Document:

exv10w2

 

Exhibit 10.2

Deutsche Bank 

Deutsche Bank AG,

London Branch

Winchester house

1 Great Winchester St,

London EC2N 2DB

Tel. 44 20 7545 8000

c/o Deutsche Bank Securities Inc.

60 Wall Street

New York, NY 10005

Telephone: 212-250-5600

June 28, 2007

	 	 	 
	To:

	 	Parker Drilling Company
	 

	 	1401 Enclave Parkway, Suite 600
	 

	 	Houston, Texas 77077
	 

	 	Attn: General Counsel
	 

	 	Telephone: (281) 406-2000
	 

	 	Facsimile: (281) 406-2001
	 
	 	 
	From:

	 	Deutsche Bank AG London
	 

	 	c/o Deutsche Bank Securities Inc.
	 

	 	60 Wall Street
	 

	 	New York, NY 10005
	 

	 	Telephone: 212-5600
	 

	 	Facsimile: 212-797-9344
	 
	 	 
	Re:

	 	Convertible Bond Hedge Transaction
	 

	 	(Transaction Reference Number: 189652)

Ladies and Gentlemen:

     The purpose of this communication (this “Confirmation”) is to set forth the terms and
conditions of the above-referenced transaction entered into on the Trade Date specified below (the
“Transaction”) between Deutsche Bank AG acting through its London branch (“Deutsche”) and Parker
Drilling Company (“Counterparty”). This communication constitutes a “Confirmation” as referred to
in the ISDA Master Agreement specified below.

DEUTSCHE BANK AG IS NOT REGISTERED AS A BROKER OR DEALER UNDER THE U.S. SECURITIES EXCHANGE
ACT OF 1934, AS AMENDED. DEUTSCHE BANK SECURITIES INC. (“AGENT”) HAS ACTED SOLELY AS AGENT IN

	 	 	 
	Chairman of the Supervisory Board: Clemens Börsig
Board of Managing Directors: Hermann-Josef Lamberti,
Josef Ackermann, Anthony Dilorio, Hugo Banziger

	 	Deutsche Bank
AG is regulated by
the FSA for the
conduct of
designated
investment business
in the UK, is a
member of the
London Stock
Exchange and is a
limited liability
company
incorporated in the
Federal Republic of
Germany HRB No. 30
000 District Court
of Frankfurt am
Main; Branch
Registration No. in
England and Wales
BR000005,
Registered address: Winchester House, 1
Great Winchester
Street, London EC2N
2DB.

 

CONNECTION WITH THE TRANSACTION AND HAS NO OBLIGATION, BY WAY
OF ISSUANCE, ENDORSEMENT, GUARANTEE OR OTHERWISE WITH RESPECT TO THE PERFORMANCE OF EITHER PARTY
UNDER THE TRANSACTION. DEUTSCHE BANK AG LONDON IS NOT A MEMBER OF THE SECURITIES INVESTOR
PROTECTION CORPORATION (SIPC).

     1. This Confirmation is subject to, and incorporates, the definitions and provisions of
the 2000 ISDA Definitions (including the Annex thereto) (the “2000 Definitions”) and the
definitions and provisions of the 2002 ISDA Equity Derivatives Definitions (except to the extent
expressly amended by this Confirmation) (the “Equity Definitions”, and together with the 2000
Definitions, the “Definitions”), in each case as published by the International Swaps and
Derivatives Association, Inc. and as in effect on the date hereof (“ISDA”). In the event of any
inconsistency between the 2000 Definitions and the Equity Definitions, the Equity Definitions will
govern. Certain defined terms used herein have the meanings assigned to them in an Indenture to be
dated as of July 5, 2007 between Counterparty and The Bank of New York Trust Company, N.A. as
trustee (the “Indenture”) relating to the USD 115.0 principal amount of 2.125% Convertible Senior
Notes due July 15, 2012 (the “Convertible Securities”). In the event of any inconsistency between
the terms defined in the Indenture and this Confirmation, this Confirmation shall govern. For the
avoidance of doubt, references herein to sections of the Indenture are based on the draft of the
Indenture most recently reviewed by the parties at the time of execution of this Confirmation. If
any relevant sections of the Indenture are changed, added or renumbered following execution of this
Confirmation but prior to the execution of the Indenture, the parties will amend this Confirmation
in good faith to preserve the economic intent of the parties.

     This Confirmation evidences a complete and binding agreement between Deutsche and Counterparty
as to the terms of the Transaction to which this Confirmation relates. This Confirmation shall be
subject to an agreement (the “Agreement”) in the form of the 2002 ISDA Master Agreement (the “ISDA
Form”) as if Deutsche and Counterparty had executed an agreement in such form (without any Schedule
but with the elections set forth in this Confirmation), except to the extent amended, modified or
supplemented by this Confirmation. For the avoidance of doubt, the Transaction shall be the only
transaction under the Agreement.

     All provisions contained in, or incorporated by reference to, the Agreement will govern this
Confirmation except as expressly modified herein. In the event of any inconsistency between this
Confirmation and either the Definitions or the Agreement, this Confirmation shall govern.

     2. The Transaction constitutes a Share Option Transaction for purposes of the Equity
Definitions. The terms of the particular Transaction to which this Confirmation relates are as
follows:

	 	 	 	 	 
	General Terms:	 	 
	 
	 	 	 	 
	 

	 	Trade Date:
	 	June 28, 2007
	 
	 	 	 	 
	 

	 	Effective Date:
	 	The closing date of the offering of the Convertible Securities.
	 
	 	 	 	 
	 

	 	Option Type:
	 	Call
	 
	 	 	 	 
	 

	 	Seller:
	 	Deutsche
	 
	 	 	 	 
	 

	 	Buyer:
	 	Counterparty
	 
	 	 	 	 
	 

	 	Shares:
	 	The Common Stock of Counterparty, par value USD 0.162/3 per share (Ticker Symbol:
	 

	 	 	 	“PKD”).

2

 

	 	 	 	 	 
	 

	 	Number of Options:
	 	30% of the number of Convertible Securities in denominations of USD1,000
principal amount issued by Counterparty on the
closing date for the initial issuance of the
Convertible Securities; provided that if the
Underwriters, as defined in the Underwriting Agreement
dated the date hereof between the Company and Banc of
America Securities LLC, as representative of the
several underwriters (the “Underwriting Agreement”)
exercise their option to purchase additional Securities
pursuant to Section 2(c) of the Underwriting Agreement,
then on the Additional Premium Payment Date, the Number
of Options shall be automatically increased by 30% of
the number of Convertible Securities in denominations
of USD 1,000 principal amount issued pursuant to such
exercise (such Convertible Securities, the “Additional
Securities”).
	 
	 	 	 	 
	 

	 	Number of Shares:
	 	As of any date, the product of the Number of Options and the Conversion
Rate in effect on such date.
	 
	 	 	 	 
	 

	 	Conversion Rate:
	 	As defined in the Indenture, but without regard to any adjustments to the
Conversion Rate pursuant to Sections 3.01(e), 10.01(c), 10.01(d), 10.04(g) and 10.04(h)
of the Indenture.
	 
	 	 	 	 
	 

	 	Strike Price:
	 	USD 13.8463
	 
	 	 	 	 
	 

	 	Premium:
	 	USD 8,687,100; provided that if the Number of Options is increased pursuant to the
proviso to the definition of Number of Options above, an additional Premium equal to
the product of the number of Options by which the Number of Options is so increased and
USD 251.80 shall be paid on the Additional Premium Payment Date.
	 
	 	 	 	 
	 

	 	Premium Payment Date:
	 	July 5, 2007
	 
	 	 	 	 
	 

	 	Additional Premium
	 	The closing date for the purchase and sale of the
	 

	 	Payment Date:
	 	Additional Securities.
	 
	 	 	 	 
	 

	 	Exchange:
	 	New York Stock Exchange
	 
	 	 	 	 
	 

	 	Related Exchange:
	 	All Exchanges
	 
	 	 	 	 
	Procedures for Exercise:	 	 
	 
	 	 	 	 
	 

	 	Potential Exercise Dates:
	 	Each Conversion Date.
	 
	 	 	 	 
	 

	 	Conversion Date:
	 	Each “Conversion Date” as defined in the Indenture.
	 
	 	 	 	 
	 

	 	Required Exercise on
	 	On each Conversion Date, a number of Options equal
	 

	 	Conversion Dates:
	 	to the number of Convertible Securities in denominations of USD1,000
principal amount submitted for conversion on such Conversion Date in accordance with
the terms of the Indenture shall be automatically exercised, subject to “Notice of
Exercise” below.
	 
	 	 	 	 
	 

	 	Expiration Date:
	 	July 15, 2012

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	 	Automatic Exercise:
	 	As provided above under “Required Exercise on Conversion Dates”.
	 
	 	 	 	 
	 

	 	Notice of Exercise:
	 	Notwithstanding anything to the contrary in the Equity Definitions, in
order to exercise any Options, Counterparty must notify Deutsche in writing prior to
5:00 PM, New York City time, on the Scheduled Valid Day prior to the scheduled first
day of the applicable Settlement Averaging Period relating to the Convertible
Securities converted on the Conversion Date occurring on the relevant Exercise Date
(such Convertible Securities, the “Relevant Convertible Securities”) of (i) the number
of Options being exercised on such Exercise Date, (ii) the scheduled first day of the
applicable Settlement Averaging Period, (iii) the scheduled settlement date under the
Indenture for the Relevant Convertible Securities and (iv) whether Counterparty has
elected to satisfy its conversion obligations with respect to the Relevant Convertible
Securities in Shares only (as described in Section 10.02(b) of the Indenture) (“Gross
Share Settlement”); provided that with respect to Options relating to Relevant
Convertible Securities with a Conversion Date occurring on or after April 15, 2012,
such Notice of Exercise may be given on or prior to the second Scheduled Valid Day
immediately preceding the Expiration Date and need only specify the number of Options
being exercised.
	 
	 	 	 	 
	 

	 	Notice of Gross Share Settlement:
	 	If Counterparty has elected Gross Share Settlement for all
Convertible Securities with a Conversion Date occurring on or after April 15, 2012,
then with respect to Options relating to such Convertible Securities, Counterparty
shall notify Deutsche of such election before 5:00 p.m. (New York City time) on or
prior to April 15, 2012.
	 
	 	 	 	 
	 

	 	Deutsche’s Telephone Number and	 	 
	 
	 	 	 	 
	 

	 	Telex and/or Facsimile Number	 	 
	 
	 	 	 	 
	 

	 	and Contact Details for purpose of Giving Notice:
	 	c/o Deutsche Bank Securities Inc.
 60 Wall Street, NYC60-0425
	 

	 	 	 	New York, NY 10005-2858
	 

	 	 	 	Attention: Equity Capital Markets
	 

	 	 	 	Telephone: 212-250-5600
	 

	 	 	 	Facsimile: 212-797-9344
	 
	 	 	 	 
	Settlement Terms:	 	 
	 
	 	 	 	 
	 

	 	Settlement Method:
	 	Net Share Settlement
	 
	 	 	 	 
	 

	 	Net Share Settlement:
	 	Deutsche will deliver to Counterparty, on or before the
relevant Settlement Date, a number of Shares equal to the Net Shares in

4

 

	 	 	 	 	 
	 

	 	 	 	respect of any Option exercised or deemed exercised
hereunder. In no event will the Net Shares be less than
zero.
	 
	 	 	 	 
	 

	 	Net Shares:
	 	In respect of any Option exercised or deemed exercised, a number of
Shares equal to (i) the sum of the quotients, for each Valid Day during the Settlement
Averaging Period for such exercisable Option, of (A) the product of (x) excess, if any,
of the Relevant Price less the Strike Price on such Valid Day and (y) the Conversion
Rate on such Valid Day divided by (B) such Relevant Price, divided by (ii) the number
of Valid Days in the Settlement Averaging Period; provided that if the calculation
contained in clause (A) above results in a negative number, such number shall be
replaced with the number zero. Notwithstanding the forgoing, if Counterparty has
elected Gross Share Settlement and so specified in the Notice of Exercise, or if
applicable, the Notice of Gross Share Settlement, then with respect to any Option
relating to the Relevant Convertible Securities with a Conversion Date occurring on or
following April 15, 2012, the Net Shares shall be equal to the lesser of (i) a number
of Shares determined as described above and (ii) a number of Shares equal to the Net
Convertible Value for such Option divided by the Obligation Price. Deutsche will
deliver cash in lieu of any fractional Shares to be delivered with respect to any Net
Shares valued at the Relevant Price for the last Valid Day of the Settlement Averaging
Period.
	 
	 	 	 	 
	 

	 	Net Convertible Value:
	 	With respect to an Option, (i) the Total Convertible Value
for such Option minus (ii) USD 1,000.
	 
	 	 	 	 
	 

	 	Total Convertible Value:
	 	With respect to an Option, (i) the aggregate number of
Shares, if any, that Counterparty is obligated to deliver to the holder of an
Convertible Security for the relevant Conversion Date pursuant to Section 10.03(b) of
the Indenture, multiplied by (ii) the Obligation Price.
	 
	 	 	 	 
	 

	 	Obligation Price:
	 	The opening price as displayed under the heading Op on Bloomberg page
PKD.N <equity> (or any successor thereto) on the Obligation Valuation Date.
	 
