set forth in the preamble hereto.

             "Indenture" shall mean the Indenture relating to the Securities,
        dated as of August 22, 2002, among the Company, the Guarantors and Bank
        One, N.A., as trustee, as the same may be amended from time to time in
        accordance with the terms thereof.

             "Initial Placement" shall have the meaning set forth in the
        preamble hereto.

             "Initial Purchaser" shall have the meaning set forth in the
        preamble hereto.

             "Losses" shall have the meaning set forth in Section 7(d) hereof.

             "Majority Holders" shall mean the Holders of a majority of the
        aggregate principal amount of Notes and/or New Notes, as applicable,
        registered under a Registration Statement.

             "Managing Underwriters" shall mean the investment banker or
        investment bankers and manager or managers that shall administer an
        underwritten offering.

             "Memorandum" shall have the meaning set forth in the Purchase
        Agreement.

             "New Notes" shall mean debt securities of the Company, guaranteed
        by the Guarantors, identical in all material respects to the Notes
        (except that the cash interest and interest rate step-up provisions and
        the transfer restrictions shall be modified or eliminated, as
        appropriate) and to be issued under the Indenture or the New Securities
        Indenture.

             "New Securities" shall mean debt securities of the Company and the
        related guarantees of the Guarantors, identical in all material respects
        to the Securities (except that the cash interest and interest rate
        step-up provisions and the transfer restrictions shall be modified or
        eliminated, as appropriate) and to be issued under the Indenture or the
        New Securities Indenture.

             "New Securities Indenture" shall mean an indenture among the
        Company, the Guarantors and the New Securities Trustee, identical in all
        material respects to the Indenture (except that the interest rate
        step-up provisions will be modified or eliminated, as appropriate).

             "New Securities Trustee" shall mean a bank or trust company
        reasonably satisfactory to the Initial Purchaser, as trustee with
        respect to the New Securities under the New Securities Indenture.

             "Prospectus" shall mean the prospectus included in any Registration
        Statement (including, without limitation, a prospectus that discloses
        information previously omitted from a prospectus filed as part of an
        effective registration statement in reliance upon Rule 430A under the
        Act), as amended or supplemented by any prospectus supplement, with
        respect to the terms of the offering of any portion of the Securities or
        the New Securities covered by such Registration

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        Statement, and all amendments and supplements thereto and all material
        incorporated by reference therein.

             "Purchase Agreement" shall have the meaning set forth in the
        preamble hereto.

             "Registered Exchange Offer" shall mean the proposed offer of the
        Company to issue and deliver to the Holders of the Securities that are
        not prohibited by any law or policy of the Commission from participating
        in such offer, in exchange for the Securities, a like aggregate
        principal amount of the New Notes and Related Guarantees.

             "Registration Statement" shall mean any Exchange Offer Registration
        Statement or Shelf Registration Statement that covers any of the
        Securities or the New Securities pursuant to the provisions of this
        Agreement, any amendments and supplements to such registration
        statement, including post-effective amendments (in each case including
        the Prospectus contained therein), all exhibits thereto and all material
        incorporated by reference therein.

             "Related Guarantees" shall mean the guarantees of the Guarantors to
        be issued under the Indenture or the New Securities Indenture in respect
        of New Notes.

             "Securities" shall have the meaning set forth in the preamble
        hereto.

             "Shelf Registration" shall mean a registration effected pursuant to
        Section 3 hereof.

             "Shelf Registration Period" has the meaning set forth in Section
        3(b) hereof.

             "Shelf Registration Statement" shall mean a "shelf" registration
        statement of the Company and the Guarantors pursuant to the provisions
        of Section 3 hereof which covers some or all of the Securities and/or
        New Securities, as applicable, on an appropriate form under Rule 415
        under the Act, or any similar rule that may be adopted by the
        Commission, amendments and supplements to such registration statement,
        including post-effective amendments, in each case including the
        Prospectus contained therein, all exhibits thereto and all material
        incorporated by reference therein.

             "Trust Indenture Act" shall mean the Trust Indenture Act of 1939,
        as amended, and the rules and regulations of the Commission promulgated
        thereunder and any successor act, rules and regulations.

             "Trustee" shall mean the trustee with respect to the Securities and
        New Securities under the Indenture.

             "Underwriter" shall mean any underwriter of Securities or New
        Securities in connection with an offering thereof under a Registration
        Statement.

          2.  Registered Exchange Offer.

          (a) Except as set forth in Section 3 below, the Company and the
     Guarantors shall prepare, at their cost, and, not later than 90 days
     following the Closing Date (or if such 90th day is not a Business Day, the
     next succeeding Business Day) shall file with the Commission the Exchange
     Offer Registration Statement with respect to the Registered Exchange Offer.
     The Company and the Guarantors shall use their reasonable best efforts to
     cause the Exchange Offer Registration Statement to become effective under
     the Act not later December 2, 2002.

          (b) Upon the effectiveness of the Exchange Offer Registration
     Statement, the Company and the Guarantors shall promptly commence the
     Registered Exchange Offer.

          (c) In connection with the Registered Exchange Offer, the Company and
     the Guarantors shall:

             (i) mail to each Holder a copy of the Prospectus forming part of
        the Exchange Offer Registration Statement, together with an appropriate
        letter of transmittal and related documents;

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             (ii) commence and use their reasonable best efforts to complete the
        Registered Exchange Offer promptly, but no later than December 31, 2002,
        and hold the Registered Exchange Offer open for not less than 20
        Business Days;

             (iii) use their reasonable best efforts to keep the Exchange Offer
        Registration Statement continuously effective under the Act,
        supplemented and amended as required, under the Act to ensure that it is
        available for sales of New Securities by Exchanging Dealers or the
        Initial Purchaser during the Exchange Offer Registration Period;

             (iv) utilize the services of a depositary for the Registered
        Exchange Offer with an address in the Borough of Manhattan in New York
        City, which may be the Trustee, the New Securities Trustee or an
        Affiliate of either of them;

             (v) permit Holders to withdraw tendered Securities at any time
        prior to the close of business, New York time, on the last Business Day
        on which the Registered Exchange Offer is open;

             (vi) prior to effectiveness of the Exchange Offer Registration
        Statement, provide a supplemental letter to the Commission (A) stating
        that the Company and the Guarantors are conducting the Registered
        Exchange Offer in reliance on the position of the Commission in Exxon
        Capital Holdings Corporation (pub. avail. May 13, 1988), Morgan Stanley
        and Co., Inc. (pub. avail. June 5, 1991); and (B) including a
        representation to the effect that the Company and the Guarantors have
        not entered into any arrangement or understanding with any Person to
        distribute the New Securities to be received in the Registered Exchange
        Offer and that, to the best of their information and belief, each Holder
        participating in the Registered Exchange Offer is acquiring the New
        Securities in the ordinary course of business and has no arrangement or
        understanding with any Person to participate in the distribution of the
        New Securities; and

             (vii) comply in all material respects with all applicable laws.

