Document:

<PAGE>   1
                                                                    EXHIBIT 10.1

                            STOCK PURCHASE AGREEMENT

                                      AMONG

                             PATTERSON ENERGY, INC.

                       PATTERSON DRILLING COMPANY LP, LLLP

                                       AND

                                KENNETH REYNOLDS

                                       AND

                                  GARY CHAPPELL

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                                TABLE OF CONTENTS

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<S>                      <C>                                                                                   <C>
ARTICLE I - THE STOCK PURCHASE

   SECTION 1.1           The Stock Purchase.......................................................................1
   SECTION 1.2           Purchase Consideration...................................................................1
   SECTION 1.3           Adjustments for Closing Date Working Capital.............................................2
   SECTION 1.4           Closing..................................................................................2

ARTICLE II - REPRESENTATIONS AND WARRANTIES OF PEC AND PDC

   SECTION 2.1           Organization, Standing and Power.........................................................3
   SECTION 2.2           Authority; Non-Contravention.............................................................3
   SECTION 2.3           Capital Structure........................................................................4
   SECTION 2.4           SEC Documents............................................................................4
   SECTION 2.5           Brokers..................................................................................4

ARTICLE III - REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS

   SECTION 3.1           Organization, Standing and Power.........................................................5
   SECTION 3.2           Capital Structure........................................................................5
   SECTION 3.3           Ownership of Company Stock...............................................................5
   SECTION 3.4           Authority; Non-Contravention.............................................................6
   SECTION 3.5           Financial Statements.....................................................................6
   SECTION 3.6           Absence of Material Adverse Change.......................................................7
   SECTION 3.7           Taxes....................................................................................7
   SECTION 3.8           Real and Personal Property; Title Thereto................................................7
   SECTION 3.9           Accounts Receivable......................................................................8
   SECTION 3.10          Liabilities..............................................................................8
   SECTION 3.11          Insurance................................................................................8
   SECTION 3.12          Contracts and Other Agreements...........................................................8
   SECTION 3.13          Records..................................................................................8
   SECTION 3.14          Transactions with Affiliates.............................................................8
   SECTION 3.15          Employee Benefit Plans; Employment Agreements............................................9
   SECTION 3.16          Labor Matters............................................................................9
   SECTION 3.17          Environmental Matters....................................................................9
   SECTION 3.18          Litigation..............................................................................11
   SECTION 3.19          Governmental Licenses and Permits; Compliance with Law..................................11
   SECTION 3.20          Brokers.................................................................................11
   SECTION 3.21          Bank Accounts...........................................................................11
   SECTION 3.22          Distributions to Stockholders of the Company............................................12
   SECTION 3.23          Workers' Compensation Claims............................................................12
   SECTION 3.24          Loans or Advances to Stockholders.......................................................12
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<S>                      <C>                                                                                   <C>
ARTICLE IV - ADDITIONAL AGREEMENTS

   SECTION 4.1           Fees and Expenses.......................................................................12
   SECTION 4.2           Reasonable Efforts......................................................................12
   SECTION 4.3           Public Announcements....................................................................12
   SECTION 4.4           Stockholders Indemnification............................................................13
   SECTION 4.5           Repayment of Bank Debt..................................................................13
   SECTION 4.6           Repayment of Stockholders Indebtedness to the Company...................................13
   SECTION 4.7           Certain Tax Matters.....................................................................13

ARTICLE V - CONDITIONS PRECEDENT TO THE STOCK PURCHASE

   SECTION 5.1           Conditions to Each Party's Obligation to Effect the Stock Purchase......................14
   SECTION 5.2           Conditions to Obligation of the Stockholders to Effect
                         the Stock Purchase......................................................................15
   SECTION 5.3           Conditions to Obligations of PEC and PDC to Effect the Stock Purchase...................15

ARTICLE VI - POST CLOSING COVENANTS

   SECTION 6.1           Sale of Assets to Stockholders..........................................................17
   SECTION 6.2           Registration Statement..................................................................18

ARTICLE VII - GENERAL PROVISIONS

   SECTION 7.1           Notices.................................................................................18
   SECTION 7.2           Interpretation..........................................................................19
   SECTION 7.3           Counterparts............................................................................19
   SECTION 7.4           Entire Agreement; No Third-Party Beneficiaries..........................................19
   SECTION 7.5           Governing Law...........................................................................19
   SECTION 7.6           Assignment..............................................................................19
   SECTION 7.7           Severability............................................................................20
   SECTION 7.8           Enforcement of This Agreement...........................................................20

Annex A        Asset Purchase Agreement
Annex B        Registration Rights Agreement
Annex C        Investment Representation Letter
Annex D-1      Non-Competition Agreement - K Reynolds
Annex D-2      Non-Competition Agreement - G Chappell
Annex E-1      Selling Stockholder Questionnaire - K Reynolds
Annex E-2      Selling Stockholder Questionnaire - G Chappell
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                            STOCK PURCHASE AGREEMENT

         STOCK PURCHASE AGREEMENT, dated as of March 31, 2000 (this
"Agreement"), among PATTERSON ENERGY, INC., a Delaware corporation ("PEC"),
PATTERSON DRILLING COMPANY LP, LLLP ("PDC"), a Delaware registered limited
liability limited partnership and a wholly-owned indirect subsidiary of PEC,
Kenneth Reynolds ("K Reynolds"), and Gary Chappell ("G Chappell"), each of whom
is an individual residing in the State of Texas (K Reynolds and G Chappell are
collectively referred to herein as the "Stockholders").

                                   WITNESSETH:

         WHEREAS, the Stockholders beneficially own all of the outstanding
common stock, no par value ("WEK Stock"), of WEK Drilling Company, Inc., a New
Mexico corporation ("WEK");

         WHEREAS, PDC desires to purchase, and the Stockholders desire to sell,
all of the outstanding WEK Stock (the "Stock Purchase") for the consideration
set forth and provided for herein; and

         WHEREAS, PEC and PDC, on the one hand, and the Stockholders, on the
other, desire to make certain representations, warranties and agreements in
connection with the Stock Purchase.

         NOW, THEREFORE, in consideration of the premises and the
representations, warranties and agreements herein contained, the parties agree
as follows:

                                   ARTICLE I

                               THE STOCK PURCHASE

         SECTION 1.1 The Stock Purchase. Upon the terms and subject to the
conditions of this Agreement, at the Closing (as defined in Section 1.4 below)
provided herein, PDC shall purchase from the stockholders of WEK, and the
Stockholders shall sell, or cause to be sold, to PDC, all of the outstanding
shares of WEK Stock.

         SECTION 1.2 Purchase Consideration. As consideration for all of the
outstanding shares of WEK Stock, PDC agrees to pay or deliver to the
Stockholders at the Closing a combination of cash and shares of common stock of
PEC (the "PEC Shares") to be paid as follows: a total of $5,660,000 cash (the
"Cash Portion") and $1,540,000 in PEC Shares, with the number of such shares to
be equal to the quotient of the average of the closing price of Patterson's
common stock over the five business day period ending on the last business day
next preceding the Closing (as defined below) divided into $1,540,000. For
example, if the average price is $20, the number of PEC Shares would be 150,000
shares, or if the average price is $10, the number of PEC Shares would be
300,000 shares (the "Stock Portion," and collectively with the Cash Portion, the
"Purchase Consideration"). The Purchase Consideration comprised of PEC Shares
shall be issued to the Stockholders at Closing in the following amounts: 47,324
PEC Shares to K Reynolds and 5,676 PEC Shares to G Chappell. The Cash

<PAGE>   5

Portion of the Purchase Consideration shall be paid to the Stockholders at the
Closing in the following amounts: $4,745,000 to K Reynolds and $915,000 to G
Chappell.

         SECTION 1.3 Adjustments for Closing Date Working Capital.

                  (a) Not less than three business days prior to the Closing,
         WEK will deliver to PEC an estimate of the components of its working
         capital as of the Closing, determined on an accrual basis in accordance
         with generally accepted accounting principles (including provisions for
         current and deferred income tax) consistently applied ("GAAP") (the
         "Estimated Closing Date Working Capital"). To the extent that the
         Estimated Closing Date Working Capital is less than $1,150,000, such
         difference (the "Estimated Closing Date Working Capital Deficiency")
         shall be deducted from the Cash Portion of the Purchase Consideration
         to be paid to the Stockholders pursuant to Section 1.2.

                  (b) As promptly as practicable (but in no event later than 30
         business days after the Closing Date), the Stockholders shall deliver
         to PDC (i) a balance sheet of WEK dated as of the close of business on
         the Closing Date (the "Closing Date Balance Sheet") prepared in
         accordance with GAAP, and (ii) an accompanying closing statement (the
         "Closing Statement") reasonably detailing the Stockholders'
         determination of WEK's aggregate net worth as of the Closing Date (the
         "Closing Date Working Capital"). PDC must, within 30 business days
         after PDC's receipt of the Closing Date Balance Sheet and the Closing
         Statement, give written notice (the "Notice") to Stockholders
         specifying in reasonable detail PDC's objections, if any, with respect
         thereto, including, without limitation, any objections relating to the
         Stockholders' determination of the Closing Date Balance Sheet and the
         Closing Date Working Capital. With respect to any disputed amounts, the
         parties shall meet in person and negotiate in good faith during the 10
         business day period (the "Resolution Period") after the date of the
         Stockholders' receipt of the Notice to resolve any such disputes. If
         the parties are unable to resolve all such disputes within the
         Resolution Period, then within five business days after the expiration
         of the Resolution Period, all unresolved disputes shall be submitted to
         a mutually agreed upon independent accountant (the "Independent
         Accountant") who shall be engaged to provide a final and conclusive
         resolution of all unresolved disputes within 15 business days after
         such engagement. The determination of the Independent Accountant shall
         be final, binding and conclusive on the parties hereto, and the fees
         and expenses of the Independent Accountant shall be borne by the party
         that the Independent Accountant determines is the non-prevailing party.

                  (c) To the extent the Closing Date Working Capital is less
         than $1,150,000, the Stockholders, jointly and severally, agree to pay
         such deficiency (together with interest at the rate of nine percent
         (9%) per annum from the Closing Date until paid) to PDC within five
         business days after its final determination pursuant to this Section
         1.3.

         SECTION 1.4 Closing. The closing of the Stock Purchase (the "Closing")
shall take place at 9:00 a.m., local time, on the date of this Agreement at the
offices of WEK in Roswell, New Mexico, or at such other time and place as PDC
and the Stockholders shall agree. The date on which the Closing occurs is
sometimes referred to herein as the "Closing Date."

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                                   ARTICLE II

                  REPRESENTATIONS AND WARRANTIES OF PEC AND PDC

         PDC represents and warrants to the Stockholders as follows:

         SECTION 2.1 Organization, Standing and Power. PEC is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware, and PDC is a registered limited liability limited partnership duly
organized, validly existing and in good standing in the State of Delaware. Each
of PEC and PDC has the requisite corporate or limited partnership (as the case
may be) power and authority to carry on its business as now being conducted, and
is in good standing in each jurisdiction where the character of its business
owned or held under lease or the nature of its activities makes such
qualification necessary, except where the failure to be so qualified would not
individually or in the aggregate, have a Material Adverse Effect on PEC.
"Material Adverse Change" or "Material Adverse Effect" means, when used with
respect to PEC, PDC or WEK, as the case may be, any change or effect that is or,
so far as can reasonably be determined, is likely to be materially adverse to
the assets, properties, condition (financial or otherwise), business or results
of operations of PEC, PDC and the subsidiaries of PEC taken as a whole or WEK,
as the case may be.

         SECTION 2.2 Authority; Non-Contravention. Each of PEC and PDC has all
requisite power and authority to enter into this Agreement and to consummate the
Stock Purchase. The execution and delivery by each of PEC and PDC of this
Agreement and the consummation by each of PEC and PDC of the Stock Purchase have
been duly authorized by all necessary corporate action on the part of PEC and
PDC, as the case may be. This Agreement has been duly executed and delivered by
PEC and PDC and (assuming the valid authorization, execution and delivery of
this Agreement by WEK) constitutes a valid and binding obligation of PEC and PDC
enforceable against PEC and PDC in accordance with its terms, except to the
extent enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer or other similar laws of general applicability
relating to or affecting the enforcement of creditors' rights and by the effect
of general principles of equity (regardless of whether enforceability is
considered in a proceeding in equity or at law). The execution and delivery of
this Agreement do not or will not, as the case may be, and the consummation of
the transactions contemplated hereby and thereby and compliance with the
provisions hereof and thereof will not, conflict with, or result in any
violation of, or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration of
any obligation or to the loss of a material benefit under, or result in the
creation of any lien, security interest, charge or encumbrance upon any of the
properties or assets of PEC or PDC under, any provision of (i) the Certificate
of Incorporation or Bylaws of PEC and the Certificate of Limited Partnership or
the Amended and Restated Agreement of Limited Partnership of PDC, (ii) any loan
or credit agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise or license applicable to PDC or PEC,
or (iii) any judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to PEC or any of their respective properties or assets,
other than, in the case of clauses (ii) or (iii), any such conflicts,
violations, defaults, rig, losses, liens, security interests, charges or
encumbrances that, individually or in the aggregate, would not have a Material
Adverse Effect on PEC or PDC, materially impair the ability of PEC or PDC to
perform its obligations hereunder or prevent the consummation of any

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of the transactions contemplated hereby or thereby. No filing or registration
with, or authorization, consent or approval of, any domestic (federal and
state), foreign or supranational court, commission, governmental body,
regulatory agency, authority or tribunal (a "Governmental Agency") is required
by or with respect to PEC or PDC in connection with the execution and delivery
of this Agreement by PEC or PDC or is necessary for the consummation by PEC or
PDC of the Stock Purchase, except for (i) in connection or in compliance, with
the provisions of the Securities Act of 1933, as amended (the "Securities Act"),
and the Securities Exchange Act of 1934 (the "Exchange Act"), (ii) such consents
and approvals, orders, registrations, authorizations, declarations and filings
as may be required under the "Blue Sky" laws of the State of Texas, and (iii)
such other consents, orders, authorizations, registrations, declarations and
filings, the failure of which to be obtained or made would not, individually or
in the aggregate, have a Material Adverse Effect on either PEC or PDC,
materially impair the ability of PEC or PDC to perform its obligations hereunder
or prevent the consummation of the transaction contemplated hereby.