	 	 	 	 
	 

	 	Obligation Valuation Date:
	 	Settlement Date
	 
	 	 	 	 
	 

	 	Settlement Averaging Period:
	 	For any Option, (i) with respect to an Option with a Conversion
Date occurring prior to April 15, 2012, the twenty (20) consecutive Valid Day period
beginning on, and including, the third Valid Day following such Conversion Date (or the
forty (40) consecutive Valid Day period commencing on, and including, the third Valid
Day following such Conversion Date if Counterparty has elected Gross Share Settlement
and specified Gross Share Settlement in the Notice of Exercise) or (ii) with respect to
an Option with a Conversion Date occurring on or following April 15, 2012, the twenty
(20) consecutive Valid Day period beginning on, and including, the twenty-second (22nd)
Scheduled Valid Day immediately prior to the Expiration Date (or the forty (40)
consecutive Valid Day period commencing on, and including, the forty second (42nd)
Scheduled Valid Day immediately prior to the Expiration Date if

5

 

	 	 	 	 	 
	 

	 	 	 	Counterparty has delivered a Notice of Gross Share
Settlement to Deutsche on or prior to April 15, 2012).
	 
	 	 	 	 
	 

	 	Settlement Date:
	 	For any Option, the third Valid Day following the final day of the
applicable Settlement Averaging Period with respect to such Option.
	 
	 	 	 	 
	 

	 	Settlement Currency:
	 	USD
	 
	 	 	 	 
	 

	 	Valid Day:
	 	A day on which (i) there is no Market Disruption Event and (ii) trading
in the Shares generally occurs on the Exchange or, if the Shares are not then listed on
the Exchange, on the principal other U.S. national or regional securities exchange on
which the Shares are then listed or, if the Shares are not then listed on a U.S.
national or regional securities exchange, on the principal other market on which the
Shares are then traded. If the Shares (or other security for which a Relevant Price
must be determined) is not so listed or quoted, a Valid Day means a Business Day.
	 
	 	 	 	 
	 

	 	Scheduled Valid Day:
	 	A day that is scheduled to be a Valid Day on the primary U.S. national
securities exchange or market on which the Shares are listed or admitted to trading.
	 
	 	 	 	 
	 

	 	Market Disruption Event:
	 	Section 6.3 of the Equity Definitions is hereby replaced in its
entirety by the following:
	 
	 	 	 	 
	 

	 	 	 	Market Disruption Event means in respect of a Share,
(i) a failure by the Exchange or, if the Shares are not
then listed on the Exchange, by the principal other
U.S. national or regional securities exchange on which
the Shares are then listed or, if the Shares are not
then listed on a U.S. national or regional securities
exchange, by the principal other market on which the
Shares are then traded, to open for trading during its
regular trading session or (ii) the occurrence or
existence prior to 1:00 p.m., New York City time, on
any trading day for the Shares for an aggregate one
half hour period of any suspension or limitation
imposed on trading (by reason of movements in price
exceeding limits permitted by the stock exchange or
otherwise) in the Shares or in any options, contracts
or future contracts relating to the Shares.
	 
	 	 	 	 
	 

	 	Relevant Price:
	 	On any Valid Day, the per Share volume-weighted average price as displayed
under the heading Bloomberg VWAP on Bloomberg page PKD.N <equity> AQR (or any
equivalent successor if such page is not available) in respect of the period from the
scheduled opening time of trading on the Exchange to the Scheduled Closing Time of the
Exchange on such Valid Day (or if such volume-weighted average price is unavailable,
the market value of one Share on such Valid Day, as determined by the Calculation Agent
using a volume-weighted method). The Relevant Price will be determined without regard
to after hours trading or any other trading outside of the regular trading session
hours.

6

 

	 	 	 	 	 
	 

	 	Other Applicable Provisions:
	 	To the extent Deutsche is obligated to deliver Shares
hereunder, the provisions of Sections 9.1(c), 9.8, 9.9, 9.10, 9.11 (except that the
Representation and Agreement contained in Section 9.11 of the Equity Definitions shall
be modified by excluding any representations therein relating to restrictions,
obligations, limitations or requirements under applicable securities laws arising as a
result of the fact that Counterparty is the Issuer of the Shares) and 9.12 of the
Equity Definitions will be applicable, except that all references in such provisions to
“Physically-Settled” shall be read as references to “Net Share Settled”. “Net Share
Settled” in relation to any Option means that Deutsche is obligated to deliver Shares
hereunder.
	 
	 	 	 	 
	 

	 	Restricted Certificated Shares:
	 	Notwithstanding anything to the contrary in the Equity
Definitions, Deutsche may, in whole or in part, deliver Shares in certificated form
representing the Number of Shares to be Delivered to Counterparty in lieu of delivery
through the Clearance System. With respect to such certificated Shares, the
Representation and Agreement contained in Section 9.11 of the Equity Definitions shall
be modified by deleting the remainder of the provision after the word “encumbrance” in
the fourth line thereof.
	 
	 	 	 	 
	Share Adjustments:	 	 
	 
	 	 	 	 
	 

	 	Method of Adjustment:
	 	Notwithstanding Section 11.2 of the Equity Definitions, upon the
occurrence of any event or condition set forth in Sections 10.04(a) through (f) of the
Indenture, the Calculation Agent shall upon prior written notice to Counterparty make a
corresponding adjustment, which it reasonably determines in good faith to be necessary,
to the terms relevant to the exercise, settlement or payment of the Transaction.
Immediately upon the occurrence of any “Adjustment Event”, as defined in the Indenture,
Counterparty shall notify the Calculation Agent of such Adjustment Event; and once the
adjustments to be made to the terms of the Indenture and the Convertible Notes in
respect of such Adjustment Event have been determined, Counterparty shall immediately
notify the Calculation Agent in writing of the details of such adjustments.
Additionally, notwithstanding Section 11.2 of the Equity Definitions, Potential
Adjustment Event shall not apply to this Transaction and, if and to the extent that any
event or condition occurs during the term of the Transaction with respect to
Counterparty and the Shares of the type described in Section 11.2(e), the Calculation
Agent shall not make any adjustment to the terms relevant to the exercise, settlement
or payment of the Transaction, except to the extent otherwise described in this
paragraph, without the prior written consent of Counterparty.
	 
	 	 	 	 
	Extraordinary Events:	 	 
	 
	 	 	 	 
	 

	 	Merger Events:
	 	Section 12.1(b) of the Equity Definitions is hereby amended and restated in
its entirety for purposes of this Confirmation so that

7

 

	 	 	 	 	 
	 

	 	 	 	“Merger Event” means the occurrence of any event or
condition set forth in Section 10.06 of the Indenture.
	 
	 	 	 	 
	 

	 	Tender Offer:
	 	Section 12.1(d) of the Equity Definitions is hereby amended and restated in
its entirety for purposes of this Confirmation so that a “Tender Offer” means the
occurrence of any event or condition set forth in Clause (1) of the definition of
“Fundamental Change” in Section 1.01 of the Indenture.
	 
	 	 	 	 
	 

	 	Consequences of Merger 
 Events
and Tender Offers:
	 	Notwithstanding Sections 12.2 and 12.3 of the Equity
Definitions, upon the occurrence of a Merger Event or Tender Offer, the Calculation
Agent shall, to the extent that any such Merger Event or Tender Offer results in
adjustments to the terms of the exercise, settlement or payment under the Indenture,
upon prior written notice to Counterparty, make the corresponding adjustment in respect
of any adjustment under the Indenture to any one or more of the nature of the Shares,
the Number of Options, the Option Entitlement and any other variable relevant to the
exercise, settlement or payment for the Transaction; provided that such adjustment
shall be made without regard to (x) any adjustment to the Conversion Rate pursuant to
Sections 10.01(c), 10.04(g), or 10.04(h) of the Indenture and (y) unless and to the
extent otherwise agreed by Deutsche and Counterparty (and provided that Deutsche may
not be required so to agree), the election, if any, by Counterparty to adjust the
Conversion Rate and the related conversion obligation pursuant to Section 10.01(d) of
the Indenture.
	 
	 	 	 	 
	 

	 	Nationalization, 
Insolvency
or Delisting:
	 	Cancellation and Payment (Calculation Agent
Determination); provided that, in addition to the provisions of
Section 12.6(a)(iii) of the Equity Definitions, it will also constitute a Delisting if
the Exchange is located in the United States and the Shares are not immediately
re-listed, re-traded or re-quoted on any of the New York Stock Exchange, the American
Stock Exchange or the NASDAQ National Market System (or their respective successors);
if the Shares are immediately re-listed, re-traded or re-quoted on any such exchange or
quotation system, such exchange or quotation system shall thereafter be deemed to be
the Exchange; provided further that, in determining any Cancellation Amount,
notwithstanding any term or provision in the Agreement or the Equity Definitions, the
Calculation Agent shall comply with the terms and provisions set forth in Section
8(n)(iii) of this Confirmation.
	 
	 	 	 	 
	 

	 	Additional Disruption Events:	 	 
	 
	 	 	 	 
	 

	 	(a) Change in Law:
	 	Applicable (provided that clause (y) of this term set forth in
Section 12.9(a)(ii) of the Equity Definitions shall not apply)
	 
	 	 	 	 
	 

	 	(b) Insolvency Filing:
	 	Applicable
	 
	 	 	 	 
	 

	 	(c) Hedging Disruption:
	 	Applicable

8

 

	 	 	 	 	 
	 

	 	Hedging Party:
	 	For all applicable Additional Disruption Events, Deutsche
	 
	 	 	 	 
	 

	 	Determining Party:
	 	For all applicable Additional Disruption Events, Deutsche
	 
	 	 	 	 
	 

	 	Non-Reliance:
	 	Applicable
	 
	 	 	 	 
	 

	 	Agreements and
	 	Applicable.
	 

	 	Acknowledgments	 	 
	 

	 	Regarding Hedging Activities:	 	 
	 
	 	 	 	 
	 

	 	Additional Acknowledgments:
	 	Applicable

     3. Calculation Agent: Deutsche; provided that all calculations, determinations and
adjustments made by Deutsche in respect of this Transaction as Calculation Agent shall be made in
good faith and in a commercially reasonable manner.

     4. Account Details:

Deutsche Payment Instructions:

Bank of New York

ABA 021-000-018

Deutsche Bank Securities Inc.

A/C 8900327634

FFC: 1459102610

Counterparty Payment Instructions:

To be provided by Counterparty.

     5. Offices:

The Office of Deutsche for the Transaction is:

Deutsche Bank AG London

c/o Deutsche Bank Securities Inc.

60 Wall Street

New York, NY 10005

Attention: Documentation Department

Telephone:      212-250-5600

Facsimile:       212-797-9344

The Office of Counterparty for the Transaction is:

Parker Drilling Company

1401 Enclave Parkway, Suite 600

Houston, Texas 77077

Attn:      General Counsel

9

 

	6.	 	Notices: For purposes of this Confirmation:
	 
	(a)	 	Address for notices or communications to Counterparty:

	 	 	 
	To:

	 	Parker Drilling Company
	 

	 	1401 Enclave Parkway, Suite 600
	 

	 	Houston, Texas 77077
	Attn:

	 	General Counsel
	Telephone:

	 	(281) 406-2000
	Facsimile:

	 	(281) 406-2001

	(b)	 	Address for notices or communications to Deutsche:

	 	 	 
	c/o Deutsche Bank Securities Inc.
	60 Wall Street, NYC60-0425
	New York, NY 10005-2858
	Attention: Equity Capital Markets
	Telephone:

	 	212-250-5600
	Facsimile:

	 	212-797-9344

	7.	 	Representations, Warranties and Agreements:
	 
	(a)	 	In addition to the representations and warranties in the Agreement and those
contained elsewhere herein, Counterparty represents and warrants to and for the benefit
of, and agrees with, Deutsche as follows:

	 	(i)	 	On the Trade Date, (A) none of Counterparty and its officers
and directors is aware of any material nonpublic information regarding
Counterparty or the Shares and (B) all reports and other documents filed by
Counterparty with the Securities and Exchange Commission pursuant to the
Securities Exchange Act of 1934, as amended (the “Exchange Act”) when
considered as a whole (with the more recent such reports and documents deemed
to amend inconsistent statements contained in any earlier such reports and
documents), do not contain any untrue statement of a material fact or any
omission of a material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances in which they were
made, not misleading.
	 
	 	(ii)	 	(A) On the Trade Date, the Shares or securities that are
convertible into, or exchangeable or exercisable for Shares, are not, and shall
not be, subject to a “restricted period,” as such term is defined in Regulation
M under the Exchange Act (“Regulation M”) and (B) Counterparty shall not engage
in any “distribution,” as such term is defined in Regulation M, other than a
distribution meeting the requirements of the exceptions set forth in sections
101(b)(10) and 102(b)(7) of Regulation M, until the second Exchange Business
Day immediately following the Trade Date.

10

 

	 	(iii)	 	On the Trade Date, neither Counterparty nor any “affiliate” or
“affiliated purchaser” (each as defined in Rule 10b-18 of the Exchange Act
(“Rule 10b-18”)) shall directly or indirectly (including, without limitation,
by means of any cash-settled or other derivative instrument) purchase, offer to
purchase, place any bid or limit order that would effect a purchase of, or
commence any tender offer relating to, any Shares (or an equivalent interest,
including a unit of beneficial interest in a trust or limited partnership or a
depository share) or any security convertible into or exchangeable or
exercisable for Shares, except through Deutsche.
	 
	 	(iv)	 	Without limiting the generality of Section 13.1 of the Equity
Definitions, Counterparty acknowledges that Deutsche is not making any
representations or warranties with respect to the treatment of the Transaction
under FASB Statements 133, as amended, or 150, EITF Issue No. 00-19 (or any
successor issue statements) or under FASB’s Liabilities & Equity Project.
	 