          (d) As soon as practicable after the close of the Registered Exchange
     Offer, the Company and the Guarantors shall:

             (i) accept for exchange all Notes tendered and not validly
        withdrawn pursuant to the Registered Exchange Offer;

             (ii) deliver to the Trustee for cancellation in accordance with
        Section 5(r) all Notes so accepted for exchange; and

             (iii) cause the Trustee or New Securities Trustee, as the case may
        be, promptly to authenticate and deliver to each Holder of Securities a
        principal amount of New Notes equal to the principal amount of the Notes
        of such Holder so accepted for exchange.

          (e) Each Holder hereby acknowledges and agrees that any Broker-Dealer
     and any such Holder using the Registered Exchange Offer to participate in a
     distribution of the New Securities (x) could not under Commission policy as
     in effect on the date of this Agreement rely on the position of the
     Commission in Morgan Stanley and Co., Inc. (pub. avail. June 5, 1991) and
     Exxon Capital Holdings Corporation (pub. avail. May 13, 1988), as
     interpreted in the Commission's letter to Shearman & Sterling dated July 2,
     1993 and similar no-action letters; and (y) must comply with the
     registration and prospectus delivery requirements of the Act in connection
     with any secondary resale transaction which must be covered by an effective
     registration statement containing the selling security holder information
     required by Item 507 or 508, as applicable, of Regulation S-K under the Act
     if the resales are of New Securities obtained by such Holder in exchange
     for Securities acquired by such Holder directly from the Company or one of
     its Affiliates. Accordingly, each Holder participating in

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     the Registered Exchange Offer shall be required to represent to the Company
     and the Guarantors that, at the time of the consummation of the Registered
     Exchange Offer:

             (i) any New Securities received by such Holder will be acquired in
        the ordinary course of business;

             (ii) such Holder will have no arrangement or understanding with any
        Person to participate in the distribution of the Securities or the New
        Securities within the meaning of the Act;

             (iii) such Holder is not an Affiliate of the Company or any of the
        Guarantors or if it is an Affiliate, such Holder will comply with the
        registration and prospectus delivery requirements of the Act to the
        extent applicable;

             (iv) if such Holder is not a Broker-Dealer, that it is not engaged
        in, and does not intend to engage in, the distribution of the New
        Securities; and

             (v) if such Holder is a Broker-Dealer, that it will receive New
        Securities for its own account in exchange for Securities that were
        acquired as a result of market-making activities or other trading
        activities and that it will deliver a prospectus in connection with any
        resale of such New Securities.

          3.  Shelf Registration.

          (a) If (i) due to any change in law or applicable interpretations
     thereof by the Commission's staff, the Company determines upon advice of
     its outside counsel that it is not permitted to effect the Registered
     Exchange Offer as contemplated by Section 2 hereof; (ii) for any other
     reason the Exchange Offer Registration Statement is not declared effective
     by December 2, 2002 or the Registered Exchange Offer is not consummated by
     December 31, 2002; (iii) the Initial Purchaser determines upon advice of
     its counsel that a Shelf Registration Statement must be filed in connection
     with any public offering or sale of Securities that are not eligible to be
     exchanged for New Securities in the Registered Exchange Offer and that are
     held by it following consummation of the Registered Exchange Offer; or (iv)
     any Holder (other than the Initial Purchaser) is not eligible to
     participate in the Registered Exchange Offer or does not receive freely
     tradeable New Securities in the Registered Exchange Offer other than by
     reason of such Holder being an Affiliate of the Company (it being
     understood that the requirement that a participating Broker-Dealer deliver
     the prospectus contained in the Exchange Offer Registration Statement in
     connection with sales of New Securities shall not result in such New
     Securities being not "freely tradeable"), the Company and the Guarantors
     shall effect a Shelf Registration Statement in accordance with subsection
     (b) below.

          (b) If required pursuant to subsection (a) above,

             (i) the Company and the Guarantors, at their cost, shall as
        promptly as practicable, but in no event later than 90 days after such
        obligation to file arises, file with the Commission and thereafter shall
        use their reasonable best efforts to cause to be declared effective
        under the Act as soon as practicable, but in no event later than
        December 31, 2002, a Shelf Registration Statement relating to the offer
        and sale of the Securities or the New Securities, as applicable, by the
        Holders thereof from time to time in accordance with the methods of
        distribution elected by such Holders and set forth in such Shelf
        Registration Statement; provided, however, that no Holder (other than
        the Initial Purchaser) shall be entitled to have the Securities or New
        Securities held by it covered by such Shelf Registration Statement
        unless such Holder agrees in writing to be bound by all of the
        provisions of this Agreement applicable to such Holder; and provided
        further, that with respect to New Securities received by the Initial
        Purchaser in exchange for Securities constituting any portion of an
        unsold allotment, the Company and the Guarantors may, if permitted by
        current interpretations by the Commission's staff, file a post-
        effective amendment to the Exchange Offer Registration Statement
        containing the information required by Item 507 or 508 of Regulation
        S-K, as applicable, in satisfaction of their obligations under this
        subsection with respect thereto, and any such Exchange Offer
        Registration Statement,

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        as so amended, shall be referred to herein as, and governed by the
        provisions herein applicable to, a Shelf Registration Statement.

             (ii) the Company and the Guarantors shall use their reasonable best
        efforts to keep the Shelf Registration Statement continuously effective,
        supplemented and amended as required by the Act, in order to permit the
        Prospectus forming part thereof to be usable by Holders for a period the
        earlier of (A) the time when all of the Securities or New Securities, as
        applicable, covered by the Shelf Registration Statement can be sold
        pursuant to Rule 144 without limitation under clauses (c), (e), (f) and
        (h) of Rule 144, (B) the date on which all the Securities or New
        Securities, as applicable, covered by the Shelf Registration Statement
        have been sold pursuant to the Shelf Registration Statement, and (C) the
        date two years from the date the Shelf Registration Statement is
        declared effective by the Commission (in any such case, such period
        being called the "Shelf Registration Period"). The Company and the
        Guarantors shall be deemed not to have used their reasonable best
        efforts to keep the Shelf Registration Statement effective during the
        requisite period if they voluntarily take any action that would result
        in Holders of Securities or New Securities covered thereby not being
        able to offer and sell such Securities or New Securities during that
        period, unless (A) such action is required by applicable law; or (B)
        such action is taken by the Company and the Guarantors in good faith and
        for valid business reasons (not including avoidance of the Company's and
        the Guarantors' obligations hereunder), including, but not limited to,
        the acquisition or divestiture of assets, so long as the Company and the
        Guarantors promptly thereafter comply with the requirements of Section
        5(k) hereof, if applicable.

             (iii) the Company and the Guarantors shall cause the Shelf
        Registration Statement and the related Prospectus and any amendment or
        supplement thereto, as of the effective date of the Shelf Registration
        Statement or such amendment or supplement, (A) to comply in all material
        respects with the applicable requirements of the Securities Act and the
        rules and regulations of the Commission; and (B) not to contain any
        untrue statement of a material fact or omit to state a material fact
        required to be stated therein or necessary in order to make the
        statements therein, in the light of the circumstances under which they
        were made, not misleading.