         SECTION 2.3 Capital Structure. As of the date hereof, the authorized
capital stock of PEC consists of 50,000,000 shares of common stock, par value
$0.01 per share ("PEC Common Stock") and 1,000,000 shares of preferred stock,
par value $0.01 per share ("PEC Preferred Stock"). At the close of business on
December 31, 1999, (i) 32,675,678 shares of PEC Common Stock were validly issued
and outstanding, fully paid and nonassessable and free of preemptive rights, and
(ii) no shares of PEC Preferred Stock are issued and outstanding. The PEC Common
Stock is designated as a national market security on an inter-dealer quotation
system by the National Association of Securities Dealers, Inc. All shares of PEC
Common Stock issuable pursuant to the Stock Purchase in accordance with this
Agreement, will be, when so issued, duly authorized, validly issued, fully paid
and non-assessable and free of preemptive rights.

         SECTION 2.4 SEC Documents. PEC has filed all required documents with
the Securities and Exchange Commission ("SEC") since January 1, 1998 (the
"PEC/SEC Documents"). As of their respective dates, the PEC/SEC Documents
complied in all material respects with the requirements of the Securities Act or
the Exchange Act, as the case may be, and none of the PEC/SEC Documents
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading. The
consolidated financial statements of PEC included in the PEC/SEC Documents
comply as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto, have been prepared in accordance with generally accepted accounting
principles (except, in the case of the unaudited statements, as permitted by
Form 10-Q of the SEC) applied on a consistent basis during the periods involved
(except as may be indicated therein or in the notes thereto) and fairly present
the consolidated financial position of PEC and its consolidated subsidiaries,
including PDC) as at the dates thereof and the consolidated results of their
operations and statements of cash flows for the periods then ended (subject, in
the case of the unaudited statements, to normal year-end audit adjustments and
to any other adjustments described therein).

         SECTION 2.5 Brokers. No broker, investment banker or other person is
entitled to any broker's, finder's or similar fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of PEC or PDC.

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                                  ARTICLE III

               REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS

         The Stockholders jointly and severally represent and warrant to PEC and
PDC as follows:

         SECTION 3.1 Organization, Standing and Power. WEK is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of New Mexico and has the requisite corporate power and authority to carry on
its business as now being conducted. WEK has no subsidiaries. WEK is duly
qualified to do business, and is in good standing, in each jurisdiction where
the character of its properties owned or held under lease or the nature of its
activities makes such qualification necessary.

         SECTION 3.2 Capital Structure. The authorized capital stock of WEK
consists of 10,000 shares of WEK Stock, of which 2,500 shares are issued and
outstanding. All outstanding shares of WEK Stock are validly issued, fully paid
and nonassessable and have not been issued in violation of any preemptive
rights. There are no options, warrants, rights, commitments, agreements,
arrangements or undertakings of any kind to which WEK is a party or by which it
is bound obligating WEK to issue, additional shares of capital stock of WEK.

         SECTION 3.3 Ownership of WEK Stock. Section 3.3 of the disclosure
schedule of the Stockholders dated as of the date of this Agreement, previously
delivered to PDC (the "Stockholders Disclosure Schedule") sets forth a true and
correct list of the ownership of WEK Stock by the Stockholders. Each of the
Stockholders is the record and beneficial owner of the shares listed as owned by
him in Section 3.3 of the Stockholders Disclosure Schedule and holds such WEK
Stock free and clear of any restrictions on transfer (other than restrictions
under the Securities Act of 1933 and state securities laws), taxes, Liens (as
defined below in this Section), options, warrants, purchase rights, contracts,
commitments, equities, claims and demands. Neither of the stockholders of WEK is
a party to (i) any option, warrant, purchase right, or other contract or
commitment that could require him/her to sell, transfer, or otherwise dispose of
any WEK Stock (other than pursuant to this Agreement) or (ii) any voting trust,
proxy, or other agreement or understanding with respect to WEK Stock. For
purposes of this Agreement "Liens" means liens, mortgages, pledges, security
interests, encumbrances, claims or charges of any kind.

         SECTION 3.4 Authority; Non-Contravention. Each of the Stockholders has
all requisite power and authority to enter into this Agreement and to consummate
the Stock Purchase. This Agreement has been duly executed and delivered by the
Stockholders and (assuming the valid authorization, execution and delivery of
this Agreement by PEC and PDC) constitutes a valid and binding obligation of
each of the Stockholders enforceable against him/her in accordance with its
terms, except to the extent enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer or other similar
laws of general applicability relating to or affecting the enforcement of
creditors' rights and by the effect of general principles of equity (regardless
of whether enforceability is considered in a proceeding in equity or at law).
The execution and delivery of this Agreement do not, and the consummation of the
Stock Purchase and compliance with the provisions hereof will not, conflict
with, or result in any violation of, or default (with or without notice of lapse
of time, or both)

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under, or give rise to a right of termination, cancellation or acceleration of
any obligation or to the loss of a material benefit under, or result in the
creation of any lien, security interest, charges or encumbrances upon any of the
properties or assets of WEK under, any provision of (i) the Articles of
Incorporation or By-laws of WEK (true and complete copies of which as of the
date hereof have been delivered to PDC), (ii) any loan or credit agreement,
note, bond, mortgage, indenture, lease or other agreement, instrument, permit,
concession, franchise or license applicable to WEK or (iii) any judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to WEK or any of
its respective properties or assets, other than, in the case of clauses (ii) or
(iii), any such conflicts, violations, defaults, rights, liens, losses, security
interests, charges or encumbrances that, individually or in the aggregate, would
not have a Material Adverse Effect on WEK, materially impair the ability of WEK
to perform its obligations hereunder or prevent the consummation of the Stock
Purchase. Except as set forth on Section 3.4 of the Stockholders Disclosure
Schedule, no filing or registration with, or authorization, consent or approval
of, any Governmental Entity is required by or with respect to any of the
Stockholders or WEK in connection with the execution and delivery of this
Agreement by the Stockholders or is necessary for the consummation by the
Stockholders of the Stock Purchase or any other transaction contemplated by this
Agreement. For purposes of this Agreement, "Material Adverse Change" or
"Material Adverse Effect" means any change or effect that is or, as far as can
reasonably be determined, is likely to be materially adverse to the assets,
properties, condition (financial or otherwise), business or results of
operations of WEK.

         SECTION 3.5 Financial Statements. Included in Section 3.5 of the
Stockholders Disclosure Schedule are the following unaudited financial
statements (collectively, the "WEK Financial Statements") of WEK: (i) balance
sheets as of March 31, 1999 and February 29, 2000; and (ii) statements of income
for (x) each of the four years in the period ended March 31, 1999, and (y) the
11-month and one-month periods ended February 29, 2000, respectively.

         Except as may be set forth in Section 3.5 of the Stockholders
Disclosure Schedule, the WEK Financial Statements (a) are complete and correct
in all material respects, (b) have been prepared in conformity with accrual tax
basis accounting consistently applied, and (c) present fairly the financial
condition of WEK at the dates presented and the results of operations of WEK for
the periods covered. There does not, and there will not be at Closing, exist any
fact, event, condition or claim known to any of the Stockholders which would
cause a Material Adverse Change in the WEK Financial Statements as presented
other than as set forth therein.

         SECTION 3.6 Absence of Material Adverse Change. Except as otherwise set
forth in Section 3.6 of the Stockholders Disclosure Schedule, there has not been
any Material Adverse Change with respect to WEK since December 31, 1999.

         SECTION 3.7 Taxes. Except as otherwise set forth in Section 3.7 of the
Stockholders Disclosure Schedule: (i) all Tax Returns required to be filed by
WEK have been filed or extensions have been validly obtained; (ii) Tax Returns
referred to in clause (i) are true and correct in all material respects and have
been completed in all material respects in accordance with applicable law; (iii)
all Taxes shown to be due on the Tax Returns referred to in clause (i) have been
timely paid or extensions have been duly obtained or such taxes have been
adequately provided for on WEK's balance sheet or are being timely and properly
contested; (iv) WEK has not waived any statute of limitations in respect of
Taxes of WEK; (v) none of the Tax Returns

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referred to in clause (i) have been examined by the Internal Revenue Service or
the appropriate state taxing authority; (vi) no issues regarding any of the Tax
Returns referred to in clause (i) have been raised in writing by the relevant
taxing authority; (vii) no deficiencies have been asserted or assessments made
with regard to any of the Tax Returns referred to in clause (i) by a taxing
authority; (viii) WEK has made available to PDC correct and complete copies of
all federal and state income Tax Returns, examination reports, and statements of
deficiencies assessed against or agreed to by WEK; (ix) WEK is not currently,
and has not been for at least the past 12 years, an S corporation pursuant to
Section 1362(a) of the Internal Revenue Code of 1986, as amended (the "Code").
For purposes of this Agreement, (a) "Tax" (and, with correlative meaning,
"Taxes" and "Taxable") means any federal, state, local or foreign income, gross
receipts, property, sales, use, license, excise, franchise, employment, payroll,
withholding, alternative or added minimum, ad valorem, transfer, severance or
excise tax, or any other tax, custom, duty, governmental fee or other like
assessment or charge of any kind whatsoever, together with any interest or
penalty, imposed by any governmental authority, and (b) "Tax Return" means any
return, report or similar statement required to be filed with respect to any Tax
(including any attached schedules), including, without limitation, any
information return, claim for refund, amended return or declaration of estimated
Tax.

         SECTION 3.8 Real and Personal Property; Title Thereto. Set forth in
Section 3.8 of the Stockholders Disclosure Schedule is a complete and accurate
schedule of all real and personal property owned or leased by WEK having an
individual fair market value in excess of $10,000, and other than the real and
personal property to be resold to Kenneth Reynolds immediately following the
Closing Date as provided in Section 6.1 of this Agreement. Except as set forth
in Section 3.8 of the Stockholders Disclosure Schedule, WEK has good and, with
respect to real property, indefeasible title to all of such real property and
personal property, subject to no Liens except for (i) Liens for taxes not yet
delinquent or the validity of which is being contested in good faith, and (ii)
any Liens arising by operation of law securing obligations not yet overdue. Any
real or personal property held by WEK under lease are held under valid and
enforceable leases which will continue in full force and effect immediately
after the Closing Date; WEK is not in default with respect to any such lease.

         SECTION 3.9 Accounts Receivable. Set forth in Section 3.9 of the
Stockholders Disclosure Schedule is a complete and accurate schedule of the
accounts receivable of WEK as of December 31, 1999, as reflected in the balance
sheet as of that date included in WEK Financial Statements, together with an
accurate aging of those accounts. To the best knowledge of the Stockholders, the
accounts described in Section 3.9 have been collected in full, or are
collectible at their full amounts.

         SECTION 3.10 Liabilities. There are no liabilities of WEK of any kind,
whether contingent or fixed, other than (i) liabilities disclosed or provided
for in the balance sheet of WEK as of March 31, 1999 included in the WEK
Financial Statements or disclosed in Section 3.10 of the Stockholders Disclosure
Schedule, or (ii) liabilities incurred in the ordinary course of business since
March 31, 1999, none of which, either individually or in the aggregate, may be
reasonably expected to be materially adverse to the business, assets, condition
(financial or otherwise) or results of operations of WEK.

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         Section 3.11 Insurance. Set forth in Section 3.11 of the Stockholders
Disclosure Schedule is an accurate and complete list and brief description of
all policies of fire and extended coverage, liability, worker compensation and
other forms of similar insurance or indemnity bonds held by WEK. WEK is not in
default in any material respect with respect to any provisions of any such
policy or indemnity bond and has not failed to give any notice or present any
claim thereunder in due and timely fashion, which failure would materially
adversely affect the condition (financial or otherwise), results of operations,
assets, liabilities or business of WEK.

         Section 3.12 Contracts and Other Agreements. Except as disclosed on
Section 3.12 of the Stockholders Disclosure Schedule, WEK is not a party to or
bound by any written or oral (i) employment, agency, consulting or similar
contract which cannot be terminated upon 30 days' notice without liability to
WEK, (ii) lease, whether as lessor or lessee, with respect to any real or
personal property, (iii) contract or commitment involving more than $10,000 a
year; (iv) credit agreements; (v) guarantee, suretyship, indemnification or
contribution agreement, (vi) drilling contracts or purchase orders, or (vii)
other contracts not made in the ordinary course of business.

         Section 3.13 Records. The stock record books and minute books of WEK
are complete and correct in all material respects, and record all transactions
required to be set forth concerning all proceedings, consents, actions and
meetings of the stockholders and the Board of Directors of WEK.

         Section 3.14 Transactions with Affiliates. Except as otherwise set
forth in 3.14 of the Stockholders Disclosure Schedule, no Affiliate (as
hereinafter defined) has any direct or indirect interest in or owns directly or
indirectly any asset or right owned by or used in the conduct of the contract
drilling business of WEK or is party to any contract, lease, agreement,
arrangement or commitment used in such business.

                  "Affiliate" as used in this Section 3.14 means a person which
         directly or indirectly, through one or more intermediaries, controls,
         is controlled by, or is under, control with WEK. For purposes of this
         definition, the officers, directors and stockholders of WEK shall be
         deemed Affiliates.

