<PAGE> 1
SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. 1)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec. 240.14(a)-11(c) or sec. 240.14a-12
PATTERSON ENERGY, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
Not Applicable
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
PATTERSON ENERGY, INC.
P. O. DRAWER 1416
SNYDER, TEXAS 79550
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD DECEMBER 30, 1997
To the Stockholders of
PATTERSON ENERGY, INC.:
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders (the
"Meeting") of Patterson Energy, Inc., a Delaware corporation (the "Company"),
will be held at the executive offices of the Company, 4510 Lamesa Highway,
Snyder, Texas 79549, on Tuesday, December 30, 1997, at 10:00 A.M., local time,
for the following purposes:
1. To consider and vote upon a proposal to amend Patterson's Restated
Certificate of Incorporation to increase its authorized Common Stock from
18,000,000 shares to 50,000,000 shares, with a significant number of the
increased shares being used to effect a two-for-one stock split of the
Company's Common Stock payable through a stock dividend;
2. To consider and vote upon a proposal to amend the Patterson Energy,
Inc. 1993 Stock Incentive Plan to increase the number of shares of Common
Stock reserved for issuance thereunder from 700,000 shares to 1,400,000
shares; and
3. To transact such other business as may properly come before the
Meeting or any adjournment thereof.
Only stockholders of record at the close of business on November 26, 1997,
are entitled to notice of, and to vote at, the Meeting or any adjournment
thereof.
STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON. WHETHER
OR NOT YOU PLAN TO BE PRESENT AT THE MEETING, YOU ARE REQUESTED TO SIGN AND
RETURN THE ENCLOSED PROXY IN THE ENCLOSED ENVELOPE SO THAT YOUR SHARES MAY BE
VOTED IN ACCORDANCE WITH YOUR WISHES AND IN ORDER THAT THE PRESENCE OF A QUORUM
MAY BE ASSURED. THE GIVING OF SUCH PROXY WILL NOT AFFECT YOUR RIGHT TO VOTE IN
PERSON, SHOULD YOU LATER DECIDE TO ATTEND THE MEETING. PLEASE DATE AND SIGN THE
ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE. YOUR VOTE IS
IMPORTANT.
By Order of the Board of Directors
/s/ JAMES C. BROWN
James C. Brown
Secretary
Snyder, Texas
December 2, 1997
<PAGE> 3
PATTERSON ENERGY, INC.
P.O. DRAWER 1416
SNYDER, TEXAS 79550
PROXY STATEMENT
FOR
SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD DECEMBER 30, 1997
This Proxy Statement is furnished to stockholders of Patterson Energy,
Inc., a Delaware corporation (the "Company"), in connection with the
solicitation of proxies by the Board of Directors of the Company for use at a
Special Meeting of Stockholders (the "Meeting") to be held at the Company's
executive offices, 4510 Lamesa Highway, Snyder, Texas 79549, on December 30,
1997, at 10:00 A.M., local time, for the purposes set forth in the accompanying
Notice of Special Meeting of Stockholders. The approximate date on which this
Proxy Statement and the enclosed Proxy will first be sent to stockholders is
December 3, 1997.
ACTIONS TO BE TAKEN AT THE MEETING
Shares represented by a properly executed Proxy, unless the stockholder
otherwise instructs in the Proxy, will be voted (i) for the proposal to amend
the Company's Restated Certificate of Incorporation to increase its authorized
Common Stock from 18,000,000 shares to 50,000,000 shares (the "Capital Stock
Charter Amendment"), with a significant number of the increased shares being
used to effect a two-for-one stock split of the Company's Common Stock through a
stock dividend; (ii) for the proposal to amend the Patterson Energy, Inc. 1993
Stock Incentive Plan ("Stock Incentive Plan") to increase the number of shares
of Common Stock reserved for issuance thereunder from 700,000 shares to
1,400,000 shares ("Stock Incentive Plan Amendment"); and (iii) at the discretion
of the proxy holders, on any other matter or business that may be properly
presented at the Meeting or any adjournment thereof. Where a stockholder
properly executes a Proxy and gives instructions on how his shares are to be
voted, the shares will be voted in accordance with those instructions.
A Proxy may be revoked at any time by a stockholder before it is exercised
by giving written notice to the Secretary of the Company or by signing and
delivering a Proxy which is dated later, or if the stockholder attends the
Meeting in person, by either notice of revocation to the inspectors of election
at the Meeting or by voting at the Meeting.
The only matters that management intends to present at the Meeting are the
two matters referenced in subparagraphs (i) and (ii) above. If any other matter
or business is properly presented at the Meeting, the proxy holders will vote
upon it in accordance with their best judgment.
VOTING SECURITIES
The record date for the Meeting is November 26, 1997. Only stockholders of
record at the close of business on November 26, 1997, will be entitled to vote
at the Meeting. At the close of business on that date, there were issued and
outstanding 15,411,337 shares of the Company's common stock, par value $0.01 per
share, (the "Common Stock"), entitled to one vote per share. There are no
outstanding shares of preferred stock. A majority of the outstanding Common
Stock, present in person or by Proxy and entitled to vote, will constitute a
quorum for the transaction of business at the Meeting. Shares of Common Stock
represented by proxies which are marked "abstain" or which are not marked as to
any particular matter or matters will be counted as shares present for purposes
of determining the presence of a quorum on all matters. Proxies relating to
"street name" shares that are voted by brokers will be counted as shares present
for purposes of determining the presence of a quorum on all matters, but will
not be treated as shares having voted at the Meeting as to any proposal as to
which authority to vote is withheld by the brokers.
<PAGE> 4
Under Delaware law and the Company's Restated Certificate of Incorporation,
as amended, if a quorum is present at the Meeting, (a) the affirmative vote of
the holders of a majority of the outstanding shares of Common Stock is required
to approve the proposed Capital Stock Charter Amendment, and (b) the affirmative
vote of the majority of shares present in person or by Proxy at the Meeting and
entitled to vote on the matter is required to approve (i) the proposed Stock
Incentive Plan Amendment, and (ii) any other matter submitted to a vote of
stockholders at the Meeting. Abstention from voting on the proposed Capital
Stock Charter Amendment or the proposed Stock Incentive Plan Amendment will have
the effect of voting against any such matter. Broker non-votes will have the
effect of a vote against the Capital Stock Charter Amendment, but will not have
the effect of a vote for or against the Stock Incentive Plan Amendment.
BENEFICIAL OWNERSHIP OF THE COMPANY'S COMMON STOCK
The following table sets forth, as of the Record Date, November 26, 1997,
information concerning the beneficial ownership of the Common Stock by (i) each
person known to the Company to be the beneficial owner of more than 5% of the
outstanding shares of the Common Stock, (ii) each director and nominee as
director of the Company, (iii) each of the executive officers named in the
Summary Compensation Table set forth below under the caption "Executive
Compensation," and (iv) all directors and executive officers as a group.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL
OWNERSHIP OF PERCENT
NAME(1) COMMON STOCK(2) OF CLASS
------- --------------- --------
<S> <C> <C>
Cloyce A. Talbott
2500 Towle Park Road
Snyder, Texas 79549...................................... 535,948 3.5%
A. Glenn Patterson......................................... 83,160(3) *
Kenneth E. Davis........................................... 77,625(4) *
Robert C. Gist............................................. 37,886(5) *
Vincent A. Rossi, Jr....................................... 10,000(6) *
James C. Brown............................................. 35,000(7) *
All executive officers and directors as a group (6
persons)................................................. 779,619(8) 5.0%
</TABLE>
- ---------------
* Less than 1%
(1) Each person named is an executive officer and/or director of the Company.
