-----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, BkegP7Q7jbxPDbGisjer+Vp8ScDwfR3dura5nRQmOGkRZ7ItkFT3BFEry8bOnkra Y1byptqkjVRj86RseobO/w== 0001035704-99-000536.txt : 19991029 0001035704-99-000536.hdr.sgml : 19991029 ACCESSION NUMBER: 0001035704-99-000536 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 12 FILED AS OF DATE: 19991028 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PATTERSON ENERGY INC CENTRAL INDEX KEY: 0000889900 STANDARD INDUSTRIAL CLASSIFICATION: DRILLING OIL & GAS WELLS [1381] IRS NUMBER: 752504748 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3 SEC ACT: SEC FILE NUMBER: 333-89885 FILM NUMBER: 99736521 BUSINESS ADDRESS: STREET 1: 4510 LAMESA HWY STREET 2: P O DRAWER 1416 CITY: SNYDER STATE: TX ZIP: 79549 BUSINESS PHONE: 9155731104 MAIL ADDRESS: STREET 1: P O DRAWER 1416 CITY: SNYDER STATE: TX ZIP: 79550 S-3 1 FORM S-3 1 As filed with Securities and Exchange Commission on October 28, 1999 Registration No. 333-_________ ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 --------------------- FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 --------------------- PATTERSON ENERGY, INC. (Exact name of registrant as specified in its charter) Delaware 75-2504748 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 4510 Lamesa Highway Snyder, Texas 79549 (915) 573-1104 (Address, including zip code and telephone number, including area code, of registrant's principal executive offices) Cloyce A. Talbott 4510 Lamesa Highway Snyder, Texas 79549 (915) 573-1104 (Name, address, including zip code, and telephone number, including area code, of agent for service) Copies to: Thomas H. Maxfield, Esq. Baker & Hostetler LLP 303 East 17th Avenue, Suite 1100 Denver, Colorado 80203-1264 APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as practicable after the effective date of this Registration Statement If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. [ ] If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. [X] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [ ] 2 CALCULATION OF REGISTRATION FEE
====================================================================================================================== Title of each class of Proposed maximum Proposed maximum Securities to be Amount to be offering price per aggregate offering Amount of registered registered(1) unit(2) price(3) registration fee - ---------------------------------------------------------------------------------------------------------------------- Debt Securities(4) Preferred Stock, par value $.01 per Share(5) Depositary Shares(6) Warrants(7) Common Stock, par value $.01 per share(8) Total.......... $150,000,000 100% $150,000,000 $41,700 ======================================================================================================================
(1) In U.S. dollars or the equivalent thereof in one or more foreign currencies, currency units or composite currencies. (2) The proposed maximum initial offering price per unit will be determined from time to time by the Registrant. (3) Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o). In no event will the aggregate initial offering price of all securities offered from time to time pursuant to this Registration Statement exceed $150,000,000 or the equivalent thereof in foreign currencies. Any securities registered hereunder may be sold separately or as units with other securities registered hereunder. (4) Subject to Footnote (3), there is being registered hereunder an indeterminate principal amount of debt securities as may be issued from time to time by the Registrant. If any such debt securities are issued at an original issue discount, then the offering price shall be in such greater principal amount as shall result in an aggregate initial offering price of up to $150,000,000. (5) Subject to Footnote (3), there is being registered hereunder an indeterminate number of shares of preferred stock as may be issued from time to time by the Registrant. (6) Subject to Footnote (3), there are being registered hereunder an indeterminate number of depositary shares as may be sold from time to time by the Registrant. (7) Subject to Footnote (3), there is being registered hereunder an indeterminate number of warrants to purchase debt securities, preferred stock or common stock as may be sold from time to time by the Registrant. (8) Subject to Footnote (3), there is being registered hereunder an indeterminate number of shares of common stock as may be (a) issued from time to time by the Registrant, including common stock issuable upon conversion or exchange of debt securities or preferred stock or upon exercise of warrants; and (b) sold by or for the account of selling stockholders. ---------------------- THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATES AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. ================================================================================ 3 The information in this prospectus is not complete and may be changed. We may not sell these Securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these Securities and we are not soliciting offers to buy these Securities in any state where the offer is not permitted. Prospectus subject to completion, October 28, 1999 [Insert Logo] $150,000,000 PATTERSON ENERGY, INC. DEBT SECURITIES PREFERRED STOCK WARRANTS COMMON STOCK DEPOSITARY SHARES --------------- The following are types of Securities that Patterson may offer and sell from time to time under this prospectus: - debt securities consisting of notes, debentures, or other evidences of indebtedness, in one or more series which may be senior debt securities, senior subordinated debt securities or subordinated debt securities; - shares of preferred stock, $.01 par value per share, in one or more series; - warrants to purchase debt securities, preferred stock or common stock; - shares of common stock, $.01 par value per share; and - depositary shares. We will describe the specific terms of the particular Securities being offered in an accompanying prospectus supplement. Also, shares of common stock may be offered from time to time by our stockholders. Any Selling Stockholders will be identified, and the number of shares to be offered by them will be set forth in a supplement to this prospectus. The common stock is traded on the Nasdaq National Market under the symbol "PTEN." On October 26, 1999, the closing price of the common stock on the Nasdaq National Market was $14.75 per share. Each prospectus supplement will indicate if the Securities offered thereby will be listed on any securities exchange. --------------- You should carefully review "Risk Factors" beginning on page 6 for a discussion of matters to consider when investing in Securities of Patterson. This prospectus may not be used to consummate sales of Securities unless accompanied by a prospectus supplement. --------------- The Securities and Exchange Commission and state securities regulators have not approved or disapproved these Securities, or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. __________, 1999 4 NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS OR THE ACCOMPANYING PROSPECTUS SUPPLEMENT, IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND THE ACCOMPANYING PROSPECTUS SUPPLEMENT AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY PATTERSON OR ANY UNDERWRITER OR DEALER. NEITHER THE DELIVERY OF THIS PROSPECTUS OR THE ACCOMPANYING PROSPECTUS SUPPLEMENT NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS AND THE ACCOMPANYING PROSPECTUS SUPPLEMENT, OR IN THE AFFAIRS OF PATTERSON SINCE THE DATES HEREOF. THIS PROSPECTUS AND THE ACCOMPANYING PROSPECTUS SUPPLEMENT DO NOT CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. --------------- TABLE OF CONTENTS
Page Forward Looking Statements....................................................2 Incorporation of Certain Documents by Reference...............................3 Patterson.....................................................................5 Risk Factors..................................................................6 Use of Proceeds..............................................................11 Ratio of Earnings To Fixed Charges...........................................11 Selling Stockholders ........................................................11 Description of Debt Securities...............................................12 Description of Preferred Stock...............................................23 Description of Depositary Shares.............................................25 Description of Warrants......................................................28 Description of Capital Stock.................................................30 Plan of Distribution.........................................................33 Legal Matters................................................................35 Experts......................................................................35 Where You Can Find More Information..........................................35
FORWARD LOOKING STATEMENTS Some statements contained in this prospectus, any accompanying prospectus supplement, and the documents incorporated by reference are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements include, without limitation, statements relating to the drilling and completion of wells, well operations, utilization rates of drilling rigs, oil and natural gas prices, reserve estimates (including related future net revenue and present value estimates), business strategies and other plans and objectives of our management for future operations and activities and other such matters. The words "believes," "budgeted," "plan," "plans," "estimates," "expects," "intends," "strategy," "project," "will," "could," "may" and similar expressions identify forward-looking statements. Actual results could differ materially from those expressed in the forward-looking statements. Factors that could cause such a difference include: - Swings in oil and natural gas prices; - Swings in demand for contract drilling services; - Shortages of drill pipe and other drilling equipment; 2 5 - Shortages of qualified drilling personnel; - Effects of competition from other drilling contractors; - Occurrence of operating hazards and uninsured losses; and - Governmental regulation, among others described under "Risk Factors" below. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The SEC allows us to "incorporate by reference" information into this prospectus. This means that we can disclose important information to you by referring you to another document filed separately by us with the SEC. The information incorporated by reference is considered to be part of this prospectus, except for any information that is superseded by information that is included directly in this document. This prospectus includes by reference the documents listed below that we have previously filed with the SEC and that are not included in or delivered with this document. They contain important information about our company and its financial condition. (1) Patterson's Annual Report on Form 10-K for the fiscal year ended December 31, 1998, filed with the SEC on March 31, 1998; (2) Patterson's Current Report on Form 8-K dated March 1, 1999, filed with the SEC on May 6, 1999; (3) Patterson's Current Report on Form 8-K dated April 30, 1999, filed with the SEC on April 22, 1999; (4) Patterson's Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 1999, filed with the SEC on May 14, 1999; (5) Patterson's Current Report on Form 8-K dated May 24, 1999, filed with the SEC on June 15, 1999; (6) Patterson's Current Report on Form 8-K dated July 29, 1999, filed with the SEC on August 31, 1999; (7) Patterson's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1999, filed with the SEC on August 16, 1999; and (8) The description of Patterson's common stock contained in the Registration Statement on Form 8-A filed with the SEC on November 2, 1993. We incorporate by reference additional documents that we may file with the SEC between the date of this prospectus and the date of the closing of this offering. These documents include periodic reports, such as Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, as well as proxy statements. You can obtain any of the documents incorporated by reference in this document from us without charge, excluding any exhibits to those documents unless the exhibit is specifically incorporated by reference as an exhibit to this prospectus. You can obtain documents incorporated by reference in this prospectus by requesting them in writing or by telephone from us at the following address: 3 6 Jonathan D. (Jody) Nelson Chief Financial Officer Patterson Energy, Inc. 4510 Lamesa Highway P.O. Box 1416 Snyder, Texas 79550 (915) 573-1104 We have not authorized anyone to give any information or make any representation about us that is different from, or in addition to, that contained in this prospectus or in any of the materials that we have incorporated by reference into this document. Therefore, if anyone does give you information of this sort, you should not rely on it. If you are in a jurisdiction where offers to sell, or solicitations of offers to purchase, the Securities offered by this document is unlawful, or if you are a person to whom it is unlawful to direct these types of activities, then the offer presented in this document does not extend to you. The information contained in this document speaks only as of the date of this document, unless the information specifically indicates that another date applies. 4 7 PATTERSON Patterson is one of the leading providers of domestic land drilling services to major and independent oil and natural gas companies. Formed in 1978 and reincorporated in 1993 as a Delaware corporation, Patterson conducts operations in Texas, New Mexico, Oklahoma, Louisiana and Utah. We have a drilling fleet of 119 rigs, 114 of which are currently operable. We are also engaged in the development, exploration, acquisition and production of oil and natural gas and provide contract drilling fluid services to other oil and natural gas operators. The Company has established a reputation for reliable, high quality drilling equipment and well-trained crews. We continually seek to modify and upgrade our equipment to maximize the performance and capabilities of our drilling rig fleet, which we believe provides us with a competitive advantage. Additionally, we have the in-house capability to design, manufacture, repair and modify our drilling rigs. Of our drilling rigs, 93 are capable of drilling to depths of 10,000 feet and greater, including 25 that are capable of drilling to 15,000 feet and greater. During the first six months of 1999, we drilled 278 wells for 105 non-affiliated customers maintaining an average utilization rate of 34%. Our oil and natural gas activities are designed to complement our land drilling operations and diversify our overall business strategy. These activities are primarily focused in mature producing regions in the Austin Chalk Trend, the Permian Basin and South Texas. Oil and natural gas operations comprised approximately 5.9% of our consolidated operating revenues in the first six months of 1999. At December 31, 1998, our proved developed reserves were approximately 1.5 million BOE and had a present value (discounted at 10% before income taxes) of estimated future net revenues of approximately $5.4 million. Our drilling fluid services are provided to operators of oil and gas wells located in the Company's areas of operation. Operating revenues derived from these activities constituted approximately 8.3% of Patterson's consolidated operating revenues for the first six months of 1999. We believe that these services integrate well with our other core operating activities. The drilling fluid operations were added during 1998 with our acquisition of Lone Star Mud, Inc., during January and Tejas Drilling Fluids, Inc. in September. Our headquarters are located at 4510 Lamesa Highway, Snyder, Texas, and our telephone number at that address is (915) 573-1104. We also have small offices in Austin, Houston, Midland, San Angelo, Kilgore and Corpus Christi, Texas and Oklahoma City, Oklahoma and Hobbs, New Mexico, and 15 yard facilities variously located in our areas of operations. You can obtain additional information about us in the reports and other documents incorporated by reference in this prospectus. See "Incorporation of Certain Documents by Reference" and "Where You Can Find More Information." 5 8 RISK FACTORS Ownership of Securities involves certain risks. In determining whether to purchase Securities, you should carefully consider the following risk factors and other information contained in or incorporated by reference in this prospectus or in any applicable prospectus supplement. RISKS RELATED TO PATTERSON'S BUSINESS GENERALLY PATTERSON IS DEPENDENT ON THE OIL AND NATURAL GAS INDUSTRY AND MARKET PRICES FOR OIL AND NATURAL GAS. DECLINES IN OIL AND NATURAL GAS PRICES HAVE ADVERSELY AFFECTED PATTERSON'S OPERATIONS. Patterson's revenue, profitability and rate of growth are substantially dependent upon prevailing prices for oil and natural gas. In recent years, oil and natural gas prices and, therefore, the level of drilling, exploration, development and production, have been extremely volatile. Prices are affected by market supply and demand factors as well as international military, political and economic conditions and the ability of the Organization of Petroleum Exporting Countries to set and maintain production and prices. All of these factors are beyond our control. Low level commodity prices beginning in the fourth quarter of 1997 and continuing into mid-1999 have materially adversely affected our operations. We expect oil and natural gas prices to continue to be volatile and to effect our financial condition and operations and ability to access sources of capital. INDUSTRY CONDITIONS FOR CONTRACT DRILLING SERVICES HAVE BEEN POOR FOR MUCH OF THE TIME SINCE MID-1982. The contract drilling business experienced increased demand for drilling services from 1995 through the third quarter of 1997 due to stronger oil and natural gas prices. However, except for that period and other occasional upturns, the market for onshore contract drilling services has generally been depressed since mid-1982. Since this time and except during the occasional upturns, there have been substantially more drilling rigs available than necessary to meet demand in most operating and geographic segments of the domestic drilling industry. As a result, drilling contractors have had difficulty sustaining profit margins. In addition to adverse effects that future declines in demand could have on Patterson, ongoing movement of drilling rigs from region to region or reactivation of onshore drilling rigs or new construction of drilling rigs could adversely effect utilization rates and pricing, even in an environment of stronger oil and natural gas prices and increased drilling activity. We cannot predict either the future level of demand for our contract drilling services or future conditions in the contract drilling business. Notwithstanding the significant improvement in oil and natural gas prices over the past few months, the demand for contract drilling services, although improving, remains relatively weak. There can be no assurance that the demand for contract drilling services will increase proportionally with the current higher prices or of the duration of the higher commodity prices. SHORTAGES OF DRILL PIPE AND OTHER DRILLING EQUIPMENT COULD ADVERSELY AFFECT PATTERSON'S DRILLING OPERATIONS. The increase in domestic drilling demand from mid-1995 through the third quarter of 1997 and related increase in contract drilling activity resulted in a shortage of drill pipe in the industry. This shortage caused the price of drill pipe to increase significantly and required that orders for new drill pipe be placed at least one year in advance. The price increase and delay in delivery of drill pipe caused Patterson to substantially increase capital expenditures in its contract drilling segment. A return to higher demand levels for contract drilling services could reinstate the problems associated with drill pipe 6 9 shortages and could cause shortages in other drilling rig parts. Severe shortages could impair Patterson's ability to obtain the equipment required for its contract drilling operations. THE CONTRACT DRILLING INDUSTRY IN WHICH PATTERSON OPERATES IS HIGHLY COMPETITIVE. The inability to compete effectively in the contract drilling industry would adversely impact Patterson's operations. Price is generally the most important competitive factor. Other competitive factors include the availability of drilling equipment and experienced personnel at or near the time and place required by customers, the reputation of the drilling contractor and its relationship with existing customers. We believe that we compete favorably with respect to all of these factors. Competition is usually on a regional basis, although drilling rigs are mobile and can be moved from one region to another in response to increased demand. An oversupply of drilling rigs in any region may result. Demand for land drilling equipment is also dependent on the exploration and development budgets of oil and natural gas companies, which are in turn influenced primarily by the financial condition of such companies, by general economic conditions, by prices of oil and natural gas, and from time to time political considerations and policies. It is not practical to estimate the number of contract drilling competitors of Patterson, some of which have substantially greater resources than Patterson. Also, in recent years, many drilling companies have consolidated or merged with other companies. Although this consolidation has decreased the total number of competitors, Patterson believes the competition for drilling services will continue to be intense. There is also substantial competition for the acquisition of oil and natural gas leases suitable for exploration and for the hiring of experienced personnel. Patterson's competitors in the exploration, development and production segment of its operations include major integrated oil and natural gas companies, numerous independent oil and natural gas companies, drilling and production purchase programs and individual producers and operators. Patterson's ability to increase its holdings of oil and natural gas reserves in the future is directly dependent upon its ability to select, acquire and develop suitable prospects in competition with those companies. Many competitors have financial resources, staff, facilities and other resources significantly greater than those of Patterson. LABOR SHORTAGES COULD ADVERSELY AFFECT PATTERSON'S DRILLING OPERATIONS. The increase in domestic drilling demand from mid-1995 through the third quarter of 1997 and related increase in contract drilling activity caused a shortage of qualified drilling rig personnel in the industry. This increase adversely impaired our ability to attract and retain sufficient qualified personnel and to market and operate our drilling rigs. Further, the labor shortages resulted in wage increases, which impacted our operating margins. A return to higher demand levels for contract drilling services could reinstate the problems associated with labor shortages. PATTERSON HAS SIGNIFICANT BANK-DEBT; FAILURE TO REPAY COULD RESULT IN FORECLOSURE ON DRILLING RIGS. Patterson has a bank term loan with a remaining principal balance of $51.4 million at June 30, 1999. All of Patterson's contract drilling rigs are pledged as collateral on the loan and the remainder of its assets are subject to a negative pledge. The loan is payable in monthly principal installments of $714,000 until January 1, 2001, when the loan matures and the balance of the note becomes due and payable. A decline in general economic conditions in the oil and gas industry could adversely affect Patterson's ability to repay the loan. Failure to repay could, at the bank's election, result in acceleration of the maturity date of the loan and foreclosure on the drilling rigs. Additionally, the loan agreement contains a number of covenants, including financial covenants, the failure of which to satisfy could also cause acceleration of the maturity date and require immediate repayment. 7 10 CONTINUED GROWTH THROUGH RIG ACQUISITIONS IS NOT ASSURED. Patterson substantially increased its drilling rig fleet over the four-year period ending in the first quarter of 1998 through strategic acquisitions. Although the land drilling industry has experienced significant consolidation over the past couple of years, Patterson believes that significant acquisition opportunities are still available. However, there can be no assurance that suitable acquisitions can be found, and we are likely to continue to face intense competition from other companies for available acquisition opportunities. There can be no assurance that Patterson will have sufficient capital resources to complete acquisitions, that acquisitions can be completed on terms acceptable to us or that any completed acquisition would improve Patterson's financial condition, results of operation, business or prospects in any material manner. In fact, Patterson may incur substantial indebtedness to finance future acquisitions and also may issue equity securities or convertible securities in connection with any such acquisitions. Additional debt service requirements could represent a significant burden on our results of operations and financial condition and the issuance of additional equity or convertible shares could be dilutive to our existing stockholders. Also, continued growth could strain Patterson's management, operations, employees and resources. PATTERSON'S OPERATIONS ARE SUBJECT TO OPERATING HAZARDS AND UNINSURED RISKS. Contract drilling and oil and natural gas activities are subject to a number of risks and hazards. These could cause serious injury or death to persons, suspension of drilling operations, serious damage to equipment or property of others, and damage to producing formations in surrounding areas. Our operations could also cause environment damage, particularly through oil spills, gas leaks, discharges of toxic gases or extensive uncontrolled fires. In addition, we could become subject to liability for reservoir damages. The occurrence of a significant event, including pollution or environmental damage, could materially affect our operations and financial condition. We believe we are adequately insured or indemnified against normal and foreseeable risks in our operations in accordance with industry standards. However, such insurance or indemnification may not be adequate to protect Patterson against liability from all consequences of well disasters, extensive fire damage or damage to the environment. There is no assurance that Patterson will be able to maintain adequate insurance in the future at rates it considers reasonable or that any particular types of coverage will be available. In addition to insurance, Patterson generally seeks to obtain indemnity agreements whenever possible from its customers requiring them to hold Patterson harmless if production or reservoir damage occurs. However, even when we are successful in obtaining contractual indemnification, the customer may not maintain adequate insurance to support such indemnification. VIOLATIONS OF ENVIRONMENTAL LAWS AND REGULATIONS COULD MATERIALLY ADVERSELY AFFECT PATTERSON'S OPERATIONS. Patterson's operations are subject to numerous domestic laws and regulations that relate directly or indirectly to the drilling of oil and natural gas wells, including laws and regulations controlling the discharge of materials into the environment, requiring removal and clean-up under certain circumstances, or otherwise relating to the protection of the environment. Laws and regulations protecting the environment have generally become more stringent in recent years, and may in certain circumstances impose strict liability, rendering a person liable for environmental damage without regard to negligence or to the fault on the part of such person. Such laws and regulations may expose us to liability for the 8 11 conduct of, or conditions caused by, others, or for our acts that were in compliance with all applicable laws at the time such acts were performed. Although we generally have been able to obtain some degree of contractual indemnification from our customers in most of our day rate drilling contracts against pollution and environmental damages, there is no assurance that Patterson will be able to enforce the indemnification in all instances, that the customer will be financially able in all cases to comply with its indemnity obligations, or that Patterson will be able to obtain such indemnification agreements in the future. No such indemnification is typically available for turnkey contracts. While we also maintain insurance coverage against certain environmental liabilities, including pollution caused by sudden and accidental oil spills, we cannot assure that we will continue to be able to secure or carry this insurance or, if Patterson were able to do so, that the coverage would be adequate to cover the liabilities. SOME OF PATTERSON'S CONTRACT DRILLING SERVICES ARE DONE UNDER TURNKEY CONTRACTS, WHICH ARE FINANCIALLY RISKY. A portion of Patterson's contract drilling is done under turnkey contracts, which involve substantial risks. Under turnkey drilling contracts, Patterson contracts to drill a well to a contract depth under specified conditions for a fixed price. The risks to us under these types of drilling contracts are substantially greater than on a well drilled on a daywork basis since we assume most of the risks associated with the drilling operations generally assumed by the operator of the well in a daywork contract, including risk of blowout, machinery breakdowns and abnormal drilling conditions. Accordingly, if severe drilling problems are encountered in drilling wells under a turnkey contract, Patterson could suffer substantial losses associated with that contract. Generally, the weaker the demand for our drilling services, the higher the percentage of our turnkey contracts. For the years ended December 31, 1997 and 1998, and the six months ended June 30, 1999, the percentage of our contract drilling revenues attributable to: turnkey contracts was 3.0%, 12.0%, and 19%, respectively. ESTIMATES OF PATTERSON'S OIL AND NATURAL GAS RESERVES ARE UNCERTAIN. Estimates of our proved developed reserves and future net revenues are based on engineering reports prepared by an independent petroleum engineer based upon a review of production histories and other geologic, economic, ownership and engineering data provided by Patterson. These estimates are based on several assumptions that the SEC requires oil and natural gas companies to use, including, for example, constant oil and natural gas prices. Such estimates are inherently imprecise indications of future net revenues. Actual future production, revenues, taxes, production costs and development costs may vary substantially from those assumed in the estimates. Any significant variance could materially affect the estimates. In addition, our reserves might be subject to upward or downward adjustment based on future production, results of future exploration and development, prevailing oil and natural gas prices and other factors. RISKS RELATED TO PATTERSON'S OPERATIONS THE LOSS OF SERVICES OF KEY OFFICERS COULD HURT PATTERSON'S OPERATIONS. Patterson is highly dependent on its executive officers and key employees. The unexpected loss of the services of any of these individuals, particularly Cloyce A. Talbott or A. Glenn Patterson, Chief Executive Officer and the President, respectively, could have a detrimental affect on Patterson. Patterson has no employment agreements with any of its executive officers. We maintain key man life insurance on the lives of Messrs. Talbott and Patterson in the amount of $3 million each. 9 12 ANTI-TAKEOVER MEASURES IN PATTERSON'S CHARTER DOCUMENTS AND UNDER STATE LAW COULD DISCOURAGE AN ACQUISITION OF PATTERSON AND THEREBY AFFECT THE RELATED PURCHASE PRICE. Patterson, as a Delaware corporation, is subject to the Delaware General Corporation Law, including Section 203, an anti-takeover law enacted in 1988. Patterson has also enacted certain anti-takeover measures, including a stockholders rights plan. In addition, our Board of Directors has the authority to issue up to one million shares of preferred stock and to determine the price, rights (including voting rights), conversion ratios, preferences and privileges of that stock without further vote or action by the holders of the common stock. As a result of these measures and others, potential acquirers of Patterson may find it more difficult or be discouraged from attempting to effect an acquisition transaction with us, thereby possibly depriving holders of Patterson securities of certain opportunities to sell or otherwise dispose of such securities at above-market prices pursuant to their transactions. PATTERSON HAS PAID NO DIVIDENDS ON ITS COMMON STOCK AND HAS NO PLANS TO PAY DIVIDENDS IN THE FORESEEABLE FUTURE. Patterson has not declared or paid cash dividends on its common stock in the past and does not expect to declare or pay any cash dividends on its common stock in the foreseeable future. The terms of our existing bank term loan prohibit payment of dividends by Patterson without the prior written consent of the bank. THERE IS NO ASSURANCE THAT A PUBLIC MARKET WILL DEVELOP FOR CERTAIN OF THE SECURITIES WHICH MAY BE OFFERED AND SOLD UNDER THIS PROSPECTUS. Any debt securities, preferred stock, depository shares and warrants sold under this prospectus will be new issues of Securities of Patterson with no established trading market. Underwriters to whom Patterson sells any of those Securities for public offering and sale may make a market in such Securities, but the underwriters will not be obligated to do so and may discontinue any market-making at any time without notice. Consequently, no assurance can be given as to the liquidity of any secondary market for any of those Securities. PARTICIPATION BY PATTERSON DIRECTORS AND OFFICERS IN OIL AND NATURAL GAS PROSPECTS COULD CREATE CONFLICTS OF INTEREST. Certain of Patterson's directors and executive officers and their respective affiliates have participated and may continue to participate from time to time in oil and natural gas prospects and properties in which Patterson has an interest. Conflicts of interest may arise between such persons and Patterson as to the advisability of conducting drilling and recompletion activities on these properties. Of the 134 wells operated by Patterson at June 30, 1999, Patterson's directors, officers and/or their respective affiliates were working interest owners in approximately 96 wells. PATTERSON BOARD MAY ISSUE PREFERRED STOCK WITH RIGHTS AND PREFERENCES ADVERSE TO COMMON STOCK. Patterson has a class of authorized preferred stock. Patterson's Board of Directors, without stockholder approval, may issue shares of the preferred stock with rights and preferences adverse to the voting power or other rights of the holders of the Common Stock. Patterson has not issued any shares of preferred stock. However, as of June 30, 1999, an aggregate of 325,170 shares of preferred stock had been reserved for issuance upon exercise of the Rights described under "Description of Capital Stock-Stockholder Rights Plan," below. 10 13 USE OF PROCEEDS Except as may otherwise be described in the prospectus supplement relating to an offering of Securities, we will use the net proceeds from the sale of the Securities offered under this prospectus and the prospectus supplement for future acquisitions and for other general corporate purposes, including working capital, investment in subsidiaries and payment or partial payment of existing indebtedness. We will determine any specific allocation of the net proceeds of an offering of Securities to a specific purpose at the time of the offering and will describe the allocation in the related prospectus supplement. RATIO OF EARNINGS TO FIXED CHARGES The following table sets forth our consolidated ratio of earnings to fixed charges (unaudited) for the periods shown:
Six months Ended Year ended December 31, ---------------- --------------------------------------------------- June 30, 1999 1998 1997 1996 1995 1994 ------------- ---- ---- ---- ---- ---- Ratio of earnings to fixed charges (1) (2) .96:1 14.03:1 1.91:1 2.71:1 8.66:1
- --------- (1) For purposes of computing the ratio of earnings to fixed charges, "earnings" consist of pretax income from continuing operations plus fixed charges (excluding capitalized interest). "Fixed charges" represent 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. No preferred stock was outstanding during any of the periods presented and, as a result, the ratio of earnings to combined fixed charges and preferred stock dividends was the same as the ratio of earnings to fixed charges. (2) There was a deficiency of $10.4 million in the ratio of earnings to fixed charges for the six months ended June 30, 1999. SELLING STOCKHOLDERS An unspecified number of shares of common stock may be offered and sold under this prospectus by selling stockholders. Identification of any such selling stockholders will be contained in the applicable prospectus supplement. Patterson will not receive proceeds of any sale of shares by selling stockholders. 11 14 DESCRIPTION OF DEBT SECURITIES The debt securities may be issued from time to time in one or more series under an Indenture (as defined below) between Patterson, as issuer, and the trustee specified in the applicable prospectus supplement. The following summaries of certain provisions of the debt securities do not purport to be complete and are subject to, and are qualified in their entirety by reference to, all the provisions of the Indenture applicable to a particular series of debt securities, including the definitions therein of certain terms. A copy of the form of the Indenture is included as an exhibit to the Registration Statement of which this prospectus is a part. The following summary is qualified in its entirety by reference to such exhibit. See "Where You Can Find More Information." Article and Section references used herein are references to the Indenture. Capitalized terms not otherwise defined in this Description of Debt Securities will have the meaning given in the Indentures. Whenever particular Sections, Articles or defined terms in the Indenture are referred to, it is intended that those Sections, Articles or defined terms shall be incorporated herein by reference. The debt securities will constitute either indebtedness designated as Senior Indebtedness ("Senior Debt Securities"), indebtedness designated as Senior Subordinated Indebtedness ("Senior Subordinated Debt Securities") or indebtedness designated as Subordinated Indebtedness ("Subordinated Debt Securities"). Senior Debt Securities, Senior Subordinated Debt Securities and Subordinated Debt Securities will each be issued under a separate indenture (individually an "Indenture" and collectively the "Indentures") to be entered into prior to the issuance of the debt securities. The Indentures will be substantially identical, except for provisions relating to subordination. See "--Subordination of Senior Subordinated Debt Securities and Subordinated Debt Securities," below. There will be a separate trustee under each Indenture. Information regarding the trustee under an Indenture will be included in any prospectus supplement relating to the debt securities issued thereunder. The following description sets forth certain general terms and provisions of the debt securities to which any prospectus supplement may relate. The particular terms of the debt securities and the extent to which such general provisions may apply will be described in a prospectus supplement relating to such debt securities. GENERAL The debt securities offered pursuant to this Prospectus will be limited to $150,000,000 aggregate principal amount or (i) its equivalent (based on the applicable exchange rate at the time of sale), if the debt securities are issued with principal amounts denominated in one or more foreign currencies, composite currencies or currency units, or (ii) such greater amount, if the debt securities are issued at an original issue discount, as shall result in aggregate proceeds of $150,000,000 to Patterson. The Indentures provide that additional debt securities may be issued thereunder up to the aggregate principal amount authorized from time to time by Patterson's Board of Directors. So long as a single trustee is acting for the benefit of the holders of all the debt securities offered hereby and any such additional debt securities issued under the Indentures, the debt securities and any such additional debt securities are herein collectively referred to as the "Indenture Securities." The Indentures also provide that there may be more than one trustee under the Indentures, each with respect to one or more different series of Indenture Securities. At any time when two or more trustees are acting, each with respect to only certain series, the term "Indenture Securities" as used herein means the one or more series with respect to which each respective trustee is acting and the powers and the trust obligations of each such trustee as described herein shall extend only to the one or more series of Indenture Securities for which it is acting as trustee. If there is more than one trustee acting for different series of Indenture Securities, then those Indenture Securities (whether of one or more than one series) for which each trustee is acting would be treated as if issued under a separate Indenture. 12 15 The applicable prospectus supplement will set forth a description of the particular series of debt securities being offered thereby, including but not limited to (Indentures, Section 3.1): (1) the designation or title of such debt securities; (2) any limit on the aggregate principal amount of such debt securities; (3) the percentage of their principal amount at which such debt securities will be offered; (4) the date or dates on which the principal of such debt securities will be payable and on which such debt securities will mature; (5) the rate or rates (which may be fixed or variable) at which such debt securities shall bear interest, or the method of determination of such rate or rates at which such debt securities shall bear interest, if any; (6) the date or dates from which interest will accrue or the method of determination of such date or dates, and the date or dates on which any such interest shall be payable; (7) whether such debt securities will be secured; (8) the currencies or currency units in which such debt securities are issued or payable; (9) the terms for redemption, extension or early repayment of such debt securities, if any; (10) if other than denominations of $1,000 and any integral multiple thereof, the denominations in which such debt securities are authorized to be issued; (11) if applicable, the terms and conditions upon which conversion will be effected, including the conversion price, the conversion period and other conversion provisions; (12) the provisions for a sinking fund, if any; (13) whether such debt securities are issuable as a Global Security or Securities (as defined below); (14) any index or formula to be used to determine the amount of payments of principal, premium, if any, and interest on such debt securities, and any commodities, currencies, currency units or indices, or value, rate or price, relevant to such determination; (15) if the principal of, premium, if any, or interest on such debt securities is to be payable, at the election of Patterson or a holder thereof, in one or more currencies or currency units other than that or those in which such debt securities are stated to be payable, the currencies or currency units in which payment of the principal of, premium, if any, and interest on such debt securities as to which election is made shall be payable, and the periods within which and the terms and conditions upon which such election is to be made; (16) if other than the principal amount thereof, the portion of the principal amount of such debt securities of the series which will be payable upon acceleration of the maturity thereof; 13 16 (17) whether such debt securities are subordinate in right of payment to any Senior Indebtedness of Patterson and, if so, the terms and conditions of such subordination and the aggregate principal amount of such Senior Indebtedness outstanding as of a recent date; (18) whether the interest, if any, on such debt securities is to be payable in securities of Patterson and the terms and conditions applicable to any such payment; (19) any covenants to which Patterson may be subject with respect to such debt securities; (20) the applicability of the provisions described under "Defeasance and Covenant Defeasance" below; (21) United States income tax consequences, if any; (22) the provisions for the payment of additional amounts with respect to any withholding taxes in certain cases; (23) any term or provision relating to such debt securities which is not inconsistent with the provisions of the Indenture; (24) the trustee; and (25) any other special terms pertaining to such debt securities. Unless otherwise specified in the applicable prospectus supplement, the debt securities will not be listed on any securities exchange. One or more series of debt securities may be sold at a substantial discount below their stated principal amount, bearing no interest or interest at a rate which at the time of issuance is below market rates. Any material federal income tax consequences and other special considerations with respect to any series of debt securities will be described in the prospectus supplement relating to any such series of debt securities. If the purchase price of any series of debt securities is denominated in a foreign currency or currencies or a foreign currency unit or units or if the principal of, premium, if any, and interest on any series of debt securities are payable in a foreign currency or currencies or a foreign currency unit or units, the restrictions, elections, general tax considerations, specific terms and other information with respect to such series of debt securities will be set forth in the applicable prospectus supplement. Debt securities may be issued from time to time with payment terms which are calculated by reference to the value, rate or price of one or more commodities, currencies, currency units or indices. holders of such debt securities may receive a principal amount (including premium, if any) on any principal payment date, or a payment of interest on any interest payment date, that is greater than or less than the amount of principal (including premium, if any) or interest otherwise payable on such dates, depending upon the value, rate or price on the applicable dates of the applicable currency, currency unit, commodity or index. Information as to the methods for determining the amount of principal, premium, if any, or interest payable on any date, the currencies, currency units, commodities or indices to which the amount payable on such date is linked and any additional tax considerations will be set forth in the applicable prospectus supplement. Except as may be set forth in the applicable prospectus supplement, holders of debt securities will not have the benefit of any specific covenants or provisions in the applicable Indenture or such debt securities in the event that Patterson engages in or becomes the subject of a highly leveraged transaction, 14 17 other than the limitations on mergers, consolidations and transfers of substantially all of Patterson's properties and assets as an entirety to any person as described below under "--Consolidation, Merger and Sale of Assets." Except as otherwise provided in the applicable prospectus supplement, principal, premium, if any, and interest, if any, will be payable at an office or agency to be maintained by Patterson in New York, New York, except that at the option of Patterson interest may be paid by check mailed to the person entitled thereto. The debt securities will be issued only in fully registered form without coupons and may be presented for the registration of transfer or exchange at the corporate trust office of the trustee. Not all debt securities of any one series need be issued at the same time, and, unless otherwise provided, a series may be reopened for issuances of additional debt securities of such series. Since Patterson is a holding company, the rights of Patterson, and the rights of its creditors, including the holders of the debt securities, to participate in any distribution of the assets of any subsidiary upon its liquidation or reorganization or otherwise are necessarily subject to the prior claims of creditors of the subsidiary, except to the extent that Patterson may be recognized as a creditor of the subsidiary. Generally, the debt securities will be effectively subordinated to all existing and future indebtedness of the operating subsidiaries of Patterson. Unless otherwise specified in an applicable prospectus supplement, the Indentures will not contain any provisions that limit the ability of Patterson or any subsidiary of Patterson to incur indebtedness or that afford holders of the debt securities protection in the event of a highly leveraged or similar transaction involving Patterson or any of its subsidiaries. SENIOR DEBT SECURITIES The Senior Debt Securities will rank pari passu with all other unsubordinated debt of Patterson and senior to the Senior Subordinated Debt Securities and Subordinated Debt Securities. SUBORDINATION OF SENIOR SUBORDINATED DEBT SECURITIES AND SUBORDINATED DEBT SECURITIES The payment of the principal of, premium, if any, and interest on the Senior Subordinated Debt Securities and the Subordinated Debt Securities will, to the extent set forth in the respective Indentures and Indenture Supplements governing such Senior Subordinated Debt Securities and Subordinated Debt Securities, be subordinated in right of payment to the prior payment in full of all Senior Indebtedness. (Indentures, Section 15.1.) Upon any payment or distribution of assets to creditors upon any liquidation, dissolution, winding up, reorganization, assignment for the benefit of creditors, marshalling of assets or any bankruptcy, insolvency or similar proceedings of Patterson, the holders of all Senior Indebtedness will be entitled to receive payment in full of all amounts due or to become due thereon before the holders of the Senior Subordinated Debt Securities or the Subordinated Debt Securities will be entitled to receive any payment in respect of the principal of, premium, if any, or interest on such Senior Subordinated Debt Securities or Subordinated Debt Securities, as the case may be. In the event of the acceleration of the maturity of any Senior Subordinated Debt Securities or Subordinated Debt Securities, the holders of all Senior Indebtedness will be entitled to receive payment in full of all amounts due or to become due thereon before the holders of the Senior Subordinated Debt Securities or Subordinated Debt Securities, as the case may be, will be entitled to receive any payment upon the principal of, premium, if any, or interest on such Senior Subordinated Debt Securities or Subordinated Debt Securities, as the case may be. No payments on account of principal, premium, if any, or interest in respect of the Senior Subordinated Debt Securities or Subordinated Debt Securities may be made if there shall have occurred and be continuing in 15 18 a default in the payment of principal of, or premium, if any, or interest on any Senior Indebtedness beyond any applicable grace period, or a default with respect to any Senior Indebtedness permitting the holders thereof to accelerate the maturity thereof, or if any judicial proceedings shall be pending with respect to any such default. For purposes of the subordination provisions, the payment, issuance or delivery of cash, property or securities (other than stock, and certain subordinated securities, of Patterson) upon conversion or exchange of a Senior Subordinated debt security or Subordinated debt security will be deemed to constitute payment on account of the principal of such Senior Subordinated debt security or Subordinated debt security, as the case may be. By reason of such provisions, in the event of insolvency, holders of Senior Subordinated Debt Securities and Subordinated Debt Securities may recover less, ratably, than holders of Senior Indebtedness with respect thereto. The term "Senior Indebtedness," when used with respect to any series of Senior Subordinated Debt Securities or Subordinated Debt Securities, is defined to include all amounts due on and obligations in connection with any of the following, whether outstanding at the date of execution of the Indentures or thereafter incurred, assumed, guaranteed or otherwise created (including, without limitation, interest accruing on or after a bankruptcy or other similar event, whether or not an allowed claim therein): (a) indebtedness, obligations and other liabilities (contingent or otherwise) of Patterson for money borrowed or evidenced by bonds, debentures, notes or similar instruments; (b) reimbursement obligations and other liabilities (contingent or otherwise) of Patterson with respect to letters of credit or bankers' acceptances issued for the account of Patterson and interest rate protection agreements and currency exchange or purchase agreements; (c) obligations and liabilities (contingent or otherwise) of Patterson related to capitalized lease obligations; (d) indebtedness, obligations and other liabilities (contingent or otherwise) of Patterson related to agreements or arrangements designed to protect Patterson against fluctuations in commodity prices, including without limitation, commodity futures contracts or similar hedging instruments; (e) indebtedness of others of the kinds described in the preceding clauses (a) through (d) that Patterson has assumed, guaranteed or otherwise assured the payment of, directly or indirectly; (f) indebtedness of another person of the type described in the preceding clauses (a) through (e) secured by any mortgage, pledge, lien or other encumbrance on property owned or held by Patterson; and (g) deferrals, renewals, extensions and refundings of, or amendments, modifications or supplements to, any indebtedness, obligation or liability described in the preceding clauses (a) through (f) whether or not there is any notice to or consent of the holders of such series of Senior Subordinated Debt Securities or Subordinated Debt Securities, as the case may be; except that, with respect to the Senior Subordinated Debt Securities, any particular indebtedness, obligation, liability, guaranty, assumption, deferral, renewal, extension or refunding shall not constitute "Senior Indebtedness" if it is expressly stated in the governing terms, or in the assumption or guarantee, thereof that the indebtedness involved is not senior in right of payment to the Senior Subordinated Debt Securities or that such indebtedness is pari passu with or junior to the Senior Subordinated Debt Securities and, with respect to Subordinated Debt Securities, any particular indebtedness, obligation, liability, guaranty, assumption, deferral, renewal, extension or refunding shall not constitute "Senior Indebtedness" if it is expressly stated in the governing 16 19 terms, or in the assumption or guarantee, thereof that the indebtedness involved is not senior in right of payment to the Subordinated Debt Securities or that such indebtedness is pari passu with or junior to the Subordinated Debt Securities. In certain circumstances, such as the bankruptcy or insolvency of Patterson, bankruptcy or insolvency legislation may be applicable and the application of such legislation may lead to different results with respect to, for example, payments to be made to holders of debt securities, or priorities between holders of the debt securities and holders of Senior Indebtedness, than those provided for in the applicable Indenture. If this prospectus is being delivered in connection with a series of Senior Subordinated Debt Securities or Subordinated Debt Securities, the accompanying prospectus supplement or the information incorporated herein by reference will set forth the approximate amount of Senior Indebtedness outstanding as of the end of Patterson's most recent fiscal quarter. FORM, EXCHANGE, REGISTRATION, CONVERSION, TRANSFER AND PAYMENT Unless otherwise indicated in the applicable prospectus supplement, the debt securities will be issued only in fully registered form in denominations of U.S.$1,000 or integral multiples thereof. (Indenture, Section 3.2) Unless otherwise indicated in the applicable prospectus supplement, payment of principal, premium, if any, and interest on the debt securities will be payable, and the exchange, conversion and transfer of debt securities will be registerable, at the office or agency of Patterson maintained for such purposes. No service charge will be made for any registration of a transfer or exchange of the debt securities, but Patterson may require payment of a sum sufficient to cover any tax or other governmental charge imposed in connection therewith. All monies paid by Patterson to a Paying Agent for the payment of principal of, premium, if any, or interest on any debt security which remain unclaimed for two years after such principal, premium or interest has become due and payable may be repaid to Patterson and thereafter the holder of such debt security may look only to Patterson for payment thereof. EVENTS OF DEFAULT Unless otherwise specified in the applicable prospectus supplement, the following events are specified in the Indentures as Events of Default with respect to debt securities of any series (Indentures, Section 5.1): (a) failure to pay principal (or premium, if any) on any debt security of that series at its maturity, whether or not such failure is a result of the subordination provisions of the Indenture with respect to such series; (b) failure to pay any interest on any debt security of that series when due, continued for 30 days, whether or not such failure is a result of the subordination provisions of the Indenture with respect to such series; (c) failure to make any mandatory sinking fund payment, when due, continued for 30 days, in respect of any debt security of that series; (d) failure to perform any other covenant of Patterson in the applicable Indenture or any other covenant to which Patterson may be subject with respect to debt securities of that series (other than 17 20 a covenant solely for the benefit of a series of debt securities other than that series), continued for 90 days after written notice as provided in the applicable Indenture; (e) acceleration of any indebtedness for borrowed money in a principal amount in excess of $15 million for which Patterson or any Significant Subsidiary is liable, including debt securities of another series, or a default by Patterson or any Significant Subsidiary in the payment at final maturity of outstanding indebtedness for borrowed money in a principal amount in excess of $15 million, and such acceleration or default at maturity shall not be waived, rescinded or annulled within 30 days after written notice to Patterson thereof, unless such acceleration or default at maturity shall be remedied or cured by Patterson or such Significant Subsidiary or rescinded, annulled or waived by the holders of such indebtedness, in which case such acceleration or default at maturity shall not constitute an Event of Default under this provision; (f) certain events of bankruptcy, insolvency or reorganization; and (g) any other Event of Default provided with respect to the debt securities of that series. If an Event of Default with respect to outstanding debt securities of any series shall occur and be continuing, either the trustee or the holders of at least 25% in principal amount of the outstanding debt securities of that series, by notice as provided in the applicable Indenture, may declare the principal amount (or, if the debt securities of that series are original issue discount securities, such portion of the principal amount as may be specified in the terms of that series) of all debt securities of that series to be due and payable immediately, except that upon the occurrence of an Event of Default specified in (f) above, the principal amount (or in the case of original issue discount securities, such portion) of all debt securities will be immediately due and payable without notice. (Indentures, Section 5.2.) However, at any time after a declaration of acceleration with respect to debt securities of any series has been made, but before judgment or decree based on such acceleration has been obtained, the holders of a majority in principal amount of the outstanding debt securities of that series may, under certain circumstances, rescind and annul such acceleration. For information as to waiver of defaults, see "Modification and Waiver" below. The Indentures will provide that, subject to the duty of the respective trustees thereunder during an Event of Default to act with the required standard of care, each such trustee will be under no obligation to exercise any of its rights or powers under the respective Indentures at the request or direction of any of the holders, unless such holders shall have offered to such trustee reasonable security or indemnity. Subject to certain provisions, including those requiring security or indemnification of the applicable trustee, the holders of a majority in principal amount of the outstanding debt securities of any series will have the right to direct the time, method and place of conducting any proceeding for any remedy available to such trustee, or to exercise any trust or power conferred on such trustee, with respect to the debt securities of that series. No holder of a debt security of any series will have any right to institute any proceeding with respect to the applicable Indenture or for any remedy thereunder, unless (Indentures, Section 5.7): (1) such holder shall have previously given to the applicable trustee written notice of a continuing Event of Default; (2) the holders of at least 25% in aggregate principal amount of the outstanding debt securities of the same series shall have made written requests, and offered reasonable indemnity, to such trustee to institute such proceeding as trustee; and 18 21 (3) the trustee shall not have received from the holders of a majority in aggregate principal amount of the outstanding debt securities of the same series a direction inconsistent with such request and shall have failed to institute such proceeding within 60 days. However, such limitations do not apply to a suit instituted by a holder of a debt security for enforcement of payment of the principal of, or premium, if any, and interest, if any, on such debt security on or after the respective due dates expressed in such debt security or the right to convert that holder's debt security in accordance with the Indentures (if applicable). (Indentures, Section 5.8.) Patterson will be required to furnish to the Trustees annually a statement as to the performance by Patterson of its obligations under the respective Indentures and as to any default in such performance. MODIFICATION AND WAIVER Without the consent of any holder of outstanding debt securities, Patterson and the trustees may amend or supplement the Indentures or the debt securities to cure any ambiguity, defect or inconsistency, or to make any change that does not adversely affect the rights of any holder of debt securities. (Indentures, Section 9.1.) Other modifications and amendments of the respective Indentures may be made by Patterson and the applicable trustee with the consent of the holders of not less than a majority in aggregate principal amount of the outstanding debt securities of each series affected thereby; provided, however, that no such modification or amendment may, without the consent of the holder of each outstanding debt security affected thereby (Indentures, Section 9.2): (a) change the stated maturity of the principal of, or any installment of principal of, or premium, if any, or interest on any debt security; (b) reduce the principal amount of, the rate of interest on, or the premium, if any, payable upon the redemption of, any debt security; (c) reduce the amount of principal of an original issue discount security payable upon acceleration of the maturity thereof; (d) change the place or currency of payment of principal of, premium, if any, or interest on any debt security; (e) impair the right to institute suit for the enforcement of any payment on or with respect to any debt security on or after the stated maturity or redemption date thereof; (f) if applicable, modify the conversion provisions in a manner adverse to the holders thereof; (g) modify the subordination provisions applicable to Senior Subordinated Debt Securities or Subordinated Debt Securities in a manner adverse to the holders thereof; (h) reduce the percentage in principal amount of outstanding debt securities of any series, the consent of the holders of which is required for modification or amendment of the applicable Indenture or for waiver of compliance with certain provisions of the applicable Indenture or for waiver of certain defaults; or (i) modify any of the provisions of certain sections as specified in the Indenture including the provisions summarized in this paragraph, except to increase any such percentage or to designate 19 22 additional provisions of the applicable Indenture, which, with respect to such series, cannot be modified or waived without the consent of the holder of each outstanding debt security affected thereby. The holders of at least a majority in principal amount of the outstanding debt securities of any series may, on behalf of the holders of all debt securities of that series, waive, insofar as that series is concerned, compliance by Patterson with certain covenants of the applicable Indenture. The holders of not less than a majority in principal amount of the outstanding debt securities of any series may, on behalf of the holders of all debt securities of that series, waive any past default under the applicable Indenture with respect to that series, except a default in the payment of the principal of, premium, if any, or interest on, any debt security of that series or in respect of a provision which under the applicable Indenture cannot be modified or amended without the consent of the holder of each outstanding debt security of that series affected. (Indentures, Section 9.8 and 5.13.) CONSOLIDATION, MERGER AND SALE OF ASSETS Patterson, without the consent of any holders of any series of outstanding debt securities, may consolidate with or merge into, or transfer or lease its assets substantially as an entirety (treating Patterson and each of its subsidiaries as a single consolidated entity) to, any corporation, and any other corporation may consolidate with or merge into, or transfer or lease its assets substantially as an entirety to, Patterson, provided that (a) the corporation (if other than Patterson) formed by such consolidation or into which Patterson is merged or which acquires or leases the assets of Patterson substantially as an entirety is organized and existing under the laws of the United States of America, a state thereof or the District of Columbia, and assumes Patterson's obligations under each series of outstanding debt securities and the Indentures applicable thereto; (b) the Trustee is satisfied that the transaction will not result in the successor being required to make any deduction or withholding on account of certain taxes from any payments in respect of the Securities; (c) after giving effect to such transaction, no Event of Default, and no event which, after notice or lapse of time or both, would become an Event of Default, shall have occurred and be continuing; and (d) the trustee shall have received an officer's certificate and an opinion of counsel with respect to compliance with the foregoing requirements. (Indentures, Section 8.1.) DEFEASANCE AND COVENANT DEFEASANCE The Indentures allow Patterson to elect either (Indentures, Section 13.1): (1) to defease and be discharged from all of its obligations with respect to any series of debt securities including, in the case of Senior Subordinated Debt Securities and Subordinated Debt Securities, the provisions described under "-- Subordination of Senior Subordinated Debt Securities and Subordinated Debt Securities" and except for the obligations to exchange or register the transfer of such debt securities, to replace temporary, mutilated, destroyed, lost or stolen debt securities, to maintain an office or agency in respect of such debt securities, and to hold monies for payments in trust ("defeasance"); or 20 23 (2) to be released from its obligations with respect to any series of debt securities concerning the restrictions described under "--Consolidation, Merger and Sale of Assets" and any other covenants applicable to such debt securities including, in the case of Senior Subordinated Debt Securities and Subordinated Debt Securities, the provisions described under "--Subordination of Senior Subordinated Debt Securities and Subordinated Debt Securities," which are subject to covenant defeasance ("covenant defeasance"), and the occurrence of an event described and notice thereof in clauses (c) and (d) under "--Events of Default" shall no longer be an Event of Default, in each case, upon the irrevocable deposit with the trustee, in trust for such purpose, of money and Government Obligations that, through the payment of principal and interest in accordance with their terms, will provide money in an amount sufficient to pay the principal of, premium, if any, and interest, if any, on such debt securities on the scheduled due dates therefor. Such a trust may only be established if, among other things (Indentures, Section 13.4), (a) Patterson has delivered to the trustee (i) in the case of defeasance, an opinion of counsel stating that (A) Patterson has received from, or there has been published by, the Internal Revenue Service a ruling, or (B) since the date of the applicable Indenture, there has been a change in the applicable United States federal income tax law, in the case of either (A) or (B) to the effect that the holders of such Securities will not recognize gain or loss for United States federal income tax purposes as a result of the deposit, defeasance and discharge to be effected with respect to such Securities and will be subject to United States federal income tax on the same amount, in the same manner and at the same times as would be the case if such deposit, defeasance and discharge were not to occur or (ii) in the case of covenant defeasance, an opinion of counsel to the effect that the holders of such debt securities will not recognize gain or loss for United States federal income tax purposes as a result of such deposit and covenant defeasance and will be subject to United States federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such deposit and covenant defeasance had not occurred, and (b) no Event of Default or event which with the giving of notice or lapse of time, or both, would become an Event of Default under the applicable Indenture shall have occurred and be continuing on the date of such deposit, and Patterson may exercise its defeasance option with respect to such debt securities notwithstanding its prior exercise of its covenant defeasance option. If Patterson exercises its defeasance option, payment of such debt securities may not be accelerated because of an Event of Default. If Patterson exercises its covenant defeasance option, payment of such debt securities may not be accelerated by reference to the covenants noted under clause (2) above. If Patterson omits to comply with its remaining obligations with respect to such debt securities under the applicable Indenture after exercising its covenant defeasance option, and if such debt securities are declared due and payable because of the occurrence of any Event of Default, then the amount of money and U.S. government obligations on deposit with the trustee may, in certain circumstances, be insufficient to pay amounts due on such debt securities at the time of the acceleration resulting from the Event of Default; however, Patterson will remain liable for making such payments. (Indentures, Article 13.) GOVERNING LAW The Indentures and the debt securities will be governed by, and construed in accordance with, the laws of the State of New York. (Indentures, Section 1.12.) 21 24 REGARDING THE TRUSTEES The Indentures contain certain limitations on the right of each trustee, should it become a creditor of Patterson, to obtain payment of claims in certain cases, or to realize for its own account on certain property received in respect of any such claim as security or otherwise. Each Trustee will be permitted to engage in certain other transactions with Patterson; however, if the Trustee acquires any conflicting interest and there is a default under the debt securities issued under the applicable Indenture, the Trustee must eliminate such conflict or resign. (Indentures, Section 6.8.) BOOK-ENTRY SYSTEM The debt securities of a Series may be issued in the form of one or more global certificates representing the debt securities (the "Global Securities") that will be deposited with a depository (the "Depository") or with a nominee for the Depository identified in the applicable prospectus supplement and will be registered in the name of the Depository or a nominee thereof. (Indentures, Section 3.1.) In such a case one or more Global Securities will be issued in a denomination or aggregate denominations equal to the portion of the aggregate principal amount of outstanding debt securities of the series to be represented by such Global Security or Securities. Unless and until it is exchanged in whole or in part for debt securities in definitive certificated form, a Global Security may be transferred, in whole but not in part, only to another nominee of the Depository for such series, or to a successor Depository for such series selected or approved by Patterson, or to a nominee of such successor Depository. (Indentures, Sections 2.6, 2.7 and 3.5.) The specific depository arrangement with respect to any series of debt securities to be represented by a Global Security will be described in the applicable prospectus supplement. Patterson expects that the following provisions will apply to depository arrangements. Upon the issuance of any Global Security, and the deposit of such Global Security with or on behalf of the Depository for such Global Security, the Depository will credit, on its book-entry registration and transfer system, the respective principal amounts of the debt securities represented by such Global Security to the accounts of institutions ("participants") that have accounts with the Depository or its nominee. The accounts to be credited will be designated by the underwriters or agents engaging in the distribution of such debt securities or by Patterson, if such debt securities are offered and sold directly by Patterson. Ownership of beneficial interests in a Global Security will be limited to participants or persons that may hold interests through participants. Ownership of beneficial interests by participants in such Global Security will be shown on, and the transfer of such beneficial interests will be effected only through, records maintained by the Depository for such Global Security or by its nominee. Ownership of beneficial interests in such Global Security by persons that hold through participants will be shown on, and the transfer of such beneficial interests within such participants will be effected only through, records maintained by such participants. The laws of some jurisdictions may require that certain purchasers of securities take physical delivery of such securities in certificated form. The foregoing limitations and such laws may impair the ability to own, pledge or transfer beneficial interests in such Global Securities. So long as the Depository for a Global Security, or its nominee, is the registered owner of such Global Security, such Depository or such nominee, as the case may be, will be considered the sole owner or holder of the debt securities represented by such Global Security for all purposes under the applicable Indenture. Unless otherwise specified in the applicable prospectus supplement and except as specified below, owners of beneficial interests in such Global Security will not be entitled to have debt securities of the series represented by such Global Security registered in their names, will not receive or be entitled to receive physical delivery of debt securities of such series in certificated form and will not be considered 22 25 the holders thereof for any purposes under the Indenture. Accordingly, each person owning a beneficial interest in such Global Security must rely on the procedures of the Depository and, if such person is not a participant, on the procedures of the participant through which such person owns its interest, to exercise any rights of a holder under the Indenture. Patterson understands that, under existing industry practices, if Patterson requests any action of holders or an owner of a beneficial interest in such Global Security desires to give any notice or take any action a holder is entitled to give or take under the Indenture, the Depository would authorize the participants to give such notice or take such action. In that case, participants would authorize beneficial owners owning through such participants to give such notice or take such action or would otherwise act upon the instructions of beneficial owners owning through them. Unless otherwise specified in the applicable prospectus supplement, payments with respect to principal, premium, if any, and interest, if any, on debt securities represented by a Global Security registered in the name of a Depository or its nominee will be made to such Depository or its nominee, as the case may be, as the registered owner of such Global Security. Patterson expects that the Depository for any debt securities represented by a Global Security, upon receipt of any payment of principal, premium or interest in respect of such Global Security, will immediately credit participants' accounts with payments in amounts proportionate to their respective beneficial interests in the principal amount of such Global Security as shown on the records of such Depository. Patterson also expects that payments by participants to owners of beneficial interests in such Global Security held through such participants will be governed by standing instructions and customary practices, as is now the case with securities held for the accounts of customers registered in "street names," and will be the responsibility of such participants. None of Patterson, the trustee or any agent of Patterson or the trustee shall have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests of a Global Security, or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests. If the Depository for any debt securities represented by a Global Security is at any time unwilling or unable to continue as Depository or ceases to be registered or in good standing under the Securities Exchange Act of 1934, as amended, and a successor Depository is not appointed by Patterson, Patterson will issue such debt securities in definitive certificated form in exchange for such Global Security. In addition, Patterson may at any time and in its sole discretion determine not to have any of the debt securities of a series represented by one or more Global Securities and, in such event, will issue debt securities of such series in definitive certificated form in exchange for all of the Global Security or Securities representing such debt securities. (Indentures, Section 2.7.) DESCRIPTION OF PREFERRED STOCK The following is a description of general terms and provisions of the preferred stock. The particular terms of any series of preferred stock will be described in the applicable prospectus supplement. If so indicated in a prospectus supplement, the terms of any such series may differ from the terms set forth below. The summary of the terms of Patterson's preferred stock contained in this Prospectus and in any prospectus supplement does not purport to be complete and is subject to, and qualified in its entirety by, the provisions of Patterson's Restated Certificate of Incorporation, as amended, and the certificate of designations relating to that series of preferred stock (the "Certificate of Designations"), which will be filed as an exhibit to or incorporated by reference in this Prospectus at or prior to the time of issuance of any such series of preferred stock. 