	 	(v)	 	Without limiting the generality of Section 3(a)(iii) of the
Agreement, the Transaction will not violate Rule 13e-1 or Rule 13e-4 under the
Exchange Act.
	 
	 	(vi)	 	Prior to the Trade Date, Counterparty shall deliver to Deutsche
a resolution of Counterparty’s board of directors authorizing the Transaction
and such other certificate or certificates as Deutsche shall reasonably
request.
	 
	 	(vii)	 	Counterparty is not entering into this Confirmation to create
actual or apparent trading activity in the Shares (or any security convertible
into or exchangeable for Shares) in violation of the Exchange Act or to raise
or depress or otherwise manipulate the price of the Shares (or any security
convertible into or exchangeable for Shares) or otherwise in violation of the
Exchange Act.
	 
	 	(viii)	 	Counterparty is not, and after giving effect to the transactions contemplated
hereby will not be, an “investment company” as such term is defined in the
Investment Company Act of 1940, as amended.
	 
	 	(ix)	 	On the Trade Date (A) the assets of Counterparty at their fair
valuation exceed the liabilities of Counterparty, including contingent
liabilities, (B) the capital of Counterparty is adequate to conduct the
business of Counterparty and (C) Counterparty has the ability to pay its debts
and obligations as such debts mature and does not intend to, or does not
believe that it will, incur debt beyond its ability to pay as such debts
mature.
	 
	 	(x)	 	On the Trade Date, the representations and warranties of
Counterparty set forth in Section 3 of the Agreement and Section 1(A) of the
Underwriting Agreement are true and correct.
	 
	 	(xi)	 	Counterparty understands no obligations of Deutsche to it
hereunder will be entitled to the benefit of deposit insurance and that such
obligations will not be guaranteed by any affiliate of Deutsche or any
governmental agency.

11

 

	(b)	 	Each of Deutsche and Counterparty agrees and represents that it is an “eligible
contract participant” as defined in Section 1a(12) of the U.S. Commodity Exchange Act,
as amended.

	(c)	 	Each of Deutsche and Counterparty acknowledges that the offer and sale of the
Transaction to it is intended to be exempt from registration under the Securities Act
of 1933, as amended (the “Securities Act”), by virtue of Section 4(2) thereof.
Accordingly, Counterparty represents and warrants to Deutsche that (i) it has the
financial ability to bear the economic risk of its investment in the Transaction and is
able to bear a total loss of its investment, (ii) it is an “accredited investor” as
that term is defined in Regulation D as promulgated under the Securities Act, (iii) it
is entering into the Transaction for its own account and without a view to the
distribution or resale thereof, and (iv) the assignment, transfer or other disposition
of the Transaction has not been and will not be registered under the Securities Act and
is restricted under this Confirmation, the Securities Act and state securities laws.

	(d)	 	Each of Deutsche and Counterparty agrees and acknowledges that Deutsche is a
“financial institution,” “swap participant” and “financial participant”, and that
Counterparty is a “swap participant”, in each case within the meaning of Sections
101(22), 101(53C) and 101(22A) of Title 11 of the United States Code (the “Bankruptcy
Code”). The parties hereto further agree and acknowledge (A) that this Confirmation is
(i) a “securities contract,” as such term is defined in Section 741(7) of the
Bankruptcy Code, with respect to which each payment and delivery hereunder is a
“settlement payment,” as such term is defined in Section 741(8) of the Bankruptcy Code,
and (ii) a “swap agreement,” as such term is defined in Section 101(53B) of the
Bankruptcy Code, with respect to which each payment and delivery hereunder is a
“transfer,” as such term is defined in Section 101(54) of the Bankruptcy Code, and (B)
that Deutsche is entitled to the protections afforded by, among other sections, Section
362(b)(6), 362(b)(17), 546(e), 546(g), 555 and 560 of the Bankruptcy Code.

	(e)	 	Counterparty shall deliver to Deutsche an opinion of counsel, dated as of the
Effective Date and reasonably acceptable to Deutsche in form and substance, with
respect to the matters set forth in Section 3(a) of the Agreement.

	8.	 	Other Provisions:

	(a)	 	Additional Termination Events. The occurrence of (i) an event of default with
respect to Counterparty under the terms of the Convertible Securities as set forth in
Section 6.01 of the Indenture which results in an acceleration of indebtedness
evidenced by the outstanding Securities under the Indenture, (ii) an Amendment Event or
(iii) a Repayment Event shall be an Additional Termination Event with respect to which
the Transaction is the sole Affected Transaction and Counterparty is the sole Affected
Party and Deutsche shall be the party entitled to designate an Early Termination Date
pursuant to Section 6(b) of the Agreement; provided that in the case of a Repayment
Event the Transaction shall be subject to termination only in respect of the number of
Convertible Securities that cease to be outstanding in connection with or as a result
of such Repayment Event.

     “Amendment Event” means that Counterparty amends, modifies, supplements or waives any
term of the Indenture or the Convertible Securities governing the principal amount, coupon,
maturity, repurchase obligation of Counterparty, redemption right of Counterparty, any term
relating to conversion of the Convertible Securities (including changes to the conversion
price, conversion settlement dates or conversion conditions), or any term that would require
consent of the holders of not less than 100% of the principal amount of the Convertible
Securities to amend.

12

 

     “Repayment Event” means that (A) any Convertible Securities are repurchased (whether in
connection with or as a result of a change of control, howsoever defined, or for any other
reason) by Counterparty or any of its subsidiaries, (B) any Convertible Securities are
delivered to Counterparty in exchange for delivery of any property or assets of Counterparty
or any of its subsidiaries (howsoever described), (C) any principal of any of the
Convertible Securities is repaid prior to the final maturity date of the Convertible
Securities (whether following acceleration of the Convertible Securities or otherwise), or
(D) any Convertible Securities are exchanged by or for the benefit of the holders thereof
for any other securities of Counterparty or any of its affiliates (or any other property, or
any combination thereof) pursuant to any exchange offer or similar transaction; provided
that, in the case of clause (B) and clause (D), conversions of the Convertible Securities
pursuant to the terms of the Indenture as in effect on the date hereof shall not be
Repayment Events.

	(b)	 	Alternative Calculations and Payment on Early Termination and on Certain
Extraordinary Events. If, subject to Section 8(k) below, Deutsche shall owe
Counterparty any amount pursuant to Section 12.2 or 12.3 of the Equity Definitions and
“Consequences of Merger Events and Tender Offers” above, or Sections 12.6, 12.7 or 12.9
of the Equity Definitions (except in the event of an Insolvency, a Nationalization, a
Tender Offer or a Merger Event, in each case, in which the consideration or proceeds to
be paid to holders of Shares consists solely of cash) or pursuant to Section 6(d)(ii)
of the Agreement (except in the event of an Event of Default in which Counterparty is
the Defaulting Party or a Termination Event in which Counterparty is the Affected
Party, that resulted from an event or events within Counterparty’s control) (a “Payment
Obligation”), Counterparty shall have the right, in its sole discretion, to require
Deutsche to satisfy any such Payment Obligation by the Share Termination Alternative
(as defined below) by giving irrevocable telephonic notice to Deutsche, confirmed in
writing within one Scheduled Trading Day, between the hours of 9:00 A.M. and 4:00 P.M.
New York City time on the Merger Date, Tender Offer Date, Announcement Date or Early
Termination Date, as applicable (“Notice of Share Termination”). Upon such Notice of
Share Termination, the following provisions shall apply on the Scheduled Trading Day
immediately following the Merger Date, the Tender Offer Date, Announcement Date or
Early Termination Date, as applicable:

	 	 	 
	Share Termination Alternative:

	 	Applicable and means that Deutsche shall
deliver to Counterparty the Share
Termination Delivery Property on the date
on which the Payment Obligation would
otherwise be due pursuant to Section 12.7
or 12.9 of the Equity Definitions or
Section 6(d)(ii) of the Agreement, as
applicable (the “Share Termination
Payment Date”), in satisfaction of the
Payment Obligation.
	 
	 	 
	Share Termination Delivery 

Property:

	 	A number of Share Termination Delivery
Units, as calculated by the Calculation
Agent, equal to the Payment Obligation
divided by the Share Termination Unit
Price. The Calculation Agent shall
adjust the Share Termination Delivery
Property by replacing any fractional
portion of a security therein with an
amount of cash equal to the value of such
fractional security based on the values
used to calculate the Share Termination
Unit Price. For the avoidance of doubt
(and notwithstanding anything herein, in
the Agreement or otherwise to the
contrary), the Share Termination Delivery
Property may included shares which are
unregistered under the Securities Act.
	 
	 	 
	Share Termination Unit Price:

	 	The value of property contained in one
Share Termination Delivery Unit on the
date such Share Termination Delivery
Units are to be delivered as Share
Termination Delivery Property, as
determined by the Calculation Agent in
its discretion by commercially reasonable
means and notified by the Calculation
Agent to Deutsche at the time of
notification of the Payment Obligation.

13

 

	 	 	 
	Share Termination Delivery Unit:

	 	In the case of a Termination Event, Event
of Default or Delisting, one Share or, in
the case of an Insolvency,
Nationalization, Merger Event or Tender
Offer, a unit consisting of the number or
amount of each type of property received
by a holder of one Share (without
consideration of any requirement to pay
cash or other consideration in lieu of
fractional amounts of any securities) in
such Insolvency, Nationalization, Merger
Event or Tender Offer. If such
Insolvency, Nationalization, Merger Event
or Tender Offer involves a choice of
consideration to be received by holders,
such holder shall be deemed to have
elected to receive the maximum possible
amount of cash.
	 
	 	 
	Failure to Deliver:

	 	Applicable
	 
	 	 
	Other Applicable Provisions:

	 	If Share Termination Alternative is
applicable, the provisions of Sections
9.8, 9.9, 9.10, 9.11 (except that the
Representation and Agreement contained in
Section 9.11(i), (iv) and (v) of the
Equity Definitions shall be modified by
excluding any representations therein
relating to restrictions, obligations,
limitations or requirements under
applicable securities laws arising as a
result of the fact that Counterparty is
the Issuer of the Shares) and 9.12 of the
Equity Definitions will be applicable,
except that all references in such
provisions to “Physically-Settled” shall
be read as references to “settled by
Share Termination Alternative” and all
references to “Shares” shall be read as
references to “Share Termination Delivery
Units”.

	(c)	 	Disposition of Hedge Shares. Counterparty hereby agrees that if, in the
commercially reasonable judgment of Deutsche acting in good faith, any Shares (the
“Hedge Shares”) acquired by Deutsche for the purpose of hedging its obligations
pursuant to the Transaction cannot be sold in the public market by Deutsche without
registration under the Securities Act (other than as a result of Deutsche being an
affiliate, as such term is used in the Securities Act and rules and regulations
promulgated thereunder, of Counterparty), Counterparty shall, at its election: (i) in
order to allow Deutsche to sell the Hedge Shares in a registered offering, make
available to Deutsche an effective registration statement under the Securities Act to
cover the resale of such Hedge Shares and (A) enter into an agreement, in form and
substance satisfactory to Deutsche, substantially in the form of an underwriting
agreement for a registered offering, (B) provide accountant’s “comfort” letters in
customary form for registered offerings of equity securities, (C) provide disclosure
opinions of nationally recognized outside counsel to Counterparty reasonably acceptable
to Deutsche, (D) provide other customary opinions, certificates and closing documents
customary in form for registered offerings of equity securities and (E) afford Deutsche
a reasonable opportunity to conduct a “due diligence” investigation with respect to
Counterparty customary in scope for underwritten offerings of equity securities;
provided, however, that if Deutsche, in its commercially reasonable judgment, is not
reasonably satisfied with access to Counterparty’s due diligence materials, the results
of its due diligence investigation, or the procedures and documentation for the
registered offering referred to above, then clause (ii) or clause (iii) of this Section
8(c) shall apply at the election of Counterparty; (ii) in order to allow Deutsche to
sell the Hedge Shares in a private placement, enter into a private placement agreement
substantially similar to private placement underwriting agreements customary for
private placements of equity securities, in form and substance reasonably satisfactory
to Deutsche, including customary representations, covenants, blue sky and other
governmental filings and/or registrations, indemnities to Deutsche, due diligence
rights (for Deutsche or any designated buyer of the Hedge Shares from Deutsche),
opinions and certificates and such other documentation as is customary for private
placements agreements, all reasonably acceptable to Deutsche (in which case, the
Calculation Agent shall make any adjustments to the terms of the Transaction that are
necessary, in its reasonable judgment, to compensate Deutsche for any discount from the
public market price of the Shares incurred on the sale of Hedge Shares in a private
placement); or (iii) purchase the

14

 

	 	 	Hedge Shares from Deutsche at the VWAP Price on such Exchange Business Days, and in
the amounts, requested by Deutsche. “VWAP Price” means, on any Exchange Business
Day, the per Share volume-weighted average price as displayed under the heading
“Bloomberg VWAP” on Bloomberg page PKD.N <equity> VAP (or any successor
thereto) in respect of the period from 9:30 a.m. to 4:00 p.m. (New York City time)
on such Exchange Business Day (or if such volume-weighted average price is
unavailable, the market value of one Share on such Exchange Business Day, as
determined by the Calculation Agent using a volume-weighted method).

	(d)	 	Amendment to Equity Definitions. The following amendment shall be made to the
Equity Definitions:

     (i) Section 12.6(a)(ii) of the Equity Definitions is hereby amended by (1)
deleting from the fourth line thereof the word “or” after the word “official” and
inserting a comma therefor, and (2) deleting the semi-colon at the end of subsection
(B) thereof and inserting the following words therefor “or (C) at Deutsche’s option,
the occurrence of any of the events specified in Section 6.01(h) or (i) of the
Indenture.”