(2) Beneficial ownership includes shares over which the indicated beneficial
owner exercises voting and/or investment power. Shares of Common Stock
subject to options currently exercisable or exercisable within 60 days are
deemed outstanding for computing the percentage ownership of the person
holding the options, but not deemed outstanding for computing the percentage
ownership of any other person.
(3) Consists of shares purchasable under exercisable employee stock options. The
number of shares stated in the table includes 30,000 shares underlying
options exercised by Mr. Patterson after November 26, 1997, but before the
date of this Proxy Statement. See "Executive Compensation -- Aggregate
Option Exercises and Option Values at December 31, 1996," below.
(4) Includes 10,948 shares owned by the wife of Mr. Davis.
(5) Includes 12,000 shares purchasable under exercisable non-employee director
stock options.
(6) Includes 10,000 shares purchasable under exercisable non-employee director
stock options.
(7) Consists of shares purchasable under exercisable employee stock options. The
number of shares stated in the table includes 30,000 shares underlying
options exercised by Mr. Brown after November 26, 1997, but before the date
of this Proxy Statement. See "Executive Compensation -- Aggregate Option
Exercises and Option Values at December 31, 1996," below.
(8) Includes the 140,160 shares purchasable under exercisable employee and
non-employee directors' stock options (see Notes 3, 5, 6 and 7 above).
2
<PAGE> 5
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid or accrued during each
of the years in the three-year period ended December 31, 1996, to the Company's
Chief Executive Officer and to each of the other executive officers, each of
whose total compensation exceeded $100,000 for the last fiscal year for services
in his capacity as such.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
----------------------------------------- AWARDS
OTHER ANNUAL ------------- ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION STOCK OPTIONS COMPENSATION(2)
--------------------------- ---- -------- -------- ------------ ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Cloyce A. Talbott............ 1996 $150,900 $ 507 $ -0- -0- $4,605
Chairman of the Board/Chief 1995 125,000 507 15,000 -0- 3,053
Executive Officer 1994 125,000 -0- 15,000 -0- 4,620
A. Glenn Patterson........... 1996 $150,900 $ 507 $ -0- -0- $4,693
President/Chief Operating 1995 125,000 115,507 -0- 70,000 3,623
Officer 1994 125,000 60,507 -0- -0- 4,620
James C. Brown............... 1996 $110,834 $ 507 $ -0- -0- $2,780
Vice
President -- Finance/Chief 1995 95,900 507 -0- 25,000 2,308
Financial Officer, Secretary 1994 92,917 -0- -0- -0- 2,323
and Treasurer
</TABLE>
- ---------------
(1) The Company furnishes certain prerequisites and other personal benefits to
its executive officers and certain of its other employees. These benefits
include one or more of the following: The use of an automobile owned or
leased by the Company; payment of annual country club dues and monthly
charges, including personal meals; personal landscape and secretarial
services through Company employees at the Company's expense. The value of
these prerequisites and other personal benefits provided to an executive
officer named in the table are reported for a year only if the aggregate
value of such benefits exceeds the lesser of $50,000 or 10% of such
executive officer's total salary and bonus disclosed in the table for the
year reported.
(2) Represents Company contributions to the Patterson Energy, Inc. 401(k) Plan
(the "Plan") for the account of the executive officers named in the table.
The Plan became effective January 1, 1992. All employees of the Company who
work 1,000 hours or more during the year, are at least 21 years of age, were
employed on the last day of the year and have at least one year of service
with the Company or its subsidiaries are eligible to participate in the
Plan. The Company has no obligation to make contributions under the Plan;
Company contributions are discretionary. Company contributions vest over a
five-year period, based on credited years of service with the Company, and
may be made either by (i) matching all or a portion of the respective
participants' contributions to the Plan, or (ii) a profit sharing
contribution to the accounts of participants which, are in turn allocated to
the accounts of active participants in the same proportion that each active
participant's compensation bears to the total compensation of all active
participants for the plan year. Each of the executive officers named in the
table are fully vested in the Plan.
Pursuant to action taken by the Compensation Committee of the Board of
Directors in October 1997, the base annual salary for each of Mr. Talbott and
Mr. Patterson was increased from $150,000 to $290,000, and the base annual
salary for Mr. Brown was increased from $133,000 to $175,000. The increases were
effective October 16, 1997. The Compensation Committee of the Board believes,
based in part on a study conducted for the Company by an outside consulting
firm, that the increased salaries are more in line with base salaries being paid
to executive officers of the Company's industry peer group.
3
<PAGE> 6
OPTION GRANTS
No options were granted during 1996 to any of the executive officers named
in the Summary Compensation Table above. Options covering a total of 75,000
shares and 25,000 shares with a per share exercise price of $29.625 (fair market
value on grant date) have been granted in 1997 to Mr. Patterson and to Mr.
Brown, respectively, under the Company's 1993 Stock Incentive Plan. No
additional options will be granted under this Plan to executive officers of the
Company during 1997. See "Proposed Stock Incentive Plan Amendment."
AGGREGATED OPTION EXERCISES AND OPTION VALUES AT DECEMBER 31, 1996
The following table sets forth information concerning the fiscal year-end
value of unexercised options held by each of the executive officers named in the
Summary Compensation Table above, other than Cloyce A. Talbott. No options have
been granted to Mr. Talbott. No options were exercised by either of the named
persons during 1996.
AGGREGATED OPTION EXERCISES
FOR YEAR ENDED DECEMBER 31, 1996
AND YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SHARES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT YEAR END(#)(1) AT YEAR-END($)(2)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE (#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
A. Glenn Patterson.... -0- -0- 45,440 94,560 $335,040 $752,460
James C. Brown........ -0- -0- 20,000 30,000 $164,000 $246,000
</TABLE>
- ---------------
(1) The total number of unexercised options held as of December 31, 1996,
separated between those options that were exercisable and those options that
were not exercisable.
(2) Calculated by subtracting actual option exercise price from market price at
year end ($25.75 per share) and multiplying the difference by the number of
shares in each category.
During 1997: (i) Mr. Patterson exercised options covering a total of 30,000
shares with a total value realized of approximately $1,601,250 (last reported
sales price of the Company's Common Stock on the Nasdaq National Market on the
day immediately preceding the date of exercise ($57.00 per share), less option
exercise price), and (ii) Mr. Brown exercised options covering a total of 30,000
shares with a total value realized of approximately $1,011,000 (last reported
sales price of the Company's Common Stock on the Nasdaq National Market on the
day immediately preceding the date of exercise ($38.375 per share), less option
exercise price). Both of the option exercises occurred after November 26, 1997,
the Record Date for the Meeting. No other options granted to date under the
Company's employee stock option plan have been exercised by executive officers
of the Company.
DIRECTOR COMPENSATION
Each non-employee director of the Company receives a $1,000 per month fee
as partial compensation for services as board members. In addition, pursuant to
the Company's Non-Employee Directors' Stock Option Plan, each non-employee
director is automatically granted options to purchase 10,000 shares at the time
he becomes a director and, thereafter, options to purchase an additional 2,000
shares for each subsequent year that he serves up to a maximum of 20,000 shares
per director. The exercise price for each such option is the fair market value
of the Common Stock on the date of grant.