          4.  Special Interest.  If (a) on or prior to December 31, 2002, the
     Registered Exchange Offer has not been consummated, or (b) after either the
     Exchange Offer Registration Statement or the Shelf Registration Statement
     has been declared effective, such Registration Statement thereafter ceases
     to be effective or usable in connection with resales of Securities or New
     Securities in accordance with and during the periods specified in this
     Agreement (each such event referred to in clauses (a) and (b), a
     ("Registration Default"), then, as liquidated damages, interest ("Special
     Interest") will accrue on the principal amount of the Securities and the
     New Securities (in addition to the stated interest on the Securities and
     New Securities) from and including the date on which any such Registration
     Default shall occur to but excluding the date on which all Registration
     Defaults have been cured. Special Interest will accrue at a rate of 0.25%
     per annum.

          All obligations of the Company and the Guarantors set forth in the
     preceding paragraph that are outstanding with respect to any Security at
     the time such Security is exchanged for a New Security shall survive until
     such time as all such obligations with respect to such Security have been
     satisfied in full.

          5.  Additional Registration Procedures.  In connection with any Shelf
     Registration Statement and, to the extent applicable, any Exchange Offer
     Registration Statement, the following provisions shall apply.

             (a) The Company and the Guarantors shall:

                (i) furnish to the Initial Purchaser, not less than five
           Business Days prior to the filing thereof with the Commission, a
           draft copy of any Exchange Offer Registration Statement and any Shelf
           Registration Statement, and each amendment thereof and each amendment
           or

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           supplement, if any, to the Prospectus included therein (including all
           documents incorporated by reference therein after the initial filing)
           and shall use their reasonable best efforts to reflect in each such
           document, when so filed with the Commission, such comments as the
           Initial Purchaser reasonably proposes;

                (ii) include the information set forth in Annex A hereto on the
           front page of the Prospectus contained in the Exchange Offer
           Registration Statement, in Annex B hereto in the forepart of the
           Exchange Offer Registration Statement in a section setting forth
           details of the Exchange Offer, in Annex C hereto in the underwriting
           or plan of distribution section of the Prospectus contained in the
           Exchange Offer Registration Statement, and in Annex D hereto in the
           letter of transmittal delivered pursuant to the Registered Exchange
           Offer;

                (iii) if requested by the Initial Purchaser, include the
           information required by Item 507 or 508 of Regulation S-K, as
           applicable, in the Prospectus contained in the Exchange Offer
           Registration Statement; and

                (iv) in the case of a Shelf Registration Statement, include the
           names of the Holders that propose to sell Securities or New
           Securities, as applicable, pursuant to the Shelf Registration
           Statement as selling security holders.

             (b) The Company and the Guarantors shall ensure that:

                (i) any Registration Statement and any amendment thereto and any
           Prospectus forming part thereof and any amendment or supplement
           thereto complies in all respects with the Act and the rules and
           regulations thereunder; and

                (ii) any Registration Statement and any amendment thereto does
           not, when it becomes effective, 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 not misleading.

             (c) The Company and the Guarantors shall advise the Initial
        Purchaser, the Holders of Securities or New Securities covered by any
        Shelf Registration Statement and any Exchanging Dealer under any
        Exchange Offer Registration Statement that has provided in writing to
        the Company and the Guarantors a telephone or facsimile number and
        address for notices, and, if requested by the Initial Purchaser or any
        such Holder or Exchanging Dealer shall confirm such advice in writing
        (which notice pursuant to clauses (ii)-(v) hereof shall be accompanied
        by an instruction to suspend the use of the Prospectus until the Company
        and the Guarantors shall have remedied the basis for such suspension):

                (i) when a Registration Statement and any amendment thereto has
           been filed with the Commission and when the Registration Statement or
           any post-effective amendment thereto has become effective;

                (ii) of any request by the Commission for any amendment or
           supplement to the Registration Statement or the Prospectus or for
           additional information;

                (iii) of the issuance by the Commission of any stop order
           suspending the effectiveness of the Registration Statement or the
           initiation of any proceedings for that purpose;

                (iv) of the receipt by the Company and the Guarantors of any
           notification with respect to the suspension of the qualification of
           the Securities or New Securities included therein for sale in any
           jurisdiction or the initiation of any proceeding for such purpose;
           and

                (v) of the happening of any event that requires any change in
           the Registration Statement or the Prospectus so that, as of such
           date, the statements therein are not misleading and do not omit to
           state a material fact required to be stated therein or necessary to
           make the statements therein (in the case of the Prospectus, in the
           light of the circumstances under which they were made) not
           misleading.

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             (d) The Company and the Guarantors shall use their reasonable best
        efforts to obtain the withdrawal of any order suspending the
        effectiveness of any Registration Statement or the qualification of the
        Securities or New Securities therein for sale in any jurisdiction at the
        earliest possible time.

             (e) The Company and the Guarantors shall furnish to each Holder of
        Securities or New Securities covered by any Shelf Registration
        Statement, without charge, at least one copy of such Shelf Registration
        Statement and any post-effective amendment thereto, and, if the Holder
        so requests in writing, all material incorporated therein by reference
        and all exhibits thereto (including exhibits incorporated by reference
        therein).

             (f) The Company and the Guarantors shall, during the Shelf
        Registration Period, deliver to each Holder of Securities or New
        Securities covered by any Shelf Registration Statement, without charge,
        as many copies of the Prospectus (including each preliminary Prospectus)
        included in such Shelf Registration Statement and any amendment or
        supplement thereto as such Holder may reasonably request. The Company
        and the Guarantors consent to the use of the Prospectus or any amendment
        or supplement thereto by each of the selling Holders of Securities or
        New Securities in connection with the offering and sale of the
        Securities or New Securities covered by the Prospectus, or any amendment
        or supplement thereto, included in the Shelf Registration Statement.

             (g) The Company and the Guarantors shall furnish to each Exchanging
        Dealer or the Initial Purchaser which so requests, without charge, at
        least one copy of the Exchange Offer Registration Statement and any
        post-effective amendment thereto, including all material incorporated by
        reference therein, and, if the Exchanging Dealer so requests in writing,
        all exhibits thereto (including exhibits incorporated by reference
        therein).

             (h) The Company and the Guarantors shall promptly deliver to the
        Initial Purchaser, each Exchanging Dealer and each other Person required
        to deliver a Prospectus during the Exchange Offer Registration Period,
        without charge, as many copies of the Prospectus included in such
        Exchange Offer Registration Statement and any amendment or supplement
        thereto as any such Person may reasonably request. The Company and the
        Guarantors consent to the use of the Prospectus or any amendment or
        supplement thereto by the Initial Purchaser, any Exchanging Dealer and
        any such other Person that may be required to deliver a Prospectus
        following the Registered Exchange Offer in connection with the offering
        and sale of the New Securities covered by the Prospectus, or any
        amendment or supplement thereto, included in the Exchange Offer
        Registration Statement.

