1
Filed Pursuant to Rule 424(b)(5)
Registration No. 333-89885
Prospectus Supplement
(To Prospectus Dated November 12, 1999)
3,000,000 SHARES
[PATTERSON ENERGY LOGO]
PATTERSON ENERGY, INC.
COMMON STOCK
- --------------------------------------------------------------------------------
We are offering and selling 3,000,000 shares of our common stock with this
prospectus supplement.
The common stock is listed on the Nasdaq National Market under the Symbol
"PTEN." On September 11, 2000, the last reported sale price for the common stock
on the Nasdaq National Market was $35.9375 per share.
INVESTING IN THE COMMON STOCK INVOLVES RISK. SEE "RISK FACTORS" ON PAGE S-1 OF
THIS PROSPECTUS SUPPLEMENT AND BEGINNING ON PAGE 5 OF THE ACCOMPANYING
PROSPECTUS.
PER SHARE TOTAL
------------ ------------
Price to the public......................................... $34.50 $103,500,000
Underwriting discount....................................... 1.50 4,500,000
Proceeds to Patterson....................................... 33.00 99,000,000
After the shares are released for sale to the public, the underwriters may
change the offering price and other selling terms at various times.
The underwriters expect to deliver the shares on or about September 14, 2000.
- --------------------------------------------------------------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS IS TRUTHFUL OR COMPLETE.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
CIBC WORLD MARKETS
MORGAN KEEGAN & COMPANY, INC.
RAYMOND JAMES & ASSOCIATES, INC.
THE DATE OF THIS PROSPECTUS SUPPLEMENT IS SEPTEMBER 11, 2000.
LOGO
2
TABLE OF CONTENTS
PAGE
----
PROSPECTUS SUPPLEMENT
About This Prospectus Supplement............................ S-1
Recent Developments......................................... S-1
Risk Factors................................................ S-1
Use of Proceeds............................................. S-2
Underwriting................................................ S-3
Experts..................................................... S-4
Legal Matters............................................... S-5
Where You Can Find More Information......................... S-5
PROSPECTUS
Forward Looking Statements.................................. 2
Incorporation of Certain Documents by Reference............. 3
Patterson................................................... 4
Risk Factors................................................ 5
Use of Proceeds............................................. 9
Ratio of Earnings To Fixed Charges.......................... 9
Selling Stockholders........................................ 10
Description of Debt Securities.............................. 10
Description of Preferred Stock.............................. 20
Description of Depositary Shares............................ 22
Description of Warrants..................................... 25
Description of Capital Stock................................ 27
Plan of Distribution........................................ 29
Legal Matters............................................... 30
Experts..................................................... 31
Where You Can Find More Information......................... 31
------------------------------
Our principal executive offices are located at 4510 Lamesa Highway, Snyder,
Texas 79549. Our telephone number is (915) 573-1104.
As used in this prospectus supplement and the accompanying prospectus, the term
"we," "us," "our," the "Company" or "Patterson" mean Patterson Energy, Inc. and
its subsidiaries (unless the context indicates a different meaning), and the
term "common stock" means our common stock, $.01 par value per share.
The underwriters are offering these shares subject to various conditions and may
reject all or part of any order.
3
ABOUT THIS PROSPECTUS SUPPLEMENT
We provide information to you about this offering of shares of our common stock
in two separate documents: (a) the accompanying prospectus, which provides
general information, some of which may not apply to this offering; and (b) this
prospectus supplement, which describes the specific details regarding this
offering. Generally, when we refer to this "prospectus," we are referring to
both documents combined.
If information in this prospectus supplement is inconsistent with the
accompanying prospectus, you should rely on this prospectus supplement.
You should read this prospectus supplement and the accompanying prospectus
carefully before you invest. Both documents contain information you should
consider when making your investment decision. You should also read and consider
the information in the documents to which we have referred you in "Where You Can
Find More Information" on page S-5 of this prospectus supplement.
RECENT DEVELOPMENTS
We are currently negotiating with a company regarding the acquisition of its
drilling fluids division. Consideration for the acquisition would be the
assumption of certain liabilities associated with the division and payment of
$15 million to $17 million. See "Use of Proceeds." Consummation of the
transaction would be subject to execution of a mutually agreeable definitive
agreement, including agreement as to form and amount of consideration, and
satisfaction of all conditions to closing, including termination of the
applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976 and delivery of clear title to the purchased assets.