EMPLOYMENT CONTRACTS AND CHANGE-IN-CONTROL ARRANGEMENTS
None of the executive officers named in the Summary Compensation Table
above has an employment or severance agreement or any plan or arrangement
providing compensation in the event of a change in control of the Company.
4
<PAGE> 7
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Kenneth E. Davis and Robert C. Gist served as members of the Compensation
Committee during calendar 1996, and continue as members in 1997. Vincent A.
Rossi, Jr. was appointed to the Compensation Committee by the Board of Directors
in July 1997. Mr. Davis has not served as officer of the Company since June
1993, when he resigned as Treasurer. Mr. Gist has never served as an officer,
but has been paid a monthly retainer of $1,000 since 1993 for legal and
consulting services. The Company also pays premiums for Mr. Gist's family health
insurance coverage, $4,595 during 1996. Mr. Rossi has never served as an officer
of the Company.
PROPOSED CAPITAL STOCK CHARTER AMENDMENT
(PROPOSAL 1 ON PROXY CARD)
The Capital Stock Charter Amendment, if adopted by the stockholders of the
Company at the Meeting, would increase the number of authorized shares of
Patterson Common Stock from 18,000,000 shares to 50,000,000 shares. The
Company's Board of Directors has unanimously approved a two-for-one stock split
("Stock Split") of the Common Stock, subject to the approval of the Capital
Stock Charter Amendment at the Meeting. Subject to this approval, the Board has
authorized the issuance to stockholders of record on January 9, 1998, of one
additional share of Common Stock for each outstanding share of Common Stock. The
following table sets forth the respective number of authorized, issued and
outstanding, and reserved shares of Common Stock on November 26, 1997, the
Record Date for the Meeting, and as adjusted to give effect to the respective
number of shares of Common Stock that would be authorized, issued and
outstanding, and reserved, if the Capital Stock Charter Amendment and the Stock
Incentive Plan Amendment were approved at the Meeting.
<TABLE>
<CAPTION>
NUMBER OF SHARES
-------------------------
ACTUAL AS ADJUSTED
---------- -----------
<S> <C> <C>
Authorized.................................................. 18,000,000 50,000,000
Issued and outstanding...................................... 15,411,337 15,411,337
Reserved:
Patterson stock options and warrants...................... 720,124 1,420,124
Two-for-one stock split................................... -- 16,831,461(1)
Unissued and unreserved..................................... 1,868,539 16,337,078
</TABLE>
- ---------------
(1) Assumes that the number of shares of Common Stock issued and outstanding on
the Record Date for the Meeting (15,411,337 shares) does not change prior to
the date the Stock Split is effected.
If the stockholders of the Company approve the Capital Stock Charter
Amendment and the Stock Incentive Plan Amendment at the Meeting, the Company,
immediately following the Meeting and assuming no other issuances of Common
Stock prior to the Meeting, would have 16,337,078 unissued and unreserved shares
of the then authorized 50,000,000 shares of Common Stock. If the Stock Incentive
Plan Amendment is not approved but the Capital Stock Charter Amendment is
approved, the number of such unissued and unreserved shares of Common Stock
would be 17,737,078 shares. The unissued and unreserved shares would be
available for issuance from time to time as may be necessary in connection with
future financings, acquisitions of other companies, stock dividends, stock
splits, other distributions, stock option plans and other employee benefit plans
or other corporate purposes. The Company currently has no plans to issue any of
these unissued and unreserved shares.
Under Delaware law, the Board of Directors of the Company generally may
issue authorized but unissued shares of Common Stock without stockholder
approval. The Company's Board does not currently intend to seek stockholder
approval prior to any future issuance of the shares, except to the extent
otherwise required by the Company's Restated Certificate of Incorporation, by
law or by the Nasdaq National Market or any securities exchange on which the
Common Stock may be listed at that time. The authorization of additional shares
of Common Stock will enable the Company, as the need may arise, to take timely
advantage of market conditions and the availability of favorable opportunities
without the delay and expense associated with the
5
<PAGE> 8
holding of a special meeting of its stockholders or of waiting for the regularly
scheduled annual meeting of stockholders in order to increase the authorized
capital. The Board of Directors does not intend to issue any shares of Common
Stock except on terms which the Board deems to be in the best interest of the
Company and its stockholders. Existing stockholders of the Company will have no
preemptive rights to purchase any shares of Common Stock issued in the future.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE CAPITAL
STOCK CHARTER AMENDMENT. PROXIES WILL BE SO VOTED UNLESS STOCKHOLDERS SPECIFY
OTHERWISE IN THE PROXY.
PROPOSED STOCK INCENTIVE PLAN AMENDMENT
(PROPOSAL 2 ON PROXY CARD)
The Board of Directors of the Company, subject to approval of stockholders
at the Meeting, has increased the number of shares of the Company's Common Stock
reserved for issuance under the Company's 1993 Stock Incentive Plan (referred to
herein as "Stock Incentive Plan") from 700,000 shares to 1,400,000 shares. The
purpose of the Stock Incentive Plan is to provide continuing incentives to the
key employees of the Company and its subsidiaries, which may include, but shall
not necessarily be limited to, members of the Board of Directors (excluding
members of the Compensation Committee) and officers of the Company. The effect
of the increase in the number of shares reserved for issuance under the Stock
Incentive Plan is to allow the Company to grant additional awards of stock
options and restricted stock from time to time and thereby augment its program
of providing incentives to key employees.
The following is a brief summary of the material provisions of the Stock
Incentive Plan as proposed to be amended. This summary is qualified in its
entirety by reference to the complete text of the Stock Incentive Plan, as
amended, a full copy of which is attached to this Proxy Statement as Appendix A.
Types of Awards. Under the Stock Incentive Plan, the Company may grant
awards of stock options and restricted stock or any combination thereof to its
key employees and to the key employees of its subsidiaries.
Administration. The Stock Incentive Plan is administered by the
Compensation Committee of the Board of Directors composed of no fewer than two
disinterested members. Subject to the terms of the Stock Incentive Plan, the
Compensation Committee determines, among other matters, persons to whom awards
are granted, type of award granted, number of shares granted, vesting schedule,
employment requirements or performance goals relating to restricted stock
awards, type of consideration to be paid to the Company for restricted stock or
upon exercise of options and the terms of any option (which cannot exceed ten
years).
Stock Option Terms. Under the stock option component of the Stock Incentive
Plan, the Company may grant both incentive stock options ("incentive stock
options") intended to qualify under Section 422 of the Internal Revenue Code of
1986, as amended (the "Code"), and options which are not qualified as incentive
stock options ("nonqualified options"). Incentive stock options may not be
granted at an exercise price less than the fair market value of the Common Stock
on the date of grant. The exercise price of incentive stock options granted to
holders of more than 10% of the Common Stock must be at least 110% of the fair
market value of the Common Stock on the date of grant, and the term of these
options cannot exceed five years. The exercise price of non-qualified stock
options will be determined by the Compensation Committee on the date of grant,
but may not be less than 85% of the fair market value of the Common Stock on
that date.