     (ii) Section 12.9(b)(i) of the Equity Definitions is hereby amended by (1)
replacing “either party may elect” with “Deutsche may elect” and (2) replacing
“notice to the other party “with “notice to Counterparty” in the first sentence of
such section.

	(e)	 	Repurchase Notices. Counterparty shall, on any day on which Counterparty
effects any repurchase of Shares, promptly give Deutsche a written notice of such
repurchase (a “Repurchase Notice”) on such day if, following such repurchase, the
Notice Percentage as determined on such day is (i) greater than 6% and (ii) greater by
0.5% than the Notice Percentage included in the immediately preceding Repurchase Notice
(or, in the case of the first such Repurchase Notice, greater than the Notice
Percentage as of the date hereof). The “Notice Percentage” as of any day is the
fraction, expressed as a percentage, the numerator of which is the Number of Shares and
the denominator of which is the number of Shares outstanding on such day. In the event
that Counterparty fails to provide Deutsche with a Repurchase Notice on the day and in
the manner specified in this Section 8(e) then Counterparty agrees to indemnify and
hold harmless Deutsche, its affiliates and their respective directors, officers,
employees, agents and controlling persons (Deutsche and each such person being an
“Indemnified Party”) from and against any and all losses, claims, damages and
liabilities (or actions in respect thereof), joint or several, to which such
Indemnified Party may become subject under applicable securities laws, including
without limitation, Section 16 of the Exchange Act, relating to or arising out of such
failure. If for any reason the foregoing indemnification is unavailable to any
Indemnified Party or insufficient to hold harmless any Indemnified Party, then
Counterparty shall contribute, to the maximum extent permitted by law, to the amount
paid or payable by the Indemnified Party as a result of such loss, claim, damage or
liability. In addition, Counterparty will reimburse any Indemnified Party for all
expenses (including reasonable counsel fees and expenses) reasonably incurred (after
notice to Counterparty in the form of a documented invoice) in connection with the
investigation of, preparation for or defense or settlement of any pending or threatened
claim or any action, suit or proceeding arising from such failure, whether or not such
Indemnified Party is a party thereto and whether or not such claim, action, suit or
proceeding is initiated or brought by or on behalf of Counterparty. This indemnity
shall survive the completion of the Transaction contemplated by this Confirmation and
any assignment and delegation of the Transaction made pursuant to this Confirmation or
the Agreement shall inure to the benefit of any permitted assignee of Deutsche.

	(f)	 	Transfer and Assignment. Deutsche may not transfer or assign its rights and
obligations hereunder and under the Agreement, in whole or in part, without the
Issuer’s prior written consent. If at any time at which the Equity Percentage exceeds
8%, Deutsche, in its discretion, is unable to

15

 

	 	 	effect a transfer or assignment of a portion of its rights and obligations under
this Transaction with the prior written consent of Counterparty (such consent not to
be unreasonably withheld) covering the number of Shares causing the Equity
Percentage to exceed 8% (the “Excess Shares”) after its commercially reasonable
efforts on pricing terms reasonably acceptable to Deutsche such that the Equity
Percentage is reduced to 8% or less, Deutsche may designate any Scheduled Trading
Day as an Early Termination Date with respect to a such portion (the “Terminated
Portion”) of the Transaction constituting the Excess Shares, such that the Equity
Percentage following such partial termination will be equal to or less than 8%. In
the event that Deutsche so designates an Early Termination Date with respect to such
a portion of the Transaction, a payment or delivery shall be made pursuant to
Section 6 of the Agreement and Section 8(b) of this Confirmation as if (i) an Early
Termination Date had been designated in respect of a Transaction having terms
identical to the Terminated Portion of the Transaction, (ii) Counterparty shall be
the sole Affected Party with respect to such partial termination and (iii) such
portion of the Transaction shall be the only Terminated Transaction. The “Equity
Percentage” as of any day is the fraction, expressed as a percentage, (A) the
numerator of which is the sum of the number of Shares that Deutsche or any of its
affiliates beneficially own (within the meaning of Section 13 of the Exchange Act)
on such day, other than any Shares so owned as a hedge of the Transaction, and the
Number of Shares and (B) the denominator of which is the number of Shares
outstanding on such day.

	(g)	 	Staggered Settlement. Deutsche may, by notice to Counterparty prior to any
Settlement Date (a “Nominal Settlement Date”), elect to deliver the Shares on two or
more dates (each, a “Staggered Settlement Date”) or at two or more times on the Nominal
Settlement Date as follows:

	 	(i)	 	in such notice, Deutsche will specify to Counterparty the
related Staggered Settlement Dates (each of which will be on or prior to such
Nominal Settlement Date, but not prior to the beginning of the related “Cash
Settlement Averaging Period”) or delivery times and how it will allocate the
Shares it is required to deliver hereunder among the Staggered Settlement Dates
or delivery times;
	 
	 	(ii)	 	the aggregate number of Shares that Deutsche will deliver to
Counterparty hereunder on all such Staggered Settlement Dates and delivery
times will equal the number of Shares that Deutsche would otherwise be required
to deliver on such Nominal Settlement Date; and
	 
	 	(iii)	 	Deutsche shall reimburse Counterparty for all reasonable and
documented operational expenses related to said staggered settlement.

	(h)	 	Right to Extend. Deutsche may postpone any Potential Exercise Date or any
other date of valuation or delivery by Deutsche, with respect to some or all of the
relevant Options (in which event the Calculation Agent shall make appropriate
adjustments to the Shares it is required to deliver hereunder), if Deutsche determines,
in its reasonable discretion, and with the prior written consent of Counterparty (such
consent not to be unreasonably withheld), that such extension is reasonably necessary
or appropriate to preserve Deutsche’s hedging or hedge unwind activity hereunder in
light of existing liquidity conditions or to enable Deutsche to effect purchases of
Shares in connection with its hedging, hedge unwind or settlement activity hereunder in
a manner that would, if Deutsche were Counterparty or an affiliated purchaser of
Counterparty, be in compliance with applicable legal, regulatory or self-regulatory
requirements, or with related policies and procedures applicable to Deutsche.

16

 

	(i)	 	Disclosure. Effective from the date of commencement of discussions concerning
the Transaction, Counterparty and each of its employees, representatives, or other
agents may disclose to any and all persons, without limitation of any kind, the tax
treatment and tax structure of the Transaction and all materials of any kind (including
opinions or other tax analyses) that are provided to Counterparty relating to such tax
treatment and tax structure.

	(j)	 	Designation by Deutsche. Notwithstanding any other provision in this
Confirmation to the contrary requiring or allowing Deutsche to purchase, sell, receive
or deliver any Shares or other securities to or from Counterparty, Deutsche may
designate any of its affiliates to purchase, sell, receive or deliver such shares or
other securities and otherwise to perform Deutsche obligations in respect of the
Transaction and any such designee may assume such obligations. Deutsche shall be
discharged of its obligations to Counterparty to the extent of any such performance,
and shall not be discharged at any time prior thereto.

	(k)	 	No Netting and Set-off. Multiple Transaction Payment Netting and the
provisions of Section 6(f) of the Agreement shall not apply. Each party waives any and
all rights it may have to set-off delivery or payment obligations it owes to the other
party under the Transaction against any delivery or payment obligation owed to it by
the other party, whether arising under the Agreement, under any other agreement between
the parties thereto, by operation or law or otherwise.

	(l)	 	Equity Rights. Deutsche acknowledges and agrees that this Confirmation is not
intended to convey to it rights with respect to the Transaction that are senior to the
claims of common stockholders in the event of Counterparty’s bankruptcy. For the
avoidance of doubt, the parties agree that the preceding sentence shall not apply at
any time other than during Counterparty’s bankruptcy to any claim arising as a result
of a breach by Counterparty of any of its obligations under this Confirmation or the
Agreement.

	(m)	 	Early Unwind. In the event the sale by Counterparty of the Convertible
Securities is not consummated with the initial purchasers pursuant to the Underwriting
Agreement for any reason by the close of business in New York on July 5 (or such later
date as agreed upon by the parties, which in no event shall be later than July 10)
(July 5 or such later date being the “Early Unwind Date”), the Transaction shall
automatically terminate (the “Early Unwind”), on the Early Unwind Date and (i) the
Transaction and all of the respective rights and obligations of Deutsche and
Counterparty thereunder shall be cancelled and terminated and (ii) Counterparty shall
pay to Deutsche an amount in cash equal to the aggregate amount of costs and expenses
reasonably incurred by Deutsche relating to the unwinding of Deutsche’s hedging
activities in respect of the Transaction (including market losses incurred in reselling
any Shares purchased by Deutsche or its affiliates in connection with such hedging
activities). Following such termination, cancellation and payment, each party shall be
released and discharged by the other party from and agrees not to make any claim
against the other party with respect to any obligations or liabilities of either party
arising out of and to be performed in connection with the Transaction either prior to
or after the Early Unwind Date. Deutsche and Counterparty represent and acknowledge to
the other that upon an Early Unwind and following the payment referred to above, all
obligations with respect to the Transaction shall be deemed fully and finally
discharged.

	(n)	 	Amendments to the Agreement. Notwithstanding any term or provision contained
in the Agreement, (i) no Potential Event of Default or Event of Default shall apply
with respect to Counterparty as a defaulting party, and no Termination Event shall
apply with respect to Counterparty as an Affected Party, in each and any such case,
except to the extent any such Event of Default or Termination Event results in the
occurrence and continuance of an Additional

17

 

	 	 	Termination Event (as specified in this Confirmation) or an Extraordinary Event
elected as being applicable in this Confirmation and Counterparty shall have no
Specified Entities or Credit Support Providers for purposes of the Agreement and
this Transaction; (ii) without limiting the generality of the foregoing, the Events
of Default specified in Sections 5(a)(i), (ii) (except to the extent that any
violation of any such agreement or obligation described therein or in this
Confirmation (x) would reasonably be expected to have a material adverse effect on
the ability of BofA to perform its obligations under this Transaction or (y)
pertains to the disposition of Hedge Shares pursuant to Section 8(c) of this
Confirmation), (iii), (iv) (except to the extent any misrepresentation made under
this Confirmation or under the Agreement would reasonably be expected to have a
material adverse effect on the ability of Deutsche to perform its obligations under
this Transaction), (v), (vi) or (vii) of the Agreement, and the Termination Events
specified in the Agreement, shall not apply with respect to Counterparty; and (iii)
with respect to any early termination of all or any portion of this Transaction for
any reason pursuant to the terms of this Confirmation, the Equity Definitions and/or
the Agreement, and additionally notwithstanding any term or provision in the Equity
Definitions, (A) any amount payable (or to be payable) by either party hereto to the
other party hereto arising as a result of such early termination (including any
costs resulting from unwinding hedging transactions) shall be determined in good
faith and in a commercially reasonable manner and (B) without limiting the
foregoing, the party determining the amount of any such payment (whether Deutsche,
Counterparty or the Calculation Agent) shall (1) utilize commercially reasonable
procedures and methodologies so as to produce a commercially reasonable
determination of such amount, and (2) disclose in reasonable detail the material
information utilized (or to be utilized) by such party in making such determination.

	(o)	 	Method of Delivery. Whenever delivery of funds or other assets is required
hereunder by or to Counterparty, such delivery shall be effected through Agent. In
addition, all notices, demands and communications of any kind relating to the
Transaction between Deutsche and Counterparty shall be transmitted exclusively through
Agent.

	(p)	 	Waiver of Trial by Jury. EACH OF COUNTERPARTY AND DEUTSCHE HEREBY IRREVOCABLY
WAIVES (ON ITS OWN BEHALF AND, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ON BEHALF OF
ITS STOCKHOLDERS) ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
(WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THE
TRANSACTION OR THE ACTIONS OF DEUTSCHE OR ITS AFFILIATES IN THE NEGOTIATION,
PERFORMANCE OR ENFORCEMENT HEREOF.

	(q)	 	Governing Law. THIS CONFIRMATION SHALL BE GOVERNED BY THE LAWS OF THE STATE OF
NEW YORK. THE PARTIES HERETO IRREVOCABLY SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE
COURTS OF THE STATE OF NEW YORK AND THE UNITED STATES COURT FOR THE SOUTHERN DISTRICT
OF NEW YORK IN CONNECTION WITH ALL MATTERS RELATING HERETO AND WAIVE ANY OBJECTION TO
THE LAYING OF VENUE IN, AND ANY CLAIM OF INCONVENIENT FORUM WITH RESPECT TO, THESE
COURTS.

18

 

Counterparty hereby agrees to check this Confirmation and to confirm that the foregoing correctly
sets forth the terms of the Transaction by signing in the space provided below and returning to
Deutsche a facsimile of the fully-executed Confirmation to Deutsche at 44 113 336 2009. Originals
shall be provided for your execution upon your request.

We are very pleased to have executed the Transaction with you and we look forward to completing
other transactions with you in the near future.

	 	 	 	 	 
	Very truly yours,
	 
	DEUTSCHE BANK AG LONDON
	 
	 	 	 	 
	By:
	 	 	 	 
	 

	 	 

Name:
	 	 
	 

	 	Title:	 	 
	 
	 	 	 	 
	By:
	 	 	 	 
	 

	 	 

Name:
	 	 
	 

	 	Title:	 	 
	 
	 	 	 	 
	DEUTSCHE BANK SECURITIES INC.
	acting solely as Agent in connection with this Transaction
	 
	 	 	 	 
	By:
	 	 	 	 
	 

	 	 

Name:
	 	 
	 

	 	Title:	 	 
	 
	 	 	 	 
	By:
	 	 	 	 
	 

	 	 

Name:
	 	 
	 

	 	Title:	 	 
	 
	Counterparty hereby agrees to, accepts and confirms the terms of the foregoing as of the Trade
Date.
	 