On June 2, 2000, we acquired High Valley Drilling, Inc., a privately owned
entity based in Oklahoma City, Oklahoma. The assets of High Valley consisted of
eight drilling rigs and other related drilling equipment. Four of the rigs are
diesel electric and four are mechanical. Consideration for the rigs and
equipment consisted of 1,150,000 shares of our common stock and three-year
warrants to acquire an additional 127,000 shares at an exercise price of $22.00
per share. The eight drilling rigs range from 1,000 to 2,500 horsepower with
drilling depth capacities ranging from 10,000 to 25,000 feet. Two of the eight
rigs are currently operable. We believe that two additional rigs will be
operable by the end of 2000 and the remaining four rigs will be operable by June
2001. The total capital expenditures required to place all of these rigs into
operation are estimated to range from approximately $8 million to $10 million of
which approximately $2.5 million has been expended. Proceeds of this offering
will be used to pay the remaining $5.5 million to $7.5 million of such estimated
expenditures. See "Use of Proceeds."
RISK FACTORS
Before purchasing our common stock, you should carefully consider the risks
described below in this section, risks described under the heading "Risk
Factors" beginning on page 5 of the accompanying prospectus and the risks
described in the documents incorporated by reference into this prospectus
supplement and the accompanying prospectus. Some of the risk factors described
under the heading "Risk Factors" beginning on page 5 of the accompanying
prospectus have been modified by the risks described under the heading
"Cautionary Statement for Purposes of the "Safe Harbor" Provisions of the
Private Securities Litigation Reform Act of 1995" of our Form 10-K/A for the
fiscal year ended December 31, 1999, filed with the Securities and Exchange
Commission on June 12, 2000, and you should carefully consider the risks as
modified by this Form 10-K/A.
S-1
4
THERE IS A LARGE NUMBER OF SHARES THAT MAY BE SOLD IN THE MARKET FOLLOWING THIS
OFFERING, WHICH MAY DEPRESS THE MARKET PRICE OF OUR COMMON STOCK.
Sales of a substantial number of shares of our common stock in the public market
following this offering could cause the market price of our common stock to
decline. Upon completion of this offering, we will have outstanding an aggregate
of 35,912,886 shares of common stock, assuming no exercise of outstanding
options or warrants. Of these shares, all of the shares sold in this offering
will be freely tradable without restriction or further registration under the
Securities Act of 1933 unless these shares are purchased by affiliates. Of the
remaining 32,912,886 shares, 633,212 shares are restricted shares held by
affiliates and are available for sale in the public market subject to certain
volume and other restrictions, and 1,273,122 shares are eligible for sale under
shelf registration statements filed by us pursuant to the terms of registration
rights agreements with the holders of those shares.
We and some of our directors and executive officers who beneficially own an
aggregate of 967,366 shares have agreed that we will not, for a period of 90
days from the date of this prospectus supplement, directly or indirectly, offer,
sell, contract to sell, pledge or otherwise dispose of (or enter into any
transaction which is designed to, or might reasonably be expected to, result in
disposition) any shares of our capital stock or any securities convertible into,
or exercisable or exchangeable for, any shares of our capital stock without the
prior written consent of CIBC. Upon the expiration of these lockup agreements,
613,326 shares held by these executive officers and directors will become
eligible for sale in the public market, subject to the applicable volume and
manner-of-sale limitations of Rule 144. In addition 318,040 shares of common
stock issuable upon exercise of outstanding warrants and options that are vested
will be eligible for sale and 36,000 shares of common stock issuable upon
exercise of options that are not vested will become eligible for sale as such
options become vested.
USE OF PROCEEDS
We estimate that the net proceeds to us from this offering will be approximately
$98.9 million. "Net proceeds" is what we expect to receive after paying expenses
of the offering.
We intend to use approximately $40 million of the net proceeds to reduce our
outstanding indebtedness with Transamerica Equipment Financial Services
Corporation from $64.4 million to $24.4 million. This facility matures on
February 1, 2006. As of September 1, 2000, the interest rate paid by Patterson
on this debt was 10.4% per year. In July 2000, we drew $5 million down for
capital expenditures relating to rig refurbishments and the purchase of related
drilling equipment.