Options granted under the Stock Incentive Plan are not transferable,
otherwise than by will or the laws of descent and distribution, and during the
lifetime of the optionholder, options are exercisable only by such optionholder.
In addition, outstanding options may not be exercised more than three months
(but in no event beyond the expiration date of the option) after the
optionholder ceases to be an employee of the Company, except that in the event
of the death or permanent and total disability of the optionholder, the option
may be exercised by the holder (or his estate, as the case may be), until the
first to occur of the expiration of the option period or the expiration of one
year after the date of death or permanent or total disability. The exercise
price may be paid in cash, in shares of Common Stock (valued at fair market
value at the date of exercise), by
6
<PAGE> 9
delivery of a promissory note or by a combination of such means of payment, as
may be determined by the Compensation Committee.
Restricted Stock Terms. Under the restricted stock component of the Stock
Incentive Plan, the Company may, in selected cases, issue to a plan participant
a given number of shares of restricted stock. Restricted stock under the Stock
Incentive Plan is Common Stock restricted as to sale pending fulfillment of such
vesting schedule, employment requirements or performance goals as the
Compensation Committee shall determine. The purchase price, if any, for
restricted stock will be specified by the Compensation Committee. Prior to
lifting of the restrictions, the participant will nevertheless be entitled to
receive distributions in liquidation and dividends on, and to vote the shares
of, the restricted stock. The Stock Incentive Plan provides for forfeiture of
restricted stock for breach of conditions of grant.
Change in Control; Adjustment in Number of Option Shares. Upon a change in
control (as defined in the Stock Incentive Plan) of the Company, all stock
options granted under the Stock Incentive Plan will become exercisable in full,
and all restricted stock grants will become immediately vested and any
applicable restrictions will lapse. Also, in the event the number of outstanding
shares of Common Stock is increased or decreased or changed into or exchanged
for a different number or kind of shares of stock or other securities of the
Company or of another company, whether as a result of a stock split, stock
dividend, combination or exchange of shares, merger or otherwise, each share
subject to an unexercised option will be substituted for the number and kind of
shares of stock into which each share of outstanding Common Stock is to be
changed or for which each such share is to be exchanged and the option price
will be increased or decreased proportionately.
Amendments. The Board of Directors may at any time and from time to time
alter, amendment, suspend or discontinue the Stock Incentive Plan, except no
such action may be taken without stockholder approval which materially increases
the benefits to participants, materially increases the number of shares to be
issued, materially extends the period for granting awards, or materially
modifies the requirements as to eligibility. In addition, no such action may be
taken which adversely affects the rights of a participant without his consent.
Federal Income Tax Consequences -- Stock Options. Neither the Company nor
the optionee will recognize taxable income or deduction for federal income tax
purposes from the grant or exercise of an incentive stock option. When an
optionee sells stock acquired upon exercise of an incentive stock option, the
tax consequences to the optionee will depend upon the length of time that the
optionee has owned the stock and the length of time that has elapsed since the
option was granted. If at least two years have elapsed since the date the option
was granted (the "Grant Date") and the optionee has held the stock for at least
one year from the date the option was exercised (the "Exercise Date"), then the
optionee will recognize capital gain in an amount equal to the excess of the
sale price of the stock over the exercise price. The capital gain recognized
will be long-term capital gain if the optionee has held the stock for more than
18 months and will be mid-term gain if the optionee has held the stock for more
than one year but not more than 18 months. If the optionee sells the stock
before the later of the expiration of two years after the Grant Date or one year
after the Exercise Date, then the excess of the fair market value of the stock
at the time of exercise over the exercise price will be taxable to the optionee
as ordinary income and the Company will generally be entitled to a deduction
equal to the amount of ordinary income recognized by the optionee if the Company
timely satisfies the applicable tax reporting requirements and if the amount
qualifies as an ordinary and necessary business expense of the Company. Even
though the optionee may not recognize taxable income for federal income tax
purposes upon the exercise of an incentive stock option, the difference between
the exercise price and fair market value of the shares at the time of exercise
gives rise to an adjustment in calculating alternative minimum taxable income.
Neither the Company nor the optionee will recognize taxable income or
deduction from the grant of a non-qualified stock option. At the time of
exercise of a non-qualified stock option, the optionee will recognize ordinary
income in an amount equal to the difference between the exercise price and the
fair market value of the Common Stock. The Company will be entitled to a
deduction for tax purposes in an amount equal to the ordinary income recognized
by the optionee, if the Company complies with applicable tax reporting
requirements and if the amount qualifies as an ordinary and necessary business
expense of the Company.
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Federal Income Tax Consequences -- Restricted Stock. If a participant in
the Stock Incentive Plan receives a grant of restricted stock, the federal
income tax consequences will depend on the nature of the restrictions. In
general, the fair market value of the restricted stock will not be taxable to
the recipient until the year in which the restricted stock is freely
transferable or is no longer subject to a substantial risk of forfeiture. At
that time, the current fair market value of the restricted stock will be treated
as ordinary income to the recipient. The recipient may elect, however, to
recognize income when the restricted stock is received, rather than when the
restricted stock is freely transferable or is no longer subject to a substantial
risk of forfeiture. If the recipient makes this election, the amount taxed to
the recipient as ordinary income will be determined as of the date of receipt of
the restricted stock. After the recipient recognizes ordinary income on the
restricted stock, the tax basis of the restricted stock will be the fair market
value thereof on the date the ordinary income was recognized. If an individual
disposes of restricted stock, the individual will recognize gain (or, under
certain conditions, loss) in the year of such disposition equal to the
difference between (a) any amount realized on the disposition and (b) the
adjusted tax basis in the restricted stock disposed of. If the restricted stock
was a capital asset in the hands of the individual, the gain (or loss) will be:
(a) long-term capital gain (or loss) if more than 18 months have elapsed between
the date income was recognized and the date of disposition; (b) mid-term gain
(or loss) if more than one year, but not more than 18 months, have elapsed
between the date income was recognized and the date of disposition; and (c)
short-term capital gain (or loss) if 12 months or less have elapsed between the
date income was recognized and the date of disposition.
In general, when an individual recognizes ordinary income with respect to
shares acquired as a result of a grant of restricted stock, the Company will be
entitled to an income tax deduction in an amount equal to the ordinary income
recognized by the individual, provided that all applicable tax reporting
requirements are satisfied and that the amount qualifies as an ordinary and
necessary business expense of the Company.
Option Grants. As of November 18, 1997, options to purchase a total of
648,000 shares had been granted under the Stock Incentive Plan. Of those
options: (i) options covering 215,000 shares and 75,000 shares were granted to
A. Glenn Patterson, President and Chief Operating Officer, and to James C.
Brown, Vice President and Chief Financial Officer, respectively, at exercise
prices ranging from $3.625 to $29.625; (ii) options covering 290,000 shares were
granted to all executive officers as a group at exercise prices ranging from
$3.625 to $29.625; and (iii) options to purchase 358,000 shares were granted to
all employees, including all current officers who were not executive officers at
exercise prices ranging from $3.625 to $29.625. Each of the options has or had a
ten-year term and vests or vested in equal annual increments of 20% beginning on
the date of grant and continuing on each succeeding anniversary date. Of the
total options granted, options to purchase 79,700 shares had been exercised as
of November 18, 1997.