         Section 3.15 Employee Benefit Plans; Employment Agreements. WEK has no
employee benefit plans, programs, employment agreements or severance agreements
or other arrangements of any kind for the benefit of any current or former
employee, officer or director of WEK other than a group medical plan ("Group
Plan") under which WEK pays 60% and employees pay 40%. The Group Plan: (i) is
not a multi-employer plan within the meaning of ERISA; (ii) does not promise or
provide retiree medical or life insurance benefits to any person, except as
otherwise required by law; (iii) does not require qualification under Section
401(a) of the Code; (iv) is not subject to Title IV of ERISA; and (v) has been
operated in all respects in accordance with its terms and the requirements of
applicable law.

         Section 3.16 Labor Matters. (i) WEK is not a party to any collective
bargaining agreement or other material contract or agreement with any labor
organization or other representative of employees nor is any such contract being
negotiated; (ii) there is no material

                                       8
<PAGE>   12

unfair labor practice charge or complaint pending nor, to the knowledge of any
of the Stockholders, threatened, with regard to employees of WEK; (iii) there is
no labor strike, material slowdown, material work stoppage or other material
labor controversy in effect, or, to the knowledge of any of the Stockholders,
threatened against WEK; (iv) as of the date hereof, no representation question
exists, nor to the knowledge of any of the Stockholders are there any campaigns
being conducted to solicit cards from the employees of WEK to authorize
representation by a labor organization; (v) WEK is not party to, or is not
otherwise bound by, any consent decree with any governmental authority relating
to employees or employment practices of WEK; (vi) WEK has not incurred any
liability under, and has complied in all respects with, the Worker Adjustment
Retraining Notification Act, and no fact or event exists that could give rise to
liability under such Act; and (vii) except as disclosed in Section 3.16 of the
Stockholders Disclosure Schedule, WEK is in compliance with all applicable
agreements, contracts and policies relating to employment, employment practices,
wages, hours and terms and conditions of employment of the employees, except
where the failure to be in compliance with each such agreement, contract and
policy would not, either singly or in the aggregate, have a Material Adverse
Effect on WEK.

         Section 3.17 Environmental Matters.

                  (a) Except with respect to oil and gas wells in which WEK
         currently owns an interest (as to which the Stockholders make no
         representation or warranty under this Section 3.17), and except to the
         extent that the inaccuracy of any of the following, individually or in
         the aggregate, would not have a Material Adverse Effect on WEK, to the
         actual knowledge of the Stockholders:

                           (i) WEK holds, and is in compliance with and has been
                  in compliance with for the last three years, all Environmental
                  Permits, and is otherwise in substantial compliance and has
                  been in substantial compliance for the last three years with,
                  all applicable Environmental Laws and there is no condition
                  that is reasonably likely to prevent or materially interfere
                  prior to the Effective Time with compliance by WEK with
                  Environmental Laws;

                           (ii) no modification, revocation, reissuance,
                  alteration, transfer or amendment of any Environmental Permit,
                  or any review by, or approval of, any third party of any
                  Environmental Permit is required in connection with the
                  execution or delivery of this Agreement or the consummation by
                  WEK of the transactions contemplated hereby or the operation
                  of the business of WEK on the date of the Closing;

                           (iii) WEK has not received any Environmental Claim,
                  nor has any Environmental Claim been threatened against WEK;

                           (iv) WEK has not entered into, agreed to or is not
                  subject to any outstanding judgment, decree, order or consent
                  arrangement with any governmental authority under any
                  Environmental Laws, including without limitation those
                  relating to compliance with any Environmental Laws or to the
                  investigation, cleanup, remediation or removal of Hazardous
                  Materials;

                                       9
<PAGE>   13

                           (v) there are no circumstances that are reasonably
                  likely to give rise to liability under any agreements with any
                  person pursuant to which WEK would be required to defend,
                  indemnify, hold harmless, or otherwise be responsible for any
                  violation by or other liability or expense of such person, or
                  alleged violation by or other liability or expense of such
                  person, arising out of any Environmental Law; and

                           (vi) there are no other circumstances or conditions
                  that are reasonably likely to give rise to liability of WEK
                  under any Environmental Laws.

                  (b) For purposes of this Agreement, the terms below shall have
         the following meanings:

                  "Environmental Claim" means any written complaint, notice,
                  claim, demand, action, suit or judicial, administrative or
                  arbitral proceeding by any person to WEK asserting liability
                  or potential liability (including without limitation,
                  liability or potential liability for investigatory costs,
                  cleanup costs, governmental response costs, natural resource
                  damages, property damage, personal injury, fines or penalties)
                  arising out of, relating to, based on or resulting from (i)
                  the presence, discharge, emission, release or threatened
                  release of any Hazardous Materials at any location, (ii)
                  circumstances forming the basis of any violation or alleged
                  violation of any Environmental Laws or Environmental Permits,
                  or (iii) otherwise relating to obligations or liabilities of
                  WEK under any Environmental Law.

                  "Environmental Permits" means all permits, licenses,
                  registrations, exemptions and other governmental
                  authorizations required under Environmental Laws for WEK to
                  conduct its operations as presently conducted.

                  "Environmental Laws" means all applicable foreign, federal,
                  state and local statutes, rules, regulations, ordinances,
                  orders, decrees and common law relating in any manner to
                  pollution or protection of the environment, to the extent and
                  in the form that such exist at the date hereof.

                  "Hazardous Materials" means all hazardous or toxic substances,
                  wastes, materials or chemicals, petroleum (including crude oil
                  or any fraction thereof) and petroleum products, asbestos and
                  asbestos-containing materials, pollutants, contaminants and
                  all other materials and substances, including but not limited
                  to radioactive materials, regulated pursuant to any
                  Environmental Laws.

         Section 3.18 Litigation. Except as set forth in Section 3.18 of the
Stockholders Disclosure Schedule, there is no suit, action, investigation or
proceeding pending or, to the knowledge of the Stockholders, threatened against
WEK at law or in equity before or by any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, or before any arbitrator of any kind, that would have a
Material Adverse Effect on WEK or, with respect to such matters that are pending
or threatened as of the date hereof, materially impair the ability of WEK to
perform its obligations hereunder or to consummate the Stock Purchase, and there
is no judgment, decree, injunction, rule or order

                                       10
<PAGE>   14
of any court, governmental department, commission, board, bureau, agency,
instrumentality or arbitrator to which WEK is subject that would have a Material
Adverse Effect on WEK or, with respect to such items that are outstanding and
applicable as of the date hereof, materially impair the ability of WEK to
perform its obligations hereunder or to consummate the Stock Purchase.

         Section 3.19 Governmental Licenses and Permits; Compliance with Law.
WEK has not received notice of any revocation or modification of any federal,
state, local or foreign governmental license, certification, tariff, permit,
authorization or approval, the revocation or modification of which would have a
Material Adverse Effect on WEK. The conduct of the business of WEK complies with
all statutes, laws, regulations, ordinances, rules, judgments, orders, decrees
or arbitration awards applicable thereto, except for violations or failures to
comply, if any, that, individually or in the aggregate, would not have a
Material Adverse Effect on WEK.

         Section 3.20 Brokers. No broker, investment banker or other person is
entitled to any broker's, finder's or other similar fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of WEK.

         Section 3.21 Bank Accounts. A complete list of each bank account
maintained by WEK, including safe deposit boxes maintained by WEK, the account
balances and the names of the persons authorized to draw down upon or have
access thereto is set forth in Section 3.21 of the Stockholders Disclosure
Schedule.

         Section 3.22 Distributions to Stockholders of WEK. WEK, since December
31, 1999, has not declared, set aside or paid any dividends on, or made any
other actual, constructive or deemed distributions in respect of, any of its
capital stock, or otherwise made any payments to any of the stockholders of WEK
other than regular monthly salaries in amounts consistent with past practice and
a $70,000 bonus in the ordinary course of business.

         Section 3.23 Workers' Compensation Claims. Except as set forth in
Section 3.18 of the Stockholders Disclosure Schedule, there are no workers'
compensation claims pending or, to the knowledge of the Stockholders, threatened
against WEK.

         Section 3.24 Loans or Advances to Stockholders. There are no
outstanding loans or advances from WEK to any persons, other than $160,000 of
advances to Kenneth Reynolds.

                                   ARTICLE IV

                              ADDITIONAL AGREEMENTS

         Section 4.1 Fees and Expenses. All costs and expenses incurred by PEC
and PDC in connection with this Agreement and the transactions contemplated
hereby shall be paid by PEC and PDC; such costs and expenses (including legal
and accounting fees) incurred by the Stockholders or WEK not to exceed a total
of $30,000 shall be paid by WEK.

         Section 4.2 Reasonable Efforts. Upon the terms and subject to the
conditions set forth in this Agreement, each of the parties agrees to use all
reasonable efforts to take, or cause to

                                       11
<PAGE>   15

be taken, all actions, and to do, or cause to be done, and to assist and
cooperate with the other parties in doing, all things necessary, proper or
advisable to consummate and make effective, in the most expeditious manner
practicable, the Stock Purchase and the other transactions contemplated by this
Agreement and the prompt satisfaction of the conditions hereto.

         Section 4.3 Public Announcements. Before issuing any press release or
otherwise making any public statements with respect to the transactions
contemplated by this Agreement, PEC and PDC, on the one hand, and the
Stockholders, on the other, will consult with each other, and will undertake
reasonable efforts to agree upon the terms of such press release, and shall not
issue any such press release or make any such public statement prior to such
consultation, except as may be required by applicable law or by obligations
pursuant to any listing agreement with the Nasdaq National Market.

         Section 4.4 Stockholders Indemnification.

                  (a) After the Closing Date, the Stockholders shall jointly and
         severally indemnify and hold PEC and PDC harmless against and in
         respect of all actions, suits, demands, judgments, costs and expenses
         (including reasonably attorneys' fees of PEC or PDC), but after giving
         effect to insurance recoveries, if any, relating to any
         misrepresentation, breach of any representation or warranty or
         non-fulfillment of any agreement on the part of the Stockholders under
         this Agreement. Any written notice of claim for indemnification shall
         be given to K Reynolds, as representative of the Stockholders, by PEC
         or PDC within 30 days after it has knowledge of any misrepresentation
         or breach of warranty or non-fulfillment of any agreement on the part
         of the Stockholders, which may give rise to a claim for
         indemnification. This indemnification provided for in this Section
         4.4(a) shall terminate and be of no further force and effect two years
         from the Closing Date, except (i) as to any representation or warranty
         as to which a written notice of claim for indemnification has been
         given to K Reynolds, as representative of the Stockholders, prior to
         the expiration of such two-year period; and (ii) for a claim for
         indemnification for unpaid or undisclosed federal income tax liability
         given to K Reynolds, as representative of the Stockholders, prior to
         the expiration of the applicable period of limitations.

                  (b) After the Closing Date, and, in addition to, but separate
         from, the indemnification contained in Section 4.4(a), K Reynolds shall
         indemnify and hold PEC and PDC harmless against and in respect of all
         actions, suits, demands, judgments, costs and expenses (including
         reasonable attorneys' fees of PEC and/or PDC), but after giving effect
         to insurance recoveries, if any, relating in any way to any of the real
         and personal properties to be sold to K Reynolds pursuant to the Asset
         Purchase Agreement referred to in Section 6.1.

         Section 4.5 Repayment of Bank Debt. Prior to the Closing Date, the
Stockholders shall cause WEK to repay all indebtedness of WEK for borrowed money
including, but not limited to, the loan from Valley Bank of Commerce, and shall
cause WEK to file all UCC-1 Termination Statements relating to any security
interests held by lenders with regard to such indebtedness.

                                       12
<PAGE>   16
         Section 4.6 Repayment of Stockholders Indebtedness to WEK. On or prior
         to the Closing Date, the Stockholders shall pay to WEK all principal
         and interest on monies borrowed by, or advanced to, them (total
         principal and interest balance of $160,000 as of the date of this
         Agreement).

         Section 4.7 Certain Tax Matters.

                  (a) For each taxable period of WEK that ends before the
         Closing Date, the Stockholders shall cause, at their expense, to be
         timely prepared and filed with the appropriate authorities all tax
         returns of WEK and shall cause to be paid by the parties responsible
         therefor all taxes when due. PEC shall cause, at its expense, to be
         prepared and filed all tax returns for WEK for tax periods not
         described in the immediately foregoing sentence, and WEK or PEC shall
         pay all taxes required to be paid for such periods.

                  (b) The Stockholders, WEK, PEC and PDC reasonably and in good
         faith shall cooperate with each other in preparing and filing all tax
         returns, including maintaining and making available to each other all
         records necessary in connection with the preparation and filing of such
         tax returns.

                  (c) The Stockholders shall be responsible at their expense for
         causing to be filed any amended tax returns of WEK for taxable periods
         ending prior to the Closing Date which are required as a result of an
         examination or adjustments made by taxing authorities, and for causing
         to be paid by the parties responsible therefor when due any taxes
         resulting therefrom. Any such amended returns shall be furnished to PEC
         for approval (which approval shall not be unreasonably withheld),
         signature and filing at least ten (10) business days prior to the due
         date for the filing of such amended returns.

                  (d) If a claim is made by any taxing authority:

                           (i) For any taxable period ending on or before the
                  Closing Date, the Stockholders shall control the proceedings
                  taken in connection with such claim; and

                           (ii) For any taxable period ending after the Closing
                  Date, PEC shall control the proceedings taken in connection
                  with such claim.

         Subject to the immediately foregoing clauses (i) and (ii), the parties
         reasonably and in good faith shall cooperate with each other in the
         contesting of any tax claim, and shall keep each other fully apprised
         of the status of such claims. Notwithstanding any of the foregoing to
         the contrary, WEK and PEC shall not without the prior written approval
         of the Stockholders (1) agree to an extension of the statute of
         limitations with respect to any taxable period of WEK ending before the
         Closing Date or (2) amend any tax return of WEK for any taxable period
         of WEK ending before the Closing Date.