             (i) Prior to the Registered Exchange Offer or any other offering of
        Securities or New Securities pursuant to any Registration Statement, the
        Company and the Guarantors shall arrange, if necessary, for the
        qualification of the Securities or the New Securities for sale under the
        laws of such jurisdictions as any Holder shall reasonably request and
        will maintain such qualification in effect so long as required; provided
        that in no event shall the Company and the Guarantors be obligated to
        qualify to do business in any jurisdiction where they are not then so
        qualified or to take any action that would subject them to service of
        process in suits or taxation, other than those arising out of the
        Initial Placement, the Registered Exchange Offer or any offering
        pursuant to a Shelf Registration Statement, in any such jurisdiction
        where they are not then so subject.

             (j) The Company and the Guarantors shall cooperate with the Holders
        of Securities and New Securities to facilitate the timely preparation
        and delivery of certificates representing New Securities or Securities
        to be issued or sold pursuant to any Registration Statement free of any
        restrictive legends and in such denominations and registered in such
        names as Holders may request.

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             (k) Upon the occurrence of any event contemplated by subsections
        (c)(ii) through (v) above, the Company and the Guarantors shall promptly
        prepare a post-effective amendment to the applicable Registration
        Statement or an amendment or supplement to the related Prospectus or
        file any other required document so that, as thereafter delivered to the
        Initial Purchaser or Exchanging Dealers, the Prospectus will not include
        an untrue statement of a material fact or omit to state any material
        fact necessary to make the statements therein, in the light of the
        circumstances under which they were made, not misleading. In such
        circumstances, the period of effectiveness of the Exchange Offer
        Registration Statement provided for in Section 2 and the Shelf
        Registration Statement provided for in Section 3(b) shall each be
        extended by the number of days from and including the date of the giving
        of a notice of suspension pursuant to Section 5(c) to and including the
        date when the Initial Purchaser, the Holders of the Securities or New
        Securities and any known Exchanging Dealer shall have received such
        amended or supplemented Prospectus pursuant to this Section.

             (l) Not later than the effective date of any Registration
        Statement, the Company and the Guarantors shall provide a CUSIP number
        for the Securities or the New Securities, as the case may be, registered
        under such Registration Statement and provide the Trustee with printed
        certificates for such Securities or New Securities, in a form eligible
        for deposit with The Depository Trust Company.

             (m) The Company and the Guarantors shall comply with all applicable
        rules and regulations of the Commission and shall make generally
        available to their security holders as soon as practicable after the
        effective date of the applicable Registration Statement an earnings
        statement satisfying the provisions of Section 11(a) of the Act.

             (n) The Company and the Guarantors shall cause the Indenture or the
        New Securities Indenture, as the case may be, to be qualified under the
        Trust Indenture Act in a timely manner.

             (o) The Company and the Guarantors may require each Holder of
        Securities or New Securities to be sold pursuant to any Shelf
        Registration Statement to furnish to the Company and the Guarantors such
        information regarding the Holder and the distribution of such Securities
        as the Company and the Guarantors may from time to time reasonably
        require for inclusion in such Registration Statement. The Company and
        the Guarantors may exclude from such Shelf Registration Statement the
        Securities or New Securities of any Holder that fails to furnish such
        information within a reasonable time after receiving such request.

             (p) In the case of any Shelf Registration Statement, the Company
        and the Guarantors shall enter into such agreements and take all other
        appropriate actions (including if requested an underwriting agreement in
        customary form) in order to expedite or facilitate the registration or
        the disposition of the Securities or New Securities, and in connection
        therewith, if an underwriting agreement is entered into, cause the same
        to contain indemnification provisions and procedures no less favorable
        than those set forth in Section 7 (or such other provisions and
        procedures acceptable to the Majority Holders and the Managing
        Underwriters, if any, with respect to all parties to be indemnified
        pursuant to Section 7).

             (q) In the case of any Shelf Registration Statement, the Company
        and the Guarantors shall use their reasonable best efforts to:

                (i) make reasonably available for inspection by the Holders of
           Securities or New Securities to be registered thereunder, any
           Underwriter participating in any disposition pursuant to such
           Registration Statement, and any attorney, accountant or other agent
           retained by the Holders or any such Underwriter all relevant
           financial and other records, pertinent corporate documents and
           properties of the Company and its subsidiaries;

                (ii) cause the Company's officers, directors and employees to
           supply all relevant information reasonably requested by the Holders
           or any such Underwriter, attorney, accountant or agent in connection
           with any such Registration Statement as is customary for
                                        9
<PAGE>

           similar due diligence examinations; provided, however, that any
           information that is designated in writing by the Company, in good
           faith, as confidential at the time of delivery of such information
           shall be kept confidential by the Holders or any such Underwriter,
           attorney, accountant or agent, unless such disclosure is made in
           connection with a court proceeding or required by law, or such
           information becomes available to the public generally or through a
           third party without an accompanying obligation of confidentiality;

                (iii) make such representations and warranties to the Holders of
           Securities or New Securities registered thereunder and the
           Underwriters, if any, in form, substance and scope as are customarily
           made by issuers to Underwriters in primary underwritten offerings and
           covering matters including, but not limited to, those set forth in
           the Purchase Agreement;

                (iv) obtain opinions of counsel to the Company and the
           Guarantors and updates thereof (which counsel and opinions (in form,
           scope and substance) shall be reasonably satisfactory to the Managing
           Underwriters, if any) addressed to each selling Holder and the
           Underwriters, if any, covering such matters as are customarily
           covered in opinions requested in underwritten offerings and such
           other matters as may be reasonably requested by such Holders and
           Underwriters;

                (v) obtain "cold comfort" letters and updates thereof from the
           independent certified public accountants of the Company (and, if
           necessary, any other independent certified public accountants of any
           subsidiary of the Company or of any business acquired by the Company
           for which financial statements and financial data are, or are
           required to be, included in the Registration Statement), addressed to
           each selling Holder of Securities or New Securities registered
           thereunder and the Underwriters, if any, in customary form and
           covering matters of the type customarily covered in "cold comfort"
           letters in connection with primary underwritten offerings; and

                (vi) deliver such documents and certificates as may be
           reasonably requested by the Majority Holders and the Managing
           Underwriters, if any, including those to evidence compliance with
           Section 5(k) and with any customary conditions contained in the
           underwriting agreement or other agreement entered into by the Company
           and the Guarantors.

        The actions set forth in clauses (iii), (iv), (v) and (vi) of this
        Section shall be performed at (A) the effectiveness of such Registration
        Statement and each post-effective amendment thereto; and (B) each
        closing under any underwriting or similar agreement as and to the extent
        required thereunder.

             (r) If a Registered Exchange Offer is to be consummated, upon
        delivery of the Securities by Holders to the Company (or to such other
        Person as directed by the Company) in exchange for the New Securities,
        the Company shall mark, or caused to be marked, on the Securities so
        exchanged that such Securities are being canceled in exchange for the
        New Securities. In no event shall the Securities be marked as paid or
        otherwise satisfied.