On November 18, 1997, the last reported sale price of the Company's Common
Stock on the Nasdaq National Market was $42.78 per share.
Vote Required for Approval. Approval of the Stock Incentive Plan Amendment
requires the affirmative vote of the holders of a majority of the Common Stock
present, or represented, and entitled to vote at the Meeting, assuming the
presence of a quorum. Each share of Common Stock is entitled to one vote.
Stockholders should note that because employee directors (subject to
re-election and stockholder approval) have received and may in the future
receive stock options under the Stock Incentive Plan, the current employee
directors of the Company have a personal interest in the proposal and its
approval by stockholders. However, the members of the Board of Directors believe
that the amendment is in the best interests of the Company and its stockholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE STOCK
INCENTIVE PLAN AMENDMENT. PROXIES WILL BE SO VOTED UNLESS STOCKHOLDERS SPECIFY
OTHERWISE IN THE PROXY.
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COST AND METHOD OF PROXY SOLICITATION
The accompanying Proxy is being solicited on behalf of the Board of
Directors of the Company. All expenses for soliciting Proxies, including the
expense of preparing, printing and mailing the form of Proxy and the material
used in the solicitation thereof, will be borne by the Company. In addition to
the use of the mail, Proxies may be solicited by personal interview, telephone
and telegram by directors and regular officers and employees of the Company.
Such persons will receive no additional compensation for such services.
Arrangements may also be made with brokerage houses and other custodians,
nominees and fiduciaries for the forwarding of solicitation material to the
beneficial owners of stock held of record by such persons, and the Company may
reimburse them for reasonable out-of-pocket expenses incurred by them in
connection therewith. In addition, Georgeson & Company, Inc., New York, New
York, will assist in the solicitation of proxies by the Company for fees of
$8,500, plus reimbursement of out-of-pocket expense.
DEADLINE FOR RECEIPT OF STOCKHOLDER
PROPOSALS FOR 1998 ANNUAL MEETING
Any proposals that stockholders of the Company desire to have presented at
the 1998 Annual Meeting of Stockholders must be received by the Company at its
principal executive offices no later than December 31, 1997.
SNYDER, TEXAS
DECEMBER 2, 1997
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APPENDIX A
PATTERSON ENERGY, INC.,
1993 STOCK INCENTIVE PLAN, AS AMENDED
1. General. This Stock Incentive Plan (the "Plan") provides eligible
employees of Patterson Energy, Inc., (the "Company") with the opportunity to
acquire or expand their equity interest in the Company by making available for
award or purchase Common Shares, par value $0.01, of the Company ("Common
Shares"), through the granting of nontransferable options to purchase Common
Shares ("Stock Options") and the granting of Common Shares subject to temporal
restrictions on transfer and substantial risks of forfeiture ("Restricted
Stock"). Stock Options and Restricted Stock shall be collectively referred to
herein as "Grants"; an individual grant of Stock Options or Restricted Stock
shall be individually referred to herein as a "Grant." It is intended that key
employees may be granted, simultaneously or from time to time, Stock Options
that qualify as incentive stock options ("Incentive Stock Options") under
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code") or
Stock Options that do not so qualify ("Non-qualified Stock Options"). No
provision of the Plan is intended or shall be construed to grant employees
alternative rights in any Incentive Stock Option granted under the Plan so as to
prevent such Option from qualifying under Section 422 of the Code.
2. Purpose of the Plan. The purpose of the Plan is to provide continuing
incentives to key employees of the Company and of any subsidiary corporation of
the Company, by encouraging such key employees to acquire new or additional
share ownership in the Company, thereby increasing their proprietary interest in
the Company's business and enhancing their personal interest in the Company's
success.
For purposes of the Plan, a "subsidiary corporation" consists of any
corporation at least fifty percent (50%) of the stock of which is directly or
indirectly owned or controlled by the Company.
3. Effective Date of the Plan. The Plan shall become effective upon its
adoption by the Board of Directors, subject to approval by holders of a majority
of the outstanding shares of voting capital stock of the Company. If the Plan is
not so approved within twelve (12) months after the date the Plan is adopted by
the Board of Directors, the Plan and any Grants made hereunder shall be null and
void. However, if the Plan is so approved, no further shareholder approval shall
be required with respect to the making of Grants pursuant to the Plan, except as
provided in Section 11 hereof.
4. Administration of the Plan. The Plan shall be administered by the
Compensation Committee of the Board of Directors of the Company, or by any other
committee selected by such Board of Directors by majority vote and composed of
no fewer than two (2) members of such Board of Directors (the "Committee"). No
person shall be appointed to the Committee who, during the one-year period
immediately preceding such person's appointment to the Committee, has received
any Grants under the Plan or any similar stock option or stock incentive plan,
other than a formula-based plan, maintained by the Company or any subsidiary
corporation. A member of the Committee shall not be eligible to participate in
this Plan while serving on the Committee.
A majority of the Committee shall constitute a quorum. The acts of a
majority of the members present at any meeting at which a quorum is present (or
acts unanimously approved in writing by the members of the Committee) shall
constitute binding acts of the Committee.
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Subject to the terms and conditions of the Plan, the Committee shall be
authorized and empowered:
(a) To select the key employees to whom Grants may be made;
(b) To determine the number of Common Shares to be covered by any
Grant;
(c) To prescribe the terms and conditions of any Grants made under the
Plan, and the form(s) and agreement(s) used in connection with such Grants,
which shall include agreements governing the granting of Restricted Stock
and/or Stock Options;
(d) To determine the time or times when Stock Options will be granted
and when they will terminate in whole or in part;
(e) To determine the time or times when Stock Options that are granted
may be exercised;
(f) To determine, at the time a Stock Option is granted under the
Plan, whether such Option is an Incentive Stock Option entitled to the
benefits of Section 422 of the Code; and
(g) To establish any other Stock Option agreement provisions not
inconsistent with the terms and conditions of the Plan or, where the Stock
Option is an Incentive Stock Option, with the terms and conditions of
Section 422 of the Code.
5. Employees Eligible for Grants. Grants may be made from time to time to
those key employees of the Company or a subsidiary corporation, who are
designated by the Committee in its sole and exclusive discretion. Key employees
may include, but shall not necessarily be limited to, members of the Board of
Directors (excluding members of the Committee), and officers, of the Company and
any subsidiary corporation; however, Stock Options intended to qualify as
Incentive Stock Options shall only be granted to key employees while actually
employed by the Company or a subsidiary corporation. The Committee may grant
more than one Stock Option to the same key employee. No Stock Option shall be
granted to any key employee during any period of time when such key employee is
on a leave of absence.
6. Shares Subject to the Plan. The shares to be issued pursuant to any
Grant made under the Plan shall be Common Shares. Either Common Shares held as
treasury stock, or authorized and unissued Common Shares, or both, may be so
issued, in such amount or amounts within the maximum limits of the Plan as the
Board of Directors shall from time to time determine.
Subject to the provisions of the next succeeding paragraph of this Section
6, the aggregate number of Common Shares that can be actually issued under the
Plan (exclusive of Restricted Stock forfeited under the Plan before the holder
thereof received any benefits of ownership, such as dividends) shall be one
million four hundred thousand (1,400,000) Common Shares. The number of Common
Shares that are subject to Grants under this Plan that are forfeited,
surrendered or terminated, expire unexercised, are settled in cash in lieu of
Common Shares or in a manner such that all or some of the shares covered by a
Grant are not issued to an optionee or are exchanged for rights that do not
involve the issuance of Common Shares shall again immediately become available
for Grants hereunder.