23 26 The Board of Directors of Patterson is authorized to approve the issuance of one or more series of preferred stock without further authorization of the stockholders and to fix the number of shares, the designations, rights, privileges, restrictions and conditions of any such series. The applicable prospectus supplement will set forth the number of shares, particular designation, relative rights and preferences and the limitations of any series of preferred stock in respect of which this Prospectus is delivered. The particular terms of any such series will include the following: - the maximum number of shares to constitute the series and the designation thereof; - the annual dividend rate, if any, on shares of the series, whether such rate is fixed or variable or both, the date or dates from which dividends will begin to accrue or accumulate, whether dividends will be cumulative and whether such dividends shall be paid in cash, common stock or otherwise; - whether the shares of the series will be redeemable and, if so, the price at and the terms and conditions on which the shares of the series may be redeemed, including the time during which shares of the series may be redeemed and any accumulated dividends thereon that the holders of the shares of the series shall be entitled to receive upon the redemption thereof; - the liquidation preference, if any, applicable to shares of the series; - whether the shares of the series will be subject to operation of a retirement or sinking fund and, if so, the extent and manner in which any such fund shall be applied to the purchase or redemption of the shares of the series for retirement or for other corporate purposes, and the terms and provisions relating to the operation of such fund; - the terms and conditions, if any, on which the shares of the series shall be convertible into, or exchangeable for, shares of any other class or classes of capital stock of Patterson or any series of any other class or classes, or of any other series of the same class, including the price or prices or the rate or rates of conversion or exchange and the method, if any, of adjusting the same; - the voting rights, if any, of the shares of the series; - the currency or units based on or relating to currencies in which such series is denominated and/or in which payments will or may be payable; - the methods by which amounts payable in respect of such series may be calculated and any commodities, currencies or indices, or price, rate or value, relevant to such calculation; - whether Patterson has elected to offer depositary shares; and - any other preferences and relative, participating, optional or other rights or qualifications, limitations or restrictions thereof. Patterson is a holding company and, therefore, its rights and the rights of holders of its Securities, including the holders of preferred stock, to participate in the distribution of assets of any subsidiary of 24 27 Patterson upon the subsidiary's liquidation or recapitalization will be subject to the prior claims of the subsidiary's creditors and preferred stockholders, except to the extent that Patterson may itself be a creditor with recognized claims against the subsidiary or a holder of preferred stock of the subsidiary. The preferred stock will rank prior to the common stock with respect to dividends rights and rights upon winding up and dissolution of Patterson. The holders of preferred stock will have no preemptive rights. Preferred stock will be fully paid and nonassessable when issued upon full payment of the purchase price therefor. Unless otherwise specified in the prospectus supplement relating to a particular series of preferred stock, each series of preferred stock offered hereby will rank on a parity as to dividends and liquidation rights in all respects with each other series of preferred stock. The prospectus supplement will contain, if applicable, a description of the material United States federal income tax consequences relating to the purchase and ownership of shares of the series of preferred stock offered by the prospectus supplement. Transfer Agent and Registrar. The transfer agent, registrar and dividend disbursement agent for the preferred stock will be designated in the applicable prospectus supplement. The registrar for shares of preferred stock will send to stockholders notices of any meeting at which holders of the applicable series of preferred stock will have the right to elect directors of Patterson or to vote on any other matter. DESCRIPTION OF DEPOSITARY SHARES The description set forth below and in any prospectus supplement of certain provisions of the deposit agreement (as further referenced below) and of the depositary shares and depositary receipts does not purport to be complete and is subject to and qualified in its entirety by reference to the forms of deposit agreement and depositary receipts relating to each series of the preferred stock which have been or will be filed with the SEC at or prior to the time of the offering of such series of the preferred stock. GENERAL Patterson may, at its option, elect to offer fractional interests in shares of preferred stock, rather than full shares of preferred stock. In the event such option is exercised, Patterson will provide for the issuance by a depositary to the public of receipts for depositary shares, each of which will represent a fractional interest (to be set forth in the prospectus supplement relating to a particular series of the preferred stock) in a share of a particular series of preferred stock. The shares of any series of the preferred stock underlying the depositary shares will be deposited under a separate deposit agreement between Patterson and a bank or trust company selected by Patterson having its principal office in the United States and having a combined capital and surplus of at least $50,000,000 (the "Depositary"). The prospectus supplement relating to a series of depositary shares will set forth the name and address of the Depositary. Subject to the terms of the deposit agreement, each owner of a depositary share will be entitled, in proportion to the applicable fractional interest in a share of preferred stock underlying such depositary shares, to all the rights and preferences of the preferred stock underlying such depositary share (including dividend, voting, redemption, conversion and liquidation rights). The depositary shares will be evidenced by depositary receipts issued pursuant to the deposit agreement. Upon surrender of depositary receipts at the office of the Depositary and upon payment of the charges provided in the deposit agreement and subject to the terms thereof, a holder of depositary shares 25 28 is entitled to have the Depositary deliver to such holder the whole shares of preferred stock and any money or other property represented by the surrendered depositary receipts. DIVIDENDS AND OTHER DISTRIBUTIONS The Depositary will distribute all cash dividends or other cash distributions received in respect of the preferred stock to the record holders of depositary shares relating to such preferred stock in proportion to the numbers of such depositary shares owned by such holders on the relevant record date. The Depositary shall distribute only such amount, however, as can be distributed without attributing to any holder of depositary receipts a fraction of one cent, and any balance not so distributed shall be added to and treated as part of the next sum received by the Depositary for distribution to record holders of depositary receipts then outstanding. In the event of a distribution other than in cash, the Depositary will distribute property received by it to the record holders of depositary shares entitled thereto, unless the Depositary determines that it is not feasible to make such distribution, in which case the Depositary may, with the approval of Patterson, sell such property and distribute the net proceeds from such sale to such holders. The deposit agreement will also contain provisions relating to the manner in which any subscription or similar rights offered by Patterson to holders of the preferred stock shall be made available to holders of depositary receipts. REDEMPTION OF DEPOSITARY SHARES If a series of the preferred stock underlying the depositary shares is subject to redemption, the depositary shares will be redeemed from the proceeds received by the Depositary resulting from the redemption, in whole or in part, of such series of the preferred stock held by the Depositary. The Depositary will mail notice of redemption not less than 30 and not more than 60 days prior to the date fixed for redemption to the record holders of the depositary receipts to be so redeemed at their respective addresses appearing in the Depositary's books. The redemption price per depositary share will be equal to the applicable fraction of the redemption price per share payable with respect to such series of the preferred stock. Whenever Patterson redeems shares of preferred stock held by the Depositary, the Depositary will redeem as of the same redemption date the number of depositary shares relating to shares of preferred stock so redeemed. If less than all of the depositary shares are to be redeemed, the depositary shares to be redeemed will be selected by lot on a pro rata basis or such other equitable basis as may be determined by the Depositary and Patterson. After the date fixed for redemption, the depositary shares so called for redemption will not longer be deemed to be outstanding and all rights of the holders of the depositary shares will cease, except the right to receive the moneys payable upon such redemption and any money or other property to which the holders of such depositary shares were entitled upon such redemption upon surrender to the Depositary of the depositary receipts evidencing such depositary shares. VOTING THE PREFERRED STOCK Upon receipt of notice of any meeting at which the holders of the preferred stock are entitled to vote, the Depositary will mail the information contained in such notice of meeting to the record holders of the depositary shares relating to such preferred stock. Each record holder of such depositary shares on the record date (which will be the same date as the record date for the preferred stock) will be entitled to instruct the Depositary as to the exercise of the voting rights pertaining to the number of shares of preferred stock underlying such holder's depositary shares. The Depositary will endeavor, insofar as 26 29 practicable, to vote the number of shares of preferred stock underlying such depositary shares in accordance with such instructions, and Patterson will agree to take all action which may be deemed necessary by the Depositary in order to enable the Depositary to do so. The Depositary will abstain from voting shares of preferred stock to the extent it does not receive specific instructions from the holders of depositary shares relating to such preferred stock. AMENDMENT AND TERMINATION OF THE DEPOSIT AGREEMENT The form of depositary receipt evidencing the depositary shares and the provisions of the deposit agreement may be amended at any time by agreement between Patterson and the Depositary. However, any amendment which materially and aversely alters the rights of the existing holders of depositary shares will not affect outstanding depositary receipts until 90 days after notice of the amendment has been mailed to the record holders of outstanding depositary receipts. Every holder of depositary receipts at the time the amendment becomes effective will be deemed to consent and agree to the amendment and to be bound by the deposit agreement, as so amended. No amendment may impair the right of any owner of depositary shares to receive shares of the preferred stock and any money or other property represented thereby, subject to the conditions specified in the deposit agreement, upon surrender of the depositary receipts evidencing such depositary shares, except in order to comply with mandatory provisions of applicable law. Whenever so directed by the Patterson, the Depositary will terminate the deposit agreement by mailing notice of termination to the record holders of all depositary receipts then outstanding at least 30 days before the termination date stated in the notice. The depositary may also terminate the deposit agreement if 45 days have expired after the Depositary delivered to the Patterson a written notice of its election to resign and a successor depositary has not been appointed and accepted its appointment. If any depositary receipts remain outstanding after the date of termination, the Depositary will discontinue the transfer of depositary receipts, will suspend the distribution of dividends to the holders of depositary receipts, and will not give any further notices (other than notice of termination) or perform any further acts under the deposit agreement, except that the Depositary will continue (1) to collect dividends and any other distributions on the preferred stock and (2) to deliver the preferred stock, together with the corresponding dividends and distributions and the net proceeds of any sales of rights, preferences, privileges or other property, without liability for interest thereon, in exchange for depositary receipts surrendered. At any time after two years from the date of termination, the Depositary may sell the preferred stock then held by it at public or private sales, at such place or places and upon such terms as it deems proper, and may hold the net proceeds of any sale, together with any money and other property then held by it, without liability for interest thereon, for the pro rata benefit of the holders of depositary receipts which have not been surrendered. CHARGES OF DEPOSITARY Patterson will pay all charges arising solely from the existence of the depositary arrangements. Patterson will pay charges of the Depositary in connection with the initial deposit of the preferred stock and issuance of depositary receipts, all withdrawals of shares of preferred stock by owners of depositary shares, any redemption of the preferred stock and the distribution of information to holders of the depositary receipts. Holders of depositary shares will pay other transfer and other taxes and governmental charges and such other charges as are expressly provided in the deposit agreement to be for their accounts. 27 30 MISCELLANEOUS The Depositary will forward to the holders of depositary shares all reports and communications from Patterson which are delivered to the Depositary and that Patterson is required to furnish to the holders of the preferred stock. Neither the Depositary nor Patterson will be liable if it is prevented or delayed by law or any circumstance beyond its control in performing its obligations under the deposit agreement. The obligations of Patterson and the Depositary under the deposit agreement will be limited to performance in good faith of their duties thereunder and they will not be obligated to prosecute or defend any legal proceeding in respect of any depositary shares or preferred stock unless satisfactory indemnity is furnished. They may rely upon written advice of counsel or accountants, or information provided by persons presenting preferred stock for deposit, holders of depositary shares or other persons believed to be competent and on documents believed to be genuine. RESIGNATION AND REMOVAL OF DEPOSITARY The Depositary may resign at any time by delivering to Patterson notice of its election to do so, and Patterson may at any time remove the Depositary, any such resignation or removal to take effect upon the appointment of a successor Depositary and its acceptance of such appointment. Such successor Depositary must be appointed within 60 days after delivery of the notice of resignation or removal and must be a bank or trust company having its principal office in the United States and having a combined capital and surplus of at least $50,000,000. DESCRIPTION OF WARRANTS Patterson may issue warrants to purchase shares of common stock, shares of preferred stock or debt securities. The preferred stock may be represented by depositary shares. Warrants may be issued, subject to regulatory approvals, independently or together with any common stock, preferred stock or debt securities, as the case may be, and may be attached to or separate from such common stock, preferred stock or debt securities. Each series of warrants will be issued under a separate warrant agreement to be entered into between Patterson and a warrant agent. The warrant agent will act solely as an agent of Patterson in connection with the warrants of such series and will not assume any obligation or relationship of agency or trust for or with any holders or beneficial owners of warrants. The following sets forth certain general terms and provisions of the warrants offered hereby. Further terms of the warrants and the applicable warrant agreement will be set forth in the applicable prospectus supplement. The applicable prospectus supplement will describe the following terms of any warrants in respect of which this Prospectus is delivered: - the title of such warrants; - a description of the securities (which may include shares of common stock, shares of preferred stock or debt securities) for which such warrants are exercisable; - the price or prices at which such warrants will be issued; - the periods during which the warrants are exercisable; - the number of shares of common stock or preferred stock or the amount of debt securities for which each warrant is exercisable; 28 31 - the exercise price for such warrants, including any changes to or adjustments in the exercise price; - the currency or currencies, including composite currencies, in which the exercise price of such warrants may be payable; - if applicable, the designation and terms of the shares of preferred stock with which such warrants are issued; - if applicable, the terms of the debt securities with which such warrants are issued; - if applicable, the number of warrants issued with each share of common stock or preferred stock or debt security; - if applicable, the date on and after which such warrants and the related shares of common stock or preferred stock or debt securities will be separately transferable; - if applicable, a discussion of certain United States federal income tax considerations; - any listing of the warrants on a securities exchange; and - any other terms of such warrants, including terms, procedures and limitations relating to the exchange and exercise of such warrants. Prior to the exercise of their warrants, holders of warrants will not have any of the rights of holders of the securities purchasable upon exercise, and will not be entitled to: - receive payments of principal of (or premium if any) or interest, if any, on any debt securities purchasable upon exercise; - receive dividend payments, if any, with respect to any underlying securities; or - exercise the voting rights of any common stock or preferred stock purchasable upon exercise. EXERCISE OF WARRANTS Unless otherwise indicated in the applicable prospectus supplement relating thereto, the warrants will be issued in registered form. Each warrant will entitle its holder to purchase for cash the principal amount or number of securities of Patterson at the exercise price set forth in, or determinable from, the applicable prospectus supplement relating to the warrants offered thereby. Warrants may be exercised as set forth in the applicable prospectus supplement relating to the warrants offered thereby at any time up to the close of business on the expiration date set forth in the prospectus supplement. After the close of business on the expiration date (or any later expiration date, as extended by Patterson), unexercised warrants will become void. Upon receipt of payment and of the certificate evidencing a warrant, properly completed and duly executed, at the corporate trust office of the warrant agent or any other office indicated in the applicable prospectus supplement, Patterson will, as soon as practicable, forward the securities purchasable upon 29 32 such exercise. If less than all of the warrants represented by a surrendered warrant certificate are exercised, a new warrant certificate will be issued for the remaining warrants. MODIFICATIONS The warrant agreements and the terms of the warrants may be amended by Patterson and the warrant agent, without the consent of the holders of warrants, for the purpose of curing any ambiguity, or of curing, correcting or supplementing any defective or inconsistent provision contained therein, or in any other manner which Patterson may deem necessary or desirable and which will not materially and adversely affect the interests of holders of outstanding warrants. Patterson and the warrant agent also may modify or amend certain other terms of the warrant agreements and the warrants with the consent of the holders of not less than a majority in number of the then-outstanding unexercised warrants affected. However, no such modification or amendment may be made without the consent of the affected holders if the amendment would: - shorten the period of time during which the warrants may be exercised; - otherwise materially and adversely affect the exercise rights of the holders of the warrants; or - reduce the number of outstanding warrants. MERGER, CONSOLIDATION OR SALE OF ASSETS If at any time there occurs a merger of, consolidation of, or sale of substantially all of the assets of, Patterson, as a result of which securities underlying warrants are converted into the right to receive stock, securities or other property, then each outstanding warrant will thereafter only be exercisable for the kind and amount of stock, securities or other property receivable upon the consummation of that transaction by a holder of the number of Securities underlying the warrant. ENFORCEABILITY OF RIGHTS BY HOLDERS The warrant agent will act solely as an agent of Patterson in connection with the issuance and exercise of any warrants. The warrant agent will have no duty or responsibility in case of any default by Patterson in the performance of its obligations under the warrant agreements or the warrant certificates. Each holder of warrants may, without the consent of the warrant agent, enforce by appropriate legal action, on its own behalf, its right to exercise its warrants. DESCRIPTION OF CAPITAL STOCK Patterson is authorized by its Certificate of Incorporation to issue 50 million shares of common stock and one million shares of preferred stock. As of June 30, 1999, there were 32,517,028 shares of common stock issued and outstanding and no issued and outstanding shares of the preferred stock. COMMON STOCK A summary of the terms and provisions of the common stock is set forth below. Dividends. The holders of common stock are entitled to receive dividends when, as and if declared by the Board out of funds legally available therefor, provided that if any shares of preferred 30 33 stock, issued under this prospectus and any accompanying prospectus supplement, or any other shares of preferred stock are at the time outstanding, the payment of dividends on common stock or other distributions (including Patterson repurchases of common stock) will be subject to the declaration and payment of all cumulative dividends on outstanding shares of preferred stock, and any preferred stock issued under this prospectus and any accompanying prospectus supplement and any other shares of preferred stock which are then outstanding. Liquidation. In the event of the dissolution, liquidation or winding up of Patterson, holders of common stock are entitled to share ratably in any assets remaining after the satisfaction in full of the prior rights of creditors, including holders of Patterson's indebtedness, and the payment of the aggregate liquidation preference of the preferred stock, and any preferred stock issued under this Prospectus and any accompanying prospectus supplement and any other shares of preferred stock then outstanding. Voting. Patterson's stockholders are entitled to one vote for each share on all matters voted on by stockholders, including election of directors. Shares of common stock held by Patterson or any entity controlled by Patterson do not have voting rights and are not counted in determining the presence of a quorum. Directors are elected annually. Holders of common stock have no cumulative voting rights. No Other Rights. The holders of common stock do not have any conversion, redemption or preemptive rights. Transfer Agent. The transfer agent for the common stock is Continental Stock Transfer & Trust Company, New York, New York. Listing. Shares of Patterson's outstanding common stock are traded on the Nasdaq National Market. PREFERRED STOCK Preferred stock may be issued in series from time to time with such designations, relative rights, priorities, preferences, qualifications, limitations and restrictions thereof, to the extent that such are not fixed in Patterson's Restated Certificate of Incorporation, as amended, as the Board of Directors determines. The rights, preferences, limitations and restrictions on different series of preferred stock may differ with respect to dividend rates, amounts payable on liquidation, voting rights, conversion rights, redemption provisions, sinking fund provisions and other matters. The Board may authorize the issuance of preferred stock which ranks senior to the common stock with respect to the payment of dividends and the distribution of assets on liquidation. In addition, the Board is authorized to fix the limitations and restrictions, if any, upon the payment of dividends on common stock to be effective while any shares of preferred stock are outstanding. The Board of Directors, without stockholder approval, can issue preferred stock with voting, conversion and other rights which could adversely affect the voting power of the holders of common stock. The issuance of preferred stock may have the effect of delaying, deferring or preventing a change in control of Patterson. Patterson has not issued any shares of preferred stock. However, as of June 30, 1999, an aggregate of 325,170 shares of preferred stock had been reserved for issuance upon exercise of the Rights described under "-- Stockholder Rights Plan." STOCKHOLDER RIGHTS PLAN In January 1997, the Board of Directors of Patterson adopted a stockholder rights plan under which stockholders of record as of January 17, 1997, received a dividend in the form of preferred share purchase rights (the "Rights"). The Rights permit the holder to purchase one one-hundredth of a share (a 31 34 unit) of Series A preferred stock at an initial exercise price of $41.50 per share under certain circumstances. The purchase price, the number of units of preferred stock and the type of securities issuable upon exercise of the Rights are subject to adjustment. The Rights expire on January 2, 2007 unless earlier redeemed or exchanged. Until a Right is exercised, the holder thereof has no rights as a stockholder of Patterson, including the right to vote or receive dividends. The Rights become exercisable on the earlier to occur of (i) the acquisition by a person or group of affiliated or associated persons of 15% or more of the outstanding shares of common stock, or (ii) 10 days following the commencement of or announcement of an intention to acquire 15% or more of the outstanding shares of common stock through a tender offer or exchange offer. OTHER PROVISIONS HAVING POSSIBLE ANTI-TAKEOVER EFFECT Delaware, like many other states, permits a corporation to adopt a number of measures through amendment of the corporate charter or bylaws or otherwise, which, along with certain provisions of the Delaware General Corporation Law (the "DGCL"), may have the effect of delaying or deterring any unsolicited takeover attempts notwithstanding that a majority of the stockholders might benefit from such a takeover or attempt. Section 203 of the DGCL, which applies to Patterson since the common stock is traded on the Nasdaq National Market, restricts certain "business combinations" with an "interested stockholder" for three years following the date such person becomes an interested stockholder, unless the Board of Directors approves the business combination. "Business combinations" is defined to include mergers, sale of assets and other similar transactions with an "interested stockholder." An "interested stockholder" is defined as a person who, together with affiliates, owns (or, within the prior three years, did own) 15% or more of the corporation's voting stock. By delaying or deterring unsolicited takeover attempts, these provisions could adversely affect prevailing market prices for Patterson's common stock. Patterson's Restated Certificate of Incorporation, as amended, and Bylaws contain certain provisions that could discourage potential takeover attempts and make more difficult attempts by stockholders to change management. The following paragraphs set forth a summary of these provisions: Special Meetings of Stockholders. The Restated Certificate of Incorporation, as amended, provides that special meetings of stockholders may be called only by the Board of Directors (or a majority of the members thereof), the Chief Executive Officer, the President or the holders of a majority of the outstanding stock entitled to vote at such special meeting. This provision will make it more difficult for stockholders to call a special meeting. No Stockholder Action by Written Consent. The Restated Certificate of Incorporation, as amended, provides that stockholder action may be taken only at annual or special meetings and not by written consent of the stockholders. Advance Notice Requirements for Stockholder Proposals and Director Nominations. The Bylaws provide that stockholders seeking to bring business before an annual meeting of stockholders, or to nominate candidates for election as directors at an annual meeting of stockholders, must provide timely notice thereof in writing. To be timely, a stockholder's notice must be delivered to, or mailed and received at, the principal executive offices of Patterson not less than 30 days nor more than 60 days prior to the meeting as originally scheduled; provided that in the event less than 40 days written notice is given to stockholders, notice by the stockholder to be made timely must be received not later than the close of business on the tenth day following the day on which such notice of the date of the annual meeting was mailed. The Bylaws also specify certain requirements for a stockholders notice to be in proper written form. These provisions may preclude some stockholders from bringing matters before the stockholders at an annual meeting or from making nominations for directors at an annual meeting. 32 35 Authorized Class of Preferred Stock. See "-- Preferred Stock" for information concerning Patterson's preferred stock. PLAN OF DISTRIBUTION Patterson and the Selling Stockholders may offer Securities to or through underwriters, through agents or directly to other purchasers. The distribution of the Securities may be effected from time to time in one or more transactions at a fixed price or prices (which may be changed from time to time), at market prices prevailing at the time of sale, at prices related to such prevailing market prices or at negotiated prices. Each prospectus supplement will describe the method of distribution of the Securities offered therein. Patterson and the Selling Stockholders may sell Securities directly, through agents designated from time to time, through underwriting syndicates led by one or more managing underwriters or through one or more underwriters acting alone. Each prospectus supplement will set forth the terms of the Securities to which such prospectus supplement relates, including the name or names of any underwriters or agents with whom Patterson or the Selling Stockholders have entered into arrangements with respect to the sale of such Securities, the public offering or purchase price of such Securities and the net proceeds to Patterson or the Selling Stockholders from such sale, any underwriting discounts and other items constituting underwriters' compensation, any discounts and commissions allowed or paid to dealers, if any, any commissions allowed or paid to agents, and the securities exchange or exchanges, if any, on which such Securities will be listed. Dealer trading may take place in certain of the Securities, including Securities not listed on any securities exchange. Securities may be purchased to be reoffered to the public through underwriting syndicates led by one or more managing underwriters, or through one or more underwriters acting alone. The underwriter or underwriters with respect to each underwritten offering of Securities will be named in the prospectus supplement relating to such offering and, if an underwriting syndicate is used, the managing underwriter or underwriters will be set forth on the cover page of such prospectus supplement. Unless otherwise set forth in the applicable prospectus supplement, the obligations of the underwriters to purchase the Securities will be subject to certain conditions precedent and each of the underwriters with respect to a sale of Securities will be obligated to purchase all of its Securities if any are purchased. Any initial public offering price and any discounts or concessions allowed or reallowed or paid to dealers may be changed from time to time. Securities may be offered and sold by Patterson and the Selling Stockholders through agents designated by Patterson or the Selling Stockholders, as the case may be, from time to time. Any agent involved in the offer and sale of any Securities will be named, and any commissions payable by Patterson or the Selling Stockholders, as the case may be, to such agent will be set forth, in the prospectus supplement relating to such offering. Unless otherwise indicated in such prospectus supplement, any such agent will be acting on a best efforts basis for the period of its appointment. Offers to purchase Securities may be solicited directly by Patterson or the Selling Stockholders and sales thereof may be made by Patterson or the Selling Stockholders, as the case may be, directly to institutional investors or others who may be deemed to be underwriters within the meaning of the Securities Act with respect to any resale thereof. The terms of any such sales will be described in the prospectus supplement relating thereto. 33 36 Patterson and the Selling Stockholders may also issue contracts under which the counterparty may be required to purchase Securities. Such contracts would be issued for Securities in amounts, at prices and on terms to be set forth in a prospectus supplement. The anticipated place and time of delivery of Securities will be set forth in the applicable prospectus supplement. If so indicated in the applicable prospectus supplement, Patterson or the Selling Stockholders will authorize underwriters or agents to solicit offers by certain institutions to purchase Securities from Patterson or the Selling Stockholders, as the case may be, pursuant to delayed delivery contracts providing for payment and delivery at a future date. Institutions with which such contracts may be made include commercial and savings banks, insurance companies, pension funds, investment companies, educational and charitable institutions and others, but in all cases such institutions must be approved by Patterson or the Selling Stockholders, as the case may be. Unless otherwise set forth in the applicable prospectus supplement, the obligations of any purchaser under any such contract will not be subject to any conditions except that: - The purchase of the Securities shall not at the time of delivery be prohibited under the laws of the jurisdiction to which such purchaser is subject; and - If the Securities are also being sold to underwriters acting as principals for their own account, the underwriters shall have purchased such Securities not sold for delayed delivery. The underwriters and such other persons will not have any responsibility in respect of the validity or performance of such contracts. Any underwriter or agent participating in the distribution of the Securities may be deemed to be an underwriter, as that term is defined in the Securities Act, of the Securities so offered and sold and any discounts or commissions received by them from Patterson or the Selling Stockholders, as the case may be, and any profit realized by them on the sale or resale of the Securities may be deemed to be underwriting discounts and commissions under the Securities Act. Underwriters and agents may be entitled, under agreements entered into with Patterson or the Selling Stockholders, to indemnification by Patterson or the Selling Stockholders, as the case may be, against certain civil liabilities, including liabilities under the Securities Act, or to contribution with respect to payments which such underwriters or agents may be required to make in respect thereof. Certain of such underwriters and agents, including their associates, may be customers of, engage in transactions with and perform services for, Patterson and its subsidiaries or the Selling Stockholders in the ordinary course of business. The Securities may or may not be listed on a national securities exchange or a foreign securities exchange, other than the common stock, which is traded on the Nasdaq National Market. Any common stock sold pursuant to a prospectus supplement will be traded on the Nasdaq National Market, subject to official notice of issuance. Any underwriters to whom Securities are sold by Patterson for public offering and sale may make a market in those Securities, but the underwriters will not be obligated to do so and may discontinue any market making activities at any time without notice. No assurances can be given that there will be an active trading market for the Securities. 34 37 LEGAL MATTERS The validity of the Securities offered will be passed upon for Patterson by Baker & Hostetler LLP, Denver, Colorado. EXPERTS The consolidated financial statements incorporated in this Prospectus by reference from Patterson's Annual Report on Form 10-K for the year ended December 31, 1998, have been so incorporated in reliance on the report of PricewaterhouseCoopers LLP, independent accountants, given on the authority of said firm as experts in auditing and accounting. The estimated reserve evaluations and related calculations of Mr. Brian Wallace, P.E., Dallas, Texas, an independent petroleum engineer, incorporated in this Prospectus by reference from Patterson's Annual Report on Form 10-K for the year ended December 31, 1998, have been so incorporated in reliance upon the authority of Mr. Wallace as an expert in petroleum engineering. WHERE YOU CAN FIND MORE INFORMATION We file annual, quarterly and special reports, proxy statements and other information with the SEC under the Securities Exchange Act of 1934. You may read and copy this information at the following locations of the SEC: Judiciary Plaza, Room 10024 Seven World Trade Center 450 Fifth Street, N.W. Suite 1300 Washington, D.C. 20549 New York, New York 10048 Citicorp Center 500 West Madison Street Suite 1400 Chicago, Illinois 60661 You can also obtain copies of this information by mail from the Public Reference Room of the SEC, 450 Fifth Street, N.W., Room 10024, Washington, D.C. 20549, at prescribed rates. You may obtain information on the operation of the Public Reference Room by calling the SEC at (800) SEC-0330. The SEC also maintains an internet world wide web site that contains reports, proxy statements and other information about issuers, like Patterson, that file electronically with the SEC. The address of that site is http://www.sec.gov. You can also inspect reports, proxy statements and other information about us at the offices of the National Association of Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C. 20006. We have filed with the SEC a registration statement on Form S-3 that registers the Securities we are offering. The registration statement, including the attached exhibits and schedules, contains additional relevant information about us and our Securities. The rules and regulations of the SEC allow us to omit certain information included in the registration statement from this prospectus. 35 38 PART II INFORMATION NOT REQUIRED IN PROSPECTUS Capitalized terms used but not defined in Part II have the meanings ascribed to them in the Prospectus included as part of this Registration Statement. ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. The following table sets forth the expenses expected to be incurred in connection with the issuance and distribution of the Securities registered hereby, all of which expenses, except for the SEC registration fee and the NASD filing fee, are estimates:
Description Amount ----------- -------- SEC registration fee........................................................................... $ 41,700 NASD filing fee................................................................................ 10,000 Nasdaq National Market listing fee............................................................. 20,000 Trustee's and warrant agent's fees............................................................. 25,000 Rating agency fees............................................................................. 50,000 Accounting fees and expenses................................................................... 75,000 Legal fees and expenses........................................................................ 150,000 Printing expenses.............................................................................. 125,000 Blue sky fees and expenses..................................................................... 20,000 Transfer agent fees and expenses............................................................... 10,000 Miscellaneous.................................................................................. 73,300 -------- Total................................................................................ $600,000 ========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS. The DGCL provides for indemnification by a corporation of costs incurred by directors, employees and agents in connection with an action, suit or proceeding brought by reason of their position as a director, employee or agent. The person being indemnified must have acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation. The DGCL provides that a corporation may advance payment of expenses. The DGCL further provides that the indemnification and advancement of expenses provisions of the DGCL will not be deemed exclusive of any other rights to which these indemnifications or advancements of expenses may be entitled under bylaw, agreement, vote of stockholders or disinterested directors or otherwise, both as to action under official capacity and as to action in another capacity when holding such office. In addition to the general indemnification section, Delaware law provides further protection for directors under Section 102(b)(7) of the DGCL. This section was enacted in June 1986 and allows a Delaware corporation to include in its certificate of incorporation a provision that eliminates and limits certain personal liability of a director for monetary damages for certain breaches of the director's fiduciary duty of care, provided that any such provision does not (in the words of the statute) do any of the following: [E]liminate or limit the liability of a director (i) for any breach of the director's duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or II-1 39 which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of this Title (dealing with willful or negligent violation of the statutory provision concerning dividends and stock purchases and redemptions), or (iv) for any transaction from which the director derived an improper personal benefit. No such provision shall eliminate or limit the liability of a director for any act or omission occurring prior to the date when such provision becomes effective.... The Board of Directors is empowered to make other indemnification as authorized under any bylaw, agreement, the Certificate of Incorporation, Bylaws or corporate resolution so long as the indemnification is consistent with the DGCL. Patterson's Restated Certificate of Incorporation, as amended, provides that, to the fullest extent permitted by the DGCL, a director of Patterson will not be liable to Patterson or its stockholders for monetary damages for breach of fiduciary duty as a director. Patterson's Bylaws provide that to the extent that a director or officer of Patterson is successful on the merits in the defense of a suit or proceeding brought against him by reason of the fact that he is a director or officer of Patterson, he will be indemnified against expenses (including attorneys' fees) reasonably incurred in connection with such action. In other circumstances, a director or officer of Patterson may be indemnified against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in and not opposed to the best interests of Patterson, and, with respect to a criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful; however, in an action or suit by or in the right of Patterson to procure a judgment in its favor, such person will not be indemnified if he has been adjudged to be liable to Patterson unless and only to the extent that the Delaware Court of Chancery or the court in which such actin or suit was brought determines upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court deems proper. A determination that indemnification of a director or officer is proper will be made by a disinterested majority of Patterson's Board of Directors, by independent legal counsel or by the stockholders of Patterson. Patterson's Bylaws also provide that Patterson may advance the payment of expenses and that the indemnification and advancement of expenses provisions of the Bylaws are nonexclusive. Patterson maintains director and officer liability insurance covering director and officer indemnification. ITEM 16. EXHIBITS. The following exhibits are filed herewith or incorporated by reference herein:
Item 601 Exhibit Cross Number Reference Document as Form S-3 Exhibit ------- --------- ---------------------------- 1.1 1 Form of Underwriting Agreement - Equity* 1.2 1 Form of Underwriting Agreement - Debt* 2.1 2 Agreement and Plan of Merger, dated as of April 12, 1996, among Patterson Energy, Inc., Patterson Drilling Company and Tucker Drilling Company, Inc. and amendment thereto, dated May 16, 1996 (1) 4.1 4 Excerpt from Restated Certificate of Incorporation , as amended, of Patterson Energy, Inc. regarding authorized Common Stock and Preferred Stock
II-2 40
Item 601 Exhibit Cross Number Reference Document as Form S-3 Exhibit ------- --------- ---------------------------- 4.2 4 Form of Certificate of Designation of Preferred Stock* 4.3 4 Form of Debt Security Indenture 4.4 4 Form of Debt Security (included in Exhibit 4.3) 4.5 4 Form of Stock Warrant Agreement for warrants attached to equity securities 4.6 4 Form of Stock Warrant Certificate (included as Exhibit A in Exhibit 4.5) 4.7 4 Form of Debt Securities Warrant Agreement for warrants attached to debt securities 4.8 4 Form of Debt Securities Warrant Certificate (included as Exhibit A in Exhibit 4.7) 4.9 4 Form of Warrant Agreement for warrants not attached to equity or debt securities 4.10 4 Form of Warrant Certificate (included as Exhibit A in Exhibit 4.9) 4.11 4 Form of Deposit Agreement, including form of Depositary Receipt for Depositary Shares 5.1 5 Opinion of Baker & Hostetler LLP regarding the legality of the Securities to be offered 12.1 12 Statement of Computation of Ratio of Earnings to Fixed Charges 15.1 15 Letter of PricewaterhouseCoopers LLP regarding unaudited interim financial information 23.1 23 Consent of PricewaterhouseCoopers LLP 23.2 23 Consent of M. Brian Wallace, independent petroleum engineer 23.3 23 Consent of Baker & Hostetler LLP (included in Exhibit 5.1) 24.1 24 Power of Attorney (included on the signature page hereto) 25.1 25 Statement of eligibility of trustee under the Senior Debt Securities* 25.2 25 Statement of eligibility of trustee under the Senior Subordinated Debt Securities* 25.3 25 Statement of eligibility of trustee under the Subordinated Debt Securities*
- --------- * To be filed by amendment or to be incorporated by reference in connection with the offering of the Securities. (1) Incorporated by reference to Item 7, "Financial Statements and Exhibits" to Form 8-K dated April 22, 1996, and filed on April 30, 1996. II-3 41 ITEM 17. UNDERTAKINGS. (a) Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, Patterson has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of Patterson in the successful defense of any action, suit or proceedings) is asserted by such director, officer or controlling person in connection with the Securities being registered, Patterson will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. (b) Patterson hereby undertakes that, for purposes of determining any liability under the Securities Act, each filing of Patterson's annual report pursuant to Section 13(a) or 15(d) of the Exchange Act (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the Securities offered therein, and the offering of such Securities at that time shall be deemed to be the initial bona fide offering thereof. (c) Patterson hereby undertakes that: (1) For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4), or 497(h) under the Securities Act shall be deemed to be part of this Registration Statement as of the time it was declared effective. (2) For the purposes of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be determined to be a new registration statement relating to the Securities offered therein, and the offering of such Securities at that time shall be deemed to be the initial bona fide offering thereof. (d) Patterson hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement: (i) to include any prospectus required by section 10(a)(3) of the Securities Act; (ii) to reflect in the prospectus any facts of events arising after the effective date of the Registration Statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the Registration Statement. Notwithstanding the foregoing, any increase or decrease in volume of Securities offered (if the total dollar value of Securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the SEC pursuant to Rule 424(b) if, in the aggregate, the changes in volume price represent no more than a 20% change in the maximum aggregate offering II-4 42 price set forth in the "Calculation of Registration Fee" table in the effective Registration Statement; and (iii) to include any material information with respect to the plan of distribution not previously disclosed in the Registration Statement or any material change to such information in the Registration Statement. Provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed by Patterson pursuant to section 13 or section 15(d) of the Exchange Act that are incorporated by reference in the Registration Statement. (2) That, for purposes of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the Securities offered therein, and the offering of such Securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the Securities being registered which remain unsold at the termination of the offering. (e) Patterson hereby undertakes to file an application for the purpose of determining the eligibility of the trustee to act under subsection (a) of Section 310 of the Trust Indenture Act in accordance with the rules and regulations prescribed by the SEC under Section 305(b)(2) of the Trust Indenture Act. SIGNATURES Pursuant to the requirements of the Securities Act of 1933, Patterson certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Snyder, State of Texas, on the 28th day of October, 1999. PATTERSON ENERGY, INC. By: /s/ A. GLENN PATTERSON -------------------------- A. Glenn Patterson President II-5 43 Each of the undersigned officers and directors of Patterson Energy, Inc. hereby appoints Cloyce A. Talbott and A. Glenn Patterson as attorneys and agents for the undersigned, with full power of substitution, for and in the name, place and stead of the undersigned, to sign and file with the SEC under the Securities Act of 1933 any and all amendments (including post-effective amendments) and exhibits to this Registration Statement and any and all applications, instruments or documents to be filed with the SEC pertaining to the registration of the Securities covered hereby, with full power and authority to do and perform any and all acts and things whatsoever requisite and necessary or desirable. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed as of October 28, 1999, by the following persons in the capacities indicated: /s/ CLOYCE A. TALBOTT Chairman of the Board, Director and - ------------------------------- Chief Executive Officer Cloyce A. Talbott Principal Executive Officer /s/ A. GLENN PATTERSON President, Chief Operating Officer and - ------------------------------- Director A. Glenn Patterson /s/ ROBERT C. GIST Director - ------------------------------- Robert C. Gist /s/ VINCENT A. ROSSI, JR. Director - ------------------------------- Vincent A. Rossi, Jr. /s/ SPENCER D. ARMOUR, III Director - ------------------------------- Spencer D. Armour, III /s/ JONATHAN D. NELSON Vice President--Finance, Secretary and - ------------------------------- Treasurer and Chief Financial Officer Jonathan D. Nelson Principal Accounting Officer
II-6 44 EXHIBIT INDEX
Item 601 Exhibit Cross Number Reference Document as Form S-3 Exhibit ------- --------- ---------------------------- 1.1 1 Form of Underwriting Agreement - Equity* 1.2 1 Form of Underwriting Agreement - Debt* 2.1 2 Agreement and Plan of Merger, dated as of April 12, 1996, among Patterson Energy, Inc., Patterson Drilling Company and Tucker Drilling Company, Inc. and amendment thereto, dated May 16, 1996 (1) 4.1 4 Excerpt from Restated Certificate of Incorporation , as amended, of Patterson Energy, Inc. regarding authorized Common Stock and Preferred Stock 4.2 4 Form of Certificate of Designation of Preferred Stock* 4.3 4 Form of Debt Security Indenture 4.4 4 Form of Debt Security (included in Exhibit 4.3) 4.5 4 Form of Stock Warrant Agreement for warrants attached to equity securities 4.6 4 Form of Stock Warrant Certificate (included as Exhibit A in Exhibit 4.5) 4.7 4 Form of Debt Securities Warrant Agreement for warrants attached to debt securities 4.8 4 Form of Debt Securities Warrant Certificate (included as Exhibit A in Exhibit 4.7) 4.9 4 Form of Warrant Agreement for warrants not attached to equity or debt securities 4.10 4 Form of Warrant Certificate (included as Exhibit A in Exhibit 4.9) 4.11 4 Form of Deposit Agreement, including form of Depositary Receipt for Depositary Shares 5.1 5 Opinion of Baker & Hostetler LLP regarding the legality of the Securities to be offered 12.1 12 Statement of Computation of Ratio of Earnings to Fixed Charges 15.1 15 Letter of PricewaterhouseCoopers LLP regarding unaudited interim financial information 23.1 23 Consent of PricewaterhouseCoopers LLP 23.2 23 Consent of M. Brian Wallace, independent petroleum engineer 23.3 23 Consent of Baker & Hostetler LLP (included in Exhibit 5.1) 24.1 24 Power of Attorney (included on the signature page hereto) 25.1 25 Statement of eligibility of trustee under the Senior Debt Securities* 25.2 25 Statement of eligibility of trustee under the Senior Subordinated Debt Securities* 25.3 25 Statement of eligibility of trustee under the Subordinated Debt Securities*
- --------- * To be filed by amendment or to be incorporated by reference in connection with the offering of the Securities. (1) Incorporated by reference to Item 7, "Financial Statements and Exhibits" to Form 8-K dated April 22, 1996, and filed on April 30, 1996. EX-4.1 2 EXCERPT FROM RESTATED CERTIFICATE OF INCORPORATION 1 EXHIBIT 4.1 EXCERPT FROM RESTATED CERTIFICATE OF INCORPORATION, AS AMENDED, OF PATTERSON ENERGY, INC. REGARDING AUTHORIZED COMMON STOCK AND PREFERRED STOCK Section 1. PREFERRED STOCK 1.1 Authority of the Board of Directors to Create Series. The Board of Directors is hereby expressly granted authority, to the full extent now or hereafter permitted herein and by the General Corporation Law of the State of Delaware, at any time or from time to time, by resolution or resolutions, to create one or more series of Preferred Stock, to fix the authorized number of shares of any series (which number of shares may vary as between series and be changed from time to time by like action), and to fix the terms of such series, including, but not limited to, the following: (a) the designation of such series, which may be by distinguishing number, letter, or title; (b) the rate or rates at which shares of such series shall be entitled to receive dividends; the periods in respect of which dividends are payable; the conditions upon, and times of payment of, such dividends; the relationship and preference, if any, of such dividends to dividends payable on any other class or classes or any other series of stock; whether such dividends shall be cumulative and, if cumulative, the date or dates from which such dividends shall accumulate; and the other terms and conditions applicable to dividends upon shares of such series; (c) the rights of the holders of the shares of such series in case the Corporation be liquidated, dissolved or wound up (which may vary depending upon the time, manner, or voluntary or involuntary nature or other circumstances of such liquidation, dissolution, or winding up) and the relationship and preference, if any, of such rights to rights of holders of shares of stock of any other class or classes or any other series of stock; (d) the right, if any, of the Corporation to redeem shares of such series at its option, including any limitation of such right, and the amount or amounts to be payable in respect of the shares of such series in case of such redemption (which may vary depending on the time, manner, or other circumstances of such redemption), and the manner, effect, and other terms and conditions of any such redemption; (e) the obligation, if any, of the Corporation to purchase, redeem, or retire shares of such series and/or to maintain a fund for such purpose, and the amount or amounts to be payable from time to time for such purpose or into such fund, or the number of shares to be purchased, redeemed, or retired, the per share purchase price or prices, and the other terms and conditions of any such obligation or obligations; (f) the voting rights, if any, which, if granted, may be full, special, or limited, to be given the shares of such series, including, without limiting the generality of the foregoing, the right, if any, as a series or in conjunction with other series or classes, to elect one or more members of the Board of Directors either generally or at certain times or under certain circumstances, and restrictions, if any, on particular corporate acts without a specified vote or consent of holders of such shares (such as, among others, restrictions on modifying the terms of such series or of the Preferred Stock, restricting the permissible terms of other series or the permissible variations between series of the Preferred Stock, 1 2 authorizing or issuing additional shares of the Preferred Stock, creating debt, or creating any class of stock ranking prior to or on a parity with the Preferred Stock or any series thereof as to dividends, or assets remaining for distribution to the stockholders in the event of the liquidation, dissolution, or winding up of the Corporation); (g) the right, if any, to exchange or convert the shares into shares of any other series of the Preferred Stock or into shares of any other class of stock of the Corporation or the securities of any other corporation, and the rate or basis, time, manner, terms, and conditions of exchange or conversion or the method by which the same shall be determined; and (h) the other special powers, preferences, or rights, if any, and the qualifications, limitations, or restrictions thereof, of the shares of such series. The Board of Directors shall fix the terms of each such series by resolution or resolutions adopted at any time prior to the issuance of the shares thereof, and the terms of each such series may, subject only to restrictions, if any, imposed by this Certificate of Incorporation or by applicable law, vary from the terms of other series to the extent determined by the Board of Directors from time to time and provided in the resolution or resolutions fixing the terms of the respective series of the Preferred Stock. 1.2 Status of Certain Shares. Shares of any series of the Preferred Stock, whether provided for herein or by resolution or resolutions of the Board of Directors, which have been redeemed (whether through the operation of a sinking fund or otherwise) or which, if convertible or exchangeable, have been converted into or exchanged for shares of stock of any other class or classes, or which have been purchased or otherwise acquired by the Corporation, shall have the status of authorized and unissued shares of the Preferred Stock of the same series and may be reissued as a part of the series of which they were originally a part or may be reclassified and reissued as part of a new series of the Preferred Stock to be created by resolution or resolutions of the Board of Directors or as a part of any other series of the Preferred Stock, all subject to the conditions or restrictions on issuance set forth herein or in the resolution or resolutions adopted by the Board of Directors providing for the issue of any series of the Preferred Stock. Section 2. COMMON STOCK 2.1 Issuance, Consideration, and Terms. Any unissued shares of the Common Stock may be issued from time to time for such consideration, having a value of not less than the par value thereof, as may be fixed from time to time by the Board of Directors. Any treasury shares may be disposed of for such consideration as may be determined from time to time by the Board of Directors. The Common Stock shall be subject to the express terms of the Preferred Stock and any series thereof. Each share of Common Stock shall be of equal rank and shall be identical to every other share of Common Stock. Holders of Common Stock shall have such rights as are provided herein and by law. 2.2 Voting Rights. Except as expressly required by law or as provided in or fixed and determined pursuant to Section 1 of this Article FOURTH, the entire voting power and all voting rights shall be vested exclusively in the Common Stock. Each holder of shares of Common Stock shall be entitled to one (1) vote for each share standing in such holder's name on the books of the Corporation. 2.3 Dividends. Subject to Section 1 of this Article FOURTH, the holders of Common Stock shall be entitled to receive, and shall share equally share for share, when and as declared by the Board of Directors, out of the assets of the Corporation which are by law available therefor, dividends or distributions payable in cash, in property, or in securities of the Corporation. 2 EX-4.3 3 FORM OF DEBT SECURITY INDENTURE 1 EXHIBIT 4.3 PATTERSON ENERGY, INC. ISSUER TO ------------------------------------- TRUSTEE INDENTURE DATED AS OF _________________ DEBT SECURITIES 2 TABLE OF CONTENTS
Page ---- ARTICLE 1 DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION 1.1 DEFINITIONS..................................................................1 1.2 COMPLIANCE CERTIFICATES AND OPINIONS.........................................8 1.3 FORM OF DOCUMENTS DELIVERED TO TRUSTEE.......................................8 1.4 ACTS OF HOLDERS; RECORD DATES................................................9 1.5 NOTICES, ETC., TO TRUSTEE AND COMPANY.......................................10 1.6 NOTICE TO HOLDERS: WAIVER...................................................10 1.7 CONFLICT WITH APPLICABLE LEGISLATION........................................11 1.8 EFFECT OF HEADINGS AND TABLE OF CONTENTS....................................11 1.9 SUCCESSORS AND ASSIGNS......................................................11 1.10 SEPARABILITY CLAUSE.........................................................11 1.11 BENEFITS OF INDENTURE.......................................................11 1.12 GOVERNING LAW...............................................................11 1.13 LEGAL HOLIDAYS..............................................................11 1.14 CORPORATE OBLIGATIONS.......................................................12 ARTICLE 2 SECURITY FORMS 2.1 FORMS GENERALLY.............................................................12 2.2 FORM OF FACE OF SECURITY....................................................12 2.3 FORM OF REVERSE OF SECURITY.................................................14 2.4 FORM OF LEGEND FOR GLOBAL SECURITIES........................................19 2.5 FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION.............................19 2.6 SECURITIES IN GLOBAL FORM...................................................19 2.7 BOOK-ENTRY SECURITIES.......................................................20 2.8 FORM OF CONVERSION NOTICE...................................................22 ARTICLE 3 THE SECURITIES 3.1 AMOUNT UNLIMITED; ISSUABLE IN SERIES........................................22 3.2 DENOMINATIONS...............................................................25 3.3 EXECUTION, AUTHENTICATION, DELIVERY AND DATING..............................26 3.4 TEMPORARY SECURITIES........................................................27 3.5 REGISTRATION, REGISTRATION OF TRANSFER AND EXCHANGE.........................27 3.6 MUTILATED, DESTROYED, LOST AND STOLEN SECURITIES............................29 3.7 PAYMENT OF INTEREST: INTEREST RIGHTS PRESERVED..............................29 3.8 PERSONS DEEMED OWNERS.......................................................31 3.9 CANCELLATION................................................................31 3.10 COMPUTATION OF INTEREST.....................................................31 3.11 PAYMENT OF ADDITIONAL AMOUNTS...............................................31 [3.12 DESIGNATION AS SENIOR INDEBTEDNESS].........................................32 [3.12 DESIGNATION AS SENIOR SUBORDINATED INDEBTEDNESS]............................33
ii 3 ARTICLE 4 SATISFACTION AND DISCHARGE 4.1 SATISFACTION AND DISCHARGE OF INDENTURE.....................................33 4.2 APPLICATION OF TRUST MONEY..................................................34 ARTICLE 5 REMEDIES 5.1 EVENTS OF DEFAULT...........................................................34 5.2 ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT..........................36 5.3 SUITS FOR ENFORCEMENT BY TRUSTEE............................................37 5.4 TRUSTEE MAY FILE PROOFS OF CLAIM............................................37 5.5 TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF SECURITIES.................38 5.6 APPLICATION OF MONEY COLLECTED..............................................38 5.7 LIMITATION ON SUITS.........................................................38 5.8 UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE PRINCIPAL, PREMIUM AND INTEREST................................................................39 5.9 RESTORATION OF RIGHTS AND REMEDIES..........................................39 5.10 RIGHTS AND REMEDIES CUMULATIVE..............................................39 5.11 DELAY OR OMISSION NOT WAIVER................................................39 5.12 CONTROL BY HOLDERS..........................................................40 5.13 WAIVER OF PAST DEFAULTS.....................................................40 5.14 UNDERTAKING FOR COSTS.......................................................40 5.15 WAIVER OF CERTAIN COVENANTS.................................................40 ARTICLE 6 THE TRUSTEE 6.1 CERTAIN DUTIES AND RESPONSIBILITIES.........................................41 6.2 NOTICE OF DEFAULTS..........................................................41 6.3 CERTAIN RIGHTS OF TRUSTEE...................................................41 6.4 NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF SECURITIES......................42 6.5 MAY HOLD SECURITIES.........................................................42 6.6 MONEY HELD IN TRUST.........................................................42 6.7 COMPENSATION AND REIMBURSEMENT..............................................42 6.8 DISQUALIFICATION; CONFLICTING INTERESTS.....................................43 6.9 CORPORATE TRUSTEE REQUIRED; ELIGIBILITY.....................................43 6.10 RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR...........................43 6.11 ACCEPTANCE OF APPOINTMENT BY SUCCESSOR......................................45 6.12 MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS.................45 6.13 PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY...........................46 6.14 APPOINTMENT OF AUTHENTICATING AGENT.........................................46 ARTICLE 7 HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY 7.1 COMPANY TO FURNISH TRUSTEE NAMES AND ADDRESSES OF HOLDERS...................47 7.2 PRESERVATION OF INFORMATION; COMMUNICATIONS TO HOLDERS......................48 7.3 REPORTS BY TRUSTEE..........................................................48 7.4 REPORTS BY COMPANY..........................................................48
iii 4 ARTICLE 8 CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE 8.1 COMPANY MAY CONSOLIDATE, ETC., ONLY ON CERTAIN TERMS........................48 8.2 SUCCESSOR SUBSTITUTED.......................................................49 ARTICLE 9 SUPPLEMENTAL INDENTURES 9.1 SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF HOLDERS..........................50 9.2 SUPPLEMENTAL INDENTURES WITH CONSENT OF HOLDERS.............................51 9.3 EXECUTION OF SUPPLEMENTAL INDENTURES........................................52 9.4 EFFECT OF SUPPLEMENTAL INDENTURES...........................................52 9.5 REVOCATION AND EFFECT OF CONSENTS...........................................52 9.6 CONFORMITY WITH APPLICABLE LEGISLATION......................................52 9.7 REFERENCE IN SECURITIES TO SUPPLEMENTAL INDENTURES..........................52 9.8 WAIVER OF COMPLIANCE BY HOLDERS.............................................53 9.9 NOTICE OF SUPPLEMENTAL INDENTURE............................................53 ARTICLE 10 COVENANTS 10.1 PAYMENT OF PRINCIPAL, PREMIUM AND INTEREST..................................53 10.2 MAINTENANCE OF OFFICE OR AGENCY.............................................53 10.3 MONEY FOR SECURITIES PAYMENTS TO BE HELD IN TRUST...........................54 10.4 STATEMENT BY OFFICERS AS TO DEFAULT.........................................55 10.5 EXISTENCE...................................................................55 10.6 WAIVER OF CERTAIN COVENANTS.................................................55 10.7 LIMITATION ON SUBORDINATED INDEBTEDNESS.....................................55 ARTICLE 11 REDEMPTION OF SECURITIES 11.1 APPLICABILITY OF ARTICLE....................................................56 11.2 ELECTION TO REDEEM; NOTICE TO TRUSTEE.......................................56 11.3 SELECTION BY TRUSTEE OF SECURITIES TO BE REDEEMED...........................56 11.4 NOTICE OF REDEMPTION........................................................57 11.5 DEPOSIT OF REDEMPTION PRICE.................................................58 11.6 SECURITIES PAYABLE ON REDEMPTION DATE.......................................58 11.7 SECURITIES REDEEMED IN PART.................................................58 ARTICLE 12 SINKING FUNDS 12.1 APPLICABILITY OF ARTICLE....................................................58 12.2 SATISFACTION OF SINKING FUND PAYMENTS WITH SECURITIES.......................59 12.3 REDEMPTION OF SECURITIES FOR SINKING FUND...................................59
iv 5 ARTICLE 13 DEFEASANCE AND COVENANT DEFEASANCE 13.1 COMPANY'S OPTION TO EFFECT DEFEASANCE AND COVENANT DEFEASANCE...............59 13.2 DEFEASANCE AND DISCHARGE....................................................59 13.3 COVENANT DEFEASANCE.........................................................60 13.4 CONDITIONS TO DEFEASANCE AND COVENANT DEFEASANCE............................60 13.5 DEPOSITED MONEY AND GOVERNMENT OBLIGATIONS TO BE HELD IN TRUST; OTHER MISCELLANEOUS PROVISIONS..............................................62 13.6 REINSTATEMENT...............................................................62 ARTICLE 14 CONVERSION OF SECURITIES 14.1 APPLICABILITY OF ARTICLE....................................................63 14.2 EXERCISE OF CONVERSION PRIVILEGE............................................63 14.3 NO FRACTIONAL SHARES........................................................64 14.4 ADJUSTMENT OF CONVERSION PRICE..............................................64 14.5 NOTICE OF CERTAIN CORPORATE ACT.............................................65 14.6 RESERVATION OF SHARES OF COMMON SHARES......................................65 14.7 PAYMENT OF CERTAIN TAXES UPON CONVERSION....................................65 14.8 NONASSESSABILITY............................................................66 14.9 EFFECT OF CONSOLIDATION OR MERGER ON CONVERSION PRIVILEGE...................66 14.10 DUTIES OF TRUSTEE REGARDING CONVERSION......................................66 14.11 REPAYMENT OF CERTAIN FUNDS UPON CONVERSION..................................67 14.12 CANCELLATION OF CONVERTED SECURITIES........................................67 ARTICLE 15 SUBORDINATION 15.1 SECURITIES SUBORDINATE TO SENIOR INDEBTEDNESS...............................67 15.2 PAYMENT OVER OF PROCEEDS UPON DISSOLUTION, ETC..............................68 15.3 PRIOR PAYMENT TO SENIOR INDEBTEDNESS UPON ACCELERATION OF SECURITIES........68 15.4 NO PAYMENT WHEN SENIOR INDEBTEDNESS IN DEFAULT..............................69 15.5 PAYMENT PERMITTED IF NO DEFAULT.............................................70 15.6 SUBROGATION TO RIGHTS OF HOLDERS OF SENIOR INDEBTEDNESS.....................70 15.7 PROVISIONS SOLELY TO DEFINE RELATIVE RIGHTS AND SUBJECT TO APPLICABLE LAWS.............................................................70 15.8 TRUSTEE TO EFFECTUATE SUBORDINATION.........................................71 15.9 NO WAIVER OF SUBORDINATION PROVISIONS.......................................71 15.10 NOTICE TO TRUSTEE...........................................................71 15.11 RELIANCE ON JUDICIAL ORDER OR CERTIFICATE OF LIQUIDATING AGENT..............72 15.12 TRUSTEE NOT FIDUCIARY FOR HOLDERS OF SENIOR INDEBTEDNESS....................72 15.13 RIGHTS OF TRUSTEE AS HOLDER OF SENIOR INDEBTEDNESS; PRESERVATION OF TRUSTEE'S RIGHTS.........................................................72 15.14 ARTICLE APPLICABLE TO PAYING AGENTS.........................................72 15.15 DEFEASANCE OF THIS ARTICLE 15...............................................72 15.16 SUBSIDIARIES................................................................73 15.17 RESCISSION..................................................................73 15.18 CERTAIN CONVERSIONS OR EXCHANGES DEEMED PAYMENT.............................73
v 6 ARTICLE 16 MEETINGS OF HOLDERS OF SECURITIES 16.1 PURPOSES FOR WHICH MEETINGS MAY BE CALLED...................................73 16.2 CALL, NOTICE AND PLACE OF MEETINGS..........................................73 16.3 PERSONS ENTITLED TO VOTE AT MEETINGS........................................74 16.4 QUORUM; ACTION..............................................................74 16.5 DETERMINATION OF VOTING RIGHTS; CONDUCT AND ADJOURNMENT OF MEETINGS.........75 16.6 COUNTING VOTES AND RECORDING ACTION OF MEETINGS.............................75
vi 7 INDENTURE, dated as of _________________, between PATTERSON ENERGY, INC, a corporation duly incorporated and existing under the laws of Delaware, having its registered office at 4510 Lamesa Highway, Snyder, Texas 79549 (herein called the "Company"), and ________________________________, a ________________ corporation, as Trustee hereunder (herein called the "Trustee"). RECITALS The Company has duly authorized the execution and delivery of this Indenture to provide for the issuance from time to time of unsecured debentures, notes or other evidences of indebtedness (herein called the "Securities") to be issued by the Company, unlimited as to principal amount, to bear such rates of interest, to mature at such time or times, to be issued in one or more series and to have such other provisions as shall be fixed as hereinafter provided. All things necessary to make this Indenture a valid agreement of the Company in accordance with its terms, have been done. NOW, THEREFORE, THIS INDENTURE WITNESSETH: For and in consideration of the premises and the purchase of the Securities by the Holders thereof, it is mutually agreed, for the equal and proportionate benefit of all Holders of the Securities or of a series thereof, as follows: ARTICLE 1 DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION 1.1 DEFINITIONS For all purposes of this Indenture and of any indenture supplemental hereto, except as otherwise expressly provided or unless the context otherwise requires: (a) the terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular; (b) all other terms used herein which are defined in the TRUST INDENTURE ACT, either directly or by reference herein, have the meanings assigned to them therein; (c) all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with generally accepted accounting principles and, except as otherwise herein expressly provided, the term "generally accepted accounting principles" with respect to any computation required or permitted hereunder shall mean such accounting principles as are generally accepted at the date of such computation; and (d) the words "herein," "hereof" and "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision. "ACT," when used with respect to any Holder, has the meaning specified in Section 1.4. "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 the Ind-1 8 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. "APPLICABLE LEGISLATION" means, with respect to any series of Securities which was required to be registered under the SECURITIES ACT, the TRUST INDENTURE ACT. "AUTHENTICATING AGENT" means any Person authorized by the Trustee pursuant to Section 6.14 to act on behalf of the Trustee to authenticate Securities of one or more series. "BOARD OF DIRECTORS" means, when used with reference to the Company, the board of directors of the Company or any committee of the board of directors of the Company empowered to act for the Company with respect to this Indenture. "BOARD RESOLUTION" means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Company to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification, and delivered to the Trustee. "BUSINESS DAY" means, when used with respect to any Place of Payment, each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in that Place of Payment are authorized or obligated by law or executive order to close, except as may otherwise be provided in the form of Securities of any particular series pursuant to the provisions of this Indenture. "COMMISSION" means the Securities and Exchange Commission, as from time to time constituted, or, if at any time after the execution of this instrument such Commission is not existing and performing the duties now assigned to it under the TRUST INDENTURE ACT, then the body performing such duties at such time. "COMMON SHARES" or "COMMON SHARES OF THE COMPANY" means the Common Shares of the Company and the shares of any other class of the Company 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 Company and which is not subject to redemption by the Company. However, subject to the provisions of 3.1(s) and Section 14.9, shares issuable on conversion of Securities shall include only shares of the class designated as Common Shares in the articles of the Company at the date of this instrument 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 Company and which are not subject to redemption by the Company; PROVIDED, HOWEVER, that if at any time there shall be more than one such resulting class, the shares of each such class then so issuable 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 Person named as the "Company" in the first paragraph of this instrument until a successor Person shall have become such pursuant to the applicable provisions of this Indenture and thereafter "Company" shall mean such successor Person. "COMPANY REQUEST" or "COMPANY ORDER" means a written request or order signed in the name of the Company by its Chairman of the Board, President or a Vice President, and by its Treasurer, Assistant Treasurer, Controller, Secretary or Assistant Secretary, and delivered to the Trustee. Ind-2 9 "CONVERSION EVENT" has the meaning specified in Section 5.1. "CORPORATE TRUST OFFICE" means the principal office of the Trustee in , at which at any particular time its corporate trust business shall be conducted. "CORPORATION" means a corporation, association, company, joint-stock company, business trust or similar organization. "COVENANT DEFEASANCE" has the meaning specified in Section 13.3. "DAYS" means calendar days. "DEFAULTED INTEREST" has the meaning specified in Section 3.7. "DEFEASIBLE SERIES" has the meaning specified in Section 13.1. "DEFEASANCE" has the meaning specified in Section 13.2. "DEPOSITARY" means, with respect to Securities of any series issuable in whole or in part in the form of one or more Global Securities, a clearing agency designated to act as Depositary for such Securities as contemplated by Section 3.1, that is registered under the EXCHANGE ACT if the Securities of such series were required to be registered under the EXCHANGE ACT, and that has been designated as a recognized clearing agency under applicable Canadian securities legislation if the Securities of such series were distributed by the Company pursuant to a prospectus filed with Canadian securities regulatory authorities. "EVENT OF DEFAULT" has the meaning specified in Section 5.1. "EXCHANGE ACT" means the United States SECURITIES EXCHANGE ACT of 1934, as amended from time to time, and any statute successor thereto. "EXCHANGE RATE" has the meaning specified in Section 5.1. "FLOATING OR ADJUSTABLE RATE PROVISION" means a formula or provision, specified in or pursuant to a Board Resolution or an indenture supplemental hereto, providing for the determination, whether pursuant to objective factors or pursuant to the sole discretion of any Person (including the Company), and periodic adjustment of the interest rate borne by a Floating or Adjustable Rate Security. "FLOATING OR ADJUSTABLE RATE SECURITY" means any Security which provides for interest thereon at a periodic rate that may vary from time to time over the term thereof in accordance with a Floating or Adjustable Rate Provision. "GLOBAL SECURITY" means a Security that evidences all or part of the Securities of any series and is authenticated and delivered to, and registered in the name of, the Depositary for such Securities or a nominee thereof. "GOVERNMENT OBLIGATIONS" means securities which are (i) direct full faith and credit obligations of the government which issued the currency in which the Securities of a particular series are denominated and in which payment of principal and interest are to be made or (ii) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of such government, the payment of which is unconditionally guaranteed as a full faith and credit obligation by such government, which, in Ind-3 10 either case, are not callable or redeemable at the option of the issuer thereof, and shall also include a depository receipt issued by a bank (as defined in Section 3(a)(2) of the United States SECURITIES ACT of 1933, as amended) as custodian with respect to any such Government Obligation or a specific payment of principal of or interest on account of the holder of such depository receipt from any amount received by the custodian in respect of such Government Obligation or the specific payment of principal of or interest on such Government Obligation evidenced by such depository receipt. "HOLDER" means a Person in whose name a Security is registered in the Security Register. "INTERNAL REVENUE CODE" means the Internal Revenue Code as in force as at the date as of which this instrument was executed; PROVIDED, HOWEVER, that in the event the Internal Revenue Code is amended after such date, "INTERNAL REVENUE CODE" means, to the extent required by such amendment, the Internal Revenue Code, as so amended. "INDENTURE" means this instrument as originally executed, as it may from time to time be supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof, including, for all purposes of this instrument and any such supplemental indenture, the provisions of the TRUST INDENTURE ACT that are deemed to be a part of and govern this instrument and any such supplemental indenture, respectively. The term "Indenture" shall also include the terms of any particular series of Securities established as contemplated by Section 3.1. "INTEREST PAYMENT DATE" means, when used with respect to any Security, the Stated Maturity of an installment of interest on such Security. "MATURITY" means, when used with respect to any Security, the date on which the principal of such Security or an installment of principal becomes due and payable as therein or herein provided, whether at the Stated Maturity or by declaration of acceleration, call for redemption or otherwise. "NOTICE OF DEFAULT" means a written notice of the kind specified in Section 5.1(d). "OFFICERS' CERTIFICATE" means, when used with reference to the Company, a certificate signed on behalf of the Company by any one of the Chairman of the Board, the Chief Executive Officer, the President or any Vice President of the Company, and by any one of the Treasurer, the Assistant Treasurer, the Controller, the Secretary or an Assistant Secretary of the Company, and delivered to the Trustee. One of the officers signing an Officers' Certificate given pursuant to Section 10.4 shall be the principal executive, chief financial or principal accounting officer of the Company. "OPINION OF COUNSEL" means a written opinion of counsel (who may be counsel for the Company and who may be an employee of the Company, except as otherwise expressly provided in this Indenture) and who shall be acceptable to the Trustee. "ORIGINAL ISSUE DISCOUNT SECURITY" means any Security which provides for an amount less than the principal amount thereof to be due and payable upon a declaration of acceleration of the Maturity thereof pursuant to Section 5.2. "OUTSTANDING," when used with respect to Securities, means, as of the date of determination, all Securities theretofore authenticated and delivered under this Indenture, EXCEPT: (a) Securities theretofore cancelled by the Trustee or delivered to the Trustee for cancellation; Ind-4 11 (b) Securities, or portions thereof, for whose payment or redemption money in the necessary amount has been theretofore deposited with the Trustee or any Paying Agent (other than the Company) in trust or set aside and segregated in trust by the Company (if the Company shall act as its own Paying Agent) for the Holders of such Securities; 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; (c) Securities as to which Defeasance has been effected pursuant to Section 13.2; and (d) Securities which have been replaced pursuant to Section 3.6 or in exchange for or in lieu of which other Securities have been authenticated and delivered pursuant to this Indenture, other than any such Securities in respect of which there shall have been presented to the Trustee proof satisfactory to it that such Securities are held by a bona fide purchaser in whose hands such Securities are valid obligations of the Company; PROVIDED, HOWEVER, that in determining whether the Holders of the requisite principal amount of the Outstanding Securities have given any request, demand, authorization, direction, notice, consent or waiver hereunder or are present at a meeting of Holders for quorum purposes, (i) the principal amount of an Original Issue Discount Security that shall be deemed to be Outstanding shall be the amount of the principal thereof (excluding premium or penalty, if any) that would be due and payable as of the date of such determination upon acceleration of the Maturity thereof pursuant to Section 5.2, (ii) the principal amount of a Security denominated in one or more foreign currencies or currency units shall be the U.S. dollar equivalent, determined in the manner provided as contemplated by Section 3.1 on the date of original issuance of such Security, of the principal amount (or, in the case of an Original Issue Discount Security, the U.S. dollar equivalent on the date of original issuance of such Security of the amount determined as provided in (i) above) of such Security, (iii) if the principal amount payable at Stated Maturity of any Security is not determinable upon original issuance, the principal amount of such Security that shall be deemed to be Outstanding shall be the amount as specified or determined as contemplated by Section 3.1, and (iv) Securities owned by the Company, or any other obligor upon the Securities or any Affiliate of the Company, or of such other obligor 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 or upon any such determination as to the presence of a quorum, only Securities which the Trustee knows to be so owned shall be so disregarded. Securities so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Securities and that the pledgee is not the Company, or any other obligor upon the Securities or any Affiliate of the Company, or of such other obligor. "PAYING AGENT" means any Person authorized by the Company to pay the principal of or any premium or interest on any Securities on behalf of the Company. "PERSON" means any individual, corporation, limited liability company, partnership, joint venture, trust, association, company, joint-stock company, business trust, unincorporated organization or government or any agency or political subdivision thereof. "PIK SECURITIES" means any series of Securities where interest is payable, at the election of the Company or a holder of such Securities, in additional Securities. "PLACE OF PAYMENT" means, when used with respect to the Securities of any series, the place or places where the principal of and any premium and interest on the Securities of that series are payable as specified as contemplated by Section 3.1. Ind-5 12 "PREDECESSOR SECURITY" of any particular Security means every previous Security evidencing all or a portion of the same debt as that evidenced by such particular Security; and, for the purposes of this definition, any Security authenticated and delivered under Section 3.6 in exchange for or in lieu of a mutilated, destroyed, lost or stolen Security shall be deemed to evidence the same debt as the mutilated, destroyed, lost or stolen Security. [IF APPLICABLE, INSERT -- "PROCEEDING" has the meaning specified in Section 15.2]. "REDEMPTION DATE" means, when used with respect to any Security to be redeemed, the date fixed for such redemption by or pursuant to this Indenture; "REDEMPTION PRICE" means, when used with respect to any Security to be redeemed, the price at which it is to be redeemed pursuant to this Indenture. "REGULAR RECORD DATE" for the interest payable on any Interest Payment Date on the Securities of any series means the date specified for that purpose as contemplated by Section 3.1. "RESPONSIBLE OFFICER" means, when used with respect to the Trustee, the chairman, or any vice-chairman of the board of directors, the chairman or any vice-chairman of the executive committee of the board of directors, the chairman of the trust committee, the chief executive officer, the president, any vice president, the secretary, any assistant secretary, the treasurer, any assistant treasurer, the cashier, any assistant cashier, any trust officer or assistant trust officer, the controller or any assistant controller or any other officer of the Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject. "SECURITIES ACT" means the United States SECURITIES ACT of 1933 as in force at the date as of which this instrument was executed; PROVIDED, HOWEVER, that in the event the United States Securities Act of 1933 is amended after such date, "SECURITIES ACT" means, to the extent required by any such amendments, the United States Securities Act of 1933, as so amended. [IF APPLICABLE, INSERT -- "SECURITIES PAYMENT" has the meaning specified in Section 15.2]. "SECURITY" or "SECURITIES" has the meaning stated in the first recital of this Indenture and more particularly means any Security or Securities authenticated and delivered under this Indenture. "SECURITY REGISTER" and "SECURITY REGISTRAR" have the respective meanings specified in Section 3.5. [IF APPLICABLE, INSERT -- "SENIOR INDEBTEDNESS" means, unless otherwise defined in the applicable indenture supplement, all amounts due on and obligations in connection with any of the following, whether outstanding at the date of execution of the Indenture, or thereafter incurred, assumed, guaranteed or otherwise created (including, without limitation, interest accruing on or after a bankruptcy or other similar event, whether or not an allowed claim therein): (a) indebtedness, obligations and other liabilities (contingent or otherwise) of the Company for money borrowed, or evidenced by bonds, debentures, notes or similar instruments; (b) reimbursement obligations and other liabilities (contingent or otherwise) of the Company with respect to letters of credit or banker's acceptances issued for the account of the Company and interest rate protection agreements and currency exchange or purchase agreements; (c) obligations and liabilities (contingent or otherwise) related to capitalized lease obligations; (d) Ind-6 13 indebtedness, obligations and other liabilities (contingent or otherwise) of the Company related to agreements or arrangements designed to protect the Company or any of its Subsidiaries against fluctuations in commodity prices, including, without limitation, commodity futures contracts or similar hedging instruments; (e) indebtedness of others of kinds described in the preceding clauses (a) through (d) that the Company has assumed, guaranteed or otherwise assured the payment of directly or indirectly; (f) any indebtedness of another Person of the type described in the preceding clauses (a) through (e) secured by any mortgage, pledge, lien or other encumbrance on property owned or held by the Company; and (g) any and all deferrals, renewals, extensions and refundings of, or amendments, modifications or supplements to, any indebtedness, obligation or liability described in clauses (a) through (f) whether or not there is any notice to or consent of the Holders of such series of Securities; unless, in any case, in the instrument creating or evidencing such indebtedness, obligation, liability, guaranty, assumption, deferral, renewal, extension or refunding, it is expressly stated that such indebtedness, obligation, liability, guarantee, assumption, deferral, renewal, extension or refunding is not senior in right of payment to the Securities or that such indebtedness is PARI PASSU with or junior to the Securities; [IF SUBORDINATED INDEBTEDNESS, INSERT -- PROVIDED, HOWEVER, that any series of Securities designated as Senior Subordinated Indebtedness shall constitute Senior Indebtedness to any series of Securities designated as Subordinated Indebtedness]. [IF APPLICABLE, INSERT -- "SENIOR SUBORDINATED INDEBTEDNESS" means the Securities and any other indebtedness, guarantee or obligation of the Company that specifically provides that such indebtedness, guarantee or obligation is to rank PARI PASSU with other Senior Subordinated Indebtedness of the Company and is not subordinated by its terms to any indebtedness, guarantee or obligation of the Company which is not Senior Indebtedness.] [IF APPLICABLE, INSERT -- "SUBORDINATED INDEBTEDNESS" means the Securities and any other indebtedness, guarantee or obligation of the Company that specifically provides that such indebtedness, guarantee or obligation is to rank PARI PASSU with other Subordinated Indebtedness of the Company and is not subordinated by its terms to any indebtedness, guarantee or obligation of the Company which is not Senior Indebtedness or Senior Subordinated Indebtedness]. "SIGNIFICANT SUBSIDIARY" shall mean any Subsidiary as shall be designated a Significant Subsidiary pursuant to the provisions of Section 3.1(z). "SPECIAL RECORD DATE" for the payment of any Defaulted Interest means a date fixed by the Trustee pursuant to Section 3.7. "STATED MATURITY" means, when used with respect to any Security or any installment of principal thereof or interest thereon, the date specified in such Security as the fixed date on which the principal of such Security or such installment of principal or interest is due and payable. "SUBSIDIARY" means any corporation more than 50% of the outstanding voting stock of which is owned, directly or indirectly, by the Company or by one or more other Subsidiaries, or by the Company and one or more other Subsidiaries. For the purposes of this definition, "voting stock" means stock which ordinarily has voting power for the election of directors, whether at all times or only so long as no senior class of stock has such voting power by reason of any contingency. "TRUST INDENTURE ACT" means the United States TRUST INDENTURE ACT of 1939 as in force at the date as of which this instrument was executed; PROVIDED, HOWEVER, that in the event the Trust Indenture Act of 1939 is amended after such date, "TRUST INDENTURE ACT" means, to the extent required by any such amendment, the Trust Indenture Act of 1939, as so amended. Ind-7 14 "TRUSTEE" means the Person named as the "Trustee" in the first paragraph of this instrument until a successor Trustee shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Trustee" shall mean or include each Person who is then a Trustee hereunder, and if at any time there is more than one such Person, "Trustee" as used with respect to the Securities of any series shall mean the Trustee with respect to Securities of that series. "VICE PRESIDENT" means, when used with respect to the Company or the Trustee, any vice president, whether or not designated by a number or a word or words added before or after the title "vice president." 