	PARKER DRILLING COMPANY
	 
	 	 	 	 
	By:
	 	 	 	 
	 

	 	 

Name:
	 	 
	 

	 	Title:	 	 

19exv10w3

 

Exhibit 10.3

     June 28, 2007

	 	 	 
	To:

	 	Parker Drilling Company
	 

	 	1401 Enclave Parkway, Suite 600
	 

	 	Houston, Texas 77077
	 

	 	Attn: General Counsel
	 

	 	Telephone: (281) 406-2000
	 

	 	Facsimile: (281) 406-2001
	 
	 	 
	From:

	 	Lehman Brothers Inc., acting as Agent
	 

	 	Lehman Brothers OTC Derivatives Inc., acting as Principal
	 

	 	c/o Lehman Brothers
	 

	 	745 Seventh Avenue
	 

	 	New York, NY 10019
	 

	 	Attn: Andrew Yare – Transaction Management Group
	 

	 	Facsimile:           646-885-9546 (United States of America)
	 

	 	Telephone:           212-526-9986
	 
	 	 
	Re:

	 	Convertible Bond Hedge Transaction
	 

	 	(Transaction Reference Number:                    )

Ladies and Gentlemen:

     The purpose of this communication (this “Confirmation”) is to set forth the terms and
conditions of the above-referenced transaction entered into on the Trade Date specified below (the
"Transaction”) between Lehman Brothers OTC Derivatives Inc., acting as Principal (“Lehman”) and
Parker Drilling Company (“Counterparty”). This communication constitutes a “Confirmation” as
referred to in the ISDA Master Agreement specified below. This Confirmation is sent on behalf of
both Lehman and Lehman Brothers Inc., acting as Agent (“LBI”). Lehman Brothers OTC Derivatives
Inc. is not a member of the Securities Investor Protection Corporation.

     1. This Confirmation is subject to, and incorporates, the definitions and provisions of the
2000 ISDA Definitions (including the Annex thereto) (the “2000 Definitions”) and the definitions
and provisions of the 2002 ISDA Equity Derivatives Definitions (except to the extent expressly
amended by this Confirmation) (the “Equity Definitions”, and together with the 2000 Definitions,
the “Definitions”), in each case as published by the International Swaps and Derivatives
Association, Inc. and as in effect on the date hereof (“ISDA”). In the event of any inconsistency
between the 2000 Definitions and the Equity Definitions, the Equity Definitions will govern.
Certain defined terms used herein have the meanings assigned to them in an Indenture to be dated as
of July 5, 2007 between Counterparty and The Bank of New York Trust Company, N.A. as trustee (the
"Indenture”) relating to the USD 115.0 principal amount of 2.125% Convertible Senior Notes due July
15, 2012 (the “Convertible Securities”). In the event of any inconsistency between the terms
defined in the Indenture and this Confirmation, this Confirmation shall govern. For the avoidance
of doubt, references herein to sections of the Indenture are based on the draft of the Indenture
most recently reviewed by the parties at the time of execution of this Confirmation. If any
relevant sections of the Indenture are changed, added or renumbered following execution of this
Confirmation but prior to the execution of the Indenture, the parties will amend this Confirmation
in good faith to preserve the economic intent of the parties.

     This Confirmation evidences a complete and binding agreement between Lehman and Counterparty
as to the terms of the Transaction to which this Confirmation relates. This Confirmation shall be
subject to an agreement (the “Agreement”) in the form of the 2002 ISDA Master Agreement (the “ISDA
Form”) as if Lehman and Counterparty had executed an agreement in such form (without any Schedule
but with the elections set forth in this Confirmation), except to the extent amended, modified or
supplemented by this Confirmation.

 

 

     All provisions contained in, or incorporated by reference to, the Agreement will govern this
Confirmation except as expressly modified herein. In the event of any inconsistency between this
Confirmation and either the Definitions or the Agreement, this Confirmation shall govern.

     2. The Transaction constitutes a Share Option Transaction for purposes of the Equity
Definitions. The terms of the particular Transaction to which this Confirmation relates are as
follows:

General Terms:

	 	 	 	 	 
	 

	 	Agent:
	 	LBI is acting as agent on behalf of Lehman and Issuer for the Transaction. LBI has no obligations, by guarantee, endorsement or otherwise, with respect to
the performance of the Transaction by either party.
	 
	 	 	 	 
	 

	 	Trade Date:
	 	June 28, 2007
	 
	 	 	 	 
	 

	 	Effective Date:
	 	The closing date of the offering of the Convertible Securities.
	 
	 	 	 	 
	 

	 	Option Type:
	 	Call
	 
	 	 	 	 
	 

	 	Seller:
	 	Lehman
	 
	 	 	 	 
	 

	 	Buyer:
	 	Counterparty
	 
	 	 	 	 
	 

	 	Shares:
	 	The Common Stock of Counterparty, par value USD 0.162/3 per share (Ticker Symbol:
	 

	 	 	 	“PKD”).
	 
	 	 	 	 
	 

	 	Number of Options:
	 	10% of the number of Convertible Securities in denominations of USD1,000
principal amount issued by Counterparty on the closing date for the initial issuance of
the Convertible Securities; provided that if the Underwriters, as defined in the
Underwriting Agreement dated the date hereof between the Company and Banc of America
Securities LLC, as representative of the several underwriters (the “Underwriting
Agreement”) exercise their option to purchase additional Securities pursuant to Section
2(c) of the Underwriting Agreement, then on the Additional Premium Payment Date, the
Number of Options shall be automatically increased by 10% of the number of Convertible
Securities in denominations of USD 1,000 principal amount issued pursuant to such
exercise (such Convertible Securities, the “Additional Securities”).
	 
	 	 	 	 
	 

	 	Number of Shares:
	 	As of any date, the product of the Number of Options and the Conversion
Rate in effect on such date.
	 
	 	 	 	 
	 

	 	Conversion Rate:
	 	As defined in the Indenture, but without regard to any adjustments to the
Conversion Rate pursuant to Sections 3.01(e), 10.01(c), 10.01(d), 10.04(g) and 10.04(h)
of the Indenture.
	 
	 	 	 	 
	 

	 	Strike Price:
	 	USD 13.8463
	 
	 	 	 	 
	 

	 	Premium:
	 	USD 2,895,700 provided that if the Number of Options is increased pursuant to the
proviso to the definition of Number of Options above, an additional Premium equal to
the product of

2

 

	 	 	 	 	 
	 

	 	 	 	the number of Options by which the Number of Options is
so increased and USD 251.80 shall be paid on the
Additional Premium Payment Date.
	 
	 	 	 	 
	 

	 	Premium Payment Date:
	 	July 5, 2007
	 
	 	 	 	 
	 

	 	Additional Premium Payment Date:
	 	The closing date for the purchase and sale of the Additional Securities.
	 
	 	 	 	 
	 

	 	Exchange:
	 	New York Stock Exchange
	 
	 	 	 	 
	 

	 	Related Exchange:
	 	All Exchanges
	 
	 	 	 	 
	 

	 	Procedures for Exercise:	 	 
	 
	 	 	 	 
	 

	 	Potential Exercise Dates:
	 	Each Conversion Date.
	 
	 	 	 	 
	 

	 	Conversion Date:
	 	Each “Conversion Date” as defined in the Indenture.
	 
	 	 	 	 
	 

	 	Required Exercise on Conversion Dates:
	 	On each Conversion Date, a number of Options equal to the number of Convertible Securities in denominations of USD1,000
principal amount submitted for conversion on such Conversion Date in accordance with
the terms of the Indenture shall be automatically exercised, subject to “Notice of
Exercise” below.
	 
	 	 	 	 
	 

	 	Expiration Date:
	 	July 15, 2012
	 
	 	 	 	 
	 

	 	Automatic Exercise:
	 	As provided above under “Required Exercise on Conversion Dates”.
	 
	 	 	 	 
	 

	 	Notice of Exercise:
	 	Notwithstanding anything to the contrary in the Equity Definitions, in
order to exercise any Options, Counterparty must notify Lehman in writing prior to 5:00
PM, New York City time, on the Scheduled Valid Day prior to the scheduled first day of
the applicable Settlement Averaging Period relating to the Convertible Securities
converted on the Conversion Date occurring on the relevant Exercise Date (such
Convertible Securities, the “Relevant Convertible Securities”) of (i) the number of
Options being exercised on such Exercise Date, (ii) the scheduled first day of the
applicable Settlement Averaging Period, (iii) the scheduled settlement date under the
Indenture for the Relevant Convertible Securities and (iv) whether Counterparty has
elected to satisfy its conversion obligations with respect to the Relevant Convertible
Securities in Shares only (as described in Section 10.02(b) of the Indenture) (“Gross
Share Settlement”); provided that with respect to Options relating to Relevant
Convertible Securities with a Conversion Date occurring on or after April 15, 2012,
such Notice of Exercise may be given on or prior to the second Scheduled Valid Day
immediately preceding the Expiration Date and need only specify the number of Options
being exercised.

3

 

	 	 	 	 	 
	 

	 	Notice of Gross Share Settlement:
	 	If Counterparty has elected Gross Share Settlement for all
Convertible Securities with a Conversion Date occurring on or after April 15, 2012,
then with respect to Options relating to such Convertible Securities, Counterparty
shall notify Lehman of such election before 5:00 p.m. (New York City time) on or prior
to April 15, 2012.
	 
	 	 	 	 
	 

	 	Lehman’s Telephone Number and Telex and/or Facsimile Number and Contact Details for purpose
of Giving Notice:
	 	To be provided by Lehman.
	 
	 	 	 	 
	 

	 	Settlement Terms:	 	 
	 
	 	 	 	 
	 

	 	Settlement Method:
	 	Net Share Settlement
	 
	 	 	 	 
	 

	 	Net Share Settlement:
	 	Lehman will deliver to Counterparty, on or before the
relevant Settlement Date, a number of Shares equal to the Net Shares in respect of any
Option exercised or deemed exercised hereunder. In no event will the Net Shares be less
than zero.
	 
	 	 	 	 
	 

	 	Net Shares:
	 	In respect of any Option exercised or deemed exercised, a number of
Shares equal to (i) the sum of the quotients, for each Valid Day during the Settlement
Averaging Period for such exercisable Option, of (A) the product of (x) excess, if any,
of the Relevant Price less the Strike Price on such Valid Day and (y) the Conversion
Rate on such Valid Day divided by (B) such Relevant Price, divided by (ii) the number
of Valid Days in the Settlement Averaging Period; provided that if the calculation
contained in clause (A) above results in a negative number, such number shall be
replaced with the number zero. Notwithstanding the forgoing, if Counterparty has
elected Gross Share Settlement and so specified in the Notice of Exercise, or if
applicable, the Notice of Gross Share Settlement, then with respect to any Option
relating to the Relevant Convertible Securities with a Conversion Date occurring on or
following April 15, 2012, the Net Shares shall be equal to the lesser of (i) a number
of Shares determined as described above and (ii) a number of Shares equal to the Net
Convertible Value for such Option divided by the Obligation Price. Lehman will deliver
cash in lieu of any fractional Shares to be delivered with respect to any Net Shares
valued at the Relevant Price for the last Valid Day of the Settlement Averaging Period.
	 
	 	 	 	 
	 

	 	Net Convertible Value:
	 	With respect to an Option, (i) the Total Convertible Value
for such Option minus (ii) USD 1,000.
	 
	 	 	 	 
	 

	 	Total Convertible Value:
	 	With respect to an Option, (i) the aggregate number of
Shares, if any, that Counterparty is obligated to deliver to the holder of an
Convertible Security for the relevant Conversion Date pursuant

4

 

	 	 	 	 	 
	 

	 	 	 	to Section 10.03(b) of the Indenture, multiplied by
(ii) the Obligation Price.
	 
	 	 	 	 
	 

	 	Obligation Price:
	 	The opening price as displayed under the heading Op on Bloomberg page
PKD.N <equity> (or any successor thereto) on the Obligation Valuation Date.
	 
	 	 	 	 
	 

	 	Obligation Valuation Date:
	 	Settlement Date
	 
	 	 	 	 
	 

	 	Settlement Averaging Period:
	 	For any Option, (i) with respect to an Option with a Conversion
Date occurring prior to April 15, 2012, the twenty (20) consecutive Valid Day period
beginning on, and including, the third Valid Day following such Conversion Date (or the
forty (40) consecutive Valid Day period commencing on, and including, the third Valid
Day following such Conversion Date if Counterparty has elected Gross Share Settlement
and specified Gross Share Settlement in the Notice of Exercise) or (ii) with respect to
an Option with a Conversion Date occurring on or following April 15, 2012, the twenty
(20) consecutive Valid Day period beginning on, and including, the twenty-second (22nd)
Scheduled Valid Day immediately prior to the Expiration Date (or the forty (40)
consecutive Valid Day period commencing on, and including, the forty second (42nd)
Scheduled Valid Day immediately prior to the Expiration Date if Counterparty has
delivered a Notice of Gross Share Settlement to Lehman on or prior to April 15, 2012).
	 
	 	 	 	 
	 

	 	Settlement Date:
	 	For any Option, the third Valid Day following the final day of the
applicable Settlement Averaging Period with respect to such Option.
	 