If, at any time subsequent to the date of adoption of the Plan by the Board
of Directors, the number of Common Shares are increased or decreased, or changed
into or exchanged for a different number or kind of shares of stock or other
securities of the Company or of another corporation (whether as a result of a
stock split, stock dividend, combination, exchange for other securities,
reclassification, reorganization, redesignation, merger, consolidation,
recapitalization or otherwise): (i) there shall automatically be substituted for
each Common Share subject to an unexercised Stock Option (in whole or in part)
granted under the Plan, the number and kind of shares of stock or other
securities into which each outstanding Common Share shall be changed or for
which each such Common Share shall be exchanged; (ii) the option price per
Common Share or unit of securities shall be increased or decreased
proportionately so that the aggregate purchase price for the securities subject
to a Stock Option shall remain the same as immediately prior to such event; and
(iii) any outstanding Restricted Stock that is converted, exchanged or otherwise
changed into a different number or kind of stock or security, shall continue to
be subject to any and all terms, conditions and restrictions originally
applicable to such Restricted Stock. In addition to the foregoing, the Committee
shall be entitled, in the event
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the number of Common Shares are increased or decreased, or changed into or
exchanged for a different number or kind of shares of stock or other securities
of the Company or of another corporation (whether as a result of a stock split,
stock dividend, combination, exchange for other securities, reclassification,
reorganization, redesignation, merger, consolidation, recapitalization or
otherwise), to make other adjustments to the securities subject to a Stock
Option, the provisions of the Plan, and to any related Stock Option agreements
(including adjustments which may provide for the elimination of fractional
shares), where necessary to preserve the terms and conditions of any Grants
hereunder.
7. Stock Option Provisions.
(a) General. The Committee may grant to key employees (also referred to as
"optionees") nontransferable Stock Options that either qualify as Incentive
Stock Options under Section 422 of the Code or do not so qualify. However, any
Stock Option which is an Incentive Stock Option shall only be granted within 10
years from the earlier of (i) the date this Plan is adopted by the Board of
Directors of the Company; or (ii) the date this Plan is approved by the
shareholders of the Company.
(b) Stock Option Price. The option price per Common Share which may be
purchased under an Incentive Stock Option under the Plan shall be determined by
the Committee at the time of Grant, but shall not be less than one hundred
percent (100%) of the fair market value of a Common Share, determined as of the
date such Option is granted; however, if a key employee to whom an Incentive
Stock Option is granted is, at the time of the grant of such Option, an "owner,"
as defined in Section 422(b)(6) of the Code (modified as provided in Section
424(d) of the Code) of more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company or any subsidiary corporation (a
"Substantial Shareholder"), the price per Common Share of such Option, as
determined by the Committee, shall not be less than one hundred ten percent
(110%) of the fair market value of a Common Share on the date such Option is
granted. The option price per Common Share under each Stock Option granted
pursuant to the Plan which is not an Incentive Stock Option shall be determined
by the Committee at the time of Grant, but shall not be less than 85% of the
market value of the Common Stock at the time of Grant. Except as specifically
provided above, the fair market value of a Common Share shall be determined in
accordance with procedures to be established by the Committee. The day on which
the Committee approves the granting of a Stock Option shall be considered the
date on which such Option is granted.
(c) Period of Stock Option. The Committee shall determine when each Stock
Option is to expire. However, no Stock Option shall be exercisable for a period
of more than ten (10) years from the date upon which such Option is granted.
Further, no Incentive Stock Option granted to an employee who is a Substantial
Shareholder at the time of the grant of such Option shall be exercisable after
the expiration of (5) years from the date of grant of such Option.
(d) Limitation on Exercise and Transfer of Stock Options. Only the key
employee to whom a Stock Option is granted may exercise such Option, except
where a guardian or other legal representative has been duly appointed for such
employee, and except as otherwise provided in the case of such employee's death.
No Stock Option granted hereunder shall be transferable by an optionee other
than by will or the laws of descent and distribution. No Stock Option granted
hereunder may be pledged or hypothecated, nor shall any such Option be subject
to execution, attachment or similar process.
(e) Employment, Holding Period Requirements For Certain Options. The
Committee may condition any Stock Option granted hereunder upon the continued
employment of the optionee by the Company or by a subsidiary corporation, and
may make any such Stock Option immediately exercisable. However, the Committee
will require that, from and after the date of grant of any Incentive Stock
Option granted hereunder until the day three (3) months prior to the date such
Option is exercised, such optionee must be an employee of the Company or of a
subsidiary corporation, but always subject to the right of the Company or any
such subsidiary corporation to terminate such optionee's employment during such
period. Each Stock Option shall be subject to such additional restrictions as to
the time and method of exercise as shall be prescribed by the Committee. Upon
completion of such requirements, if any, a Stock Option or the appropriate
portion thereof may be exercised in whole or in part from time to time during
the option period; however, such exercise right(s) shall be limited to whole
shares.
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(f) Payment for Stock Option Price. A Stock Option shall be exercised by an
optionee giving written notice to the Company of his intention to exercise the
same, accompanied by full payment of the purchase price in cash or by check, or,
with the consent of the Committee, in whole or in part with a promissory note or
with a surrender of Common Shares having a fair market value on the date of
exercise equal to that portion of the purchase price for which payment in cash
or check is not made. The Committee may, in its sole discretion, approve other
methods of exercise for a Stock Option or payment of the option price, provided
that no such method shall cause any option granted under the Plan as an
Incentive Stock Option to not qualify under Section 422 of the Code, or cause
any Common Share issued in connection with the exercise of an option not to be a
fully paid and non-assessable Common Share.
(g) Certain Reissuances of Stock Options. To the extent Common Shares are
surrendered by an optionee in connection with the exercise of a Stock Option in
accordance with Section 7(f), the Committee may in its sole discretion grant new
Stock Options to such optionee (to the extent Common Shares remain available for
Grants), subject to the following terms and conditions:
(i) The number of Common Shares shall be equal to the number of Common
Shares being surrendered by the optionee;
(ii) The option price per Common Share shall be equal to the fair
market value of Common Shares, determined on the date of exercise of the
Stock Options whose exercise caused such Grant; and
(iii) The terms and conditions of such Stock Options shall in all
other respects replicate such terms and conditions of the Stock Options
whose exercise caused such Grant, except to the extent such terms and
conditions are determined to not be wholly consistent with the general
provisions of this Section 7, or in conflict with the remaining provisions
of this Plan.
(h) Limitation on Exercisable Incentive Stock Options. The aggregate fair
market value of the Common Shares first becoming subject to exercise as
Incentive Stock Options by a key employee during any given calendar year shall
not exceed the sum of One Hundred Thousand Dollars ($100,000). Such aggregate
fair market value shall be determined as of the date such Option is granted,
taking into account, in the order in which granted, any other incentive stock
options granted by the Company, or by a parent or subsidiary thereof.