             (s) If any Broker-Dealer shall underwrite any Securities or New
        Securities or participate as a member of an underwriting syndicate or
        selling group or "assist in the distribution" (within the meaning of the
        Rules of Fair Practice and the By-Laws of the National Association of
        Securities Dealers, Inc.) thereof, whether as a Holder of such
        Securities or New Securities or as an Underwriter, a placement or sales
        agent or a broker or dealer in respect thereof, or otherwise, assist
        such Broker-Dealer in complying with the requirements of such Rules and
        By-Laws, including, without limitation, by:

                (i) if such Rules or By-Laws shall so require, engaging a
           "qualified independent underwriter" (as defined in such Rules) to
           participate in the preparation of the Registration Statement, to
           exercise usual standards of due diligence with respect thereto and,
           if any portion of the offering contemplated by such Registration
           Statement is an underwritten
                                        10
<PAGE>

           offering or is made through a placement or sales agent, to recommend
           the yield of such Securities or New Securities;

                (ii) indemnifying any such qualified independent underwriter to
           the extent of the indemnification of Underwriters provided in Section
           7 hereof; and

                (iii) providing such information to such Broker-Dealer as may be
           required in order for such Broker-Dealer to comply with the
           requirements of such Rules.

             (t) The Company and the Guarantors shall use their reasonable best
        efforts to take all other steps necessary to effect the registration of
        the Securities or the New Securities, as the case may be, covered by a
        Registration Statement.

          6.  Registration Expenses.  The Company and the Guarantors shall bear
     all expenses incurred in connection with the performance of their
     obligations under Sections 2, 3 and 5 hereof and, in the event of any Shelf
     Registration Statement, will reimburse the Holders for the reasonable fees
     and disbursements of one firm or counsel designated by the Majority Holders
     to act as counsel for the Holders in connection therewith, but excluding
     fees and expenses of counsel to the Initial Purchaser or the Holders, all
     agency fees and commissions, underwriting discounts and commissions and
     transfer taxes attributable to the sale or disposition of Securities by a
     Holder.

          7.  Indemnification and Contribution.

          (a) The Company and the Guarantors agree, jointly and severally, to
     indemnify and hold harmless (i) the Initial Purchaser, (ii) each Holder of
     Securities or New Securities, as the case may be, covered by any
     Registration Statement (including with respect to any Prospectus delivery
     as contemplated in Section 5(h) hereof, each Exchanging Dealer), (iii) 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 of the foregoing
     (any of the Persons referred to in this clause (iii) being hereinafter
     referred to as a "controlling person"), and (iv) the respective officers,
     directors, partners, employees, representatives and agents of the Initial
     Purchaser, the Holders (including predecessor Holders) or any controlling
     person (any person referred to in clause (i), (ii), (iii) or (iv) may
     hereinafter be referred to as an "Indemnified Holder"), from and against
     any and all losses, claims, damages, and liabilities (including, without
     limitation, reasonable legal fees and other expenses incurred in connection
     with any suit, action or proceeding or any claim asserted) (collectively
     "Losses") 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 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 Guarantors in writing by such Indemnified Holder expressly for use in
     therein; provided, however, that neither the Company nor the Guarantors
     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
     Securities or New 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 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 Guarantors shall have
     furnished such Indemnified Holder with such amendment or supplement
     thereto, as the case may be, on a timely basis). The Company or the
     Guarantors shall notify such Indemnified
                                        11
<PAGE>

     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 or the Guarantors or such Indemnified Holder.

          (b) Each Holder agrees, severally and not jointly, to indemnify and
     hold harmless the Company and the Guarantors, each of their respective
     directors and officers and each Person who controls the Company or the
     Guarantors 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 Guarantors 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 Guarantors 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. This
     indemnity agreement will be in addition to any liability which any such
     Holder may otherwise have.

          (c) The Initial Purchaser agrees to indemnify and hold harmless the
     Company and the Guarantors, each of their respective directors and officers
     and each Person who controls the Company or the Guarantors 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 Guarantors to the Initial Purchaser, 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 the Initial
     Purchaser furnished to the Company or the Guarantors in writing by the
     Initial Purchaser expressly for use in any Registration Statement or
     Prospectus, or any amendment or supplement thereto or any related
     preliminary prospectus. This indemnity agreement will be in addition to any
     liability which the Initial Purchaser may otherwise have.

          (d) 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 7 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 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 Securities and New Securities offered in the
     Prospectus to which the claim

                                        12
<PAGE>

     relates, 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 Guarantors, its
     directors, respective officers and such control Persons of the Guarantors
     shall be designated in writing by the Guarantors. 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.

          (e) If the indemnification provided for in the first and second
     paragraphs of this Section 7 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 Securities
     or New Securities pursuant to any Registration Statement which resulted in
     such losses, claims, damages or liabilities 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 Guarantors on the one hand and any Indemnified Holder on the other
     shall be deemed to be in the same proportion as the total net proceeds from
     the Initial Placement received by the Company and the Guarantors bear to
     the total net proceeds received by such Indemnified Holder from sales of
     Securities or New Securities giving rise to such obligations. The relative
     fault of the parties shall be determined by reference to, 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 Guarantors or such Indemnified
     Holder and the parties' relative intent, knowledge, access to information
     and opportunity to correct or prevent such statement or omission.

          (f) Each of the Company, the Guarantors and the Initial Purchaser
     agrees that it would not be just and equitable if contribution pursuant to
     this Section 7 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 7, in no event shall any
     Holder of any Securities or New Securities 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 Security or New Security pursuant to a
     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.

          (g) The remedies provided for in this Section 7 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.

                                        13
<PAGE>

          (h) The indemnity and contribution agreements contained in this
     Section 7 shall remain operative and in full force and effect regardless of
     (i) any termination of this Agreement, (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 Guarantors, their respective officers or
     directors or any other Person controlling any of the Company or the
     Guarantors and (iii) acceptance of and payment for any of the Securities or
     New Securities.

          8.  Underwritten Registrations.

          (a) If any of the Securities or New Securities, as the case may be,
     covered by any Shelf Registration Statement are to be sold in an
     underwritten offering, the Managing Underwriters shall be selected by the
     Majority Holders and shall be reasonably satisfactory to the Company and
     the Guarantors.

          (b) No Person may participate in any underwritten offering pursuant to
     any Shelf Registration Statement, unless such Person (i) agrees to sell
     such Person's Securities or New Securities, as the case may be, on the
     basis reasonably provided in any underwriting arrangements approved by the
     Persons entitled hereunder to approve such arrangements; and (ii) completes
     and executes all questionnaires, powers of attorney, indemnities,
     underwriting agreements and other documents reasonably required under the
     terms of such underwriting arrangements.

          9.  No Inconsistent Agreements.  The Company has not, as of the date
     hereof, entered into, nor shall it, on or after the date hereof, enter
     into, any agreement with respect to its securities that is inconsistent
     with the rights granted to the Holders herein or otherwise conflicts with
     the provisions hereof.