We also expect to use $5.5 million to $7.5 million of net proceeds for capital
expenditures on the remaining inoperable rigs acquired from High Valley
Drilling, Inc. and from $40 million to $45 million of net proceeds for business
and equipment acquisitions. See "Recent Developments." Remaining proceeds will
be used for general corporate purposes.
Until we use the net proceeds of the offering, we may invest the net proceeds in
highly liquid investment grade instruments, including interest-bearing bank
accounts, certificates of deposit, money market securities, or U.S. government
or U.S. government agency securities.
S-2
5
UNDERWRITING
We have entered into an underwriting agreement with the underwriters named
below.
The underwriting agreement provides for the purchase of a specific number of the
shares of common stock by each of the underwriters. The underwriters'
obligations are several, which means that each underwriter is required to
purchase a specified number of shares, but is not responsible for the commitment
of any other underwriter to purchase shares, except as described below. Subject
to the terms and conditions of the underwriting agreement, each underwriter has
severally agreed to purchase the number of common shares set forth opposite its
name below:
UNDERWRITERS NUMBER OF SHARES
- ------------------------------------------------------------ ----------------
CIBC World Markets Corp. ................................... 2,000,000
Morgan Keegan & Company, Inc. .............................. 500,000
Raymond James & Associates, Inc. ........................... 500,000
---------
Total............................................. 3,000,000
This is a firm commitment underwriting. This means that the underwriters have
agreed to purchase all of the shares offered by this prospectus supplement if
any are purchased. Under the underwriting agreement, if an underwriter other
than CIBC World Markets Corp. defaults in its commitment to purchase shares,
CIBC World Markets Corp. is obligated to purchase those shares upon the terms
set forth in the underwriting agreement or to make other arrangements as CIBC
World Markets Corp. may deem advisable.
The underwriters do not intend to use any means of distributing or delivering
the prospectus supplements, including the accompanying prospectus, other than by
hand or the mails and do not intend to use any forms of prospectuses other than
printed prospectus supplements and prospectuses.
The shares should be ready for delivery on or about September 14, 2000 against
payment in immediately available funds. The underwriters have advised us that
they propose to offer the shares directly to the public at the public offering
price that appears on the cover page of this prospectus supplement. After the
shares are released for sale to the public, the underwriters may change the
offering price and other selling terms at various times. The underwriters may
sell shares of common stock to or through dealers, and those dealers may receive
compensation in the form of discounts, concessions or commissions from the
underwriters and/or the purchasers of the shares of common stock for whom they
may act as agents or to whom they may sell as principal. Any compensation
received by the underwriters or those dealers and any profits on resale as
principal may be deemed to be underwriting discounts and commissions under the
Securities Act of 1933.
In connection with the offering, the underwriters may make short sales of our
common stock and may purchase our stock on the open market to cover positions
created by short sales. Short sales involve the sale by the underwriters of a
greater number of shares than they are required to purchase in the offering.
Because we have not granted the underwriters an over-allotment option in
connection with the offering, short sales of our common stock, if any, by the
underwriters would be "naked" short sales. The underwriters must close out any
naked short position by purchasing shares in the open market. A naked short
position is more likely to be created if the underwriters are concerned that
there may be downward pressure on the price of the shares in the open market
after pricing that could adversely affect investors who purchase in the
offering. Similar to other purchase transactions, the underwriters' purchases to
cover the syndicate short sales may have the effect of raising or maintaining
the market price of our common stock or preventing or retarding a decline in the
market price of our common stock. As a result, the price of our common stock may
be higher than the price that might otherwise exist in the open market.
The following table provides information regarding the amount of the discount to
be paid to the underwriters by us.
PER SHARE TOTAL
--------- ----------
Patterson................................................... $1.50 $4,500,000
S-3
6
We estimate the offering expenses payable by us to be approximately $150,000.
We have agreed to indemnify the underwriters against certain liabilities,
including liabilities under the Securities Act of 1933.
We and some of our officers and directors have agreed with the underwriters,
subject to certain exceptions, not to issue, sell or register with the
Securities and Exchange Commission or otherwise dispose of any of our equity
securities for a period of 90 days after the date of this prospectus supplement,
without the prior written consent of CIBC World Markets Corp.
From time to time, the underwriters have provided, and may continue to provide,
investment banking and other financial advisory services to us. In the ordinary
course of business, the underwriters may actively trade our securities for their
own accounts or for accounts of customers and, accordingly, they may at any time
hold long or short positions in those securities.