8. Restricted Stock.
(a) Grant. The Committee shall determine the key employees to whom, and the
time or times at which, Grants of Restricted Stock will be made, the number of
shares of Restricted Stock to be granted, the price (if any) to be paid by such
key employees (subject to Section 8(b)), the time or times within which such
Restricted Stock grants may be subject to forfeiture, and the other terms and
conditions of the grants in addition to those set forth in Section 8(b). The
Committee may condition the grant of Restricted Stock upon the attainment of
specified vesting schedules, employment requirements or performance goals or
such other factors as the Committee may determine in its sole discretion.
(b) Terms and Conditions. Restricted Stock granted under the Plan shall
contain any terms and conditions, not inconsistent with the provisions of the
Plan, which are deemed desirable by the Committee. A key employee who receives a
grant of Restricted Stock shall not have any rights with respect to such Grant,
unless and until such key employee has executed an agreement evidencing such
Grant in the form approved from time to time by the Committee, has delivered a
fully executed copy thereof to the Company, and has otherwise complied with the
applicable terms and conditions of such Grant. In addition, Restricted Stock
granted under the Plan shall be subject to the following terms and conditions:
(i) The purchase price for Common Shares consisting of Restricted
Stock, if any, will be specified by the Committee.
(ii) Grants of Restricted Stock shall only be accepted by executing a
Restricted Stock agreement and paying, in cash or by check, whatever price
(if any) is required under Section 8(b)(i).
(iii) Each key employee granted Restricted Stock shall be issued a
stock certificate in respect of such shares of Restricted Stock. Such
certificate shall be registered in the name of such key employee,
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and shall bear an appropriate legend referring to the terms, conditions,
and restrictions applicable to such Grant.
(iv) Any stock certificates evidencing Common Shares consisting of
Restricted Stock shall either (A) be held in custody by the Company until
the employment and other restrictions thereon shall all have lapsed; or (B)
be affixed with a legend, identifying such Shares as Restricted Stock and
expressly prohibiting the sale, transfer, tender, pledge, assignment or
encumbrance of such Shares, as the Committee shall determine. With respect
to any Restricted Stock held in custody by the Company, the key employee
granted such Restricted Stock shall deliver to the Company a stock power,
endorsed in blank, relating to the Common Shares represented by such Stock.
With respect to any Restricted Stock held by a key employee under legend,
the key employee granted such Restricted Stock shall deliver to the Company
an acknowledgement that such Stock remains subject to a substantial risk of
forfeiture in the event of termination of employment under certain
circumstances, and that the certificates representing ownership of such
Stock will be surrendered to the Company immediately upon any such
termination of employment.
(v) Subject to the provisions of the Plan and the Restricted Stock
agreement, during a temporal period set by the Committee and commencing
with the date of such Grant (the "Restriction Period"), a key employee
shall not be permitted to sell, transfer, tender, pledge, assign or
otherwise encumber any Restricted Stock granted under the Plan. However,
the Committee, in its sole discretion, may provide for the lapse of such
transfer or other restrictions in installments, or accelerate or waive such
restrictions in whole or in part, based on service, performance or other
factors and criteria selected by the Committee.
(vi) Except as provided in this Section 8(b)(vi) and Section 8(b)(v),
a key employee shall have, with respect to shares of Restricted Stock
granted to him, all of the rights of a shareholder of the Company,
including the right to vote such Stock and the right to receive any
dividends thereon. The Committee, in its sole discretion and as determined
at the time of a Grant of Restricted Stock, may permit or require cash
dividends otherwise due and payable to be deferred and, if the Committee so
determines, reinvested either in additional Restricted Stock (to the extent
Common Shares are available), or otherwise. Stock dividends issued with
respect to Restricted Stock shall be treated as additional shares of
Restricted Stock. As Restricted Stock, such additional Common Shares will
be subject to the same restrictions, terms and conditions applicable to the
Restricted Stock with respect to which such additional Common Shares were
issued.
(vii) No Restricted Stock shall be transferable by a key employee
other than by will or by the laws of descent and distribution.
(viii) In the event Restricted Stock is forfeited by a key employee,
the Company will refund to such key employee any payment(s) made by such
key employee to purchase such Stock, promptly upon such forfeiture (and any
corresponding surrender of stock certificates).
(c) Minimum Value Provisions. To ensure that Grants of Restricted Stock
actually reflect the performance of the Company and service of the key employee,
the Committee may provide, in its sole discretion, for a tandem
performance-based award, or other grant, designed to guarantee a minimum value,
payable in cash or Common Shares, to the recipient of a Restricted Stock Grant,
subject to such performance, future service, deferral and other terms and
conditions as may be specified by the Committee.
9. Termination of Employment. If a key employee ceases to be an employee of
the Company and every subsidiary corporation, for a reason other than death,
retirement, or permanent and total disability, his Grants shall, unless extended
by the Committee on or before his date of termination of employment, terminate
on the effective date of such termination of employment. Neither the key
employee nor any other person shall have any right after such date to exercise
all or any part of his Stock Options, and all Restricted Stock which is not
vested or otherwise subject to restriction shall thereupon be forfeited, and/or
declared void and without value.
If termination of employment is due to death or permanent and total
disability, then outstanding Stock Options may be exercised within the one (1)
year period ending on the anniversary of such death or permanent and total
disability. In the case of death, such outstanding Stock Options shall be
exercised by such
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key employee's estate, or the person designated by such key employee by will, or
as otherwise designated by the laws of descent and distribution. Notwithstanding
the foregoing, in no event shall any Stock Option be exercisable after the
expiration of the option period, and in the case of exercises made after a key
employee's death, not to any greater extent than the key employee would have
been entitled to exercise such Option at the time of his death. Restricted Stock
held by a key employee whose employment by the Company or any subsidiary
corporation terminates by reason of death shall thereupon vest and all
restrictions and risks of forfeiture thereon shall thereupon lapse.
Subject to the discretion of the Committee, in the event a key employee
terminates employment with the Company and all subsidiary corporations because
of normal or early retirement, or, in the case of Restricted Stock, permanent
and total disability, (a) any then-outstanding Stock Options held by such key
employee shall lapse at the earlier of the end of the term of such Stock Option
or three (3) months after such retirement or permanent and total disability; and
(b) any Restricted Stock held by such key employee shall thereafter vest and any
applicable restrictions shall lapse, to the extent such Restricted Stock would
have become vested or no longer subject to restriction within one year from the
time of termination had the key employee continued to fulfill all of the
conditions of the Restricted Stock during such period (or on such accelerated
basis as the Committee may determine at or after date of Grant).
In the event an employee of the Company or one of its subsidiary
corporations is granted a leave of absence by the Company or such subsidiary
corporation to enter military service or because of sickness, his employment
with the Company or such subsidiary corporation shall not be considered
terminated, and he shall be deemed an employee of the Company or such subsidiary
corporation during such leave of absence or any extension thereof granted by the
Company or such subsidiary corporation.
10. Change of Control. Upon the occurrence of a Change of Control (as
defined below), notwithstanding any other provisions hereof or of any agreement
to the contrary, all Stock Options granted under this Plan shall become
immediately exercisable in full and all Restricted Stock grants shall become
immediately vested and any applicable restrictions shall lapse.