          10.  Amendments and Waivers.  The provisions of this Agreement,
     including the provisions of this sentence, may not be amended, qualified,
     modified or supplemented, and waivers or consents to departures from the
     provisions hereof may not be given, unless the Company has obtained the
     written consent of the Majority Holders (or, after the consummation of any
     Registered Exchange Offer in accordance with Section 2 hereof, of New
     Securities); provided, however, that, with respect to any matter that
     directly or indirectly affects the rights of the Initial Purchaser
     hereunder, the Company shall obtain the written consent of the Initial
     Purchaser. Notwithstanding the foregoing (except the foregoing proviso), a
     waiver or consent to departure from the provisions hereof with respect to a
     matter that relates exclusively to the rights of Holders whose Securities
     or New Securities, as the case may be, are being sold pursuant to a
     Registration Statement and that does not directly or indirectly affect the
     rights of other Holders may be given by the Majority Holders, determined on
     the basis of Securities or New Securities, as the case may be, being sold
     rather than registered under such Registration Statement.

          11.  Notices.  All notices and other communications provided for or
     permitted hereunder shall be made in writing by hand-delivery, first-class
     mail, telex, telecopier or air courier guaranteeing overnight delivery:

             (a) if to a Holder, at the most current address given by such
        holder to the Company in accordance with the provisions of this Section,
        which address initially is, with respect to each Holder, the address of
        such Holder maintained by the Registrar under the Indenture, with a copy
        in like manner to Salomon Smith Barney Inc;

             (b) if to the Initial Purchaser, initially at its address set forth
        in the Purchase Agreement; and

             (c) if to the Company or the Guarantors, initially at its or their
        address set forth in the Purchase Agreement.

          All such notices and communications shall be deemed to have been duly
     given when received.

                                        14
<PAGE>

          The Initial Purchaser or the Company by notice to the other parties
     may designate additional or different addresses for subsequent notices or
     communications.

          12.  Successors.  This Agreement shall inure to the benefit of and be
     binding upon the successors and assigns of each of the parties, including,
     without the need for an express assignment or any consent by the Company
     thereto, subsequent Holders of Securities or New Securities. The Company
     hereby agrees to extend the benefits of this Agreement to any Holder of
     Securities and the New Securities, and any such Holder may specifically
     enforce the provisions of this Agreement as if an original party hereto.

          13.  Counterparts.  This Agreement may be in signed counterparts, each
     of which shall an original and all of which together shall constitute one
     and the same agreement.

          14.  Headings.  The headings used herein are for convenience only and
     shall not affect the construction hereof.

          15.  Applicable Law.  This Agreement shall be governed by and
     construed in accordance with the laws of the State of New York.

          16.  Severability.  If any one of more of the provisions contained
     herein, or the application thereof in any circumstances, is held invalid,
     illegal or unenforceable in any respect for any reason, the validity,
     legality and enforceability of any such provision in every other respect
     and of the remaining provisions hereof shall not be in any way impaired or
     affected thereby, it being intended that all of the rights and privileges
     of the parties shall be enforceable to the fullest extent permitted by law.

          17.  Securities Held by the Company, etc.  Whenever the consent or
     approval of Holders of a specified percentage of principal amount of
     Securities or New Securities is required hereunder, Securities or New
     Securities, as applicable, held by the Company or its Affiliates (other
     than subsequent Holders of Securities or New Securities if such subsequent
     Holders are deemed to be Affiliates solely by reason of their holdings of
     such Securities or New Securities) shall not be counted in determining
     whether such consent or approval was given by the Holders of such required
     percentage.

              [Remainder Of This Page Is Intentionally Left Blank]

                                        15
<PAGE>

     If the foregoing is in accordance with your understanding of our agreement,
please sign and return to us the enclosed duplicate hereof, whereupon this
Agreement and your acceptance shall represent a binding agreement among the
Company, the Guarantors and you.

                                          Very truly yours,

                                          NABORS HOLDINGS 1, ULC

                                          By: /s/ Bruce P. Koch
                                              ----------------------------------
                                              Name: Bruce P. Koch
                                              Title: President

                                          NABORS INDUSTRIES LTD.

                                          By: /s/ Daniel McLachlin
                                              ----------------------------------
                                              Name: Daniel McLachlin
                                              Title: Vice President and
                                                     Corporate Secretary
                                              Signed in St. Michael, Barbados

                                          NABORS INDUSTRIES, INC.

                                          By: /s/ Anthony G. Petrello
                                              ----------------------------------
                                              Name: Anthony G. Petrello
                                              Title: President and Chief
                                                     Operating Officer

The foregoing Agreement is hereby
confirmed and accepted as of the date
first above written.

LEHMAN BROTHERS INC.

By: /s/ Gregory Hall
    -----------------------------------
    Name: Gregory Hall
    Title: Managing Director

                                        16
<PAGE>

                                                                         ANNEX A

     Each Broker-Dealer that receives New Securities for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such New Securities. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
Broker-Dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a Broker-Dealer in connection
with resales of New Securities received in exchange for Securities where such
Securities were acquired by such Broker-Dealer as a result of market-making
activities or other trading activities. The Company has agreed that, starting on
the Expiration Date (as defined herein) and ending on the close of business one
year after the Expiration Date, or such shorter period as will terminate when
all New Securities held by Exchanging Dealers or Initial Purchaser have been
sold pursuant hereto, it will make this Prospectus available to any
Broker-Dealer for use in connection with any such resale. Furthermore, any
broker-dealer that acquired any of the old notes directly from us:

     - may not rely on the applicable interpretation of the staff of the SEC's
       position contained in Exxon Capital Holdings Corporation (pub. avail. May
       13, 1988), Morgan Stanley and Co., Inc. (pub. avail. June 5, 1991),), as
       interpreted in the Commission's letter to Shearman & Sterling dated July
       2, 1993 and similar no-action letters; and

     - must also be named as a selling noteholder in connection with the
       registration and prospectus delivery requirements of the Securities Act
       relating to any resale transaction.

See "Plan of Distribution."

                                        17
<PAGE>

                                                                         ANNEX B

     Each Broker-Dealer that receives New Securities for its own account in
exchange for Securities, where such Securities were acquired by such
Broker-Dealer as a result of market-making activities or other trading
activities, must acknowledge that it will comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
offer, resale or other transfer of such New Securities, including information
with respect to any selling holder required by the Securities Act in connection
with the resale of the New Securities. See "Plan of Distribution."

                                        18
<PAGE>

                                                                         ANNEX C

                              PLAN OF DISTRIBUTION

     Each Broker-Dealer that receives New Securities for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such New Securities. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a Broker-Dealer in connection with resales of New Securities received in
exchange for Securities where such Securities were acquired as a result of
market-making activities or other trading activities. We have agreed that,
starting on the Expiration Date and ending on the close of business 180-days
after the Expiration Date or such shorter period as will terminate when all New
Securities held by Exchanging Dealers or Initial Purchaser have been sold
pursuant hereto, we will make this Prospectus, as amended or supplemented,
available to any Broker-Dealer for use in connection with any such resale. In
addition, until           , 200  , all dealers effecting transactions in the New
Securities may be required to deliver a prospectus.