                                       13
<PAGE>   17

                                   ARTICLE V

                   CONDITIONS PRECEDENT TO THE STOCK PURCHASE

         Section 5.1 Conditions to Each Party's Obligation to Effect the Stock
Purchase. The respective obligations of each party to effect the Stock Purchase
shall be subject to the fulfillment or waiver (where permissible) at or prior to
the Closing Date of the following condition:

                  (a) No Order. No Governmental Entity or court of competent
         jurisdiction shall have enacted, issued, promulgated, enforced or
         entered any law, rule, regulation, executive order, decree, injunction
         or other order (whether temporary, preliminary or permanent) which is
         then in effect and has the effect of prohibiting the Stock Purchase or
         any of the other transactions contemplated hereby; provided that, in
         the case of any such decree, injunction or other order, each of the
         parties shall have used reasonable best efforts to prevent the entry of
         any such injunction or other order and to appeal as promptly as
         practicable any decree, injunction or other order that may be entered.

                  (b) Registration Rights Agreement. The Registration Rights
         Agreement in the form attached hereto as Annex B shall have been
         executed and delivered by the Stockholders and PEC.

         Section 5.2 Conditions to Obligation of the Stockholders to Effect the
Stock Purchase. The obligation of the Stockholders to effect the Stock Purchase
shall be subject to the fulfillment at or prior to the Closing Date of the
following additional conditions; provided that the Stockholders may waive any of
such conditions in their sole discretion:

                  (a) Performance of Obligations; Representations and
         Warranties. PEC and PDC shall have performed in all material respects
         each of its agreements contained in this Agreement required to be
         performed on or prior to the Closing Date, each of the representations
         and warranties of PEC and PDC contained in this Agreement that is
         qualified by materiality shall be true and correct on and as of the
         Closing Date and each of the representations and warranties that is not
         so qualified shall be true and correct in all material respects on and
         as of the Closing Date.

                  (b) Officers' Certificate. PEC and PDC shall have furnished to
         the Stockholders a certificate, dated the Closing Date, signed by the
         appropriate officers of PEC and PDC, certifying to the effect that to
         the best of the knowledge and belief of PEC and PDC, the conditions set
         forth in Section 5.1 and this Section 5.2(a) have been satisfied in
         full.

                  (c) Payment of Purchase Price. PDC shall have made delivery of
         the Purchase Consideration as provided in Section 1.2 of this
         Agreement.

         Section 5.3 Conditions to Obligations of PEC and PDC to Effect the
Stock Purchase. The obligations of PEC and PDC to effect the Stock Purchase
shall be subject to the

                                       14
<PAGE>   18

fulfillment at or prior to the Closing Date of the following additional
conditions, provided that PDC may waive any such conditions in its sole
discretion:

                  (a) Performance of Obligations; Representations and
         Warranties. The Stockholders shall have performed in all material
         respects each of their agreements contained in this Agreement required
         to be performed on or prior to the Closing Date, each of the
         representations and warranties of the Stockholders contained in this
         Agreement that is qualified by materiality shall be true and correct on
         and as of the Closing Date and each of the representations and
         warranties that is not so qualified shall be true in all material
         respects on and as of the Closing Date.

                  (b) Officers' Certificate. The Stockholders shall have
         furnished to PEC and PDC a certificate, dated the Closing Date,
         certifying to the effect that to the best of the knowledge and belief
         of each of them, the conditions set forth in Section 5.1 and this
         Section 5.3(a) have been satisfied.

                  (c) Opinion of J.W. Neal, Esquire. PEC and PDC shall have
         received an opinion of counsel from J.W. Neal, Esquire, counsel to WEK
         and the Stockholders, dated the Closing Date, substantially to the
         effect that:

                           (i) The incorporation, existence, good standing and
                  capitalization of WEK are as stated in this Agreement; the
                  authorized shares of WEK Stock are as stated in this
                  Agreement; all outstanding shares of WEK Stock are duly and
                  validly authorized and issued, fully paid and non-assessable
                  and have not been issued in violation of any preemptive right
                  of stockholders; and, to the knowledge of such counsel, there
                  is no existing option, warrant, right, call, subscription or
                  other agreement or commitment obligating WEK to issue or sell,
                  or to purchase or redeem, any shares of its capital stock
                  other than as stated in this Agreement.

                           (ii) This Agreement and the respective
                  Non-Competition Agreements have been duly authorized, executed
                  and delivered by each of the Stockholders, and (assuming the
                  due and valid authorization, execution and delivery by PDC)
                  constitutes the legal, valid and binding agreements of them
                  enforceable against them in accordance with its terms, except
                  to the extent enforceability may be limited by bankruptcy,
                  insolvency, reorganization, moratorium, fraudulent transfer or
                  other similar laws of general applicability relating to or
                  affecting the enforcement of creditors' rights and by the
                  effect of general principles of equity (regardless of whether
                  enforceability is considered in a proceeding in equity or at
                  law).

                           (iii) The execution and performance by the
                  Stockholders of this Agreement will not violate the Articles
                  of Incorporation or By-laws of WEK and will not violate,
                  result in a breach of, or constitute a default under, any
                  material lease, mortgage, contract, agreement, instrument,
                  law, rule, regulation, judgment, order or decree known to such
                  counsel to which WEK or any of the Stockholders is a party or
                  to which they or any of their properties or assets may be
                  bound.

                                       15
<PAGE>   19

                           (iv) To the knowledge of such counsel, there are no
                  actions, suits or proceedings, pending or threatened against
                  or affecting WEK or any of the Stockholders by any
                  Governmental Entity which seek to restrain, prohibit or
                  invalidate the transactions contemplated by this Agreement.

                           (v) To the knowledge of such counsel, no consent,
                  approval, authorization or order of any court or governmental
                  agency or body which has not been obtained is required on
                  behalf of WEK or any of the Stockholders for consummation of
                  the transactions contemplated by this Agreement.

                           (vi) Each Non-Competition Agreement between PDC and
                  each of K Reynolds and G Chappell constitutes the legal, valid
                  and binding agreement of him enforceable against him in
                  accordance with its terms, except to the extent enforceability
                  may be limited by bankruptcy, insolvency, reorganization,
                  moratorium, fraudulent transfer or other similar laws of
                  general applicability relating to or affecting the enforcement
                  of creditors' rights and by the effect of general principles
                  of equity (regardless of whether enforceability is considered
                  in a proceeding in equity or at law).

         In rendering such opinion, counsel for WEK and the Stockholders may
         rely as to matters of fact upon the representations of officers of WEK
         and of the Stockholders contained in any certificate delivered to such
         counsel and certificates of public officials.

                  Such opinion shall be limited to the laws of the United States
         of America and the State of New Mexico.

                  (d) Officer and Director Resignation Letters. PDC shall have
         received a resignation letter dated the Closing Date from each of the
         directors and officers of WEK.

                  (e) WEK Stock Certificates. PEC shall have received all of the
         WEK Stock certificates from the stockholders of WEK duly endorsed to
         PEC.

                  (f) Investment Representation Letter. Each of the Stockholders
         shall have executed and delivered the investment representation letter
         in the form attached hereto as Annex C.

                  (g) Non-Competition Agreement. Each of the Stockholders shall
         have executed and delivered a Non-Competition in the form attached
         hereto as Annex D-1 and Annex D-2, respectively.

                  (h) Selling Stockholder Questionnaire. Each of the
         Stockholders shall have completed, executed and delivered a Selling
         Stockholder Questionnaire in the form attached hereto as Annex E-1 and
         Annex E-2, respectively.

                                       16
<PAGE>   20

                                   ARTICLE VI

                             POST CLOSING COVENANTS

         Section 6.1 Sale of Assets to Stockholders. PEC and PDC and the
Stockholders covenant and agree that, immediately following the Closing Date,
they will cause the execution, delivery and performance of the Asset Purchase
Agreement in the form attached hereto as Annex A to this Agreement.

         Section 6.2 Registration Statement. Promptly following the Closing, but
in no event later than two business days following the Closing Date, PEC shall
execute and file a Registration Statement on Form S-3 with the SEC relating to
resale of the PEC Shares.

                                  ARTICLE VII

                               GENERAL PROVISIONS

         Section 7.1 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally, sent by
overnight courier or telecopied (with a confirmatory copy sent by overnight
courier) to the parties at the following addresses (or at such other address for
a party as shall be specified by like notice):

                  (a) if to PEC or PDC, to

                              Patterson Energy, Inc.
                              4510 Lamesa Highway
                              P.O. Drawer 1416
                              Snyder, Texas   79549
                              Attention: Cloyce A. Talbott
                                         Chairman and Chief Executive Officer

                      with copies to:

                              Thomas H. Maxfield, Esq.
                              Baker & Hostetler LLP
                              303 East 17th Avenue, Suite 1100
                              Denver, Colorado 80203-1264

                  (c) if to the Stockholders, to

                              Ken Reynolds
                              13 Hawthorn
                              Midland, Texas 79705

                      with copies to:

                              Ken Reynolds
                              Box 2055
                              Roswell, New Mexico 88202

                                       17
<PAGE>   21

                              and

                              Gary Chappell
                              4305 Lehigh
                              Midland, Texas 79707

                      with copies to:

                              J.W. Neal, Esq.
                              214 W. Cain
                              Hobbs, New Mexico 88241

         Section 7.2 Interpretation. When a reference is made in this Agreement
to a Section, such reference shall be to a Section of this Agreement unless
otherwise indicated, and the words "hereof", "herein" and "hereunder" and
similar terms refer to this Agreement as a whole and not to any particular
provision of this Agreement, unless the context otherwise requires. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation."

         Section 7.3 Counterparts. This Agreement may be executed in
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties.

         Section 7.4 Entire Agreement; No Third-Party Beneficiaries. This
Agreement, including the documents and instruments referred to herein, (a)
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof and (b) is not intended to confer upon any person other
than the parties any rights or remedies hereunder; provided, however, that legal
counsel for the Stockholders and WEK hereto may rely upon the representations
and warranties of the Stockholders contained herein and in the certificates
delivered pursuant to Sections 5.3(b) and (c).

         Section 7.5 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New Mexico, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof.

         Section 7.6 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
without the prior written consent of the other parties. Subject to the preceding
sentence, this Agreement shall be binding upon, inure to the benefit of, and be
enforceable by, the parties and their respective successors and assigns.

         Section 7.7 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby are not affected in any manner
materially adverse to any party. Upon such determination that any term or other

                                       18
<PAGE>   22
provision is invalid, illegal or incapable of being enforced, the parties shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in a mutually acceptable manner in
order that the transactions be consummated as originally contemplated to the
fullest extent possible.

         Section 7.8 Enforcement of This Agreement. The parties agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any District Court in
Chavez or Eddy County, New Mexico.

         IN WITNESS WHEREOF, PEC and PDC and each of the Stockholders have
executed this Agreement as of the date first written above.

                                       PEC:

                                       PATTERSON ENERGY, INC.

                                       By: /s/ CLOYCE A. TALBOTT
                                          --------------------------------------
Attest:                                   Cloyce A. Talbott
                                          Chief Executive Officer
/s/ JONATHAN D. NELSON
----------------------------------
Jonathan D. Nelson, Secretary
                                       PDC:

                                       PATTERSON DRILLING COMPANY LP,
                                       LLLP

                                       By: /s/ A. GLENN PATTERSON
                                          --------------------------------------
Attest:                                   A. Glenn Patterson
                                          President
/s/ JONATHAN D. NELSON
----------------------------------
Jonathan D. Nelson, Secretary
                                       STOCKHOLDERS:

                                       K REYNOLDS

                                       /s/ KENNETH REYNOLDS
                                       -----------------------------------------
                                       Kenneth Reynolds

                                       G CHAPPELL

                                       /s/ GARY CHAPPELL
                                       -----------------------------------------
                                       Gary Chappell

                                       19
<PAGE>   23

                                                                         ANNEX A

                            ASSET PURCHASE AGREEMENT

         This ASSET PURCHASE AGREEMENT ("Agreement") is made and entered into
this 31st day of March, 2000, by and between Kenneth Reynolds, an individual
residing in the State of Texas ("Buyer"), and WEK Drilling Company, Inc., a New
Mexico corporation ("WEK" or the "Seller").

                                    RECITALS

         A. Patterson Drilling Company LP, LLLP, a Delaware registered limited
liability limited partnership ("PDC"), and the former stockholders of Seller are
parties to the Stock Purchase Agreement dated as of March 31, 2000 ("Stock
Purchase Agreement") pursuant to which PDC purchased on this date all of the
outstanding shares of capital stock of Seller.

         B. Pursuant to the Stock Purchase Agreement, immediately following the
Stock Purchase, Seller has agreed to sell, and Buyer has agreed to purchase
certain specified assets of Seller which assets were owned by Seller prior to
the Stock Purchase (the "Assets").

         C. Buyer desires to purchase and Seller desires to sell the Assets (as
defined herein).

                                   AGREEMENTS

         In consideration of the mutual promises and covenants contained herein,
the parties agree as follows:

         1. Purchase of Assets. Subject to the terms and conditions of this
Agreement, Seller shall sell, convey, transfer, assign and deliver AS IS to
Buyer, and Buyer shall purchase and accept from Seller, AS IS, the assets set
forth on Schedule I attached hereto (collectively, the "Assets").

         2. Assumption of Liabilities. Buyer shall assume all fixed or
contingent liabilities or obligations arising out of or connected in any way
with the Assets.