Rules of the SEC may limit the ability of the underwriters to bid for or
purchase common shares before the distribution of the shares is completed.
However, the underwriters may engage in the following activities in accordance
with the rules:
- - Stabilizing transactions -- The underwriters may make bids or purchases for
the purpose of pegging, fixing or maintaining the price of the common shares,
so long as stabilizing bids do not exceed a specified maximum.
- - Over-allotments and syndicate covering transactions -- As described above, the
underwriters may create a short position in the common shares by selling more
common shares than are set forth on the cover page of this prospectus
supplement. If a short position is created in connection with the offering,
the underwriters may engage in syndicate covering transactions by purchasing
common shares in the open market.
- - Penalty bids -- If the underwriters purchase common shares in the open market
in a stabilizing transaction or syndicate covering transaction, they may
reclaim a selling concession from the underwriters and selling group members
who sold those common shares as part of this offering.
- - Passive market making -- Market makers in the common shares who are
underwriters or prospective underwriters may make bids for or purchases of
common shares, subject to limitations, until the time, if ever, at which a
stabilizing bid is made.
Stabilization and syndicate covering transactions may cause the price of the
common shares to be higher than it would be in the absence of such transactions.
The imposition of a penalty bid might also have an effect on the price of the
common shares if it discourages resales of the shares.
Neither Patterson nor the underwriters make any representation or prediction as
to the effect that the transactions described above may have on the price of the
shares. These transactions may occur on the Nasdaq National Market or otherwise.
If such transactions are commenced, they may be discontinued without notice at
any time.
EXPERTS
The audited financial statements and schedules incorporated by reference in
accompanying prospectus and elsewhere in the registration statement have been
audited by PricewaterhouseCoopers LLP, independent public accountants, as
indicated in their reports with respect thereto, and are included herein in
reliance upon the authority of that firm as experts in giving those reports.
S-4
7
LEGAL MATTERS
The validity of the common stock offered under this prospectus supplement and
the accompanying prospectus will be passed upon for us by Baker & Hostetler LLP,
Denver, Colorado. A member of that firm currently owns 8,200 shares of Patterson
common stock. As of the date of the prospectus accompanying this prospectus
supplement, members of that firm owned 17,800 shares of Patterson's common
stock. Andrews & Kurth L.L.P., Houston, Texas, is acting as counsel for the
underwriter in connection with selected legal matters relating to the shares of
common stock offered by this prospectus supplement and the accompanying
prospectus.
WHERE YOU CAN FIND MORE INFORMATION
The Securities and Exchange Commission allows us to "incorporate by reference"
information into this prospectus supplement and the accompanying prospectus,
which means that we can disclose important information to you by referring you
to another document separately filed with the SEC. The information incorporated
by reference is an important part of this prospectus supplement and the
accompanying prospectus. Information that we have filed, and will file,
subsequent to the date of the accompanying prospectus, with the SEC will
automatically update the accompanying prospectus. The full documents listed
below that we previously filed with the SEC have been automatically incorporated
by reference into the accompanying prospectus. The documents contain important
information about us and our finances.
- - Our Current Report on Form 8-K, dated February 3, 2000, filed with the SEC on
February 9, 2000.
- - Our Current Report on Form 8-K, dated February 7, 2000, filed with the SEC on
February 9, 2000.
- - Our Annual Report on Form 10-K for the fiscal year ended December 31, 1999,
filed with the SEC on March 29, 2000, as amended by our Form 10-K/A for the
fiscal year ended December 31, 1999, filed with the SEC on June 12, 2000.
- - Our Current Report on Form 8-K, dated March 31, 2000, filed with the SEC on
April 4, 2000.
- - Our Proxy Statement with respect to our annual meeting of stockholders held
June 22, 2000, filed with the SEC on May 1, 2000.
- - Our Quarterly Report on Form 10-Q for the quarter ended March 31, 2000, filed
with the SEC on May 15, 2000.
- - Our Quarterly Report on Form 10-Q for the quarter ended June 30, 2000, filed
with the SEC on August 14, 2000.
- - Our Current Report on Form 8-K, dated June 2, 2000, filed with the SEC on
August 22, 2000.
- - Our Current Report on Form 8-K, dated July 27, 2000, filed with the SEC on
August 22, 2000.