	 	 	 	 
	 

	 	Settlement Currency:
	 	USD
	 
	 	 	 	 
	 

	 	Valid Day:
	 	A day on which (i) there is no Market Disruption Event and (ii) trading
in the Shares generally occurs on the Exchange or, if the Shares are not then listed on
the Exchange, on the principal other U.S. national or regional securities exchange on
which the Shares are then listed or, if the Shares are not then listed on a U.S.
national or regional securities exchange, on the principal other market on which the
Shares are then traded. If the Shares (or other security for which a Relevant Price
must be determined) is not so listed or quoted, a Valid Day means a Business Day.
	 
	 	 	 	 
	 

	 	Scheduled Valid Day:
	 	A day that is scheduled to be a Valid Day on the primary U.S. national
securities exchange or market on which the Shares are listed or admitted to trading.
	 
	 	 	 	 
	 

	 	Market Disruption Event:
	 	Section 6.3 of the Equity Definitions is hereby replaced in its
entirety by the following:
	 
	 	 	 	 
	 

	 	 	 	Market Disruption Event means in respect of a Share,
(i) a failure by the Exchange or, if the Shares are not
then listed on the Exchange, by the principal other
U.S. national or regional securities exchange on which
the Shares are then listed or, if the Shares are not
then listed on a U.S. national or regional

5

 

	 	 	 	 	 
	 

	 	 	 	securities exchange, by the principal other market on
which the Shares are then traded, to open for trading
during its regular trading session or (ii) the
occurrence or existence prior to 1:00 p.m., New York
City time, on any trading day for the Shares for an
aggregate one half hour period of any suspension or
limitation imposed on trading (by reason of movements
in price exceeding limits permitted by the stock
exchange or otherwise) in the Shares or in any options,
contracts or future contracts relating to the Shares.
	 
	 	 	 	 
	 

	 	Relevant Price:
	 	On any Valid Day, the per Share volume-weighted average price as displayed
under the heading Bloomberg VWAP on Bloomberg page PKD.N <equity> AQR (or any
equivalent successor if such page is not available) in respect of the period from the
scheduled opening time of trading on the Exchange to the Scheduled Closing Time of the
Exchange on such Valid Day (or if such volume-weighted average price is unavailable,
the market value of one Share on such Valid Day, as determined by the Calculation Agent
using a volume-weighted method). The Relevant Price will be determined without regard
to after hours trading or any other trading outside of the regular trading session
hours.
	 
	 	 	 	 
	 

	 	Other Applicable Provisions:
	 	To the extent Lehman is obligated to deliver Shares
hereunder, the provisions of Sections 9.1(c), 9.8, 9.9, 9.10, 9.11 (except that the
Representation and Agreement contained in Section 9.11 of the Equity Definitions shall
be modified by excluding any representations therein relating to restrictions,
obligations, limitations or requirements under applicable securities laws arising as a
result of the fact that Counterparty is the Issuer of the Shares) and 9.12 of the
Equity Definitions will be applicable, except that all references in such provisions to
“Physically-Settled” shall be read as references to “Net Share Settled”. “Net Share
Settled” in relation to any Option means that Lehman is obligated to deliver Shares
hereunder.
	 
	 	 	 	 
	 

	 	Restricted Certificated Shares:
	 	Notwithstanding anything to the contrary in the Equity
Definitions, Lehman may, in whole or in part, deliver Shares in certificated form
representing the Number of Shares to be Delivered to Counterparty in lieu of delivery
through the Clearance System. With respect to such certificated Shares, the
Representation and Agreement contained in Section 9.11 of the Equity Definitions shall
be modified by deleting the remainder of the provision after the word “encumbrance” in
the fourth line thereof.
	 
	 	 	 	 
	 

	 	Share Adjustments:	 	 
	 
	 	 	 	 
	 

	 	Method of Adjustment:
	 	Notwithstanding Section 11.2 of the Equity Definitions, upon the
occurrence of any event or condition set forth in Sections 10.04(a) through (f) of the
Indenture, the Calculation Agent shall upon prior written notice to Counterparty make a
corresponding adjustment, which it reasonably determines in good faith to be necessary,
to the terms relevant to the exercise, settlement or payment of the Transaction.
Immediately upon the

6

 

	 	 	 	 	 
	 

	 	 	 	occurrence of any “Adjustment Event”, as defined in the
Indenture, Counterparty shall notify the Calculation
Agent of such Adjustment Event; and once the
adjustments to be made to the terms of the Indenture
and the Convertible Notes in respect of such Adjustment
Event have been determined, Counterparty shall
immediately notify the Calculation Agent in writing of
the details of such adjustments. Additionally,
notwithstanding Section 11.2 of the Equity Definitions,
Potential Adjustment Event shall not apply to this
Transaction and, if and to the extent that any event or
condition occurs during the term of the Transaction
with respect to Counterparty and the Shares of the type
described in Section 11.2(e), the Calculation Agent
shall not make any adjustment to the terms relevant to
the exercise, settlement or payment of the Transaction,
except to the extent otherwise described in this
paragraph, without the prior written consent of
Counterparty.
	 
	 	 	 	 
	 

	 	Extraordinary Events:	 	 
	 
	 	 	 	 
	 

	 	Merger Events:
	 	Section 12.1(b) of the Equity Definitions is hereby amended and restated in
its entirety for purposes of this Confirmation so that “Merger Event” means the
occurrence of any event or condition set forth in Section 10.06 of the Indenture.
	 
	 	 	 	 
	 

	 	Tender Offer:
	 	Section 12.1(d) of the Equity Definitions is hereby amended and restated in
its entirety for purposes of this Confirmation so that a “Tender Offer” means the
occurrence of any event or condition set forth in Clause (1) of the definition of
“Fundamental Change” in Section 1.01 of the Indenture.
	 
	 	 	 	 
	 

	 	Consequences of Merger Events
and Tender Offers:
	 	Notwithstanding Sections 12.2 and 12.3 of the Equity
Definitions, upon the occurrence of a Merger Event or Tender Offer, the Calculation
Agent shall, to the extent that any such Merger Event or Tender Offer results in
adjustments to the terms of the exercise, settlement or payment under the Indenture,
upon prior written notice to Counterparty, make the corresponding adjustment in respect
of any adjustment under the Indenture to any one or more of the nature of the Shares,
the Number of Options, the Option Entitlement and any other variable relevant to the
exercise, settlement or payment for the Transaction; provided that such adjustment
shall be made without regard to (x) any adjustment to the Conversion Rate pursuant to
Sections 10.01(c), 10.04(g), or 10.04(h) of the Indenture and (y) unless and to the
extent otherwise agreed by Lehman and Counterparty (and provided that Lehman may not be
required so to agree), the election, if any, by Counterparty to adjust the Conversion
Rate and the related conversion obligation pursuant to Section 10.01(d) of the
Indenture.
	 
	 	 	 	 
	 

	 	Nationalization, Insolvency or Delisting:	 	Cancellation and Payment (Calculation Agent Determination); provided that, in addition to the provisions of
Section 12.6(a)(iii) of the Equity Definitions, it will also constitute a Delisting if
the Exchange is located in the United States and the Shares are not immediately
re-listed, re-traded or

7

 

	 	 	 	 	 
	 

	 	 	 	re-quoted on any of the New York Stock Exchange, the
American Stock Exchange or the NASDAQ National Market
System (or their respective successors); if the Shares
are immediately re-listed, re-traded or re-quoted on
any such exchange or quotation system, such exchange or
quotation system shall thereafter be deemed to be the
Exchange; provided further that, in determining any
Cancellation Amount, notwithstanding any term or
provision in the Agreement or the Equity Definitions,
the Calculation Agent shall comply with the terms and
provisions set forth in Section 8(n)(iii) of this
Confirmation.
	 
	 	 	 	 
	 

	 	Additional Disruption Events:	 	 
	 
	 	 	 	 
	 

	 	(a) Change in Law:
	 	Applicable (provided that clause (y) of this term set forth in
Section 12.9(a)(ii) of the Equity Definitions shall not apply)
	 
	 	 	 	 
	 

	 	(b) Insolvency Filing:
	 	Applicable
	 
	 	 	 	 
	 

	 	(c) Hedging Disruption:
	 	Applicable
	 
	 	 	 	 
	 

	 	Hedging Party:
	 	For all applicable Additional Disruption Events, Lehman
	 
	 	 	 	 
	 

	 	Determining Party:
	 	For all applicable Additional Disruption Events, Lehman
	 
	 	 	 	 
	 

	 	Non-Reliance:
	 	Applicable
	 
	 	 	 	 
	 

	 	Agreements and Acknowledgments Regarding Hedging Activities:
	 	Applicable.
	 
	 	 	 	 
	 

	 	Additional Acknowledgments:
	 	Applicable

     3. Calculation Agent: LBI; provided that all calculations, determinations and
adjustments made by LBI in respect of this Transaction as Calculation Agent shall be made in good
faith and in a commercially reasonable manner.

     4. Account Details:

          Lehman Payment Instructions:

JPMorgan Chase Bank

Swift Code: CHASUS33XXX

ABA: 021000021

Account Name: Lehman Brothers OTC Derivatives

Account No.: 066626277

          Counterparty Payment Instructions:

To be provided by Counterparty.

     5. Offices:

8

 

The Office of Lehman for the Transaction is:

	 	 	 	 	 
	 

	 	Lehman Brothers OTC Derivatives Inc.
	 	 
	 

	 	c/o Lehman Brothers	 	 
	 

	 	745 Seventh Avenue	 	 
	 

	 	New York, NY 10019	 	 
	 

	 	Attn: Andrew Yare – Transaction Management Group	 	 
	 

	 	Facsimile: 646-885-9546 (United States of America)	 	 
	 

	 	Telephone: 212-526-9986	 	 

The Office of Counterparty for the Transaction is:

	 	 	 	 	 
	 

	 	Parker Drilling Company
	 	 
	 

	 	1401 Enclave Parkway, Suite 600	 	 
	 

	 	Houston, Texas 77077	 	 
	 

	 	Attn: General Counsel	 	 

	 	6.	 	Notices: For purposes of this Confirmation:

	 	(a)	 	Address for notices or communications to Counterparty:

	 	 	 	 	 
	 

	 	To:
	 	Parker Drilling Company
	 

	 	 	 	1401 Enclave Parkway, Suite 600
	 

	 	 	 	Houston, Texas 77077
	 

	 	Attn:
	 	General Counsel
	 

	 	Telephone:
	 	(281) 406-2000
	 

	 	Facsimile:
	 	(281) 406-2001

	 	(b)	 	Address for notices or communications to Lehman:

To be provided by Lehman

	 	7.	 	Representations, Warranties and Agreements:

	 	(a)	 	In addition to the representations and warranties in the Agreement and those
contained elsewhere herein, Counterparty represents and warrants to and for the benefit
of, and agrees with, Lehman as follows:

	 	(i)	 	On the Trade Date, (A) none of Counterparty and its officers
and directors is aware of any material nonpublic information regarding
Counterparty or the Shares and (B) all reports and other documents filed by
Counterparty with the Securities and Exchange Commission pursuant to the
Securities Exchange Act of 1934, as amended (the “Exchange Act”) when
considered as a whole (with the more recent such reports and documents deemed
to amend inconsistent statements contained in any earlier such reports and
documents), do not contain any untrue statement of a material fact or any
omission of a material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances in which they were
made, not misleading.

9

 

	 	(ii)	 	(A) On the Trade Date, the Shares or securities that are
convertible into, or exchangeable or exercisable for Shares, are not, and shall
not be, subject to a “restricted period,” as such term is defined in Regulation
M under the Exchange Act (“Regulation M”) and (B) Counterparty shall not engage
in any “distribution,” as such term is defined in Regulation M, other than a
distribution meeting the requirements of the exceptions set forth in sections
101(b)(10) and 102(b)(7) of Regulation M, until the second Exchange Business
Day immediately following the Trade Date.
	 
	 	(iii)	 	On the Trade Date, neither Counterparty nor any “affiliate” or
“affiliated purchaser” (each as defined in Rule 10b-18 of the Exchange Act
(“Rule 10b-18”)) shall directly or indirectly (including, without limitation,
by means of any cash-settled or other derivative instrument) purchase, offer to
purchase, place any bid or limit order that would effect a purchase of, or
commence any tender offer relating to, any Shares (or an equivalent interest,
including a unit of beneficial interest in a trust or limited partnership or a
depository share) or any security convertible into or exchangeable or
exercisable for Shares, except through Lehman.
	 
	 	(iv)	 	Without limiting the generality of Section 13.1 of the Equity
Definitions, Counterparty acknowledges that Lehman is not making any
representations or warranties with respect to the treatment of the Transaction
under FASB Statements 133, as amended, or 150, EITF Issue No. 00-19 (or any
successor issue statements) or under FASB’s Liabilities & Equity Project.
	 
	 	(v)	 	Without limiting the generality of Section 3(a)(iii) of the
Agreement, the Transaction will not violate Rule 13e-1 or Rule 13e-4 under the
Exchange Act.
	 
	 	(vi)	 	Prior to the Trade Date, Counterparty shall deliver to Lehman a
resolution of Counterparty’s board of directors authorizing the Transaction and
such other certificate or certificates as Lehman shall reasonably request.
	 
	 	(vii)	 	Counterparty is not entering into this Confirmation to create
actual or apparent trading activity in the Shares (or any security convertible
into or exchangeable for Shares) in violation of the Exchange Act or to raise
or depress or otherwise manipulate the price of the Shares (or any security
convertible into or exchangeable for Shares) or otherwise in violation of the
Exchange Act.
	 