     We will not receive any proceeds from any sale of New Securities by
brokers-dealers. New Securities received by Broker-Dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the New Securities or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
Broker-Dealer and/or the purchasers of any such New Securities. Any
Broker-Dealer that resells New Securities that were received by it for its own
account pursuant to the Exchange Offer and any broker or dealer that
participates in a distribution of such New Securities may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit of any
such resale of New Securities and any commissions or concessions received by any
such Persons may be deemed to be underwriting compensation under the Securities
Act. The Letter of Transmittal states that by acknowledging that it will deliver
and by delivering a prospectus, a Broker-Dealer will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act.

     Furthermore, any broker-dealer that acquired any of the old notes directly
from us:

     - may not rely on the applicable interpretation of the staff of the SEC's
       position contained in Exxon Capital Holdings Corporation (pub. avail. May
       13, 1988), Morgan Stanley and Co., Inc. (pub. avail. June 5, 1991),), as
       interpreted in the Commission's letter to Shearman & Sterling dated July
       2, 1993 and similar no-action letters; and

     - must also be named as a selling noteholder in connection with the
       registration and prospectus delivery requirements of the Securities Act
       relating to any resale transaction.

     For a period of 180-days after the Expiration Date or such shorter period
as will terminate when all New Securities held by Exchanging Dealers or Initial
Purchaser have been sold pursuant hereto, we will promptly send additional
copies of this Prospectus and any amendment or supplement to this Prospectus to
any Broker-Dealer that requests such documents in the Letter of Transmittal. We
have agreed to pay all expenses incident to the Exchange Offer (including the
expenses of one counsel for the holder of the Securities) other than commissions
or concessions of any brokers or dealers and will indemnify the holders of the
Securities (including any Broker-Dealers) against certain liabilities, including
liabilities under the Securities Act.

     [If applicable, add information required by Regulation S-K Items 507 and/or
508.]

                                        19
<PAGE>

                                                                         ANNEX D

Rider A
         CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10
         ADDITIONAL COPIES OF THE PROSPECTUS AND
         10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO.

         Name:
         --------------------------------------------------------------

         Address:
         --------------------------------------------------------------

         --------------------------------------------------------------

Rider B

     If the undersigned is not a Broker-Dealer, the undersigned represents that
it acquired the New Securities in the ordinary course of its business, it is not
engaged in, and does not intend to engage in, a distribution of New Securities
and it has no arrangements or understandings with any Person to participate in a
distribution of the New Securities. If the undersigned is a Broker-Dealer that
will receive New Securities for its own account in exchange for Securities, it
represents that the Securities to be exchanged for New Securities were acquired
by it as a result of market-making activities or other trading activities and
acknowledges that it will deliver a prospectus in connection with any resale of
such New Securities; however, by so acknowledging and by delivering a
prospectus, the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.

                                        20<PAGE>

                                                                   EXHIBIT 10.19

                                HOLLY CORPORATION

                         SUPPLEMENTAL PAYMENT AGREEMENT
                          FOR 2001 SERVICE AS DIRECTOR

         This Supplemental Payment Agreement is entered into effective as of
March 9, 2001 between ______________ (the "Director") and Holly Corporation, a
Delaware corporation with its principal offices at 100 Crescent Court, Suite
1600, Dallas, Texas 75201 (the "Company").

         1. REASON FOR SUPPLEMENTAL PAYMENTS. As part of the compensation to the
Director for his services as a member of the Board of Directors of the Company
(the "Board") in the year ending with the Company's Annual Meeting of
Stockholders following the close of the Company's 2001 fiscal year, the Company
hereby agrees to pay deferred incentive compensation in the form of the payments
as provided in this Agreement.

         2. PHANTOM SHARES. Amounts payable under this Agreement ("Supplemental
Payments") shall be computed as if the Director had certain rights with respect
to 420.17 shares of the Company's Common Stock, par value $0.01 per share
("Common Stock"). For convenience, these shares are referred to herein as
"Phantom Shares." It is understood that the Phantom Shares are merely
bookkeeping entries used to compute Supplemental Payments to be paid to the
Director hereunder and do not constitute actual shares of Common Stock for any
purpose.

         3. ADJUSTMENTS IN NUMBER OF PHANTOM SHARES. In the event that there is
after March 9, 2001 any change in the Common Stock through merger,
consolidation, reorganization or recapitalization or in the event of any stock
split or dividend to holders of such stock payable in stock of the same class or
the issuance to such holders of rights to subscribe to stock of the same class,
or in the event of any change in the capital structure of the Company, the
number of Phantom Shares allocated to the Director immediately prior thereto
shall be adjusted so that the Director shall have allocated to him a number of
Phantom Shares that bears the same relation to the number of shares of Common
Stock (or shares into which shares of Common Stock are converted, as the case
may be) outstanding immediately after the happening of any such event as
immediately before the happening of such event.

         4. INTERIM PAYMENTS WITH RESPECT TO PHANTOM SHARE. So long as a final
payment pursuant to paragraph 5 ("Final Payment") has not been made with respect
to a Phantom Share, the Company shall pay to the Director from time to time with
respect to the Phantom Share an interim payment ("Interim Payment") equal to the
amount of the dividend in cash or property (but not shares of Common Stock) paid
per share to holders of shares of Common Stock. Each such Interim Payment shall
be paid at the same time as the payment of the dividend to which the Interim
Payment relates.

         5. FINAL PAYMENT WITH RESPECT TO PHANTOM SHARES. The Company shall make
a Final Payment with respect to the Phantom Shares in the amount determined
under paragraph 6 and at the time determined under paragraph 7. Upon the payment
of the Final Payment calculated as provided in paragraph 6 with respect to a
Phantom Share, the Phantom Share shall be treated as terminated for all purposes
and the Director and his successors in interest shall have no further rights of
any kind with respect to the Phantom Share.

         6. AMOUNT OF FINAL PAYMENT. The amount of the Final Payment with
respect to a Phantom Share shall equal the Applicable Value (as defined below)
of a share of Common Stock with respect to a date (the "Valuation Date") which
shall be either (a) the date that the Director ceases to serve as a member of
the Board for any reason other than resignation or (b) the date of the Company's
Annual Meeting of Stockholders that first occurs after the Director resigns as a
Director of the Company. The "Applicable Value" shall be the average, over the
20 trading days ending 5 trading days before the Valuation Date, of the daily
trading prices for shares of Common Stock as reported on the composite tape for
securities listed on the stock exchange on which the Common Stock is listed or
over the counter. However, if no sales of Common Stock were reported on said
composite tape for more than 3 days during the 20-trading-day period referred to
above, the Applicable Value shall be calculated using the average of the
reported trading prices on said composite tape for the most recent 7 trading
days before the Valuation Date on which trading in shares of Common Stock
occurred. In case there is more than one trading price on a day, the mean of the
high and low trading prices for the day shall be used as the daily trading price
for calculations under this paragraph.

         7. TIME FOR FINAL PAYMENT. The Final Payment with respect to all
Phantom Shares of the Director shall be made by check, in the amount per Phantom
Share determined under paragraph 6, within 40 days after the Valuation Date.