All documents and reports that we file pursuant to sections 13(a), 13(c), 14 or
15(d) of the Securities Exchange Act of 1934 after the date of this prospectus
supplement are also incorporated by reference in this prospectus supplement and
the accompanying prospectus and will be deemed a part of this prospectus
supplement and the accompanying prospectus from the date of filing of the
document or report.
Statements contained in this document or incorporated or deemed to be
incorporated by reference after the date of this prospectus supplement will
modify statements in any other subsequently filed documents to the extent the
new information differs from the old information. Any statements modified or
superseded will no longer constitute a part of this prospectus supplement and
the accompanying prospectus in their original form.
We will provide without charge to each person to whom a copy of this prospectus
supplement and the accompanying prospectus are delivered, upon written or oral
request, a copy of the information that has
S-5
8
been or may be incorporated by reference in this prospectus supplement and the
accompanying prospectus, other than exhibits to the relevant documents. Direct
any request for copies to Jonathan D. (Jody) Nelson, Chief Financial Officer, at
our corporate headquarters, located at 4510 Lamesa Highway, P.O. Box 1416,
Snyder, Texas 79550 (telephone number (915) 573-1104).
S-6
9
PROSPECTUS
[PATTERSON ENERGY 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 5 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.
THE DATE OF THIS PROSPECTUS IS NOVEMBER 12, 1999
10
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................................................... 4
Risk Factors................................................ 5
Use of Proceeds............................................. 9
Ratio of Earnings To Fixed Charges.......................... 9
Selling Stockholders........................................ 10
Description of Debt Securities.............................. 10
Description of Preferred Stock.............................. 20
Description of Depositary Shares............................ 22
Description of Warrants..................................... 25
Description of Capital Stock................................ 27
Plan of Distribution........................................ 29
Legal Matters............................................... 30
Experts..................................................... 31
Where You Can Find More Information......................... 31
------------------------------
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;
- 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.
2
11
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
under Section 13(a), 15(c), 14 or 14(d) of the Securities Exchange Act of 1934
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:
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.
3
12
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."
4
13
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
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
5
14
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.
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
6
15
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 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
7
16
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.
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
8
17
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.
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.
9
18
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.
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
10
19
or more than one series) for which each trustee is acting would be treated as if
issued under a separate Indenture.
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;
(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;
11
20
(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,
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,
12
21
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 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;
13
22
(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 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
14
23
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 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
15
24
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
(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
16
25
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 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
(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
17
26
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.)
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.)
18
27
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 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
19
28
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.
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;
20
29
- 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 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.
21
30
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 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
22
31
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 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
23
32
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.
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.
24
33
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;
- 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.
25
34
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 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.
26
35
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 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."
27
36
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 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.
28
37
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.
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.
29
38
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.
LEGAL MATTERS
The validity of the Securities offered will be passed upon for Patterson by
Baker & Hostetler LLP, Denver, Colorado.
30
39
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, Suite 1300
N.W. 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.
31
40
(This page intentionally left blank)
41
(This page intentionally left blank)
42
(This page intentionally left blank)
43
- --------------------------------------------------------------------------------
[PATTERSON ENERGY LOGO]
PATTERSON ENERGY, INC.
3,000,000 SHARES
COMMON STOCK
---------------------------
PROSPECTUS
SUPPLEMENT
---------------------------
September 11, 2000
CIBC WORLD MARKETS
MORGAN KEEGAN & COMPANY, INC.
RAYMOND JAMES & ASSOCIATES, INC.
- --------------------------------------------------------------------------------
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS SUPPLEMENT
AND THE ACCOMPANYING PROSPECTUS. NO DEALER, SALESPERSON OR OTHER PERSON IS
AUTHORIZED TO GIVE INFORMATION THAT IS NOT CONTAINED IN THE PROSPECTUS
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS. THIS PROSPECTUS SUPPLEMENT AND THE
ACCOMPANYING PROSPECTUS ARE NOT AN OFFER TO SELL NOR ARE THEY SEEKING AN OFFER
TO BUY THESE SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT
PERMITTED. THE INFORMATION CONTAINED IN THIS PROSPECTUS SUPPLEMENT AND THE
ACCOMPANYING PROSPECTUS IS CORRECT ONLY AS OF THE DATE OF THIS PROSPECTUS
SUPPLEMENT, REGARDLESS OF THE TIME OF DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR
ANY SALE OF THESE SECURITIES.
LOGO