1.2 COMPLIANCE CERTIFICATES AND OPINIONS Upon any application or request by the Company to the Trustee to take any action under any provision of this Indenture, the Company shall furnish to the Trustee an Officers' Certificate stating that all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with and, where required or if requested, an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent, if any, have been complied with, except that in the case of any such application or request as to which the furnishing of such documents is specifically required by any provision of this Indenture relating to such particular application or request, no additional certificate or opinion need be furnished. Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture (including certificates provided for in Section 10.4) shall include: (a) a statement that each individual signing such certificate or opinion has read and understood such covenant or condition and the definitions herein related thereto; (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (c) a statement that, in the opinion of each such individual, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (d) a statement as to whether, in the opinion of each such individual, such condition or covenant has been complied with. 1.3 FORM OF DOCUMENTS DELIVERED TO TRUSTEE In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents. Any certificate or opinion of an officer of the Company may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which his certificate or opinion is based are erroneous. Any such certificate or opinion of counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or Ind-8 15 representations by, an officer or officers of the Company stating that the information with respect to such factual matters has been provided by the Company, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to such matters are erroneous. Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument. 1.4 ACTS OF HOLDERS; RECORD DATES (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by an agent duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee and, where it is hereby expressly required, to the Company. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Section 6.1) conclusive in favor of the Trustee and the Company, if made in the manner provided in this Section. (b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by a certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof. Where such execution is by a signer acting in a capacity other than his individual capacity, such certificate or affidavit shall also constitute sufficient proof of his authority. The fact and date of the execution of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other manner which the Trustee deems sufficient. (c) The ownership of Securities shall be proved by the Security Register. (d) Any request, demand, authorization, direction, notice, consent, waiver or other Act of the Holder of any Security shall bind every future Holder of the same Security and the Holder of every Security issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustee or the Company in reliance thereon, whether or not notation of such action is made upon such Security. (e) The Company may, in the circumstances permitted by the Trust Indenture Act, where the series of Securities was required to be registered under the SECURITIES ACT, fix any day as the record date for the purpose of determining the Holders of Outstanding Securities of any series entitled to give or take any request, demand, authorization, direction, notice, consent, waiver or other action, or to vote on any action, authorized or permitted to be given or taken by Holders of Securities of such series. If not set by the Company prior to the first solicitation of a Holder of Securities of such series made by any Person in respect of any such action, or, in the case of any such vote, prior to such vote, the record date for any such action or vote shall be the 30th day (or, if later, the date of the most recent list of Holders required to be provided pursuant to Section 7.1) prior to such first solicitation or vote, as the case may be. With regard to any record date for action to be taken by the Holders of one or more series of Securities, only the Holders of Securities of such series on such date (or their duly designated proxies) shall be entitled to give or take, or vote on, the relevant action. With regard to any record date set pursuant to this paragraph, Ind-9 16 the Holders of Outstanding Securities of the relevant series on such record date (or their duly appointed agents), and only such Persons, shall be entitled to give or take the relevant action, whether or not such Holders remain Holders after such record date. With regard to any action that may be given or taken hereunder by Holders of a requisite principal amount of Outstanding Securities of any series (or their duly appointed agents) and for which a record date is set pursuant to this paragraph, the Company may, at its option, set an expiration date after which no such action purported to be given or taken by any Holder shall be effective hereunder unless given or taken on or prior to such expiration date by Holders of the requisite principal amount of Outstanding Securities of such series on such record date (or their duly appointed agents). On or prior to any expiration date set pursuant to this paragraph, the Company may, on one or more occasions at its option, extend such date to any later date. Nothing in this paragraph shall prevent any Holder (or any duly appointed agent thereof) from giving or taking, after any expiration date, any action identical to, or, at any time, contrary to or different from, any action given or taken, or purported to have been given or taken, hereunder by a Holder on or prior to such date, in which event the Company may set a record date in respect thereof pursuant to this paragraph. Notwithstanding the foregoing or the Trust Indenture Act, the Company shall not set a record date for, and the provisions of this paragraph shall not apply with respect to, any action to be given or taken by Holders pursuant to Sections 5.1, 5.2 or 5.12. (f) Without limiting the foregoing, a Holder entitled hereunder to give or take any action hereunder with regard to any particular Security may do so with regard to all or any part of the principal amount of such Security or by one or more duly appointed agents each of which may do so pursuant to such appointment with regard to all or any different part of such principal amount. 1.5 NOTICES, ETC., TO TRUSTEE AND COMPANY Any request, demand, authorization, direction, notice, consent, waiver or Act of Holders or other document provided or permitted by this Indenture to be made upon, given or furnished to, or filed with: (a) the Trustee by any Holder or by the Company shall be sufficient for every purpose hereunder if made, given, furnished or filed in writing to or with the Trustee at its Corporate Trust Office, Attention:__________________; or (b) the Company by the Trustee or by any Holder shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to the Company, addressed to it at the address of its principal office specified in the first paragraph of this instrument or at any other address previously furnished in writing to the Trustee by the Company. 1.6 NOTICE TO HOLDERS: WAIVER Where this Indenture provides for notice to Holders of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to each Holder affected by such event, at his address as it appears in the Security Register, not later than the latest date (if any), and not earlier than the earliest date (if any), prescribed for the giving of such notice. In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. Ind-10 17 In case by reason of the suspension of regular mail service or by reason of any other cause it shall be impracticable to give such notice by mail, then such notification as shall be made with the approval of the Trustee shall constitute a sufficient notification for every purpose hereunder. 1.7 CONFLICT WITH APPLICABLE LEGISLATION If any provision hereof limits, qualifies or conflicts with a provision of any Applicable Legislation that is required under such legislation to be a part of and govern this Indenture, the latter provision shall control. If any provision of this Indenture modifies or excludes any provision of any Applicable Legislation that may be so modified or excluded, the latter provision shall be deemed to apply to this Indenture as so modified or to be excluded, as the case may be. 1.8 EFFECT OF HEADINGS AND TABLE OF CONTENTS The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. 1.9 SUCCESSORS AND ASSIGNS All covenants and agreements in this Indenture by the Company shall bind its successors and assigns, whether so expressed or not. 1.10 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. 1.11 BENEFITS OF INDENTURE Nothing in this Indenture or in the Securities, express or implied, shall give to any Person, other than the parties hereto and their successors hereunder, any Authenticating Agent, Paying Agent, Security Registrar and the Holders, any benefit or any legal or equitable right, remedy or claim under this Indenture. 1.12 GOVERNING LAW This Indenture and the Securities shall be governed by and construed in accordance with the laws of the State of New York, but without regard to principles of conflicts of laws. 1.13 LEGAL HOLIDAYS In any case where any Interest Payment Date, Redemption Date or Stated Maturity of any Security shall not be a Business Day at any Place of Payment, then (notwithstanding any other provision of this Indenture or the Securities (other than a provision of the Securities of any series which specifically states that such provision shall apply in lieu of this Section)) payment of interest or principal (and premium, if any) need not be made at such Place of Payment on such date, but may be made on the next succeeding Business Day at such Place of Payment with the same force and effect as if made on the Interest Payment Date or Redemption Date, or at the Stated Maturity, PROVIDED THAT no interest Ind-11 18 shall accrue for the period from and after such Interest Payment Date, Redemption Date or Stated Maturity, as the case may be. 1.14 CORPORATE OBLIGATIONS No recourse may be taken, directly or indirectly, against any incorporator, subscriber to the capital stock, stockholder, officer, director or employee of the Company or the Trustee or of any predecessor or successor of the Company or the Trustee with respect to the Company's obligations on the Securities or the obligations of the Company or the Trustee under this Indenture or any certificate or other writing delivered in connection herewith. ARTICLE 2 SECURITY FORMS 2.1 FORMS GENERALLY The Securities of each series shall be in substantially the form set forth in this Article, or in such other form as shall be established by or pursuant to Board Resolutions of the Board of Directors of the Company or in one or more indentures supplemental hereto, in each case with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture, and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may be required to comply with the rules of any securities exchange or as may, consistently herewith, be determined by the officers executing such Securities, as evidenced by their execution of the Securities. If temporary Securities of any series are issued in global form as permitted by Section 3.4, the form thereof shall be established as provided in the preceding sentence. A copy of the Board Resolutions establishing the form or forms of Securities of any series (or any such temporary global security) shall be certified by the Secretary or an Assistant Secretary of the Company and delivered to the Trustee at or prior to the delivery of the Company Order contemplated by Section 3.3 for the authentication and delivery of such Securities (or any temporary global Security). The definitive Securities shall be printed, lithographed or engraved on steel engraved borders or may be produced in any other manner, all as determined by the officers executing such Securities, as evidenced by their execution of such Securities. 2.2 FORM OF FACE OF SECURITY [INSERT ANY LEGEND REQUIRED BY THE INTERNAL REVENUE CODE AND THE REGULATIONS THEREUNDER.] PATTERSON ENERGY, INC. - ---------------------------------- No. U.S. $ ------- ------------ PATTERSON ENERGY, INC., a corporation duly incorporated and existing under the laws of Delaware (herein called the "Company," which term includes any successor corporation under the Indenture hereinafter referred to), for value received, hereby promises to pay to ___________________, or registered assigns, the principal sum of _____________________________________ [United States] Dollars on ________________________ [IF APPLICABLE, INSERT one or more foreign currencies, currency units or composite currencies] [IF THE SECURITY IS TO BEAR INTEREST PRIOR TO Ind-12 19 MATURITY, INSERT -- , and to pay interest thereon from _________________________ or from the most recent Interest Payment Date to which interest has been paid or duly provided for, [semi-annually on ________________ and _______________ in each year], [IF OTHER THAN SEMI-ANNUAL PAYMENTS, INSERT frequency of payments and payment dates], commencing _________________, [IF THE SECURITY IS TO BEAR INTEREST AT A FIXED RATE, INSERT -- at the rate of ____________% per annum], [IF THE SECURITY IS A FLOATING OR ADJUSTABLE RATE SECURITY, insert -- a rate per annum [computed - determined] in accordance with [INSERT defined name of floating or adjustable rate provision set forth] [IF THE SECURITY IS TO BEAR INTEREST AT A RATE DETERMINED WITH REFERENCE TO AN INDEX, REFER TO DESCRIPTION OF INDEX BELOW] until the principal hereof is paid or made available for payment [IF APPLICABLE, INSERT -- , and (to the extent that the payment of such interest shall be legally enforceable) at the rate of _____% per annum on any overdue principal and premium and on any overdue installment of interest], from the dates such amounts are due until they are paid or made available for payment. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in such Indenture, be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest, which shall be the _________ or __________ (whether or not a Business Day), as the case may be, next preceding such Interest Payment Date. Any such interest not so punctually paid or duly provided for will forthwith cease to be payable to the Holder on such Regular Record Date and may either be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to Holders of Securities of this series not less than 10 days prior to such Special Record Date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities of this series may be listed, and upon such notice as may be required by such exchange, all as more fully provided in said Indenture. [IF THE SECURITIES ARE FLOATING OR ADJUSTABLE RATE SECURITIES WITH RESPECT TO WHICH PRINCIPAL OF OR ANY PREMIUM OR INTEREST MAY BE DETERMINED WITH REFERENCE TO AN INDEX, INSERT THE TEXT OF THE FLOATING OR ADJUSTABLE RATE PROVISION.] [IF THE SECURITY IS NOT TO BEAR INTEREST PRIOR TO MATURITY, INSERT -- The principal of this Security shall not bear interest except in the case of a default in payment of principal upon acceleration, upon redemption or at Stated Maturity and in such case the overdue principal of this Security shall bear interest at the rate of _________% per annum (to the extent that the payment of such interest shall be legally enforceable), which shall accrue from the date of such default in payment to the date payment of such principal has been made or duly provided for. Interest on any overdue principal shall be payable on demand. Any such interest on any overdue principal that is not so paid on demand shall bear interest at the rate of ___% per annum (to the extent that the payment of such interest shall be legally enforceable), which shall accrue from the date of such demand for payment to the date payment of such interest has been made or duly provided for, and such interest shall also be payable on demand.] Payment of principal of (and premium, if any) and [IF APPLICABLE, INSERT -- any such] interest on this Security will be made at the office or agency of the Company maintained for that purpose in ______________, in such coin or currency of [IF APPLICABLE, INSERT -- the United States of America] [IF APPLICABLE, INSERT ANOTHER CURRENCY, CURRENCY UNIT OR COMPOSITE CURRENCY] as at the time of payment is legal tender for payment of public and private debts [IF APPLICABLE, INSERT --]; PROVIDED, HOWEVER, that at the option of the Company payment of interest may be made by check mailed to the address of the Person entitled thereto as such address shall appear in the Security Register.] Ind-13 20 Reference is hereby made to the further provisions of this Security set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. Unless the certificate of authentication hereof 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, the Company has caused this instrument to be duly executed under its corporate seal. Dated: PATTERSON ENERGY, INC. By: --------------------------------- Attest: 2.3 FORM OF REVERSE OF SECURITY This Security is one of a duly authorized issue of securities of the Company (herein called the "Securities"), issued and to be issued in one or more series under an Indenture, dated as of __________________ (herein called the "Indenture"), among the Company and _____________, as Trustee (herein called the "Trustee," which term includes any successor trustee under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Trustee and the Holders of the Securities and of the terms upon which the Securities are, and are to be, authenticated and delivered. This Security is one of the series designated on the face hereof [, limited in aggregate amount to U.S. $__________] [IF APPLICABLE, INSERT RELEVANT AMOUNT IN APPLICABLE FOREIGN CURRENCY, CURRENCY UNIT OR COMPOSITE CURRENCY]. [IF THE SECURITY IS CONVERTIBLE INTO COMMON STOCK OF THE COMPANY, INSERT -- subject to and upon compliance with the provisions of the Indenture, the Holder of this Security is entitled, at his option, at any time on or before the close of business on, or in case this Security or a portion hereof is called for redemption, then in respect of this Security or such portion hereof until and including, but (unless the Company defaults in making the payment due upon redemption) not after, the close of business on the 10th calendar day before the Redemption Date, to convert this Security (or any portion of the principal amount hereof which is U.S. $1,000 or an integral multiple thereof [IF APPLICABLE, INSERT RELEVANT AMOUNT IN APPLICABLE FOREIGN CURRENCY, CURRENCY UNIT OR COMPOSITE CURRENCY]), at the principal amount hereof, or of such portion, into fully paid and non-assessable Common Shares (calculated as to each conversion to the nearest 1/100 of a share) at an initial Conversion Price per Common Share equal to U.S. $_________ per each Common Share [IF APPLICABLE, INSERT RELEVANT AMOUNT IN APPLICABLE FOREIGN CURRENCY, CURRENCY UNIT OR COMPOSITE CURRENCY] (or at the current adjusted Conversion Price if an adjustment has been made as provided in the Indenture) by surrender of this Security, duly endorsed or assigned to the Company or in blank, to the Company at its office or agency in _____________________, accompanied by written notice to the Company that the Holder hereof elects to convert this Security, or if less than the entire principal amount hereof is to be converted, the portion hereof to be converted, and, in such case such surrender shall be made during the period from the close of business on any Regular Ind-14 21 Record Date next preceding any Interest Payment Date (unless this Security or the portion thereof being converted has been called for redemption on a Redemption Date within such period), also accompanied by payment in New York Clearing House or other funds acceptable to the Company of an amount equal to the interest payable on such Interest Payment Date on the principal amount of this Security then being converted. Subject to the aforesaid requirement for payment and, in the case of a conversion after the Regular Record Date next preceding any Interest Payment Date and on or before such Interest Payment Date, to the right of the Holder of this Security (or any Predecessor Security) of record at such Regular Record Date to receive an installment of interest (with certain exceptions provided in the Indenture), no payment or adjustment is to be made on conversion for interest accrued hereon or for dividends on the Common Shares issued on conversion. No fractions or shares or scrip representing fractions of shares will be issued on conversion, but instead of any fractional interest the Company shall pay a cash adjustment as provided in the Indenture. The Conversion Price is subject to adjustment as provided in the Indenture. In addition, the Indenture provides that in case of certain consolidations or mergers to which the Company is a party or the transfer of substantially all of the assets of the Company, the Indenture shall be amended, without the consent of any Holders of Securities, so that this Security, if then outstanding, will be convertible thereafter, during the period this Security shall be convertible as specified above, only into the kind and amount of securities, cash and other property receivable upon the consolidation, merger or transfer by a holder of the number of Common Shares into which this Security might have been converted immediately prior to such consolidation, merger or transfer (assuming such holder of Common Shares failed to exercise any rights of election and received per share the kind and amount received per share by a plurality of non-electing shares). Adjustments in the Conversion Price of less than one percent of such price will not be required, but any adjustment that would otherwise be required to be made will be carried forward and taken into account in the computation of any subsequent adjustment. [If the Security is convertible into other securities or property, specify the conversion features and the form of conversion notice pursuant to Section 2.8 hereof.] [IF APPLICABLE, INSERT -- The Securities of this series are subject to redemption upon not less than 30 days' nor more than 60 days' notice by mail, [IF APPLICABLE, INSERT -- (1) on __________ in any year commencing with the year _____ and ending with the year _____ through operation of the sinking fund for this series at a Redemption Price equal to 100% of the principal amount, and (2)] at any time [IF APPLICABLE, INSERT -- on or after ________________], as a whole or in part, at the election of the Company, at the following Redemption Prices (expressed as percentages of the principal amount): if redeemed [IF APPLICABLE, INSERT -- on or before ________, __%, and if redeemed] during the 12 month period beginning _____ of the years indicated,
Year Redemption Price Year Redemption Price ---- ---------------- ---- ----------------
and thereafter at a Redemption Price equal to ___% of the principal amount, together in the case of any such redemption [IF APPLICABLE, INSERT -- (whether through operation of the sinking fund or otherwise)] with accrued interest to the Redemption Date, but interest installments whose Stated Maturity is on or prior to such Redemption Date will be payable to the Holders of such Securities, or one or more Predecessor Securities, of record at the close of business on the relevant Record Dates referred to on the face hereof, all as provided in the Indenture.] [IF APPLICABLE, INSERT -- The Securities of this series are subject to redemption upon not less than 30 days' nor more than 60 days' notice by mail, (1) on _____ in any year commencing with the year _____ and ending with the year _____ through operation of the sinking fund for this series at the Ind-15 22 Redemption Prices for redemption through operation of the sinking fund (expressed as percentages of the principal amount) set forth in the table below, and (2) at any time [IF APPLICABLE, INSERT - --on or after _____], as a whole or in part, at the election of the Company, at the Redemption Prices for redemption otherwise than through operation of the sinking fund (expressed as percentages of the principal amount) set forth in the table below: if redeemed during the 12-month period beginning _____ of the years indicated,
Redemption Price For Redemption Redemption Price For Redemption Through Operation of the Sinking Otherwise Than Through Operation Year Fund of the Sinking Fund - ---- -------------------------------- --------------------------------
and thereafter at a Redemption Price equal to ___% of the principal amount, together in the case of any such redemption (whether through operation of the sinking fund or otherwise)] with accrued interest to the Redemption Date, but interest installments whose Stated Maturity in on or prior to such Redemption Date will be payable to the Holders of such Securities, or one or more Predecessor Securities, of record at the close of business on the relevant Record Dates referred to on the face hereof, all as provided in the Indenture.] [IF APPLICABLE, INSERT -- The sinking fund for this series provides for the redemption on _____ in each year beginning with the year _____ and ending with the year _____ of [IF APPLICABLE, INSERT -- not less than U.S. $_____ ("mandatory sinking fund") and not more than] U.S. $_____ aggregate principal amount of Securities of this series. Securities of this series acquired or redeemed by the Company otherwise than through [IF APPLICABLE, INSERT -- mandatory] sinking fund payments may be credited against subsequent [IF APPLICABLE, INSERT -- mandatory] sinking fund payments otherwise required to be made [IF APPLICABLE, INSERT -- in the inverse order in which they become due].] [IF THE SECURITY IS SUBJECT TO REDEMPTION OF ANY KIND, INSERT -- In the event of redemption or conversion of this Security in part only, a new Security or Securities of this series and of like tenor for the unredeemed or unconverted portion hereof will be issued in the name of the Holder hereof upon the cancellation hereof.] [IF SENIOR INDEBTEDNESS, INSERT -- The indebtedness evidenced by this Security has been designated as Senior Indebtedness, and, to the extent provided in the Indenture, is PARI PASSU with all other Senior Indebtedness]. [IF SENIOR SUBORDINATED INDEBTEDNESS, INSERT -- The indebtedness evidenced by this Security is, to the extent provided in the Indenture, (i) subordinate and subject in right of payment to the prior payment in full of all Senior Indebtedness and (ii) PARI PASSU with all other Senior Subordinated Indebtedness, and this Security is issued subject to the provisions of the Indenture with respect thereto. Each Holder of this Security, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Trustee on his behalf to take action as may be necessary or appropriate to effectuate the subordination so provided and (c) appoints the Trustee his attorney-in-fact for any and all such purposes.] Ind-16 23 [IF SUBORDINATED INDEBTEDNESS, INSERT -- The indebtedness evidenced by this Security is, to the extent provided in the Indenture, (i) subordinate and subject in right of payment to the prior payment in full of all Senior Indebtedness and (ii) PARI PASSU with all other Subordinated Indebtedness, and this Security is issued subject to the provisions of the Indenture with respect thereto. Each Holder of this Security, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Trustee on his behalf to take action as may be necessary or appropriate to effectuate the subordination so provided and (c) appoints the Trustee his attorney-in-fact for any and all such purposes.] [IF APPLICABLE, INSERT -- The Indenture contains provisions for defeasance at any time of (i) the entire indebtedness of this Security or (ii) certain restrictive covenants and Events of Default with respect to this Security, in each case upon compliance with certain conditions set forth in the Indenture.] [IF THE SECURITY IS NOT AN ORIGINAL ISSUE DISCOUNT SECURITY, INSERT -- If an Event of Default with respect to Securities of this series shall occur and be continuing, the principal of the Securities of this series may be declared due and payable in the manner and with the effect provided in the Indenture.] [IF THE SECURITY IS AN ORIGINAL ISSUE DISCOUNT SECURITY, INSERT -- If an Event of Default with respect to Securities of this series shall occur and be continuing, an amount of principal of the Securities of this series may be declared due and payable in the manner and with the effect provided in the Indenture. Such amount shall be equal to -- INSERT FORMULA FOR DETERMINING THE AMOUNT. Upon payment (i) of the amount of principal so declared due and payable and (ii) of interest on any overdue principal and overdue interest (in each case to the extent that the payment of such interest shall be legally enforceable), all of the Company's obligations in respect of the payment of the principal of and interest, if any, on the Securities of this series shall terminate.] The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Holders of the Securities of each series to be affected under the Indenture at any time by the Company and the Trustee with the consent of the Holders of a majority in principal amount of the Securities at the time Outstanding of each series to be affected. The Indenture also permits certain amendments and modifications thereto from time to time by the Company and the Trustee without the consent of the Holders of any series of the Securities to be affected thereby for certain specified purposes, including curing ambiguities, defects or inconsistencies and making any such change that does not adversely affect the rights of any Holder of such series of the Securities, as provided therein. The Indenture contains provisions permitting the Holders of specified percentages in principal amount of the Securities of each series at the time Outstanding, on behalf of the Holders of all Securities of such series, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and of any Security issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof, whether or not notation of such consent or waiver is made upon this Security. The Indenture also contains provisions permitting the Holders of specified percentages in principal amount of the Securities of each series at the time Outstanding, on behalf of the Holders of Securities of such series, to waive compliance by the Company with certain past provisions of the Indenture and certain defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Security shall be conclusive and binding upon such Holder and upon all future Holders Ind-17 24 of this Security and of any Security issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Security. As provided in and subject to the provisions of the Indenture, the Holder of this Security shall not have the right to institute any proceeding with respect to the Indenture or for the appointment of a receiver or trustee or for any other remedy thereunder, unless such Holder shall have previously given the Trustee written notice of a continuing Event of Default with respect to the Securities of this series, the Holders of not less than 25% in principal amount of the Securities of this series at the time Outstanding shall have made written request to the Trustee to institute proceedings in respect of such Event of Default as Trustee and offered the Trustee reasonable indemnity and the Trustee shall not have received from the Holders of a majority in principal amount of Securities of this series at the time Outstanding a direction inconsistent with such request, and shall have failed to institute any such proceeding, for 60 days after receipt of such notice, request and offer of indemnity. The foregoing shall not apply to any suit instituted by the Holder of this Security for the enforcement of any payment of principal hereof or any premium or interest hereon on or after the respective due dates expressed herein. [IF THE SECURITY IS ISSUED ON A SUBORDINATED OR SENIOR SUBORDINATED BASIS, INSERT -- Subject to the rights of holders of Senior Indebtedness, as set forth in the Indenture, no other reference herein to the Indenture and no other provision of this Security or of the Indenture shall alter or impair the obligations of the Company, which are unconditional, to pay the principal of and any premium and interest on this Security at the times, place and rate, and in the coin and currency, herein prescribed or to convert this Security as so provided in the Indenture.] As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Security is registrable in the Security Register, upon surrender of this Security for registration of transfer at the office or agency of the Company in any place where the principal of and any premium and interest on this Security are payable, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Securities of this series and of like tenor, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees. The Securities of this series are issuable only in registered form without coupons in denominations of U.S. $1,000 and any integral multiple thereof. As provided in the Indenture and subject to certain limitations therein set forth, Securities of this series are exchangeable for a like aggregate principal amount of Securities of this series and of like tenor of a different authorized denomination, as requested by the Holder surrendering the same. No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. Prior to due presentment of this 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 this Security is registered as the owner hereof for all purposes, whether or not this Security be overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary. The terms used in this Security which are defined in the Indenture shall have the meanings assigned to them in the Indenture. Ind-18 25 2.4 FORM OF LEGEND FOR GLOBAL SECURITIES Unless otherwise specified as contemplated by Section 3.1 for the Securities evidenced thereby, every Global Security authenticated and delivered hereunder shall bear a legend in substantially the following form: This Security is a Global Security within the meaning of the Indenture hereinafter referred to and is registered in the name of a Depositary or a nominee thereof. This Security may not be transferred to, or registered or exchanged for Securities registered in the name of, any Person other than the Depositary or a nominee thereof and no such transfer may be registered, except in the limited circumstances described in the Indenture. Every Security authenticated and delivered upon registration of transfer of, or in exchange for or in lieu of, this Security shall be a Global Security subject to the foregoing, except in such limited circumstances. 2.5 FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION The Trustee's certificates of authentication shall be in substantially the following form: This is one of the Securities of the series designated therein referred to in the within-mentioned Indenture. ---------------------------------- As Trustee By: ------------------------------- Authorized Officer 2.6 SECURITIES IN GLOBAL FORM If Securities of a series are issuable in global form, as contemplated by Section 3.1, then, notwithstanding clause (k) of Section 3.1 and the provisions of Section 3.2, any such Security shall represent such of the Outstanding Securities of such series as shall be specified therein and may 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 reduced to reflect exchanges. Any endorsement of a Security in global form to reflect the amount, or any increase or decrease in the amount, of Outstanding Securities represented thereby shall be made by the Trustee in such manner and upon instructions given by such Person or Persons as shall be specified in such Security or in a Company Order to be delivered to the Trustee pursuant to Section 3.3 or Section 3.4. Subject to the provisions of Section 3.3 and, if applicable, Section 3.4, the Trustee shall deliver and redeliver any Security in permanent global form in the manner and upon instructions given by the Person or Persons specified in such Security or in the applicable Company Order. If a Company Order pursuant to Section 3.3 or 3.4 has been, or simultaneously is, delivered, any instructions by the Company with respect to endorsement or delivery or redelivery of a Security in global form shall be in writing but need not comply with Section 1.3 and need not be accompanied by an Opinion of Counsel. The provisions of the last sentence of Section 3.3 shall apply to any Security in global form if such Security was never issued and sold by the Company and the Company delivers to the Trustee the Security in global form together with written instructions (which need not comply with Section 1.3 and need not be accompanied by an Opinion of Counsel) with regard to the reduction in the principal amount of Securities represented thereby, together with the written statement contemplated by the last sentence of Section 3.3. Ind-19 26 Notwithstanding the provisions of Sections 2.1 and 3.7, unless otherwise specified as contemplated by Section 3.1, payment of principal of (and premium, if any) and interest on and any Additional Amounts with respect to any Security in permanent global form shall be made to the Person or Persons specified therein. Notwithstanding the provisions of Section 3.8 and except as provided in the preceding paragraph, the Company, the Trustee and any agent of the Company or of the Trustee shall treat a Person as the Holder of such principal amount of Outstanding Securities represented by a Global Security as shall be specified in a written statement, if any, of the Holder of such Global Security, which is produced to the Security Registrar by such Holder. Global Securities may be issued in either temporary or permanent form. Permanent Global Securities will be issued in definitive form. 2.7 BOOK-ENTRY SECURITIES Notwithstanding any provision of this Indenture to the contrary: (a) At the discretion of the Company, any Security may be issued from time to time, in whole or in part, in permanent global form registered in the name of a Depositary, or its nominee. Each such Security in permanent global form is hereafter referred to as a "Book-Entry Security." Subject to Section 3.3, upon such election, the Company shall execute, and the Trustee or an Authenticating Agent shall authenticate and deliver, one or more Book-Entry Securities that (i) are denominated in an amount equal to the aggregate principal amount of the Outstanding Securities of such series if elected in whole or such lesser amount if elected in part, (ii) are registered in the name of the Depositary or its nominee, (iii) are delivered by the Trustee or an Authenticating Agent to the Depositary or pursuant to the Depositary's instructions and (iv) bear a legend in substantially the following form (or such other form as the Depositary and the Company may agree upon): UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF [THE DEPOSITARY], TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF [NOMINEE OF THE DEPOSITARY] OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF [THE DEPOSITARY] (AND ANY PAYMENT IS MADE TO [NOMINEE OF THE DEPOSITARY] OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF [THE DEPOSITARY]), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, [NOMINEE OF THE DEPOSITARY], HAS AN INTEREST HEREIN. (b) Any Book-Entry Security shall be initially executed and delivered as provided in Section 3.3. Notwithstanding any other provision of this Indenture, unless and until it is exchanged in whole or in part for Securities not issued in global form, a Book-Entry Security may not be transferred except as a whole by the Depositary to a nominee of such Depositary, by a nominee of such Depositary to such Depositary or another nominee of such Depositary, or by such Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary. Ind-20 27 (c) If at any time the Depositary notifies the Company or the Trustee that it is unwilling or unable to continue as Depositary for any Book-Entry Securities, the Company shall appoint a successor Depositary, whereupon the retiring Depositary shall surrender or cause the surrender of its Book-Entry Security or Securities to the Trustee. The Trustee shall promptly notify the Company upon receipt of such notice. If a successor Depositary has not been so appointed by the effective date of the resignation of the Depositary, the Book-Entry Securities will be issued as Securities not issued in global form, in an aggregate principal amount equal to the principal amount of the Book-Entry Security or Securities theretofore held by the Depositary. The Company may at any time and in its sole discretion determine that the Securities shall no longer be Book-Entry Securities represented by a global certificate or certificates, and will so notify the Depositary. Upon receipt of such notice, the Depositary shall promptly surrender or cause the surrender of its Book-Entry Security or Securities to the Trustee. Concurrently therewith, Securities not issued in global form will be issued in an aggregate principal amount equal to the principal amount of the Book-Entry Security or Securities theretofore held by the Depositary. Upon any exchange of Book-Entry Securities for Securities not issued in global form as set forth in this Section 2.7(c), such Book-Entry Securities shall be cancelled by the Trustee, and Securities issued in exchange for such Book-Entry Securities pursuant to this Section shall be registered in such names and in such authorized denominations as the Depositary for such Book- Entry Securities, pursuant to instructions from its direct or indirect participants or otherwise, shall instruct the Trustee. The Trustee or any Authenticating Agent shall deliver such Securities to the persons in whose names such Securities are so registered. (d) The Company and the Trustee shall be entitled to treat the Person in whose name any Book-Entry Security is registered as the Holder thereof for all purposes of the Indenture and any applicable laws, notwithstanding any notice to the contrary received by the Trustee or the Company; and the Trustee and the Company shall have no responsibility for transmitting payments to, communication with, notifying, or otherwise dealing with any beneficial owners of any Book- Entry Security. Neither the Company nor the Trustee shall have any responsibility or obligations, legal or otherwise, to the beneficial owners or to any other party including the Depositary, except for the Holder of any Book- Entry Security; provided however, notwithstanding anything herein to the contrary, (i) for the purposes of determining whether the requisite principal amount of Outstanding Securities have given, made or taken any request, demand, authorization, direction, notice, consent, waiver, instruction or other action hereunder as of any date, the Trustee shall treat any Person specified in a written statement of the Depositary with respect to any Book-Entry Securities as the Holder of the principal amount of such Securities set forth therein and (ii) nothing herein shall prevent the Company, the Trustee, or any agent of the Company or Trustee, from giving effect to any written certification, proxy or other authorization furnished by a Depositary with respect to any Book-Entry Securities, or impair, as between a Depositary and holders of beneficial interests in such Securities, the operation of customary practices governing the exercise of the rights of the Depositary as Holder of such Securities. (e) So long as any Book-Entry Security is registered in the name of a Depositary or its nominee, all payments of the principal of (and premium, if any) and interest on such Book-Entry Security and redemption thereof and all notices with respect to such Book Entry Security shall be made and given, respectively, in the manner provided in the arrangements of the Company with such Depositary. Ind-21 28 2.8 FORM OF CONVERSION NOTICE To: PATTERSON ENERGY, INC. The undersigned owner of this Security hereby irrevocably exercises the option to convert this Security, or the portion hereof (which is U.S. $1,000 or an integral multiple thereof) [IF APPLICABLE, INSERT RELEVANT AMOUNT IN APPLICABLE FOREIGN CURRENCY, CURRENCY UNIT OR COMPOSITE CURRENCY] below designated, into Common Shares of Patterson Energy, Inc., in accordance with the terms of the Indenture referred to in this Security, and directs that the shares issuable and deliverable upon the conversion, together with any check in payment for fractional shares and any Securities, representing any unconverted principal amount hereof, be issued and delivered to the registered holder hereof unless a different name has been indicated below. If shares 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. Any amount required to be paid by the undersigned on account of interest accompanies this Security. Dated: Fill in for registration of Common Shares and Securities if to be issued otherwise than to the registered holder. Principal Amount to be converted (in an integral Name multiple of U.S. $1,000, if less than all): U.S. $ Address (Please print name and address, including signature zip/postal code number) SOCIAL SECURITY OR OTHER TAXPAYER IDENTIFYING [SIGNATURE GUARANTEED -- required only if Common NUMBER Shares and Securities are to be issued and delivered to other than the registered holder] ARTICLE 3 THE SECURITIES 3.1 AMOUNT UNLIMITED; ISSUABLE IN SERIES The aggregate principal amount of Securities which may be authenticated and delivered under this Indenture is unlimited. The Securities may be issued from time to time in one or more series. All Securities of each series under this Indenture shall in all respects be equally and ratably entitled to the benefits hereof with respect to such series without preference, priority or distinction on account of the actual time of the authentication and delivery or Stated Maturity of the Securities of such series. There shall be established in or pursuant to Board Resolutions of the Company and, subject to Section 3.3, set forth, or determined in the manner provided, in an Officers' Certificate of the Company, or established in one or more indentures supplemental hereto, prior to the issuance of Securities of any series: (a) the title of the Securities of the series (which shall distinguish the Securities of the series from Securities of any other series); (b) any limit upon the aggregate principal amount of the Securities of the series which may be authenticated and delivered Ind-22 29 under this Indenture (except for Securities authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Securities of the series pursuant to section 3.4, 3.5, 3.6, 9.7, 11.7 or 14.2 and except for any Securities which, pursuant to section 3.3, are deemed never to have been authenticated and delivered hereunder); (c) if the Securities will be issuable at a premium over or discount from their stated principal amount, specification of such premium or discount, as applicable; (d) whether any Securities of the series are to be listed for trading on a securities exchange or otherwise; (e) the Person to whom any interest on a Security of the series shall be payable, if other than the Person in whose name that Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest; (f) the date or dates on which the principal of the Securities of the series is payable and on which the Securities will mature; (g) the rate or rates (which may be fixed or variable) at which the Securities of the series shall bear interest, if any, or the Floating or Adjustable Rate Provision pursuant to which such rate or rates shall be determined, the date or dates from which such interest shall accrue or the method of determination of such date or dates, the Interest Payment Dates on which any such interest shall be payable on any Securities and the Regular Record Date for any interest payable on any Interest Payment Date, and the basis upon which interest shall be calculated if other than that of a 360-day year of twelve 30-day months; (h) the place or places where the principal of and any premium and interest on the Securities of the series shall be payable; (i) the period or periods within which, the price or prices at which, and the terms and conditions upon which Securities of the series may be redeemed, in whole or in part, at the option of the Company and, if other than by a Board Resolution, the manner in which any election by the Company to redeem the Securities shall be evidenced; (j) the obligation, if any, of the Company to redeem or purchase Securities of the series pursuant to any sinking fund, purchase fund or analogous obligation or at the option of a Holder thereof and the period or periods within which, the price or prices at which and the terms and conditions upon which Securities of the series shall be redeemed or purchased, in whole or in part, pursuant to such obligation; (k) if other than denominations of U.S. $1,000 and any integral multiple thereof, the denominations in which Securities of the series shall be issuable; (l) the currency, currencies or currency unit or units in which the Securities of such series shall be denominated and in which payment of the principal of and any premium and interest on any Securities of such series shall be payable if other than the currency of the United States of America and the manner of determining the equivalent thereof in the currency of the United States of America for purposes of the definition of "Outstanding" in Section 1.1; (m) if the amount of payments of principal of or any premium or interest on any Securities of the series may be determined by reference to an index, formula or other method, including, without limitation, such method based on (i) currency, currencies or currency units other than that in which the Ind-23 30 Securities of such series are payable, (ii) changes in the price of one or more other securities or groups or indices of securities, or (iii) changes in the prices of one or more commodities or groups or indexes of commodities or any combination of the foregoing, the manner in which such amounts shall be determined and any commodities, currencies, currency units or indices, value, rate or price relevant to such determination; (n) if the principal of or any premium or interest on any Securities of the series are to be payable, at the election of the Company or a Holder thereof, in one or more currencies or currency units other than that or those in which the Securities are stated to be payable, the currency, currencies or currency units in which payment of the principal of and any premium and interest on Securities of such series as to which such election is made shall be payable, and the period or periods within which, and the terms and conditions upon which, such election is to be made and the amount so payable for the manner in which such amount shall be determined; (o) if other than the principal amount thereof, the portion of the principal amount of Securities of the series which shall be payable upon declaration of acceleration of the Maturity thereof pursuant to Section 5.2; (p) if the principal amount payable at the Stated Maturity of any Securities of the series is not determinable upon original issuance thereof, the amount which shall be deemed to be the principal amount of such Securities for any other purpose hereunder, including the principal amount thereof which shall be due and payable upon any Maturity other than the Stated Maturity or which shall be deemed to be Outstanding as of any date (or, in any such case, the manner in which such principal amount shall be determined); (q) if applicable, that the Securities of the series shall be subject to Defeasance or Covenant Defeasance as provided in Article 13; (r) if and as applicable, that the Securities of the series shall be issuable in whole or in part in the form of one or more Global Securities and, in such case, the respective Depositaries for such Global Securities, the form of any legend or legends which shall be borne by any such Global Security in addition to or in lieu of that set forth in Section 2.4 and any circumstances other than those set forth in Section 3.5 in which any such Global Security may be transferred to, and registered and exchanged for Securities registered in the name of, a Person other than the Depositary for such Global Security or a nominee thereof and in which any such transfer may be registered; (s) if applicable, the terms and conditions pursuant to which the Securities are convertible into or exchangeable at the option of the Holders thereof or the Company, for or into new Securities of a different series, other Securities of the same series of the same aggregate principal amount of a different kind or different authorized denomination or denominations, or other securities or other property, including shares in the capital of the Company or any subsidiaries of the Company or securities directly or indirectly convertible into or exchangeable for such shares; (t) if applicable, any covenants in addition to those set forth in Article 10 to which the Company may be subject with respect to Securities of such series; or any other additions, deletions or changes to the provisions of Article 10 or any definitions relating to such Article that shall be applicable to the Securities of the series (including a provision making any Section of such Article inapplicable to the Securities of such series); (u) any Event of Default with respect to the Securities of such series, if not set forth herein, and any additions, deletions or other changes to the Events of Default set forth herein that shall be Ind-24 31 applicable to the Securities of such series (including a provision making any Event of Default set forth herein inapplicable to the Securities of that series); (v) provisions, if any, regarding the appointment by the Trustee of an Authenticating Agent in one or more places other than the location of the office of the Trustee with power to act on behalf of the Trustee and subject to its direction in the authentication and delivery of the Securities of any one or more series in connection with such transactions as shall be specified in the provisions of this Indenture or in or pursuant to the Board Resolution or other supplemental indenture creating such series; (w) the provisions for the payment of any additional amounts, to the extent not set forth herein; (x) whether the interest, if any, on the Securities is to be payable, at the election of the Company or a holder thereof, in cash or in PIK Securities and the period or periods within which, and the terms and conditions upon which, such election may be made; (y) designation of the series of Securities as Senior Indebtedness, Senior Subordinated Indebtedness or Subordinated Indebtedness, and any additions, deletions or changes to the provisions of Article 15 or any definition relating to such Article that shall be applicable to the Securities of the series defining the rights of holders of Senior Indebtedness in respect of the Securities of such series; (z) any addition to or deletion from the definition of Significant Subsidiary; (aa) any other terms of the series (which terms shall not be inconsistent with the provisions of this Indenture, except as permitted by Section 9.1); and (bb) whether any Securities of the series will be secured. All Securities of any one series shall be substantially identical except as to denomination and except as may otherwise be provided in or pursuant to the Board Resolutions of the Company referred to above and (subject to Section 3.3) set forth, or determined in the manner provided, in the Officers' Certificate referred to above or in any such indenture supplemental hereto. All Securities of any one series need not be issued at the same time and, unless otherwise provided, a series may be reopened for issuances of additional Securities of such series. If any of the terms of the series are established by action taken pursuant to Board Resolutions of the Company, a copy of an appropriate record of such action shall be certified by the Secretary or an Assistant Secretary of the Company and delivered to the Trustee at or prior to the delivery of the Officers' Certificates setting forth the terms of the series. 3.2 DENOMINATIONS The Securities of each series shall be issuable in registered form without coupons in such denominations and in such currencies as shall be specified as contemplated by Section 3.1. In the absence of any such provisions with respect to the Securities of any series, the Securities of such series shall be issuable in denominations of U.S. $1,000 and any integral multiple thereof. Ind-25 32 3.3 EXECUTION, AUTHENTICATION, DELIVERY AND DATING The Securities shall be executed on behalf of the Company by its Chief Executive Officer, its President, one of its Vice Presidents or its Treasurer, under its corporate seal reproduced thereon attested by its Secretary. The signature of any of these officers 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 such Securities. At any time and from time to time after the execution and delivery of this Indenture, the Company may deliver Securities of any series executed by the Company to the Trustee for authentication, together with a Company Order for the authentication and delivery of such Securities, and the Trustee in accordance with the Company Order (which may provide that Securities that are the subject thereof will be authenticated and delivered by the Trustee upon the telephonic or written order of Persons designated in said Company Order and that such Persons are authorized to determine such terms and conditions of said Securities as are specified in the Company Order) shall authenticate and deliver such Securities. If the form or terms of the Securities of the series have been established in or pursuant to one or more Board Resolutions of the Company as permitted by Sections 2.1 and 3.1, in authenticating such Securities, and accepting the additional responsibilities under this Indenture in relation to such Securities, the Trustee shall be entitled to receive, and (subject to Section 6.1) shall be fully protected in relying upon, an Opinion of Counsel stating: (a) if the form of such Securities has been established by or pursuant to Board Resolutions of the Company as permitted by Section 2.1, that such form has been established in conformity with the provisions of this Indenture; (b) if the terms of such Securities have been established by or pursuant to Board Resolutions of the Company as permitted by Section 3.1, that such terms have been established in conformity with the provisions of this Indenture; and (c) 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 and to such other matters as counsel may specify. If such form or terms have been so established, the Trustee shall not be required to authenticate such Securities if the issue of such Securities pursuant to this Indenture will affect the Trustee's own rights, duties or immunities under the Securities and this Indenture or otherwise in a manner which is not reasonably acceptable to the Trustee. Notwithstanding the provisions of Section 3.1 and of the preceding paragraph, if all Securities of a series are not to be originally issued at one time, it shall not be necessary to deliver the Officers' Certificate otherwise required pursuant to Section 3.1 or the Company Order and Opinion of Counsel otherwise required pursuant to such preceding paragraph at or prior to the time of authentication of each Security of such series if such documents are delivered at or prior to the authentication upon original issuance of the first Security of such series to be issued and contemplate issuance of all Securities of such series. Ind-26 33 Each Security shall be dated the date of its authentication. 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 executed by the Trustee by manual signature, and such certificate upon any Security shall be conclusive evidence, and the only evidence, that such Security has been duly authenticated and delivered hereunder. Notwithstanding the foregoing, if any Security shall have been authenticated and delivered hereunder but never issued and sold by the Company, and the Company shall deliver such Security to the Trustee for cancellation as provided in Section 3.9, for all purposes of this Indenture such Security shall be deemed never to have been authenticated and delivered hereunder and shall never be entitled to the benefits of this Indenture. 3.4 TEMPORARY SECURITIES Pending the preparation of definitive Securities of any series, 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 evidenced by their execution of such Securities. Except in the case of temporary Securities in global form (which shall be exchanged in accordance with the provisions of the following paragraphs). If temporary Securities of any series are issued, the Company will cause definitive Securities of that series to be prepared without unreasonable delay. After the preparation of definitive Securities of such series, the temporary Securities of such series shall be exchangeable for definitive Securities of such series upon surrender of the temporary Securities of such series at the office or agency of the Company maintained pursuant to Section 10.2 in a Place of Payment for that series for the purpose of exchanges of Securities of such series, without charge to the Holder. Upon surrender for cancellation of any one or more temporary Securities of any series the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor one or more definitive Securities of the same series, of any authorized denominations and of a like aggregate principal amount and tenor. Until so exchanged the temporary Securities of any series shall in all respects be entitled to the same benefits under this Indenture as definitive Securities of such series and tenor. All outstanding temporary Securities of any series shall in all respects be entitled to the same benefits under this Indenture as definitive Securities of the same series and of like tenor authenticated and delivered hereunder. 3.5 REGISTRATION, REGISTRATION OF TRANSFER AND EXCHANGE The Company shall cause to be kept at the Corporate Trust Office of the Trustee a register (the register maintained in such office and in any other office or agency of the Company in a Place of Payment being herein sometimes collectively referred to as the "Security Register") in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration of Securities and of transfers of Securities. The Trustee is hereby appointed "Security Registrar" for the purpose of registering Securities and transfers of Securities as herein provided. Upon surrender for registration of transfer of any Security or of any series at the office or agency in a Place of Payment for that series, 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 the same series, of any authorized denominations and of a like aggregate principal amount and tenor. Ind-27 34 At the option of the Holder, Securities of any series may be exchanged for other Securities of the same series of any authorized denominations and of a like aggregate principal amount and tenor, upon surrender of the Securities to be exchanged at such office or agency. Whenever any Securities are so surrendered for exchange, the Company shall execute, and the Trustee shall authenticate and deliver, the Securities which the Holder making the exchange is entitled to receive. All Securities issued upon any registration of transfer or exchange of Securities shall be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Securities surrendered upon such registration of transfer or exchange. Every Security presented or surrendered for registration of transfer or exchange shall (if so required by the Company or the Trustee) be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed by the Holder thereof or his attorney duly authorized in writing. No service charge shall be made for any registration of transfer or exchange of Securities, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer or exchange of Securities, other than exchanges pursuant to Section 3.4, 9.7, 11.7 or 14.2 not involving any transfer. The Company shall not be required to (a) issue or register the transfer or exchange of Securities of any series during a period beginning at the opening of business 15 days before the day of the mailing of a notice of redemption of Securities of that series selected for redemption under Section 11.3 and ending at the close of business on the day of such mailing, or (b) register the transfer or exchange of any Security so selected for redemption in whole or in part, except in the case of any Security to be redeemed in part, the portion thereof not to be redeemed. Notwithstanding any other provision in this Indenture, no Global Security may be transferred to, or registered or exchanged for Securities registered in the name of, any Person other than the Depositary for such Global Security or any nominee thereof, and no such transfer may be registered, unless (a) such Depositary (i) notifies the Company and the Trustee that it is unwilling or unable to continue as Depositary for such Global Security or (ii) ceases to be a clearing agency registered under the Exchange Act and a successor Depositary is not appointed by the Company within 90 days after the Company receives the notice referred to in subclause (i) or becomes aware of the condition specified in subclause (ii), (b) the Company executes and delivers to the Trustee a Company Order that such Global Security shall be so transferable, registrable and exchangeable, and such transfers shall be registrable, (c) there shall have occurred and be continuing an Event of Default with respect to the Securities evidenced by such Global Security or (d) there shall exist such other circumstances, if any, as have been specified for this purpose as contemplated by Section 3.1. Notwithstanding any other provision in this Indenture, a Global Security to which the restriction set forth in the preceding sentence shall have ceased to apply may be transferred only to, and may be registered and exchanged for Securities registered only in the name or names of, such Person or Persons as the Depositary for such Global Security shall have directed and no transfer thereof other than such a transfer may be registered. Every Security authenticated and delivered upon registration of transfer of, or in exchange for or in lieu of, a Global Security to which the restriction set forth in the first sentence of the preceding paragraph shall apply, whether pursuant to this Section, Sections 3.4, 3.6, 9.7, 11.7 or 14.2 or otherwise, shall be authenticated and delivered in the form of, and shall be, a Global Security. Ind-28 35 3.6 MUTILATED, DESTROYED, LOST AND STOLEN SECURITIES If any mutilated Security is surrendered to the Trustee, the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor a new Security of the same series and of like tenor and principal amount and bearing a number not contemporaneously outstanding. If there shall be delivered to the Company and the Trustee (a) evidence to their satisfaction of the destruction, loss or theft of any Security and (b) such security or indemnity as may be required by them to save each of them and any agent of either of them 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 the Trustee shall authenticate and deliver in lieu of any such destroyed, lost or stolen Security, a new Security of the same series and of like tenor and principal amount and 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, the Company in its discretion, may, instead of issuing a new Security and subject to the above provisions regarding security or indemnity, pay such Security. Upon the issuance of any new Security under this Section, the Company may require the payment of a sum sufficient to cover any tax 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 of any series issued pursuant to this Section in exchange for any mutilated Security or in lieu of any 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 the benefits of this Indenture equally and proportionately with any and all other Securities of that series duly issued hereunder. The provisions of this Section 3.6 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. 3.7 PAYMENT OF INTEREST: INTEREST RIGHTS PRESERVED Except as otherwise provided as contemplated by Section 3.1 with respect to any series of Securities, interest on any Security which is payable, and is punctually paid or duly provided for, on any Interest Payment Date shall be paid to the Person in whose name that Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest. In the case of Securities represented by a Global Security registered in the name of or held by a Depositary or its nominee, unless otherwise specified by Section 3.1, payment of principal, premium, if any, and interest, if any, will be made to the Depositary or its nominee, as the case may be, as the registered owner or Holder of such Global Security. None of the Company, the Trustee, any Paying Agent, any Authenticating Agent nor the Security Registrar for such Securities will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interest in a Global Security or for maintaining, supervising or reviewing any records relating to such beneficial ownership interest. Any interest on any Security of any series which is payable, but is not punctually paid or duly provided for, on any Interest Payment Date (herein called "Defaulted Interest") shall forthwith cease to be payable to the Holder on the relevant Regular Record Date by virtue of having been such Holder, on such Ind-29 36 date, and such Defaulted Interest may be paid by the Company, at its election in each case, as provided in clause (a) or (b) below: (a) The Company may elect to make payment of any Defaulted Interest to the Persons in whose names the Securities of such series (or their respective Predecessor Securities) are registered at the close of business on a Special Record Date for the payment of such Defaulted 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 of such series and the date of the proposed payment, 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 Interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as in this clause provided. Thereupon the Trustee shall fix a Special Record Date for the payment of such Defaulted 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 Record Date and, in the name and at the expense of the Company, shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be mailed, first-class postage prepaid, to each Holder of Securities of such series at his address as it appears in the Security Register, not less than 10 days prior to such Special Record Date. Notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor having been so mailed, such Defaulted Interest shall be paid to the Persons in whose names the Securities of such series (or their respective Predecessor Securities) are registered at the close of business on such Special Record Date and shall no longer be payable pursuant to the following clause (b). (b) The Company may make payment of any Defaulted Interest on the Securities of any series 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 is 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. At the option of the Company, interest on Securities of any series that bear interest may be paid by mailing a check to the address of the Person entitled thereto as such address shall appear in the Security Register. Subject to the foregoing provisions of this Section, 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 interest accrued and unpaid, and to accrue, which were carried by such other Security. Subject to the provisions of 14.2, in the case of any security which is converted after any Regular Record Date and on or prior to the next succeeding Interest Payment Date (other than any Security the principal of (or premium, if any, on) which shall become due and payable, whether at a Stated Maturity or by declaration of acceleration, call for redemption, or otherwise, prior to such Interest Payment Date), interest whose Stated Maturity Date is on such Interest Payment Date shall be payable on such Interest Payment Date notwithstanding such conversion and such interest (whether or not punctually paid or duly provided for) shall be paid to the Person in whose name that Security (or any one or more Predecessor Securities) is registered at the close of business on such Regular Record Date. Except as otherwise expressly provided in the immediately preceding sentence, in the case of any Security which is converted, interest whose Stated Maturity is after the date of conversion of such Security shall not be payable. Ind-30 37 3.8 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 shall treat the Person in whose name such Security is registered as the owner of such Security for the purpose of receiving payment of principal of and any premium and (except as otherwise specified as contemplated by Section 3.1(e) and subject to Section 3.7) any interest on such Security and for all other purposes whatsoever, whether or not such Security be overdue, and neither the Company, the Trustee nor any agent of the Company or the Trustee shall be affected by notice to the contrary. In the case of a Global Security, so long as the Depositary for such Global Security, or its nominee, is the registered owner of such Global Security, such Depositary or such nominee, as the case may be, will be considered the sole owner or Holder of the Securities represented by such Global Security for all purposes under this Indenture. Except as provided in Section 3.5, owners of beneficial interests in a Global Security will not be entitled to have Securities that are represented by such Global Security registered in their names, will not receive or be entitled to receive physical delivery of such Securities in definitive form and will not be considered the owners or Holders thereof under this Indenture. Notwithstanding the foregoing, with respect to any Global Security, nothing herein shall (a) prevent the Company, the Trustee, or any agent of the Company or the Trustee, from giving effect to any written certification, proxy or other authorization furnished by a Depositary or (b) impair, as between a Depositary and holders of beneficial interests in any Global Security, the operation of customary practices governing the exercise of the rights of the Depositary as Holder of such Global Security. 3.9 CANCELLATION All Securities surrendered for payment, redemption, registration of transfer or exchange or for credit against any sinking fund payment shall, if surrendered to any Person other than the Trustee, be delivered to the Trustee and shall be promptly cancelled 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 may deliver to the Trustee (or to any other Person for delivery to the Trustee) for cancellation any Securities previously authenticated hereunder which the Company has not issued and sold, and all Securities so delivered shall be promptly cancelled by the Trustee. No Securities shall be authenticated in lieu of or in exchange for any Securities cancelled as provided in this Section, except as expressly permitted by this Indenture. All cancelled Securities held by the Trustee shall be disposed of as directed by a Company Order. 3.10 COMPUTATION OF INTEREST Except as otherwise specified as contemplated by Section 3.1 for Securities of any series, interest on the Securities of each series shall be computed on the basis of a 360-day year of twelve 30-day months. 3.11 PAYMENT OF ADDITIONAL AMOUNTS All payments made by the Company under or with respect to the Securities will be made free and clear of and without withholding or deduction for or on account of any present or future tax, duty, levy, impost, assessment or other governmental charge imposed or levied by or on behalf of the Government of the United States, any state thereof or the District of Columbia, or by any authority or agency therein or thereof having power to tax (hereinafter "Taxes"), unless the Company is required to withhold or deduct Taxes by law or by the interpretation or administration thereof. If the Company is so required to withhold Ind-31 38 or deduct any amount for or on account of Taxes from any payment made under or with respect to the Securities, the Company will pay such additional amounts ("Additional Amounts") as may be necessary so that the net amount received by each Holder (including Additional Amounts) after such withholding or deduction will not be less than the amount the Holder would have received if such Taxes had not been withheld or deducted; PROVIDED THAT no Additional Amounts will be payable with respect to a payment made to a Holder (an "Excluded Holder") (i) with which the Company does not deal at arm's length (within the meaning of the INTERNAL REVENUE CODE) at the time of making such payment or (ii) which is subject to such Taxes by reason of its being connected with the United States, any state thereof or the District of Columbia, otherwise than by the mere holding of Securities or the receipt of payments thereunder. The Company will also (i) make such withholding or deduction and (ii) remit the full amount deducted or withheld to the relevant authority in accordance with applicable law. The Company will furnish to the Holders of the Securities, within 30 days after the date the payment of any Taxes is due pursuant to applicable law, certified copies of tax receipts evidencing such payment by the Company. The Company will indemnify and hold harmless each Holder (other than an Excluded Holder) and upon written request reimburse each such Holder for the amount of (i) any Taxes so levied or imposed and paid by such Holder as a result of payments made under or with respect to the Securities, (ii) any liability (including penalties, interest and expenses) arising therefrom or with respect thereto, and (iii) any Taxes imposed with respect to any reimbursement under (i) or (ii), but excluding any such Taxes on such Holders' net income. 