<PAGE>

         8. AUTHORITY OF BOARD TO ADMINISTER AND INTERPRET AGREEMENT. The Board
(or a committee designated by the Board) shall have complete authority to
construe, interpret and administer this Agreement. The determination,
interpretation and construction made by the Board or the committee designated by
the Board with respect to any aspect of this Agreement shall be final and
conclusive.

         9. RIGHT OF COMPANY TO MAKE FINAL PAYMENTS TO TERMINATE PHANTOM SHARES
IN CERTAIN CIRCUMSTANCES. Notwithstanding any other provision of this Agreement,
the Company shall have the right to terminate the Phantom Shares held by the
Director by making a Final Payment with respect to the remaining Phantom Shares
if (i) at any time the Board determines, in its reasonable judgment, that a
termination of the Phantom Shares is necessary or desirable in order for the
Company to comply appropriately with applicable government regulations or in
order to facilitate a transaction (other than simply the termination of the
Phantom Shares) that the Board determines to be in the best interest of the
Company or (ii) the Common Stock permanently ceases to be traded on a national
exchange or over the counter. The amount paid per Phantom Share pursuant to this
paragraph 9 shall be computed as provided in paragraph 6 using as the Valuation
Date the date of the Board determination (in the case of the circumstance listed
in (i) of the preceding sentence) or the date that trading in the Common Stock
permanently ceases (in the case of the circumstance listed in (ii) of the
preceding sentence). Any payment pursuant to this paragraph 9 shall be made
within 40 days after the Valuation Date determined in accord with the preceding
sentence.

         10. BENEFIT OF THE AGREEMENT. This Agreement shall be binding upon, and
inure to the benefit of and be enforceable by, the Director and the Director's
personal or legal representatives, executors, administrators, successors, heirs,
distributees, devisees, and legatees and the Company and its successors in
interest.

         11. RIGHTS NOT TRANSFERABLE. The interest of the Director or his
beneficiary under this Agreement is not subject to the claims of creditors and
may not be voluntarily or involuntarily sold, transferred, assigned, alienated
or encumbered.

         12. BENEFICIARIES; PAYMENTS TO INCOMPETENTS. If the Director dies
before receiving all amounts due hereunder, the unpaid amount shall be paid to
the beneficiary designated by the Director. No beneficiary designation shall be
valid unless it is in writing, signed by the Director, dated and filed with the
Company prior to death. Any beneficiary designation may be revoked and a new
designation may be made, as long as the new designation is in writing, signed by
the Director, dated and filed with the Company prior to death. If no beneficiary
has been designated under this Agreement, or there is no surviving designated
beneficiary or contingent beneficiary, any unpaid amounts will be paid to the
Director's estate as soon as administratively possible. Any amounts payable
hereunder to any person under legal disability or who, in the judgment of the
Board (or a committee designated by the Board), is unable to properly manage his
financial affairs may be paid to the legal representative of such person or may
be applied for the benefit of such person in any manner that the Board or the
committee designated by the Board may select.

         13. ENTIRE AGREEMENT. This Agreement constitutes and expresses the
whole agreement of the parties in reference to deferred compensation payments to
the Director for services as a member of the Board for the period ending with
the Company's Annual Meeting of Stockholders following the close of the
Company's 2001 fiscal year.

         14. AMENDMENTS. This Agreement may not be amended, modified, or
supplemented except by a writing signed by both of the parties hereto which
expressly refers to this paragraph 14.

         15. EFFECT OF INVALID TERM. If any term, provision, covenant, or remedy
of this Agreement or the application thereof to any person or circumstances
shall, to any extent, be construed to be invalid or unenforceable in whole or in
part, then such term, provision, covenant, or remedy shall be construed in a
manner so as to permit its enforceability under the applicable law and to
accomplish its intent to the fullest extent permitted by law. In any such case,
the remaining provisions of this Agreement, other than those which have been
held invalid or unenforceable, shall remain in full force and effect.

         16. AGREEMENT DOES NOT CREATE PROPERTY RIGHTS. Amounts payable under
this Agreement shall be unfunded. Any liability of the Company to the Director
with respect to this Agreement shall be based solely upon the contractual
obligations created by this Agreement and no such obligation of the Company
shall be deemed to be secured by any pledge or other encumbrance on any property
of the Company. Although accounts may be established with respect to the rights
of the Director under this Agreement, any such accounts shall be used merely as
a bookkeeping convenience. The Company shall not be required to segregate any
assets that may at any time be represented by cash, shares of Common Stock or
rights thereto, nor shall this Agreement be construed as providing for such
segregation, nor shall the Company be deemed to be a trustee of any cash, shares
of Common Stock or property under this Agreement. The Company shall not be
required at any time to provide any reports (other than as required for purposes
of income tax or securities law reporting purposes) or to give any security or
bond for the performance of any obligation that may be created by this
Agreement. Nothing contained

<PAGE>

in this Agreement, and no action taken pursuant to its provisions, shall create
or be construed to create a trust or a fiduciary relationship of any kind
between the Company and the Director or any other person. Neither the Director
nor any successor in interest shall acquire any interest in any assets of the
Company or in any investment reserves, accounts, or funds that the Company may
purchase, establish or accumulate for the purpose of paying benefits hereunder.

         17. NO RIGHTS TO CONTINUE TO SERVE AS DIRECTOR OR TO BE STOCKHOLDER.
The Director recognizes that this Agreement constitutes only an unsecured
promise by the Company to make future cash payments in certain circumstances and
that the Agreement confers no right for the Director to continue to serve as a
member of the Board or in any other capacity for the Company and confers no
rights as a stockholder in the Company.

         18. TAX MATTERS. The Company shall withhold any amounts from payments
made to the Director under this Agreement and deduct such amounts from income as
the Company determines to be necessary or desirable to ensure compliance with
applicable federal, state and local tax laws and to ensure that the Company may
properly deduct under applicable federal, state and local tax laws all amounts
paid pursuant to this Agreement.

         19. RELATIONSHIP OF AGREEMENT TO OTHER PLANS. No amount payable
hereunder shall be deemed compensation to the Director for the purpose of
computing benefits to which the Director may be entitled under any other
compensation agreement or arrangement or any benefit plan or arrangement of the
Company.

         20. COOPERATION IN COMPLIANCE WITH LEGAL REQUIREMENTS. The Company and
the Director each agree to file such reports with applicable governmental
authorities and to supply such information to the other party as may be
reasonably necessary to comply with or obtain the benefit of government
regulations that may apply to or with respect to the rights of and payments to
the Director under this Agreement.

         21. EFFECT OF HEADINGS. The paragraph headings of this Agreement are
not part of this Agreement and shall have no effect upon its construction or
interpretation.

         22. TEXAS LAW APPLICABLE. THIS AGREEMENT SHALL BE DEEMED TO BE MADE
UNDER AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.

         IN WITNESS WHEREOF, the parties have signed and sealed this Agreement
as of the 9th day of March 2001.

                                       HOLLY CORPORATION

                                       By
                                         --------------------------------
                                         Matthew P. Clifton
                                         President

                                         [Name]
                                         Director

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