         3. Purchase Price. As consideration for the Assets, Buyer shall pay to
Seller the sum of $1 million ("Purchase Price"), all of which shall be due and
payable at Closing (as defined below). The Purchase Price shall be allocated as
set forth above on Schedule I with such allocation to be used by the parties in
reporting the transaction contemplated hereby for federal, state, county and
local tax purposes.

         4. Sales or Transfer Taxes. Buyer agrees that, promptly following
written notice from Seller, he will reimburse WEK for any and all state or local
sales, transfer or use taxes incurred by Seller in connection with the sale of
the Assets pursuant to this Agreement.

                                     AX A-1
<PAGE>   24

         5. Real Estate Taxes. Seller and Buyer hereby agree to pro rate all
state and local real estate taxes payable with respect to the sale of the Assets
pursuant to this Agreement with K Reynolds paying three-fourths of all such
taxes and WEK paying the remaining one-fourth.

         6. Closing.

                  (a) Time and Place. The Closing shall take place at 10:00 a.m.
         (CST) on March 31, 2000, at the former offices of Seller in Roswell,
         New Mexico, or at such other time or location as the parties may
         mutually agree.

                  (b) Seller's Deliveries. At Closing, Seller shall deliver to
         Buyer the following:

                           (1) A Bill of Sale in substantially the form attached
                  hereto as Exhibit A, duly executed by Seller.

                           (2) Deeds without Warranty for the real property and
                  improvements set forth on Schedule I in substantially the form
                  attached hereto as Exhibit C in the case of the New Mexico
                  property and Exhibit B in the case of the Texas property, duly
                  executed by Seller.

                           (3) Certificates of Title for each of the boats and
                  trailers and for the motor vehicles listed in Schedule I.

                  (c) Buyer's Deliveries. At Closing, Buyer shall deliver the
         Purchase Price to Seller.

         7. Disclaimer of Warranties. SELLER EXPRESSLY DISCLAIMS ANY
REPRESENTATIONS OR WARRANTIES OF ANY KIND WITH RESPECT TO THE ASSETS, INCLUDING
WITHOUT LIMITATION ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE. Seller transfers to Buyer, and Buyer accepts from Seller,
the Assets AS IS without any warranties or representations thereon.

         8. Miscellaneous.

                  (a) Severability. In the event any provision of this Agreement
         is held to be invalid or unenforceable, the remaining provisions of
         this Agreement will remain in full force and effect.

                  (b) Notices. Unless otherwise specified in this Agreement all
         notices, including change of address notices, required to be sent
         hereunder shall be in writing and shall be deemed to have been given
         when mailed as follows:

                           Buyer:           Kenneth Reynolds
                                            Box 2055
                                            Roswell, New Mexico  88202
                                            Telephone: (505) 623-5070

                                     AX A-2
<PAGE>   25

                           Seller:          WEK Drilling Company, Inc.
                                            4510 Lamesa Highway
                                            P.O. Drawer 1416
                                            Synder, Texas  79549
                                            Telephone: (915) 573-1104

                  (c) Binding Arbitration. Any controversy, dispute, or claim
         arising out of, in connection with, or in relation to, the
         interpretation, performance, or breach of this Agreement, including,
         without limitation, the validity, scope, and enforceability of this
         Section, may at the election of Buyer or Seller be solely and finally
         settled by binding arbitration conducted in Artesia, New Mexico, or if
         arbitration cannot be conducted in such location, then at such other
         location as the parties may mutually agree, by and in accordance with
         the then existing rules for commercial arbitration of the American
         Arbitration Association ("AAA"), or any successor organization.
         Judgment upon any award rendered by the arbitrator(s) may be entered by
         the State or Federal Court having jurisdiction thereof. Either of the
         parties may demand arbitration by written notice to the other and to
         the AAA ("Demand for Arbitration"). The arbitrator(s) shall conduct the
         arbitration in a manner in accordance with the Federal Arbitration Act
         U.S.C. Section 1 et seq. and the rules of the AAA. The parties intend
         that this agreement to arbitrate be valid, enforceable, and
         irrevocable.

                  (d) Choice of Law. This Agreement shall be construed and
         interpreted in accordance with the laws of the State of New Mexico,
         without regard to the conflict of laws principles of such State.

                  (e) Risk of Loss. All risk of loss to the Assets shall be
         borne by Buyer, whether prior to or after the Closing.

                  (f) Waiver. The waiver by either party of any default or
         breach of this Agreement will not constitute a waiver of any other or
         subsequent default or breach.

                  (g) Counterparts. This Agreement may be executed
         simultaneously in one or more counterparts, each of which shall be
         deemed to be an original, but all of which shall constitute but one and
         the same instrument.

                  (h) Entirety. This Agreement embodies the entire understanding
         and agreement between the parties relative to its subject matter, and
         there are no understandings, agreements, conditions, or
         representations, oral or written, express or implied, with reference to
         such subject matter that are not merged in or superseded by this
         Agreement. This Agreement may be modified only by a writing signed by
         both parties.

                  (i) Headings. The headings to Sections of this Agreement are
         for convenience of reference only and do not form a part of this
         Agreement, and shall not in any way affect the interpretation of this
         Agreement.

                                     AX A-3
<PAGE>   26

                  (j) No Brokers. Neither party has utilized any brokers in
         connection with this transaction.

                  (k) Further Assurances. Each party shall cooperate fully with
         the other and execute such further instruments, documents, and
         agreements and give such further written assurances, as may be
         reasonably requested by the other to better evidence and reflect the
         transactions described herein and contemplated hereby, and to carry
         into effect the intents and purposes of this Agreement.

         IN WITNESS WHEREOF, the parties have executed this Agreement as of the
Effective Date.

                                       SELLER:

                                       WEK DRILLING COMPANY, INC.

                                       By:
                                          --------------------------------------
                                          Cloyce A. Talbott, President

                                       BUYER:

                                       -----------------------------------------
                                       Kenneth Reynolds

                                     AX A-4
<PAGE>   27

                                   SCHEDULE I

                                   ALLOCATION
                                       OF
                                 PURCHASE PRICE

<TABLE>
<S>                                                                                     <C>
         Account Receivable - K Reynolds                                                $ 160,000
         Cash Value - Life Insurance                                                      173,719
         Investment in Pecos Air                                                           44,480
         Building:
                  Leasehold Improvements                                                   28,183
                  Heat Pumps                                                                7,821
                  Land - Midland                                                           25,000
                  Carport                                                                  10,044
                  Carport                                                                  13,711
                  Building - Midland                                                      230,000
         Building - Artesia:
                  Building                                                                 48,637
                  Land                                                                      7,000
                                                                                       ----------
                                                     Subtotal                          $  752,595
         Office Equipment                                                                  73,179
         Computer Equipment                                                                18,656
                                                                                       ----------
                                                     Subtotal                          $  844,430
         Automobiles:
           167    1994 Dodge Pickup                                                         2,200
           163    1992 Dodge Pickup                                                            10
           136    1989 Ford F-350 Pickup (Welder)                                              10
           152    1995 Chevrolet Blazer                                                    14,400
           165    1998 Mercedes ML320                                                      30,400
           142    1999 Mercedes CLK430                                                     44,700
           172    1999 Mercedes CLK320                                                     36,400
           124    Boat, Motor and Trailer                                                      10
           125    Boat, Motor and Trailer                                                      10
           112    Ford Tractor                                                                 10
           145    1983 Suburban                                                                10
           133    1981 Aztec Trailer                                                           10
           175    2000 Ford Expedition                                                     27,400
                                                                                       ----------
                                                     Totals                            $1,000,000
                                                                                       ==========
</TABLE>

                                     SCH-1
<PAGE>   28

                                    EXHIBIT A

                                  BILL OF SALE

         Pursuant to that certain Stock Purchase Agreement dated March 31, 2000,
by and between Kenneth Reynolds ("Buyer") and WEK Drilling Company, Inc., a New
Mexico corporation ("Seller"), Seller, for good and valuable consideration, the
receipt and adequacy of which is hereby acknowledged, does hereby transfer,
convey, sell, assign and deliver AS IS to Buyer, the following assets:

                         Office Equipment and Computer Equipment
                         167      1994 Dodge Pickup
                         163      1992 Dodge Pickup
                         136      1989 Ford F-350 Pickup (Welder)
                         152      1995 Chevrolet Blazer
                         165      1998 Mercedes ML320
                         142      1999 Mercedes CLK430
                         172      1999 Mercedes CLK320
                         124      Boat, Motor and Trailer
                         125      Boat, Motor and Trailer
                         112      Ford Tractor
                         145      1983 Suburban
                         133      1981 Aztec Trailer
                         175      2000 Ford Expedition

         IN WITNESS WHEREOF, Seller has caused this Bill of Sale to be duly
executed on March 31, 2000.

                                       SELLER

                                       WEK DRILLING COMPANY, INC.

                                       By:
                                          --------------------------------------
                                          Cloyce A. Talbott, President

                                    EXH A-1
<PAGE>   29

                                    EXHIBIT B

                              DEED WITHOUT WARRANTY

Date:    March 31, 2000

Grantor (including address):           WEK Drilling Company, Inc.
                                       4510 Lamesa Highway
                                       P.O. Drawer 1416
                                       Snyder, Texas   79549

Grantee (including address):           Kenneth Reynolds
                                       Box 2055
                                       Roswell, New Mexico  88202

Consideration:                         $10 and other consideration

Property:                              Being Lot Seven (7), Block Eight (8),
                                       Saddle Club Estates, an addition to the
                                       City of Midland, Midland County, Texas,
                                       according to the map or plat thereof of
                                       record in Plat Cabinet C/44, Plat Records
                                       of Midland County, Texas

Reservations From and Exceptions to Conveyance:

         This deed is without any warranties, express or implied, and is subject
         to any and all matters of record, including, without limitation, any
         and all parties in possession, restrictions, covenants, and/or
         outstanding mineral reservations, rights and/or royalties, and any and
         all zoning laws, regulations, or ordinances of any municipal and/or
         other governmental authority, if any.

Grantor, for the consideration and subject to the reservations from and
exceptions to conveyance, conveys to Grantee the property, together with all and
singular the rights and appurtenances thereto in any wise belonging, to have and
to hold it to Grantee, Grantee's heirs, successors or assigns forever, without
express or implied warranty; and all warranties that might arise by common law
and the warranties in Section 5.023 of the Texas Property Code (or its
successor) are excluded.

         When the context requires, singular nouns and pronouns include the
plural.

                                    EXH B-1
<PAGE>   30

         IN WITNESS WHEREOF Grantor has executed this deed on the date set forth
above.

                                       WEK DRILLING COMPANY, INC.

                                       By:
                                          --------------------------------------
                                          Cloyce A. Talbott, President

STATE OF NEW MEXICO
COUNTY OF EDDY

         This instrument was acknowledged before me on the ______ day of March,
2000, by Cloyce A. Talbott, President of WEK Drilling Company, Inc., a New
Mexico corporation, on behalf of said corporation.

                                       -----------------------------------------
                                       Notary Public, State of New Mexico

                                       Notary's commission expires:
                                                                   -------------

AFTER RECORDING RETURN TO:

Kenneth Reynolds
Box 2055
Roswell, New Mexico  88202

                                     EXH B-2
<PAGE>   31

                                    EXHIBIT C

                              DEED WITHOUT WARRANTY

Date:    March 31, 2000

Grantor (including address):                WEK Drilling Company, Inc.
                                            4510 Lamesa Highway
                                            P.O. Drawer 1416
                                            Snyder, Texas   79549

Grantee (including address):                Kenneth Reynolds
                                            Box 2055
                                            Roswell, New Mexico  88202

Consideration:                              $10 and other consideration

Property:                                   Lots 6, 7 and 8 of Artesia View
                                            Subdivision of part of the SE1/4 of
                                            Section 17, Township 17 South, Range
                                            27 East, N.M.P.M., as the same
                                            appear on the official plat on file
                                            in the County Clerks office, Eddy
                                            County, New Mexico, EXCEPTING all
                                            oil, gas and other mineral in and
                                            under said land.

Reservations From and Exceptions to Conveyance:

         This deed is without any warranties, express or implied, and is subject
         to any and all matters of record, including, without limitation, any
         and all parties in possession, restrictions, covenants, and/or
         outstanding mineral reservations, rights and/or royalties, and any and
         all zoning laws, regulations, or ordinances of any municipal and/or
         other governmental authority, if any.

Grantor, for the consideration and subject to the reservations from and
exceptions to conveyance, conveys to Grantee the property, together with all and
singular the rights and appurtenances thereto in any wise belonging, to have and
to hold it to Grantee, Grantee's heirs, successors or assigns forever, without
express or implied warranty; and all warranties that might arise by common law
are excluded.

         When the context requires, singular nouns and pronouns include the
plural.

                                    EXH C-1
<PAGE>   32

         IN WITNESS WHEREOF Grantor has executed this deed on the date set forth
above.

                                       WEK DRILLING COMPANY, INC.

                                       By:
                                          --------------------------------------
                                          Cloyce A. Talbott, President

STATE OF NEW MEXICO
COUNTY OF EDDY

         This instrument was acknowledged before me on the ______ day of March,
2000, by Cloyce A. Talbott, President of WEK Drilling Company, Inc., a New
Mexico corporation, on behalf of said corporation.

                                       -----------------------------------------
                                       Notary Public, State of New Mexico

                                       Notary's commission expires:
                                                                   -------------

AFTER RECORDING RETURN TO:

Kenneth Reynolds
Box 2055
Roswell, New Mexico  88202

                                    EXH C-2
<PAGE>   33

                                                                         ANNEX B

                          REGISTRATION RIGHTS AGREEMENT

         This Registration Rights Agreement ("Agreement") is made and entered
into this 31st day of March, 2000, by and among PATTERSON ENERGY, INC., a
Delaware corporation ("PEC"), and KENNETH REYNOLDS and GARY CHAPPELL
(collectively, the "Stockholders").