	 	(viii)	 	Counterparty is not, and after giving effect to the transactions contemplated
hereby will not be, an “investment company” as such term is defined in the
Investment Company Act of 1940, as amended.
	 
	 	(ix)	 	On the Trade Date (A) the assets of Counterparty at their fair
valuation exceed the liabilities of Counterparty, including contingent
liabilities, (B) the capital of Counterparty is adequate to conduct the
business of Counterparty and (C) Counterparty has the ability to pay its debts
and obligations as such debts mature and does not intend to, or does not
believe that it will, incur debt beyond its ability to pay as such debts
mature.

10

 

	 	(x)	 	On the Trade Date, the representations and warranties of
Counterparty set forth in Section 3 of the Agreement and Section 1(A) of the
Underwriting Agreement are true and correct.
	 
	 	(xi)	 	Counterparty understands no obligations of Lehman to it
hereunder will be entitled to the benefit of deposit insurance and that such
obligations will not be guaranteed by any affiliate of Lehman or any
governmental agency.

	 	(b)	 	Each of Lehman and Counterparty agrees and represents that it is an “eligible
contract participant” as defined in Section 1a(12) of the U.S. Commodity Exchange Act,
as amended.
	 
	 	(c)	 	Each of Lehman and Counterparty acknowledges that the offer and sale of the
Transaction to it is intended to be exempt from registration under the Securities Act
of 1933, as amended (the “Securities Act”), by virtue of Section 4(2) thereof.
Accordingly, Counterparty represents and warrants to Lehman that (i) it has the
financial ability to bear the economic risk of its investment in the Transaction and is
able to bear a total loss of its investment, (ii) it is an “accredited investor” as
that term is defined in Regulation D as promulgated under the Securities Act, (iii) it
is entering into the Transaction for its own account and without a view to the
distribution or resale thereof, and (iv) the assignment, transfer or other disposition
of the Transaction has not been and will not be registered under the Securities Act and
is restricted under this Confirmation, the Securities Act and state securities laws.
	 
	 	(d)	 	Each of Lehman and Counterparty agrees and acknowledges that Lehman is a “swap
participant” and “financial participant”, and that Counterparty is a “swap
participant”, in each case within the meaning of Sections 101(53C) and 101(22A) of
Title 11 of the United States Code (the “Bankruptcy Code”). The parties hereto further
agree and acknowledge (A) that this Confirmation is (i) a “securities contract,” as
such term is defined in Section 741(7) of the Bankruptcy Code, with respect to which
each payment and delivery hereunder is a “settlement payment,” as such term is defined
in Section 741(8) of the Bankruptcy Code, and (ii) a “swap agreement,” as such term is
defined in Section 101(53B) of the Bankruptcy Code, with respect to which each payment
and delivery hereunder is a “transfer,” as such term is defined in Section 101(54) of
the Bankruptcy Code, and (B) that Lehman is entitled to the protections afforded by,
among other sections, Section 362(b)(6), 362(b)(17), 546(e), 546(g), 555 and 560 of the
Bankruptcy Code.
	 
	 	(e)	 	Counterparty shall deliver to Lehman an opinion of counsel, dated as of the
Effective Date and reasonably acceptable to Lehman in form and substance, with respect
to the matters set forth in Section 3(a) of the Agreement.
	 
	 	8.	 	Other Provisions:
	 
	 	(a)	 	Additional Termination Events. The occurrence of (i) an event of default with
respect to Counterparty under the terms of the Convertible Securities as set forth in
Section 6.01 of the Indenture which results in an acceleration of indebtedness
evidenced by the outstanding Securities under the Indenture, (ii) an Amendment Event or
(iii) a Repayment Event shall be an Additional Termination Event with respect to which
the Transaction is the sole Affected Transaction and Counterparty is the sole Affected
Party and Lehman shall be the party entitled to designate an Early Termination Date
pursuant to Section 6(b) of the Agreement; provided that in the case of a Repayment
Event the Transaction shall be subject to termination only in respect of the number of

11

 

	 	 	 	Convertible Securities that cease to be outstanding in connection with or as a
result of such Repayment Event.

     “Amendment Event” means that Counterparty amends, modifies, supplements or waives any
term of the Indenture or the Convertible Securities governing the principal amount, coupon,
maturity, repurchase obligation of Counterparty, redemption right of Counterparty, any term
relating to conversion of the Convertible Securities (including changes to the conversion
price, conversion settlement dates or conversion conditions), or any term that would require
consent of the holders of not less than 100% of the principal amount of the Convertible
Securities to amend.

     “Repayment Event” means that (A) any Convertible Securities are repurchased (whether in
connection with or as a result of a change of control, howsoever defined, or for any other
reason) by Counterparty or any of its subsidiaries, (B) any Convertible Securities are
delivered to Counterparty in exchange for delivery of any property or assets of Counterparty
or any of its subsidiaries (howsoever described), (C) any principal of any of the
Convertible Securities is repaid prior to the final maturity date of the Convertible
Securities (whether following acceleration of the Convertible Securities or otherwise), or
(D) any Convertible Securities are exchanged by or for the benefit of the holders thereof
for any other securities of Counterparty or any of its affiliates (or any other property, or
any combination thereof) pursuant to any exchange offer or similar transaction; provided
that, in the case of clause (B) and clause (D), conversions of the Convertible Securities
pursuant to the terms of the Indenture as in effect on the date hereof shall not be
Repayment Events.

	 	(b)	 	Alternative Calculations and Payment on Early Termination and on Certain
Extraordinary Events. If, subject to Section 8(k) below, Lehman shall owe Counterparty
any amount pursuant to Section 12.2 or 12.3 of the Equity Definitions and “Consequences
of Merger Events and Tender Offers” above, or Sections 12.6, 12.7 or 12.9 of the Equity
Definitions (except in the event of an Insolvency, a Nationalization, a Tender Offer or
a Merger Event, in each case, in which the consideration or proceeds to be paid to
holders of Shares consists solely of cash) or pursuant to Section 6(d)(ii) of the
Agreement (except in the event of an Event of Default in which Counterparty is the
Defaulting Party or a Termination Event in which Counterparty is the Affected Party,
that resulted from an event or events within Counterparty’s control) (a “Payment
Obligation”), Counterparty shall have the right, in its sole discretion, to require
Lehman to satisfy any such Payment Obligation by the Share Termination Alternative (as
defined below) by giving irrevocable telephonic notice to Lehman, confirmed in writing
within one Scheduled Trading Day, between the hours of 9:00 A.M. and 4:00 P.M. New York
City time on the Merger Date, Tender Offer Date, Announcement Date or Early Termination
Date, as applicable (“Notice of Share Termination”). Upon such Notice of Share
Termination, the following provisions shall apply on the Scheduled Trading Day
immediately following the Merger Date, the Tender Offer Date, Announcement Date or
Early Termination Date, as applicable:

	 	 	 
	Share Termination Alternative:

	 	Applicable and means that Lehman shall
deliver to Counterparty the Share
Termination Delivery Property on the date
on which the Payment Obligation would
otherwise be due pursuant to Section 12.7
or 12.9 of the Equity Definitions or
Section 6(d)(ii) of the Agreement, as
applicable (the “Share Termination
Payment Date”), in satisfaction of the
Payment Obligation.

12

 

	 	 	 
	Share Termination Delivery 

Property:

	 	A number of Share Termination Delivery
Units, as calculated by the Calculation
Agent, equal to the Payment Obligation
divided by the Share Termination Unit
Price. The Calculation Agent shall
adjust the Share Termination Delivery
Property by replacing any fractional
portion of a security therein with an
amount of cash equal to the value of such
fractional security based on the values
used to calculate the Share Termination
Unit Price. For the avoidance of doubt
(and notwithstanding anything herein, in
the Agreement or otherwise to the
contrary), the Share Termination Delivery
Property may included shares which are
unregistered under the Securities Act.
	 
	 	 
	Share Termination Unit Price:

	 	The value of property contained in one
Share Termination Delivery Unit on the
date such Share Termination Delivery
Units are to be delivered as Share
Termination Delivery Property, as
determined by the Calculation Agent in
its discretion by commercially reasonable
means and notified by the Calculation
Agent to Lehman at the time of
notification of the Payment Obligation.
	 
	 	 
	Share Termination Delivery Unit:

	 	In the case of a Termination Event, Event
of Default or Delisting, one Share or, in
the case of an Insolvency,
Nationalization, Merger Event or Tender
Offer, a unit consisting of the number or
amount of each type of property received
by a holder of one Share (without
consideration of any requirement to pay
cash or other consideration in lieu of
fractional amounts of any securities) in
such Insolvency, Nationalization, Merger
Event or Tender Offer. If such
Insolvency, Nationalization, Merger Event
or Tender Offer involves a choice of
consideration to be received by holders,
such holder shall be deemed to have
elected to receive the maximum possible
amount of cash.
	 
	 	 
	Failure to Deliver:

	 	Applicable
	 
	 	 
	Other Applicable Provisions:

	 	If Share Termination Alternative is
applicable, the provisions of Sections
9.8, 9.9, 9.10, 9.11 (except that the
Representation and Agreement contained in
Section 9.11(i), (iv) and (v) of the
Equity Definitions shall be modified by
excluding any representations therein
relating to restrictions, obligations,
limitations or requirements under
applicable securities laws arising as a
result of the fact that Counterparty is
the Issuer of the Shares) and 9.12 of the
Equity Definitions will be applicable,
except that all references in such
provisions to “Physically-Settled” shall
be read as references to “settled by
Share Termination Alternative” and all
references to “Shares” shall be read as
references to “Share Termination Delivery
Units”.

	 	(c)	 	Disposition of Hedge Shares. Counterparty hereby agrees that if, in the
commercially reasonable judgment of Lehman acting in good faith, any Shares (the “Hedge
Shares”) acquired by Lehman for the purpose of hedging its obligations pursuant to the
Transaction cannot be sold in the public market by Lehman without registration under
the Securities Act (other than as a result of Lehman being an affiliate, as such term
is used in the Securities Act and rules and regulations promulgated thereunder, of
Counterparty), Counterparty shall, at its election: (i) in order to allow Lehman to
sell the Hedge Shares in a registered offering, make available to Lehman an effective
registration statement under the Securities Act to cover the resale of such Hedge
Shares and (A) enter into an agreement, in form and substance satisfactory to Lehman,
substantially in the form of an underwriting agreement for a registered offering, (B)
provide accountant’s “comfort” letters in customary form for registered offerings of
equity securities, (C) provide disclosure opinions of

13

 

	 	 	 	nationally recognized outside counsel to Counterparty reasonably acceptable to Lehman,
(D) provide other customary opinions, certificates and closing documents customary in form
for registered offerings of equity securities and (E) afford Lehman a reasonable opportunity
to conduct a “due diligence” investigation with respect to Counterparty customary in scope
for underwritten offerings of equity securities; provided, however, that if Lehman, in its
commercially reasonable judgment, is not reasonably satisfied with access to Counterparty’s
due diligence materials, the results of its due diligence investigation, or the procedures
and documentation for the registered offering referred to above, then clause (ii) or clause
(iii) of this Section 8(c) shall apply at the election of Counterparty; (ii) in order to
allow Lehman to sell the Hedge Shares in a private placement, enter into a private placement
agreement substantially similar to private placement underwriting agreements customary for
private placements of equity securities, in form and substance reasonably satisfactory to
Lehman, including customary representations, covenants, blue sky and other governmental
filings and/or registrations, indemnities to Lehman, due diligence rights (for Lehman or any
designated buyer of the Hedge Shares from Lehman), opinions and certificates and such other
documentation as is customary for private placements agreements, all reasonably acceptable
to Lehman (in which case, the Calculation Agent shall make any adjustments to the terms of
the Transaction that are necessary, in its reasonable judgment, to compensate Lehman for any
discount from the public market price of the Shares incurred on the sale of Hedge Shares in
a private placement); or (iii) purchase the Hedge Shares from Lehman at the VWAP Price on
such Exchange Business Days, and in the amounts, requested by Lehman. “VWAP Price” means,
on any Exchange Business Day, the per Share volume-weighted average price as displayed under
the heading “Bloomberg VWAP” on Bloomberg page PKD.N <equity> VAP (or any successor
thereto) in respect of the period from 9:30 a.m. to 4:00 p.m. (New York City time) on such
Exchange Business Day (or if such volume-weighted average price is unavailable, the market
value of one Share on such Exchange Business Day, as determined by the Calculation Agent
using a volume-weighted method).
	 
	 	(d)	 	Amendment to Equity Definitions. The following amendment shall be made to the
Equity Definitions:

     (i) Section 12.6(a)(ii) of the Equity Definitions is hereby amended by (1)
deleting from the fourth line thereof the word “or” after the word “official” and
inserting a comma therefor, and (2) deleting the semi-colon at the end of subsection
(B) thereof and inserting the following words therefor “or (C) at Lehman’s option,
the occurrence of any of the events specified in Section 6.01(h) or (i) of the
Indenture.”

     (ii) Section 12.9(b)(i) of the Equity Definitions is hereby amended by (1)
replacing “either party may elect” with “Lehman may elect” and (2) replacing “notice
to the other party “with “notice to Counterparty” in the first sentence of such
section.