For purposes of this Plan, a Change of Control shall be deemed to have
occurred if: (i) a tender offer shall be made and consummated for the ownership
of 25% or more of the outstanding voting securities of the Company; (ii) the
Company shall be merged or consolidated with another corporation and, as a
result of such merger or consolidation, less than 75% of the outstanding voting
securities of the surviving or resulting corporation shall be owned in the
aggregate by the former shareholders of the Company as the same shall have
existed immediately prior to such merger or consolidation; or (iii) the Company
shall sell substantially all of its assets to another corporation which is not a
wholly owned subsidiary; or (iv) a person, within the meaning of Section 3(a)(9)
or of Section 13(d)(3) (as in effect on the date hereof) of the Exchange Act,
shall acquire, other than by reason of inheritance, twenty-five percent (25%) or
more of the outstanding voting securities of the Company (whether directly,
indirectly, beneficially or of record). In making any such determination,
transfers made by a person to an affiliate of such person (as determined by the
Board of Directors of the Company), whether by gift, devise or otherwise, shall
not be taken into account. For purposes of this Plan, ownership of voting
securities shall take into account and shall include ownership as determined by
applying the provisions of Rule 13d-3(d)(1)(i) as in effect on the date hereof
pursuant to the Exchange Act.
Notwithstanding the provisions of subparagraph (iv) of this Section 10,
"person" as used in that subparagraph shall not include any holder who was the
beneficial owner of more than ten percent (10%) of the voting securities of the
company on the date the Plan was adopted by the Board of Directors.
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11. Amendments to Plan. The Committee is authorized to interpret this Plan
and from time to time adopt any rules and regulations for carrying out this Plan
that it may deem advisable. Subject to the approval of the Board of Directors of
the Company, the Committee may at any time amend, modify, suspend or terminate
this Plan. In no event, however, without the approval of shareholders, shall any
action of the Committee or the Board of Directors result in:
(a) Materially amending, modifying or altering the eligibility
requirements provided in Section 5 hereof;
(b) Materially increasing, except as provided in Section 6 hereof, the
maximum number of shares subject to Grants; or
(c) Materially increasing the benefits accruing to participants under
this Plan;
except to conform this Plan and any agreements made hereunder to changes in the
Code or governing law.
12. Investment Representation, Approvals and Listing. The Committee may, if
it deems appropriate, condition its grant of any Stock Option hereunder upon
receipt of the following investment representation from the optionee:
"I agree that any Common Shares of Patterson Energy, Inc., which I may
acquire by virtue of this Stock Option shall be acquired for investment
purposes only and not with a view to distribution or resale, and may not be
transferred, sold, assigned, pledged, hypothecated or otherwise disposed of
by me unless (i) a registration statement or post-effective amendment to a
registration statement under the Securities Act of 1933, as amended, with
respect to said Common Shares has become effective so as to permit the sale
or other disposition of said shares by me; or (ii) there is presented to
Patterson Energy, Inc., an opinion of counsel satisfactory to Patterson
Energy, Inc., to the effect that the sale or other proposed disposition of
said Common Shares by me may lawfully be made otherwise than pursuant to an
effective registration statement or post-effective amendment to a
registration statement relating to the said shares under the Securities Act
of 1933, as amended."
The Company shall not be required to issue any certificate or certificates
for Common Shares upon the exercise of any Stock Option granted under this Plan
prior to (i) the obtaining of any approval from any governmental agency which
the Committee shall, in its sole discretion, determine to be necessary or
advisable; (ii) the admission of such shares to listing on any national
securities exchange on which the Common Shares may be listed; (iii) the
completion of any registration or other qualifications of the Common Shares
under any state or federal law or ruling or regulations of any governmental body
which the Committee shall, in its sole discretion, determine to be necessary or
advisable or the determination by the Committee, in its sole discretion, that
any registration or other qualification of the Common Shares is not necessary or
advisable; and (iv) the obtaining of an investment representation from the
optionee in the form stated above or in such other form as the Committee, in its
sole discretion, shall determine to be adequate.
13. General Provisions. The form and substance of Stock Option agreements
and Restricted Stock agreements made hereunder, whether granted at the same or
different times, need not be identical. Nothing in this Plan or in any agreement
shall confer upon any employee any right to continue in the employ of the
Company or any of its subsidiary corporations, to be entitled to any
remuneration or benefits not set forth in this Plan or such Grant, or to
interfere with or limit the right of the Company or any subsidiary corporation
to terminate his employment at any time, with or without cause. Nothing
contained in this Plan or in any Stock Option agreement shall be construed as
entitling any optionee to any rights of a shareholder as a result of the grant
of a Stock Option, until such time as Common Shares are actually issued to such
optionee pursuant to the exercise of such Option. This Plan may be assumed by
the successors and assigns of the Company. The liability of the Company under
this Plan and any sale made hereunder is limited to the obligations set forth
herein with respect to such sale and no term or provision of this Plan shall be
construed to impose any liability on the Company in favor of any employee with
respect to any loss, cost or expense which the employee may incur in connection
with or arising out of any transaction in connection with this Plan. The cash
proceeds received by the Company from the issuance of Common Shares pursuant to
this Plan will be used for general
A-7
<PAGE> 19
corporate purposes. The expense of administering this Plan shall be borne by the
Company. The captions and section numbers appearing in this Plan are inserted
only as a matter of convenience. They do not define, limit, construe or describe
the scope or intent of the provisions of this Plan.
14. Termination of This Plan. This Plan shall terminate on August 23, 2003,
and thereafter no Stock Options or Restricted Stock shall be granted hereunder.
All Stock Options and Restricted Stock outstanding at the time of termination of
this Plan shall continue in full force and effect according to their terms and
the terms and conditions of this Plan.
A-8
<PAGE> 20
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PATTERSON ENERGY, INC.
PROXY FOR SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER 30, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of Patterson Energy, Inc. (the "Company") hereby
constitutes and appoints Cloyce A. Talbott and A. Glenn Patterson, or either of
them, each with the power of substitution as attorneys and proxies to vote all
of the shares which the undersigned is entitled to vote at the Special Meeting
of Stockholders of the Company to be held at the executive offices of the
Company, 4510 Lamesa Highway, Snyder, Texas, on December 30, 1997, at 10:00
A.M., local time, and at any and all adjournments thereof, with the same force
and effect as if the undersigned were personally present, and the undersigned
hereby instructs the above-named Attorneys and Proxies to vote as follows:
1. Proposal to amend the Company's Restated Certificate of Incorporation to
increase its authorized Common Stock from 18,000,000 shares to 50,000,000
shares, with a significant number of the increased shares being used to
effect a two-for-one stock split of the Company's Common Stock payable
through a stock dividend.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. Proposal to increase the number of shares of the Company's Common Stock
reserved for issuance under the Patterson Energy, Inc. 1993 Stock Incentive
Plan from 700,000 shares to 1,400,000 shares.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the Meeting or any adjournment of
adjournments thereof.
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<PAGE> 21
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(Continued from other side)
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR PROPOSALS 1 AND 2.
Dated: December ____ , 1997
-------------------------------
(Signature)
-------------------------------
(Signature)
NOTE: Please sign exactly as
your name or names appear on
this card. Joint owners should
each sign personally. When
signing as attorney, executor,
administrator, personal
representative, trustee or
guardian, please give your full
title as such. For a
corporation or a partnership,
please sign in the full
corporate name by the President
or other authorized officer or
the full partnership name by an
authorized person, as the case
may be. (Please mark, sign,
date, and return this proxy in
the enclosed envelope.)
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