         A. Pursuant to that certain Stock Purchase Agreement dated of even date
herewith ("Purchase Agreement") by and among PEC, Patterson Drilling Company LP,
LLLP, a Delaware registered limited liability limited partnership and a
wholly-owned indirect subsidiary of PEC ("PDC"), and the Stockholders, PEC has
agreed to issue a total of __________ shares ("Restricted Shares") of PEC's
Common Stock, $0.01 par value (the "Common Stock") as partial consideration for
the purchase by PDC of the outstanding capital stock of WEK Drilling Company,
Inc., all of which stock is owned by the Stockholders.

         B. This Agreement is being entered into in connection with and as a
condition to the parties closing the transactions contemplated under the Stock
Purchase Agreement.

         NOW, THEREFORE, the parties hereto agree as follows:

         1. Certain Definitions. As used in this Agreement the following terms
shall have the following respective meanings:

                  "Commission" shall mean the United States Securities and
         Exchange Commission and any successor federal agency having similar
         powers.

                  "Holders" shall mean the Stockholders.

                  "Person" shall mean an individual, a partnership, a joint
         venture, a corporation, a trust, an unincorporated organization and a
         government or any department or agency thereof.

                  The terms "register," "registered," and "registration" refer
         to a registration effected by preparing and filing a registration
         statement in compliance with the Securities Act, and the declaration or
         ordering of the effectiveness of such registration statement.

                  "Registration Expenses" shall mean all expenses incident to
         PEC's performance of or compliance with this Agreement, including
         without limitation all registration and filing fees, fees and expenses
         of compliance with securities or blue sky laws and all reasonable
         printing expenses, messenger and delivery expenses, and fees and
         disbursements of counsel for PEC and all independent certified public
         accountants, underwriters (excluding discounts and commissions) and
         other persons retained by PEC (all such expenses being herein called
         "Registration Expenses"), will be borne as provided in this Agreement,
         except that PEC will, in any event, pay its internal expenses
         (including, without limitation, all salaries and expenses of its
         officers and employees

                                     AX B-1
<PAGE>   34

         performing legal or accounting duties), the expense of any annual audit
         or quarterly review, the expense of any liability insurance and the
         expenses and fees for listing the securities to be registered on each
         securities exchange on which similar securities issued by PEC are then
         listed or on the NASD automated quotation system.

                  "Restricted Shares" shall include Common Stock issued or
         issuable with respect to the Restricted Shares by way of a stock
         dividend or stock split or in connection with a combination of shares,
         recapitalization, merger, consolidation or other reorganization. As to
         any particular Restricted Shares, such shares will cease to be
         Restricted Shares when they have been distributed to the public
         pursuant to an offering registered under the Securities Act or sold to
         the public through a broker, dealer or market maker in compliance with
         Rule 144 under the Securities Act (or any similar rule then in force).

                  "Securities Act" shall mean the Securities Act of 1933, or any
         successor thereto, as the same shall be amended from time to time.

         2. Restrictions on Transfer. The Restricted Shares were acquired by the
respective Stockholders from PEC for investment for their own account and not as
a nominee or agent and not with a present view to the resale or distribution of
any part thereof, except in compliance with the Securities Act. Each of the
Stockholders acknowledges that the Restricted Shares are "restricted securities"
within the meaning of the Securities Act.

         3. Restricted Shares - Registration Under Securities Act, etc.

                  3.1 Registration.

                  (a) Filing. Promptly following the execution of this Agreement
and the contemporaneous closing of the transaction contemplated by the Purchase
Agreement, but in no event later than two business days following the date of
this Agreement, PEC shall file a Registration Statement on Form S-3 (the "Form
S-3") with the Commission covering the distribution of the Restricted Shares.
PEC agrees to use its best efforts to have the Form S-3 declared effective.

                  (b) Expenses. PEC shall pay all Registration Expenses in
connection with the Form S-3.

                  3.2 Registration Procedures. Following the effective date of
the Form S-3, PEC will promptly:

                  (a) prepare and file with the Commission such amendments and
supplements to the Form S-3 and the prospectus used in connection therewith as
may be necessary to keep the Form S-3 effective and to comply with the
provisions of the Securities Act with respect to the disposition of the
Restricted Shares until the earlier of (i) such time as all of such Restricted
Shares have been disposed of in accordance with the intended methods of
disposition by the Stockholders, or (ii) the expiration of twelve (12) months
after such effective date and furnish to each of the Stockholders prior to the
filing thereof a copy of any amendment or supplement to the Form S-3 or
prospectus and shall not file any such amendment or supplement to which either
of the Stockholders shall have reasonably objected on the grounds that such
amendment or

                                     AX B-2
<PAGE>   35
supplement does not comply in all material respects with the requirements of the
Securities Act or of the rules or regulations thereunder;

                  (b) furnish to each of the Stockholders one originally
executed Form S-3, with all amendments, supplements and additional
documentation; such number of conformed copies of such Form S-3 and of each such
amendment and supplement thereto (in each case including all exhibits) as either
or both of the Stockholders may reasonably request; such number of copies of the
prospectus included in the Form S-3 (including each preliminary prospectus and
any summary prospectus) as required by the Securities Act as such Stockholders
may reasonably request; such documents, if any, incorporated by reference in the
Form S-3 or prospectus; and such other documents as either or both of the
Stockholders may reasonably request;

                  (c) use its best efforts to register or qualify the Restricted
Shares and other securities covered by the Form S-3 under such other securities
or blue sky laws of such jurisdictions as either or both of the Stockholders
shall reasonably request, to keep such registration or qualification in effect
for so long as the Form S-3 remains in effect, and do any and all other acts and
things which may be necessary or advisable to enable the Stockholders to
consummate the disposition in such jurisdictions of the Restricted Shares
covered by the Form S-3, except that PEC shall not for any such purpose be
required to qualify generally to do business as a foreign corporation in any
jurisdiction wherein it would not but for the requirements of this subdivision
(c) be obligated to be so qualified, or to subject itself to taxation in any
such jurisdiction, or to consent to general service of process in any such
jurisdiction;

                  (d) immediately notify the Stockholders at any time when a
prospectus relating thereto is required to be delivered under the Securities
Act, upon discovery that, or upon the happening of any event as a result of
which, the prospectus included in the Form S-3, as then in effect, includes an
untrue statement of a material fact or omits to state any material fact required
to be stated therein or necessary to make the statements therein not misleading
in light of the circumstances then existing, or if it is necessary to amend or
supplement such prospectus or Form S-3 to comply with law, and at the request of
the Stockholders, prepare and furnish to the Stockholders a reasonable number of
copies of a supplement to or an amendment of such prospectus as may be necessary
so that, as thereafter delivered to the purchasers of such Restricted Shares,
such prospectus shall not include an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statement therein not misleading in light of the circumstances then existing and
shall otherwise comply in all material respects with the law and so that such
prospectus or Form S-3, as amended or supplemented, will comply with law;

                  (e) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make available to its
securities holders, as soon as reasonably practicable, an earnings statement
covering the period of at least twelve (12) months beginning with the first
month of the first fiscal quarter after the effective date of the Form S-3, if
such earnings statement is necessary to satisfy the provisions of Section 11(a)
of the Securities Act.

                                     AX B-3
<PAGE>   36

         4. Indemnification.

                  4.1 Indemnification by PEC. PEC will, and hereby does,
indemnify and hold harmless each of the Stockholders against any losses, claims,
damages, liabilities or expenses, joint or several (including, without
limitation, the costs and expenses of investigating, preparing for and defending
any legal proceeding, including reasonable attorney's fees), to which the
respective Stockholders may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages, liabilities or expenses (or
actions or proceedings in respect thereof) arise out of or are based upon (i)
any untrue statement or alleged untrue statement of any material fact contained
in any registration statement under which such securities were registered under
the Securities Act, any preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement thereto, or any
document incorporated by reference therein, or (ii) any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and PEC will reimburse
the respective Stockholders for any legal or any other expenses incurred by them
in connection with investigating or defending or settling any such loss, claim,
liability, action or proceeding; provided that PEC shall not be liable in any
such case to the extent that any loss, claim, damage, liability or expense (or
action or proceeding in respect thereof) arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in such registration statement, any such preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement in reliance upon and in
conformity with information furnished to PEC by either or both of the
Stockholders for use in preparation thereof. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of the
Stockholders and shall survive the transfer of such securities by either or both
of the Stockholders. PEC will make provision for contribution in lieu of any
such indemnity that may be disallowed as shall be reasonably requested by either
or both of the Stockholders.

                  4.2 Indemnification by the Stockholders. In the event of any
registration of any securities of PEC under the Securities Act (pursuant to
which either or both of the Stockholders sells Restricted Shares covered by such
registration statement), the Stockholders will, and each of them hereby does,
severally indemnify and hold harmless PEC, each director of PEC, each officer of
PEC who shall sign such registration statement and each other person, if any,
who controls PEC within the meaning of the Securities Act from and against
losses, claims, damages and liabilities caused by any untrue statement or
alleged untrue statement of material fact contained in such registration
statement, any preliminary prospectus, final prospectus or summary prospectus
included therein, or any amendment or supplement thereto, or caused by any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, if
such statement or omission was made in reliance upon and in conformity with
information furnished to PEC for use in the preparation of such registration
statement, preliminary prospectus, final prospectus, summary prospectus,
amendment or supplement up to the net proceeds received by the Stockholders.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of PEC or any such director, officer or
controlling person and shall survive the transfer of such securities by either
or both of the Stockholders.

                  4.3 Notice of Claims, etc. In case any proceeding (including
any governmental investigation) shall be instituted involving any person in
respect of which

                                     AX B-4
<PAGE>   37

indemnity may be sought pursuant to this Section 4, such person (hereinafter
called the "indemnified party") shall promptly notify the person against whom
such indemnity may be sought (hereinafter called the "indemnifying party") in
writing and the indemnifying party, upon request of the indemnified party, shall
retain counsel reasonably satisfactory to the indemnified party to represent the
indemnified party and any other party the indemnifying party may designate in
such proceeding and shall pay the fees and disbursements of such counsel related
to such proceeding. In any such proceeding, any indemnified party shall have the
right to retain its own counsel, but the fees and expenses of such counsel shall
be at the expense of such indemnified party unless (i) the indemnifying party
and the indemnified party shall have mutually agreed to the retention of such
counsel or (ii) the named parties to any such proceeding (including any
impleaded parties) include both the indemnifying party and the indemnified party
and representation of both parties by the same counsel would be inappropriate
due to actual or potential differing interests between them. The indemnifying
party shall not be liable for the settlement of any proceeding effected without
its written consent, but if settled with such consent or if there is a final
judgment for the plaintiff, the indemnifying party agrees to indemnify the
indemnified party from and against any loss or liability by reason of such
settlement or judgment.

                  4.4 Indemnification Unavailable. If the indemnification
provided for in this Section 4 is unavailable as a matter of law to an
indemnified party in respect of any losses, claims, damages or liabilities
referred to therein, then each indemnifying party under any such paragraph, in
lieu of indemnifying such indemnified party thereunder, shall contribute to the
amount paid or payable by such indemnified party as a result of such losses,
claims, damages or liabilities (i) in such proportion as is appropriate to
reflect the relative benefits received by such indemnified party on the one hand
and the indemnifying parties on the other or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of such indemnified party on the one hand and
the indemnifying parties on the other in connection with the statements or
omissions which resulted in such losses, claims, damages or liabilities, as well
as any other relevant equitable considerations. The relative fault of such
indemnified party and the indemnifying parties shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission to state a material fact relates to information
supplied by such parties and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omissions.
The parties agree that it would not be just and equitable if contribution
pursuant to this Section 4.4 were determined by pro rata allocation or by any
other method of allocation which does not take account of the equitable
considerations referred to above. The amount paid or payable by an indemnified
party as a result of the losses, claims, damages and liabilities referred to
above shall be deemed to include, subject to the limitations set forth above,
any legal or other expenses reasonably incurred by such indemnified party in
connection with investigating, defending or settling any such action or claim.
Notwithstanding the foregoing, the liability of the respective Stockholders
under this Section 4.4 shall be limited to the net proceeds received by each
such Stockholder.

                  4.5 No Settlement, etc. No indemnifying party shall, except
with the written consent of the indemnified party, consent to entry of any
judgment or entry into settlement that

                                     AX B-5
<PAGE>   38

does not include as an unconditional term thereof the giving by the claimant or
plaintiff to such indemnified party of a release from all liability in respect
to such claim or action.

                  4.6 Indemnity Operative and in Full Force. The indemnity and
contribution agreements contained in this Section 4 shall remain operative and
in full force and effect regardless of any termination of this Agreement.

         5. Amendments and Waivers. This Agreement may be amended, and PEC may
take any action herein prohibited or omit to perform any act herein required to
be performed by it, only if PEC shall have obtained the written consent to such
amendment, action or omissions to act of the holder or holders of at least 51%
or more of the Restricted Shares.

         6. Notices. Notices and other communications under this Agreement shall
be in writing and shall be sent by registered mail, postage prepaid, or courier
addressed to:

                  6.1 if to the respective Stockholders, at the address shown on
stock transfer books of PEC or such other address as either of the Stockholders
has advised PEC in writing, and

                  6.2 if to PEC, at 4510 Lamesa Highway, P.O. Drawer 1416,
Snyder, Texas 79550 to the attention of its President or to such other address
as PEC shall have furnished to the Stockholders.

         7. Miscellaneous. This Agreement embodies the entire agreement and
understanding between PEC and the respective Stockholders with respect to the
subject matter hereof and supersedes all prior agreements and understandings
relating to the subject matter hereof. This Agreement shall be construed and
enforced in accordance with and governed by the laws of the State of Texas. The
headings in this Agreement are for the purposes of reference only and shall not
limit or otherwise affect the meaning hereof. This Agreement may be executed in
counterparts, each of which shall be an original, but both of which together
shall constitute one instrument.

         IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their respective officers thereunto duly authorized as
of the date first above written.

                                       PEC:

                                       PATTERSON ENERGY, INC.

                                       By:
                                          --------------------------------------
                                          Cloyce A. Talbott
                                          Chief Executive Officer

                                       STOCKHOLDERS:

                                       -----------------------------------------
                                       Kenneth Reynolds

                                       -----------------------------------------
                                       Gary Chappell

                                     AX B-6
<PAGE>   39

                                                                         ANNEX C

                        INVESTMENT REPRESENTATION LETTER

                                 March 31, 2000

Patterson Energy, Inc.
4510 Lamesa Highway
Snyder, Texas  79549

         This letter is being submitted to Patterson Energy, Inc. ("PEC") in
connection with and as a condition to PEC's closing of the transaction
contemplated by the Stock Purchase Agreement among PEC, Patterson Drilling
Company LP, LLLP ("PDC") and Kenneth Reynolds and Gary Chappell (collectively,
the "Stockholders"). Capitalized terms not defined herein shall have the meaning
given them in the Memorandum (as defined below).

         1. Representations and Warranties.

         Each of the undersigned hereby represents and warrants to PEC that the
following statements are true:

                  a. Each of the undersigned has been furnished a copy of the
Memorandum, dated March 29, 2000 (the "Memorandum") containing a copy of PEC's
Annual Report on Form 10-K for the fiscal year ended December 31, 1999, and all
other reports filed by PEC with the Securities and Exchange Commission since
January 1, 2000 (collectively, the "Reports") and has carefully reviewed the
Memorandum and the Reports, including, but not limited to, (i) the statements in
the Memorandum relating to taxation of the Stock Purchase and lack of free
transferability of the PEC Common Stock to be issued by PEC as consideration for
the Stock Purchase, and (ii) the section entitled "Disclosure Concerning
Forward-Looking Statements," setting forth certain Cautionary Statements or risk
factors relating to PEC and its businesses and operations.

                  b. Each of the undersigned has such knowledge and experience
in financial and business matters that it is capable of evaluating the merits
and risks of an investment in PEC vis-a-vis the PEC Common Stock to be issued by
PEC as partial consideration for the Stock Purchase.

                  c. Each of the undersigned has had an opportunity to ask
questions of PEC and its management concerning PEC and PDC, the businesses of
PEC and PDC and the PEC Common Stock and, if asked, all such questions have been
answered to the full satisfaction of the undersigned.

                  d. Each of the undersigned understands that PEC has not
registered the offer or sale of the PEC Common Stock under the Securities Act of
1933, as amended (the "Act"), in reliance upon an exemption therefrom under
Section 4(2) of the Act and the provisions of Regulation D promulgated
thereunder. Each of the undersigned therefore acknowledges that in

                                     AX C-1
<PAGE>   40

no event may it sell or otherwise transfer the PEC Common Stock without
registration under the Act (see paragraph (g) below).

                  e. Each of the undersigned represents that he will acquire the
PEC Common Stock for his own account, with no intention to distribute or offer
to distribute the same to others without registration under the Act, and
understands that the issuance by PEC of the PEC Common Stock will be predicated
upon the undersigned's lack of such intention.

                  f. Each of the undersigned understands that neither the
Securities and Exchange Commission nor the securities commissioner of any state
has received or reviewed any documents relative to an investment in PEC, or has
made any finding or determination relating to the fairness of an investment in
PEC.

                  g. Each of the undersigned acknowledges that stop transfer
instructions will be placed with PEC's transfer agent to restrict the resale,
pledge, hypothecation or other transfer of the PEC Common Stock.

                  h. Each of the undersigned acknowledges that, except as
provided in the Registration Rights Agreement attached as Annex B to the Stock
Purchase Agreement, PEC is under no obligation to register the PEC Common Stock
for sale under the Act or to assist the undersigned in complying with any
exemption from registration under the Act, or any state securities laws.

                  i. If other than a natural person, each of the undersigned was
not organized for the specific purpose of acquiring the PEC Common Stock.

                  j. Each of the undersigned understands and acknowledges that
the foregoing representations and warranties will be relied upon by PEC in
connection with the issuance of the PEC Common Stock.

                  k. Each of the undersigned has an individual net worth, or
joint net worth with the undersigned's spouse in excess of $1 million.

         2. Indemnification.

         Each of the undersigned agrees to indemnify and hold harmless PEC and
PDC, or either of them, the officers, directors and affiliates of either of them
and each other person, if any, who controls either of them, within the meaning
of Section 15 of the Act, against any and all loss, liability, claim, damage and
expense whatsoever (including, but not limited to, any and all expenses
reasonably incurred in investigating, preparing or defending against any
litigation commenced or threatened or any claim whatsoever) arising out of or
based upon any false representation or warranty or failure by the undersigned to
comply with any covenant or agreement made by each of the undersigned herein.

                                     AX C-2
<PAGE>   41

         3. Survival.

         All representations, warranties and covenants contained in this letter
shall survive the closing of the Stock Purchase.

                                       Very truly yours,

                                       -----------------------------------------
                                       Kenneth Reynolds

                                       -----------------------------------------
                                       Gary Chappell

                                     AX C-3
<PAGE>   42

                                                                       ANNEX D-1

                       PATTERSON DRILLING COMPANY LP, LLLP

                            NON-COMPETITION AGREEMENT

         THIS NON-COMPETITION AGREEMENT is made and entered into this 31st day
of March, 2000 (this "Agreement"), by and between PATTERSON DRILLING COMPANY LP,
LLLP, a Delaware registered limited liability limited partnership ("PDC"), and
Kenneth Reynolds, an individual residing in Roswell, New Mexico ("K Reynolds").

                                    RECITALS:

         A. Simultaneously with the execution of this Agreement, PDC has entered
into that certain Stock Purchase Agreement (the "Stock Purchase Agreement"),
among PEC, PDC, Gary Chappell and K Reynolds, providing for, among other things,
the purchase by PDC of all of the outstanding shares of capital stock of WEK
Drilling Company, Inc., a New Mexico corporation.

         B. The execution and delivery of this Agreement is a condition to the
consummation of the Stock Purchase contemplated by the Stock Purchase Agreement,
and the parties are entering into this Agreement in order to fulfill such
condition.

         NOW, THEREFORE, in consideration of the foregoing, the mutual covenants
and agreements contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties, intending
to be legally bound, hereby agree as follows:

         1. Period of Agreement.

                  The period of this Agreement shall commence on the date hereof
and remain in effect through March 31, 2005, unless sooner terminated as the
result of the death of K Reynolds (the "Non-Compete Period").

         2. Covenant Not to Compete.

                  (a) K Reynolds covenants and agrees that during the
Non-Compete Period, K Reynolds shall not, without the prior written consent of
PDC, directly or indirectly, and whether as a principal or as an agent, officer,
director, employee, consultant, or otherwise, alone or in association with any
other person, carry on, be engaged, concerned, or take part in, render services
to, or own, share in the earnings of, or invest in the stock, bonds, or other
securities of, any person which is engaged in, the contract oil and gas well
drilling business within the Permian Basin of West Texas and Southeastern New
Mexico (the "Competitive Business"); provided, however, that K Reynolds may
invest in stock, bonds, or other securities of any Competitive Business (but
without otherwise participating in the Competitive Business) if: (A) such stock,
bonds, or other securities are listed on any national securities exchange or are

                                    AX D-1-1
<PAGE>   43

registered under Section 12(g) of the Securities Exchange Act of 1934, as
amended; (B) the investment does not exceed, in the case of any class of capital
stock of any one issuer, two percent (2%) of the issued and outstanding shares,
or, in the case of bonds or other securities of any one issuer, two percent (2%)
of the aggregate principal amount thereof issued and outstanding; and (C) such
investment would not prevent, directly or indirectly, the transaction of
business by PDC or any affiliate of PDC with any state, district, territory, or
possession of the United States or any governmental subdivision, agency, or
instrumentality thereof by virtue of any statute, law, regulation or
administrative practice. The period of time during which K Reynolds is
prohibited from engaging in certain activities by this Section shall be extended
by the length of time during which K Reynolds is in breach of the terms of this
section.

                  (b) It is understood by and between the parties hereto that
the foregoing covenant by K Reynolds not to enter into competition with PDC as
set forth in Section 3(a) hereof is an essential element of this Agreement and
the Stock Purchase Agreement and that, but for the agreement of K Reynolds to
comply with such covenant, PDC would not have agreed to enter into this
Agreement or the Stock Purchase Agreement. PDC and K Reynolds have independently
consulted with their respective counsel and have been advised in all respects
concerning the reasonableness and propriety of such covenant, with specific
regard to the nature of the business conducted by PDC and its affiliates. K
Reynolds agrees that such covenant is reasonable in scope, geographic area, and
duration, and that compliance with such covenant would not impose economic or
professional hardship on K Reynolds.

                  (c) Notwithstanding the terms and provisions of Section 2(a)
above, it is expressly understood that K Reynolds shall be free to participate,
own, manage and operate an existing drilling company known as "Rod Ric Corp".
Such company is presently operating in Texas and New Mexico with five drilling
rigs capable of drilling shallow oil and gas wells to a depth of 7,500 feet and
occasionally to a depth of 9,000 feet. The participation by K Reynolds shall not
be a violation of this agreement and PDC specially consents to such association
by K Reynolds with such drilling company.

         3. Restrictions on Soliciting Business of PDC.

                  K Reynolds further covenants and agrees that during the
Non-Compete Period, K Reynolds will not, either for himself or for any other
person or entity, directly or indirectly, engage in any of the following
activities in a Competitive Business without the express prior written consent
of PDC:

                  (a) Solicit or hire any of the employees of PDC or solicit or
take away any of PDC's customers, lessors, or suppliers or attempt any of the
foregoing;

                  (b) Acquire or attempt to acquire rights providing any product
or service in a Competitive Business within the territory described in Section 3
hereof; or

                  (c) Engage in any act which would interfere with or harm any
business relationship PDC has with any customer, lessor, employee, principal or
supplier.

                                    AX D-1-2
<PAGE>   44

         4. Specific Performance.

                  Without intending to limit the remedies available to PDC, K
Reynolds acknowledges that PDC will have no adequate remedies at law if K
Reynolds violates the terms of Section 3 or 4, hereof. In such event, K Reynolds
agrees that PDC shall have the right, in addition to any other rights it may
have, to obtain in any court of competent jurisdiction specific performance of
such Sections of this Agreement or injunctive relief to restrain any breach or
threatened breach thereof. Nothing herein shall be construed as prohibiting PDC
from pursuing any other remedies available to PDC (whether at law or in equity)
for such breach or threatened breach, including, without limitation, the
recovery of monetary damages from K Reynolds. The provisions of this Section 5
shall survive the expiration, termination or cancellation of this Agreement.

         5. Attorneys Fees and Costs.

                  If an action at law or in equity is necessary to enforce or
interpret the terms of this Agreement, the prevailing party shall be entitled to
reasonable attorneys fees, costs and necessary expenses in addition to any other
relief to which that party may be entitled. This provision is applicable to this
entire Agreement.

         6. Representations and Warranties of PDC and K Reynolds.

                  (a) Representations and Warranties of PDC. PDC hereby
represents and warrants to K Reynolds that: (i) it has all requisite power to
enter into and perform its obligations under this Agreement; (ii) this Agreement
has been duly and validly authorized by all necessary corporate action on the
part of PDC; (iii) the execution of this Agreement by PDC and performance of
PDC's obligations hereunder do not require the consent or approval of any other
party; and (iv) this Agreement is a valid and binding obligation of PDC.

                  (b) Representations and Warranties of K Reynolds. K Reynolds
hereby represents and warrants to PDC that: (i) K Reynolds has the capacity and
power to enter into and perform obligations of K Reynolds under this Agreement;
(ii) K Reynolds has duly and validly executed this Agreement; (iii) the
execution of this Agreement and performance of obligations of K Reynolds
hereunder do not require the consent or approval of any other party; and (iv)
this Agreement constitutes a valid and binding obligation of K Reynolds.

         7. General Provisions.

                  (a) Compliance with Laws. The parties agree that they will
comply with all applicable laws and regulations of government bodies or agencies
in their respective performance of their obligations under this Agreement.

                  (b) Governing Law and Construction. This Agreement will be
governed by and construed in accordance with the laws of the State of New Mexico
without reference to its conflict-of-laws principles. This Agreement's final
form resulted from review and negotiations

                                    AX D-1-3
<PAGE>   45

among the parties and their attorneys, and no part of this Agreement should be
construed against any party on the basis of authorship.

                  (c) Forum for Dispute Resolution. If any dispute arises among
the parties concerning the interpretation or performance of any portion of this
Agreement which the parties are unable to resolve themselves, and any party
brings an action against any other party seeking a declaratory order, specific
performance, damages, or any other legal or equitable relief based on this
Agreement, the parties agree that the forum for any such action shall be the
District Court in Eddy or Chavez County, New Mexico, agree that venue will be
proper in such courts, and waive any objections based on inconvenience of the
forum, and further agree that the prevailing party in any such action, as
determined by the court, shall be awarded its reasonable attorneys' fees and
costs in addition to any relief or judgment the court awards.

                  (d) Entire Agreement; Amendment. This Agreement constitutes
the entire agreement between the parties with respect to the subject matter
contained herein and supersedes any previous oral or written communications,
representations, understandings or agreements with respect thereto. The terms of
this Agreement may be modified only in a writing, signed by authorized
representatives of both parties.