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 will be obligated to pay Additional Amounts with respect to such payment, the Company will deliver to the Trustee an Officers' Certificate stating the fact that such Additional Amounts will be payable, stating the amounts so payable and setting forth such other information as is necessary to enable the Trustee to pay such Additional Amounts to Holders on the payment date. Whenever in this Indenture there is mentioned, in any context, the payment of principal (and premium, if any), Redemption Price, interest or any other amount payable under or with respect to any Security, such mention shall be deemed to include mention of the payment of Additional Amounts provided for in this Section 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 and express mention of the payment of Additional Amounts (if applicable) in any provisions hereof shall not be construed as excluding Additional Amounts in those provisions hereof where such express mention is not made (if applicable). The obligations of the Company under this Section 3.11 survive the termination of the Indenture and the payment of all amounts under or with respect to the Securities. [IF SENIOR INDEBTEDNESS, INSERT -- 3.12 DESIGNATION AS SENIOR INDEBTEDNESS The Company hereby confirms the designation of the Securities as "Senior Indebtedness" for the purpose of any securities that may be issued pursuant to the Senior Subordinated Indenture or the Subordinated Indenture.] Ind-32 39 [IF SENIOR SUBORDINATED INDEBTEDNESS, INSERT -- 3.12 DESIGNATION AS SENIOR SUBORDINATED INDEBTEDNESS The Company hereby confirms the designation of the Securities as "Senior Subordinated Indebtedness" for the purpose of any securities that may be issued pursuant to the Subordinated Indenture.] ARTICLE 4 SATISFACTION AND DISCHARGE 4.1 SATISFACTION AND DISCHARGE OF INDENTURE This Indenture shall, upon Company Request, cease to be of further effect (except as to any surviving rights or registration of transfer or exchange of Securities herein expressly provided for) and the Trustee, at the expense of the Company, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture, when: (a) either, (i) all Securities theretofore authenticated and delivered (other than (i) Securities which have been destroyed, lost or stolen and which have been replaced or paid as provided in Section 3.6 and (ii) Securities for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Company and thereafter repaid to the Company or discharged from such trust, as provided in Section 10.3) have been delivered to the Trustee for cancellation, or (ii) all such Securities not theretofore delivered to the Trustee for cancellation (A) have become due and payable, or (B) will become due and payable at their Stated Maturity within one year, or (C) are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Company, and the Company, in the case of (A), (B) or (C) above, has deposited or caused to be deposited with the Trustee, as trust funds in trust for the purpose, money in the currency in which the Securities of such series are denominated or Government Obligations of the government issuing the currency in which the Securities of such series are denominated which through the payment of interest and principal in respect thereof in accordance with their terms will provide lawful money not later than one day before the due dates of principal (and premium, if any) or interest, or any combination thereof, in an amount sufficient to pay and discharge the entire indebtedness on such Securities not theretofore delivered to the Trustee for cancellation, for principal and any premium and interest to the date of such deposit (in the case of Securities which have become due and payable) or to the Stated Maturity or Redemption Date, as the case may be; Ind-33 40 (b) the Company has paid or caused to be paid all other sums payable hereunder by the Company; and (c) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have been complied with. In the event there are Securities of two or more series hereunder, the Trustee shall be required to execute an instrument acknowledging satisfaction and discharge of this Indenture only if requested to do so with respect to the Securities of all series to which it is Trustee and if the other conditions thereto are met. In the event there are two or more Trustees hereunder, then the effectiveness of any such instrument shall be conditioned upon receipt of such instruments from all Trustees hereunder. Notwithstanding the satisfaction and discharge of this Indenture, the obligations of the Company to the Trustee under Section 6.7, the obligations of the Trustee to any Authenticating Agent under Section 6.14 and, if money shall have been deposited with the Trustee pursuant to subclause (ii) of clause (a) of this Section, and the obligations of the Trustee under Section 4.2 and the last paragraph of Section 10.3 shall survive. 4.2 APPLICATION OF TRUST MONEY Subject to the provisions of the penultimate paragraph of Section 10.3, all money deposited with the Trustee pursuant to Section 4.1 shall be held in trust and applied by it, in accordance with the provisions of the Securities and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of the principal and any premium and interest for whose payment such money has been deposited with the Trustee. [IF APPLICABLE, INSERT IN SUBORDINATED INDENTURE -- Money deposited pursuant to this section shall not be subject to the claims of the holders of Senior Indebtedness or Senior Subordinated Indebtedness...or in the Senior Subordinated Debenture... Money deposited pursuant to this section shall not be subject to the claims of Senior Indebtedness.] ARTICLE 5 REMEDIES 5.1 EVENTS OF DEFAULT "Event of Default," wherever used herein with respect to Securities of any series, means any one of the following events (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body), unless such event is either inapplicable to a particular series or it is specifically deleted or modified in the Board Resolutions or supplemental indenture creating such series of Securities or in the form of Security for such series: (a) default in the payment of any interest upon any Security of that series when it becomes due and payable, and continuance of such default for a period of 30 days (whether or not such failure is a result of the subordination provisions relating to such series); or (b) default in the payment of the principal of (or premium, if any, on) any Security of that series at its Maturity (whether or not such failure is a result of the subordination provisions relating to such series); or Ind-34 41 (c) default in the deposit of any mandatory sinking fund payment, when and as due by the terms of a Security of that series and continuance of such default for a period of 30 days; or (d) default in the performance, or breach of any covenant or warranty of the Company in this Indenture or of any other covenant to which the Company is subject with respect to such series of Securities by virtue of Section 3.1(t) (other than a covenant or warranty a default in whose performance or whose breach is specifically dealt with elsewhere in this Section or which has expressly been included in this Indenture or in the applicable Board Resolutions or supplemental indenture with respect to such series of Securities solely for the benefit of a series of Securities other than that series or which has been included in this Indenture or in the applicable Board Resolutions or supplemental indenture with respect to such series of Securities but not made applicable to the Securities of such series) and continuance of such default or breach for a period of 90 days after there has been given, by registered or certified mail, to the Company by the Trustee or to the Company and the Trustee by the Holders of at least 25% in principal amount of the Outstanding Securities of that series, a written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a "Notice of Default" hereunder; or (e) (i) an event of default, as defined in any indenture or instrument evidencing or under which the Company or any Significant Subsidiary shall have outstanding indebtedness for borrowed money in a principal amount in excess of $15 million, shall happen and be continuing and such indebtedness shall have been accelerated so that the same shall be or become due and payable prior to the date on which the same would otherwise have become due and payable or (ii) the Company or any Significant Subsidiary shall default in the payment at final maturity of outstanding indebtedness for borrowed money in a principal amount of $15 million, and such acceleration or default at maturity shall not be waived, rescinded or annulled within 30 days after written notice thereof, stating that such notice is a "Notice of Default" hereunder, shall have been given to the Company by the Trustee (if such event be known to it), or to the Company and the Trustee by the Holders of at least 25% in principal amount of the Outstanding Securities of that series; provided, however, that if such acceleration under such indenture or instrument or default at maturity shall be remedied or cured by the Company or Significant Subsidiary, or waived, rescinded or annulled by the requisite holders of such indebtedness, then the Event of Default hereunder by reason thereof shall be deemed likewise to have been thereupon remedied, cured or waived without further action upon the part of either the Trustee or any of the Holders; or (f) the entry by a court having jurisdiction in the premises of (i) a decree or order for relief in respect of the Company in an involuntary case or proceeding under the any applicable Federal or State bankruptcy, insolvency, reorganization or similar law, or (ii) a decree or order adjudging the Company bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of the Company under any applicable Federal or State law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or of any substantial part of its respective property, or ordering the winding up or liquidation of its affairs, and the continuance of any such decree or order for relief specified in this clause (ii) unstayed and in effect for a period of 90 consecutive days; or (g) the commencement by the Company of a voluntary case or proceeding under the any applicable Federal or State COMPANIES' CREDITORS bankruptcy, insolvency, reorganization or similar law, or of any other case or proceeding to be adjudicated a bankrupt or insolvent, or the consent by the Company to the entry of a decree or order for relief in respect of the Company in an involuntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or similar law, or to the commencement of any bankruptcy or insolvency case or proceeding against the Company or the filing by the Company of a petition or answer or consent seeking reorganization or relief under any applicable Federal or State law, or the consent by it to the filing of such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignees, trustee, sequestrator or Ind-35 42 other similar official of the Company or of any substantial part of its property, or the making by the Company of an assignment for the benefit of creditors, or the admission by the Company in writing its inability to pay its debts generally as they become due, or the taking of corporate action by the Company in furtherance of any such action; or (h) any other Event of Default provided in the supplemental indenture or Board Resolution of the Company under which such series of Securities is issued or in the form of Security for such series. Notwithstanding the foregoing provisions of this Section 5.1, if the principal of (and premium, if any) or any interest on, or Additional Amounts with respect to, any Security is payable in a currency or currencies (including a composite currency) other than Dollars and such currency (or currencies) is (or are) not available to the Company for making payment thereof due to the imposition of exchange controls or other circumstances beyond the control of the Company (a "Conversion Event"), the Company will be entitled to satisfy its obligations to Holders of the Securities by making such payment in Dollars in an amount equal to the Dollar equivalent of the amount payable in such other currency, as determined by the Company by reference to the noon buying rate in The City of New York for cable transfers for such currency ("Exchange Rate"), as such Exchange Rate is certified for customs purposes by the Federal Reserve Bank of New York on the date of such payment, or, if such rate is not then available, on the basis of the most recently available Exchange Rate. Notwithstanding the foregoing provisions of this Section 5.1, any payment made under such circumstances in Dollars where the required payment is in a currency other than Dollars will not constitute an Event of Default under this Indenture. Promptly after the occurrence of a Conversion Event with respect to Securities of any series, the Company shall give written notice thereof to the Trustee; and the Trustee, promptly after receipt of such notice, shall give notice thereof in the manner provided in Section 1.6 to the Holders of such series. Promptly after the making of any payment in Dollars as a result of a Conversion Event with respect to Securities of any series, the Company shall give notice in the manner provided in Section 1.6 to the Holders of such series, setting forth the applicable Exchange Rate and describing the calculation of such payments. 5.2 ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT (a) If an Event of Default with respect to Securities of any series at the time Outstanding occurs and is continuing, then in every such case, the Trustee or the Holders of not less than 25% in principal amount of the Outstanding Securities of that series may declare the principal amount (or, if any of the Securities of that series are Original Issue Discount Securities, such portion of the principal amount of such Securities as may be specified in the terms thereof) of all of the Securities of that series to be due and payable immediately, by a notice in writing to the Company (and to the Trustee if given by Holders) and upon any such declaration such principal amount (or specified amount) shall become immediately due and payable, except that if the Event of Default is an event described in clause 5.1(e) or 5.1(f) above, the principal amount (or in the case of Original Issue Discount Securities, such portion thereof) of all Securities shall become due and payable immediately, without notice of further action of any kind whatsoever. (b) At any time after such a declaration of acceleration with respect to Securities of any series has been made, but before a judgment or decree for payment of the money due has been obtained by the Trustee as hereinafter in this Article provided, the Holders of a majority in principal amount of the Outstanding Securities of that series, by written notice to the Company and the Trustee, may rescind and annul such declaration and its consequences if: (i) the Company has paid or deposited with the Trustee a sum sufficient to pay Ind-36 43 (A) all overdue interest on all Securities of that series, (B) the principal of (and premium, if any, on) any Securities of that series which have become due otherwise than by such declaration of acceleration and any interest thereon at the rate or rates prescribed therefore in such Securities, to the extent that payment of such interest is lawful, (C) to the extent that payment of such interest is lawful, interest upon overdue interest at the rate or rates prescribed therefor in such Securities, and (D) all sums paid or advanced by the Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel; and (ii) all Events of Default with respect to Securities of that series, other than the non-payment of the principal of Securities of that series which have become due solely by such declaration of acceleration, have been cured or waived as provided in Section 5.13. No such rescission shall affect any subsequent default or impair any right consequent thereon. 5.3 SUITS FOR ENFORCEMENT BY TRUSTEE The Trustee, in its own name and as trustee of an express trust, may institute a judicial proceeding for the collection of any sums due and unpaid as a consequence of the action set froth in Section 5.2(a), and may prosecute such proceedings to judgment or final decrees, and may enforce the same against the Company or any other obligor upon the Securities of such series and collect the money adjudged or decreed to be payable in the manner provided by law out of the property of the Company or any other obligor upon such Securities, wherever situated. If an Event of Default with respect to Securities of any series occurs and is continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Holders of Securities of such series by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy. 5.4 TRUSTEE MAY FILE PROOFS OF CLAIM In case of any judicial proceeding relative to the Company or any other obligor upon the Securities, its property or its creditors, the Trustee shall be entitled and empowered, by intervention in such proceeding or otherwise, to take any and all actions authorized under Applicable Legislation in order to have claims of the Holders and the Trustee allowed in any such proceeding. In particular, the Trustee shall be authorized to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same; and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other 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 to 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 6.7, except for such costs and expenses as are a result of negligence or bad faith on the part of the Trustee. Ind-37 44 No provision of this Indenture 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 claim of any Holder in any such proceeding. 5.5 TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF SECURITIES All rights of action and claims under this Indenture or the Securities may be prosecuted and enforced by the Trustee without the possession of any of the Securities or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, be for the ratable benefit of the Holders of the Securities in respect of which such judgment has been recovered. 5.6 APPLICATION OF MONEY COLLECTED [IF APPLICABLE, INSERT -- Subject to Article 15,] Any money collected by the Trustee pursuant to this Article shall be applied in the following order, at the date or dates fixed by the Trustee and, in case of the distribution of such money on account of principal or any premium or interest, upon presentation of the Securities and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid: (a) first, to the payment of all amounts due the Trustee under Section 6.7; (b) second, to the payment of the amounts then due and unpaid for principal of and any premium and interest on the Securities in respect of which or for the benefit of which such money has been collected, ratably, without preference or priority of any kind, according to the amounts due and payable on such Securities for principal and any premium and interest, respectively; and (c) third, the balance, if any, to the Company or any other Person or Persons entitled thereto. 5.7 LIMITATION ON SUITS No Holder of any Security of any series shall have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless: (a) such Holder has previously given written notice to the Trustee of a continuing Event of Default with respect to the Securities of that series; (b) the Holders of not less than 25% in principal amount of the Outstanding Securities of that series shall have made written request to the Trustee to institute proceedings in respect of such Event of Default in its own name as Trustee hereunder; (c) such Holder or Holders have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request; (d) the Trustee for 60 days after receipt of such notice, request and offer of indemnity has failed to institute any such proceeding; and Ind-38 45 (e) no direction inconsistent with such written request has been given to the Trustee during such 60-day period by the Holders of a majority in principal amount of the Outstanding Securities of that series; it being understood and intended that no one or more of such Holders shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other of such Holders, or to obtain or to seek to obtain priority or preference over any other of such Holders or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all of such Holders. 5.8 UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE PRINCIPAL, PREMIUM AND INTEREST Notwithstanding any other provision of this Indenture, the Holder of any Security shall have the right, which is absolute and unconditional, to receive payment of the principal of, any premium and (except as specified as contemplated by Section 3.1(e) and subject to Section 3.7) any interest on such Security on the Stated Maturity or Maturities expressed in such Security (or, in the case of redemption, on the Redemption Date) and to institute suit for the enforcement of any such payment and such rights shall not be impaired without the consent of such Holder. 5.9 RESTORATION OF RIGHTS AND REMEDIES If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then and in every such case, subject to any determination in such proceeding, the Company, the Trustee and the Holders shall be restored severally and respectively to their former positions hereunder and thereafter all rights and remedies of the Trustee and the Holders shall continue as though no such proceeding had been instituted. 5.10 RIGHTS AND REMEDIES CUMULATIVE Except as otherwise provided with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities in the last paragraph of Section 3.6, no right or remedy herein conferred upon or reserved to the Trustee or to the Holders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. 5.11 DELAY OR OMISSION NOT WAIVER No delay or omission of the Trustee or of any Holder of any Securities to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article or by law to the Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Holders, as the case may be. Ind-39 46 5.12 CONTROL BY HOLDERS The Holders of a majority in principal amount of the Outstanding Securities of any series shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or to exercise any trust or power conferred on the Trustee, with respect to the Securities of such series, PROVIDED THAT: (a) such direction shall not be in conflict with any rule of law or with this Indenture; (b) the Trustee shall not determine that the action so directed would be unjustly prejudicial to Holders of Securities of that series, or any other series not taking part in such direction; and (c) the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction. 5.13 WAIVER OF PAST DEFAULTS The Holders of not less than a majority in principal amount of the Outstanding Securities of any series may on behalf of the Holders of all the Securities of such series waive any past default hereunder with respect to such series and its consequences, except a default: (a) in the payment of the principal of or any premium or interest on any Security of such series; or (b) in respect of a covenant or provision hereof which under Article 9 cannot be modified or amended without the consent of the Holder of each Outstanding Security of such series affected. Upon any such waiver, such default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other default or impair any right consequent thereon. 5.14 UNDERTAKING FOR COSTS All parties to this Indenture agree, and each Holder of any Security by his acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, 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, suffered or omitted by it as Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorney's fees, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; PROVIDED THAT this Section shall not be deemed to authorize any court to require such an undertaking or to make such an assessment in any suit instituted by the Company, or to any suit instituted by any Holder, or group of Holders, holding in the aggregate more than 10% in principal amount of the Outstanding Securities of any series. 5.15 WAIVER OF CERTAIN COVENANTS The Company may omit in any particular instance to comply with any term, provision or condition to which the Company is subject with respect to the Securities of any series by virtue of Section 3.1(t), or any covenant provided pursuant to Section 9.1(b) for the benefit of Holders of such series, if before the time for such compliance the Holders of at least a majority in principal amount of the Outstanding Securities of such series shall, by Act of such Holders, either waive such compliance in such Ind-40 47 instance or generally waive compliance with such term, provision or condition, but no such waiver shall extend to or affect such term, provision or condition except to the extent so expressly waived, and, until such waiver shall become effective, the obligations of the Company and the duties of the Trustee in respect of any such term, provision or condition shall remain in full force and effect. ARTICLE 6 THE TRUSTEE 6.1 CERTAIN DUTIES AND RESPONSIBILITIES The duties and responsibilities of the Trustee shall be as provided by Applicable Legislation. Notwithstanding the foregoing (but subject to Section 1.7), no provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section. 6.2 NOTICE OF DEFAULTS If a default occurs hereunder with respect to Securities of any series, the Trustee shall give the Holders of Securities of such series notice of such default as and to the extent provided by Applicable Legislation and in the manner provided in Section 1.6. For the purpose of this Section, the term "default" means any event which is, or after notice or lapse of time or both would become, an Event of Default with respect to Securities of such series. 6.3 CERTAIN RIGHTS OF TRUSTEE Subject to the provisions of Section 6.1: (a) the Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; (b) any request or direction of the Company mentioned herein shall be sufficiently evidenced by a Company Request or Company Order (unless other evidence in respect thereof be herein specifically prescribed) and any resolution of the Board of Directors of the Company may be sufficiently evidenced by a Board Resolution; (c) whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, rely upon an Officers' Certificate; (d) the Trustee may consult with counsel and the written advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon; Ind-41 48 (e) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders pursuant to this Indenture, unless such Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction; (f) 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 such 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, personally or by agent or attorney; and (g) 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 misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder. 6.4 NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF SECURITIES The recitals contained herein and in the Securities, except the Trustee's certificates of authentication, shall be taken as the statements of the Company, and the Trustee or any Authenticating Agent assumes no responsibility for their correctness. The Trustee makes no representations as to the validity or sufficiency of this Indenture or of the Securities, except that the Trustee represents that it is duly authorized to execute and deliver this Indenture, authenticate the Securities and perform its obligations hereunder and, if the series of Securities was required to be registered under the SECURITIES ACT, that the statements made by it in a Statement of Eligibility on Form T-1 supplied to the Company are true and accurate, subject to the qualifications set forth therein. The Trustee or any Authenticating Agent shall not be accountable for the use or application by the Company of Securities or the proceeds thereof. 6.5 MAY HOLD SECURITIES The Trustee, any Authenticating Agent, any Paying Agent, any Security Registrar or any other agent of the Company, or the Trustee, in its individual or any other capacity, may become the owner or pledgee of Securities and, subject to Sections 6.8 and 6.13, may otherwise deal with the Company with the same rights it would have if it were not Trustee, Authenticating Agent, Paying Agent, Security Registrar or such other agent. 6.6 MONEY HELD IN TRUST Money held by the Trustee in trust hereunder need not be segregated from other funds except to the extent required by law. The Trustee shall be under no liability for interest on any money received by it hereunder except as otherwise agreed with the Company in writing. 6.7 COMPENSATION AND REIMBURSEMENT The Company covenants and agrees: (a) to pay to the Trustee from time to time reasonable compensation 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); Ind-42 49 (b) except as otherwise expressly provided herein, 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 reasonable compensation and the expenses and disbursements of its agents and counsel), except to the extent any such expense, disbursement or advance may be attributable to its negligence or bad faith; and (c) to indemnify the Trustee for, and to hold it harmless against, any loss, liability or expense, arising out of or in connection with the acceptance or administration of the trust or trusts hereunder, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder, except to the extent any such expense, disbursement or advance may be attributable to its negligence or bad faith. "Trustee," for purposes of this Section 6.7, includes any predecessor Trustee, PROVIDED THAT the negligence or bad faith of any Trustee shall not affect the rights under this Section 6.7 of any other Trustee. 6.8 DISQUALIFICATION; CONFLICTING INTERESTS If the Trustee has or shall acquire a conflicting interest within the meaning of Applicable Legislation, the Trustee shall either eliminate such interest or resign, to the extent and in the manner provided by, and subject to the provisions of, Applicable Legislation and this Indenture, and the Company shall take prompt action to have a successor Trustee appointed in the manner provided herein. To the extent permitted by such legislation, the Trustee shall not be deemed to have a conflicting interest by virtue of being a trustee under [LIST ANY PRIOR INDENTURES BETWEEN THE COMPANY AND THE TRUSTEE THAT HAVE NOT BEEN SATISFIED AND DISCHARGED AND THAT MAY BE EXCLUDED BY THE PROVISO TO SECTION 310(B)(1) OF THE TRUST INDENTURE ACT.] 6.9 CORPORATE TRUSTEE REQUIRED; ELIGIBILITY There shall at all times be a Trustee hereunder with respect to the Securities of each series and the Trustee shall be a Person that is eligible pursuant to the TRUST INDENTURE ACT to act as such, has a combined capital and surplus of at least U.S. $50,000,000 and is subject to supervision or examination by United States Federal, Territorial, District of Columbia or State authority. If such Person publishes reports of condition at least annually, pursuant to law or to the requirements of said supervising or examining authority, then, for the purposes of this Section and to the extent permitted by the TRUST INDENTURE ACT, the combined capital and surplus of such Person shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect hereinafter specified in this Article. The Indenture shall always have a Trustee who satisfies the requirements of Section 3.10(a)(1) and 310(a)(5) of the Trust Indenture Act. 6.10 RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR (a) No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee in accordance with the applicable requirements of Section 6.11. Ind-43 50 (b) The Trustee may resign at any time with respect to the Securities of one or more series by giving written notice thereof to the Company. If the instrument of acceptance by a successor Trustee required by Section 6.11 shall not have been delivered to the Trustee within 30 days after the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee with respect to the Securities of such series. (c) The Trustee may be removed at any time with respect to the Securities of any series by Act of the Holders of a majority in principal amount of the Outstanding Securities of such series, delivered to the Trustee and the Company. (d) If at any time: (i) the Trustee shall fail to comply with Section 6.8 after written request therefor by the Company or by any Holder who has been a bona fide Holder of a Security for at least six months; or (ii) the Trustee shall cease to be eligible under Section 6.9 and shall fail to resign after written request therefor by the Company or by any such Holder; or (iii) the Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent or a receiver of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation of liquidation, then, in any such case, (A) the Company by a Board Resolution, may remove the Trustee with respect to all Securities, or (B) subject to Section 5.14, any Holder who has been a bona fide Holder of a Security for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee with respect to all Securities and the appointment of a successor Trustee or Trustees. (e) If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any cause, with respect to the Securities of one or more series, the Company, by a Board Resolution, shall promptly appoint a successor Trustee or Trustees with respect to the Securities of that or those series (it being understood that any such successor Trustee may be appointed with respect to the Securities of one or more or all of such series and that at any time there shall be only one Trustee with respect to the Securities of any particular series) and shall comply with the applicable requirements of Section 6.11. If, within one year after such resignation, removal or incapability, or the occurrence of such vacancy, a successor Trustee with respect to the Securities of any series shall be appointed by Act of the Holders of a majority in principal amount of the Outstanding Securities of such series delivered to the Company and the retiring Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance of such appointment in accordance with the applicable requirements of Section 6.11, become the successor Trustee with respect to the Securities of such series and to that extent supersede the successor Trustee appointed by the Company. If no successor Trustee with respect to the Securities of any series shall have been so appointed by the Company or the Holders and accepted appointment in the manner required by Section 6.11, any Holder who has been a bona fide Holder of a Security of such series for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee with respect to the Securities of such series. (f) The Company shall give notice of each resignation and each removal of the Trustee with respect to the Securities of any series and each appointment of a successor Trustee with respect to the Ind-44 51 Securities of any series to all Holders of Securities of such series in the manner provided in Section 1.6. Each notice shall include the name of the successor Trustee with respect to the Securities of such series and the address of its Corporate Trust Office. 6.11 ACCEPTANCE OF APPOINTMENT BY SUCCESSOR (a) In case of the appointment hereunder of a successor Trustee with respect to all Securities, every such successor Trustee so appointed 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. (b) In case of the appointment hereunder of a successor Trustee with respect to the Securities of one or more (but not all) series, the Company, the retiring Trustee and each successor Trustee with respect to the Securities of one or more series shall execute and deliver an indenture supplemental hereto wherein each successor Trustee shall accept such appointment and which (i) shall contain such provisions as shall be necessary or desirable to transfer and confirm to, and to vest in, each successor Trustee all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series to which the appointment of such successor Trustee relates, (ii) if the retiring Trustee is not retiring with respect to all Securities, shall contain such provisions as shall be deemed necessary or desirable to confirm that all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series as to which the retiring Trustee is not retiring shall continue to be vested in the retiring Trustee, and (iii) shall add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee, it being understood that nothing herein or in such supplemental indenture shall constitute such Trustees co-trustees of the same trust and that each such Trustee shall be trustee of a trust or trusts hereunder separate and apart from any trust or trusts hereunder administered by any other such Trustee; and upon the execution and delivery of such supplemental indenture the resignation or removal of the retiring Trustee shall become effective to the extent provided therein and each 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 with respect to the Securities of that or those series to which the appointment of such successor Trustee relates; but, on request of the Company or any successor Trustee, such retiring Trustee shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder with respect to the Securities of that or those series to which the appointment of such successor Trustee relates. (c) 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 referred to in paragraph (a) or (b) of this Section, as the case may be. (d) No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be qualified and eligible under this Article. 6.12 MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Ind-45 52 Trustee shall be a party, or any corporation succeeding to all or substantially all the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided such corporation shall be otherwise qualified and 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. 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. In the event any Securities shall not have been authenticated by such predecessor Trustee, any such successor Trustee may authenticate and deliver such Securities, in either its own name or that of its predecessor Trustee, with the full force and effect which this Indenture provides for the certificate of authentication of the Trustee. 6.13 PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY If and when the Trustee with respect to any series of Securities which was required to be registered under the EXCHANGE ACT shall be or become a creditor of the Company (or any other obligor upon the Securities), the Trustee shall be subject to the provisions of the TRUST INDENTURE ACT regarding the collection of claims against the Company (or any such other obligor). 6.14 APPOINTMENT OF AUTHENTICATING AGENT The Trustee may appoint an Authenticating Agent or Agents with respect to one or more series of Securities which shall be authorized to act on behalf of the Trustee to authenticate Securities of such series issued upon original issue and upon exchange, registration of transfer or partial redemption thereof or pursuant to Section 3.6, and Securities so authenticated shall be entitled to the benefits of this Indenture and shall be valid and obligatory for all purposes as if authenticated by the Trustee hereunder. Wherever reference is made in this Indenture to the authentication and delivery of Securities by the Trustee or the Trustee's certificate of authentication, such reference shall be deemed to include authentication and delivery on behalf of the Trustee by an Authenticating Agent and a certificate of authentication executed on behalf of the Trustee by an Authenticating Agent. Each Authenticating Agent shall be acceptable to the Company and, if such Authenticating Agent is appointed with respect to any series of Securities which was required to be registered under the EXCHANGE ACT, shall at all times be a corporation organized and doing business under the laws of the United States of America, any State thereof or the District of Columbia, authorized under such laws to act as an Authenticating Agent, having a combined capital and surplus of not less than U.S. $50,000,000 and subject to supervision or examination by Federal or State authority. If such Authenticating Agent publishes reports of condition at least annually, pursuant to law or to the requirements of said supervising or examining authority, then, for the purposes of this Section, the combined capital and surplus of such Authenticating Agent shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time an Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, such Authenticating Agent shall resign immediately in the manner and with the effect specified in this Section. Any corporation into which an Authenticating Agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which such Authenticating Agent shall be a party, or any corporation succeeding to the corporate agency or corporate trust business of an Authenticating Agent, shall continue to be an Authenticating Agent, provided such corporation shall be otherwise eligible under this Section, without the execution or filing of any paper or any further act on the part of the Trustee or the Authenticating Agent. An Authenticating Agent may resign at any time by giving written notice thereof to the Trustee and the Company. The Trustee may at any time terminate the agency of an Authenticating Agent by giving written notice thereof to such Authenticating Agent and to the Company. Upon receiving such a Ind-46 53 notice of resignation or upon such a termination, or in case at any time such Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, the Trustee may appoint a successor Authenticating Agent which shall be acceptable to the Company and shall mail written notice of such appointment by first-class mail, postage prepaid, to all Holders of Securities of the series with respect to which such Authenticating Agent will serve, as their names and addresses appear in the Security Register. Any successor Authenticating Agent upon acceptance of its appointment hereunder shall become vested with all the rights, powers and duties of its predecessor hereunder, with like effect as if originally named as an Authenticating Agent. No successor Authenticating Agent shall be appointed unless eligible under the provisions of this Section. The Trustee agrees to pay to each Authenticating Agent from time to time reasonable compensation for its services under this Section, and the Trustee shall be entitled to be reimbursed for such payments, subject to the provisions of Section 6.7. If an appointment with respect to one or more series is made pursuant to this Section, the Securities of such series may have endorsed thereon, in addition to the Trustee's certificate of authentication, an alternative certificate of authentication in the following form: This is one of the Securities of the series designated therein referred to in the within-mentioned Indenture. ---------------------------------- As Trustee By: ------------------------------- As Authenticating Agent By: ------------------------------- Authorized Officer ARTICLE 7 HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY 7.1 COMPANY TO FURNISH TRUSTEE NAMES AND ADDRESSES OF HOLDERS The Company will furnish or cause to be furnished to the Trustee: (a) semi-annually, not later than 15 days after the Regular Record Date for each series of Securities, a list, in such form as the Trustee may reasonably require, of the names and addresses of the Holders of Securities as of such Regular Record Date, or if there is no Regular Record Date for interest for such series of Securities, semi-annually, upon such dates as are set forth in the Board Resolution or indenture supplemental hereto authorizing such series; and (b) at such other times as the Trustee may request in writing, within 30 days after the receipt by the Company of any such request, a list of similar form and content as of a date not more than 15 days prior to the time such list is furnished; [provided, however, that so long as the Trustee is the Security Registrar, the Company shall not be required to furnish or cause to be furnished such a list to the Trustee. The Company shall otherwise comply with Section 310(a) of the Trust Indenture Act.] PROVIDED, HOWEVER, that so long as the Trustee is the Security Registrar, no such list shall be required to be furnished. Ind-47 54 7.2 PRESERVATION OF INFORMATION; COMMUNICATIONS TO HOLDERS (a) The Trustee shall preserve, in as current a form as is reasonably practicable, the names and addresses of Holders of Securities (i) contained in the most recent list furnished to the Trustee for each series as provided in Section 7.1 and (ii) received by the Trustee for each series in the capacity as Security Registrar if the Trustee is acting in such capacity. The Trustee may destroy any list furnished to it as provided in Section 7.1 upon receipt of a new list so furnished. The Trustee shall otherwise comply with Section 310(a) of the Trust Indenture Act. (b) The rights of Holders to communicate with other Holders with respect to their rights under this Indenture or under the Securities, and the corresponding rights and privileges of the Trustee, shall be as provided by Applicable Legislation and any other relevant provisions of United States securities laws. (c) Every Holder of Securities, by receiving and holding the same, agrees with the Company and the Trustee that neither the Company nor the Trustee nor any agent of either of them shall be held accountable by reason of any disclosure of information as to names and addresses of Holders made pursuant to Applicable Legislation. 7.3 REPORTS BY TRUSTEE (a) The Trustee shall transmit to Holders of Securities, as their names and addresses appear in the Security Register, such reports concerning the Trustee and its actions under this Indenture as may be required pursuant to Applicable Legislation at the times and in the manner provided pursuant thereto. (b) A copy of such report shall, at the time of such transmission to Holders, be filed by the Trustee with each stock exchange upon which any Securities are listed, with the Commission and with the Company. The Company will notify the Trustee when any Securities are listed on any stock exchange. 7.4 REPORTS BY COMPANY The Company shall file with the Trustee and the Commission, and transmit to Holders, such information, documents and other reports, and such summaries thereof, as may be required pursuant to the TRUST INDENTURE ACT at the times and in the manner provided pursuant to such Act; PROVIDED THAT any such information, documents or reports required to be filed with the Commission pursuant to Section 13 or 15(d) of the EXCHANGE ACT shall be filed with the Trustee within 15 days after the same is so required to be filed with the Commission. The provisions of this section shall not require the Company to make any filing with the Commission with respect to any series of Securities to which the EXCHANGE ACT and the TRUST INDENTURE ACT are not applicable. ARTICLE 8 CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE 8.1 COMPANY MAY CONSOLIDATE, ETC., ONLY ON CERTAIN TERMS The Company shall not consolidate with or merge into any other corporation (other than a wholly-owned Subsidiary of the Company) or convey, transfer, sell or lease its properties and assets substantially as an entirety (treating the Company and each Subsidiary of the Company as a single consolidated entity and treating any sale by a Subsidiary or of a Subsidiary (including by merger) as a sale by the Company for such purpose) to any corporation (other than a wholly-owned Subsidiary of the Company), and the Company shall not permit any corporation (other than a wholly owned Subsidiary of Ind-48 55 the Company) to consolidate with or merge into the Company or convey, transfer or lease its properties and assets substantially as an entirety to the Company, unless: (a) the Company shall consolidate with or merge into another corporation or convey, transfer or lease its properties and assets substantially as an entirety (treating the Company and each Subsidiary or of a Subsidiary (including by merger)) of the Company as a single consolidated entity and treating any sale by a Subsidiary or of a Subsidiary (including by merger) as a sale by the Company for such purpose) to any corporation, where the corporation formed by such consolidation or into which the Company is merged or the corporation which acquires by conveyance or transfer, or which leases, the properties and assets of the Company substantially as an entirety (treating the Company and each Subsidiary of the Company as a single consolidated entity and treating any sale by a Subsidiary or of a Subsidiary (including by merger) as a sale by the Company for such purpose), shall be organized and existing under the laws of the United States of America or a state thereof or the District of Columbia, and such corporation shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, in form satisfactory to the Trustee, the due and punctual payment of the principal of and any premium and interest on all the Securities and the performance or observance of every covenant of this Indenture on the part of the Company to be performed or observed; (b) the Trustee shall have received an Opinion of Counsel to the effect that the transaction will not result in the successor being required to make any deduction or withholding on account of any present or future tax, duty, levy, impost, assessment or other governmental charge imposed or levied by or on behalf of the Government of the United States, any state thereof or the District of Columbia, or by any authority or agency therein or thereof having power to tax from any payments in respect of the Securities, which deduction or withholding is greater than any deduction or withholding to which the Company was subject prior to the transaction; (c) immediately after giving effect to such transaction and treating any indebtedness which becomes an obligation of the Company, or any Subsidiary, as a result of such transaction as having been incurred by the Company, or such Subsidiary, at the time of such transaction, no Event of Default, and no event which, after notice or lapse of time or both, would become an Event of Default, shall have happened and be continuing; and (d) the Company 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 required in connection with such transaction, such supplemental indenture, comply with this Article and that all conditions precedent herein provided for relating to such transaction have been complied with. 8.2 SUCCESSOR SUBSTITUTED Upon any consolidation of the Company with, or merger of the Company into, any other Person or any conveyance, transfer or lease of the properties and assets of the Company substantially as an entirety in accordance with Section 8.1, the successor Person formed by such consolidation or into which the Company 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 under this Indenture with the same effect as if such successor corporation had been named as the Company herein, and thereafter the predecessor corporation shall be relieved of all obligations and covenants under this Indenture and the Securities. Ind-49 56 ARTICLE 9 SUPPLEMENTAL INDENTURES 9.1 SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF HOLDERS Without the consent of any Holders, the Company, when authorized by a Board Resolution, and the Trustee, at any time and from time to time, may enter into one or more indentures supplemental hereto, in form satisfactory to the Trustee, for any of the following purposes: (a) to evidence the succession of another corporation to the Company and the assumption by any such successor of the covenants of the Company herein and in the Securities; or (b) to add to the covenants of the Company or to surrender any right or power herein conferred upon the Company for the benefit of the Holders of all or any series of Securities (and if such covenants or the surrender of such right or power are to be for the benefit of less than all series of Securities, stating that such covenants are expressly being included solely for the benefit of such series); or (c) to add any additional Events of Default with respect to the Securities of any or all series (and if such additional Events of Default are to be for the benefit of less than all series of Securities, stating that such additional Events of Default are expressly being included solely for the benefit of one or more specified series); or (d) to add or change any of the provisions of this Indenture to such extent as shall be necessary to permit or facilitate the issuance of Securities in bearer form, registrable or not registrable as to principal, and with or without interest coupons, or to permit or facilitate the issuance of Securities in uncertificated form; or (e) to add, change or eliminate any of the provisions of this Indenture in respect of one or more series of Securities, PROVIDED THAT any such addition, change or elimination (i) shall neither (A) apply to any Security of any series created prior to the execution of such supplemental indenture and entitled to the benefit of such provision nor (B) modify the rights of the Holder of any such Security with respect to such provision or (ii) shall become effective only when there is no such Security Outstanding of such series; or (f) to secure the Securities; or (g) to establish the form or terms of Securities of any series as permitted by Sections 2.1 and 3.1; or (h) to evidence and provide for the acceptance of appointment hereunder by another corporation as a successor Trustee with respect to the Securities of one or more series and to add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee, pursuant to the requirements of Section 6.11(b); or (i) to comply with the requirements of the Commission in connection with the qualification of this Indenture under the TRUST INDENTURE ACT; or (j) to cure any ambiguity, to correct or supplement any provision herein which may be inconsistent with any other provision herein, or to make any other provisions with respect to matters or Ind-50 57 questions arising under this Indenture, PROVIDED THAT such action pursuant to this clause 9.1(j) shall not adversely affect the interests of the Holders of Outstanding Securities of any series; or (k) to make provision with respect to the conversion rights of Holders pursuant to the requirements of Article 14, including providing for the conversion of the Securities into any security (other than the Common Stock of the Company) or property of the Company; or (l) to confirm to any mandatory provisions of law. 9.2 SUPPLEMENTAL INDENTURES WITH CONSENT OF HOLDERS With the consent of the Holders of not less than a majority in principal amount of the Outstanding Securities of each series affected by such supplemental indenture or indentures, by Act of said Holders delivered to the Company and the Trustee, the Company, when authorized by a Board Resolution, and the Trustee may enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of modifying in any manner the rights of the Holders of Securities of each such series under this Indenture; PROVIDED, HOWEVER, that no such supplemental indenture shall, without the consent of the Holder of each Outstanding Security affected thereby, (a) change the Maturity or the Stated Maturity of the principal of, or any installment of principal of or interest on, any Security, or reduce the principal amount thereof or the rate of interest thereon or any premium payable upon the redemption thereof, or reduce the amount of the principal of an Original Issue Discount Security that would be due and payable upon a declaration of acceleration of the Maturity thereof pursuant to Section 5.2, or change the method of computing the amount of principal thereof or interest thereon on any date, or change any Place of Payment where, or the coin or currency in which, any Security or any premium or interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment on or after the Maturity or the Stated Maturity, as the case may be, thereof (or, in the case of redemption, on or after the Redemption Date); or (b) reduce the percentage in principal amount of the Outstanding Securities of any series, the consent of whose Holders is required for any such supplemental indenture, or the consent of whose Holders is required for any waiver of compliance with certain provisions of this Indenture or certain defaults hereunder and their consequences, provided for in this Indenture; or (c) if applicable, make any change that adversely affects the right to convert any Security to which the provisions of Article 14 are applicable or, except as provided in this Indenture, decrease the conversion rate or increase the conversion price for any Security; or (d) modify any of the provisions of this Section, Section 5.13 or Section 5.16, except to increase any such percentage, or to designate, in any supplemental indenture, additional provisions of this Indenture which, with respect to such series, cannot be modified or waived without the consent of the Holder of each Outstanding Security affected thereby; PROVIDED, HOWEVER, that this clause shall not be deemed to require the consent of any Holder with respect to changes in the references to "the Trustee" and concomitant changes in this Section and Section 5.16, or the deletion of this proviso, in accordance with the requirements of Section 6.11(b) and 9.1(h); or (e) modify the provisions of Article 14 hereof relating to conversion of Securities of a series in a manner adverse to the holders of Securities of such series; or Ind-51 58 (f) [IF APPLICABLE, INSERT -- modify the provisions of Article 15 hereof as it relates to Outstanding Securities of a series in a manner adverse to the Holders of Securities of such series;] A supplemental indenture which changes or eliminates any covenants or other provision of this Indenture which has expressly been included solely for the benefit of one or more particular series of Securities, or which modifies the rights of the Holders of Securities of such series with respect to such covenant or other provision, shall be deemed not to affect the rights under this Indenture of the Holders of Securities of any other series. It shall not be necessary for any Act of Holders under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act shall approve the substance thereof. 9.3 EXECUTION OF SUPPLEMENTAL INDENTURES In executing, or accepting the additional trusts created by, any supplemental indenture permitted by this Article or the modifications thereby of the trusts created by this Indenture, the Trustee shall be entitled to receive, and (subject to Section 6.1) shall be fully protected in relying upon, an Opinion of Counsel stating that the execution of such supplemental indenture is authorized or permitted by this Indenture. The Trustee may, but shall not be obligated to, enter into any such supplemental indenture which affects the Trustee's own rights, duties or immunities under this Indenture or otherwise. 9.4 EFFECT OF SUPPLEMENTAL INDENTURES Upon the execution of any supplemental indenture under this Article, 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 to the extent provided therein. 9.5 REVOCATION AND EFFECT OF CONSENTS. Until an amendment or supplement under this Article becomes effective, a consent to it by a Holder of a Security is a continuing consent by the Holder and every subsequent Holder of a Security or portion of a Security that evidences the same debt as the consenting Holder's Security, even if notation of the consent is not made on any Security. However, any such Holder or subsequent Holder may revoke the consent as to his Security or portion of a Security if the Trustee receives the notice of revocation before the date the amendment, supplement or waiver becomes effective. 9.6 CONFORMITY WITH APPLICABLE LEGISLATION Every supplemental indenture executed pursuant to this Article shall conform to the requirements of Applicable Legislation. 9.7 REFERENCE IN SECURITIES TO SUPPLEMENTAL INDENTURES Securities of any series authenticated and delivered after the execution of any supplemental indenture pursuant to this Article 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 of any series so modified as to conform, in the opinion of the Company and the Trustee, 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 of such series. Ind-52 59 9.8 WAIVER OF COMPLIANCE BY HOLDERS Anything in this Indenture to the contrary notwithstanding, any of the acts which the Company is required to do, or is prohibited from doing, by any of the provisions of this Indenture may, to the extent that such provisions might be changed or eliminated by a supplemental indenture pursuant to Section 9.2 upon consent of Holders of not less than a majority in aggregate principal amount of the then Outstanding Securities of the series affected, be omitted or done by the Company, if there is obtained the prior consent or waiver of the Holders of at least a majority in aggregate principal amount of the then Outstanding Securities of such series. 9.9 NOTICE OF SUPPLEMENTAL INDENTURE Promptly after the execution by Company and the Trustees of any supplemental indenture pursuant to the provisions of Section 9.2, the Company shall give notice thereof to the Holders of each Outstanding Security affected, in the manner provided for in Section 1.6, setting forth in general terms the substance of such supplemental indenture. ARTICLE 10 COVENANTS 10.1 PAYMENT OF PRINCIPAL, PREMIUM AND INTEREST The Company covenants and agrees for the benefit of each series of Securities that it will duly and punctually pay the principal of and any premium and interest on the Securities of such series in accordance with the terms of the Securities and this Indenture and will duly comply with all the other terms, agreements and conditions contained in, or made in this Indenture for the benefit of, the Securities of such series. 10.2 MAINTENANCE OF OFFICE OR AGENCY The Company will maintain in each Place of Payment for any series of Securities an office or agency where Securities of such series may be presented or surrendered for payment, where Securities of such series may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Company in respect of the Securities of such series and this Indenture may be served. The Company will give prompt written notice to the Trustee of the location, and any change in the location, of such 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 of the Trustee, Attention: Corporate Trust Department, and the Company hereby appoints the Trustee as its agent to receive all such presentations, surrenders, notices and demands. The Company may also from time to time designate one or more other offices or agencies where the Securities of one or more series 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 each Place of Payment for Securities of any series for such purposes. The Company will give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. Ind-53 60 10.3 MONEY FOR SECURITIES PAYMENTS TO BE HELD IN TRUST If the Company shall at any time act as its own Paying Agent with respect to any series of Securities, it will, on or before each due date of the principal of, or any premium or interest on, any of the Securities of such series, segregate and hold in trust for the benefit of the Persons entitled thereto a sum sufficient to pay the principal and any premium and interest so becoming due until such sums shall be paid to such Persons or otherwise disposed of as herein provided and the Company will promptly notify the Trustee of its action or failure so to act. Whenever the Company shall have one or more Paying Agents for any series of Securities, it will, prior to each due date of the principal of, or any premium or interest on, any Securities of such series, deposit with any such Paying Agent a sum sufficient to pay such principal, premium (if any) or interest so becoming due, such sum to be held in trust for the benefit of the Persons entitled to such principal, premium (if any) or interest thereon and (unless such Paying Agent is the Trustee) the Company will promptly notify the Trustee of its action or failure so to act. The Company will cause each Paying Agent for any series of Securities, other than the Trustee, to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this Section, that such Paying Agent will: (a) hold all sums held by it for the payment of the principal of (and premium, if any) or interest on Securities in trust for the benefit of the Persons entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as herein provided; (b) give the Trustee notice of any default by the Company (or any other obligor upon the Securities) in the making of any payment of principal (and premium, if any) or interest on the Securities of such series; and (c) at any time during the continuance of any such default, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such Paying Agent for payment in respect of such series. The Company may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture with respect to any series of Securities or for any other purpose, pay, or the Company may by Company Order direct any Paying Agent to pay, to the Trustee all sums held in trust by the Company or such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by the Company or such Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such money. Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of, or any premium or interest on, any Security of any series and remaining unclaimed for two years after such principal, premium or interest has become due and payable shall be paid to the Company on Company Request (including interest income accrued on such funds, if any), or (if then held by the Company) shall be discharged from such trust; and the Holder of such Security shall thereafter, as an unsecured general creditor, look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease; PROVIDED, HOWEVER, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Company cause to be published once in the WALL STREET JOURNAL or other daily newspaper of national circulation in the United States or mail to each Holder of the Securities for which the money to be repaid is held in trust, as their names and addresses appear in the Security Register, a notice that such money 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 balance of such money then remaining will be repaid to the Company. Ind-54 61 The Company initially authorizes the Trustee to act as Paying Agent for the Securities on its behalf. The Company may at any time and from time to time authorize one or more Persons to act as Paying Agent in addition to or in place of the Trustee with respect to any series of Securities issued under this Indenture. 10.4 STATEMENT BY OFFICERS AS TO DEFAULT The Company will deliver to the Trustee, within 120 days after the end of each fiscal year of the Company ending after the date hereof, an Officers' Certificate, stating whether or not to the best knowledge of the signers thereof the Company, 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 shall so be in default, specifying all such defaults and the nature and status thereof of which they may have knowledge. Such statement need not include reference to any default which has been fully cured prior to the date as of which such statement speaks. 10.5 EXISTENCE Subject to Article 8, the Company will do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence. [IF, PURSUANT TO A BOARD RESOLUTION, THE SECURITIES ARE DESIGNATED AS SENIOR SUBORDINATED INDEBTEDNESS, THE FOLLOWING COVENANT SHOULD BE INSERTED.] 10.6 WAIVER OF CERTAIN COVENANTS The Company may omit in any particular instance to comply with any covenant or condition set forth in Section 10.4, or any covenant added for the benefit of any series of Securities as contemplated by Section 3.1 (unless otherwise specified pursuant to Section 3.1) if before or after the time for such compliance the Holders of a majority in principal amount of the Outstanding Securities of all series affected by such omission (acting as one class) shall, by Act of such Holders, either waive such compliance in such instance or generally waive compliance with such covenant or condition, but no such waiver shall extend to or affect such covenant or condition except to the extent so expressly waived, and, until such waiver shall become effective, the obligations of the Company and the duties of the Trustee in respect of any such covenant or condition shall remain in full force and effect. 10.7 LIMITATION ON SUBORDINATED INDEBTEDNESS The Company shall not issue, assume, guarantee, incur or otherwise become liable, directly or indirectly, for any indebtedness which is subordinate or junior in right of payment to any Senior Indebtedness unless such indebtedness constitutes Securities or is PARI PASSU or expressly subordinated in right of payment to any Securities. Ind-55 62 ARTICLE 11 REDEMPTION OF SECURITIES 11.1 APPLICABILITY OF ARTICLE Securities of any series which are redeemable before their Stated Maturity shall be redeemable in accordance with their terms and (except as otherwise specified as contemplated by Section 3.1 for Securities of any series) in accordance with this Article. 11.2 ELECTION TO REDEEM; NOTICE TO TRUSTEE The election of the Company to redeem any Securities shall be evidenced by a Board Resolution or in another manner specified as contemplated by Section 3.1 for such Securities. In case of any redemption at the election of the Company of less than all the Securities of any series of the same tenor, the Company shall, at least 60 days prior to the Redemption Date fixed by the Company (unless a shorter notice shall be satisfactory to the Trustee), notify the Trustee of such Redemption Date and of the principal amount of Securities of such series to be redeemed and, if applicable, of the tenor of the Securities to be redeemed, which notice shall be irrevocable. In the case of any redemption of Securities prior to the expiration of any restriction on such redemption provided in the terms of such Securities or elsewhere in this Indenture, the Company shall furnish the Trustee with an Officers' Certificate evidencing compliance with such restriction. 11.3 SELECTION BY TRUSTEE OF SECURITIES TO BE REDEEMED If less than all the Securities of any series are to be redeemed (unless all of the Securities of such series and of a specified tenor are to be redeemed), the particular Securities to be redeemed shall be selected not more than 60 days prior to the Redemption Date by the Trustee, from the Outstanding Securities of such series not previously called for redemption, by such method as the Trustee shall deem fair and appropriate and which may provide for the selection for redemption of portions (equal to the minimum authorized denomination for Securities of that series or any integral multiple thereof) of the principal amount of Securities of such series of a denomination larger than the minimum authorized denomination for Securities of that series. Unless otherwise provided in the terms of a particular series of Securities, the portions of the principal of Securities so selected for partial redemption shall be equal to the minimum authorized denomination of the Securities of such series, or an integral multiple thereof, and the principal amount which remains outstanding shall not be less than the minimum authorized denomination for Securities of such series. If any convertible or exchangeable Security selected for partial redemption is converted in part before the termination of the conversion or exchange right with respect to the portion of the Security so selected, the converted or exchanged portion of such Security shall be deemed (so far as may be) to be the portion selected for redemption. Upon any redemption of fewer than all of the Securities of any given series, the Company and the Trustee may treat as Outstanding any Securities surrendered for conversion or exchange during the period of 15 days next preceding the mailing of a notice of redemption, and need not treat as Outstanding any Security authenticated and delivered during such period in exchange for the unconverted portion of any Security converted in part during such period. The Trustee shall promptly notify the Company in writing of the Securities selected for redemption and, in the case of any Securities selected for partial redemption, the principal amount thereof to be redeemed. Ind-56 63 For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to the redemption of Securities shall relate, in the case of any Securities redeemed or to be redeemed only in part to the portion of the principal amount of such Securities which has been or is to be redeemed. 11.4 NOTICE OF REDEMPTION Notice of redemption shall be given by first-class mail, postage prepared, mailed not less than 30 nor more than 60 days prior to the Redemption Date, unless a shorter period is specified in the Securities to be redeemed, to each Holder of Securities to be redeemed, at his address appearing in the Security Register. Any notice that is mailed to the Holder of any Securities in the manner herein provided shall be conclusively presumed to have been duly given, whether or not such Holder receives the notice. All notices of redemption shall state: (a) the Redemption Date; (b) the Redemption Price and the amount of accrued interest, if any, to be paid; (c) if less than all the Outstanding Securities of any series are to be redeemed, the identification (and, in the case of partial redemption of any Securities, the principal amounts) of the particular Securities to be redeemed; (d) in case any Security is to be redeemed in part only, the notice which relates to such Security shall state that on and after the Redemption Date, upon surrender of such Security, the Holder of such Security will receive, without charge, a new Security or Securities of authorized denominations for the principal amount thereof remaining unredeemed; (e) that on the Redemption Date, the Redemption Price will become due and payable upon each such Security to be redeemed and, if applicable, that interest thereon will cease to accrue on and after said date; (f) in the case of any Securities that are convertible pursuant to Article 14, the Conversion Price, the date on which the right to convert the principal of the Securities to be redeemed will terminate and the place or places where such Securities may be surrendered for conversion; (g) the place or places where such Securities are to be surrendered for payment of the Redemption Price; and (h) that the redemption is for a sinking or purchase fund or other analogous obligation, if such is the case. Notice of redemption of Securities to be redeemed at the election of the Company shall be given by the Company or, at the Company's request, by the Trustee in the name and at the expense of the Company and shall be irrevocable. Ind-57 64 11.5 DEPOSIT OF REDEMPTION PRICE On or prior to any Redemption Date, the Company shall deposit with the Trustee or with a Paying Agent (or, if the Company is acting as its own Paying Agent, segregate and hold in trust as provided in Section 10.3) an amount of money in same day funds (or New York Clearing House funds if such deposit is made prior to the applicable Redemption Date) sufficient to pay the Redemption Price of, and (except if the Redemption Date shall be an Interest Payment Date) accrued interest on, all the Securities which are to be redeemed on that date, other than any Securities called for redemption on that date which have been converted prior to the date of such deposit. 11.6 SECURITIES PAYABLE ON REDEMPTION DATE Notice of redemption having been given as aforesaid, the Securities so to be redeemed shall, on the Redemption Date, become due and payable at the Redemption Price therein specified, and from and after such date (unless the Company shall default in the payment of the Redemption Price and accrued interest) such Securities shall cease to bear interest. Upon surrender of any such Security for redemption in accordance with said notice, such Security shall be paid by the Company at the Redemption Price, together with accrued interest to the Redemption Date; PROVIDED, HOWEVER, that, unless otherwise specified as contemplated by Section 3.1, installments of interest whose Stated Maturity is on or prior to the Redemption Date will be payable to the Holders of such Securities, or one or more Predecessor Securities, registered as such at the close of business on the relevant record dates according to their terms and the provisions of Section 3.7. If any Security called for redemption shall not be so paid upon surrender thereof for redemption, the principal and any premium shall, until paid, bear interest from the Redemption Date at the rate prescribed therefor in the Security and each Security shall remain convertible into Common Shares until the principal of such Security shall have been paid or fully provided for. 11.7 SECURITIES REDEEMED IN PART Any Security which is to be redeemed only in part shall be surrendered at a Place of Payment therefor (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 his 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 the same series and of like tenor, of any authorized denomination as requested by such Holder, in aggregate principal amount equal to and in exchange for the unredeemed portion of the principal of the Security so surrendered. ARTICLE 12 SINKING FUNDS 12.1 APPLICABILITY OF ARTICLE The provisions of this Article shall be applicable to any sinking fund for the retirement of Securities of a series except as otherwise specified as contemplated by Section 3.1 for Securities of such series. The minimum amount of any sinking fund payment provided for by the terms of Securities of any series is herein referred to as a "mandatory sinking fund payment," and any payment in excess of such minimum amount provided for by the terms of Securities of any series is herein referred to as an "optional Ind-58 65 sinking fund payment." If provided for by the terms of Securities of any series, the cash amount of any sinking fund payment may be subject to reduction as provided in Section 12.2. Each sinking fund payment shall be applied to the redemption of Securities of any series as provided for by the terms of Securities of such series. 12.2 SATISFACTION OF SINKING FUND PAYMENTS WITH SECURITIES The Company (a) may deliver Outstanding Securities of a series (other than any previously called for redemption) and (b) may apply as a credit Securities of a series which have been redeemed either at the election of the Company pursuant to the terms of such Securities or through the application of permitted optional sinking fund payments pursuant to the terms of such Securities, in each case in satisfaction of all or any part of any sinking fund payment with respect to the Securities of such series required to be made pursuant to the terms of such Securities as provided for by the terms of such Series; PROVIDED THAT such Securities have not been previously so credited. Such Securities shall be received and credited for such purpose by the Trustee at the Redemption Price specified in such Securities for redemption through operation of the sinking fund and the amount of such sinking fund payment shall be reduced accordingly. 12.3 REDEMPTION OF SECURITIES FOR SINKING FUND Not less than 60 days prior to each sinking fund payment date for any series of Securities, the Company will deliver to the Trustee an Officers' Certificate specifying the amount of the next ensuing sinking fund payment for that series pursuant to the terms of that series, the portion thereof, if any, which is to be satisfied by payment of cash and the portion thereof, if any, which is to be satisfied by delivering the crediting Securities of that series pursuant to Section 12.2 and will also deliver to the Trustee any Securities to be so delivered. Not less than 30 days before each such sinking fund payment date the Trustee shall select the Securities to be redeemed upon such sinking fund payment date in the manner specified in Section 11.3 and cause notice of the redemption thereof to be given in the name of and at the expense of the Company in the manner provided in Section 11.4. Such notice having been duly given, the redemption of such Securities shall be made upon the terms and in the manner stated in Sections 11.6 and 11.7. ARTICLE 13 DEFEASANCE AND COVENANT DEFEASANCE 13.1 COMPANY'S OPTION TO EFFECT DEFEASANCE AND COVENANT DEFEASANCE The Company may elect, at its option by Board Resolution, at any time, to have Section 13.2 or Section 13.3 applied to the Outstanding Securities of any series designated pursuant to Section 3.1 as being defeasible pursuant to this Article 13 (hereinafter called a "Defeasible Series"), upon compliance with the conditions set forth below in this Article 13. 13.2 DEFEASANCE AND DISCHARGE Upon the Company's exercise of the option provided in Section 13.1 to have this Section 13.2 applied to the Outstanding Securities of any Defeasible Series, the Company shall be deemed to have been discharged from its obligations, with respect to the Outstanding Securities of such series as provided in this Section on and after the date the conditions set forth in Section 13.4 are satisfied (hereinafter called "Defeasance"). For this purpose, such Defeasance means that the Company shall be deemed to have paid and discharged the entire indebtedness represented by the Outstanding Securities of such series and to Ind-59 66 have satisfied all its other obligations under the Securities of such series and this Indenture insofar as the Securities of such series are concerned (and the Trustee, at the expense of the Company, shall execute proper instruments acknowledging the same), subject to the following which shall survive until otherwise terminated or discharged hereunder: (1) the rights of Holders of Securities of such series to receive, solely from the trust fund described in Section 13.4 and as more fully set forth in such Section, payments in respect of the principal of and any premium and interest on such Securities of such series when payments are due, (2) the Company's obligations with respect to the Securities of such series under Sections 3.4, 3.5, 3.6, 10.2 and 10.3, (3) the rights, powers, trusts, duties and immunities of the Trustee hereunder, including, without limitation, its rights under Section 6.7 and (4) this Article 13. Subject to compliance with this Article 13, the Company may exercise its option provided in Section 13.1 to have this Section 13.2 applied to the Outstanding Securities of any series notwithstanding the prior exercise of its option provided in Section 13.1 to have Section 13.3 applied to the Outstanding Securities of such series. 13.3 COVENANT DEFEASANCE Upon the exercise by the Company of the option provided in Section 13.1 to have this Section 13.3 applied to the Outstanding Securities of any Defeasible Series, (a) the Company shall be released from its obligations under Section 10.5 [and 10.7], and under any other covenant to which the Company is subject with respect to such series of Securities by virtue of Section 3.1(t) and Article 8 and (b) the occurrence of any event specified in Sections 5.1(d) (with respect to either of Section 10.5 [or 10.7] and any other covenant to which the Company is subject with respect to such series of Securities by virtue of Section 3.1(t) and Article 8), 5.1(e) and 5.1(h) shall be deemed not to be or result in an Event of Default, in each case with respect to the Outstanding Securities of such series as provided in this Section on and after the date the conditions set forth in Section 13.4 are satisfied (hereinafter called "Covenant Defeasance"). For this purpose, such Covenant Defeasance means that the Company may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such specified Section (to the extent so specified in the case of Section 5.1(d)), whether directly or indirectly by reason of any reference elsewhere herein to any such Section or by reason of any reference in any such Section to any other provision herein or in any other document, but the remainder of this Indenture and the Securities of such series shall be unaffected thereby. [IF APPLICABLE, INSERT --; provided, however, that notwithstanding the provisions of Article 15, in the event that the Company deposits money or government obligations in compliance with this Article 13, the money or government obligations so deposited will not be subject to the subordination provisions of Article 15 and the indebtedness evidenced by such Outstanding Securities of any Defeasible Series will not be subordinated in right of payment to the holders of applicable Senior Indebtedness to the extent of the money or government obligations so deposited.] 