	 	(e)	 	Repurchase Notices. Counterparty shall, on any day on which Counterparty
effects any repurchase of Shares, promptly give Lehman a written notice of such
repurchase (a “Repurchase Notice”) on such day if, following such repurchase, the
Notice Percentage as determined on such day is (i) greater than 6% and (ii) greater by
0.5% than the Notice Percentage included in the immediately preceding Repurchase Notice
(or, in the case of the first such Repurchase Notice, greater than the Notice
Percentage as of the date hereof). The “Notice Percentage” as of any day is the
fraction, expressed as a percentage, the numerator of which is the Number of Shares and
the denominator of which is the number of Shares outstanding on such day. In the event
that Counterparty fails to provide Lehman with a Repurchase Notice on the day and in
the manner specified in this Section 8(e) then Counterparty agrees to indemnify and
hold harmless Lehman, its affiliates and their respective directors, officers,
employees, agents and controlling persons (Lehman and each such person being an
“Indemnified Party”) from and against any and all losses, claims, damages and
liabilities (or actions in respect thereof), joint or several, to which such
Indemnified Party may become subject under applicable securities laws, including
without

14

 

	 	 	 	limitation, Section 16 of the Exchange Act, relating to or arising out of such
failure. If for any reason the foregoing indemnification is unavailable to any
Indemnified Party or insufficient to hold harmless any Indemnified Party, then
Counterparty shall contribute, to the maximum extent permitted by law, to the amount
paid or payable by the Indemnified Party as a result of such loss, claim, damage or
liability. In addition, Counterparty will reimburse any Indemnified Party for all
expenses (including reasonable counsel fees and expenses) reasonably incurred (after
notice to Counterparty in the form of a documented invoice) in connection with the
investigation of, preparation for or defense or settlement of any pending or
threatened claim or any action, suit or proceeding arising from such failure,
whether or not such Indemnified Party is a party thereto and whether or not such
claim, action, suit or proceeding is initiated or brought by or on behalf of
Counterparty. This indemnity shall survive the completion of the Transaction
contemplated by this Confirmation and any assignment and delegation of the
Transaction made pursuant to this Confirmation or the Agreement shall inure to the
benefit of any permitted assignee of Lehman.
	 
	 	(f)	 	Transfer and Assignment. Lehman may transfer or assign its rights and
obligations hereunder and under the Agreement, in whole or in part, to any of its
affiliates, or any entities sponsored or organized by, or on behalf of or for the
benefit of, Lehman, provided that such transferees are not less creditworthy than, or
such transferees’ payment and performance obligations under this Transaction are
guaranteed by, Lehman Brothers Holdings Inc., and for so long as the ratings then
assigned to such transferees (or, in the case of any transferee whose payment and
performance obligations under this Transaction are guaranteed by Lehman Brothers
Holdings Inc., Lehman Brothers Holdings Inc.’s) long term unsecured debt or deposit
obligations (not supported by third party credit enhancement) is not less than “A” by
Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc. or
“A2” by Moody’s Investors Service, Inc. If at any time at which the Equity Percentage
exceeds 8%, Lehman, in its discretion, is unable to effect a transfer or assignment of
a portion of its rights and obligations under this Transaction with the prior written
consent of Counterparty (such consent not to be unreasonably withheld) covering the
number of Shares causing the Equity Percentage to exceed 8% (the “Excess Shares”) after
its commercially reasonable efforts on pricing terms reasonably acceptable to Lehman
such that the Equity Percentage is reduced to 8% or less, Lehman may designate any
Scheduled Trading Day as an Early Termination Date with respect to a such portion (the
“Terminated Portion”) of the Transaction constituting the Excess Shares, such that the
Equity Percentage following such partial termination will be equal to or less than 8%.
In the event that Lehman so designates an Early Termination Date with respect to such a
portion of the Transaction, a payment or delivery shall be made pursuant to Section 6
of the Agreement and Section 8(b) of this Confirmation as if (i) an Early Termination
Date had been designated in respect of a Transaction having terms identical to the
Terminated Portion of the Transaction, (ii) Counterparty shall be the sole Affected
Party with respect to such partial termination and (iii) such portion of the
Transaction shall be the only Terminated Transaction. The “Equity Percentage” as of
any day is the fraction, expressed as a percentage, (A) the numerator of which is the
sum of the number of Shares that Lehman or any of its affiliates beneficially own
(within the meaning of Section 13 of the Exchange Act) on such day, other than any
Shares so owned as a hedge of the Transaction, and the Number of Shares and (B) the
denominator of which is the number of Shares outstanding on such day.
	 
	 	(g)	 	Staggered Settlement. Lehman may, by notice to Counterparty prior to any
Settlement Date (a “Nominal Settlement Date”), elect to deliver the Shares on two or
more dates (each, a “Staggered Settlement Date”) or at two or more times on the Nominal
Settlement Date as follows:

	 	(i)	 	in such notice, Lehman will specify to Counterparty the related
Staggered Settlement Dates (each of which will be on or prior to such Nominal
Settlement Date, but not prior to the beginning of the related “Cash Settlement
Averaging Period”) or delivery times and how it will allocate the Shares it is
required to deliver hereunder among the Staggered Settlement Dates or delivery
times;

15

 

	 	(ii)	 	the aggregate number of Shares that Lehman will deliver to
Counterparty hereunder on all such Staggered Settlement Dates and delivery
times will equal the number of Shares that Lehman would otherwise be required
to deliver on such Nominal Settlement Date; and
	 
	 	(iii)	 	Lehman shall reimburse Counterparty for all reasonable and
documented operational expenses related to said staggered settlement.

	 	(h)	 	Right to Extend. Lehman may postpone any Potential Exercise Date or any other
date of valuation or delivery by Lehman, with respect to some or all of the relevant
Options (in which event the Calculation Agent shall make appropriate adjustments to the
Shares it is required to deliver hereunder), if Lehman determines, in its reasonable
discretion, and with the prior written consent of Counterparty (such consent not to be
unreasonably withheld), that such extension is reasonably necessary or appropriate to
preserve Lehman’s hedging or hedge unwind activity hereunder in light of existing
liquidity conditions or to enable Lehman to effect purchases of Shares in connection
with its hedging, hedge unwind or settlement activity hereunder in a manner that would,
if Lehman were Counterparty or an affiliated purchaser of Counterparty, be in
compliance with applicable legal, regulatory or self-regulatory requirements, or with
related policies and procedures applicable to Lehman.
	 
	 	(i)	 	Disclosure. Effective from the date of commencement of discussions concerning
the Transaction, Counterparty and each of its employees, representatives, or other
agents may disclose to any and all persons, without limitation of any kind, the tax
treatment and tax structure of the Transaction and all materials of any kind (including
opinions or other tax analyses) that are provided to Counterparty relating to such tax
treatment and tax structure.
	 
	 	(j)	 	Designation by Lehman. Notwithstanding any other provision in this
Confirmation to the contrary requiring or allowing Lehman to purchase, sell, receive or
deliver any Shares or other securities to or from Counterparty, Lehman may designate
any of its affiliates to purchase, sell, receive or deliver such shares or other
securities and otherwise to perform Lehman obligations in respect of the Transaction
and any such designee may assume such obligations. Lehman shall be discharged of its
obligations to Counterparty to the extent of any such performance, and shall not be
discharged at any time prior thereto.
	 
	 	(k)	 	No Netting and Set-off. Multiple Transaction Payment Netting and the
provisions of Section 6(f) of the Agreement shall not apply. Each party waives any and
all rights it may have to set-off delivery or payment obligations it owes to the other
party under the Transaction against any delivery or payment obligation owed to it by
the other party, whether arising under the Agreement, under any other agreement between
the parties thereto, by operation or law or otherwise.
	 
	 	(l)	 	Equity Rights. Lehman acknowledges and agrees that this Confirmation is not
intended to convey to it rights with respect to the Transaction that are senior to the
claims of common stockholders in the event of Counterparty’s bankruptcy. For the
avoidance of doubt, the parties agree that the preceding sentence shall not apply at
any time other than during Counterparty’s bankruptcy to any claim arising as a result
of a breach by Counterparty of any of its obligations under this Confirmation or the
Agreement.

16

 

	 	(m)	 	Early Unwind. In the event the sale by Counterparty of the Convertible
Securities is not consummated with the initial purchasers pursuant to the Underwriting
Agreement for any reason by the close of business in New York on July 5 (or such later
date as agreed upon by the parties, which in no event shall be later than July 10)
(July 5 or such later date being the “Early Unwind Date”), the Transaction shall
automatically terminate (the “Early Unwind”), on the Early Unwind Date and (i) the
Transaction and all of the respective rights and obligations of Lehman and Counterparty
thereunder shall be cancelled and terminated and (ii) Counterparty shall pay to Lehman
an amount in cash equal to the aggregate amount of costs and expenses reasonably
incurred by Lehman relating to the unwinding of Lehman’s hedging activities in respect
of the Transaction (including market losses incurred in reselling any Shares purchased
by Lehman or its affiliates in connection with such hedging activities). Following
such termination, cancellation and payment, each party shall be released and discharged
by the other party from and agrees not to make any claim against the other party with
respect to any obligations or liabilities of either party arising out of and to be
performed in connection with the Transaction either prior to or after the Early Unwind
Date. Lehman and Counterparty represent and acknowledge to the other that upon an
Early Unwind and following the payment referred to above, all obligations with respect
to the Transaction shall be deemed fully and finally discharged.
	 
	 	(n)	 	Amendments to the Agreement. Notwithstanding any term or provision contained
in the Agreement, (i) no Potential Event of Default or Event of Default shall apply
with respect to Counterparty as a defaulting party, and no Termination Event shall
apply with respect to Counterparty as an Affected Party, in each and any such case,
except to the extent any such Event of Default or Termination Event results in the
occurrence and continuance of an Additional Termination Event (as specified in this
Confirmation) or an Extraordinary Event elected as being applicable in this
Confirmation and Counterparty shall have no Specified Entities or Credit Support
Providers for purposes of the Agreement and this Transaction; (ii) without limiting the
generality of the foregoing, the Events of Default specified in Sections 5(a)(i),
(ii) (except to the extent that any violation of any such agreement or
obligation described therein or in this Confirmation (x) would reasonably be expected
to have a material adverse effect on the ability of BofA to perform its obligations
under this Transaction or (y) pertains to the disposition of Hedge Shares pursuant to
Section 8(c) of this Confirmation), (iii), (iv) (except to the extent any
misrepresentation made under this Confirmation or under the Agreement would reasonably
be expected to have a material adverse effect on the ability of Lehman to perform its
obligations under this Transaction), (v), (vi) or (vii) of the Agreement, and the
Termination Events specified in the Agreement, shall not apply with respect to
Counterparty; and (iii) with respect to any early termination of all or any portion of
this Transaction for any reason pursuant to the terms of this Confirmation, the Equity
Definitions and/or the Agreement, and additionally notwithstanding any term or
provision in the Equity Definitions, (A) any amount payable (or to be payable) by
either party hereto to the other party hereto arising as a result of such early
termination (including any costs resulting from unwinding hedging transactions) shall
be determined in good faith and in a commercially reasonable manner and (B) without
limiting the foregoing, the party determining the amount of any such payment (whether
Lehman, Counterparty or the Calculation Agent) shall (1) utilize commercially
reasonable procedures and methodologies so as to produce a commercially reasonable
determination of such amount, and (2) disclose in reasonable detail the material
information utilized (or to be utilized) by such party in making such determination.
	 
	 	(o)	 	Guarantee. Lehman agrees, no later than the Effective Date, to provide a
guarantee of Lehman Brothers Holdings Inc. dated the Trade Date in a form reasonably
acceptable to Counterparty, and the parties agree that the Guarantee shall be a Credit
Support Document and Lehman Brothers Holdings Inc. shall be a Credit Support Provider
under the Agreement.
	 
	 	(p)	 	Regulatory Provisions.

17

 

	 	(i)	 	Issuer represents and warrants that it has received and read
and understands the Notice of Regulatory Treatment and the OTC Option Risk
Disclosure Statement.
	 
	 	(ii)	 	The Agent will furnish Issuer upon written request a statement as to
the source and amount of any remuneration received or to be received by the
Agent in connection with the Transaction evidenced hereby.

	 	(q)	 	Waiver of Trial by Jury. EACH OF COUNTERPARTY AND LEHMAN HEREBY IRREVOCABLY
WAIVES (ON ITS OWN BEHALF AND, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ON BEHALF OF
ITS STOCKHOLDERS) ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
(WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THE
TRANSACTION OR THE ACTIONS OF LEHMAN OR ITS AFFILIATES IN THE NEGOTIATION, PERFORMANCE
OR ENFORCEMENT HEREOF.
	 
	 	(r)	 	Governing Law. THIS CONFIRMATION SHALL BE GOVERNED BY THE LAWS OF THE STATE OF
NEW YORK. THE PARTIES HERETO IRREVOCABLY SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE
COURTS OF THE STATE OF NEW YORK AND THE UNITED STATES COURT FOR THE SOUTHERN DISTRICT
OF NEW YORK IN CONNECTION WITH ALL MATTERS RELATING HERETO AND WAIVE ANY OBJECTION TO
THE LAYING OF VENUE IN, AND ANY CLAIM OF INCONVENIENT FORUM WITH RESPECT TO, THESE
COURTS.

18

 

Please confirm your agreement with the foregoing by executing this Confirmation and returning such
Confirmation, in its entirety, to us at facsimile number 646-885-9546 (United States of America),
Attention: Documentation.

	 	 	 	 	 	 	 	 	 	 	 
	Yours sincerely,	 	 	 	Accepted and agreed to:	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Lehman Brothers OTC Derivatives Inc.	 	 	 	Parker Drilling Company	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:

	 	 	 	 	 	By:
	 	 	 	 
	 

	 	 
	 	 	 	 	 	 	 	 
	Name:	 	 	 	Name:	 	 
	Title:	 	 	 	Title:	 	 

Execution time will be furnished upon Party B’s written request.

19

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