13.4 CONDITIONS TO DEFEASANCE AND COVENANT DEFEASANCE The following shall be the conditions to application of Section 13.2 or 13.3 to the Outstanding Securities of any Defeasible Series: (a) The Company shall elect by Board Resolution to effect a Defeasance pursuant to Section 13.2 or a Covenant Defeasance pursuant to Section 13.3 with respect to the Outstanding Securities of any Defeasible Series. (b) The Company shall irrevocably have deposited or caused to be deposited with the Trustee (or another trustee that satisfies the requirements contemplated by Section 6.9 and agrees to comply with the provisions of this Article 13 applicable to it) and conveyed all right, title and interest to the Trustee for the benefit of the Holders of the Securities of such series, under the terms of an irrevocable trust agreement in form and substance satisfactory to the Trustee, as trust funds in trust for the purpose of Ind-60 67 making the following payments, specifically pledged to the Trustee as security for, and dedicated solely to, the benefit of the Holders of Outstanding Securities of such series, (i) an amount in the currency in which the Securities of such series are denominated and in which payments of principal, premium (if any) and interest are to be made, or (ii) the equivalent in Government Obligations denominated in the currency in which the Securities of such series are denominated and in which payments of principal, premium (if any), or interest are to be made, issued by the government that issued such currency, through the scheduled payment of principal and interest in respect thereof in accordance with their terms, not later than one day before the due date of any payment, money in an amount, or (iii) a combination thereof, in each case sufficient, in the opinion of a nationally recognized firm of independent public accountants or chartered accountants expressed in a written certification thereof delivered to the Trustee, to pay and discharge, without consideration of the reinvestment of such interest and after payment of all federal, state, provincial and local taxes or other charges and assessments in respect thereof payable by the Trustee and which shall be applied by the Trustee (or any such other qualifying trustee) to pay and discharge each installment of principal (including mandatory sinking fund payments) of, and premium (not relating to optional redemption), if any, and interest on, the Outstanding Securities of such series on the dates such installments of principal of, and premium (not relating to optional redemption), if any, or interest are due up to the Stated Maturity Date, or the Redemption Date, as the case may be (PROVIDED THAT in the case of redemption, before such deposit, the Company must give to the Trustee, in accordance with Section 11.2 hereof, a notice of its election to redeem the Outstanding Securities at a future date in accordance with Article 11 hereof, which notice shall be irrevocable). (c) In the case of an election under Section 13.2, the Company shall have delivered to the Trustee an Opinion of Counsel stating that (i) the Company has received from, or there has been published by, the Internal Revenue Service, a ruling or (ii) since the date hereof, there has been a change in the applicable Federal income tax law, in case of either (i) or (ii) to the effect that, and based thereon such opinion shall confirm that, the Holders of such Securities will not recognize gain or loss for Federal income tax purposes as a result of the deposit, Defeasance and discharge to be effected with respect to the Securities of such series and will be subject to Federal income tax on the same amount, in the same manner and at the same times as would be the case if such deposit, Defeasance and discharge were not to occur. (d) In the case of an election under Section 13.3 with respect to any series of Securities required to be registered under the SECURITIES ACT, the Company shall have delivered to the Trustee an Opinion of Counsel to the effect that the Holders of the Outstanding Securities of such series will not recognize income, gain or loss for United States Federal income tax purposes as a result of the deposit and Covenant Defeasance to be effected with respect to the Securities of such series and will be subject to United States Federal income tax on the same amount, in the same manner and at the same times as would be the case if such deposit and Covenant Defeasance were not to occur. (e) The Company shall have delivered to the Trustee an Officers' Certificate to the effect that the Securities of such series, if then listed on any securities exchange, will not be delisted as a result of such deposit. (f) No Event of Default or event that (after notice of lapse of time or both) would become an Event of Default shall have occurred and be continuing at the time of such deposit or, with regard to any Event of Default or any such event specified in Sections 5.1(f) and 5.1(g), at any time on or prior to the 123rd day after the date of such deposit (it being understood that this condition shall not be deemed satisfied until after such 123rd day). Ind-61 68 (g) Such Defeasance or Covenant Defeasance shall not cause the Trustee to have a conflicting interest within the meaning of Applicable Legislation (assuming, in the case of the TRUST INDENTURE ACT, that all Securities are in default within the meaning of such Act). (h) Such Defeasance or Covenant Defeasance shall not result in a breach or violation of, or constitute a default under, any other agreement or instrument to which the Company is a party or by which it is bound. (i) The Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent with respect to such Defeasance or Covenant Defeasance have been complied with. (j) With respect to any series of Securities required to be registered under the SECURITIES ACT, such Defeasance or Covenant Defeasance shall not result in the trust arising from such deposit constituting an investment company within the meaning of the United States INVESTMENT COMPANY ACT of 1940, as amended, unless such trust shall be qualified under such Act or exempt from regulation thereunder. 13.5 DEPOSITED MONEY AND GOVERNMENT OBLIGATIONS TO BE HELD IN TRUST; OTHER MISCELLANEOUS PROVISIONS Subject to the provisions of the last paragraph of Section 10.3, all money and Government Obligations (including the proceeds thereof) deposited with the Trustee or other qualifying trustee (solely for purposes of this Section and Section 13.6, the Trustee and any such other trustee are referred to collectively as the "Trustee") pursuant to Section 13.4 in respect of the Securities of any Defeasible Series shall be held in trust and applied by the Trustee, in accordance with the provisions of the Securities of such series and this Indenture, to the payment, either directly or through any such Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the Holders of Securities of such series, of all sums due and to become due thereon in respect of principal and any premium and interest, but money so held in trust need not be segregated from other funds except to the extent required by law [IF APPLICABLE, INSERT -- and shall not be subject to the claims of the holders of Senior Indebtedness.] The Company shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the Government Obligations deposited pursuant to Section 13.4 or the principal and interest received in respect thereof other than any such tax, fee or other charge that by law is for the account of the Holders of Outstanding Securities. Notwithstanding anything in this Article 13 to the contrary, the Trustee shall deliver or pay to the Company from time to time upon Company Request any money or Government Obligations held by it as provided in Section 13.4 with respect to Securities of any Defeasible Series that, in the opinion of a nationally recognized firm of independent public accountants or chartered accountants expressed in a written certification thereof delivered to the Trustee, are in excess of the amount thereof that would then be required to be deposited to effect an equivalent Covenant Defeasance with respect to the Securities of such series. 13.6 REINSTATEMENT If the Trustee or the Paying Agent is unable to apply any money in accordance with this Article 13 with respect to the Securities of any series by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the Ind-62 69 Company's obligations under this Indenture and the Securities of such series shall be revived and reinstated as though no deposit had occurred pursuant to this Article 13 with respect to Securities of such series until such time as the Trustee or Paying Agent is permitted to apply all money held in trust pursuant to Section 13.5 with respect to Securities of such series in accordance with this Article 13; provided, however, that if the Company makes any payment of principal of or any premium or interest on any Security of such series following the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of Securities of such series to receive such payment from the money so held in trust. ARTICLE 14 CONVERSION OF SECURITIES 14.1 APPLICABILITY OF ARTICLE The provisions of this Article shall be applicable to the Securities of any series which are convertible into Common Shares, and the issuance of such Common Shares upon the conversion of such Securities, except as otherwise specified as contemplated by Section 3.1 for the Securities of such series. 14.2 EXERCISE OF CONVERSION PRIVILEGE In order to exercise a conversion privilege, the Holder of a Security of a series with such a privilege shall surrender such Security to the Company at the office or agency maintained for that purpose pursuant to Section 10.2, accompanied by written notice to the Company that the Holder elects to convert such Security or a specified portion thereof. Such notice shall also state, if different from the name and address of such Holder, the name or names (with address) in which the certificate or certificates for Common Shares which shall be issuable on such conversion shall be issued. Securities surrendered for conversion shall (if so required by the Company or the Trustee) be duly endorsed by or accompanied by instruments of transfer in forms satisfactory to the Company and the Trustee duly executed by the registered Holder or its attorney duly authorized in writing; and Securities so surrendered for conversion during the period from the close of business on any Regular Record Date to the opening of business on the next succeeding Interest Payment Date (excluding Securities or portions thereof called for redemption during such period) shall also be accompanied by payment of an amount equal to the interest payable on such Interest Payment Date on the principal amount of such Security then being converted, and such interest shall be payable to such registered Holder notwithstanding the conversion of such Security, subject to the provisions of Section 3.7 relating to the payment of Defaulted Interest by the Company. As promptly as practicable after the receipt of such notice and of any payment required pursuant to a Board Resolution and, subject to Section 3.3, set forth, or determined in the manner provided, in an Officers' Certificate, or established in one or more indentures supplemental hereto setting forth the terms of such series of Security, and the surrender of such Security in accordance with such reasonable procedures as the Company may prescribe, the Company shall issue and shall deliver, at the office or agency at which such Security is surrendered, to such Holder or on its written order, a certificate or certificates for the number of full Common Shares issuable upon the conversion of such Security (or specified portion thereof), in accordance with the provisions of such Board Resolution, Officers' Certificate or supplemental indenture, and cash as provided therein in respect of any fractional share of such Common Shares otherwise issuable upon such conversion. Such conversion shall be deemed to have been effected immediately prior to the close of business on the date on which such notice and such payment, if required, shall have been received in proper order for conversion by the Company and such Security shall have been surrendered as aforesaid (unless such Holder shall have so surrendered such Security and shall have instructed the Company to effect the conversion on a particular date following such surrender and such Holder shall be entitled to convert such Security on such date, in which case such conversion shall be deemed to be effected immediately prior to the close of business on such date) and at such time the rights Ind-63 70 of the Holder of such Security as such Security Holder shall cease and the person or persons in whose name or names any certificate or certificates for Common Shares shall be issuable upon such conversion shall be deemed to have become the Holder or Holders of record of the shares represented thereby. Except as set forth above and subject to the final paragraph of Section 3.7, no payment or adjustment shall be made upon any conversion on account of any interest accrued on the Securities surrendered for conversion or on account of any dividends on the Common Shares issued upon such conversion. In the case of any Security which is converted in part only, upon such conversion the Company shall execute and the Trustee shall authenticate and deliver to or on the order of the Holder thereof, at the expense, a new Security or Securities of the same series, of authorized denominations, in aggregate principal amount equal to the unconverted portion of such Security. 14.3 NO FRACTIONAL SHARES No fractional share of Common Shares shall be issued upon conversions of Securities of any series. If more than one Security shall be surrendered for conversion at one time by the same Holder, the number of full shares which shall be issuable upon conversion shall be computed on the basis of the aggregate principal amount of the Securities (or specified portions thereof to the extent permitted hereby) so surrendered. If, except for the provisions of this Section 14.3, any Holder of a Security or Securities would be entitled to a fractional share of Common Shares upon the conversion of such Security or Securities, or specified portions thereof, the Company shall pay to such Holder an amount in cash equal to the current market value of such fractional share computed, (i) if such Common Shares are listed or admitted to unlisted trading privileges on a national securities exchange, on the basis of the last reported sale price regular way on such exchange on the last trading day prior to the date of conversion upon which such a sale shall have been effected, or (ii) if such Common Shares are not at the time so listed or admitted to unlisted trading privileges on a national securities exchange, on the basis of the average of the bid and asked prices of such Common Shares in the over-the-counter market, on the last trading day prior to the date of conversion, as reported by the National Quotation Bureau, Incorporated or similar organization if the National Quotation Bureau, Incorporated is no longer reporting such information, or if not so available, the fair market price as determined by the Board of Directors. For purposes of this Section, "trading day" shall mean each Monday, Tuesday, Wednesday, Thursday and Friday other than any day an which the Common Shares are not traded on the New York Stock Exchange, or if the Common Shares are not traded on the New York Stock Exchange, on the principal exchange or market on which the Common Shares is traded or quoted. 14.4 ADJUSTMENT OF CONVERSION PRICE The conversion price of Securities of any series that is convertible into Common Shares shall be adjusted for any stock dividends, stock splits, reclassification, combinations or similar transactions in accordance with the term of the supplemental indenture or Board Resolutions setting forth the terms of the Securities of such series. Whenever the conversion price is adjusted, the Company shall compute the adjusted conversion price in accordance with terms of the applicable Board Resolution or supplemental indenture and shall prepare an Officers' Certificate setting forth the adjusted conversion price and showing in reasonable detail the facts upon which such adjustment is based, and such certificate shall forthwith be filed at each office or agency maintained for the purpose of conversion of Securities pursuant to Section 10.2 and, if different, with the Trustee. The Company shall forthwith cause a notice setting forth the adjusted conversion price to be mailed, first class postage prepaid, to each Holder of Securities of such series at its address appearing on the Security Register and to any conversion agent other than the Trustee. Ind-64 71 14.5 NOTICE OF CERTAIN CORPORATE ACTIONS In case: (a) the Company shall declare a dividend (or any other distribution) on its Common Shares payable otherwise than in cash out of its retained earnings (other than a dividend for which approval of any stockholders of the Company is required); or (b) the Company shall authorize the granting to the holders of its Common Shares of rights, options or warrants to subscribe for or purchase any shares of capital stock of any class or of any other rights (other than any such grant for which approval of any stockholders of the Company is required); or (c) of any reclassification of the Common Shares (other than a subdivision or combination of its outstanding shares of Common Shares , or of any consolidation, merger or share exchange to which the Company is a party and for which approval of any stockholders of the Company is required), or of the sale of all or substantially all of the assets; or (d) of the voluntary or involuntary dissolution, liquidation or winding up; then the Company shall cause to be filed with the Trustee, and shall cause to be mailed to all Holders at their last addresses as they shall appear in the Securities Register, at least 20 days (or 10 days in any case specified in clause (a) or (b) above) prior to the applicable record date hereinafter specified, a notice stating (i) the date on which a record is to be taken for the purpose of such dividend, distribution, rights, options or warrants, or, if a record is not to be taken, the date as of which the holders of Common Shares of record to be entitled to such dividend, distribution, rights, options or warrants are to be determined, or (ii) the date on which such reclassification, consolidation, merger, share exchange, sale, dissolution, liquidation or winding up is expected to become effective, and the date as of which it is expected that holders of Common Shares of record shall be entitled to exchange their Common Shares for securities, cash or other property deliverable upon such reclassification, consolidation, merger, share exchange, sale, dissolution, liquidation or winding up. If at any time the Trustee shall not be the conversion agent, a copy of such notice shall also forthwith be filed by the Company with the Trustee. 14.6 RESERVATION OF SHARES OF COMMON SHARES The Company shall at all times reserve and keep available, free from preemptive rights, out of its authorized but unissued Common Shares, for the purpose of effecting the conversion of Securities, the full number of Common Shares then issuable upon the conversion of all outstanding Securities of any series that has conversion rights. 14.7 PAYMENT OF CERTAIN TAXES UPON CONVERSION The Company will pay any and all taxes that may be payable in respect of the issue or delivery of shares of its Common Shares on conversion of Securities pursuant hereto. The Company shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issue and delivery of shares of its Common Shares in a name other than that of the Holder of the Security or Securities to be converted, and no such issue or delivery shall be made unless and until the Person requesting such issue has paid to the Company the amount of any such tax, or has established, to the satisfaction, that such tax has been paid. Ind-65 72 14.8 NONASSESSABILITY The Company covenants that all Common Shares which may be issued upon conversion of Securities will upon issue in accordance with the terms hereof be duly and validly issued and fully paid and nonassessable. 14.9 EFFECT OF CONSOLIDATION OR MERGER ON CONVERSION PRIVILEGE In case of any consolidation of the Company with, or merger into or with any other Person, or in case of any sale of all or substantially all of the assets of the Company, the Company or the Person formed by such consolidation or the Person into which the Company shall have been merged or the Person which shall have acquired such assets, as the case may be, shall execute and deliver to the Trustee a supplemental indenture in accordance with Section 8.1 providing that the Holder of each Security then outstanding of any series that is convertible into Common Shares shall have the right, which right shall be the exclusive conversion right thereafter available to said Holder (until the expiration of the conversion right of such Security), to convert such Security into the kind and amount of shares of stock or other securities or property (including cash) receivable upon such consolidation, merger or sale by a holder of the number of Common Shares into which such Security might have been converted immediately prior to such consolidation, merger or sale, subject to compliance with the other provisions of this Indenture, such Security and such supplemental indenture. Such supplemental indenture shall provide for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for in such Security. The above provisions of this Section shall similarly apply to successive consolidations, mergers or sales. It is expressly agreed and understood that anything in this Indenture to the contrary notwithstanding, if, pursuant to such merger, consolidation or sale, holders of outstanding Common Shares do not receive Common Shares of the surviving corporation but receive other securities, cash or other property or any combination thereof, Holders of Securities shall not have the right to thereafter convert their Securities into Common Shares of the surviving corporation or the corporation which shall have acquired such assets, but rather, shall have the right upon such conversion to receive the other securities, cash or other property receivable by a holder of the number of Common Shares into which the Securities held by such holder might have been converted immediately prior to such consolidation, merger or sale, all as more fully provided in the first sentence of this Section 14.9. Anything in this Section 14.9 to the contrary notwithstanding, the provisions of this Section 14.9 shall not apply to a merger or consolidation of another corporation with or into the Company pursuant to which both of the following conditions are applicable: (i) the Company is the surviving corporation and (ii) the outstanding Common Shares are not changed or converted into any other securities or property (including cash) or changed in number or character or reclassified pursuant to the terms of such merger or consolidation. As evidence of the kind and amount of shares of stock or other securities or property (including cash) into which Securities may properly be convertible after any such consolidation, merger or sale, or as to the appropriate adjustments of the conversion prices applicable with respect thereto, the Trustee shall be furnished with and may accept the certificate or opinion of an independent certified public accountant with respect thereto; and, in the absence of bad faith on the part of the Trustee, the Trustee may conclusively rely thereon, and shall not be responsible or accountable to any Holder of Securities for any provision in conformity therewith or approved by such independent certified accountant which may be contained in said supplemental indenture. 14.10 DUTIES OF TRUSTEE REGARDING CONVERSION Neither the Trustee nor any conversion agent shall at any time be under any duty or responsibility to any Holder of Securities of any series that is convertible into Common Shares to determine whether any facts exist which may require any adjustment of the conversion price, or with respect to the nature or Ind-66 73 extent of any such adjustment when made, or with respect to the method employed, whether herein or in any supplemental indenture, any resolutions of the Board of Directors or written instrument executed by one or more officers of the Company provided to be employed in making the same. Neither the Trustee nor any conversion agent shall be accountable with respect to the validity or value (or the kind or amount) of any Common Shares, or of any securities or property, which may at any time be issued or delivered upon the conversion of any Securities and neither the Trustee nor any conversion agent makes any representation with respect thereto. Subject to the provisions of Section 6.1, neither the Trustee nor any conversion agent shall be responsible for any failure of the Company to issue, transfer or deliver any of its Common Shares or stock certificates or other securities or property upon the surrender of any Security for the purpose of conversion or to comply with any of the covenants of the Company contained in this Article 14 or in the applicable supplemental indenture, resolutions of the Board of Directors or written instrument executed by one or more duly authorized officers of the Company. 14.11 REPAYMENT OF CERTAIN FUNDS UPON CONVERSION Any funds which at any time shall have been deposited by the Company or on its behalf with the Trustee or any other paying agent for the purpose of paying the principal of, and premium, if any, and interest, if any, on any of the Securities (including funds deposited for the sinking fund referred to in Article 3 hereof) and which shall not be required for such purposes because of the conversion of such Securities as provided in this Article 14 shall after such conversion be repaid to the Company by the Trustee upon the Company's written request by Company Request. 14.12 CANCELLATION OF CONVERTED SECURITIES All securities surrendered for conversion pursuant to Section 14.2 shall be delivered to the Company and shall be cancelled concurrently with such conversion. ARTICLE 15 SUBORDINATION [THIS ARTICLE SHALL BE RESERVED, UNLESS PURSUANT TO A BOARD RESOLUTION WITH RESPECT TO THE SECURITIES OF ANY SERIES, THE SECURITIES OF SUCH SERIES ARE DESIGNATED AS SENIOR SUBORDINATED INDEBTEDNESS OR SUBORDINATED INDEBTEDNESS, IN WHICH CASE THE FOLLOWING PROVISIONS SHOULD BE INSERTED]. 15.1 SECURITIES SUBORDINATE TO SENIOR INDEBTEDNESS The Company covenants and agrees, and each Holder of Securities of each series, by his acceptance thereof, likewise covenants and agrees, that the indebtedness represented by the Securities of such series, including the principal of (and premium, if any) and interest thereon, shall be subordinate and subject in right of payment, to the extent and in the manner hereinafter set forth, to the prior payment in full of all Senior Indebtedness of the Company with respect thereto, whether outstanding on the date of original issuance of Securities of such series or thereafter incurred; PROVIDED, HOWEVER, that each series of Securities designated as Senior Indebtedness shall in all respects rank PARI PASSU with all other series of Securities designated as Senior Indebtedness; that each series of Securities designated as Senior Subordinated Indebtedness shall in all respects rank PARI PASSU with all other series of Securities designated as Senior Subordinated Indebtedness; and that each series of Securities designated as Subordinated Indebtedness shall in all respects rank PARI PASSU will all other series of Securities designated as Subordinated Indebtedness. Ind-67 74 15.2 PAYMENT OVER OF PROCEEDS UPON DISSOLUTION, ETC. In the event of (a) any insolvency or bankruptcy case or proceeding, or any receivership, liquidation, reorganization or other similar case or proceeding in connection therewith, relative to the Company or to its assets, or (b) any liquidation, dissolution or other winding up of the Company, whether voluntary or involuntary and whether or not involving insolvency or bankruptcy, or (c) any assignment for the benefit of creditors or any other marshaling of the assets and liabilities of the Company, then and in any such event specified in (a), (b) or (c) above (each such event, if any, herein sometimes referred to as a "Proceeding"), the holders of Senior Indebtedness shall be entitled to receive payment in full of all amounts due or to become due on or in respect of all Senior Indebtedness, or provision shall be made in money or money's worth before the Holders of the Securities are entitled to receive any payment or distribution of assets of the Company, of any kind or character, whether in cash, property or securities, on account of principal of (or premium, if any) or interest on the Securities or on account of any purchase or other acquisition of Securities by the Company or any Subsidiary of the Company (all such payments, distributions, purchases and acquisitions by the Company herein referred to, individually and collectively, as a "Securities Payment"), and to that end the holders of Senior Indebtedness shall be entitled to receive, for application to the payment thereof, any Securities Payment which may be payable or deliverable in respect of the Securities in any such Proceeding. In the event that, notwithstanding the foregoing provisions of this Section, the Trustee or the Holder of any Security shall have received any Securities Payment before all Senior Indebtedness is paid in full or payment thereof provided for, and if such fact shall, at or prior to the time of such Securities Payment, have been made known to a Responsible Officer of the Trustee or, as the case may be, such Holder, then and in such event such Securities Payment shall be paid over or delivered forthwith to the trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee, agent or other Person making payment or distribution of assets of the Company, for application to the payment of all Senior Indebtedness remaining unpaid, to the extent necessary to pay all Senior Indebtedness in full, after giving effect to any concurrent payment or distribution to or for the holders of Senior Indebtedness. For purposes of this Article only, the words "cash, property or securities" shall not be deemed to include shares or other securities of the Company provided for by a plan or reorganization or readjustment as reorganized or readjusted, or securities of the Company or any other corporation which are subordinated in right of payment to all then outstanding Senior Indebtedness to substantially the same extent as, or to a greater extent than, the Securities are so subordinated as provided in this Article. The consolidation of the Company with, or the merger of the Company into, another corporation or the liquidation or dissolution of the Company following the conveyance, transfer, sale or lease of its properties and assets substantially as an entirety to another corporation upon the terms and conditions set forth in Article 8 shall not be deemed a Proceeding for the purposes of this Section if the corporation formed by such consolidation or into which the Company is merged or the corporation which acquires by conveyance, transfer, sale or lease such properties and assets substantially as an entirety, as the case may be, shall, as a part of such consolidation, merger, conveyance, transfer, sale or lease, comply with the conditions set forth in Article 8. 15.3 PRIOR PAYMENT TO SENIOR INDEBTEDNESS UPON ACCELERATION OF SECURITIES In the event that any Securities are declared due and payable before their Stated Maturity (an "Acceleration of Securities"), the holders of the Senior Indebtedness outstanding at the time of such Acceleration of Securities shall be entitled to receive payment in full of all amounts due or which become due as a result of such Acceleration of Securities on or in respect of all such Senior Indebtedness, or Ind-68 75 provision shall be made for such payment in money or money's worth, before the Holders of the Securities are entitled to receive any Securities Payment. In the event that, notwithstanding the foregoing, the Company shall make any Securities Payment to the Trustee or any Holder prohibited by the foregoing provisions of this Section, and if such fact shall, at or prior to the time of such Securities Payment, have been made known to a Responsible Officer of the Trustee or such Holder, as the case may be, then and in such event such Securities Payment shall be paid over and delivered forthwith to the Company, for application to the payment of all Senior Indebtedness remaining unpaid, to the extent necessary to pay all Senior Indebtedness in full, after giving effect to any concurrent payment or distribution to or for the holders of Senior Indebtedness. The provisions of this Section shall not apply to any Securities Payment with respect to which Section 15.2 would be applicable. 15.4 NO PAYMENT WHEN SENIOR INDEBTEDNESS IN DEFAULT (a) In the event and during the continuation of any default in the payment of principal of (or premium, if any) or interest on or other monetary obligation with respect to any Senior Indebtedness beyond any applicable grace period with respect thereto or, with respect to any series of Securities designated as Subordinated Indebtedness, in the event that any event of default with respect to any Senior Indebtedness shall have occurred and be continuing permitting the holders of such Senior Indebtedness (or a trustee or other representative on behalf of the holders thereof) to declare such Senior Indebtedness due and payable prior to the date on which it would otherwise have become due and payable, unless and until such event of default shall have been cured or waived or shall have ceased to exist and, if any such Senior Indebtedness shall have been accelerated, such acceleration shall have been rescinded or annulled, or in the event any judicial proceeding shall be pending with respect to any such default, then no Securities Payment shall be made to the Trustee or any Holder in respect of the Securities; provided, however, that nothing in this Section shall prevent the satisfaction of any sinking fund payment in accordance with Article 12 by delivering and crediting pursuant to Section 12.2 Securities which have been acquired (upon redemption or otherwise) prior to such default in payment or event of default or which have been converted pursuant to Article 14. (b) In addition and notwithstanding the foregoing, with respect to any series of Securities designated as Senior Subordinated Indebtedness or Subordinated Indebtedness, during the continuance of any event of default other than the payment of principal of (or premium, if any) or interest on or other monetary obligation with respect to any Senior Indebtedness, no payment may be made by the Company upon or in respect of any series of Securities designated as Senior Subordinated Indebtedness or Subordinated Indebtedness for a payment blockage period ("Payment Blockage Period") commencing on the date the Company shall have received a notice from a holder of Senior Indebtedness or a trustee or other representative thereof and ending 179 days thereafter (unless such event of default shall have been cured or waived or such Payment Blockage Period shall have been terminated by written notice to the Company from such holder, trustee or representative thereof). Notwithstanding anything to the contrary herein, in no event shall any one Payment Blockage Period extend beyond 179 days. Notwithstanding anything to the contrary herein, Payment Blockage Periods aggregating more than 179 days may not be commenced with respect to any series of Securities designated as Senior Subordinated Indebtedness or Subordinated Indebtedness during any period of 360 consecutive days. (c) In the event that, notwithstanding the foregoing, the Company shall make any Securities Payment to the Trustee or any Holder prohibited by the foregoing provisions of this Section, and if such fact shall, at or prior to the time of such Securities Payment, have been made known to a Responsible Officer of the Trustee or, as the case may be, such Holder then and in such event such Securities Payment Ind-69 76 shall be paid over and delivered forthwith to the Company for application to the payment of all Senior Indebtedness remaining unpaid, to the extent necessary to pay all Senior Indebtedness in full, after giving effect to any concurrent payment or distribution to or for the holders of Senior Indebtedness. (d) The provisions of this Section 15.4 shall not apply to any Securities Payment with respect to which Section 15.2 would be applicable. 15.5 PAYMENT PERMITTED IF NO DEFAULT Nothing contained in this Article or elsewhere in this Indenture or in any of the Securities shall prevent (a) the Company at any time except during the pendency of any Proceeding referred to in Section 15.2 or under the conditions described in Section 15.3 or 15.4, from making at any time Securities Payments, or (b) the application by the Trustee of any money deposited with it hereunder to Securities Payments or the retention of such Securities Payment by the Holders, if, at the time of such application by the Trustee, it did not have actual knowledge that such Securities Payment would have been prohibited by the provisions of this Article. 15.6 SUBROGATION TO RIGHTS OF HOLDERS OF SENIOR INDEBTEDNESS Subject to the payment in full of all Senior Indebtedness, the Holders of the Securities shall be subrogated to the rights of the holders of such Senior Indebtedness to receive payments and distributions of cash, property and securities applicable to the Senior Indebtedness until the principal of (and premium, if any) and interest on the Securities shall be paid in full. For purposes of such subrogation, no payments or distributions to the holder of the Senior Indebtedness of any cash, property or securities to which the Holders of the Securities or the Trustee would be entitled except for the provisions of this Article, and no payments over pursuant to the provisions of this Article to the holders of Senior Indebtedness by Holders of the Securities or the Trustee, shall, as among the Company, creditors other than holders of Senior Indebtedness and the Holders of the Securities, be deemed to be a payment or distribution by the Company to or on account of the Senior Indebtedness. 15.7 PROVISIONS SOLELY TO DEFINE RELATIVE RIGHTS AND SUBJECT TO APPLICABLE LAWS The provisions of this Article are and are intended solely for the purpose of defining the relative rights of the Holders of the Securities on the one hand and the holders of Senior Indebtedness on the other hand and are subject to all applicable laws, including, in the case of the bankruptcy or insolvency of the Company, the potential application of Canadian legislation. Nothing contained in this Article or elsewhere in this Indenture or in the Securities is intended to or shall (a) impair, as among the Company, the creditors of the Company, other than holders of Senior Indebtedness and the Holders of the Securities, the obligation of the Company, which is absolute and unconditional, to pay to the Holders of the Securities the principal of and interest on the Securities as and when the same shall become due and payable in accordance with their terms; or (b) affect the relative rights against the Company of the Holders of the Securities and creditors of the Company, other than the holders of Senior Indebtedness; or (c) prevent the Trustee or the Holder of any Security from exercising all remedies otherwise permitted by applicable law upon default under this Indenture, subject to the rights, if any, under this Article of the holders of Senior Indebtedness to receive cash, property and securities otherwise payable or deliverable to the Trustee or such Holder. Ind-70 77 15.8 TRUSTEE TO EFFECTUATE SUBORDINATION Each Holder of a Security, by his acceptance thereof, authorizes and directs the Trustee on his behalf to take such action as may be necessary or appropriate to effectuate the subordination provided in this Article and appoints the Trustee his attorney-in-fact for any and all such purposes. 15.9 NO WAIVER OF SUBORDINATION PROVISIONS No right of any present or future holder of any Senior Indebtedness to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Company, or by any act or failure to act, in good faith, by any such holder, or by any non-compliance by the Company with the terms, provisions and covenants of this Indenture, regardless of any knowledge thereof any such holder may have or be otherwise charged with. Without in any way limiting the generality of the foregoing paragraph, the holders of Senior Indebtedness may, at any time and from time to time, without the consent of or notice to the Trustee or the Holders of the Securities, without incurring responsibility to the Holders of the Securities and without impairing or releasing the subordination provided in this Article or the obligations hereunder of the Holders of the Securities to the holders of Senior Indebtedness, do any one or more of the following: (i) change the manner, place or terms of payment or the time of payment of, or renew or alter Senior Indebtedness, or otherwise amend or supplement in any manner Senior Indebtedness or any instrument evidencing the same or any agreement under which Senior Indebtedness is outstanding; (ii) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing Senior Indebtedness; (iii) release any Person liable in any manner for the collection of Senior Indebtedness; and (iv) exercise or refrain from exercising any rights against the Company or any other Person. 15.10 NOTICE TO TRUSTEE The Company shall give prompt written notice to the Trustee of any fact known to the Company which would prohibit the making of any payment to or by the Trustee in respect of the Securities. Notwithstanding the provisions of this Article or any other provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts which would prohibit the making of any payment to or by the Trustee in respect of the Securities, unless and until the Trustee shall have received written notice thereof from the Company or a holder of Senior Indebtedness or from any trustee therefor or representative thereof, and prior to the receipt of any such written notice, the Trustee, subject to the provisions of Section 6.1, shall be entitled in all respects to assume that no such facts exist; PROVIDED, HOWEVER, that if the Trustee shall not have received the notice provided for in this Section at least two Business Days prior to the date upon which by the terms hereof any money may become payable for any purpose (including, without limitation, the payment of the principal of (and premium, if any) or interest on any Security), then, anything herein contained to the contrary notwithstanding, the Trustee shall have full power and authority to receive such money and to apply the same to the purpose for which such money was received and shall not be affected by any notice to the contrary which may be received by it within two Business Days prior to the date such amounts may be payable. Subject to the provisions of Section 6.1, the Trustee shall be entitled to rely on the delivery to it of a written notice, and proof of ownership acceptable to the Trustee, by a Person representing himself to be a holder of Senior Indebtedness (or a trustee therefor or representative thereof) to establish that such notice has been given by a holder of Senior Indebtedness (or a trustee therefor or representative thereof). In the event that the Trustee determines in good faith that further evidence is required with respect to the right of any Person as a holder of Senior Indebtedness to participate in any payment or distribution pursuant to this Article, the Trustee may request such Person to furnish evidence to the reasonable Ind-71 78 satisfaction of the Trustee as to the amount of Senior Indebtedness held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and any other facts pertinent to the rights of such Person under this Article, and if such evidence is not furnished, the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment. 15.11 RELIANCE ON JUDICIAL ORDER OR CERTIFICATE OF LIQUIDATING AGENT Upon any payment or distribution of assets of the Company referred to in this Article, the Trustee, subject to the provisions of Section 6.1, and the Holders of the Securities shall be entitled to rely upon any order or decree entered by any court of competent jurisdiction in which such Proceeding is pending, or a certificate of the trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee for the benefit of creditors, agent or other Person making such payment or distribution, delivered to the Trustee or to the Holders of Securities for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, the holders of the Senior Indebtedness and other indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article. 15.12 TRUSTEE NOT FIDUCIARY FOR HOLDERS OF SENIOR INDEBTEDNESS The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness and shall not be liable to any such holders if it shall in good faith and absent gross negligence or willful misconduct, mistakenly pays over or distributes to Holders of Securities or to the Company or to any other Person cash, property or securities to which any holders of Senior Indebtedness shall be entitled by virtue of this Article or otherwise. 15.13 RIGHTS OF TRUSTEE AS HOLDER OF SENIOR INDEBTEDNESS; PRESERVATION OF TRUSTEE'S RIGHTS The Trustee in its individual capacity shall be entitled to all the rights set forth in this Article with respect to any Senior Indebtedness which may at any time be held by it, to the same extent as any other holder of Senior Indebtedness, and nothing in this Indenture shall deprive the Trustee of any of its rights as such holder. Nothing in this Article shall apply to claims of, or payments to, the Trustee under or pursuant to Section 6.7. 15.14 ARTICLE APPLICABLE TO PAYING AGENTS In case at any time any Paying Agent other than the Trustee shall have been appointed by the Company and be then acting hereunder, the term "Trustee" as used in this Article shall in such case (unless the context otherwise requires) be construed as extending to and including such Paying Agent within its meaning as fully for all intents and purposes as if such Paying Agent were named in this Article in addition to or in place of the Trustee; PROVIDED, HOWEVER, that Sections 15.10 and 15.13 shall not apply to the Company or any Affiliate of the Company if it or such Affiliate acts as Paying Agent. 15.15 DEFEASANCE OF THIS ARTICLE 15 The subordination of the Securities provided by this Article 15 is expressly made subject to the provisions for defeasance or covenant defeasance in Article 13 and, anything herein to the contrary Ind-72 79 notwithstanding, upon the effectiveness of any such defeasance or covenant defeasance, the Securities then outstanding shall thereupon cease to be subordinated pursuant to this Article 15. 15.16 SUBSIDIARIES No payment, distribution of assets or other action may be taken by any Subsidiary of the Company with respect to the Securities if the Company would be prohibited by this Article 15 from taking such action. 15.17 RESCISSION The provisions of this Article 15 shall continue to be effective or be reinstated, as the case may be, if at any time any payment in respect of any of the Senior Indebtedness is rescinded or must otherwise be returned by the holder thereof upon the insolvency, bankruptcy or reorganization of the Company or otherwise, all as though such payment had not been made. 15.18 CERTAIN CONVERSIONS OR EXCHANGES DEEMED PAYMENT For purposes of this Article only, (a) the issuance and delivery of junior securities upon conversion or exchange of Securities in accordance with their terms shall not be deemed to constitute a Securities Payment, and (b) the payment, issuance or delivery of cash, property or securities (other than junior securities) upon conversion or exchange of a Security shall be deemed to constitute a Securities Payment. For the purposes of this Section, the term "junior securities" means (i) shares of any class of the Company and (ii) other securities of the Company which are subordinated in right of payment to all Senior Indebtedness which may be outstanding at the time of issuance or delivery of such securities to substantially the same extent as, or to a greater extent than, the Securities are so subordinated as provided in this Article. Nothing contained in this Article or elsewhere in this Indenture or in the Securities is intended to or shall impair, as among the Company, its creditors other than holders of Senior Indebtedness and the Holders of the Securities, the right which is absolute and unconditional, of the Holder of any Security to convert or exchange such Security in accordance with its terms. ARTICLE 16 MEETINGS OF HOLDERS OF SECURITIES 16.1 PURPOSES FOR WHICH MEETINGS MAY BE CALLED A meeting of Holders of Securities of any or all series may be called at any time and from time to time pursuant to this Article to make, give or take any request, demand, authorization, direction, notice, consent, waiver or other action provided by this indenture to be made, given or taken by Holders of Securities of such series. 16.2 CALL, NOTICE AND PLACE OF MEETINGS (a) The Trustee may at any time call a meeting of Holders of Securities of any series for any purpose specified in Section 16.1, to be held at such time and at such place in Houston, Texas, in New York, New York or in any other location, as the Trustee shall determine. Notice of every meeting of Holders of Securities of any series, setting forth the time and the place of such meeting and in general terms the action proposed to be taken at such meeting, shall be given, in the manner specified in Section 1.6, not less than 20 nor more than 180 days prior to the date fixed for the meeting. Ind-73 80 (b) In case at any time the Company, pursuant to a Board Resolution, or the Holders of at least 10% in aggregate principal amount of the Outstanding Securities of any series, shall have requested the Trustee for any such series to call a meeting of the Holders of Securities of such series for any purpose specified in Section 16.1, by written request setting forth in reasonable detail the action proposed to be taken at the meeting, and the Trustee shall not have made the first publication of the notice of such meeting within 30 days after receipt of such request or shall not thereafter proceed to cause the meeting to be held as provided herein, then the Company or the Holders of Securities of such series in the amount above specified, as the case may be, may determine the time and the place in Houston, Texas, or in New York, New York, for such meeting and may call such meeting for such purposes by giving notice thereof as provided in Subsection (a) of this Section. 16.3 PERSONS ENTITLED TO VOTE AT MEETINGS To be entitled to vote at any meeting of Holders of Securities of any series, a Person shall be (1) a Holder of one or more Outstanding Securities of such series, or (2) a Person appointed by an instrument in writing as proxy for a Holder or Holders of one or more Outstanding Securities of such series by such Holder or Holders. The only Persons who shall be entitled to be present or to speak at any meeting of Holders of Securities of any series shall be the Persons entitled to vote at such meeting and their counsel, any representatives of the Trustee and its counsel and any representatives of the Company and its counsel. 16.4 QUORUM; ACTION The Persons entitled to vote a majority in aggregate principal amount of the Outstanding Securities of a series shall constitute a quorum for a meeting of Holders of Securities of such series. In the absence of a quorum within 30 minutes of the time appointed for any such meeting, the meeting shall, if convened at the request of Holders of Securities of such series, be dissolved. In any other case, the meeting may be adjourned for a period of not less than 10 days as determined by the chairman of the meeting prior to the adjournment of such meeting. In the absence of a quorum at any such adjourned meeting, such adjourned meeting may be further adjourned for a period of not less than 10 days as determined by the chairman of the meeting prior to the adjournment of such adjourned meeting. Subject to Section 16.5(d), notice of the reconvening of any adjourned meeting shall be given as provided in Section 16.2(a), except that such notice need be given only once not less than five days prior to the date on which the meeting is scheduled to be reconvened. Notice of the reconvening of an adjourned meeting shall state expressly that Persons entitled to vote a majority in principal amount of the Outstanding Securities of such series shall constitute a quorum. Except as limited by the proviso to Section 9.2, any resolution presented to a meeting or adjourned meeting duly reconvened at which a quorum is present as aforesaid may be adopted by the affirmative vote of the Holders of a majority in aggregate principal amount of the Outstanding Securities of that series; provided, however, that, except as limited by the proviso to Section 9.2, any resolution with respect to any request, demand, authorization, direction, notice, consent or waiver which this Indenture expressly provides may be made, given or taken by the Holders of a specified percentage that is less than a majority in aggregate principal amount of the Outstanding Securities of a series may be adopted at a meeting or an adjourned meeting duly reconvened and at which a quorum is present as aforesaid by the affirmative vote of the Holders of such specified percentage in aggregate principal amount of the Outstanding Securities of that series. Except as limited by the proviso to Section 9.2, any resolution passed or decision taken at any meeting of Holders of Securities of any series duly held in accordance with this Section shall be binding on all the Holders of Securities of such series, whether or not present or represented at the meeting. Ind-74 81 16.5 DETERMINATION OF VOTING RIGHTS; CONDUCT AND ADJOURNMENT OF MEETINGS (a) The holding of Securities shall be proved in the manner specified in Section 1.3, and the appointment of any proxy shall be proved in the manner specified in Section 1.3. Such regulations may provide that written instruments appointing proxies, regular or on their face, may be presumed valid and genuine without the proof specified in Section 1.3 or other proof. (b) The Trustee shall, by an instrument in writing, appoint a temporary chairman of the meeting, unless the meeting shall have been called by the Company or by Holders of Securities as provided in Section 16.2(b), in which case the Company or the Holders of Securities of the series calling the meeting, as the case may be, shall appoint a temporary chairman. A permanent chairman and a permanent secretary of the meeting shall be elected by vote of the Persons entitled to vote a majority in aggregate principal amount of the Outstanding Securities of such series represented at the meeting. (c) At any meeting each Holder of a Security of such series and each proxy shall be entitled to one vote for each $1,000 principal amount of the Outstanding Securities of such series held or represented by him; provided, however, that no vote shall be cast or counted at any meeting in respect of any Security challenged as not Outstanding and ruled by the chairman of the meeting to be not Outstanding. The chairman of the meeting shall have no right to vote, except as a Holder of a Security of such series or as a proxy. (d) Any meeting of Holders of Securities of any series duly called pursuant to Section 16.2 at which a quorum is present may be adjourned from time to time by Persons entitled to vote a majority in aggregate principal amount of the Outstanding Securities of such series represented at the meeting; and the meeting may be held as so adjourned without further notice. 16.6 COUNTING VOTES AND RECORDING ACTION OF MEETINGS The vote upon any resolution submitted to any meeting of Holders of Securities of any series shall be by written ballots on which shall be subscribed the signatures of the Holders of Securities of such series or of their representatives by proxy and the principal amounts and serial numbers of the Outstanding Securities of such series held or represented by them. The permanent chairman of the meeting shall appoint two inspectors of votes who shall count all votes cast at he meeting for or against any resolution and who shall make and file with the secretary of the meeting their verified written reports in duplicate of all votes cast at the meeting. A record, at least in duplicate, of the proceedings of each meeting of Holders of Securities of any series shall be prepared by the secretary of the meeting, and there shall be attached to such record the original reports of the inspectors of votes on any vote by ballot taken thereat and affidavits by one or more persons having knowledge of the facts setting forth a copy of the notice of the meeting and showing that such notice was given as provided in Section 16.2 and, if applicable, Section 16.4. Each copy shall be signed and verified by the affidavits of the permanent chairman and secretary of the meeting and one such copy shall be delivered to the Company, and another to the Trustee to be preserved by the Trustee, the latter to have attached thereto the ballots voted at the meeting., Any record so signed and verified shall be conclusive evidence of the matters therein stated. This instrument may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. Ind-75 82 IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, and their respective corporate seals to be hereunto affixed and attested, all as of the day and year first above written. PATTERSON ENERGY, INC. By: ------------------------------------ Name: ---------------------------------- Title: --------------------------------- ATTEST: , as Trustee --------------------------- By: ------------------------------------ Name: ---------------------------------- Title: --------------------------------- ATTEST: By: ------------------------------------ Name: ---------------------------------- Title: --------------------------------- Ind-76 EX-4.5 4 FORM OF STOCK WARRANT AGREEMENT 1 EXHIBIT 4.5 PATTERSON ENERGY, INC. Form of Warrant Agreement [for warrants sold attached to equity securities](1) THIS WARRANT AGREEMENT is dated as of _________________, between Patterson Energy, Inc., a Delaware corporation (hereinafter called "Patterson", which term includes any successor corporation), and ___________, as Warrant Agent (herein called the "Warrant Agent"). WHEREAS, Patterson proposes to sell [title of Equity Securities being offered] (the "Offered Securities") with warrant certificates evidencing one or more warrants (the "Warrants" or, individually, a "Warrant") representing the right to purchase [title of Equity Securities purchasable through exercise of Warrants] (the "Warrant Securities"), such warrant certificates and other warrant certificates issued pursuant to this Agreement being herein called the "Warrant Certificates"; and WHEREAS, Patterson desires the Warrant Agent to act on behalf of Patterson in connection with the issuance, exchange, exercise and replacement of the Warrant Certificates, and in this Agreement wishes to set forth, among other things, the form and provisions of the Warrant Certificates and the terms and conditions on which they may be issued, exchanged, exercised and replaced; NOW, THEREFORE, in consideration of the premises and of the mutual agreements herein contained, the parties hereto agree as follows: ARTICLE I Issuance of Warrants and Execution and Delivery of Warrant Certificates Section 1.1. Issuance of Warrants. Warrants shall be initially issued in connection with the issuance of the Offered Securities [but shall be separately transferable on and after __________ (the "Detachable Date")] [and shall not be separately transferable] and each Warrant Certificate shall evidence one or more Warrants. Each Warrant evidenced thereby shall represent the right, subject to the provisions contained herein and therein, to purchase Warrant Securities. Warrant Certificates shall be initially issued in units with the Offering Securities and each Warrant Certificate included in such a unit shall evidence _____ Warrants for Offered Securities included in such unit. Section 1.2. Execution and Delivery of Warrant Certificates. Each Warrant Certificate, whenever issued, shall be in registered(2) form substantially in the form set forth in Exhibit A hereto, shall be dated the date of its issuance and may have such letters, numbers or other marks of identification or designation and such legends or endorsements printed, lithographed or engraved thereon as the officers of Patterson executing the same may approve (execution thereof to be conclusive evidence of such approval) and as are not inconsistent with the provisions of this Agreement, or as may be required to comply with any law or with any rule or regulation made pursuant thereto or with any rule or regulation of any stock exchange on which the Warrants may be listed, or to conform to usage. The Warrant Certificates shall be signed on behalf of Patterson by its Chief Executive Officer, its President, or one of its Vice Presidents, - --------------- (1) Complete or modify the provisions of this Form as appropriate to reflect the terms of the Warrants and Warrant Securities. (2) If Warrants are issued in bearer form, appropriate revisions will be made to this Agreement to facilitate such issuance. EW-1 2 under its corporate seal and attested by its Secretary or one of its Assistant Secretaries. Such signatures may be manual or facsimile signatures of such authorized officers and may be imprinted or otherwise reproduced on the Warrant Certificates. The seal of Patterson may be in the form of a facsimile thereof and may be impressed, affixed, imprinted or otherwise reproduced on the Warrant Certificates. No Warrant Certificate shall be valid for any purpose, and no Warrant evidenced thereby shall be exercisable, until such Warrant Certificate has been countersigned by the manual signature of the Warrant Agent. Such signature by the Warrant Agent upon any Warrant Certificate executed by Patterson shall be conclusive evidence that the Warrant Certificate so countersigned has been duly issued hereunder. In case any officer of Patterson who shall have signed any of the Warrant Certificates either manually or by facsimile signature shall cease to be such officer before the Warrant Certificates so signed shall have been countersigned and delivered by the Warrant Agent, such Warrant Certificates may be countersigned and delivered notwithstanding that the person who signed such Warrant Certificates ceased to be such officer of Patterson; and any Warrant Certificate may be signed on behalf of Patterson by such persons as, at the actual date of the execution of such Warrant Certificate, shall be the proper officers of Patterson, although at the date of the execution of this Agreement any such person was not such officer. The term "holder" or "holder of a Warrant Certificate" as used herein shall mean any person in whose name at the time any Warrant Certificate shall be registered upon the books to be maintained by the Warrant Agent for that purpose. [If Offered Securities with Warrants which are not immediately detachable - or upon the register of the Offered Securities prior to the Detachable Date. Patterson will or will cause the registrar of the Offered Securities to make available at all times to the Warrant Agent such information as to holders of the Offered Securities with Warrants as may be necessary to keep the Warrant Agent's records up to date.] Section 1.3. Issuance of Warrant Certificates. Warrant Certificates evidencing the right to purchase Warrant Securities (except as provided in Sections 2.3(c), 3.2 and 4.1) may be executed by Patterson and delivered to the Warrant Agent upon the execution of this Warrant Agreement or from time to time thereafter. The Warrant Agent shall, upon receipt of Warrant Certificates duly executed on behalf of Patterson, countersign Warrant Certificates evidencing Warrants representing the right to purchase up to ____________ Warrant Securities and shall deliver such Warrant Certificates to or upon the order of Patterson. Subsequent to such original issuance of the Warrant Certificates, the Warrant Agent shall countersign a Warrant Certificate only if the Warrant Certificate is issued in exchange or substitution for one or more previously countersigned Warrant Certificates or in connection with their transfer, as hereinafter provided or as provided in Section 2.3(c). ARTICLE II Warrant Price, Duration and Exercise of Warrants Section 2.1. Warrant Price. [On ___________, the] [The original] exercise price of each Warrant is [$]____. [During the period from _____________, through and including _____________, the exercise price of each Warrant will be [$]___________. On _______________, the exercise price of each Warrant will be [$]________.] [if applicable, insert relevant amounts in applicable foreign currency, currency unit or composite currency] Such purchase price of Warrant Securities is referred to in this Agreement as the "Warrant Price." The Warrant Price and the number and kind of Warrant Securities for which a Warrant may be exercised is subject to adjustment from time to time as set forth in Article V hereof. Section 2.2. Duration of Warrants. Each Warrant may be exercised in whole at any time, as specified herein, on or after [the date thereof] [_____________] and at or before 5 p.m. New York time EW-2 3 on ______________ (the "Expiration Date"). Each Warrant not exercised at or before 5 p.m. New York time on the Expiration Date shall become void, and all rights of the holder of the Warrant Certificate evidencing such Warrant under this Agreement shall cease. Section 2.3. Exercise of Warrants. (a) During the period specified in Section 2.2, any whole number of Warrants may be exercised by providing certain information set forth on the reverse side of the Warrant Certificate and by paying in full, [in lawful money of the United States of America] [if applicable -- insert relevant foreign currency, currency unit or composite currency] [in cash or by certified check or official bank check or by bank wire transfer, in each case] [by bank wire transfer], in immediately available funds, the Warrant Price for each Warrant exercised, to the Warrant Agent at its corporate trust office [or at ________], provided that such exercise is subject to receipt, within three business days of such [payment] [wire transfer] by the Warrant Agent of the Warrant Certificate with the form of election to purchase Warrant Securities set forth on the reverse side of the Warrant Certificate properly completed and duly executed. The date on which payment in full of the Warrant Price is received by the Warrant Agent shall, subject to receipt of the Warrant Certificate as aforesaid, be deemed to be the date on which the Warrant is exercised. The Warrant Agent shall deposit all funds received by it in payment of the Warrant Price in an account of Patterson maintained with it and shall advise Patterson by telephone at the end of each day on which a [payment] [wire transfer] for the exercise of Warrants is received of the amount so deposited to its account. The Warrant Agent shall promptly confirm such telephone advice to Patterson in writing. (b) The Warrant Agent shall, from time to time, as promptly as practicable, advise Patterson of (i) the number of Warrants exercised, (ii) the instructions of each holder of the Warrant Certificates evidencing such Warrants with respect to delivery of the Warrant Securities to which such holder is entitled upon such exercise, (iii) delivery of Warrant Certificates evidencing the balance, if any, of the Warrants remaining after such exercise, and (iv) such other information as Patterson shall reasonably require. (c) As soon as practicable after the exercise of any Warrant, Patterson shall issue to or upon the order of the holder of the Warrant Certificate evidencing such Warrant, the Warrant Securities to which such holder is entitled in fully registered form, registered in such name or names as may be directed by such holder. Such certificate or certificates evidencing the Warrant Securities shall be deemed to have been issued and any persons who are designated to be named therein shall be deemed to have become the holder of record of such Warrant Securities as of the close of business on the exercise date. No fractional Warrant Securities will be issued upon exercise of any Warrant. For each fractional Warrant Security that would otherwise be issued, Patterson will pay by company check in an amount equal to such fraction multiplied by the closing sales price of the Warrant Securities on the principal national securities exchange on which they are listed (or if not so listed, another equivalent means reasonably determined by Patterson) on the business day immediately preceding the exercise date. If fewer than all of the Warrants evidenced by such Warrant Certificate are exercised, Patterson shall execute, and an authorized officer of the Warrant Agent shall manually countersign and deliver, a new Warrant Certificate evidencing the number of such Warrants remaining unexercised. (d) Patterson shall not be required to pay any stamp or other tax or other governmental charge required to be paid in connection with any transfer involved in the issue of the Warrant Securities; and in the event that any such transfer is involved, Patterson shall not be EW-3 4 required to issue or deliver any Warrant Security until such tax or other charge shall have been paid or it has been established to Patterson's satisfaction that no such tax or other charge is due. ARTICLE III Other Provisions Relating to Rights of Holders of Warrant Certificates Section 3.1. No Rights as Stockholder Conferred by Warrants or Warrant Certificates. No Warrant Certificate or Warrant evidenced thereby shall entitle the holder thereof to any of the rights of a holder of Warrant Securities, including, without limitation, the right to receive dividends, vote, receive notice of any meeting of stockholders or otherwise have any right as a stockholder of Patterson. Section 3.2. Lost, Stolen, Mutilated or Destroyed Warrant Certificates. Upon receipt by the Warrant Agent of evidence reasonably satisfactory to it of the ownership of and the loss, theft, destruction or mutilation of any Warrant Certificate and of indemnity reasonably satisfactory to it, and, in the case of mutilation, upon surrender thereof to the Warrant Agent for cancellation, then, in the absence of notice to Patterson or the Warrant Agent that such Warrant Certificate has been acquired by a bona fide purchaser, Patterson shall execute, and an authorized officer of the Warrant Agent shall manually countersign and deliver, in exchange for or in lieu of the lost, stolen, destroyed or mutilated Warrant Certificate, a new Warrant Certificate of the same tenor and evidencing a like number of Warrants. Upon the issuance of any new Warrant Certificate under this Section, Patterson may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Warrant Agent) in connection therewith. Every substitute Warrant Certificate executed and delivered pursuant to this Section in lieu of any lost, stolen or destroyed Warrant Certificate shall represent an additional contractual obligation of Patterson, whether or not the lost, stolen or destroyed Warrant Certificate shall be at any time enforceable by anyone, and shall be entitled to the benefits of this Agreement equally and proportionately with any and all other Warrant Certificates duly executed and delivered hereunder. The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement of mutilated, lost, stolen or destroyed Warrant Certificates. Section 3.3. Holder of Warrant Certificate May Enforce Rights. Notwithstanding any of the provisions of this Agreement, any holder of a Warrant Certificate, without the consent of the Warrant Agent, the holder of any Warrant Securities or the holder of any other Warrant Certificate, may in his own behalf and for his own benefit, enforce, and may institute and maintain any suit, action or proceeding against Patterson suitable to enforce or otherwise in respect of, his right to exercise the Warrants evidenced by his Warrant Certificate in the manner provided in his Warrant Certificate and in this Agreement. ARTICLE IV Exchange and Transfer of Warrant Certificates Section 4.1. Exchange and Transfer of Warrant Certificates. [If Offered Securities with Warrants which are immediately detachable - Upon] [If Offered Securities with Warrants which are not immediately detachable - Prior to the Detachable Date, a Warrant Certificate may be exchanged or transferred only together with the Offered Securities to which the Warrant Certificate was initially attached and only for the purpose of effecting or in conjunction with an exchange or transfer of such Offered Securities. Prior to the Detachable Date, each transfer of the Offered Securities [on the register of the Offered Securities] shall operate also to transfer the related Warrant Certificates. After the Detachable Date, upon] surrender at the corporate trust office of the Warrant Agent [or at ________], Warrant Certificates evidencing Warrants may be exchanged for Warrant Certificates in other denominations EW-4 5 evidencing such Warrants or the transfer thereof may be registered in whole or in part; provided that such other Warrant Certificates evidence the same aggregate number of Warrants as the Warrant Certificates so surrendered. The Warrant Agent shall keep, at its corporate trust office [and at __________] books in which, subject to such reasonable regulations as it may prescribe, it shall register Warrant Certificates and exchanges and transfers of outstanding Warrant Certificates, upon surrender of the Warrant Certificates to the Warrant Agent at its corporate trust office [or at ____________] for exchange or registration of transfer, properly endorsed or accompanied by appropriate instruments of registration of transfer and written instructions for transfer, all in form satisfactory to Patterson and the Warrant Agent. No service charge shall be made for any exchange or registration of transfer of Warrant Certificates but Patterson may require payment of a sum sufficient to cover any stamp or other tax or other governmental charge that may be imposed in connection with any such exchange or registration of transfer. Whenever any Warrant Certificates are so surrendered for exchange or registration of transfer an authorized officer of the Warrant Agent shall manually countersign and deliver to the person or persons entitled thereto a Warrant Certificate or Warrant Certificates duly authorized and executed by Patterson, as so requested. The Warrant Agent shall not be required to effect any exchange or registration of transfer which will result in the issuance of a Warrant Certificate evidencing a fraction of a Warrant or a number of full Warrants and a fraction of a Warrant. All Warrant Certificates issued upon any exchange or registration of transfer of Warrant Certificates shall be the valid obligations of Patterson, evidencing the same obligations, and entitled to the same benefits under this Agreement, as the Warrant Certificates surrendered for such exchange or registration of transfer. Section 4.2. Treatment of Holders of Warrant Certificates. [If Warrants which are not immediately detachable - Every holder of a Warrant Certificate, by accepting the same, consents and agrees with Patterson, the Warrant Agent and with every subsequent holder of such Warrant Certificate that until the transfer of the Warrant Certificate is registered on the books of the Warrant Agent [or the registrar of the Offered Securities prior to the Detachable Date], Patterson and the Warrant Agent [or the registrar of the Offered Securities prior to the Detachable Date] may treat the registered holder as the absolute owner thereof for any purpose and as the person entitled to exercise the rights represented by the Warrants evidenced thereby, any notice to the contrary notwithstanding.] Section 4.3. Cancellation of Warrant Certificates. Any Warrant Certificate surrendered for exchange, registration of transfer or exercise of the Warrants evidenced thereby shall, if surrendered to Patterson, be delivered to the Warrant Agent and all Warrant Certificates surrendered or so delivered to the Warrant Agent shall be promptly cancelled by the Warrant Agent and shall not be reissued and, except as expressly permitted by this Agreement, no Warrant Certificate shall be issued hereunder in exchange or in lieu thereof. The Warrant Agent shall deliver to Patterson from time to time or otherwise dispose of cancelled Warrant Certificates in a manner satisfactory to Patterson. ARTICLE V Adjustments Section 5.1. Adjustment of Warrant Price and Number of Warrant Securities Purchasable. (a) In case at any time Patterson shall issue and sell for cash any Warrant Securities (excluding (i) Warrant Securities issued in any of the transactions described in paragraphs (b), (c) or (d) below and (ii) Warrant Securities issued upon exercise of Warrants) at a price per Share lower than [___%] below the Market Price determined as of the date immediately preceding the date of such sale and issuance, the Warrant Price in effect at the close of business on the date immediately preceding the date of such sale and issuance shall be reduced by multiplying such Warrant Price by a fraction, (i) the numerator of which shall be the sum of (x) the number of Warrant Securities outstanding at the close of business on the date immediately preceding the EW-5 6 date of such sale and issuance plus (y) the number of Warrant Securities which the aggregate amount of cash received or receivable for such sale and issuance would purchase at such current Market Price per Warrant Security, and (ii) the denominator of which shall be the total number of Warrant Securities outstanding immediately after such sale and issuance. Such adjustment shall be made successively whenever such an issuance is made. (b) In case Patterson shall pay or make a dividend or other distribution on any class of stock of Patterson in Warrant Securities or securities convertible into or exchangeable for Warrant Securities (such convertible or exchangeable stock or securities being hereinafter called "Convertible Securities"), other than Convertible Securities which require payments of cash to be made by the holder thereof in connection with any conversion into or exchange for Warrant Securities, the Warrant Price in effect at the close of business on the day fixed for the determination of shareholders entitled to receive such dividend or other distribution shall be reduced by multiplying such Warrant Price by a fraction of which the numerator shall be the number of Warrant Securities outstanding at the close of business on the date immediately preceding the date fixed for such determination and the denominator shall be the sum of such number of Warrant Securities and the total number of Warrant Securities constituting such dividend or other distribution or the maximum number of Warrant Securities issuable upon conversion or exchange of all Convertible Securities constituting such dividend or other distribution. (c) In case at any time Patterson shall grant (whether directly or otherwise) any rights (other than the Warrants and "poison pill" rights distributed pursuant to a stockholders' rights plan) to subscribe for or to purchase, or any options for the purchase of, Warrant Securities or Convertible Securities, whether or not such rights or options or the right to convert or exchange any such Convertible Securities are immediately exercisable, and the price per Warrant Security for which Warrant Securities are issuable upon the exercise of such rights or options or upon conversion or exchange of such Convertible Securities (determined by dividing (x) the total amount, if any, received or receivable by Patterson as consideration for the granting of such rights or options, plus the minimum aggregate amount of additional consideration payable to Patterson upon the exercise of all such rights or options, or, in the case of such rights or options which relate to Convertible Securities, the total amount, if any, received or receivable by Patterson as consideration for the granting of such rights or options, plus the minimum aggregate amount of additional consideration, if any, payable upon the issuance or sale of such Convertible Securities and upon the conversion or exchange thereof, by (y) the total maximum number of Warrant Securities issuable upon the exercise of such rights or options or upon the conversion or exchange of all such Convertible Securities issuable upon the exercise of such rights or options) shall be less than the Market Price, determined as of the date immediately preceding the date of granting such rights or options, the Warrant Price in effect at the close of business on the date immediately preceding the date of granting such rights or options shall be adjusted by multiplying such Warrant Price by a fraction, (i) the numerator of which shall be the sum of (x) the number of Warrant Securities outstanding at the close of business on the date immediately preceding the date of granting such rights or options plus (y) the quotient obtained by dividing the product of the price per Warrant Security, determined as set forth above, and the maximum number of Warrant Securities issuable upon the exercise of such rights or options or upon the conversion or exchange of all such Convertible Securities issuable upon the exercise of such rights or options by the Market Price and (ii) the denominator of which shall be the sum of the number of Warrant Securities outstanding at the close of business on the date immediately preceding the date of granting such rights or options and the maximum number of Warrant Securities issuable upon the exercise of such rights or options or upon the conversion or exchange of all such Convertible Securities issuable upon the exercise of such rights or options. Except as provided in this EW-6 7 subparagraph (c), no further adjustments of the Warrant Price shall be made upon the issuance of such Warrant Securities or of such Convertible Securities upon exercise of such rights or options or upon the actual issuance of such Warrant Securities upon conversion or exchange of such Convertible Securities. (d) In case Patterson shall issue (whether directly or by assumption in a merger or otherwise) or sell any Convertible Securities, whether or not the rights to exchange or convert thereunder are immediately exercisable, and the price per Warrant Security for which Warrant Securities are issuable upon such conversion or exchange (determined by dividing (x) the total amount received or receivable by Patterson as consideration for the issue or sale of such Convertible Securities, plus the minimum aggregate amount of additional consideration, if any, payable to Patterson upon the conversion or exchange thereof, by (y) the total maximum number of Warrant Securities issuable upon the conversion or exchange of all such Convertible Securities) shall be less than the Market Price, determined as of the date immediately preceding the date of such issuance or sale of such Convertible Securities, then the Warrant Price in effect at the close of business on the date immediately preceding the date of issuance or sale of such Convertible Securities shall be adjusted by multiplying such Warrant Price by a fraction, (i) the numerator of which shall be the sum of (x) the number of Warrant Securities outstanding at the close of business on the date immediately preceding the date of issuance or sale of such Convertible Securities plus (y) the quotient obtained by dividing the product of the price per Warrant Security, determined as set forth above, and the maximum number of Warrant Securities issuable upon conversion or exchange of all such Convertible Securities by the Market Price and (ii) the denominator of which shall be the sum of the number of Warrant Securities outstanding at the close of business on the date immediately preceding the date of issuance or sale of such Convertible Securities and such maximum number of Warrant Securities issuable upon conversion or exchange, provided that (1) except as provided in subparagraph (e), no further adjustments of the Warrant Price shall be made upon the actual issuance of such Warrant Securities upon conversion or exchange of such Convertible Securities, and (2) if any such issuance or sale of such Convertible Securities is made upon exercise of any rights to subscribe for or to purchase or any option to purchase any such Convertible Securities for which adjustments of the Warrant Price have been or are to be made pursuant to subparagraph (c) or the other provisions of this subparagraph (d), no further adjustments of the Warrant Price shall be made by reason of such issuance or sale. (e) If (x) the purchase price provided for in any rights or options referred to in subparagraph (c), or (y) the additional consideration, if any, payable upon the conversion or exchange of any Convertible Securities referred to in subparagraphs (c) and/or (d), or (z) the rate at which any Convertible Securities referred to in subparagraphs (c) and/or (d) are convertible into or exchangeable for Warrant Securities shall change (other than under or by reason of provisions contained in the instruments governing such rights, options or Convertible Securities that are designed to protect against dilution), the Warrant Price in effect at the close of business on the date of such event shall forthwith be adjusted to the Warrant Price which would have been in effect at such time had such rights, options or Convertible Securities still outstanding provided for such changed purchase price, additional consideration or conversion rate, as the case may be, at the time initially granted, issued or sold. On the expiration of any such option or right or the termination of any such right to convert or exchange such Convertible Securities, the Warrant Price in effect at the close of business on the date of expiration or termination shall be readjusted to the Warrant Price which would have been in effect at such time had such right, option or Convertible Securities, to the extent outstanding immediately prior to the date of such expiration or termination, never been granted, issued or sold. EW-7 8 (f) In case Patterson shall, by dividend or otherwise, declare a dividend or other distribution on its Warrant Securities payable in evidences of its indebtedness or assets (including securities, but excluding (i) any rights or options referred to in subparagraph (c) of this Section, (ii) any dividend or distribution paid in cash out of consolidated retained earnings or consolidated earned surplus, determined in accordance with generally accepted accounting principles, including the making of appropriate deductions for minority interests, if any, in subsidiaries, and (iii) any dividend or distribution otherwise paid in Warrant Securities or Convertible Securities), the Warrant Price in effect at the close of business on the date fixed for the determination of shareholders entitled to receive such dividend or other distribution shall be adjusted so that the same shall equal the price determined by multiplying the Warrant Price in effect at the close of business on the date fixed for the determination of shareholders entitled to receive such dividend or other distribution by a fraction of which the numerator shall be the current Market Price per Warrant Security on the date fixed for such determination less the then fair market value (as determined by the board of directors, whose determination shall be conclusive and described in a Board Resolution filed with the Warrant Agent) of the portion of the assets or evidences of indebtedness so distributed applicable to one share and of which the denominator shall be such current Market Price per share. (g) In case Patterson shall at any time subdivide its outstanding Warrant Securities into a greater number of Warrant Securities, the Warrant Price in effect immediately prior to such subdivision shall be proportionately reduced, and conversely, in case the outstanding Warrant Securities shall be combined into a smaller number of Warrant Securities, the Warrant Price in effect immediately prior to such combination shall be proportionately increased, such reduction or increase, as the case may be, to become effective immediately upon the opening of business on the day following the day upon which such subdivision or combination becomes effective. (h) In case of any consolidation of Patterson with, or merger of Patterson into, any other corporation or other entity, or in case of any merger of another corporation or other entity into Patterson (other than a merger which does not result in any reclassification, conversion, exchange or cancellation of outstanding Warrant Securities), or in case of any sale or transfer of all or substantially all of the assets of Patterson, or in the case of a capital reorganization or recapitalization of the capital stock of Patterson in such a way that holders of Warrant Securities shall be able to receive securities, cash or assets with respect to or in exchange for such Warrant Securities from the corporation or other entity formed by such consolidation or resulting from such merger or which acquires such assets, as the case may be, or from Patterson, in the case of a capital reorganization or recapitalization not involving a consolidation, merger or sale or transfer of all or substantially all of the assets of Patterson, such corporation or other entity or Patterson, as the case may be, and the Warrant Agent shall execute and deliver an amendment to this Agreement providing that the holder of each Warrant then outstanding shall have the right thereafter, during the period such Warrant shall be exercisable, to exercise such Warrant only for the kind and amount of securities, cash and other property receivable upon such consolidation, merger, sale, transfer, capital reorganization or recapitalization by a holder of the number of Warrant Securities for which such Warrant might have been exercised on the date immediately prior to such consolidation, merger, sale, transfer, capital reorganization or recapitalization, assuming such holder of Warrant Securities failed to exercise his rights of election, if any, as to the kind or amount of securities, cash and other property receivable upon such consolidation, merger, sale, transfer, capital reorganization or recapitalization (provided that if the kind or amount of securities, cash and other property receivable upon such consolidation, merger, sale, transfer, capital reorganization or recapitalization is not the same for each Warrant Security in respect of which such rights of election shall not have been exercised (the "Non-electing Warrant Securities"), then, for the purpose of this subparagraph (h), the kind and amount of securities, EW-8 9 cash and other property receivable upon such consolidation, merger, sale, transfer, capital reorganization or recapitalization by each Non- electing Warrant Security shall be deemed to be the kind and amount so receivable per Warrant Security by a plurality of the Non-electing Warrant Securities). Such amendment shall provide for adjustments which, for events subsequent to the effective date of such amendment, shall be as nearly equivalent as may be practicable to the adjustments provided for in this Article V. The above provisions of this paragraph shall similarly apply to successive consolidations, mergers, sales, transfers, capital reorganizations or recapitalization. Patterson shall not effect any such consolidation, merger, sale or transfer, unless prior to or simultaneously with the consummation thereof the successor corporation (if other than Patterson) resulting from such consolidation or merger or the corporation purchasing or otherwise acquiring such assets or other appropriate corporation or entity shall assume, by written instrument executed and delivered to the Warrant Agent, the obligation to deliver to the holder of each Warrant such shares of stock, securities, cash or assets as, in accordance with the foregoing provisions, such holders may be entitled to receive and the other obligations under this Agreement. (i) In case an adjustment in the Warrant Price shall be required by Section 5.1 (a), (b), (c), (d) and/or (f) above, the required adjustment shall become effective at the opening of business on (i) the Business Day immediately following the date fixed for the determination of shareholders of Patterson entitled to receive such dividend or distribution, in the case of any adjustment pursuant to Section 12(b) or (f), or (ii) the Business Day immediately following the date of such sale and issuance or the date of such grating of such rights or options, as the case may be, in the case of an adjustment pursuant to section 5.1 (a), (c) or (d). (j) For the purposes of this Article V the number of Warrant Securities outstanding at any given time shall not include Warrant Securities owned or held by or for the account of Patterson or of any of its wholly or majority owned subsidiaries. (k) Upon each adjustment of the Warrant Price pursuant to this Section 5.1, each Warrant outstanding at the time of and immediately prior to such adjustment shall give the holder thereof the right to purchase, at the Warrant Price resulting from such adjustment, the number of Warrant Securities obtained by multiplying the Warrant Price in effect immediately prior to such adjustment by the number of Warrant Securities issuable upon exercise of such Warrant immediately prior to such adjustment and dividing the product thereof by the Warrant Price resulting from such adjustment. (l) No adjustment in the Warrant Price shall be required unless such adjustment would require an increase or decrease of at least one percent in such Warrant Price; provided, however, that any one or more such adjustments which, by reason of this subparagraph (l) is not required to be made shall be carried forward on a cumulative basis and fully taken into account in any subsequent adjustment. All calculations under this Section 5.1 shall be made to the nearest cent or to the nearest 1/100 of a Warranty Security, as the case may be. The provisions of this Section 12(l) shall also apply to readjustments provided for in subparagraph (e). (m) Patterson shall be obligated to issue any additional Warrant Securities which become issuable upon exercise of Warrants as a result of any event described in this Section 5.1 EW-9 10 which requires an adjustment in the Warrant Price and the number of Warrant Securities issuable upon exercise of the Warrants. (n) For purposes of this Section 5.1, "Market Price" means the average of the closing prices per Warrant Security on the American Stock Exchange or the National Association of Securities Dealers, Inc. Automated Quotation System ("NASDAQ"), as the case may be (or, if there is no such closing price, the mean between the bid and asked prices reported on NASDAQ, or on any other national securities exchange or over-the-counter market on which such quotations are regularly available, as the case may be), on each of the ten trading days immediately preceding the date as of which the determination of Market Price is to be made. If at any time the Warrant Securities are not listed on any national securities exchange or quoted in the over-the-counter market, the Market Price shall be deemed to be the fair value thereof determined in good faith by an independent brokerage firm or Standard & Poor's Corp. as of a date which is within 15 days of the date as of which the determination of Market Price is to be made. (o) If Patterson shall take any action affecting the Warrant Securities, other than action described in this Section 5.1, which in the opinion of the Board of Directors of Patterson would materially adversely affect the exercise rights of the holders of the Warrants, the Warrant Price for the Warrants may be adjusted, to the extent permitted by law, in such manner, if any, and at such time, as such Board of Directors may determine in good faith to be equitable in the circumstances. Failure of the Board of Directors of Patterson to provide for any such adjustment prior to the effective date of any such action by Patterson affecting the Warrant Securities shall be evidence that the Board of Directors of Patterson has determined that it is equitable to make no adjustments in the circumstances. Section 5.2. Voluntary Adjustment by Patterson. Patterson may at its option, at any time during the term of the Warrants, reduce the then current Warrant Price to any amount deemed appropriate by the Board of Directors of Patterson; provided, that, if Patterson elects so to reduce the then current Warrant Price, such reduction shall remain in effect for at least 20 Business Days, after which time Patterson may, at its option, reinstate the Warrant Price in effect prior to such reduction. Section 5.3. Notice of Adjustment. Whenever the Warrant Price is adjusted as herein provided, the Chief Financial Officer of Patterson shall compute the adjusted Warrant Price in accordance with the foregoing provisions and shall prepare a certificate setting forth such adjusted Warrant Price and showing in reasonable detail the facts upon which such adjustment is based. A copy of such certificate shall be filed promptly with the Warrant Agent. Promptly after delivery of such certificate, Patterson shall prepare a notice of such adjustment of the Warrant Price setting forth the adjusted Warrant Price and the date on which such adjustment becomes effective and shall mail, or cause the Warrant Agent to mail at Patterson's expense, such notice of such adjustment of the Warrant Price to each holder of a Warrant at his last address as shown on the Warrant Register. Section 5.4. No Adjustment for Dividends. Except as provided in Section 5.1 hereof, no adjustment in respect of any dividends or other payments or distributions made to holders of securities issuable upon exercise of Warrants shall be made during the term of a Warrant or upon the exercise of a Warrant. Section 5.5. Statement on Warrants Certificate. Irrespective of any adjustments in the number or kind of securities purchasable upon the exercise of the Warrants or the Warrant Securities, any Warrant Certificate theretofore or thereafter issued may continue to express the same price and number and kind of shares as are stated in the Warrant Certificate initially issuable pursuant to this Agreement. EW-10 11 Section 5.6. Warrant Agent's Adjustment Disclaimer. The Warrant Agent has no duty to determine when an adjustment under this Article V should be made, how it should be made or what it should be. The Warrant Agent shall not be accountable for and makes no representation as to the validity or value of any securities or assets issued upon exercise of Warrants. The Warrant Agent shall not be responsible for Patterson's failure to comply with this Article V. ARTICLE VI Concerning the Warrant Agent Section 6.1. Warrant Agent. Patterson hereby appoints __________, as Warrant Agent of Patterson in respect of the Warrants and the Warrant Certificates upon the terms and subject to the conditions herein set forth; and _________ hereby accepts such appointment. The Warrant Agent shall have the powers and authority granted to and conferred upon it in the Warrant Certificates and hereby and such further powers and authority to act on behalf of Patterson as Patterson may hereafter grant to or confer upon it. All of the terms and provisions with respect to such powers and authority contained in the Warrant Certificates are subject to and governed by the terms and provisions hereof. Section 6.2. Conditions of Warrant Agent's Obligations. The Warrant Agent accepts its obligations herein set forth upon the terms and conditions hereof, including the following, to all of which Patterson agrees and to all of which the rights hereunder of the holders from time to time of the Warrant Certificates shall be subject: (a) Patterson agrees promptly to pay the Warrant Agent the compensation to be agreed upon with Patterson for all services rendered by the Warrant Agent and to reimburse the Warrant Agent for reasonable out-of-pocket expenses (including counsel fees) incurred by the Warrant Agent in connection with the services rendered hereunder by the Warrant Agent. Patterson also agrees to indemnify the Warrant Agent for, and to hold it harmless against, any loss, liability or expense incurred without negligence or bad faith on the part of the Warrant Agent, arising out of or in connection with its acting as Warrant Agent hereunder, as well as the costs and expenses of defending against any claim of such liability. (b) In acting under this Warrant Agreement and in connection with the Warrant Certificates, the Warrant Agent is acting solely as agent of Patterson and does not assume any obligation or relationship of agency or trust for or with any of the holders of Warrant Certificates or beneficial owners of Warrants. (c) The Warrant Agent may consult with counsel satisfactory to it, and the advice of such counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with the advice of such counsel. (d) The Warrant Agent shall be protected and shall incur no liability for or in respect of any action taken or thing suffered by it in reliance upon any Warrant Certificate, notice, direction, consent, certificate, affidavit, statement or other paper or document reasonably believed by it to be genuine and to have been presented or signed by the proper parties. (e) The Warrant Agent, and its officers, directors and employees, may become the owner of, or acquire any interest in, Warrants, with the same rights that it or they would have if it were not the Warrant Agent hereunder, and, to the extent permitted by applicable law, it or they may engage or be interested in any financial or other transaction with Patterson and may act on, EW-11 12 or as depositary, trustee or agent for, any committee or body of holders of Warrant Securities or other obligations of Patterson as freely as if it were not the Warrant Agent hereunder. (f) The Warrant Agent shall have no liability for interest on any monies at any time received by it pursuant to any of the provisions of this Agreement or of the Warrant Certificates. (g) The Warrant Agent shall have no liability with respect to any invalidity of this Agreement or any of the Warrant Certificates. (h) The Warrant Agent shall not be responsible for any of the recitals or representations herein or in the Warrant Certificates (except as to the Warrant Agent's countersignature thereon), all of which are made solely by Patterson. (i) The Warrant Agent shall be obligated to perform only such duties as are herein and in the Warrant Certificates specifically set forth and no implied duties or obligations shall be read into this Agreement or the Warrant Certificates against the Warrant Agent. The Warrant Agent shall not be under any obligation to take any action hereunder which may tend to involve it in any expense or liability, the payment of which within a reasonable time is not, in its reasonable opinion, assured to it. The Warrant Agent shall not be accountable or under any duty or responsibility for the use by Patterson of any of the Warrant Certificates authenticated by the Warrant Agent and delivered by it to Patterson pursuant to this Agreement or for the application by Patterson of the proceeds of the Warrant Certificates. The Warrant Agent shall have no duty or responsibility in case of any default by Patterson in the performance of its covenants or agreements contained herein or in the Warrant Certificates or in the case of the receipt of any written demand from a holder of a Warrant Certificate with respect to such default, including, without limiting the generality of the foregoing, any duty or responsibility to initiate or attempt to initiate any proceedings at law or otherwise or, except as provided in Section 6.2, to make any demand upon Patterson. (j) The Warrant Agent is hereby authorized to obtain from time to time from the present transfer agent for the Warrant Securities (the "Transfer Agent"), and any successor Transfer Agent, stock certificates required to honor outstanding Warrants. Patterson hereby authorizes its present and any successor Transfer Agent to comply with all such requests. Patterson will supply such Transfer Agent with duly executed stock certificates for such purpose and will provide or otherwise make available any cash which may be payable as provided in Section 2.3 hereof, and the Warrant Agent shall not be responsible for any delay or failure by such Transfer Agent in supplying such stock certificates. Section 6.3. Resignation and Appointment of Successor. (a) Patterson agrees, for the benefit of the holders of the Warrant Certificates, that there shall at all times be a Warrant Agent hereunder until all the Warrant Certificates are no longer exercisable. (b) The Warrant Agent may at any time resign as such agent by giving written notice to Patterson of such intention on its part, specifying the date on which its desired resignation shall become effective; provided that such date shall not be less than three months after the date on which such notice is given unless Patterson otherwise agrees. The Warrant Agent hereunder may be removed at any time by the filing with it of an instrument in writing signed by or on behalf of Patterson and specifying such removal and the date when it shall EW-12 13 become effective. Such resignation or removal shall take effect upon the appointment by Patterson, as hereinafter provided, of a successor Warrant Agent (which shall be a bank or trust company authorized under the laws of the jurisdiction of its organization to exercise corporate trust powers) and the acceptance of such appointment by such successor Warrant Agent. The obligation of Patterson under Section 6.3(a) shall continue to the extent set forth therein notwithstanding the resignation or removal of the Warrant Agent. (c) In case at any time the Warrant Agent shall resign, or shall be removed, or shall become incapable of acting, or shall be adjudged a bankrupt or insolvent, or shall file a petition seeking relief under the Federal Bankruptcy Code, as now constituted or hereafter amended, or under any other applicable Federal or State bankruptcy law or similar law or make an assignment for the benefit of its creditors or consent to the appointment of a receiver or custodian of all or any substantial part of its property, or shall admit in writing its inability to pay or meet its debts as they mature, or if a receiver or custodian of it or of all or any substantial part of its property shall be appointed, or if an order of any court shall be entered for relief against it under the provisions of the Federal Bankruptcy Code, as now constituted or hereafter amended, or under any other applicable Federal or State bankruptcy or similar law, or if any public officer shall have taken charge or control of the Warrant Agent or of its property or affairs, for the purpose of rehabilitation, conservation or liquidation, a successor Warrant Agent, qualified as aforesaid, shall be appointed by Patterson, by an instrument in writing, filed with the successor Warrant Agent. Upon the appointment as aforesaid of a successor Warrant Agent and acceptance by the successor Warrant Agent of such appointment, the Warrant Agent shall cease to be Warrant Agent hereunder. (d) Any successor Warrant Agent appointed hereunder shall execute, acknowledge and deliver to its predecessor and to Patterson an instrument accepting such appointment hereunder, and thereupon such successor Warrant Agent, without any further act, deed or conveyance, shall become vested with all the authority, rights, powers, trusts, immunities, duties and obligations of such predecessor with like effect as if originally named as Warrant Agent hereunder, and such predecessor, upon payment of its charges and disbursements then unpaid, shall thereupon become obligated to transfer, deliver and pay over, and such successor Warrant Agent shall be entitled to receive, all monies, securities and other property on deposit with or held by such predecessor, as Warrant Agent hereunder. (e) Any corporation into which the Warrant Agent hereunder may be merged or converted or any corporation with which the Warrant Agent may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Warrant Agent shall be a party, or any corporation to which the Warrant Agent shall sell or otherwise transfer all or substantially all the assets and business of the Warrant Agent, provided that it shall be qualified as aforesaid, shall be the successor Warrant Agent under this Agreement without the execution or filing of any paper or any further act on the part of any of the parties hereto. EW-13 14 ARTICLE VII Miscellaneous Section 7.1. Amendment. This Agreement may be amended by the parties hereto, without the consent of the holder of any Warrant Certificate, for the purpose of curing any ambiguity, or of curing, correcting or supplementing any defective or inconsistent provision contained herein, or making any other provisions with respect to matters or questions arising under this Agreement as Patterson and the Warrant Agent may deem necessary or desirable; provided, that such action shall not materially and adversely affect the interests of the holders of the Warrant Certificates and, provided further, that Patterson and the Warrant Agent may amend this Agreement in any manner prior to the issuance of any Warrants hereunder. With the consent of the holders of not less than a majority in number of the then outstanding unexercised Warrants affected, Patterson and the Warrant Agent may modify or amend any other term of this Agreement; provided, however, that no such modification or amendment may be made without the consent of the holders affected thereby if such proposed amendment would (i) shorten the period of time during which the Warrants may be exercised; (ii) otherwise materially and adversely affect the exercise rights of the holders of the Warrants; or (iii) reduce the number of outstanding Warrants. Section 7.2. Notices and Demands to Patterson and Warrant Agent. If the Warrant Agent shall receive any notice or demand addressed to Patterson by the holder of a Warrant Certificate pursuant to the provisions of the Warrant Certificates, the Warrant Agent shall promptly forward such notice or demand to Patterson. Section 7.3. Addresses. Any communication from Patterson to the Warrant Agent with respect to this Agreement shall be addressed to ____________, and any communication from the Warrant Agent to Patterson with respect to this Agreement shall be addressed to Patterson Energy, Inc., Patterson Energy, Inc., 4510 Lamesa Highway, P.O. Box 1416, Snyder, Texas 79550, Attention: _______________ (or such other address as shall be specified in writing by the Warrant Agent or by Patterson). Section 7.4. Applicable Law. The validity, interpretation and performance of this Agreement and each Warrant Certificate issued hereunder and of the respective terms and provisions thereof shall be governed by and construed in accordance with, the laws of the State of [New York], without giving effect to the conflict of laws principles thereof. Section 7.5. Delivery of Prospectus. Patterson will furnish to the Warrant Agent sufficient copies of a prospectus relating to the Warrant Securities deliverable upon exercise of Warrants (the "Prospectus"), and the Warrant Agent agrees that upon the exercise of any Warrant, the Warrant Agent will deliver to the holder of the Warrant Certificate evidencing such Warrant, prior to or concurrently with, the delivery of the Warrant Securities issued upon such exercise, a Prospectus. Section 7.6. Obtaining of Governmental Approvals. Patterson will from time to time take all action which may be necessary to obtain and keep effective any and all permits, consents and approvals of governmental agencies and authorities and securities acts filings under United States Federal and State laws (including, without limitation, a registration statement in respect of the Warrants and Warrant Securities under the Securities Act of 1933, as amended), which may be or become requisite in connection with the issuance, sale, transfer, and delivery of the Warrant Certificates, the exercise of the Warrants, the issuance, sale, transfer, and delivery of the Warrant Securities issued upon exercise of the Warrants or upon the expiration of the period during which the Warrants are exercisable. Section 7.7. Persons Having Rights under Warrant Agreement. Nothing in this Agreement shall give to any person other than Patterson, the Warrant Agent and the holders of the Warrant Certificates any right, remedy or claim under or by reason of this Agreement. EW-14 15 Section 7.8. Headings. The descriptive headings of the several Articles and Sections of this Agreement are inserted for convenience only and shall not control or affect the meaning or construction of any of the provisions hereof. Section 7.9. Counterparts. This Agreement may be executed in any number of counterparts, each of which as so executed shall be deemed to be an original, but such counterparts shall together constitute but one and the same instrument. Section 7.10. Inspection of Agreement. A copy of this Agreement shall be available at all reasonable times at the principal corporate trust office of the Warrant Agent for inspection by the holder of any Warrant Certificate. The Warrant Agent may require such holder to submit his Warrant Certificates for inspection by it. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and their respective corporate seals to be affixed hereunto, and the same to be attested, all as of the day and year first above written. PATTERSON ENERGY, INC. By --------------------------- Attest: - ------------------------------ [NAME OF WARRANT AGENT], as Warrant Agent By --------------------------- Attest: - ------------------------------ EW-15 16 Exhibit A (FORM OF WARRANT CERTIFICATE) [Face of Warrant Certificate] [Form of Legend of Warrants which are not immediately detachable: Prior to ______, this Warrant Certificate cannot be transferred or exchanged unless attached to [Title of Offered Securities].] Exercisable Only if Countersigned by the Warrant Agent as Provided Herein PATTERSON ENERGY, INC. WARRANTS TO PURCHASE [Title of Warrant Securities] Void After 5:00 P.M. New York Time on [No.] Warrants This certifies that ____________ or registered assigns is the registered owner of the above indicated number of Warrants, each Warrant entitling such owner to purchase, at any time [after 5 p.m. New York time on _________, and] on or before 5 p.m. New York time on _________, [Title of Warrant Securities] (the "Warrant Securities"), of Patterson Energy, Inc. ("Patterson"), on the following basis: [on _________, the exercise price of each Warrant is [$]; during the period from _____________, through and including _______________, the exercise price of each Warrant will be [$] ________]. The holder may exercise the Warrants evidenced hereby by providing certain information set forth on the back hereof and by paying in full, [in lawful money of the United States of America] [if applicable, express Warrant exercise price in applicable foreign currency, currency unit or composite currency] [in cash or by certified check or official bank check or by bank wire transfer, in each case] [by bank wire transfer], in immediately available funds, the Warrant Price for each Warrant exercised to the Warrant Agent (as hereinafter defined) and by surrendering this Warrant Certificate, with the purchase form on the back hereof duly executed, at the corporate trust office of [name of Warrant Agent], or its successors as warrant agent (the "Warrant Agent"), [or ______________] currently at the address specified on the reverse hereof, and upon compliance with and subject to the conditions set forth herein and in the Warrant Agreement (as hereinafter defined). Any whole number of Warrants evidenced by this Warrant Certificate may be exercised to purchase Warrant Securities in registered form. Upon any exercise of fewer than all of the Warrants evidenced by this Warrant Certificate, there shall be issued to the holder hereof a new Warrant Certificate evidencing the number of Warrants remaining unexercised. Patterson will not be required to issue fractional shares of Warrant Securities upon exercise of the Warrants or distribute stock certificates that evidence fractional shares of Warrant Securities. In lieu of fractional Warrant Securities, there shall be paid by Patterson to the registered holder of this Warrant Certificate at the time such Warrant Certificate is exercised an amount in cash payable by company check equal to the closing sales price of the Warrant Securities on the American Stock Exchange (or if not so listed, another equivalent means reasonably determined by Patterson) on the business day immediately preceding the exercise date, multiplied by such fraction. This Warrant Certificate is issued under and in accordance with the Warrant Agreement dated as of ___________, (the "Warrant Agreement") between Patterson and the Warrant Agent and is subject to the terms and provisions contained in the Warrant Agreement, to all of which terms and provisions the holder of this Warrant Certificate consents by acceptance hereof. Copies of the Warrant Agreement and the form of Warrant Securities are on file at the above-mentioned office of the Warrant Agent [and at ]. EW-16 17 [If Offered Securities with Warrants which are not immediately detachable - Prior to ___________ this Warrant Certificate may be exchanged or transferred only together with the [Title of Offered Securities] ("Offered Securities") to which this Warrant Certificate was initially attached, and only for the purpose of effecting, or in conjunction with, an exchange or transfer of such Offered Securities. After such date, this [If Offered Securities with Warrants which are immediately detachable - Transfer of this] Warrant Certificate may be transferred when this Warrant Certificate is surrendered at the corporate trust office of the Warrant Agent [or _____] by the registered owner or his assigns, in person or by an attorney duly authorized in writing, in the manner and subject to the terms provided in the Warrant Agreement.] [If Offered Securities with Warrants which are not immediately detachable - Except as provided in the immediately preceding paragraph, after] [If Offered Securities with Warrants which are immediately detachable - After] countersignature by the Warrant Agent and prior to the expiration of this Warrant Certificate, this Warrant Certificate may be exchanged at the corporate trust office of the Warrant Agent for Warrant Certificates representing the same aggregate number of Warrants. This Warrant Certificate shall not entitle the holder hereof to any of the rights of a holder of Warrant Securities, including, without limitation, the right to receive dividends, vote, receive notice of any meeting of stockholders or otherwise have any right as a stockholder of Patterson. This Warrant Certificate shall not be valid for any purpose until countersigned by the Warrant Agent. Dated as of --------------------- PATTERSON ENERGY, INC. By ------------------------------- Cloyce A. Talbott Chief Executive Officer Attest: - -------------------------------- Countersigned ---------------------------------- As Warrant Agent By ------------------------------- Authorized Signature EW-17 18 [Reverse of Warrant Certificate] Instructions for Exercise of Warrant To exercise the Warrants evidenced hereby, the holder must pay [in cash or by certified check or official bank check or by bank wire transfer] [by bank wire transfer], in immediately available funds, the Warrant Price in full for Warrants exercised to [insert name of Warrant Agent] Corporate Trust Department [insert address of Warrant Agent], Attn: [or ], which [payment] [wire transfer] must specify the name of the holder and the number of Warrants exercised by such holder. In addition, the holder must complete the information required below and present this Warrant Certificate in person or by mail (registered mail is recommended) to the Warrant Agent at the addresses set forth below. This Warrant Certificate, completed and duly executed, must be received by the Warrant Agent within five business days of the [payment] [wire transfer]. To Be Executed Upon Exercise of Warrant The undersigned hereby irrevocably elects to exercise Warrants evidenced by this Warrant Certificate, to purchase _______________ [Title of Warrant Securities] (the "Warrant Securities") of Patterson Energy, Inc. and represents that he has tendered payment for such Warrant Securities [in cash or by certified check or official bank check or by bank wire transfer, in each case] [by bank wire transfer], in immediately available funds, to the order of Patterson Energy, Inc., c/o [insert name and address of Warrant Agent], in the amount of [$]______________ [if applicable -- insert relevant amounts in applicable foreign currency, currency unit or composite currency] in accordance with the terms hereof]. The undersigned requests that said principal amount of Warrant Securities be in fully registered form and in the authorized denominations, registered in such names and delivered, all as specified in accordance with the instructions set forth below. If the number of Warrants exercised is less than all of the Warrants evidenced hereby, the undersigned requests that a new Warrant Certificate representing the remaining Warrants evidenced hereby be issued and delivered to the undersigned unless otherwise specified in the instructions below. Dated Name ------------------------------------- ------------------------ (Please Print) - ------------------------------------------- Address - ------------------------------------------- Social Security Number of Holder - ------------------------------------------- Signature The Warrants evidenced hereby may be exercised at the following addresses: By hand at -------------------------------------------- -------------------------------------------- By mail at -------------------------------------------- -------------------------------------------- [Instructions as to form and delivery of Warrant Securities and, if applicable, Warrant Certificates evidencing unexercised Warrants--complete as appropriate.] EW-18 19 Assignment (Form of Assignment to be Executed if Holder Desires to Transfer Warrants Evidenced Hereby) For value received ____________________________ hereby sells, assigns and transfers unto ____________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________ (Please print name and address, including zip code of assignee, and Social Security Number or other identifying number) the Warrants represented by the within Warrant Certificate and does hereby irrevocably constitute and appoint Attorney, to transfer said Warrant Certificate on the books of the Warrant Agent with full power of substitution in the premises. Dated -------------------------------- ------------------------------ Signature (Signature must conform in all respect to name of holder as specified on the face of this Warrant Certificate and must bear a signature guarantee of a commercial bank, trust company, or member broker of the New York, American, Midwest or Pacific Stock Exchange.) Signature Guaranteed: - -------------------------------------- EW-19 EX-4.7 5 FORM OF DEBT SECURITIES WARRANT DEBT SECURITIES 1 EXHIBIT 4.7 PATTERSON ENERGY, INC. Form of Warrant Agreement [for warrants sold attached to debt securities]* THIS WARRANT AGREEMENT is dated as of ________________, between Patterson Energy, Inc., a Delaware corporation (hereinafter called "Patterson", which term includes any successor corporation under the Indenture hereinafter referred to), and _________________, as Warrant Agent (herein called the "Warrant Agent"). WHEREAS, Patterson has entered into an Indenture dated as of _____________, (the "Indenture"), with ____________, as trustee (the "Trustee"), providing for the issuance from time to time of its unsecured [senior] [subordinated] debentures, notes or other evidences of indebtedness (the "Debt Securities"), to be issued in one or more series, as provided in the Indenture; and WHEREAS, Patterson proposes to sell [title of Debt Securities being offered] (the "Offered Securities") with warrant certificates evidencing one or more warrants (the "Warrants" or, individually a "Warrant") representing the right to purchase [title of Debt Securities purchasable through exercise of Warrants] (the "Warrant Securities"), such warrant certificates and other warrant certificates issued pursuant to this Agreement being herein called the "Warrant Certificates"; and WHEREAS, Patterson desires the Warrant Agent to act on behalf of Patterson in connection with the issuance, exchange, exercise and replacement of the Warrant Certificates, and in this Agreement wishes to set forth, among other things, the form and provisions of the Warrant Certificates and the terms and conditions on which they may be issued, exchanged, exercised and replaced: NOW, THEREFORE, in consideration of the premises and of the mutual agreements herein contained, the parties hereto agree as follows: ARTICLE I Issuance of Warrants and Execution and Delivery of Warrant Certificates Section 1.1. Issuance of Warrants. Warrants shall be initially issued in connection with the issuance of the Offered Securities [but shall be separately transferable on and after _________, ____ (the "Detachable Date")] [and shall not be separately transferable] and each Warrant Certificate shall evidence one or more Warrants. Each Warrant evidenced thereby shall represent the right, subject to the provisions contained herein and therein, to purchase a Warrant Security in the principal amount of [$]_______. Warrant Certificates shall be initially issued in units with the Offered Securities and each Warrant Certificate included in such a unit shall evidence ___ Warrants for each [$]____ principal amount of Offered Securities included in such unit. Section 1.2. Execution and Delivery of Warrant Certificates. Each Warrant Certificate, whenever issued, shall be in registered* form substantially in the form set forth in Exhibit A hereto, shall be dated the date of its issuance and may have such letters, numbers or other marks of identification or designation and such legends or endorsements printed, lithographed or engraved thereon as the officers of Patterson executing the same may approve (execution thereof to be conclusive evidence of such approval) and as are not inconsistent with the provisions of this Agreement, or as may be required to comply with - ---------------- * Complete or modify the provisions of this Form as appropriate to reflect the terms of the Warrants and Warrant Securities. DW-1 2 any law or with any rule or regulation made pursuant thereto or with any rule or regulation of any stock exchange on which the Warrants may be listed, or to conform to usage. The Warrant Certificates shall be signed on behalf of Patterson by its Chief Executive Officer, its President, one of its Vice Presidents, its Treasurer or one of its Assistant Treasurers under its corporate seal and attested by its Secretary or one of its Assistant Secretaries. Such signatures may be manual or facsimile signatures of such authorized officers and may be imprinted or otherwise reproduced on the Warrant Certificates. The seal of Patterson may be in the form of a facsimile thereof and may be impressed, affixed, imprinted or otherwise reproduced on the Warrant Certificates. No Warrant Certificate shall be valid for any purpose, and no Warrant evidenced thereby shall be exercisable, until such Warrant Certificate has been countersigned by the manual signature of the Warrant Agent. Such signature by the Warrant Agent upon any Warrant Certificate executed by Patterson shall be conclusive evidence that the Warrant Certificate so countersigned has been duly issued hereunder. In case any officer of Patterson who shall have signed any of the Warrant Certificates either manually or by facsimile signature shall cease to be such officer before the Warrant Certificates so signed shall have been countersigned and delivered by the Warrant Agent, such Warrant Certificates may be countersigned and delivered notwithstanding that the person who signed such Warrant Certificates ceased to be such officer of Patterson; and any Warrant Certificate may be signed on behalf of Patterson by such persons as, at the actual date of the execution of such Warrant Certificate, shall be the proper officers of Patterson, although at the date of the execution of this Agreement any such person was not such officer. The term "holder" or "holder of a Warrant Certificate" as used herein shall mean any person in whose name at the time any Warrant Certificate shall be registered upon the books to be maintained by the Warrant Agent for that purpose. [If Offered Securities with Warrants which are not immediately detachable - or upon the register of the Offered Securities prior to the Detachable Date. Patterson will or will cause the registrar of the Offered Securities to make available at all times to the Warrant Agent such information as to holders of the Offered Securities with Warrants as may be necessary to keep the Warrant Agent's records up to date.] Section 1.3. Issuance of Warrant Certificates. Warrant Certificates evidencing the right to purchase an aggregate principal amount not exceeding [$]______ of Warrant Securities (except as provided in Sections 2.3(c), 3.2 and 4.1) may be executed by Patterson and delivered to the Warrant Agent upon the execution of this Warrant Agreement or from time to time thereafter. The Warrant Agent shall, upon receipt of Warrant Certificates duly executed on behalf of Patterson, countersign Warrant Certificates evidencing Warrants representing the right to purchase up to [$]______ aggregate principal amount of Warrant Securities and shall deliver such Warrant Certificates to or upon the order of Patterson. Subsequent to such original issuance of the Warrant Certificates, the Warrant Agent shall countersign a Warrant Certificate only if the Warrant Certificate is issued in exchange or substitution for one or more previously countersigned Warrant Certificates or in connection with their transfer, as hereinafter provided or as provided in Section 2.3(c). ARTICLE II Warrant Price, Duration and Exercise of Warrants Section 2.1. Warrant Price. [On _______, _____, the] [The Warrant] exercise price of each Warrant is [$] ______. [During the period from _________, ____, through and including _________, ____, the exercise price of each Warrant will be [$]___________], plus [accrued amortization of the original issue discount] [accrued interest] from _________, ____. [On ___________, ____, the exercise price of each Warrant will be [$]________. [if applicable -- insert relevant amounts in applicable foreign currency, currency unit or composite currency] During the period from _________, ____, through and DW-2 3 including _________, ____, the exercise price of each Warrant will be [$]___________, plus [accrued amortization of the original issue discount] [accrued interest] from _________, ____.] [In each case, the original issue discount will be amortized at a ___% annual rate, computed on an annual basis using a 360-day year consisting of twelve 30-day months]. Such purchase price of Warrant Securities is referred to in this Agreement as the "Warrant Price." [The original issue discount for each $1,000 principal amount of Warrant Securities is [$]_____.] Section 2.2. Duration of Warrants. Each Warrant may be exercised in whole at any time, as specified herein, on or after [the date thereof] [_________, ____,] and at or before 5 p.m. New York time on __________________ (the "Expiration Date"). Each Warrant not exercised at or before 5 p.m. New York time on the Expiration Date shall become void, and all rights of the holder of the Warrant Certificate evidencing such Warrant under this Agreement shall cease. Section 2.3. Exercise of Warrants. (a) During the period specified in Section 2.2, any whole number of Warrants may be exercised by providing certain information set forth on the reverse side of the Warrant Certificate and by paying in full, [in lawful money of the United States of America] [if applicable -- insert relevant amounts in applicable foreign currency, currency unit or composite currency] [in cash or by certified check or official bank check or by bank wire transfer, in each case] [by bank wire transfer], in immediately available funds, the Warrant Price for each Warrant exercised, to the Warrant Agent at its corporate trust office [or at ________], provided that such exercise is subject to receipt, within five business days of such [payment] [wire transfer] by the Warrant Agent of the Warrant Certificate with the form of election to purchase Warrant Securities set forth on the reverse side of the Warrant Certificate properly completed and duly executed. The date on which payment in full of the Warrant Price is received by the Warrant Agent shall, subject to receipt of the Warrant Certificate as aforesaid, be deemed to be the date on which the Warrant is exercised. The Warrant Agent shall deposit all funds received by it in payment of the Warrant Price in an account of Patterson maintained with it and shall advise Patterson by telephone at the end of each day on which a [payment] [wire transfer] for the exercise of Warrants is received of the amount so deposited to its account. The Warrant Agent shall promptly confirm such telephone advice to Patterson in writing. (b) The Warrant Agent shall, from time to time, as promptly as practicable, advise Patterson and the Trustee under the Indenture (if such Trustee is not the Warrant Agent) of (i) the number of Warrants exercised, (ii) the instructions of each holder of the Warrant Certificates evidencing such Warrants with respect to delivery of the Warrant Securities to which such holder is entitled upon such exercise, (iii) delivery of Warrant Certificates evidencing the balance, if any, of the Warrants remaining after such exercise, and (iv) such other information as Patterson shall reasonably require. (c) As soon as practicable after the exercise of any Warrant, Patterson shall issue, pursuant to the Indenture, in authorized denominations to or upon the order of the holder of the Warrant Certificate evidencing such Warrant, the Warrant Securities to which such holder is entitled in fully registered form, registered in such name or names as may be directed by such holder.** If fewer than all of the Warrants evidenced by such Warrant Certificate are exercised, Patterson shall execute, and an authorized officer of the Warrant Agent shall manually countersign and deliver, a new Warrant Certificate evidencing the number of such Warrants remaining unexercised. - --------------------- ** Subject to change in accordance with changes in tax laws and regulations. DW-3 4 (d) Patterson shall not be required to pay any stamp or other tax or other governmental charge required to be paid in connection with any transfer involved in the issue of the Warrant Securities; and in the event that any such transfer is involved, Patterson shall not be required to issue or deliver any Warrant Security until such tax or other charge shall have been paid or it has been established to Patterson's satisfaction that no such tax or other charge is due. ARTICLE III Other Provisions Relating to Rights of Holders of Warrant Certificates Section 3.1. No Rights as Warrant Securityholder Conferred by Warrants or Warrant Certificates. No Warrant Certificate or Warrant evidenced thereby shall entitle the holder thereof to any of the rights of a holder of Warrant Securities, including, without limitation, the right to receive the payment of principal of, premium, if any, or interest on Warrant Securities or to enforce any of the covenants in the Indenture. Section 3.2. Lost, Stolen, Mutilated or Destroyed Warrant Certificates. Upon receipt by the Warrant Agent of evidence reasonably satisfactory to it of the ownership of and the loss, theft, destruction or mutilation of any Warrant Certificate and of indemnity reasonably satisfactory to it, and, in the case of mutilation, upon surrender thereof to the Warrant Agent for cancellation, then, in the absence of notice to Patterson or the Warrant Agent that such Warrant Certificate has been acquired by a bona fide purchaser, Patterson shall execute, and an authorized officer of the Warrant Agent shall manually countersign and deliver, in exchange for or in lieu of the lost, stolen, destroyed or mutilated Warrant Certificate, a new Warrant Certificate of the same tenor and evidencing a like number of Warrants. Upon the issuance of any new Warrant Certificate under this Section, Patterson may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Warrant Agent) in connection therewith. Every substitute Warrant Certificate executed and delivered pursuant to this Section in lieu of any lost, stolen or destroyed Warrant Certificate shall represent an additional contractual obligation of Patterson, whether or not the lost, stolen or destroyed Warrant Certificate shall be at any time enforceable by anyone, and shall be entitled to the benefits of this Agreement equally and proportionately with any and all other Warrant Certificates duly executed and delivered hereunder. The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement of mutilated, lost, stolen or destroyed Warrant Certificates. Section 3.3. Holder of Warrant Certificate May Enforce Rights. Notwithstanding any of the provisions of this Agreement, any holder of a Warrant Certificate, without the consent of the Warrant Agent, the holder of any Warrant Securities or the holder of any other Warrant Certificate, may in his own behalf and for his own benefit, enforce, and may institute and maintain any suit, action or proceeding against Patterson suitable to enforce or otherwise in respect of, his right to exercise the Warrants evidenced by his Warrant Certificate in the manner provided in his Warrant Certificate and in this Agreement. ARTICLE IV Exchange and Transfer of Warrant Certificates Section 4.1. Exchange and Transfer of Warrant Certificates. [If Offered Securities with Warrants which are immediately detachable - Upon] [If Offered Securities with Warrants which are not immediately detachable -Prior to the Detachable Date, a Warrant Certificate may be exchanged or transferred only together with the Offered Securities to which the Warrant Certificate was initially DW-4 5 attached and only for the purpose of effecting or in conjunction with an exchange or transfer of such Offered Securities. Prior to the Detachable Date, each transfer of the Offered Securities [on the register of the Offered Securities] shall operate also to transfer the related Warrant Certificates. After the Detachable Date upon] surrender at the corporate trust office of the Warrant Agent [or ________], Warrant Certificates evidencing Warrants may be exchanged for Warrant Certificates in other denominations evidencing such Warrants or the transfer thereof may be registered in whole or in part; provided that such other Warrant Certificates evidence the same aggregate number of Warrants as the Warrant Certificates so surrendered. The Warrant Agent shall keep, at its corporate trust office [and at _______ __] books in which, subject to such reasonable regulations as it may prescribe, it shall register Warrant Certificates and exchanges and transfers of outstanding Warrant Certificates, upon surrender of the Warrant Certificates to the Warrant Agent at its corporate trust office [or ____________] for exchange or registration of transfer, properly endorsed or accompanied by appropriate instruments of registration of transfer and written instructions for transfer, all in form satisfactory to Patterson and the Warrant Agent. No service charge shall be made for any exchange [or registration of transfer] of Warrant Certificates but Patterson may require payment of a sum sufficient to cover any stamp or other tax or other governmental charge that may be imposed in connection with any such exchange or registration of transfer. Whenever any Warrant Certificates are so surrendered for exchange or registration of transfer an authorized officer of the Warrant Agent shall manually countersign and deliver to the person or persons entitled thereto a Warrant Certificate or Warrant Certificates duly authorized and executed by Patterson, as so requested. The Warrant Agent shall not be required to effect any exchange or registration of transfer which will result in the issuance of a Warrant Certificate evidencing a fraction of a Warrant or a number of full Warrants and a fraction of a Warrant. All Warrant Certificates issued upon any exchange [or registration of transfer] of Warrant Certificates shall be the valid obligations of Patterson, evidencing the same obligations, and entitled to the same benefits under this Agreement, as the Warrant Certificates surrendered for such exchange or registration of transfer. Section 4.2. Treatment of Holders of Warrant Certificates. [If Warrants which are not immediately detachable - Every holder of a Warrant Certificate, by accepting the same, consents and agrees with Patterson, the Warrant Agent and with every subsequent holder of such Warrant Certificate that until the transfer of the Warrant Certificate is registered on the books of the Warrant Agent [or the registrar of the Offered Securities prior to the Detachable Date], Patterson and the Warrant Agent [or the registrar of the Offered Securities prior to the Detachable Date] may treat the registered holder as the absolute owner thereof for any purpose and as the person entitled to exercise the rights represented by the Warrants evidenced thereby, any notice to the contrary notwithstanding.] Section 4.3. Cancellation of Warrant Certificates. Any Warrant Certificate surrendered for exchange, registration of transfer or exercise of the Warrants evidenced thereby shall, if surrendered to Patterson, be delivered to the Warrant Agent and all Warrant Certificates surrendered or so delivered to the Warrant Agent shall be promptly cancelled by the Warrant Agent and shall not be reissued and, except as expressly permitted by this Agreement, no Warrant Certificate shall be issued hereunder in exchange or in lieu thereof. The Warrant Agent shall deliver to Patterson from time to time or otherwise dispose of cancelled Warrant Certificates in a manner satisfactory to Patterson. ARTICLE V Concerning the Warrant Agent Section 5.1. Warrant Agent. Patterson hereby appoints __________, as Warrant Agent of Patterson in respect of the Warrants and the Warrant Certificates upon the terms and subject to the conditions herein set forth; and __________ hereby accepts such appointment. The Warrant Agent shall have the powers and authority granted to and conferred upon it in the Warrant Certificates and hereby and such further powers and authority to act on behalf of Patterson as Patterson may hereafter grant to or DW-5 6 confer upon it. All of the terms and provisions with respect to such powers and authority contained in the Warrant Certificates are subject to and governed by the terms and provisions hereof. Section 5.2. Conditions of Warrant Agent's Obligations. The Warrant Agent accepts its obligations herein set forth upon the terms and conditions hereof, including the following, to all of which Patterson agrees and to all of which the rights hereunder of the holders from time to time of the Warrant Certificates shall be subject: (a) Compensation and Indemnification. Patterson agrees promptly to pay the Warrant Agent the compensation to be agreed upon with Patterson for all services rendered by the Warrant Agent and to reimburse the Warrant Agent for reasonable out-of-pocket expenses (including counsel fees) incurred by the Warrant Agent in connection with the services rendered hereunder by the Warrant Agent. Patterson also agrees to indemnify the Warrant Agent for, and to hold it harmless against, any loss, liability or expense incurred without negligence or bad faith on the part of the Warrant Agent, arising out of or in connection with its acting as Warrant Agent hereunder, as well as the costs and expenses of defending against any claim of such liability. (b) Agent for Patterson. In acting under this Warrant Agreement and in connection with the Warrant Certificates, the Warrant Agent is acting solely as agent of Patterson and does not assume any obligation or relationship of agency or trust for or with any of the holders of Warrant Certificates or beneficial owners of Warrants. (c) Counsel. The Warrant Agent may consult with counsel satisfactory to it, and the advice of such counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with the advice of such counsel. (d) Documents. The Warrant Agent shall be protected and shall incur no liability for or in respect of any action taken or thing suffered by it in reliance upon any Warrant Certificate, notice, direction, consent, certificate, affidavit, statement or other paper or document reasonably believed by it to be genuine and to have been presented or signed by the proper parties. (e) Certain Transactions. The Warrant Agent, and its officers, directors and employees, may become the owner of, or acquire any interest in, Warrants, with the same rights that it or they would have if it were not the Warrant Agent hereunder, and, to the extent permitted by applicable law, it or they may engage or be interested in any financial or other transaction with Patterson and may act on, or as depositary, trustee or agent for, any committee or body of holders of Warrant Securities or other obligations of Patterson as freely as if it were not the Warrant Agent hereunder. Nothing in this Warrant Agreement shall be deemed to prevent the Warrant Agent from acting as trustee for any series of Debt Securities under the Indenture. (f) No Liability for Interest. The Warrant Agent shall have no liability for interest on any monies at any time received by it pursuant to any of the provisions of this Agreement or of the Warrant Certificates. (g) No Liability for Invalidity. The Warrant Agent shall have no liability with respect to any invalidity of this Agreement or any of the Warrant Certificates. (h) No Responsibility for Representations. The Warrant Agent shall not be responsible for any of the recitals or representations herein or in the Warrant Certificates (except as to the Warrant Agent's countersignature thereon), all of which are made solely by Patterson. DW-6 7 (i) No Implied Obligations. The Warrant Agent shall be obligated to perform only such duties as are herein and in the Warrant Certificates specifically set forth and no implied duties or obligations shall be read into this Agreement or the Warrant Certificates against the Warrant Agent. The Warrant Agent shall not be under any obligation to take any action hereunder which may tend to involve it in any expense or liability, the payment of which within a reasonable time is not, in its reasonable opinion, assured to it. The Warrant Agent shall not be accountable or under any duty or responsibility for the use by Patterson of any of the Warrant Certificates authenticated by the Warrant Agent and delivered by it to Patterson pursuant to this Agreement or for the application by Patterson of the proceeds of the Warrant Certificates. The Warrant Agent shall have no duty or responsibility in case of any default by Patterson in the performance of its covenants or agreements contained herein or in the Warrant Certificates or in the case of the receipt of any written demand from a holder of a Warrant Certificate with respect to such default, including, without limiting the generality of the foregoing, any duty or responsibility to initiate or attempt to initiate any proceedings at law or otherwise or, except as provided in Section 6.2, to make any demand upon Patterson. Section 5.3. Resignation and Appointment of Successor. (a) Patterson agrees, for the benefit of the holders of the Warrant Certificates, that there shall at all times be a Warrant Agent hereunder until all the Warrant Certificates are no longer exercisable. (b) The Warrant Agent may at any time resign as such agent by giving written notice to Patterson of such intention on its part, specifying the date on which its desired resignation shall become effective; provided that such date shall not be less than three months after the date on which such notice is given unless Patterson otherwise agrees. The Warrant Agent hereunder may be removed at any time by the filing with it of an instrument in writing signed by or on behalf of Patterson and specifying such removal and the date when it shall become effective. Such resignation or removal shall take effect upon the appointment by Patterson, as hereinafter provided, of a successor Warrant Agent (which shall be a bank or trust company authorized under the laws of the jurisdiction of its organization to exercise corporate trust powers) and the acceptance of such appointment by such successor Warrant Agent. The obligation of Patterson under Section 5.2(a) shall continue to the extent set forth therein notwithstanding the resignation or removal of the Warrant Agent. (c) In case at any time the Warrant Agent shall resign, or shall be removed, or shall become incapable of acting, or shall be adjudged a bankrupt or insolvent, or shall file a petition seeking relief under the Federal Bankruptcy Code, as now constituted or hereafter amended, or under any other applicable Federal or State bankruptcy law or similar law or make an assignment for the benefit of its creditors or consent to the appointment of a receiver or custodian of all or any substantial part of its property, or shall admit in writing its inability to pay or meet its debts as they mature, or if a receiver or custodian of it or of all or any substantial part of its property shall be appointed, or if an order of any court shall be entered for relief against it under the provisions of the Federal Bankruptcy Code, as now constituted or hereafter amended, or under any other applicable Federal or State bankruptcy or similar law, or if any public officer shall have taken charge or control of the Warrant Agent or of its property or affairs, for the purpose of rehabilitation, conservation or liquidation, a successor Warrant Agent, qualified as aforesaid, shall be appointed by Patterson by an instrument in writing, filed with the successor Warrant Agent. Upon the appointment as aforesaid of a successor Warrant Agent and acceptance by the DW-7 8 successor Warrant Agent of such appointment, the Warrant Agent shall cease to be Warrant Agent hereunder. (d) Any successor Warrant Agent appointed hereunder shall execute, acknowledge and deliver to its predecessor and to Patterson an instrument accepting such appointment hereunder, and thereupon such successor Warrant Agent, without any further act, deed or conveyance, shall become vested with all the authority, rights, powers, trusts, immunities, duties and obligations of such predecessor with like effect as if originally named as Warrant Agent hereunder, and such predecessor, upon payment of its charges and disbursements then unpaid, shall thereupon become obligated to transfer, deliver and pay over, and such successor Warrant Agent shall be entitled to receive, all monies, securities and other property on deposit with or held by such predecessor, as Warrant Agent hereunder. (e) Any corporation into which the Warrant Agent hereunder may be merged or converted or any corporation with which the Warrant Agent may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Warrant Agent shall be a party, or any corporation to which the Warrant Agent shall sell or otherwise transfer all or substantially all the assets and business of the Warrant Agent, provided that it shall be qualified as aforesaid, shall be the successor Warrant Agent under this Agreement without the execution or filing of any paper or any further act on the part of any of the parties hereto. ARTICLE VI Miscellaneous Section 6.1. Amendment. This Agreement may be amended by the parties hereto, without the consent of the holder of any Warrant Certificate, for the purpose of curing any ambiguity, or of curing, correcting or supplementing any defective or inconsistent provision contained herein, or making any other provisions with respect to matters or questions arising under this Agreement as Patterson and the Warrant Agent may deem necessary or desirable; provided, that such action shall not materially and adversely affect the interests of the holders of the Warrant Certificates and, provided further, that Patterson and the Warrant Agent may amend this Agreement in any manner prior to the issuance of any Warrants hereunder. With the consent of the holders of not less than a majority in number of the then outstanding unexercised Warrants affected, Patterson and the Warrant Agent may modify or amend any other term of this Agreement; provided, however, that no such modification or amendment may be made without the consent of the holders affected thereby if such proposed amendment would (i) shorten the period of time during which the Warrants may be exercised; (ii) otherwise materially and adversely affect the exercise rights of the holders of the Warrants; or (iii) reduce the number of outstanding Warrants. Section 6.2. Notices and Demands to Patterson and Warrant Agent. If the Warrant Agent shall receive any notice or demand addressed to Patterson by the holder of a Warrant Certificate pursuant to the provisions of the Warrant Certificates, the Warrant Agent shall promptly forward such notice or demand to Patterson. Section 6.3. Addresses. Any communication from Patterson to the Warrant Agent with respect to this Agreement shall be addressed to ____________________, and any communication from the Warrant Agent to Patterson with respect to this Agreement shall be addressed to Patterson Energy, Inc., 4510 Lamesa Highway, Snyder, Texas 79549, Attention: _______________ (or such other address as shall be specified in writing by the Warrant Agent or by Patterson). Section 6.4. Applicable Law. The validity, interpretation and performance of this Agreement and each Warrant Certificate issued hereunder and of the respective terms and provisions thereof shall be DW-8 9 governed by and construed in accordance with, the laws of the State of [New York], without giving effect to the conflict of laws principles thereof. Section 6.5. Delivery of Prospectus. Patterson will furnish to the Warrant Agent sufficient copies of a prospectus relating to the Warrant Securities deliverable upon exercise of Warrants (the "Prospectus"), and the Warrant Agent agrees that upon the exercise of any Warrant, the Warrant Agent will deliver to the holder of the Warrant Certificate evidencing such Warrant, prior to or concurrently with, the delivery of the Warrant Securities issued upon such exercise, a Prospectus. Section 6.6. Obtaining of Governmental Approvals. Patterson will from time to time take all action which may be necessary to obtain and keep effective any and all permits, consents and approvals of governmental agencies and authorities and securities acts filings under United States Federal and State laws (including, without limitation, a registration statement in respect of the Warrants and Warrant Securities under the Securities Act of 1933, as amended), which may be or become requisite in connection with the issuance, sale, transfer, and delivery of the Warrant Certificates, the exercise of the Warrants, the issuance, sale, transfer, and delivery of the Warrant Securities issued upon exercise of the Warrants or upon the expiration of the period during which the Warrants are exercisable. Section 6.7. Persons Having Rights under Warrant Agreement. Nothing in this Agreement shall give to any person other than Patterson, the Warrant Agent and the holders of the Warrant Certificates any right, remedy or claim under or by reason of this Agreement. Section 6.8. Headings. The descriptive headings of the several Articles and Sections of this Agreement are inserted for convenience only and shall not control or affect the meaning or construction of any of the provisions hereof. Section 6.9. Counterparts. This Agreement may be executed in any number of counterparts, each of which as so executed shall be deemed to be an original, but such counterparts shall together constitute but one and the same instrument. Section 6.10. Inspection of Agreement. A copy of this Agreement shall be available at all reasonable times at the principal corporate trust office of the Warrant Agent for inspection by the holder of any Warrant Certificate. The Warrant Agent may require such holder to submit his Warrant Certificates for inspection by it. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and their respective corporate seals to be affixed hereunto, and the same to be attested, all as of the day and year first above written. PATTERSON ENERGY, INC. Attest: By --------------------------------- - ---------------------------- [NAME OF WARRANT AGENT], as Warrant Agent Attest: By --------------------------------- - ---------------------------- DW-9 10 EXHIBIT A (FORM OF WARRANT CERTIFICATE) [Face of Warrant Certificate] [Form of Legend of Warrants which are not immediately detachable: Prior to ___________, this Warrant Certificate cannot be transferred or exchanged unless attached to a [Title of Offered Securities].] Exercisable Only if Countersigned by the Warrant Agent as Provided Herein PATTERSON ENERGY, INC. WARRANTS TO PURCHASE [Title of Warrant Securities] Void After 5:00 P.M. New York Time on ___________ [No.] Warrants This certifies that ________ or registered assigns is the registered owner of the above indicated number of Warrants, each Warrant entitling such owner to purchase, at any time [after 5 p.m. New York time on , [date], and] on or before 5 p.m. New York time on [date] [$] _____________ principal amount of [Title of Warrant Securities] (the "Warrant Securities"), of Patterson Energy, Inc. ("Patterson") issued and to be issued under the Indenture (as hereinafter defined), on the following basis: [on [date] the exercise price of each Warrant is [$] ; during the period from , [date] through and including [date], the exercise price of each Warrant will be [$] , plus [accrued amortization of the original issue discount] [accrued interest] from [date]; on [date] the exercise price of each Warrant will be [$] ; during the period from [date] through and including [date] , the exercise price of each Warrant will be [$] , plus [accrued amortization of the original issue discount] [accrued interest] from [date]; [in each case, the original issue discount will be amortized at __% annual rate, computed on an annual basis using a 360-day year consisting of twelve 30-day months] (the "Warrant Price"). [The original issue discount for each $1,000 principal amount [if applicable, insert relevant amount of foreign currency, currency units or composite currency] of Warrant Securities is $____________.] The holder may exercise the Warrants evidenced hereby by providing certain information set forth on the back hereof and by paying in full, [in lawful money of the United States of America] [if applicable, express Warrant exercise price in applicable foreign currency, currency unit or composite currency] [in cash or by certified check or official bank check or by bank wire transfer, in each case] [by bank wire transfer], in immediately available funds, the Warrant Price for each Warrant exercised to the Warrant Agent (as hereinafter defined) and by surrendering this Warrant Certificate, with the purchase form on the back hereof duly executed, at the corporate trust office of [name of Warrant Agent], or its successors as warrant agent (the "Warrant Agent"), [or ________________] currently at the address specified on the reverse hereof, and upon compliance with and subject to the conditions set forth herein and in the Warrant Agreement (as hereinafter defined Any whole number of Warrants evidenced by this Warrant Certificate may be exercised to purchase Warrant Securities in registered form in denominations of $______________ and any integral multiples thereof. Upon any exercise of fewer than all of the Warrants evidenced by this Warrant Certificate, there shall be issued to the holder hereof a new Warrant Certificate evidencing the number of Warrants remaining unexercised. This Warrant Certificate is issued under and in accordance with the Warrant Agreement dated as of ___________, ____, (the "Warrant Agreement") between Patterson and the Warrant Agent and is subject to the terms and provisions contained in the Warrant Agreement, to all of which terms and DW-10 11 provisions the holder of this Warrant Certificate consents by acceptance hereof. Copies of the Warrant Agreement are on file at the above-mentioned office of the Warrant Agent [and at ______________]. The Warrant Securities to be issued and delivered upon the exercise of the Warrants evidenced by this Warrant Certificate will be issued under and in accordance with an Indenture dated as of ___________, ____, (the "Indenture") between Patterson and ________________, as trustee, and will be subject to the terms and provisions contained in the Indenture. Copies of the Indenture and the form of Warrant Securities are on file at the corporate trust office of the trustee [and at ________________]. [If Offered Securities with Warrants which are not immediately detachable - Prior to , 199__, this Warrant Certificate may be exchanged or transferred only together with the [Title of Offered Securities] ("Offered Securities") to which this Warrant Certificate was initially attached, and only for the purpose of effecting, or in conjunction with, an exchange or transfer of such Offered Securities. After such date, this [If Offered Securities with Warrants which are immediately detachable - Transfer of this] Warrant Certificate may be registered when this Warrant Certificate is surrendered at the corporate trust office of the Warrant Agent [or _____] by the registered owner or his assigns, in person or by an attorney duly authorized in writing, in the manner and subject to the limitations provided in the Warrant Agreement.] [If Offered Securities with Warrants which are not immediately detachable - Except as provided in the immediately preceding paragraph, after] [If Offered Securities with Warrants which are immediately detachable - After] countersignature by the Warrant Agent and prior to the expiration of this Warrant Certificate, this Warrant Certificate may be exchanged at the corporate trust office of the Warrant Agent for Warrant Certificates representing the same aggregate number of Warrants. This Warrant Certificate shall not entitle the holder hereof to any of the rights of a holder of Warrant Securities, including, without limitation, the right to receive payments of principal of, premium, if any, or interest, if any, on the Warrant Securities or to enforce any of the covenants of the Indenture. This Warrant Certificate shall not be valid or obligatory for any purpose until countersigned by the Warrant Agent. Dated as of ----------------------- PATTERSON ENERGY, INC. By ----------------------------------- Cloyce A. Talbott Chief Executive Officer Attest: - ---------------------------------- Countersigned ------------------------------------- As Warrant Agent By ----------------------------------- DW-11 12 [Reverse of Warrant Certificate] Instructions for Exercise of Warrant To exercise the Warrants evidenced hereby, the holder must pay [in cash or by certified check or official bank check or by bank wire transfer] [by bank wire transfer], in immediately available funds, the Warrant Price in full for Warrants exercised to [insert name of Warrant Agent] Corporate Trust Department [insert address of Warrant Agent], Attn: [or ], which [payment] [wire transfer] must specify the name of the holder and the number of Warrants exercised by such holder. In addition, the holder must complete the information required below and present this Warrant Certificate in person or by mail (registered mail is recommended) to the Warrant Agent at the addresses set forth below. This Warrant Certificate, completed and duly executed, must be received by the Warrant Agent within five business days of the [payment] [wire transfer]. To Be Executed Upon Exercise of Warrant The undersigned hereby irrevocably elects to exercise Warrants evidenced by this Warrant Certificate, to purchase [$]_____________ principal amount of the [Title of Warrant Securities] (the "Warrant Securities") of Patterson Energy, Inc. and represents that he has tendered payment for such Warrant Securities [in cash or by certified check or official bank check or by bank wire transfer, in each case] [by bank wire transfer], in immediately available funds, to the order of Patterson Energy, Inc., c/o [insert name and address of Warrant Agent], in the amount of [$]_____________ in accordance with the terms hereof. The undersigned requests that said principal amount of Warrant Securities be in fully registered form and in the authorized denominations, registered in such names and delivered, all as specified in accordance with the instructions set forth below. If the number of Warrants exercised is less than all of the Warrants evidenced hereby, the undersigned requests that a new Warrant Certificate representing he remaining Warrants evidenced hereby be issued and delivered to the undersigned unless otherwise specified in the instructions below. Dated Name ------------------ ------------------------------- (Please Print) - --------------------------------------- Address - --------------------------------------- Social Security Number of Holder - --------------------------------------- Signature The Warrants evidenced hereby may be exercised at the following addresses: By hand at ------------------------------------------------ ------------------------------------------------ By mail at ------------------------------------------------ ------------------------------------------------ [Instructions as to form and delivery of Warrant Securities and, if applicable, Warrant Certificates evidencing unexercised Warrants--complete as appropriate.] DW-12 13 Assignment (Form of Assignment to be Executed if Holder Desires to Transfer Warrants Evidenced Hereby) For value received _______________________ hereby sells, assigns and transfers unto _________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ (Please print name and address, including zip code of assignee, and Social Security Number or other identifying number) the Warrants represented by the within Warrant Certificate and does hereby irrevocably constitute and appoint Attorney, to transfer said Warrant Certificate on the books of the Warrant Agent with full power of substitution in the premises. Dated ------------------------ -------------------------------- Signature (Signature must conform in all respect to name of holder as specified on the face of this Warrant Certificate and must bear a signature guarantee of a commercial bank, trust company, or member broker of the New York, American, Midwest or Pacific Stock Exchange.) Signature Guaranteed: - --------------------------------------- DW-13 EX-4.9 6 FORM OF WARRANT AGREEMENT 1 EXHIBIT 4.9 PATTERSON ENERGY, INC. Form of Warrant Agreement [for warrants sold alone](1) THIS WARRANT AGREEMENT is dated as of ___________, between Patterson Energy, Inc., a Delaware corporation (hereinafter called "Patterson", which term includes any successor corporation), and ________________________________, as Warrant Agent (herein called the "Warrant Agent"). WHEREAS, Patterson proposes to sell warrant certificates evidencing one or more warrants (the "Warrants" or, individually, a "Warrant") representing the right to purchase [title of Debt or Equity Securities purchasable through exercise of Warrants] (the "Warrant Securities"), such warrant certificates and other warrant certificates issued pursuant to this Agreement being herein called the "Warrant Certificates"; and WHEREAS, Patterson desires the Warrant Agent to act on behalf of Patterson in connection with the issuance, exchange, exercise and replacement of the Warrant Certificates, and in this Agreement wishes to set forth, among other things, the form and provisions of the Warrant Certificates and the terms and conditions on which they may be issued, exchanged, exercised and replaced; NOW, THEREFORE, in consideration of the premises and of the mutual agreements herein contained, the parties hereto agree as follows: ARTICLE I. Issuance of Warrants and Execution and Delivery of Warrant Certificates. Section 1.1. Issuance of Warrants. Each Warrant Certificate shall evidence one or more Warrants. Each Warrant evidenced thereby shall represent the right, subject to the provisions contained herein and therein, to purchase Warrant Securities. Section 1.2. Execution and Delivery of Warrant Certificates. Each Warrant Certificate, whenever issued, shall be in registered(2) form substantially in the form set forth in Exhibit A hereto, shall be dated the date of its issuance and may have such letters, numbers or other marks of identification or designation and such legends or endorsements printed, lithographed or engraved thereon as the officers of Patterson executing the same may approve (execution thereof to be conclusive evidence of such approval) and as are not inconsistent with the provisions of this Agreement, or as may be required to comply with any law or with any rule or regulation made pursuant thereto or with any rule or regulation of any stock exchange on which the Warrants may be listed, or to conform to usage. The Warrant Certificates shall be signed on behalf of Patterson by its Chief Executive Officer, its President, one of its Vice Presidents, its Treasurer or one of its Assistant Treasurers under its corporate seal and attested by its Secretary or one of its Assistant Secretaries. Such signatures may be manual or facsimile signatures of such authorized officers and may be imprinted or otherwise reproduced on the Warrant Certificates. The seal of Patterson - ---------------------- (1) Complete or modify the provisions of this Form as appropriate to reflect the terms of the Warrants and Warrant Securities. (2) If Warrants are issued in bearer form, appropriate revisions will be made to this Agreement to facilitate such issuance. W-1 2 may be in the form of a facsimile thereof and may be impressed, affixed, imprinted or otherwise reproduced on the Warrant Certificates. No Warrant Certificate shall be valid for any purpose, and no Warrant evidenced thereby shall be exercisable, until such Warrant Certificate has been countersigned by the manual signature of the Warrant Agent. Such signature by the Warrant Agent upon any Warrant Certificate executed by Patterson shall be conclusive evidence that the Warrant Certificate so countersigned has been duly issued hereunder. In case any officer of Patterson who shall have signed any of the Warrant Certificates either manually or by facsimile signature shall cease to be such officer before the Warrant Certificates so signed shall have been countersigned and delivered by the Warrant Agent, such Warrant Certificates may be countersigned and delivered notwithstanding that the person who signed such Warrant Certificates ceased to be such officer of Patterson; and any Warrant Certificate may be signed on behalf of Patterson by such persons as, at the actual date of the execution of such Warrant Certificate, shall be the proper officers of Patterson, although at the date of the execution of this Agreement any such person was not such officer. The term "holder" or "holder of a Warrant Certificate" as used herein shall mean any person in whose name at the time any Warrant Certificate shall be registered upon the books to be maintained by the Warrant Agent for that purpose. Section 1.3. Issuance of Warrant Certificates. Warrant Certificates evidencing the right to purchase Warrant Securities (except as provided in Sections 2.3(c), 3.2 and 4.1) may be executed by Patterson and delivered to the Warrant Agent upon the execution of this Warrant Agreement or from time to time thereafter. The Warrant Agent shall, upon receipt of Warrant Certificates duly executed on behalf of Patterson, countersign Warrant Certificates evidencing Warrants representing the right to purchase up to ____________ Warrant Securities and shall deliver such Warrant Certificates to or upon the order of Patterson. Subsequent to such original issuance of the Warrant Certificates, the Warrant Agent shall countersign a Warrant Certificate only if the Warrant Certificate is issued in exchange or substitution for one or more previously countersigned Warrant Certificates or in connection with their transfer, as hereinafter provided or as provided in Section 2.3(c). ARTICLE II Warrant Price, Duration and Exercise of Warrants Section 2.1. Warrant Price. [On ________, _____, the] [The original] exercise price of each Warrant is [$]_______. [During the period from _________, ____, through and including _________, ____, the exercise price of each Warrant will be [$]___________. On ___________, ____, the exercise price of each Warrant will be [$]________.] [if applicable, insert relevant amounts in applicable foreign currency, currency unit or composite currency] Such purchase price of Warrant Securities is referred to in this Agreement as the "Warrant Price." The Warrant Price and the number and kind of Warrant Securities for which a Warrant may be exercised is subject to adjustment from time to time as set forth in Article V hereof. Section 2.2. Duration of Warrants. Each Warrant may be exercised in whole at any time, as specified herein, on or after [the date thereof] [_________, ____,] and at or before 5 p.m. New York time on ______________ (the "Expiration Date"). Each Warrant not exercised at or before 5 p.m. New York time on the Expiration Date shall become void, and all rights of the holder of the Warrant Certificate evidencing such Warrant under this Agreement shall cease. W-2 3 Section 2.3. Exercise of Warrants. (a) During the period specified in Section 2.2, any whole number of Warrants may be exercised by providing certain information set forth on the reverse side of the Warrant Certificate and by paying in full, [in lawful money of the United States of America] [if applicable, express Warrant exercise price in applicable foreign currency, currency unit or composite currency] [in cash or by certified check or official bank check or by bank wire transfer, in each case] [by bank wire transfer], in immediately available funds, the Warrant Price for each Warrant exercised, to the Warrant Agent at its corporate trust office [or at ________], provided that such exercise is subject to receipt, within three business days of such [payment] [wire transfer] by the Warrant Agent of the Warrant Certificate with the form of election to purchase Warrant Securities set forth on the reverse side of the Warrant Certificate properly completed and duly executed. The date on which payment in full of the Warrant Price is received by the Warrant Agent shall, subject to receipt of the Warrant Certificate as aforesaid, be deemed to be the date on which the Warrant is exercised. The Warrant Agent shall deposit all funds received by it in payment of the Warrant Price in an account of Patterson maintained with it and shall advise Patterson by telephone at the end of each day on which a [payment] [wire transfer] for the exercise of Warrants is received of the amount so deposited to its account. The Warrant Agent shall promptly confirm such telephone advice to Patterson in writing. (b) The Warrant Agent shall, from time to time, as promptly as practicable, advise Patterson of (i) the number of Warrants exercised, (ii) the instructions of each holder of the Warrant Certificates evidencing such Warrants with respect to delivery of the Warrant Securities to which such holder is entitled upon such exercise, (iii) delivery of Warrant Certificates evidencing the balance, if any, of the Warrants remaining after such exercise, and (iv) such other information as Patterson shall reasonably require. (c) As soon as practicable after the exercise of any Warrant, Patterson shall issue to or upon the order of the holder of the Warrant Certificate evidencing such Warrant, the Warrant Securities to which such holder is entitled in fully registered form, registered in such name or names as may be directed by such holder. Such certificate or certificates evidencing the Warrant Securities shall be deemed to have been issued and any persons who are designated to be named therein shall be deemed to have become the holder of record of such Warrant Securities as of the close of business on the exercise date. No fractional Warrant Securities will be issued upon exercise of any Warrant. For each fractional Warrant Security that would otherwise be issued, Patterson will pay by company check in an amount equal to such fraction multiplied by the closing sales price of the Warrant Securities on the principal national securities exchange on which they are listed (or if not so listed, another equivalent means reasonably determined by Patterson) on the business day immediately preceding the exercise date. If fewer than all of the Warrants evidenced by such Warrant Certificate are exercised, Patterson shall execute, and an authorized officer of the Warrant Agent shall manually countersign and deliver, a new Warrant Certificate evidencing the number of such Warrants remaining unexercised. (d) Patterson shall not be required to pay any stamp or other tax or other governmental charge required to be paid in connection with any transfer involved in the issue of the Warrant Securities; and in the event that any such transfer is involved, Patterson shall not be required to issue or deliver any Warrant Security until such tax or other charge shall have been paid or it has been established to Patterson's satisfaction that no such tax or other charge is due. W-3 4 ARTICLE III Other Provisions Relating to Rights of Holders of Warrant Certificates Section 3.1. No Rights as Stockholder or Debtholder Conferred by Warrants or Warrant Certificates. No Warrant Certificate or Warrant evidenced thereby shall entitle the holder thereof to any of the rights of a holder of Warrant Securities, including, without limitation, the right to receive dividends, vote, receive notice of any meeting of stockholders or otherwise have any right as a stockholder of Patterson, or the right to receive the payment of principal of, premium, if any, or interest on Warrant Securities or to enforce any of the covenants in the Indenture. Section 3.2. Lost, Stolen, Mutilated or Destroyed Warrant Certificates. Upon receipt by the Warrant Agent of evidence reasonably satisfactory to it of the ownership of and the loss, theft, destruction or mutilation of any Warrant Certificate and of indemnity reasonably satisfactory to it, and, in the case of mutilation, upon surrender thereof to the Warrant Agent for cancellation, then, in the absence of notice to Patterson or the Warrant Agent that such Warrant Certificate has been acquired by a bona fide purchaser, Patterson shall execute, and an authorized officer of the Warrant Agent shall manually countersign and deliver, in exchange for or in lieu of the lost, stolen, destroyed or mutilated Warrant Certificate, a new Warrant Certificate of the same tenor and evidencing a like number of Warrants. Upon the issuance of any new Warrant Certificate under this Section, Patterson may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Warrant Agent) in connection therewith. Every substitute Warrant Certificate executed and delivered pursuant to this Section in lieu of any lost, stolen or destroyed Warrant Certificate shall represent an additional contractual obligation of Patterson, whether or not the lost, stolen or destroyed Warrant Certificate shall be at any time enforceable by anyone, and shall be entitled to the benefits of this Agreement equally and proportionately with any and all other Warrant Certificates duly executed and delivered hereunder. The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement of mutilated, lost, stolen or destroyed Warrant Certificates. Section 3.3. Holder of Warrant Certificate May Enforce Rights. Notwithstanding any of the provisions of this Agreement, any holder of a Warrant Certificate, without the consent of the Warrant Agent, the holder of any Warrant Securities or the holder of any other Warrant Certificate, may, in his own behalf and for his own benefit, enforce, and may institute and maintain any suit, action or proceeding against Patterson suitable to enforce or otherwise in respect of, his right to exercise the Warrants evidenced by his Warrant Certificate in the manner provided in his Warrant Certificate and in this Agreement. ARTICLE IV Exchange and Transfer of Warrant Certificates Section 4.1. Exchange and Transfer of Warrant Certificates. Upon surrender at the corporate trust office of the Warrant Agent [or at ________], Warrant Certificates evidencing Warrants may be exchanged for Warrant Certificates in other denominations evidencing such Warrants or the transfer thereof may be registered in whole or in part; provided that such other Warrant Certificates evidence the same aggregate number of Warrants as the Warrant Certificates so surrendered. The Warrant Agent shall keep, at its corporate trust office [and at __________] books in which, subject to such reasonable regulations as it may prescribe, it shall register Warrant Certificates and exchanges and transfers of outstanding Warrant Certificates, upon surrender of the Warrant Certificates to the Warrant Agent at its corporate trust office [or at ____________] for exchange or registration of transfer, properly endorsed or W-4 5 accompanied by appropriate instruments of registration of transfer and written instructions for transfer, all in form satisfactory to Patterson and the Warrant Agent. No service charge shall be made for any exchange or registration of transfer of Warrant Certificates but Patterson may require payment of a sum sufficient to cover any stamp or other tax or other governmental charge that may be imposed in connection with any such exchange or registration of transfer. Whenever any Warrant Certificates are so surrendered for exchange or registration of transfer an authorized officer of the Warrant Agent shall manually countersign and deliver to the person or persons entitled thereto a Warrant Certificate or Warrant Certificates duly authorized and executed by Patterson, as so requested. The Warrant Agent shall not be required to effect any exchange or registration of transfer which will result in the issuance of a Warrant Certificate evidencing a fraction of a Warrant or a number of full Warrants and a fraction of a Warrant. All Warrant Certificates issued upon any exchange or registration of transfer of Warrant Certificates shall be the valid obligations of Patterson, evidencing the same obligations, and entitled to the same benefits under this Agreement, as the Warrant Certificates surrendered for such exchange or registration of transfer. Section 4.2. Treatment of Holders of Warrant Certificates. Patterson and the Warrant Agent may treat the registered holder as the absolute owner thereof for any purpose and as the person entitled to exercise the rights represented by the Warrants evidenced thereby, any notice to the contrary notwithstanding. Section 4.3. Cancellation of Warrant Certificates. Any Warrant Certificate surrendered for exchange registration of transfer or exercise of the Warrants evidenced thereby shall, if surrendered to Patterson, be delivered to the Warrant Agent and all Warrant Certificates surrendered or so delivered to the Warrant Agent shall be promptly canceled by the Warrant Agent and shall not be reissued and, except as expressly permitted by this Agreement, no Warrant Certificate shall be issued hereunder in exchange or in lieu thereof. The Warrant Agent shall deliver to Patterson from time to time or otherwise dispose of canceled Warrant Certificates in a manner satisfactory to Patterson. ARTICLE V Adjustments Section 5.1. Adjustment of Warrant Price and Number of Warrant Securities Purchasable. (a) In case at any time Patterson shall issue and sell for cash any Warrant Securities (excluding (i) Warrant Securities issued in any of the transactions described in paragraphs (b), (c) or (d) below and (ii) Warrant Securities issued upon exercise of Warrants) at a price per Share lower than ___% below the Market Price determined as of the date immediately preceding the date of such sale and issuance, the Warrant Price in effect at the close of business on the date immediately preceding the date of such sale and issuance shall be reduced by multiplying such Warrant Price by a fraction, (i) the numerator of which shall be the sum of (x) the number of Warrant Securities outstanding at the close of business on the date immediately preceding the date of such sale and issuance plus (y) the number of Warrant Securities, which the aggregate amount of cash received or receivable for such sale, and issuance would purchase at such current Market Price per Warrant Security and (ii) the denominator of which shall be the total number of Warrant Securities outstanding immediately after such sale and issuance. Such adjustment shall be made successively whenever such an issuance is made. (b) In case Patterson shall pay or make a dividend or other distribution on any class of stock of Patterson in Warrant Securities or securities convertible into or exchangeable for Warrant Securities (such convertible or exchangeable stock or securities being hereinafter called "Convertible Securities"), other than Convertible Securities which require payments of cash to be W-5 6 made by the holder thereof in connection with any conversion into or exchange for Warrant Securities, the Warrant Price in effect at the close of business on the day fixed for the determination of shareholders entitled to receive such dividend or other distribution shall be reduced by multiplying such Warrant Price by a fraction of which the numerator shall be the number of Warrant Securities outstanding at the close of business on the date immediately preceding the date fixed for such determination and the denominator shall be the sum of such number of Warrant Securities and the total number of Warrant Securities constituting such dividend or other distribution or the maximum number of Warrant Securities issuable upon conversion or exchange of all Convertible Securities constituting such dividend or other distribution. (c) In case at any time Patterson shall grant (whether directly or otherwise) any rights (other than the Warrants and "poison pill" rights distributed pursuant to a stockholders' rights plan) to subscribe for or to purchase, or any options for the purchase of, Warrant Securities or Convertible Securities, whether or not such rights or options or the right to convert or exchange any such Convertible Securities are immediately exercisable, and the price per Warrant Security for which Warrant Securities are issuable upon the exercise of such rights or options or upon conversion or exchange of such Convertible Securities (determined by dividing (x) the total amount, if any, received or receivable by Patterson as consideration for the granting of such rights or options, plus the minimum aggregate amount of additional consideration payable to Patterson upon the exercise of all such rights or options, or, in the case of such rights or options which relate to Convertible Securities, the total amount, if any, received or receivable by Patterson as consideration for the granting of such rights or options, plus the minimum aggregate amount of additional consideration, if any, payable upon the issuance or sale of such Convertible Securities and upon the conversion or exchange thereof, by (y) the total maximum number of Warrant Securities issuable upon the exercise of such rights or options or upon the conversion or exchange of all such Convertible Securities issuable upon the exercise of such rights or options) shall be less than the Market Price, determined as of the date immediately preceding the date of granting such rights or options, the Warrant Price in effect at the close of business on the date immediately preceding the date of granting such rights or options shall be adjusted by multiplying such Warrant Price by a fraction, (i) the numerator of which shall be the sum of (x) the number of Warrant Securities outstanding at the close of business on the date immediately preceding the date of granting such rights or options plus (y) the quotient obtained by dividing the product of the price per Warrant Security, determined as set forth above, and the maximum number of Warrant Securities issuable upon the exercise of such rights or options or upon the conversion or exchange of all such Convertible Securities issuable upon the exercise of such rights or options by the Market Price and (ii) the denominator of which shall be the sum of the number of Warrant Securities outstanding at the close of business on the date immediately preceding the date of granting such rights or options and the maximum number of Warrant Securities issuable upon the exercise of such rights or options or upon the conversion or exchange of all such Convertible Securities issuable upon the exercise of such rights or options. Except as provided in this subparagraph (c), no further adjustments of the Warrant Price shall be made upon the issuance of such Warrant Securities or of such Convertible Securities upon exercise of such rights or options or upon the actual issuance of such Warrant Securities upon conversion or exchange of such Convertible Securities. (d) In case Patterson shall issue (whether directly or by assumption in a merger or otherwise) or sell any Convertible Securities, whether or not the rights to exchange or convert thereunder are immediately exercisable, and the price per Warrant Security for which Warrant Securities are issuable upon such conversion or exchange (determined by dividing (x) the total amount received or receivable by Patterson as consideration for the issue or sale of such W-6 7 Convertible Securities, plus the minimum aggregate amount of additional consideration, if any, payable to Patterson upon the conversion or exchange thereof, by (y) the total maximum number of Warrant Securities issuable upon the conversion or exchange of all such Convertible Securities) shall be less than the Market Price, determined as of the date immediately preceding the date of such issuance or sale of such Convertible Securities, then the Warrant Price in effect at the close of business on the date immediately preceding the date of issuance or sale of such Convertible Securities shall be adjusted by multiplying such Warrant Price by a fraction, (i) the numerator of which shall be the sum of (x) the number of Warrant Securities outstanding at the close of business on the date immediately preceding the date of issuance or sale of such Convertible Securities plus (y) the quotient obtained by dividing the product of the price per Warrant Security, determined as set forth above, and the maximum number of Warrant Securities issuable upon conversion or exchange of all such Convertible Securities by the Market Price and (ii) the denominator of which shall be the sum of the number of Warrant Securities outstanding at the close of business on the date immediately preceding the date of issuance or sale of such Convertible Securities and such maximum number of Warrant Securities issuable upon conversion or exchange, provided that (1) except as provided in subparagraph (e), no further adjustments of the Warrant Price shall be made upon the actual issuance of such Warrant Securities upon conversion or exchange of such Convertible Securities, and (2) if any such issuance or sale of such Convertible Securities is made upon exercise of any rights to subscribe for or to purchase or any option to purchase any such Convertible Securities for which adjustments of the Warrant Price have been or are to be made pursuant to subparagraph (c) or the other provisions of this subparagraph (d), no further adjustments of the Warrant Price shall be made by reason of such issuance or sale. (e) If (x) the purchase price provided for in any rights or options referred to in subparagraph (c), or (y) the additional consideration, if any, payable upon the conversion or exchange of any Convertible Securities referred to in subparagraphs (c) and/or (d), or (z) the rate at which any Convertible Securities referred to in subparagraphs (c) and/or (d) are convertible into or exchangeable for Warrant Securities shall change (other than under or by reason of provisions contained in the instruments governing such rights, options or Convertible Securities that are designed to protect against dilution), the Warrant Price in effect at the close of business on the date of such event shall forthwith be adjusted to the Warrant Price which would have been in effect at such time had such rights, options or Convertible Securities still outstanding provided for such changed purchase price, additional consideration or conversion rate, as the case may be, at the time initially granted, issued or sold. On the expiration of any such option or right or the termination of any such right to convert or exchange such Convertible Securities, the Warrant Price in effect at the close of business on the date of expiration or termination shall be readjusted to the Warrant Price which would have been in effect at such time had such right, option or Convertible Securities, to the extent outstanding immediately prior to the date of such expiration or termination, never been granted, issued or sold. (f) In case Patterson shall, by dividend or otherwise, declare a dividend or other distribution on its Warrant Securities payable in evidences of its indebtedness or assets (including securities, but excluding (i) any rights or options referred to in subparagraph (c) of this Section, (ii) any dividend or distribution paid in cash out of consolidated retained earnings or consolidated earned surplus, determined in accordance with generally accepted accounting principles, including the making of appropriate deductions for minority interests, if any, in subsidiaries, and (iii) any dividend or distribution otherwise paid in Warrant Securities or Convertible Securities), the Warrant Price in effect at the close of W-7 8 business on the date fixed for the determination of shareholders entitled to receive such dividend or other distribution shall be adjusted so that the same shall equal the price determined by multiplying the Warrant Price in effect at the close of business on the date fixed for the determination of shareholders entitled to receive such dividend or other distribution by a fraction of which the numerator shall be the current Market Price per Warrant Security on the date fixed for such determination less the then fair market value (as determined by the board of directors, whose determination shall be conclusive and described in a Board Resolution filed with the Warrant Agent) of the portion of the assets or evidences of indebtedness so distributed applicable to one share and of which the denominator shall be such current Market Price per share. (g) In case Patterson shall at any time subdivide its outstanding Warrant Securities into a greater number of Warrant Securities, the Warrant Price in effect immediately prior to such subdivision shall be proportionately reduced, and conversely, in case the outstanding Warrant Securities shall be combined into a smaller number of Warrant Securities, the Warrant Price in effect immediately prior to such combination shall be proportionately increased, such reduction or increase, as the case may be, to become effective immediately upon the opening of business on the day following the day upon which such subdivision or combination becomes effective. (h) In case of any consolidation of Patterson with, or merger of Patterson into, any other corporation or other entity, or in case of any merger of another corporation or other entity into Patterson (other than a merger which does not result in any reclassification, conversion, exchange or cancellation of outstanding Warrant Securities), or in case of any sale or transfer of all or substantially all of the assets of Patterson, or in the case of a capital reorganization or recapitalization of the capital stock of Patterson in such a way that holders of Warrant Securities shall be able to receive securities, cash or assets with respect to or in exchange for such Warrant Securities from the corporation or other entity formed by such consolidation or resulting from such merger or which acquires such assets, as the case may be, or from Patterson, in the case of a capital reorganization or recapitalization not involving a consolidation, merger or sale or transfer of all or substantially all of the assets of Patterson, such corporation or other entity or Patterson, as the case may be, and the Warrant Agent shall execute and deliver an amendment to this Agreement providing that the holder of each Warrant then outstanding shall have the right thereafter, during the period such Warrant shall be exercisable, to exercise such Warrant only for the kind and amount of securities, cash and other property receivable upon such consolidation, merger, sale, transfer, capital reorganization or recapitalization by a holder of the number of Warrant Securities for which such Warrant might have been exercised on the date immediately prior to such consolidation, merger, sale, transfer, capital reorganization or recapitalization, assuming such holder of Warrant Securities failed to exercise his rights of election, if any, as to the kind or amount of securities, cash and other property receivable upon such consolidation, merger, sale, transfer, capital reorganization or recapitalization (provided that if the kind or amount of securities, cash and other property receivable upon such consolidation, merger, sale, transfer, capital reorganization or recapitalization is not the same for each Warrant Security in respect of which such rights of election shall not have been exercised (the "Non-electing Warrant Securities"), then, for the purpose of this subparagraph (h), the kind and amount of securities, cash and other property receivable upon such consolidation, merger, sale, transfer, capital reorganization or recapitalization by each Non-electing Warrant Security shall be deemed to be the kind and amount so receivable per Warrant Security by a plurality of the Non-electing Warrant Securities). Such amendment shall provide for adjustments which, for events subsequent to the effective date of such amendment, shall be as nearly equivalent as may be practicable to the adjustments provided for in this Article V. The above provisions of this paragraph shall similarly apply to successive consolidations, mergers, sales, transfers, capital reorganizations or recapitalization. Patterson shall not effect any such consolidation, merger, sale or transfer, unless prior to or simultaneously with the consummation thereof the successor corporation (if other than Patterson) resulting from such consolidation or merger or the corporation purchasing or otherwise W-8 9 acquiring such assets or other appropriate corporation or entity shall assume, by written instrument executed and delivered to the Warrant Agent, the obligation to deliver to the holder of each Warrant such shares of stock, securities, cash or assets as, in accordance with the foregoing provisions, such holders may be entitled to receive and the other obligations under this Agreement. (i) In case an adjustment in the Warrant Price shall be required by Section 5.1 (a), (b), (c), (d) and/or (f) above, the required adjustment shall become effective at the opening of business on (i) the Business Day immediately following the date fixed for the determination of shareholders of Patterson entitled to receive such dividend or distribution, in the case of any adjustment pursuant to Section 12(b) or (f), or (ii) the Business Day immediately following the date of such sale and issuance or the date of such grating of such rights or options, as the case may be, in the case of an adjustment pursuant to section 5.1 (a), (c) or (d). (j) For the purposes of this Article V the number of Warrant Securities outstanding at any given time shall not include Warrant Securities owned or held by or for the account of Patterson or of any of its wholly or majority owned subsidiaries. (k) Upon each adjustment of the Warrant Price pursuant to this Section 5.1, each Warrant outstanding at the time of and immediately prior to such adjustment shall give the holder thereof the right to purchase, at the Warrant Price resulting from such adjustment, the number of Warrant Securities obtained by multiplying the Warrant Price in effect immediately prior to such adjustment by the number of Warrant Securities issuable upon exercise of such Warrant immediately prior to such adjustment and dividing the product thereof by the Warrant Price resulting from such adjustment. (l) No adjustment in the Warrant Price shall be required unless such adjustment would require an increase or decrease of at least one percent in such Warrant Price; provided, however, that any one or more such adjustments which, by reason of this subparagraph (l) is not required to be made shall be carried forward on a cumulative basis and fully taken into account in any subsequent adjustment. All calculations under this Section 5.1 shall be made to the nearest cent or to the nearest 1/100 of a Warranty Security, as the case may be. The provisions of this Section 12(l) shall also apply to readjustments provided for in subparagraph (e). (m) Patterson shall be obligated to issue any additional Warrant Securities which become issuable upon exercise of Warrants as a result of any event described in this Section 5.1 which requires an adjustment in the Warrant Price and the number of Warrant Securities issuable upon exercise of the Warrants. (n) For purposes of this Section 5.1, "Market Price" means the average of the closing prices per Warrant Security on the American Stock Exchange or the National Association of Securities Dealers, Inc. Automated Quotation System ("NASDAQ"), as the case may be (or, if there is no such closing price, the mean between the bid and asked prices reported on American Stock Exchange or NASDAQ, or on any other national securities exchange or over-the-counter market on which such quotations are regularly available, as the case may be), on each of the ten trading days immediately preceding the date as of which the determination of Market Price is to be made. If at any time the Warrant Securities are not listed on any national securities exchange or quoted in the over-the-counter market, the Market Price shall be deemed to be the fair value thereof determined in good faith by an independent brokerage firm or Standard & Poor's Corp. as W-9 10 of a date which is within 15 days of the date as of which the determination of Market Price is to be made. (o) If Patterson shall take any action affecting the Warrant Securities, other than action described in this Section 5.1, which in the opinion of the Board of Directors of Patterson would materially adversely affect the exercise rights of the holders of the Warrants, the Warrant Price for the Warrants may be adjusted, to the extent permitted by law, in such manner, if any, and at such time, as such Board of Directors may determine in good faith to be equitable in the circumstances. Failure of the Board of Directors of Patterson to provide for any such adjustment prior to the effective date of any such action by Patterson affecting the Warrant Securities shall be evidence that the Board of Directors of Patterson has determined that it is equitable to make no adjustments in the circumstances. Section 5.2. Voluntary Adjustment by Patterson. Patterson may at its option, at any time during the term of the Warrants, reduce the then current Warrant Price to any amount deemed appropriate by the Board of Directors of Patterson; provided, that, if Patterson elects so to reduce the then current Warrant Price, such reduction shall remain in effect for at least 20 Business Days, after which time Patterson may, at its option, reinstate the Warrant Price in effect prior to such reduction. Section 5.3. Notice of Adjustment. Whenever the Warrant Price is adjusted as herein provided, the Chief Financial Officer of Patterson shall compute the adjusted Warrant Price in accordance with the foregoing provisions and shall prepare a certificate setting forth such adjusted Warrant Price and showing in reasonable detail the facts upon which such adjustment is based. A copy of such certificate shall be filed promptly with the Warrant Agent. Promptly after delivery of such certificate, Patterson shall prepare a notice of such adjustment of the Warrant Price setting forth the adjusted Warrant Price and the date on which such adjustment becomes effective and shall mail, or cause the Warrant Agent to mail at Patterson's expense, such notice of such adjustment of the Warrant Price to each holder of a Warrant at his last address as shown on the Warrant Register. Section 5.4. No Adjustment for Dividends. Except as provided in Section 5.1 hereof, no adjustment in respect of any dividends or other payments or distributions made to holders of securities issuable upon exercise of Warrants shall be made during the term of a Warrant or upon the exercise of a Warrant. Section 5.5. Statement on Warrants Certificate. Irrespective of any adjustments in the number or kind of securities purchasable upon the exercise of the Warrants or the Warrant Securities, any Warrant Certificate theretofore or thereafter issued may continue to express the same price and number and kind of shares as are stated in the Warrant Certificate initially issuable pursuant to this Agreement. Section 5.6. Warrant Agent's Adjustment Disclaimer. The Warrant Agent has no duty to determine when an adjustment under this Article V should be made, how it should be made or what it should be. The Warrant Agent shall not be accountable for and makes no representation as to the validity or value of any securities or assets issued upon exercise of Warrants. The Warrant Agent shall not be responsible for Patterson's failure to comply with this Article V. W-10 11 ARTICLE VI Concerning the Warrant Agent Section 6.1. Warrant Agent. Patterson hereby appoints __________, as Warrant Agent of Patterson in respect of the Warrants and the Warrant Certificates upon the terms and subject to the conditions herein set forth; and ___________ hereby accepts such appointment. The Warrant Agent shall have the powers and authority granted to and conferred upon it in the Warrant Certificates and hereby and such further powers and authority to act on behalf of Patterson as Patterson may hereafter grant to or confer upon it. All of the terms and provisions with respect to such powers and authority contained in the Warrant Certificates are subject to and governed by the terms and provisions hereof. Section 6.2. Conditions of Warrant Agent's Obligations. The Warrant Agent accepts its obligations herein set forth upon the terms and conditions hereof, including the following, to all of which Patterson agrees and to all of which the rights hereunder of the holders from time to time of the Warrant Certificates shall be subject: (a) Patterson agrees promptly to pay the Warrant Agent the compensation to be agreed upon with Patterson for all services rendered by the Warrant Agent and to reimburse the Warrant Agent for reasonable out-of-pocket expenses (including counsel fees) incurred by the Warrant Agent in connection with the services rendered hereunder by the Warrant Agent. Patterson also agrees to indemnify the Warrant Agent for, and to hold it harmless against, any loss, liability or expense incurred without negligence or bad faith on the part of the Warrant Agent, arising out of or in connection with its acting as Warrant Agent hereunder, as well as the costs and expenses of defending against any claim of such liability. (b) In acting under this Warrant Agreement and in connection with the Warrant Certificates, the Warrant Agent is acting solely as agent of Patterson and does not assume any obligation or relationship of agency or trust for or with any of the holders of Warrant Certificates or beneficial owners of Warrants. (c) The Warrant Agent may consult with counsel satisfactory to it, and the advice of such counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with the advice of such counsel. (d) The Warrant Agent shall be protected and shall incur no liability for or in respect of any action taken or thing suffered by it in reliance upon any Warrant Certificate, notice, direction, consent, certificate, affidavit, statement or other paper or document reasonably believed by it to be genuine and to have been presented or signed by the proper parties. (e) The Warrant Agent, and its officers, directors and employees, may become the owner of, or acquire any interest in, Warrants, with the same rights that it or they would have if it were not the Warrant Agent hereunder, and, to the extent permitted by applicable law, it or they may engage or be interested in any financial or other transaction with Patterson and may act on, or as depositary, trustee or agent for, any committee or body of holders of Warrant Securities or other obligations of Patterson as freely as if it were not the Warrant Agent hereunder. (f) The Warrant Agent shall have no liability for interest on any monies at any time received by it pursuant to any of the provisions of this Agreement or of the Warrant Certificates. W-11 12 (g) The Warrant Agent shall have no liability with respect to any invalidity of this Agreement or any of the Warrant Certificates. (h) The Warrant Agent shall not be responsible for any of the recitals or representations herein or in the Warrant Certificates (except as to the Warrant Agent's countersignature thereon), all of which are made solely by Patterson. (i) The Warrant Agent shall be obligated to perform only such duties as are herein and in the Warrant Certificates specifically set forth and no implied duties or obligations shall be read into this Agreement or the Warrant Certificates against the Warrant Agent. The Warrant Agent shall not be under any obligation to take any action hereunder which may tend to involve it in any expense or liability, the payment of which within a reasonable time is not, in its reasonable opinion, assured to it. The Warrant Agent shall not be accountable or under any duty or responsibility for the use by Patterson of any of the Warrant Certificates authenticated by the Warrant Agent and delivered by it to Patterson pursuant to this Agreement or for the application by Patterson of the proceeds of the Warrant Certificates. The Warrant Agent shall have no duty or responsibility in case of any default by Patterson in the performance of its covenants or agreements contained herein or in the Warrant Certificates or in the case of the receipt of any written demand from a holder of a Warrant Certificate with respect to such default, including, without limiting the generality of the foregoing, any duty or responsibility to initiate or attempt to initiate any proceedings at law or otherwise or, except as provided in Section 6.2, to make any demand upon Patterson. (j) The Warrant Agent is hereby authorized to obtain from time to time from the present transfer agent for the Warrant Securities (the "Transfer Agent"), and any successor Transfer Agent, stock certificates required to honor outstanding Warrants. Patterson hereby authorizes its present and any successor Transfer Agent to comply with all such requests. Patterson will supply such Transfer Agent with duly executed stock certificates for such purpose and will provide or otherwise make available any cash which may be payable as provided in Section 2.3 hereof, and the Warrant Agent shall not be responsible for any delay or failure by such Transfer Agent in supplying such stock certificates. Section 6.3. Resignation and Appointment of Successor. (a) Patterson agrees, for the benefit of the holders of the Warrant Certificates, that there shall at all times be a Warrant Agent hereunder until all the Warrant Certificates are no longer exercisable. (b) The Warrant Agent may at any time resign as such agent by giving written notice to Patterson of such intention on its part, specifying the date on which its desired resignation shall become effective; provided that such date shall not be less than three months after the date on which such notice is given unless Patterson otherwise agrees. The Warrant Agent hereunder may be removed at any time by the filing with it of an instrument in writing signed by or on behalf of Patterson and specifying such removal and the date when it shall become effective. Such resignation or removal shall take effect upon the appointment by Patterson, as hereinafter provided, of a successor Warrant Agent (which shall be a bank or trust company authorized under the laws of the jurisdiction of its organization to exercise corporate trust powers) and the acceptance of such appointment by such successor Warrant Agent. The obligation of Patterson under Section 6.3(a) shall continue to the extent set forth therein notwithstanding the resignation or removal of the Warrant Agent. W-12 13 (c) In case at any time the Warrant Agent shall resign, or shall be removed, or shall become incapable of acting, or shall be adjudged a bankrupt or insolvent, or shall file a petition seeking relief under the Federal Bankruptcy Code, as now constituted or hereafter amended, or under any other applicable Federal or State bankruptcy law or similar law or make an assignment for the benefit of its creditors or consent to the appointment of a receiver or custodian of all or any substantial part of its property, or shall admit in writing its inability to pay or meet its debts as they mature, or if a receiver or custodian of it or of all or any substantial part of its property shall be appointed, or if an order of any court shall be entered for relief against it under the provisions of the Federal Bankruptcy Code, as now constituted or hereafter amended, or under any other applicable Federal or State bankruptcy or similar law, or if any public officer shall have taken charge or control of the Warrant Agent or of its property or affairs, for the purpose of rehabilitation, conservation or liquidation, a successor Warrant Agent, qualified as aforesaid, shall be appointed by Patterson, by an instrument in writing, filed with the successor Warrant Agent. Upon the appointment as aforesaid of a successor Warrant Agent and acceptance by the successor Warrant Agent of such appointment, the Warrant Agent shall cease to be Warrant Agent hereunder. (d) Any successor Warrant Agent appointed hereunder shall execute, acknowledge and deliver to its predecessor and to Patterson an instrument accepting such appointment hereunder, and thereupon such successor Warrant Agent, without any further act, deed or conveyance, shall become vested with all the authority, rights, powers, trusts, immunities, duties and obligations of such predecessor with like effect as if originally named as Warrant Agent hereunder, and such predecessor, upon payment of its charges and disbursements then unpaid, shall thereupon become obligated to transfer, deliver and pay over, and such successor Warrant Agent shall be entitled to receive, all monies, securities and other property on deposit with or held by such predecessor, as Warrant Agent hereunder. (e) Any corporation into which the Warrant Agent hereunder may be merged or converted or any corporation with which the Warrant Agent may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Warrant Agent shall be a party, or any corporation to which the Warrant Agent shall sell or otherwise transfer all or substantially all the assets and business of the Warrant Agent, provided that it shall be qualified as aforesaid, shall be the successor Warrant Agent under this Agreement without the execution or filing of any paper or any further act on the part of any of the parties hereto. ARTICLE VII Miscellaneous Section 7.1. Amendment. This Agreement may be amended by the parties hereto, without the consent of the holder of any Warrant Certificate, for the purpose of curing any ambiguity, or of curing, correcting or supplementing any defective or inconsistent provision contained herein, or making any other provisions with respect to matters or questions arising under this Agreement as Patterson and the Warrant Agent may deem necessary or desirable; provided, that such action shall not materially and adversely affect the interests of the holders of the Warrant Certificates and, provided, further, that Patterson and the Warrant Agent may amend this Agreement in any manner prior to the issuance of any Warrants hereunder. With the consent of the holders of not less than a majority in number of the then outstanding unexercised Warrants affected, Patterson and the Warrant Agent may modify or amend any other term of this Agreement; provided, however, that no such modification or amendment may be made without the consent of the holders affected thereby if such proposed amendment would (i) shorten the period of time during which the Warrants may be exercised; (ii) otherwise materially and adversely affect the exercise rights of the holders of the Warrants; or (iii) reduce the number of outstanding Warrants. W-13 14 Section 7.2. Notices and Demands to Patterson and Warrant Agent. If the Warrant Agent shall receive any notice or demand addressed to Patterson by the holder of a Warrant Certificate pursuant to the provisions of the Warrant Certificates, the Warrant Agent shall promptly forward such notice or demand to Patterson. Section 7.3. Addresses. Any communication from Patterson to the Warrant Agent with respect to this Agreement shall be addressed to ____________, and any communication from the Warrant Agent to Patterson with respect to this Agreement shall be addressed to Patterson Energy, Inc., 4510 Lamesa Highway, Snyder, Texas 79549, Attention: _______________ (or such other address as shall be specified in writing by the Warrant Agent or by Patterson). Section 7.4. Applicable Law. The validity, interpretation and performance of this Agreement and each Warrant Certificate issued hereunder and of the respective terms and provisions thereof shall be governed by and construed in accordance with, the laws of the State of [New York], without giving effect to the conflict of laws principles thereof. Section 7.5. Delivery of Prospectus. Patterson will furnish to the Warrant Agent sufficient copies of a prospectus relating to the Warrant Securities deliverable upon exercise of Warrants (the "Prospectus"), and the Warrant Agent agrees that upon the exercise of any Warrant, the Warrant Agent will deliver to the holder of the Warrant Certificate evidencing such Warrant, prior to or concurrently with, the delivery of the Warrant Securities issued upon such exercise, a Prospectus. Section 7.6. Obtaining of Governmental Approvals. Patterson will from time to time take all action which may be necessary to obtain and keep effective any and all permits, consents and approvals of governmental agencies and authorities and securities acts filings under United States Federal and State laws (including, without limitation, a registration statement in respect of the Warrants and Warrant Securities under the Securities Act of 1933, as amended), which may be or become requisite in connection with the issuance, sale, transfer, and delivery of the Warrant Certificates, the exercise of the Warrants, the issuance, sale, transfer, and delivery of the Warrant Securities issued upon exercise of the Warrants or upon the expiration of the period during which the Warrants are exercisable. Section 7.7. Persons Having Rights under Warrant Agreement. Nothing in this Agreement shall give to any person other than Patterson, the Warrant Agent and the holders of the Warrant Certificates any right, remedy or claim under or by reason of this Agreement. Section 7.8. Headings. The descriptive headings of the several Articles and Sections of this Agreement are inserted for convenience only and shall not control or affect the meaning or construction of any of the provisions hereof. Section 7.9. Counterparts. This Agreement may be executed in any number of counterparts, each of which as so executed shall be deemed to be an original, but such counterparts shall together constitute but one and the same instrument. Section 7.10. Inspection of Agreement. A copy of this Agreement shall be available at all reasonable times at the principal corporate trust office of the Warrant Agent for inspection by the holder of any Warrant Certificate. The Warrant Agent may require such holder to submit his Warrant Certificates for inspection by it. W-14 15 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and their respective corporate seals to be affixed hereunto, and the same to be attested, all as of the day and year first above written. PATTERSON ENERGY, INC. By Attest: ---------------------------------- - --------------------------- [NAME OF WARRANT AGENT], as Warrant Agent By Attest: ---------------------------------- - --------------------------- W-15 16 EXHIBIT A (FORM OF WARRANT CERTIFICATE) Exercisable Only if Countersigned by the Warrant Agent as Provided Herein PATTERSON ENERGY, INC. WARRANTS TO PURCHASE [Title of Warrant Securities] Void After 5:00 P.M. New York Time on [No.] Warrants This certifies that _______________ or registered assigns is the registered owner of the above indicated number of Warrants, each Warrant entitling such owner to purchase, at any time [after 5 p.m. New York time on ________, ________, and] on or before 5 p.m. New York time on _______, ____, [Title of Warrant Securities] (the "Warrant Securities"), of Patterson Energy, Inc., (the "Patterson"), issued and to be issued on the following basis: [on _________, ____, the exercise price of each Warrant will be [$]____________; during the period from ____________, ____, through and including ________, ________, the exercise price of each Warrant will be [$]______. The holder may exercise the Warrants evidenced hereby by providing certain information set forth on the back hereof and by paying in full, [in lawful money of the United States of America] [if applicable, express Warrant exercise price in applicable foreign currency, currency unit or composite currency] [in cash or by certified check or official bank check or by bank wire transfer, in each case] [by bank wire transfer], in immediately available funds, the Warrant Price for each Warrant exercised to the Warrant Agent (as hereinafter defined) and by surrendering this Warrant Certificate, with the purchase form on the back hereof duly executed, at the corporate trust office of [name of Warrant Agent], or its successors as warrant agent (the "Warrant Agent"), [or ______________] currently at the address specified on the reverse hereof, and upon compliance with and subject to the conditions set forth herein and in the Warrant Agreement (as hereinafter defined). Any whole number of Warrants evidenced by this Warrant Certificate may be exercised to purchase Warrant Securities in registered form. Upon any exercise of fewer than all of the Warrants evidenced by this Warrant Certificate, there shall be issued to the holder hereof a new Warrant Certificate evidencing the number of Warrants remaining unexercised. Patterson will not be required to issue fractional shares of Warrant Securities upon exercise of the Warrants or distribute stock certificates that evidence fractional shares of Warrant Securities. In lieu of fractional Warrant Securities, there shall be paid by Patterson to the registered holder of this Warrant Certificate at the time such Warrant Certificate is exercised an amount in cash payable by company check equal to the closing sales price of the Warrant Securities on the American Stock Exchange (or if not so listed, another equivalent means reasonably determined by Patterson) on the business day immediately preceding the exercise date, multiplied by such fraction. This Warrant Certificate is issued under and in accordance with the Warrant Agreement dated as of ___________, ____, (the "Warrant Agreement") between Patterson and the Warrant Agent and is subject to the terms and provisions contained in the Warrant Agreement, to all of which terms and provisions the holder of this Warrant Certificate consents by acceptance hereof. Copies of the Warrant W-16 17 Agreement and the form of Warrant Securities are on file at the above-mentioned office of the Warrant Agent [and at _________ ]. This Warrant Certificate may be transferred when surrendered at the corporate trust office of the Warrant Agent [or ____________] by the registered owner or his assigns, in person or by an attorney duly authorized in writing, in the manner and subject to the terms provided in the Warrant Agreement. After countersignature by the Warrant Agent and prior to the expiration of this Warrant Certificate, this Warrant Certificate may be exchanged at the corporate trust office of the Warrant Agent for Warrant Certificates representing the same aggregate number of Warrants. This Warrant Certificate shall not entitle the holder hereof to any of the rights of a holder of Warrant Securities, including, without limitation, the right to receive dividends, vote, receive notice of any meeting of stockholders or otherwise have any right as a stockholder of Patterson, or the right to receive the payment of principal of, premium, if any, or interest on Warrant Securities or to enforce any of the covenants in the Indenture. This Warrant Certificate shall not be valid for any purpose until countersigned by the Warrant Agent. Dated as of --------------------- PATTERSON ENERGY, INC. By ---------------------------------- Cloyce A. Talbott Chief Executive Officer Attest: - ------------------------------------- Countersigned ------------------------------------ As Warrant Agent By ---------------------------------- Authorized Signature W-17 18 [Reverse of Warrant Certificate] Instructions for Exercise of Warrant To exercise the Warrants evidenced hereby, the holder must pay [in cash or by certified check or official bank check or by bank wire transfer] [by bank wire transfer], in immediately available funds, the Warrant Price in full for Warrants exercised to [insert name of Warrant Agent] Corporate Trust Department [insert address of Warrant Agent], Attn: [or ], which [payment] [wire transfer] must specify the name of the holder and the number of Warrants exercised by such holder. In addition, the holder must complete the information required below and present this Warrant Certificate in person or by mail (registered mail is recommended) to the Warrant Agent at the addresses set forth below. This Warrant Certificate, completed and duly executed, must be received by the Warrant Agent within five business days of the [payment] [wire transfer]. To Be Executed Upon Exercise of Warrant The undersigned hereby irrevocably elects to exercise Warrants evidenced by this Warrant Certificate, to purchase ______________ [Title of Warrant Securities] (the "Warrant Securities") of Patterson Energy, Inc. and represents that he has tendered payment for such Warrant Securities [in cash or by certified check or official bank check or by bank wire transfer, in each case] [by bank wire transfer], in immediately available funds, to the order of Patterson Energy, Inc., c/o [insert name and address of Warrant Agent], in the amount of [$]______________ [if applicable, express Warrant exercise price in applicable foreign currency, currency unit or composite currency] in accordance with the terms hereof. The undersigned requests that said principal amount of Warrant Securities be in fully registered form and in the authorized denominations, registered in such names and delivered, all as specified in accordance with the instructions set forth below. If the number of Warrants exercised is less than all of the Warrants evidenced hereby, the undersigned requests that a new Warrant Certificate representing the remaining Warrants evidenced hereby be issued and delivered to the undersigned unless otherwise specified in the instructions below. Dated Name ------------------ ------------------------------- (Please Print) - --------------------------------------- Address - --------------------------------------- Social Security Number of Holder - --------------------------------------- Signature The Warrants evidenced hereby may be exercised at the following addresses: By hand at ------------------------------------------------ ------------------------------------------------ By mail at ------------------------------------------------ ------------------------------------------------ [Instructions as to form and delivery of Warrant Securities and, if applicable, Warrant Certificates evidencing unexercised Warrants--complete as appropriate.] W-18 19 Assignment (Form of Assignment to be Executed if Holder Desires to Transfer Warrants Evidenced Hereby) For value received _______________________ hereby sells, assigns and transfers unto _________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ (Please print name and address, including zip code of assignee, and Social Security Number or other identifying number) the Warrants represented by the within Warrant Certificate and does hereby irrevocably constitute and appoint Attorney, to transfer said Warrant Certificate on the books of the Warrant Agent with full power of substitution in the premises. Dated ------------------------ -------------------------------- Signature (Signature must conform in all respect to name of holder as specified on the face of this Warrant Certificate and must bear a signature guarantee of a commercial bank, trust company, or member broker of the New York, American, Midwest or Pacific Stock Exchange.) Signature Guaranteed: - --------------------------------------- W-19 EX-4.11 7 FORM OF DEPOSIT AGREEMENT 1 EXHIBIT 4.11 PATTERSON ENERGY, INC. and [------------------------------], As Depositary and HOLDERS OF DEPOSITARY RECEIPTS -------------- FORM OF DEPOSIT AGREEMENT* -------------- Dated as of [__________] - -------------------------- *Complete or modify the provisions of this Form as appropriate to reflect the terms of the Depositary Shares and Depositary Receipts. 2 TABLE OF CONTENTS
Page ---- ARTICLE 1 DEFINITIONS Certificate of Incorporation...................................................................................1 Certificate of Designation.....................................................................................1 Common Stock...................................................................................................1 Corporate Office...............................................................................................1 Deposit Agreement..............................................................................................1 Depositary.....................................................................................................1 Depositary Share...............................................................................................1 Depositary's Agent.............................................................................................2 New York Office................................................................................................2 Receipt........................................................................................................2 Record holder..................................................................................................2 Registrar......................................................................................................2 Securities Act.................................................................................................2 Stock..........................................................................................................2 ARTICLE 2 FORM OF RECEIPTS, DEPOSIT OF STOCK, EXECUTION AND DELIVERY, TRANSFER, SURRENDER, REDEMPTION AND CONVERSION OF RECEIPTS SECTION 2.1 Form and Transfer of Receipts................................................................2 SECTION 2.2 Deposit of Stock; Execution and Delivery of Receipts in Respect Thereof......................3 SECTION 2.3 Redemption and Conversion of Stock...........................................................3 SECTION 2.4 Register of Transfer of Receipts.............................................................5 SECTION 2.5 Combination and Split-ups of Receipts........................................................6 SECTION 2.6 Surrender of Receipts and Withdrawal of Stock................................................6 SECTION 2.7 Limitations on Execution and Delivery, Transfer, Split-up, Combination, Surrender and Exchange of Receipts and Withdrawal or Deposit of Stock........................6 SECTION 2.8 Lost Receipts, etc...........................................................................7 SECTION 2.9 Cancellation and Destruction of Surrendered Receipts.........................................7 ARTICLE 3 CERTAIN OBLIGATIONS OF HOLDERS OF RECEIPTS AND PATTERSON SECTION 3.1 Filing Proofs, Certificates and Other Information............................................7 SECTION 3.2 Payment of Taxes or Other Governmental Charges...............................................7 SECTION 3.3 Withholding..................................................................................8 SECTION 3.4 Representations and Warranties as to Stock...................................................8 ARTICLE 4 THE STOCK, NOTICES SECTION 4.1 Cash Distributions...........................................................................8 SECTION 4.2 Distributions Other Than Cash................................................................8 SECTION 4.3 Subscription Rights, Preferences or Privileges...............................................9
ii 3 SECTION 4.4 Notice of Dividends, Fixing of Record Date for Holders of Receipts...........................9 SECTION 4.5 Voting Rights................................................................................9 SECTION 4.6 Changes Affecting Stock and Reclassifications, Recapitalizations, etc.......................10 SECTION 4.7 Reports.....................................................................................10 SECTION 4.8 Lists of Receipt Holders....................................................................10 ARTICLE 5 THE DEPOSITARY, THE DEPOSITARY'S AGENTS, THE REGISTRAR AND THE COMPANY SECTION 5.1 Maintenance of Offices, Agencies, Transfer Books by the Depositary; the Registrar...............................................................................10 SECTION 5.2 Prevention or Delay in Performance by the Depositary, the Depositary's Agents, the Registrar or Patterson..................................................................11 SECTION 5.3 Obligations of the Depositary, the Depositary's Agents, the Registrar and Patterson...............................................................................11 SECTION 5.4 Resignation and Removal of the Depositary, Appointment of Successor Depositary..................................................................................12 SECTION 5.5 Corporate Notices and Reports...............................................................13 SECTION 5.6 Deposit of Stock by Patterson...............................................................13 SECTION 5.7 Indemnification by Patterson................................................................13 SECTION 5.8 Fees, Charges and Expenses..................................................................13 ARTICLE 6 AMENDMENT AND TERMINATION SECTION 6.1 Amendment...................................................................................13 SECTION 6.2 Termination.................................................................................14 ARTICLE 7 MISCELLANEOUS SECTION 7.1 Counterparts................................................................................14 SECTION 7.2 Exclusive Benefits of Parties...............................................................14 SECTION 7.3 Invalidity of Provisions....................................................................14 SECTION 7.4 Notices.....................................................................................15 SECTION 7.5 Depositary's Agents.........................................................................15 SECTION 7.6 Holders of Receipts Are Parties.............................................................15 SECTION 7.7 Law.........................................................................................15 SECTION 7.8 Headings....................................................................................15
iii 4 DEPOSIT AGREEMENT THIS DEPOSIT AGREEMENT, dated as of [________], among Patterson Energy, Inc., a Delaware corporation ("Patterson"), [_________________________________], a [________] banking corporation, as Depositary, and all holders from time to time of Receipts issued hereunder. W I T N E S S E T H: WHEREAS, Patterson desires to provide as hereinafter set forth in this Deposit Agreement, for the deposit of shares of Stock with the Depositary, as agent for the beneficial owners of the Stock, for the purposes set forth in this Deposit Agreement and for the issuance hereunder of the Receipts evidencing Depositary Shares representing an interest in the Stock so deposited; and WHEREAS, the Receipts are to be substantially in the form annexed as Exhibit A to this Deposit Agreement, with appropriate insertions, modifications and omissions, as hereinafter provided in this Deposit Agreement. NOW, THEREFORE, in consideration of the premises contained herein, it is agreed by and among the parties hereto as follows: ARTICLE 1 DEFINITIONS The following definitions shall apply to the respective terms (in the singular and plural forms of such terms) used in this Deposit Agreement and the Receipts: "Certificate of Incorporation" shall mean the Restated Certificate of Incorporation, as amended and restated from time to time, of Patterson. "Certificate of Designation" shall mean the Certificate of Designations establishing and setting forth the rights, preferences, privileges and limitations of the Stock. "Common Stock" shall mean Patterson's Common Stock, par value $.01 per share. "Corporate Office" shall mean the office of the Depositary in [__________], [______________] at which at any particular time its business in respect of matters governed by this Deposit Agreement shall be administered, which at the date of this Deposit Agreement is located at [______________________]. "Deposit Agreement" shall mean this agreement, as the same may be amended, modified or supplemented from time to time. "Depositary" shall mean [_____________________], as Depositary hereunder, and any successor as Depositary hereunder. "Depositary Share" shall mean the rights evidenced by the Receipts executed and delivered hereunder, including the interests in Stock granted to holders of Receipts pursuant to the terms and conditions of the Deposit Agreement. Each Depositary Share shall represent an interest in [fraction] of a share of Stock deposited with the Depositary hereunder and the same proportionate interest in any and all other property received by the Depositary in respect of such share of Stock and held under this Deposit Agreement. Subject to the terms of this Deposit Agreement, each record holder of a Receipt evidencing a Depositary Share or Shares is entitled, proportionately, to all the rights, preferences and privileges of the D-1 5 Stock represented by such Depositary Share or Shares, including the dividend, voting and liquidation rights contained in the Certificate of Designation, and to the benefits of all obligations and duties of Patterson in respect of the Stock under the Certificate of Designation and the Certificate of Incorporation. "Depositary's Agent" shall mean an agent appointed by the Depositary as provided, and for the purposes specified, in Section 7.5. ["New York Office" shall mean the facility maintained by the Depositary in the Borough of Manhattan, The City of New York for accepting, executing and delivering Receipts and other instruments prior to processing such instruments at the Corporate Office, which facility at the date of this Deposit Agreement is located at [____________.] "Receipt" shall mean a Depositary Receipt executed and delivered hereunder, in substantially the form of Exhibit A hereto, evidencing a Depositary Share or Shares, as the same may be amended from time to time in accordance with the provisions hereof. "Record holder" or "holder" as applied to a Receipt shall mean the person in whose name a Receipt is registered on the books maintained by or on behalf of the Depositary for such purpose. "Registrar" shall mean any bank or trust company appointed to register ownership and transfers of Receipts as herein provided. "Securities Act" shall mean the Securities Act of 1933, as amended. "Stock" shall mean shares of Patterson's [name of series] Preferred Stock, $.01 par value per share. ARTICLE 2 FORM OF RECEIPTS, DEPOSIT OF STOCK, EXECUTION AND DELIVERY, TRANSFER, SURRENDER, REDEMPTION AND CONVERSION OF RECEIPTS SECTION 2.1 Form and Transfer of Receipts. Receipts shall be engraved or printed or lithographed and shall be substantially in the form set forth in Exhibit A annexed to this Deposit Agreement, with appropriate insertions, modifications and omissions, as hereinafter provided. Receipts shall be executed by the Depositary by the manual signature of a duly authorized signatory of the Depositary; provided, however, that such signature may be a facsimile if a Registrar (other than the Depositary) shall have countersigned the Receipts by manual signature of a duly authorized signatory of the Registrar. No Receipt shall be entitled to any benefits under this Deposit Agreement or be valid or obligatory for any purpose unless it shall have been executed as provided in the preceding sentence. The Depositary shall record on its books each Receipt executed as provided above and delivered as hereinafter provided. Receipts bearing the facsimile signature of anyone who was at any time a duly authorized officer of the Depositary shall bind the Depositary, notwithstanding that such officer has ceased to hold such office prior to the delivery of such Receipts. Receipts may be issued in denominations of any number of whole Depositary Shares. All Receipts shall be dated the date of their execution. Receipts may be endorsed with or have incorporated in the text thereof such legends or recitals or changes not inconsistent with the provisions of this Deposit Agreement as may be required by the Depositary or required to comply with any applicable law or regulation or with the rules and regulations D-2 6 of any securities exchange upon which the Stock or the Depositary Shares may be listed or to conform with any usage with respect thereto, or to indicate any special limitations or restrictions to which any particular Receipts are subject by reason of the date of issuance of the Stock or otherwise. Title to any Receipt (and to the Depositary Shares evidenced by such Receipt) that is properly endorsed or accompanied by a properly executed instrument of transfer shall be transferable by delivery with the same effect as in the case of a negotiable instrument; provided, however, that the Depositary may, notwithstanding any notice to the contrary, treat the record holder thereof at such time as the absolute owner thereof for the purpose of determining the person entitled to distributions of dividends or other distributions or to any notice provided for in this Deposit Agreement and for all other purposes. SECTION 2.2 Deposit of Stock; Execution and Delivery of Receipts in Respect Thereof. Subject to the terms and conditions of this Deposit Agreement, Patterson or any holder of Stock may deposit such Stock under this Deposit Agreement by delivery to the Depositary of a certificate or certificates for the Stock to be deposited, properly endorsed or accompanied, if required by the Depositary, by a properly executed instrument of transfer in form satisfactory to the Depositary, together with (i) all such certifications as may be required by the Depositary in accordance with the provisions of this Deposit Agreement and (ii) a written order of Patterson or such holder, as the case may be, directing the Depositary to execute and deliver to or upon the written order of the person or persons stated in such order a Receipt or Receipts for the number of Depositary Shares representing such deposited Stock. Upon receipt by the Depositary of a certificate or certificates for Stock to be deposited hereunder, together with the other documents specified above, the Depositary shall, as soon as transfer and registration can be accomplished, present such certificate or certificates to the registrar and transfer agent of the Stock for transfer and registration in the name of the Depositary or its nominee of the Stock being deposited. Deposited Stock shall be held by the Depositary in an account to be established by the Depositary at the Corporate Office. Upon receipt by the Depositary of a certificate or certificates for Stock to be deposited hereunder, together with the other documents specified above, the Depositary, subject to the terms and conditions of this Deposit Agreement, shall execute and deliver, to or upon the order of the person or persons named in the written order delivered to the Depositary referred to in the first paragraph of this Section 2.2, a Receipt or Receipts for the number of whole Depositary Shares representing the Stock so deposited and registered in such name or names as may be requested by such person or persons. The Depositary shall execute and deliver such Receipt or Receipts at the New York Office, except that, at the request, risk and expense of any person requesting such delivery and for the account of such person, such delivery may be made at such other place as may be designated by such person. In each case, delivery will be made only upon payment by such person to the Depositary of all taxes and other governmental charges and any fees payable in connection with such deposit and the transfer of the deposited Stock. Patterson shall deliver to the Depositary from time to time such quantities of Receipts as the Depositary may request to enable the Depositary to perform its obligations under this Deposit Agreement. SECTION 2.3 Redemption and Conversion of Stock.* Whenever Patterson shall elect to redeem or be required to convert shares of Stock into shares of Common Stock or other securities in accordance with the Certificate of Designation, it shall (unless otherwise agreed in writing with the Depositary) give the Depositary in its capacity as Depositary not less than five business days' prior notice of the proposed - -------------------------- *This section to be modified to discuss specific redemption or conversion terms of the Stock, if any. D-3 7 date of the mailing of a notice of redemption or conversion of Stock and the simultaneous redemption or conversion of the Depositary Shares representing the Stock to be redeemed or converted and of the number of such shares of Stock held by the Depositary to be redeemed or converted. The Depositary shall, as directed by Patterson in writing, mail, first class postage prepaid, notice of the redemption or conversion of Stock and the proposed simultaneous redemption or conversion of the Depositary Shares representing the Stock to be redeemed or converted, not less than 30 and not more than 60 days prior to the date fixed for redemption or conversion of such Stock and Depositary Shares, to the record holders of the Receipts evidencing the Depositary Shares to be so redeemed or converted, at the addresses of such holders as the same appear on the records of the Depositary; provided, that if the effectiveness of a Merger or Consolidation (as defined in the Certificate of Designation) makes it impracticable to provide at least 30 days' notice, the Depositary shall provide such notice as soon as practicable prior to such effectiveness. Any such notice shall also be published in the same manner as notices of redemption or conversion of Stock are required to be published pursuant to Section [ ] of the Certificate of Designation. Notwithstanding the foregoing, neither failure to mail or publish any such notice to one or more such holders nor any defect in any notice shall affect the sufficiency of the proceedings for redemption or conversion. Patterson shall provide the Depositary with such notice, and each such notice shall state: the redemption or conversion date; the number of Depositary Shares to be redeemed or converted; if fewer than all the Depositary Shares held by any holder are to be redeemed, the number of such Depositary Shares held by such holder to be so redeemed; in the case of a call for redemption, the call price payable upon redemption and the Current Market Price (as defined in the Certificate of Designation) to be used to calculate the number of shares of Common Stock or other securities deliverable upon redemption; whether Patterson is exercising any option to deliver shares of Common Stock or other securities in lieu of any cash consideration pursuant to Section [ ] of the Certificate of Designation and the Current Market Price to be used to calculate the number of such shares or other securities; the place or places where Receipts evidencing Depositary Shares to be redeemed or converted are to be surrendered for redemption or conversion; whether Patterson is depositing with a bank or trust company on or before the redemption or conversion date, the shares of Common Stock or other securities and cash, if any, payable by Patterson and the proposed date of such deposit; the amount of accrued and unpaid dividends payable per share of Stock to be redeemed or converted to and including such redemption or conversion date, as the case may be, and that dividends in respect of the Stock represented by the Depositary Shares to be redeemed or converted will cease to accrue on such redemption or conversion date (unless Patterson shall default in delivering shares of Common Stock or other securities and cash, if any, at the time and place specified in such notice). On the date of any such redemption or conversion, the Depositary shall surrender the certificate or certificates held by the Depositary evidencing the number of shares of Stock to be redeemed or converted in the manner specified in the notice of redemption or conversion of Stock provided by Patterson pursuant to Section [ ] of the Certificate of Designation. The Depositary shall, thereafter, redeem or convert the number of Depositary Shares representing such redeemed or converted Stock upon the surrender of Receipts evidencing such Depositary Shares in the manner provided in the notice sent to record holders of Receipts; provided, that the Depositary shall have received, upon surrendering such certificate or certificates as aforesaid, a sufficient number of shares of Common Stock or other securities to convert or redeem such number of Depositary Shares (including, in the event that Patterson elects pursuant to Section [ ] of the Certificate of Designation to exercise any option to deliver shares of Common Stock or other securities in lieu of any cash consideration payable on the Effective Date (as defined in the Certificate of Designation) of any Merger or Consolidation, a number of shares of Common Stock equal to such cash consideration (as determined in the manner set forth in the Certificate of Designation)), plus any accrued and unpaid dividends payable with respect thereto to and including the date of any such redemption or conversion and any other cash consideration payable on the Effective Date of a Merger or Consolidation (other than any dividends or other cash consideration payable on the Effective Date of a Merger or Consolidation that Patterson has elected to pay in shares of Common Stock pursuant to Section [ ] of the Certificate of Designation) as instructed and calculated by Patterson. In case fewer than all the outstanding Depositary Shares are to be redeemed, the Depositary Shares to be D-4 8 redeemed shall be selected by the Depositary by lot, on a pro rata basis or such other equitable method as shall be approved by Patterson and the Depositary. Notice having been mailed by the Depositary as aforesaid, from and after the redemption or conversion date (unless Patterson shall have failed to redeem or convert the shares of Stock to be redeemed or converted by it upon the surrender of the certificate or certificates therefor by the Depositary as described in the preceding paragraph), the Depositary Shares called for redemption or subject to conversion shall be deemed no longer to be outstanding and all rights of the holders of Receipts evidencing such Depositary Shares (except the right to receive the shares of Common Stock or other securities and cash, if any, payable upon redemption or conversion upon surrender of such Receipts) shall, to the extent of such Depositary Shares, cease and terminate. Upon surrender in accordance with said notice of the Receipts evidencing such Depositary Shares (properly endorsed or assigned for transfer, if the Depositary shall so require), such Depositary Shares shall be converted into or redeemed for shares of Common Stock or other securities at a rate equal to [ ] of the number of shares of Common Stock or other securities delivered, and the holders thereof shall be entitled to [ ] of the cash, if any, payable, in respect of the shares of Stock pursuant to the Certificate of Designation. The foregoing shall be subject further to the terms and conditions of the Certificate of Designation. If fewer than all of the Depositary Shares evidenced by a Receipt are called for redemption, the Depositary will deliver to the holder of such Receipt upon its surrender to the Depositary, together with the shares of Common Stock or other securities and all accrued and unpaid dividends to and including the date fixed for redemption payable in respect of the Depositary Shares called for redemption, a new Receipt evidencing the Depositary Shares evidenced by such prior Receipt and not called for redemption. To the extent that Depositary Shares are converted into or redeemed for shares of Common Stock or other securities and all of such shares of Common Stock or other securities cannot be distributed to the record holders of Receipts converted or called for redemption without creating fractional interests in such shares, the Depositary may, with the consent of Patterson, adopt such method as it deems equitable and practicable for the purpose of effecting such distribution, including the sale (at public or private sale) of such shares of Common Stock or other securities at such place or places and upon such terms as it may deem proper, and the net proceeds of any such sale shall, subject to Section 3.2, be distributed or made available for distribution to such record holders that would otherwise receive fractional interests in such shares of Common Stock or other securities. The Depositary shall not be required (a) to issue, transfer or exchange any Receipts for a period beginning at the opening of business 15 days next preceding any selection of Depositary Shares and Stock to be redeemed and ending at the close of business on the day of the mailing of notice of redemption of Depositary Shares or (b) to transfer or exchange for another Receipt any Receipt evidencing Depositary Shares called or being called for redemption, in whole or in part, or subject to conversion except as provided in the second preceding paragraph of this Section 2.3. SECTION 2.4 Register of Transfer of Receipts. Subject to the terms and conditions of this Deposit Agreement, the Depositary shall register on its books from time to time transfers of Receipts upon any surrender thereof at the Corporate Office, the New York Office or such other office as the Depositary may designate for such purpose, by the record holder in person or by a duly authorized attorney, properly endorsed or accompanied by a properly executed instrument of transfer, together with evidence of the payment of any transfer taxes as may be required by law. Upon such surrender, the Depositary shall execute a new Receipt or Receipts and deliver the same to or upon the order of the person entitled thereto evidencing the same aggregate number of Depositary Shares evidenced by the Receipt or Receipts surrendered. D-5 9 SECTION 2.5 Combination and Split-ups of Receipts. Upon surrender of a Receipt or Receipts at the Corporate Office, the New York Office or such other office as the Depositary may designate for the purpose of effecting a split-up or combination of Receipts, subject to the terms and conditions of this Deposit Agreement, the Depositary shall execute and deliver a new Receipt or Receipts in the authorized denominations requested evidencing the same aggregate number of Depositary Shares evidenced by the Receipt or Receipts surrendered; provided, however, that the Depositary shall not issue any Receipt evidencing a fractional Depositary Share. SECTION 2.6 Surrender of Receipts and Withdrawal of Stock.* Any holder of a Receipt or Receipts may withdraw any or all of the Stock (but only in whole shares of Stock) represented by the Depositary Shares evidenced by such Receipts and all money and other property, if any, represented by such Depositary Shares by surrendering such Receipt or Receipts at the Corporate Office, the New York Office or at such other office as the Depositary may designate for such withdrawals. After such surrender, without unreasonable delay, the Depositary shall deliver to such holder, or to the person or persons designated by such holder as hereinafter provided, the whole number of shares of Stock and all such money and other property, if any, represented by the Depositary Shares evidenced by the Receipt or Receipts so surrendered for withdrawal, but holders of such whole shares of Preferred Stock will not thereafter be entitled to deposit such Preferred Stock hereunder or to receive Depositary Shares thereafter. If the Receipt or Receipts delivered by the holder to the Depositary in connection with such withdrawal shall evidence a number of Depositary Shares in excess of the number of whole Depositary Shares representing the whole number of shares of Stock to be withdrawn, the Depositary shall at the same time, in addition to such whole number of shares of Stock and such money and other property, if any, to be withdrawn, deliver to such holder, or (subject to Section 2.4) upon his order, a new Receipt or Receipts evidencing such excess number of whole Depositary Shares. Delivery of the Stock and such money and other property being withdrawn may be made by the delivery of such certificates, documents of title and other instruments as the Depositary may deem appropriate, which, if required by the Depositary, shall be properly endorsed or accompanied by proper instruments of transfer. If the Stock and the money and other property being withdrawn are to be delivered to a person or persons other than the record holder of the Receipt or Receipts being surrendered for withdrawal of Stock, such holder shall execute and deliver to the Depositary a written order so directing the Depositary and the Depositary may require that the Receipt or Receipts surrendered by such holder for withdrawal of such shares of Stock be properly endorsed in blank or accompanied by a properly executed instrument of transfer in blank and that the signature on such instrument of transfer be guaranteed by an eligible guarantor institution (banks, stockbrokers, savings and loan associations and credit unions with membership in an approved signature guarantee medallion program) pursuant to Rule 17Ad-15 of the Securities Exchange Act of 1934, as amended. The Depositary shall deliver the Stock and the money and other property, if any, represented by the Depositary Shares evidenced by Receipts surrendered for withdrawal, without unreasonable delay, at the office at which such Receipts were surrendered, except that, at the request, risk and expense of the holder surrendering such Receipt or Receipts and for the account of the holder thereof, such delivery may be made, without unreasonable delay, at such other place as may be designated by such holder. SECTION 2.7 Limitations on Execution and Delivery, Transfer, Split-up, Combination, Surrender and Exchange of Receipts and Withdrawal or Deposit of Stock. As a condition precedent to the execution and delivery, registration of transfer, split-up, combination, surrender or exchange of any Receipt, the delivery of any distribution thereon or the withdrawal or deposit of Stock, the Depositary, any of the Depositary's Agents or Patterson may require any or all of the following: (i) payment to it of a sum sufficient for the payment (or, in the event that the Depositary or Patterson shall have made such payment, the reimbursement to it) of any tax or other governmental charge with respect thereto (including any such tax or charge with respect to the Stock being deposited or withdrawn or with respect to the - -------------------------- *This section to be modified to reflect any restrictions on withdrawal of underlying securities D-6 10 Common Stock or other securities or property of Patterson being issued upon conversion or redemption); (ii) production of proof satisfactory to it as to the identity and genuineness of any signature; and (iii) compliance with such reasonable regulations, if any, as the Depositary or Patterson may establish not inconsistent with the provisions of this Deposit Agreement. The deposit of Stock may be refused, the delivery of Receipts against Stock or the registration of transfer, split-up, combination, surrender or exchange of outstanding Receipts and the withdrawal of deposited Stock may be suspended (i) during any period when the register of stockholders of Patterson is closed, (ii) if any such action is deemed necessary or advisable by the Depositary, any of the Depositary's Agents or Patterson at any time or from time to time because of any requirement of law or of any government or governmental body or commission, or under any provision of this Deposit Agreement, or (iii) with the approval of Patterson, for any other reason. Without limitation of the foregoing, the Depositary shall not knowingly accept for deposit under this Deposit Agreement any shares of Stock that are required to be registered under the Securities Act unless a registration statement under the Securities Act is in effect as to such shares of Stock. SECTION 2.8 Lost Receipts, etc. In case any Receipt shall be mutilated or destroyed or lost or stolen, the Depositary shall execute and deliver a Receipt of like form and tenor in exchange and substitution for such mutilated Receipt or in lieu of and in substitution for such destroyed, lost or stolen Receipt unless the Depositary has notice that such Receipt has been acquired by a bona fide purchaser; provided, however, that the holder thereof provides the Depositary with (i) evidence satisfactory to the Depositary of such destruction, loss or theft of such Receipt, of the authenticity thereof and of his ownership thereof, (ii) reasonable indemnification satisfactory to the Depositary or the payment of any charges incurred by the Depositary in obtaining insurance in lieu of such indemnification, and (iii) payment of any expense (including fees, charges and expenses of the Depositary) in connection with such execution and delivery. SECTION 2.9 Cancellation and Destruction of Surrendered Receipts. All Receipts surrendered to the Depositary or any Depositary's Agent shall be cancelled by the Depositary. Except as prohibited by applicable law or regulation, the Depositary is authorized to destroy such Receipts so cancelled. ARTICLE 3 CERTAIN OBLIGATIONS OF HOLDERS OF RECEIPTS AND PATTERSON SECTION 3.1 Filing Proofs, Certificates and Other Information. Any person presenting Stock for deposit or any holder of a Receipt may be required from time to time to file such proof of residence or other information, to execute such certificates and to make such representations and warranties as the Depositary or Patterson may reasonably deem necessary or proper. The Depositary or Patterson may withhold or delay the delivery of any Receipt, the registration of transfer, redemption, conversion or exchange of any Receipt, the withdrawal of the Stock represented by the Depositary Shares evidenced by any Receipt or the distribution of any dividend or other distribution until such proof or other information is filed, such certificates are executed or such representations and warranties are made. SECTION 3.2 Payment of Taxes or Other Governmental Charges. If any tax or other governmental charge shall become payable by or on behalf of the Depositary with respect to (i) any Receipt, (ii) the Depositary Shares evidenced by such Receipt, (iii) the Stock (or fractional interest therein) or other property represented by such Depositary Shares, or (iv) any transaction referred to in Section 4.6, such tax (including transfer, issuance or acquisition taxes, if any) or governmental charge shall be payable by the holder of such Receipt, who shall pay the amount thereof to the Depositary. Until such payment is made, registration of transfer of any Receipt or any split-up or combination thereof or any withdrawal of the Stock or money or other property, if any, represented by the Depositary Shares evidenced by such Receipt may be refused, any dividend or other distribution may be withheld and any part or all of the Stock or other property (including Common Stock or other securities received in D-7 11 connection with a conversion or redemption of Stock) represented by the Depositary Shares evidenced by such Receipt may be sold for the account of the holder thereof (after attempting by reasonable means to notify such holder prior to such sale). Any dividend or other distribution so withheld and the proceeds of any such sale may be applied to any payment of such tax or other governmental charge, the holder of such Receipt remaining liable for any deficiency. SECTION 3.3 Withholding. The Depositary shall act as the tax withholding agent for any payments, distributions and exchanges made with respect to the Depositary Shares and Receipts, and the Stock, Common Stock or other securities or assets represented thereby (collectively, the "Securities"). The Depositary shall be responsible with respect to the Securities for the timely (i) collection and deposit of any required withholding or backup withholding tax, and (ii) filing of any information returns or other documents with federal (and other applicable) taxing authorities. SECTION 3.4 Representations and Warranties as to Stock. In the case of the initial deposit of the Stock, Patterson and, in the case of subsequent deposits thereof, each person so depositing Stock under this Deposit Agreement shall be deemed thereby to represent and warrant that such Stock and each certificate therefor are valid and that the person making such deposit is duly authorized to do so. Such representations and warranties shall survive the deposit of the Stock and the issuance of Receipts therefor. ARTICLE 4 THE STOCK, NOTICES SECTION 4.1 Cash Distributions. Whenever the Depositary shall receive any cash dividend or other cash distribution on the Stock, the Depositary shall, subject to Section 3.2, distribute to record holders of Receipts on the record date fixed pursuant to Section 4.4 such amounts of such sum as are, as nearly as practicable, in proportion to the respective numbers of Depositary Shares evidenced by the Receipts held by such holders; provided, however, that in case Patterson or the Depositary shall be required by law to withhold and does withhold from any cash dividend or other cash distribution in respect of the Stock an amount on account of taxes, the amount made available for distribution or distributed in respect of Depositary Shares shall be reduced accordingly. The Depositary shall distribute or make available for distribution, as the case may be, only such amount, however, as can be distributed without attributing to any owner of Depositary Shares a fraction of one cent and any balance not so distributable shall be held by the Depositary (without liability for interest thereon) and shall be added to and be treated as part of the next sum received by the Depositary for distribution to record holders of Receipts then outstanding. SECTION 4.2 Distributions Other Than Cash. Whenever the Depositary shall receive any distribution other than cash, rights, preferences or privileges upon the Stock, the Depositary shall, subject to Section 3.2, distribute to record holders of Receipts on the record date fixed pursuant to Section 4.4 such amounts of the securities or property received by it as are, as nearly as practicable, in proportion to the respective numbers of Depositary Shares evidenced by the Receipts held by such holders, in any manner that the Depositary and Patterson may deem equitable and practicable for accomplishing such distribution. If, in the opinion of Patterson after consultation with the Depositary, such distribution cannot be made proportionately among such record holders, or if for any other reason (including any tax withholding or securities law requirement), the Depositary deems, after consultation with Patterson, such distribution not to be feasible, the Depositary may, with the approval of Patterson which approval shall not be unreasonably withheld, adopt such method as it deems equitable and practicable for the purpose of effecting such distribution, including the sale (at public or private sale) of the securities or property thus received, or any part thereof, at such place or places and upon such terms as it may deem proper. The net proceeds of any such sale shall, subject to Section 3.2, be distributed or made available for distribution, as D-8 12 the case may be, by the Depositary to record holders of Receipts as provided by Section 4.1 in the case of a distribution received in cash. SECTION 4.3 Subscription Rights, Preferences or Privileges. If Patterson shall at any time offer or cause to be offered to the persons in whose names Stock is registered on the books of Patterson any rights, preferences or privileges to subscribe for or to purchase any securities or any rights, preferences or privileges of any other nature, such rights, preferences or privileges shall in each such instance be made available by the Depositary to the record holders of Receipts in such manner as Patterson shall instruct (including by the issue to such record holders of warrants representing such rights, preferences or privileges); provided, however, that (a) if at the time of issue or offer of any such rights, preferences or privileges Patterson determines and instructs the Depositary that it is not lawful or feasible to make such rights, preferences or privileges available to some or all holders of Receipts (by the issue of warrants or otherwise) or (b) if and to the extent instructed by holders of Receipts who do not desire to exercise such rights, preferences or privileges, the Depositary shall then, in each case, and if applicable laws or the terms of such rights, preferences or privileges so permit, sell such rights, preferences or privileges of such holders at public or private sale, at such place or places and upon such terms as it may deem proper. The net proceeds of any such sale shall be distributed by the Depositary to the record holders of Receipts entitled thereto as provided by Section 4.1 in the case of a distribution received in cash. If registration under the Securities Act of the securities to which any rights, preferences or privileges relate is required in order for holders of Receipts to be offered or sold such securities, Patterson shall promptly file a registration statement pursuant to the Securities Act with respect to such rights, preferences or privileges and securities and use its best efforts and take all steps available to it to cause such registration statement to become effective sufficiently in advance of the expiration of such rights, preferences or privileges to enable such holders to exercise such rights, preferences or privileges. In no event shall the Depositary make available to the holders of Receipts any right, preference or privilege to subscribe for or to purchase any securities unless and until such registration statement shall have become effective or unless the offering and sale of such securities to such holders are exempt from registration under the provisions of the Securities Act. If any other action under the law of any jurisdiction or any governmental or administrative authorization, consent or permit is required in order for such rights, preferences or privileges to be made available to holders of Receipts, Patterson agrees with the Depositary that Patterson will use its reasonable best efforts to take such action or obtain such authorization, consent or permit sufficiently in advance of the expiration of such rights, preferences or privileges to enable such holders to exercise such rights, preferences or privileges. SECTION 4.4 Notice of Dividends, Fixing of Record Date for Holders of Receipts. Whenever (i) any cash dividend or other cash distribution shall become payable, or any distribution other than cash shall be made, or any rights, preferences or privileges shall at any time be offered, with respect to the Stock, or (ii) the Depositary shall receive notice of any meeting at which holders of Stock are entitled to vote or of which holders of Stock are entitled to notice or of the mandatory conversion of, or any election on the part of Patterson to call for the redemption of, any shares of Stock, the Depositary shall in each such instance fix a record date (which shall be the same date as the record date fixed by Patterson with respect to the Stock) for the determination of the holders of Receipts (x) who shall be entitled to receive such dividend, distribution, rights, preferences or privileges or the net proceeds of the sale thereof, or (y) who shall be entitled to give instructions for the exercise of voting rights at any such meeting or to receive notice of such meeting or of such conversion or redemption. SECTION 4.5 Voting Rights. Upon receipt of notice of any meeting at which the holders of Stock are entitled to vote, the Depositary shall, as soon as practicable thereafter, mail to the record holders of Receipts a notice, which shall be provided by Patterson and which shall contain (i) such information as is contained in such notice of meeting, (ii) a statement that the holders of Receipts at the close of business on a specified record date fixed pursuant to Section 4.4 will be entitled, subject to any applicable D-9 13 provision of law, the Certificate of Incorporation or the Certificate of Designation, to instruct the Depositary as to the exercise of the voting rights pertaining to the Stock represented by their respective Depositary Shares and (iii) a brief statement as to the manner in which such instructions may be given. Upon the written request of a holder of a Receipt on such record date, the Depositary shall endeavor insofar as practicable to vote or cause to be voted the Stock represented by the Depositary Shares evidenced by such Receipt in accordance with the instructions set forth in such request. Patterson hereby agrees to take all reasonable action that may be deemed necessary by the Depositary in order to enable the Depositary to vote such Stock or cause such Stock to be voted. In the absence of specific instructions from the holder of a Receipt, the Depositary will abstain from voting to the extent of the Stock represented by the Depositary Shares evidenced by such Receipt. SECTION 4.6 Changes Affecting Stock and Reclassifications, Recapitalizations, etc. Upon any split-up, consolidation or any other reclassification of Stock, or upon any recapitalization, reorganization, merger, amalgamation or consolidation affecting Patterson or to which it is a party (other than a Merger or Consolidation) or sale of all or substantially all of Patterson's assets, the Depositary shall treat any shares of stock or other securities or property (including cash) that shall be received by the Depositary in exchange for or upon conversion of or in respect of the Stock as new deposited property under this Deposit Agreement, and Receipts then outstanding shall thenceforth represent the proportionate interests of holders thereof in the new deposited property so received in exchange for or upon conversion or in respect of such Stock. In any such case the Depositary may, in its discretion, with the approval of Patterson, execute and deliver additional Receipts, or may call for the surrender of all outstanding Receipts to be exchanged for new Receipts specifically describing such new deposited property. SECTION 4.7 Reports. The Depositary shall make available for inspection by holders of Receipts at the Corporate Office, the New York Office and at such other places as it may from time to time deem advisable during normal business hours any reports and communications received from Patterson that are received by the Depositary as the holder of Stock. SECTION 4.8 Lists of Receipt Holders. Promptly upon request from time to time by Patterson, the Depositary shall furnish to it a list, as of a recent date, of the names, addresses and holdings of Depositary Shares of all persons in whose names Receipts are registered on the books of the Depositary. At the expense of Patterson, Patterson shall have the right to inspect transfer and registration records of the Depositary, any Depositary's Agent or the Registrar, take copies thereof and require the Depositary, any Depositary's Agent or the Registrar to supply copies of such portions of such records as Patterson may request. ARTICLE 5 THE DEPOSITARY, THE DEPOSITARY'S AGENTS, THE REGISTRAR AND PATTERSON SECTION 5.1 Maintenance of Offices, Agencies, Transfer Books by the Depositary; the Registrar. Upon execution of this Deposit Agreement in accordance with its terms, the Depositary shall maintain (i) at the New York Office facilities for the execution and delivery, registration, registration of transfer, surrender and exchange, split-up, combination, redemption and conversion of Receipts and deposit and withdrawal of Stock and (ii) at the Corporate Office and at the offices of the Depositary's Agents, if any, facilities for the delivery, registration, registration of transfer, surrender and exchange, split-up, combination, conversion and redemption of Receipts and deposit and withdrawal of Stock, all in accordance with the provisions of this Deposit Agreement. The Depositary shall keep books at the Corporate Office for the registration and transfer of Receipts, which books at all reasonable times shall be open for inspection by the record holders of Receipts; provided that any such holder requesting to exercise such right shall certify to the Depositary that such inspection shall be for a proper purpose reasonably related to such person's interest as an owner of Depositary Shares. The Depositary shall D-10 14 consult with Patterson upon receipt of any request for inspection. The Depositary may close such books, at any time or from time to time, when deemed expedient by it in connection with the performance of its duties hereunder. If the Receipts or the Depositary Shares evidenced thereby or the Stock represented by such Depositary Shares shall be listed on one or more stock exchanges, the Depositary shall, with the approval of Patterson, appoint a Registrar for registry of such Receipts or Depositary Shares in accordance with the requirements of such exchange or exchanges. Such Registrar (which may be the Depositary if so permitted by the requirements of such exchange or exchanges) may be removed and a substitute registrar appointed by the Depositary upon the request or with the approval of Patterson. In addition, if the Receipts, such Depositary Shares or such Stock are listed on one or more stock exchanges, the Depositary will, at the request of Patterson, arrange such facilities for the delivery, registration, registration of transfer, surrender and exchange, split-up, combination, redemption or conversion of such Receipts, such Depositary Shares or such Stock as may be required by law or applicable stock exchange regulations. SECTION 5.2 Prevention or Delay in Performance by the Depositary, the Depositary's Agents, the Registrar or Patterson. Neither the Depositary nor any Depositary's Agent nor the Registrar nor Patterson shall incur any liability to any holder of any Receipt, if by reason of any provision of any present or future law or regulation thereunder of the United States of America or of any other governmental authority or, in the case of the Depositary, the Registrar or any Depositary's Agent, by reason of any provision, present or future, of the Certificate of Incorporation or the Certificate of Designation or, in the case of Patterson, the Depositary, the Registrar or any Depositary's Agent, by reason of any act of God or war or other circumstances beyond the control of the relevant party, the Depositary, any Depositary's Agent, the Registrar or Patterson shall be prevented or forbidden from doing or performing any act or thing that the terms of this Deposit Agreement provide shall be done or performed; nor shall the Depositary, any Depositary's Agent, the Registrar or Patterson incur any liability to any holder of a Receipt (i) by reason of any nonperformance or delay, caused as aforesaid, in the performance of any act or thing that the terms of this Deposit Agreement provide shall or may be done or performed, or (ii) by reason of any exercise of, or failure to exercise, any discretion provided for in this Deposit Agreement except, in the case of the Depositary, any Depositary's Agent or the Registrar, if any such exercise or failure to exercise discretion is caused by its negligence or bad faith. SECTION 5.3 Obligations of the Depositary, the Depositary's Agents, the Registrar and Patterson. Patterson assumes no obligation and shall be subject to no liability under this Deposit Agreement or the Receipts to holders or other persons, except to perform in good faith such obligations as are specifically set forth and undertaken by it to perform in this Deposit Agreement. Each of the Depositary, the Depositary's Agents and the Registrar assumes no obligation and shall be subject to no liability under this Deposit Agreement or the Receipts to holders or other persons, except to perform such obligations as are specifically set forth and undertaken by it to perform in this Deposit Agreement without negligence or bad faith. Neither the Depositary nor any Depositary's Agent nor the Registrar nor Patterson shall be under any obligation to appear in, prosecute or defend any action, suit or other proceeding with respect to Stock, Depositary Shares, Receipts or Common Stock that in its opinion may involve it in expense or liability, unless indemnity satisfactory to it against all expense and liability be furnished as often as may be required. Neither the Depositary nor any Depositary's Agent nor the Registrar nor Patterson shall be liable for any action or any failure to act by it in reliance upon the advice of or information from legal counsel, accountants, any person presenting Stock for deposit, any holder of a Receipt or any other person believed by it in good faith to be competent to give such advice or information. The Depositary, any Depositary's Agent, the Registrar and Patterson may each rely and shall each be protected in acting upon any written notice, request, direction or other document believed by it to be genuine and to have been signed or presented by the proper party or parties. The Depositary, the Registrar and any Depositary's Agent may own and deal in any class of securities of Patterson and its affiliates and in Receipts or Depositary Shares. The Depositary may also act as transfer agent or registrar D-11 15 of any of the securities of Patterson and its affiliates. It is intended that neither the Depositary nor any Depositary's Agent shall be deemed to be an "issuer" of the Stock, the Depositary Shares, the Receipts or the Common Stock issued upon conversion or redemption of the Stock under the federal securities laws or applicable state securities laws, it being expressly understood and agreed that the Depositary and any Depositary's Agent are acting only in a ministerial capacity as Depositary for the Stock; provided, however, that the Depositary agrees to comply with all information reporting and withholding requirements applicable to it under law or this Deposit Agreement in its capacity as Depositary. Neither the Depositary (or its officers, directors, employees or agents) nor any Depositary's Agent makes any representation or has any responsibility as to the validity of the Registration Statement pursuant to which the Depositary Shares are registered under the Securities Act, the Stock, the Depositary Shares or any instruments referred to therein or herein, or as to the correctness of any statement made therein or herein; provided, however, that the Depositary is responsible for its representations in this Deposit Agreement. The Depositary assumes no responsibility for the correctness of the description that appears in the Receipts, which can be taken as a statement of Patterson summarizing certain provisions of this Deposit Agreement. Notwithstanding any other provision herein or in the Receipts, the Depositary makes no warranties or representations as to the validity, genuineness or sufficiency of any Stock at any time deposited with the Depositary hereunder or of the Depositary Shares, as to the validity or sufficiency of this Deposit Agreement, as to the value of the Depositary Shares or as to any right, title or interest of the record holders of Receipts in and to the Depositary Shares except that the Depositary hereby represents and warrants as follows: (i) the Depositary has been duly organized and is validly existing and in good standing under the laws of the State of [____________], with full power, authority and legal right under such law to execute, deliver and carry out the terms of this Deposit Agreement; (ii) this Deposit Agreement has been duly authorized, executed and delivered by the Depositary; and (iii) this Deposit Agreement constitutes a valid and binding obligation of the Depositary, enforceable against the Depositary in accordance with its terms, except as enforcement thereof may be limited by bankruptcy, insolvency, reorganization or other similar laws affecting enforcement of creditors' rights generally and except as enforcement thereof is subject to general principles of equity (regardless of whether enforcement is considered in a proceeding in equity or at law). The Depositary shall not be accountable for the use or application by Patterson of the Depositary Shares or the Receipts or the proceeds thereof. SECTION 5.4 Resignation and Removal of the Depositary, Appointment of Successor Depositary. The Depositary may at any time resign as Depositary hereunder by written notice via registered mail of its election to do so delivered to Patterson, such resignation to take effect upon the appointment of a successor depositary and its acceptance of such appointment as hereinafter provided. The Depositary may at any time be removed by Patterson by written notice of such removal delivered to the Depositary, such removal to take effect upon the appointment of a successor depositary and its acceptance of such appointment as hereinafter provided. In case at any time the Depositary acting hereunder shall resign or be removed, Patterson shall, within 45 days after the delivery of the notice of resignation or removal, as the case may be, appoint a successor depositary, which shall be a bank or trust company, or an affiliate of a bank or trust company, having its principal office in the United States of America and having a combined capital and surplus of at least $50,000,000. If a successor depositary shall not have been appointed in 45 days, the resigning or removed Depositary may petition a court of competent jurisdiction to appoint a successor depositary. Every successor depositary shall execute and deliver to its predecessor and to Patterson an instrument in writing accepting its appointment hereunder, and thereupon such successor depositary, without any further act or deed, shall become fully vested with all the rights, powers, duties and obligations of its predecessor and for all purposes shall be the Depositary under this Deposit Agreement, and such predecessor, upon payment of all sums due it and on the written request of Patterson, shall promptly execute and deliver an instrument transferring to such successor all rights and powers of such predecessor hereunder, shall duly assign, transfer and deliver all rights, title and interest in the Stock and any moneys or property held hereunder to such successor and shall deliver to such successor a list of the record holders of all outstanding Receipts. Any successor depositary shall D-12 16 promptly mail notice of its appointment to the record holders of Receipts. Any corporation into or with which the Depositary may be merged, consolidated or converted shall be the successor of such Depositary without the execution or filing of any document or any further act. Such successor depositary may execute the Receipts either in the name of the predecessor depositary or in the name of the successor depositary. SECTION 5.5 Corporate Notices and Reports. Patterson agrees that it will deliver to the Depositary, and the Depositary will, promptly after receipt thereof, transmit to the record holders of Receipts, in each case at the address recorded in the Depositary's books, copies of all notices and reports (including financial statements) required by law, by the rules of any national securities exchange upon which the Stock, the Depositary Shares or the Receipts are listed or by the Certificate of Incorporation and the Certificate of Designation to be furnished by Patterson to holders of Stock. Such transmission will be at Patterson's expense and Patterson will provide the Depositary with such number of copies of such documents as the Depositary may reasonably request. In addition, the Depositary will transmit to the record holders of Receipts at Patterson's expense such other documents as may be requested by Patterson. SECTION 5.6 Deposit of Stock by Patterson. Patterson agrees with the Depositary that neither Patterson nor any company controlled by Patterson will at any time deposit any Stock if such Stock is required to be registered under the provisions of the Securities Act and no registration statement is at such time in effect as to such Stock. SECTION 5.7 Indemnification by Patterson. Patterson agrees to indemnify the Depositary, any Depositary's Agent and any Registrar against, and hold each of them harmless from, any liability, costs and expenses (including reasonable fees and expenses of counsel) that may arise out of or in connection with its acting as Depositary, Depositary's Agent or Registrar, respectively, under this Deposit Agreement and the Receipts, except for any liability arising out of negligence, bad faith or willful misconduct on the part of any such person or persons. SECTION 5.8 Fees, Charges and Expenses. No fees, charges and expenses of the Depositary or any Depositary's Agent hereunder or of any Registrar shall be payable by any person other than Patterson, except for any taxes and other governmental charges and except as provided in this Deposit Agreement. If, at the request of a holder of a Receipt, the Depositary incurs fees, charges or expenses for which it is not otherwise liable hereunder, such holder or other person will be liable for such fees, charges and expenses. All other fees, charges and expenses of the Depositary and any Depositary's Agent hereunder and of any Registrar (including, in each case, reasonable fees and expenses of counsel) incident to the performance of their respective obligations hereunder will be paid from time to time upon consultation and agreement between the Depositary and Patterson as to the amount and nature of such fees, charges and expenses. ARTICLE 6 AMENDMENT AND TERMINATION SECTION 6.1 Amendment. The form of the Receipts and any provision of this Deposit Agreement may at any time and from time to time be amended by agreement between Patterson and the Depositary in any respect that they may deem necessary or desirable. Any amendment that shall impose or increase any fees, taxes or charges payable by holders of Receipts (other than taxes and other governmental charges, fees and other expenses payable by holders pursuant to the terms hereof or of the Receipts), or that shall otherwise prejudice any substantial existing right of holders of Receipts, shall not become effective as to outstanding Receipts until the expiration of 90 days after notice of such amendment shall have been given to the record holders of outstanding Receipts. Every holder of an outstanding Receipt at the time any such amendment becomes effective shall be deemed, by continuing to D-13 17 hold such Receipt, to consent and agree to such amendment and to be bound by this Deposit Agreement as amended thereby. In no event shall any amendment impair the right, subject to the provisions of Sections 2.3, 2.6 and 2.7 and Article 3, of any owner of any Depositary Shares to surrender the Receipt evidencing such Depositary Shares with instructions to the Depositary to deliver to the holder the Stock and all money and other property, if any, represented thereby, except in order to comply with mandatory provisions of applicable law. SECTION 6.2 Termination. Whenever so directed by Patterson, the Depositary will terminate this Deposit Agreement by mailing notice of such termination to the record holders of all Receipts then outstanding at least 30 days prior to the date fixed in such notice for such termination. The Depositary may likewise terminate this Deposit Agreement if at any time 45 days shall have expired after the Depositary shall have delivered to Patterson a written notice of its election to resign and a successor depositary shall not have been appointed and accepted its appointment as provided in Section 5.4. If any Receipts shall remain outstanding after the date of termination of this Deposit Agreement, the Depositary thereafter shall discontinue the transfer of Receipts, shall suspend the distribution of dividends to the holders thereof and shall not give any further notices (other than notice of such termination) or perform any further acts under this Deposit Agreement, except as provided below and that the Depositary shall continue to collect dividends and other distributions pertaining to Stock, shall sell rights, preferences or privileges as provided in this Deposit Agreement and shall continue to deliver the Stock and any money and other property represented by Receipts, without liability for interest thereon, upon surrender thereof by the holders thereof. At any time after the expiration of two years from the date of termination, the Depositary may sell Stock then held hereunder at public or private sale, at such places and upon such terms as it deems proper and may thereafter hold in a segregated account the net proceeds of any such sale, together with any money and other property held by it hereunder, without liability for interest, for the benefit, pro rata in accordance with their holdings, of the holders of Receipts that have not heretofore been surrendered. After making such sale, the Depositary shall be discharged from all obligations under this Deposit Agreement except to account for such net proceeds and money and other property. Upon the termination of this Deposit Agreement, Patterson shall be discharged from all obligations under this Deposit Agreement except for its obligations to the Depositary, any Depositary's Agent and any Registrar under Sections 5.7 and 5.8. In the event this Deposit Agreement is terminated, Patterson hereby agrees to use its best efforts to list the underlying Stock on the Nasdaq National Market. ARTICLE 7 MISCELLANEOUS SECTION 7.1 Counterparts. This Deposit Agreement may be executed by Patterson and the Depositary in separate counterparts, each of which counterparts, when so executed and delivered, shall be deemed an original, but all such counterparts taken together shall constitute one and the same instrument. Delivery of an executed counterpart of a signature page to this Deposit Agreement by telecopier shall be effective as delivery of a manually executed counterpart of this Deposit Agreement. Copies of this Deposit Agreement shall be filed with the Depositary and the Depositary's Agents and shall be open to inspection during business hours at the Corporate Office and the New York Office and the respective offices of the Depositary's Agents, if any, by any holder of a Receipt. SECTION 7.2 Exclusive Benefits of Parties. This Deposit Agreement is for the exclusive benefit of the parties hereto, and their respective successors hereunder, and shall not be deemed to give any legal or equitable right, remedy or claim to any other person whatsoever. SECTION 7.3 Invalidity of Provisions. In case any one or more of the provisions contained in this Deposit Agreement or in the Receipts should be or become invalid, illegal or unenforceable in any D-14 18 respect, the validity, legality and enforceability of the remaining provisions contained herein or therein shall in no way be affected, prejudiced or disturbed thereby. SECTION 7.4 Notices. Any notices to be given to Patterson hereunder or under the Receipts shall be in writing and shall be deemed to have been duly given if personally delivered or sent by mail, or by telegram or telex or telecopier confirmed by letter, addressed to Patterson at 4510 Lamesa Highway, P.O. Box 1416, Snyder, Texas 79550, Attention: Chief Executive Officer, or at any other place to which Patterson may have transferred its principal executive office. Any notices to be given to the Depositary hereunder or under the Receipts shall be in writing and shall be deemed to have been duly given if personally delivered or sent by mail, or by telegram or telex or telecopier confirmed by letter, addressed to the Depositary at the Corporate Office. Any notices given to any record holder of a Receipt hereunder or under the Receipts shall be in writing and shall be deemed to have been duly given if personally delivered or sent by mail, or by telegram or telex or telecopier confirmed by letter, addressed to such record holder at the address of such record holder as it appears on the books of the Depositary or, if such holder shall have filed with the Depositary a written request that notices intended for such holder be mailed to some other address, at the address designated in such request. Delivery of a notice sent by mail, or by telegram or telex or telecopier shall be deemed to be effected at the time when a duly addressed letter containing the same (or a duly addressed letter confirming an earlier notice in the case of a telegram or telex or telecopier message) is deposited, postage prepaid, in a post office letter box. The Depositary or Patterson may, however, act upon any telegram or telex or telecopier message received by it from the other or from any holder of a Receipt, notwithstanding that such telegram or telex or telecopier message shall not subsequently be confirmed by letter as aforesaid. SECTION 7.5 Depositary's Agents. The Depositary may, with the approval of Patterson which approval shall not be unreasonably withheld, from time to time appoint one or more Depositary's Agents to act in any respect for the Depositary for the purposes of this Deposit Agreement and may vary or terminate the appointment of such Depositary's Agents. SECTION 7.6 Holders of Receipts Are Parties. Notwithstanding that holders of Receipts have not executed and delivered this Deposit Agreement or any counterpart thereof, the holders of Receipts from time to time shall be deemed to be parties to this Deposit Agreement and shall be bound by all of the terms and conditions, and be entitled to all of the benefits, hereof and of the Receipts by acceptance of delivery of Receipts. SECTION 7.7 Law. This Deposit Agreement and the Receipts and all rights hereunder and thereunder and provisions hereof and thereof shall be governed by, and construed in accordance with, the law of the State of New York without giving effect to principles of conflict of laws. SECTION 7.8 Headings. The headings of articles and sections in this Deposit Agreement and in the form of the Receipt set forth in Exhibit A hereto have been inserted for convenience only and are not to be regarded as a part of this Deposit Agreement or to have any bearing upon the meaning or interpretation of any provision contained herein or in the Receipts. D-15 19 IN WITNESS WHEREOF, Patterson Energy and [_______________________] have duly executed this Deposit Agreement as of the day and year first above set forth and all holders of Receipts shall become parties hereto by and upon acceptance by them of delivery of Receipts issued in accordance with the terms hereof. PATTERSON ENERGY, INC. Attest: By ---------------------------------- - ---------------------------------- Cloyce A. Talbott, Chief Executive Officer [ ] ----------------------------------- Attest: By ---------------------------------- Authorized Signatory - ---------------------------------- D-16 20 EXHIBIT A DEPOSITARY RECEIPT FOR DEPOSITARY SHARES EACH REPRESENTING [ ] OF A SHARE OF [ ] ---------------------------------------------- PREFERRED STOCK OF PATTERSON ENERGY, INC. (Incorporated under the Laws of the State of Delaware) No. [_________________________________] (the "Depositary") hereby certifies that ____________ is the registered owner of ___________ Depositary Shares (the "Depositary Shares"), each Depositary Share representing [ ] of a share of [____________________________] Preferred Stock, $.01 par value (the "Stock"), of Patterson Energy, Inc., a corporation duly organized and existing under the laws of the State of Delaware ("Patterson"), and the same proportionate interest in any and all other property received by the Depositary in respect of such shares of Stock and held by the Depositary under the Deposit Agreement (as defined below). Subject to the terms of the Deposit Agreement, each owner of a Depositary Share is entitled, proportionately, to all the rights, preferences and privileges of the Stock represented thereby, including the dividend, voting, liquidation and other rights contained in the Certificate of Designation establishing the rights, preferences, privileges and limitations of the Stock (the "Certificate of Designation"), copies of which are on file at the office of the Depositary at which at any particular time its business in respect of matters governed by the Deposit Agreement shall be administered, which at the time of the execution of the Deposit Agreement is located at [________________] (the "Corporate Office"). This Depositary Receipt ("Receipt") shall not be entitled to any benefits under the Deposit Agreement or be valid or obligatory for any purpose unless this Receipt shall have been executed manually or, if a Registrar for the Receipts (other than the Depositary) shall have been appointed, by facsimile by the Depositary by the signature of a duly authorized signatory and, if executed by facsimile signature of the Depositary, shall have been countersigned manually by such Registrar by the signature of a duly authorized signatory. THE DEPOSITARY IS NOT RESPONSIBLE FOR THE VALIDITY OF ANY DEPOSITED STOCK. THE DEPOSITARY ASSUMES NO RESPONSIBILITY FOR THE CORRECTNESS OF THE DESCRIPTION SET FORTH IN THIS RECEIPT, WHICH CAN BE TAKEN AS A STATEMENT OF PATTERSON SUMMARIZING CERTAIN PROVISIONS OF THE DEPOSIT AGREEMENT. UNLESS EXPRESSLY SET FORTH IN THE DEPOSIT AGREEMENT, THE DEPOSITARY MAKES NO WARRANTIES OR REPRESENTATIONS AS TO THE VALIDITY, GENUINENESS OR SUFFICIENCY OF ANY STOCK AT ANY TIME DEPOSITED WITH THE DEPOSITARY UNDER THE DEPOSIT AGREEMENT OR OF THE DEPOSITARY SHARES, AS TO THE VALIDITY OR SUFFICIENCY OF THE DEPOSIT AGREEMENT, AS TO THE VALUE OF THE DEPOSITARY SHARES OR AS TO ANY RIGHT, TITLE OR INTEREST OF THE RECORD HOLDERS OF THE DEPOSITARY RECEIPTS IN AND TO THE DEPOSITARY SHARES. Patterson will furnish to any holder of this Receipt without charge, upon request addressed to its executive office, a full statement of the designation, relative rights, preferences and limitations of the shares of each authorized class, and of each class of preferred stock authorized to be issued, so far as the D-17 21 same may have been fixed, and a statement of the authority of the Board of Directors of Patterson to designate and fix the relative rights, preferences and limitations of other classes. This Receipt is continued on the reverse hereof and the additional provisions therein set forth for all purposes have the same effect as if set forth at this place. Dated: [ ] ------------------------------------------- as Depositary and Registrar By ----------------------------------------- Authorized Signatory D-18 22 [FORM OF REVERSE OF DEPOSITARY RECEIPT] (1) The Deposit Agreement. Depositary Receipts (the "Receipts"), of which this Receipt is one, are made available upon the terms and conditions set forth in the Deposit Agreement, dated as of [_________] (the "Deposit Agreement"), among Patterson, the Depositary and all holders from time to time of Receipts. The Deposit Agreement (copies of which are on file at the Corporate Office, the office maintained by the Depositary in the Borough of Manhattan, the City of New York which at the time of the execution of the Deposit Agreement is located at [________________________] (the "New York Office") and at the office of any agent of the Depositary) sets forth the rights of holders of Receipts and the rights and duties of the Depositary. The statements made on the face and the reverse of this Receipt are summaries of certain provisions of the Deposit Agreement and are subject to the detailed provisions thereof, to which reference is hereby made. In the event of any conflict between the provisions of this Receipt and the provisions of the Deposit Agreement, the provisions of the Deposit Agreement will govern. (2) Definitions. Unless otherwise expressly herein provided, all defined terms used herein shall have the meanings ascribed thereto in the Deposit Agreement. (3) Redemption and Conversion of Stock.* Whenever Patterson shall elect to redeem or be required to convert shares of Stock into shares of Common Stock in accordance with the Certificate of Designation, it shall (unless otherwise agreed in writing with the Depositary) give the Depositary in its capacity as Depositary not less than 5 business days' prior notice of the proposed date of the mailing of a notice of redemption or conversion of Stock and the simultaneous redemption or conversion of the Depositary Shares representing the Stock to be redeemed or converted and of the number of such shares of Stock held by the Depositary to be redeemed or converted. The Depositary shall, as directed by Patterson in writing, mail, first class postage prepaid, notice of the redemption or conversion of Stock and the proposed simultaneous redemption or conversion of Depositary Shares representing the Stock to be redeemed or converted, not less than 30 and not more than 60 days prior to the date fixed for redemption or conversion of such Stock and Depositary Shares, to the record holders of the Receipts evidencing the Depositary Shares to be so redeemed or converted, at the addresses of such holders as the same appear on the records of the Depositary; provided, that if the effectiveness of a Merger or Consolidation (as defined in the Certificate of Designation) makes it impracticable to provide at least 30 days' notice, the Depositary shall provide such notice as soon as practicable prior to such effectiveness. Any such notice shall also be published in the same manner as notices of redemption or conversion of the Stock are required to be published pursuant to Section [ ] of the Certificate of Designation. On the date of any such redemption or conversion, the Depositary shall surrender the certificate or certificates held by the Depositary evidencing the number of shares of Stock to be redeemed or converted in the manner specified in the notice of redemption or conversion of Stock provided by Patterson pursuant to Section [ ] of the Certificate of Designation. The Depositary shall, thereafter, redeem or convert the number of Depositary Shares representing such redeemed or converted Stock upon the surrender of Receipts evidencing such Depositary Shares in the manner provided in the notice sent to record holders of Receipts; provided, that the Depositary shall have received, upon surrendering such certificate or certificates as aforesaid, a sufficient number of shares of Common Stock or other securities to convert or redeem such number of Depositary Shares (including, in the event that Patterson elects pursuant to Section [ ] of the Certificate of Designation to exercise any option to deliver shares of Common Stock or other securities in lieu of any cash consideration payable on the Effective Date (as defined in the Certificate of Designation) of any Merger or Consolidation, a number of shares of Common Stock or other securities equal to such cash consideration (as determined in the manner set forth in the Certificate of Designation)), plus any accrued and unpaid dividends payable with respect thereto to and including the date of any such redemption or - --------------------------------- *This section to be modified to discuss specific redemption or conversion terms of the Stock, if any. D-19 23 conversion and any other cash consideration payable on the Effective Date of a Merger or Consolidation (other than any dividends or other cash consideration payable on the Effective Date of a Merger or Consolidation that Patterson has elected to pay in shares of Common Stock or other securities pursuant to Section [ ] of the Certificate of Designation). In case fewer than all the outstanding Depositary Shares are to be redeemed, the Depositary Shares to be redeemed shall be selected by the Depositary by lot or on a pro rata basis. Notice having been mailed and published as aforesaid, from and after the redemption or conversion date (unless Patterson shall have failed to redeem or convert the shares of Stock to be redeemed or converted by it upon the surrender of the certificate or certificates therefor by the Depositary as described above), the Depositary Shares called for redemption or subject to conversion shall be deemed no longer to be outstanding and all rights of the holders of Receipts evidencing such Depositary Shares (except the right to receive the shares of Common Stock or other securities and cash, if any, payable upon redemption or conversion upon surrender of such Receipts) shall, to the extent of such Depositary Shares, cease and terminate. Upon surrender in accordance with said notice of the Receipts evidencing such Depositary Shares (properly endorsed or assigned for transfer, if the Depositary shall so require), such Depositary Shares shall be converted into or redeemed for shares of Common Stock or other securities at a rate equal to [ ] of the number of shares of Common Stock or other securities delivered, and the holders thereof shall be entitled to [________] of the cash, if any, payable, in respect of the shares of Stock pursuant to the Certificate of Designation. The foregoing is subject further to the terms and conditions of the Certificate of Designation. If fewer than all of the Depositary Shares evidenced by this Receipt are called for redemption, the Depositary will deliver to the holder of this Receipt upon its surrender to the Depositary, together with shares of Common Stock or other securities and all accrued and unpaid dividends to and including the date fixed for redemption payable in respect of the Depositary Shares called for redemption, a new Receipt evidencing the Depositary Shares evidenced by such prior Receipt and not called for redemption. (4) Surrender of Receipts and Withdrawal of Stock. Upon surrender of this Receipt to the Depositary at the Corporate Office, the New York Office or at such other offices as the Depositary may designate, and subject to the provisions of the Deposit Agreement, the holder hereof is entitled to withdraw, and to obtain delivery, without unreasonable delay, to or upon the order of such holder, any or all of the Stock (but only in whole shares of Stock) and all money and other property, if any, at the time represented by the Depositary Shares evidenced by this Receipt; provided, however, that, in the event this Receipt shall evidence a number of Depositary Shares in excess of the number of Depositary Shares representing the whole number of shares of Stock to be withdrawn, the Depositary shall, in addition to such whole number of shares of Stock and such money and other property, if any, to be withdrawn, deliver, to or upon the order of such holder, a new Receipt or Receipts evidencing such excess number of whole Depositary Shares. (5) Transfers, Split-ups, Combinations. Subject to Paragraphs 6, 7 and 8 below, this Receipt is transferable on the books of the Depositary upon surrender of this Receipt to the Depositary at the Corporate Office or the New York Office, or at such other offices as the Depositary may designate, properly endorsed or accompanied by a properly executed instrument of transfer, and upon such transfer the Depositary shall sign and deliver a Receipt or Receipts to or upon the order of the person entitled thereto, all as provided in and subject to the Deposit Agreement. This Receipt may be split into other Receipts or combined with other Receipts into one Receipt evidencing the same aggregate number of Depositary Shares evidenced by the Receipt or Receipts surrendered; provided, however, that the Depositary shall not issue any Receipt evidencing a fractional Depositary Share. (6) Conditions to Signing and Delivery, Transfer, etc., of Receipts. Prior to the execution and delivery, registration of transfer, split-up, combination, surrender or exchange of this Receipt, the delivery of any distribution hereon or the withdrawal or deposit of Stock, the Depositary, any of the Depositary's Agents or Patterson may require any or all of the following: (i) payment to it of a sum sufficient for the D-20 24 payment (or, in the event that the Depositary or Patterson shall have made such payment, the reimbursement to it) of any tax or other governmental charge with respect thereto (including any such tax or charge with respect to Stock being deposited or withdrawn or with respect to Common Stock or other securities or property of Patterson being issued upon conversion or redemption); (ii) production of proof satisfactory to it as to the identity and genuineness of any signature; and (iii) compliance with such reasonable regulations, if any, as the Depositary or Patterson may establish not inconsistent with the Deposit Agreement. Any person presenting Stock for deposit, or any holder of this Receipt, may be required to file such proof of information, to execute such certificates and to make such representations and warranties as the Depositary or Patterson may reasonably deem necessary or proper. The Depositary or Patterson may withhold or delay the delivery of this Receipt, the registration of transfer, redemption, conversion or exchange of this Receipt, the withdrawal of the Stock represented by the Depositary Shares evidenced by this Receipt or the distribution of any dividend or other distribution until such proof or other information is filed, such certificates are executed or such representations and warranties are made. (7) Suspension of Delivery, Transfer, etc. The deposit of Stock may be refused and the delivery of this Receipt against Stock or the registration of transfer, split-up, combination, surrender or exchange of this Receipt and the withdrawal of deposited Stock may be suspended (i) during any period when the register of stockholders of Patterson is closed, (ii) if any such action is deemed necessary or advisable by the Depositary, any of the Depositary's Agents or Patterson at any time or from time to time because of any requirement of law or of any government or governmental body or commission, or under any provision of the Deposit Agreement, or (iii) with the approval of Patterson, for any other reason. The Depositary shall not be required (a) to issue, transfer or exchange any Receipts for a period beginning at the opening of business 15 days next preceding any selection of Depositary Shares and Stock to be redeemed and ending at the close of business on the day of the mailing of notice of redemption of Depositary Shares or (b) to transfer or exchange for another Receipt any Receipt evidencing Depositary Shares called or being called for redemption, in whole or in part, or subject to conversion except as provided in the last sentence of Paragraph 3. (8) Payment of Taxes or Other Governmental Charges. If any tax or other governmental charge shall become payable by or on behalf of the Depositary with respect to (i) this Receipt, (ii) the Depositary Shares evidenced by this Receipt, (iii) the Stock (or fractional interest therein) or other property represented by such Depositary Shares, or (iv) any transaction referred to in Section 4.6 of the Deposit Agreement, such tax (including transfer, issuance or acquisition taxes, if any) or governmental charge shall be payable by the holder of this Receipt, who shall pay the amount thereof to the Depositary. Until such payment is made, registration of transfer of this Receipt or any split-up or combination hereof or any withdrawal of the Stock or money or other property, if any, represented by the Depositary Shares evidenced by this Receipt may be refused, any dividend or other distribution may be withheld and any part or all of the Stock or other property (including Common Stock or other securities received in connection with a conversion or redemption of Stock) represented by the Depositary Shares evidenced by this Receipt may be sold for the account of the holder hereof (after attempting by reasonable means to notify such holder prior to such sale). Any dividend or other distribution so withheld and the proceeds of any such sale may be applied to any payment of such tax or other governmental charge, the holder of this Receipt remaining liable for any deficiency. (9) Amendment. The form of the Receipts and any provision of the Deposit Agreement may at any time and from time to time be amended by agreement between Patterson and the Depositary in any respect that they may deem necessary or desirable. Any amendment that shall impose or increase any fees, taxes or charges payable by holders of Receipts (other than taxes and other governmental charges, fees and other expenses payable by holders as provided herein or in the Deposit Agreement), or that shall otherwise prejudice any substantial existing right of holders of Receipts, shall not become effective as to outstanding Receipts until the expiration of 90 days after notice of such amendment shall have been given D-21 25 to the record holders of outstanding Receipts. The holder of this Receipt at the time any such amendment becomes effective shall be deemed, by continuing to hold this Receipt, to consent and agree to such amendment and to be bound by the Deposit Agreement as amended thereby. In no event shall any amendment impair the right, subject to the provisions of Paragraphs 3, 4, 6, 7 and 8 hereof and of Sections 2.3, 2.6 and 2.7 and Article 3 of the Deposit Agreement, of the owner of the Depositary Shares evidenced by this Receipt to surrender this Receipt with instructions to the Depositary to deliver to the holder the Stock and all money and other property, if any, represented thereby, except in order to comply with mandatory provisions of applicable law. (10) Fees, Charges and Expenses. Patterson will pay all fees, charges and expenses of the Depositary, except for taxes (including transfer taxes, if any) and other governmental charges and such charges as are expressly provided in the Deposit Agreement to be at the expense of persons depositing Stock, holders of Receipts or other persons. (11) Title to Receipts. It is a condition of this Receipt, and every successive holder hereof by accepting or holding the same consents and agrees, that title to this Receipt (and to the Depositary Shares evidenced hereby), when properly endorsed or accompanied by a properly executed instrument of transfer, is transferable by delivery with the same effect as in the case of a negotiable instrument; provided, however, that the Depositary may, notwithstanding any notice to the contrary, treat the record holder hereof at such time as the absolute owner hereof for the purpose of determining the person entitled to distribution of dividends or other distributions or to any notice provided for in the Deposit Agreement and for all other purposes. (12) Dividends and Distributions. Whenever the Depositary shall receive any cash dividend or other cash distribution on the Stock, the Depositary shall, subject to the provisions of the Deposit Agreement, distribute to record holders of Receipts such amounts of such sums as are, as nearly as practicable, in proportion to the respective numbers of Depositary Shares evidenced by the Receipts held by such holders; provided, however, that in case Patterson or the Depositary shall be required by law to withhold and does withhold from any cash dividend or other cash distribution in respect of the Stock an amount on account of taxes, the amount made available for distribution or distributed in respect of Depositary Shares shall be reduced accordingly. The Depositary shall distribute or make available for distribution, as the case may be, only such amount, however, as can be distributed without attributing to any owner of Depositary Shares a fraction of one cent and any balance not so distributable shall be held by the Depositary (without liability for interest thereon) and shall be added to and be treated as part of the next sum received by the Depositary for distribution to record holders of Receipts then outstanding. (13) Subscription Rights, Preferences or Privileges. If Patterson shall at any time offer or cause to be offered to the persons in whose name Stock is registered on the books of Patterson any rights, preferences or privileges to subscribe for or to purchase any securities or any rights, preferences or privileges of any other nature, such rights, preferences or privileges shall in each such instance, subject to the provisions of the Deposit Agreement, be made available by the Depositary to the record holders of Receipts in such manner as Patterson shall instruct. (14) Notice of Dividends, Fixing of Record Date. Whenever (i) any cash dividend or other cash distribution shall become payable, or any distribution other than cash shall be made, or any rights, preferences or privileges shall at any time be offered, with respect to the Stock, or (ii) the Depositary shall receive notice of any meeting at which holders of Stock are entitled to vote or of which holders of Stock are entitled to notice or of the mandatory conversion of, or any election on the part of Patterson to call for redemption of, any shares of Stock, the Depositary shall in each such instance fix a record date (which shall be the same date as the record date fixed by Patterson with respect to the Stock) for the determination of the holders of Receipts (x) who shall be entitled to receive such dividend, distribution, D-22 26 rights, preferences or privileges or the net proceeds of the sale thereof, or (y) who shall be entitled to give instructions for the exercise of voting rights at any such meeting or of such meeting or to receive notice of such conversion or redemption. (15) Voting Rights. Upon receipt of notice of any meeting at which the holders of Stock are entitled to vote, the Depositary shall, as soon as practicable thereafter, mail to the record holders of Receipts a notice, which shall contain (i) such information as is contained in such notice of meeting, (ii) a statement that the holders of Receipts at the close of business on a specified record date determined as provided in Paragraph 14 will be entitled, subject to any applicable provision of law, the Certificate of Incorporation or the Certificate of Designation, to instruct the Depositary as to the exercise of the voting rights pertaining to the Stock represented by their respective Depositary Shares, and (iii) a brief statement as to the manner in which such instructions may be given. Upon the written request of a holder of this Receipt on such record date the Depositary shall endeavor insofar as practicable to vote or cause to be voted the Stock represented by the Depositary Shares evidenced by this Receipt in accordance with the instructions set forth in such request. Patterson hereby agrees to take all reasonable action that may be deemed necessary by the Depositary in order to enable the Depositary to vote such Stock or cause such Stock to be voted. In the absence of specific instructions from the holder of this Receipt, the Depositary will abstain from voting to the extent of the Stock represented by the Depositary Shares evidenced by this Receipt. (16) Reports, Inspection of Transfer Books. The Depositary shall make available for inspection by holders of Receipts at the Corporate Office, the New York Office and at such other places as it may from time to time deem advisable during normal business hours any reports and communications received from Patterson that are received by the Depositary as the holder of Stock. The Depositary shall keep books at the Corporate Office for the registration and transfer of Receipts, which books at all reasonable times will be open for inspection by the record holders of Receipts; provided that any such holder requesting to exercise such right shall certify to the Depositary that such inspection shall be for a proper purpose reasonably related to such person's interest as an owner of Depositary Shares. (17) Liability of the Depositary, the Depositary's Agents, the Registrar and Patterson. Neither the Depositary nor any Depositary's Agent nor the Registrar nor Patterson shall incur any liability to any holder of this Receipt, if by reason of any provision of any present or future law or regulation thereunder of any governmental authority or, in the case of the Depositary, the Registrar or any Depositary's Agent, by reason of any provision present or future, of the Certificate of Incorporation or the Certificate of Designation or, in the case of Patterson, the Depositary, the Registrar or any Depositary's Agent, by reason of any act of God or war or other circumstances beyond the control of the relevant party, the Depositary, any Depositary's Agent, the Registrar or Patterson shall be prevented or forbidden from doing or performing any act or thing that the terms of the Deposit Agreement provide shall be done or performed; nor shall the Depositary, any Depositary's Agent, the Registrar or Patterson incur any liability to any holder of this Receipt (i) by reason of any nonperformance or delay, caused as aforesaid, in the performance of any act or thing that the terms of the Deposit Agreement provide shall or may be done or performed, or (ii) by reason of any exercise of, or failure to exercise, any discretion provided for in the Deposit Agreement except, in the case of the Depositary, any Depositary's Agent or the Registrar, if such exercise or failure to exercise discretion is caused by its negligence or bad faith. (18) Obligations of the Depositary, the Depositary's Agents, the Registrar and Patterson. Patterson assumes no obligation and shall be subject to no liability under the Deposit Agreement or this Receipt to the holder hereof or other persons, except to perform in good faith such obligations as are specifically set forth and undertaken by it to perform in the Deposit Agreement. Each of the Depositary, the Depositary's Agents and the Registrar assumes no obligation and shall be subject to no liability under the Deposit Agreement or this Receipt to the holder hereof or other persons, except to perform such D-23 27 obligations as are specifically set forth and undertaken by it to perform in the Deposit Agreement without negligence or bad faith. Neither the Depositary nor any Depositary's Agent nor the Registrar nor Patterson shall be under any obligation to appear in, prosecute or defend any action, suit or other proceeding with respect to Stock, Depositary Shares or Receipts or Common Stock that in its opinion may involve it in expense or liability, unless indemnity satisfactory to it against all expense and liability be furnished as often as may be required. Neither the Depositary nor any Depositary's Agent nor the Registrar nor Patterson will be liable for any action or failure to act by it in reliance upon the advice of or information from legal counsel, accountants, any person presenting Stock for deposit, any holder of this Receipt or any other person believed by it in good faith to be competent to give such advice or information. (19) Termination of Deposit Agreement. Whenever so directed by Patterson, the Depositary will terminate the Deposit Agreement by mailing notice of such termination to the record holders of all Receipts then outstanding at least 30 days prior to the date fixed in such notice for such termination. The Depositary may likewise terminate the Deposit Agreement if at any time 45 days shall have expired after the Depositary shall have delivered to Patterson a written notice of its election to resign and a successor depositary shall not have been appointed and accepted its appointment as provided in Section 5.4 of the Deposit Agreement. Upon the termination of the Deposit Agreement, Patterson shall be discharged from all obligations thereunder except for its obligations to the Depositary, any Depositary's Agent and any Registrar under Sections 5.7 and 5.8 of the Deposit Agreement. If any Receipts remain outstanding after the date of termination of the Deposit Agreement, the Depositary thereafter shall discontinue all functions and be discharged from all obligations as provided in the Deposit Agreement, except as specifically provided therein. (20) Governing Law. The Deposit Agreement and this Receipt and all rights thereunder and hereunder and provisions thereof and hereof shall be governed by, and construed in accordance with, the law of the State of New York without giving effect to principles of conflict of laws. D-24 28 FORM OF ASSIGNMENT FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto ___________________ the within Receipt and all rights and interests represented by the Depositary Shares evidenced thereby, and hereby irrevocably constitutes and appoints his attorney, to transfer the same on the books of the within-named Depositary, with full power of substitution in the premises. Dated: Signature: ----------------------------------- NOTE: The signature to this assignment must correspond with the name as written upon the face of the Receipt in every particular, without alteration or enlargement, or any change whatever. D-25 EX-5.1 8 OPINION AND CONSENT OF BAKER & HOSTETLER LLP 1 EXHIBIT 5.1 [B&H letterhead] October 28, 1999 Patterson Energy, Inc. 4510 Lamesa Highway P.O. Box 1416 Snyder, Texas 79550 RE: Registration Statement on Form S-3 relating to $150,000,000 Aggregate Principal Amount of Debt and Equity Securities Gentlemen: We have acted as counsel for Patterson Energy, Inc., a Delaware corporation ("Patterson"), in connection with the preparation of a Registration Statement on Form S-3 (the "Registration Statement") filed by Patterson with the Securities and Exchange Commission. The Registration Statement relates to the registration under the Securities Act of 1933, as amended (the "1933 Act"), of an aggregate of $150,000,000 principal amount of senior debt securities, senior subordinated debt securities and subordinated debt securities which may be issued by Patterson (collectively, the "Debt Securities") and equity securities which may be issued by Patterson or offered for the account of certain selling shareholders (the "Selling Shareholders") of Patterson (the "Equity Securities") (together, the "Securities"). This opinion is delivered in accordance with the requirements of Item 601(b)(5) of Regulation S-K under the 1933 Act. We have examined the form of the Indentures filed by Patterson as an exhibit to the Registration Statement (the "Indentures"). In addition, we have examined and relied on originals or copies certified or otherwise identified to our satisfaction of such documents, corporate records and other instruments, have made such inquiries as to questions of fact of officers and representatives of Patterson and have made such examinations of law as we have deemed necessary or appropriate for purposes of giving the opinion expressed below. In such examination, we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals and the conformity with the originals of all documents submitted to us as copies. We have assumed for purposes of this opinion (i) that all necessary filings with the Secretary of State of the State of Delaware with respect to the Equity Securities have been made, (ii) that the Board of Directors of Patterson has authorized the issuance and sale of the particular security to be sold, (iii) the corporate power, authority and legal right of the trustee under the respective Indentures to execute, deliver and perform its obligations thereunder, that the performance of such obligations by the trustee will not violate its charter or by-laws and that the trustee has the legal ability to exercise its trust powers in the State of Texas, and (iv) that the applicable Indenture will have been duly authorized, executed and delivered by the trustee at the time of issuance of the Debt Securities. The following opinions are limited solely to the applicable federal law of the United States of America, the law of the State of Texas and the General Corporation Law of the State of Delaware. While we are not licensed to practice in the State of Delaware, we have reviewed applicable provisions of the General Corporation Law of Delaware as we have deemed appropriate in connection with the opinions 2 expressed herein. Except as described, we have neither examined nor do we express any opinion with respect to Delaware law. Based upon and subject to the foregoing, we are of the opinion that: 1. The issuance and sale by Patterson of up to $150,000,000 of Securities, as provided in the Registration Statement, have been duly and validly authorized by all necessary corporate action of Patterson. 2. With respect to the Equity Securities offered by Patterson, when such Equity Securities are issued and sold in conformity with the resolutions of the Board of Directors of Patterson and as provided in the Registration Statement, the prospectus contained therein (the "Prospectus") and in the applicable supplement to the Prospectus, they will be legally issued, fully paid and non-assessable shares of the capital stock of Patterson. 3. With respect to the Equity Securities offered by the Selling Shareholders, such Equity Securities, when sold, will be legally issued, fully paid and non-assessable shares of the capital stock of Patterson. 4. When (i) the Registration Statement has become effective under the 1933 Act; (ii) the applicable Indentures have been qualified under the Trust Indenture Act of 1939 and have been duly executed and delivered by the parties thereto; (iii) the definitive terms of any Debt Securities and of their issue and sale have been duly established in conformity with the resolutions of the Board of Directors of Patterson and the Indentures so as not to violate any applicable law or agreement or instrument then binding on Patterson; (iv) such Debt Securities have been duly executed and authenticated in accordance with the Indentures; and (v) such Debt Securities have been issued and sold as contemplated in the Registration Statement, the Prospectus and in the applicable supplement to the Prospectus, such Debt Securities will constitute valid and legally binding obligations of Patterson entitled to the benefits provided by the Indentures, except (A) the enforceability thereof may be limited by bankruptcy, insolvency, reorganization, fraudulent transfer, moratorium or other similar laws now or hereafter in effect relating to creditors' rights generally, and (B) the remedy of specific performance and injunctive and other forms of equitable relief may be subject to certain equitable defenses and to the discretion of the court before which any proceeding therefor may be brought. We hereby consent to the filing of this opinion with the Commission as Exhibit 5.1 to the Registration Statement. We also consent to the reference to this firm under the heading "Legal Matters" in the Prospectus included in the Registration Statement as the counsel who will pass upon the validity of the Securities. In giving this consent, we do not thereby admit that we are in the category of persons whose consent is required under Section 7 of the Securities Act or the rules of the Securities and Exchange Commission thereunder. Very truly yours, BAKER & HOSTETLER LLP EX-12.1 9 STATEMENT RE: COMPUTATION OF RATIO OF EARNINGS 1 EXHIBIT 12.1 STATEMENT OF COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
Six months December 31, June 30, ----------------------------------------------------------------- 1999 1998 1997 1996 1995 1994 ------------ -------- -------- -------- -------- -------- (in thousands) Income (loss) before income taxes... $ (10,431) $ (232) $ 35,108 $ 2,017 $ 2,414 $ 4,813 Fixed charges: Interest expense.................. 2,026 4,471 1,045 1,612 1,065 366 Rents under leases(1) representative of an interest factor................. 317 1,419 1,650 594 344 262 -------- -------- -------- -------- -------- -------- Total fixed charges................. $ 2,343 $ 5,890 $ 2,695 $ 2,206 $ 1,409 $ 628 ======== ======== ======== ======== ======== ======== Income (loss) before income taxes plus fixed charges................ $ (8,088) $ 5,658 $ 37,803 $ 4,223 $ 3,823 $ 5,441 ======== ======== ======== ======== ======== ======== Ratio of earnings to fixed charges ......................... (2) .96:1 14.03:1 1.91:1 2.71:1 8.66:1 ======== ======== ======== ======== ======== ========
- --------- (1) Management of Patterson Energy, Inc. believes approximately one-third of rental and lease expense is representative of the interest component of rent expense. (2) There was a deficiency of $10.4 million in the ratio of earnings to fixed charges for the six months ended June 30, 1999. EX-15.1 10 LETTER OF PRICEWATERHOUSECOOPERS LLP 1 EXHIBIT 15.1 October 28, 1999 Securities and Exchange Commission 450 Fifth Street, N.W. Washington, D.C. 20549 Commissioners: We are aware that (i) our report dated April 30, 1999 on our review of interim financial information of Patterson Energy, Inc. and Subsidiaries for the period ended March 31, 1999 and (ii) our report dated June 29, 1999 on our review of interim financial information of Patterson Energy, Inc. and Subsidiaries for the period ended June 30, 1999 are incorporated by reference in this registration statement. Yours very truly, PRICEWATERHOUSECOOPERS LLP EX-23.1 11 CONSENT OF PRICEWATERHOUSECOOPERS LLP 1 EXHIBIT 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in this Registration Statement on Form S-3 of our report dated March 1, 1999 relating to the financial statements which appear in Patterson Energy, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1998. We also consent to the reference to us under the heading "Experts" in such Registration Statement. PRICEWATERHOUSECOOPERS LLP Dallas, Texas October 28, 1999 EX-23.2 12 CONSENT OF M. BRIAN WALLACE 1 EXHIBIT 23.2 CONSENT OF INDEPENDENT PETROLEUM ENGINEERS I hereby consent to the incorporation by reference in the Prospectus constituting part of this Registration Statement on Form S-3 (the "Registration Statement") of information contained in my summary reserve reports appearing in the Patterson Energy, Inc. Annual Report on Form 10-K for the year ended December 31, 1998 relating to the oil and gas reserves and revenues, as of December 31, 1996, 1997 and 1998, of certain properties owned by Patterson Energy, Inc. and the references to me under the headings "Experts" in such Prospectus, and further consent to me being named as an expert therein. M. BRIAN WALLACE, P.E. Dallas, Texas October 28, 1999 -----END PRIVACY-ENHANCED MESSAGE-----