                  (e) Assignability. This Agreement will be binding upon the
parties' respective successors and permitted assigns. Neither party may assign
this Agreement and/or any of its rights and/or obligations hereunder without the
prior written consent of the other party, and any such attempted assignment will
be void; provided, however, that PDC may assign this Agreement to a subsidiary
or affiliate without the prior written consent of K Reynolds, and provided
further that a transfer by PDC as a result of a merger or sale of all or
substantially all of the assets of PDC with or to a third party that assumes
PDC's obligations hereunder by operation of law or otherwise shall not
constitute a prohibited assignment under this Section 7(e).

                  (f) Waiver. A waiver of a breach or default under this
Agreement will not constitute a waiver of any other breach or default. Failure
or delay by either party to enforce compliance with any term or condition of
this Agreement will not constitute a waiver of such term or condition.

                  (g) Severability. If any provision of this Agreement is
declared to be invalid, the parties agree that such invalidity will not affect
the validity of the remaining provisions of this Agreement, and further agree,
to the extent possible, to substitute for the invalid provision a valid
provision that approximates the intent and economic effect of the invalid
provision as closely as possible.

                  (h) Headings. The titles of the Sections and subsections of
this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.

                  (i) Notice. Any notice, request, consent, demand or other
communication required to be given under this Agreement will be in writing and
will be given personally, by facsimile or by mailing the same, first-class,
postage prepaid to the appropriate address and facsimile number set forth below
or to such other person or at such other address as may

                                    AX D-1-4
<PAGE>   46

hereafter be designated by like notice. Notices by mail will be considered
delivered and become effective three days after the mailing thereof. All notices
by facsimile will be considered delivered and become effective immediately upon
the confirmed (by answer back or other tangible printed verification or
successful receipt) sending thereof.

                          To PDC:

                                 Patterson Drilling Company LP, LLLP
                                 4510 Lamesa Highway
                                 P.O. Drawer 1410
                                 Snyder, Texas 79550
                                 Facsimile: (915) 573-0281
                                 Attention: Cloyce A. Talbott
                                            Chairman and Chief Executive Officer

                          To K Reynolds:

                                 Box 2055
                                 Roswell, New Mexico 88202
                                 Facsimile:
                                           ---------------

                          with copies to:

                                 J. W. Neal, Esq.
                                 Box 278
                                 Hobbs, New Mexico 88241
                                 Facsimile: (505) 397-7405

                  (j) Counterparts. This Agreement may be executed in
counterparts and by the parties hereto in separate counterparts, each of which
will be deemed an original, but all of which together will constitute one and
the same instrument.

         IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed by their respective representatives as of the day and year first above
written.

                                       PATTERSON DRILLING COMPANY LP,
                                       LLLP

                                       By:
                                          --------------------------------------
                                          Cloyce A. Talbott
                                          Chief Executive Officer

                                       K REYNOLDS

                                       -----------------------------------------
                                       Kenneth Reynolds

                                    AX D-1-5
<PAGE>   47

                                                                       ANNEX D-2

                       PATTERSON DRILLING COMPANY LP, LLLP

                            NON-COMPETITION AGREEMENT

         THIS NON-COMPETITION AGREEMENT is made and entered into this 31st day
of March, 2000 (this "Agreement"), by and between PATTERSON DRILLING COMPANY LP,
LLLP, a Delaware registered limited liability limited partnership ("PDC"), and
Gary Chappell, an individual residing in Midland, Texas ("G Chappell").

                                    RECITALS:

         A. Simultaneously with the execution of this Agreement, PDC has entered
into that certain Stock Purchase Agreement (the "Stock Purchase Agreement"),
among PEC, PDC, Kenneth Reynolds and G Chappell, providing for, among other
things, the purchase by PDC of all of the outstanding shares of capital stock of
WEK Drilling Company, Inc., a New Mexico corporation.

         B. The execution and delivery of this Agreement is a condition to the
consummation of the Stock Purchase contemplated by the Stock Purchase Agreement,
and the parties are entering into this Agreement in order to fulfill such
condition.

         NOW, THEREFORE, in consideration of the foregoing, the mutual covenants
and agreements contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties, intending
to be legally bound, hereby agree as follows:

         1. Period of Agreement.

                  The period of this Agreement shall commence on the date hereof
and remain in effect through March 31, 2005, unless sooner terminated as the
result of the death of G Chappell (the "Non-Compete Period").

         2. Covenant Not to Compete.

                  (a) G Chappell covenants and agrees that during the
Non-Compete Period, G Chappell shall not, without the prior written consent of
PDC, directly or indirectly, and whether as a principal or as an agent, officer,
director, employee, consultant, or otherwise, alone or in association with any
other person, carry on, be engaged, concerned, or take part in, render services
to, or own, share in the earnings of, or invest in the stock, bonds, or other
securities of, any person which is engaged in, the contract oil and gas well
drilling business within the Permian Basin of West Texas and Southeastern New
Mexico (the "Competitive Business"); provided, however, that G Chappell may
invest in stock, bonds, or other securities of any Competitive Business (but
without otherwise participating in the Competitive Business) if:

                                    AX D-2-1
<PAGE>   48

(A) such stock, bonds, or other securities are listed on any national securities
exchange or are registered under Section 12(g) of the Securities Exchange Act of
1934, as amended; (B) the investment does not exceed, in the case of any class
of capital stock of any one issuer, two percent (2%) of the issued and
outstanding shares, or, in the case of bonds or other securities of any one
issuer, two percent (2%) of the aggregate principal amount thereof issued and
outstanding; and (C) such investment would not prevent, directly or indirectly,
the transaction of business by PDC or any affiliate of PDC with any state,
district, territory, or possession of the United States or any governmental
subdivision, agency, or instrumentality thereof by virtue of any statute, law,
regulation or administrative practice. The period of time during which G
Chappell is prohibited from engaging in certain activities by this Section shall
be extended by the length of time during which G Chappell is in breach of the
terms of this section.

                  (b) It is understood by and between the parties hereto that
the foregoing covenant by G Chappell not to enter into competition with PDC as
set forth in Section 3(a) hereof is an essential element of this Agreement and
the Stock Purchase Agreement and that, but for the agreement of G Chappell to
comply with such covenant, PDC would not have agreed to enter into this
Agreement or the Stock Purchase Agreement. PDC and G Chappell have independently
consulted with their respective counsel and have been advised in all respects
concerning the reasonableness and propriety of such covenant, with specific
regard to the nature of the business conducted by PDC and its affiliates. G
Chappell agrees that such covenant is reasonable in scope, geographic area, and
duration, and that compliance with such covenant would not impose economic or
professional hardship on G Chappell.

                  (c) Notwithstanding the terms and provisions of Section 2(a)
above, it is expressly understood that G Chappell shall be free to participate,
own, manage and operate an existing drilling company known as "Rod Ric Corp".
Such company is presently operating in Texas and New Mexico with five drilling
rigs capable of drilling shallow oil and gas wells to a depth of 7,500 feet and
occasionally to a depth of 9,000 feet. The participation by G Chappell shall not
be a violation of this agreement and PDC specially consents to such association
by G Chappell with such drilling company.

         3. Restrictions on Soliciting Business of PDC.

                  G Chappell further covenants and agrees that during the
Non-Compete Period, G Chappell will not, either for himself or for any other
person or entity, directly or indirectly, engage in any of the following
activities in a Competitive Business without the express prior written consent
of PDC:

                  (a) Solicit or hire any of the employees of PDC or solicit or
take away any of PDC's customers, lessors, or suppliers or attempt any of the
foregoing;

                  (b) Acquire or attempt to acquire rights providing any product
or service in a Competitive Business within the territory described in Section 3
hereof; or

                  (c) Engage in any act which would interfere with or harm any
business relationship PDC has with any customer, lessor, employee, principal or
supplier.

                                    AX D-2-2
<PAGE>   49

         4. Specific Performance.

                  Without intending to limit the remedies available to PDC, G
Chappell acknowledges that PDC will have no adequate remedies at law if G
Chappell violates the terms of Section 3 or 4, hereof. In such event, G Chappell
agrees that PDC shall have the right, in addition to any other rights it may
have, to obtain in any court of competent jurisdiction specific performance of
such Sections of this Agreement or injunctive relief to restrain any breach or
threatened breach thereof. Nothing herein shall be construed as prohibiting PDC
from pursuing any other remedies available to PDC (whether at law or in equity)
for such breach or threatened breach, including, without limitation, the
recovery of monetary damages from G Chappell. The provisions of this Section 5
shall survive the expiration, termination or cancellation of this Agreement.

         5. Attorneys Fees and Costs.

                  If an action at law or in equity is necessary to enforce or
interpret the terms of this Agreement, the prevailing party shall be entitled to
reasonable attorneys fees, costs and necessary expenses in addition to any other
relief to which that party may be entitled. This provision is applicable to this
entire Agreement.

         6. Representations and Warranties of PDC and G Chappell.

                  (a) Representations and Warranties of PDC. PDC hereby
represents and warrants to G Chappell that: (i) it has all requisite power to
enter into and perform its obligations under this Agreement; (ii) this Agreement
has been duly and validly authorized by all necessary corporate action on the
part of PDC; (iii) the execution of this Agreement by PDC and performance of
PDC's obligations hereunder do not require the consent or approval of any other
party; and (iv) this Agreement is a valid and binding obligation of PDC.

                  (b) Representations and Warranties of G Chappell. G Chappell
hereby represents and warrants to PDC that: (i) G Chappell has the capacity and
power to enter into and perform obligations of G Chappell under this Agreement;
(ii) G Chappell has duly and validly executed this Agreement; (iii) the
execution of this Agreement and performance of obligations of G Chappell
hereunder do not require the consent or approval of any other party; and (iv)
this Agreement constitutes a valid and binding obligation of G Chappell.

         7. General Provisions.

                  (a) Compliance with Laws. The parties agree that they will
comply with all applicable laws and regulations of government bodies or agencies
in their respective performance of their obligations under this Agreement.

                  (b) Governing Law and Construction. This Agreement will be
governed by and construed in accordance with the laws of the State of New Mexico
without reference to its conflict-of-laws principles. This Agreement's final
form resulted from review and negotiations

                                    AX D-2-3
<PAGE>   50

among the parties and their attorneys, and no part of this Agreement should be
construed against any party on the basis of authorship.

                  (c) Forum for Dispute Resolution. If any dispute arises among
the parties concerning the interpretation or performance of any portion of this
Agreement which the parties are unable to resolve themselves, and any party
brings an action against any other party seeking a declaratory order, specific
performance, damages, or any other legal or equitable relief based on this
Agreement, the parties agree that the forum for any such action shall be the
District Court in Eddy or Chavez County, New Mexico, agree that venue will be
proper in such courts, and waive any objections based on inconvenience of the
forum, and further agree that the prevailing party in any such action, as
determined by the court, shall be awarded its reasonable attorneys' fees and
costs in addition to any relief or judgment the court awards.

                  (d) Entire Agreement; Amendment. This Agreement constitutes
the entire agreement between the parties with respect to the subject matter
contained herein and supersedes any previous oral or written communications,
representations, understandings or agreements with respect thereto. The terms of
this Agreement may be modified only in a writing, signed by authorized
representatives of both parties.

                  (e) Assignability. This Agreement will be binding upon the
parties' respective successors and permitted assigns. Neither party may assign
this Agreement and/or any of its rights and/or obligations hereunder without the
prior written consent of the other party, and any such attempted assignment will
be void; provided, however, that PDC may assign this Agreement to a subsidiary
or affiliate without the prior written consent of G Chappell, and provided
further that a transfer by PDC as a result of a merger or sale of all or
substantially all of the assets of PDC with or to a third party that assumes
PDC's obligations hereunder by operation of law or otherwise shall not
constitute a prohibited assignment under this Section 7(e).

                  (f) Waiver. A waiver of a breach or default under this
Agreement will not constitute a waiver of any other breach or default. Failure
or delay by either party to enforce compliance with any term or condition of
this Agreement will not constitute a waiver of such term or condition.

                  (g) Severability. If any provision of this Agreement is
declared to be invalid, the parties agree that such invalidity will not affect
the validity of the remaining provisions of this Agreement, and further agree,
to the extent possible, to substitute for the invalid provision a valid
provision that approximates the intent and economic effect of the invalid
provision as closely as possible.

                  (h) Headings. The titles of the Sections and subsections of
this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.

                  (i) Notice. Any notice, request, consent, demand or other
communication required to be given under this Agreement will be in writing and
will be given personally, by facsimile or by mailing the same, first-class,
postage prepaid to the appropriate address and facsimile number set forth below
or to such other person or at such other address as may

                                    AX D-2-4
<PAGE>   51

hereafter be designated by like notice. Notices by mail will be considered
delivered and become effective three days after the mailing thereof. All notices
by facsimile will be considered delivered and become effective immediately upon
the confirmed (by answer back or other tangible printed verification or
successful receipt) sending thereof.

                          To PDC:

                                 Patterson Drilling Company LP, LLLP
                                 4510 Lamesa Highway
                                 P.O. Drawer 1410
                                 Snyder, Texas 79550
                                 Facsimile: (915) 573-0281
                                 Attention: Cloyce A. Talbott
                                            Chairman and Chief Executive Officer

                          To G Chappell:

                                 4305 Lehigh
                                 Midland, Texas 79707
                                 Facsimile:
                                           ---------------

                          with copies to:

                                 J. W. Neal, Esq.
                                 Box 278
                                 Hobbs, New Mexico 88241
                                 Facsimile: (505) 397-7405

                  (j) Counterparts. This Agreement may be executed in
counterparts and by the parties hereto in separate counterparts, each of which
will be deemed an original, but all of which together will constitute one and
the same instrument.

         IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed by their respective representatives as of the day and year first above
written.

                                       PATTERSON DRILLING COMPANY LP,
                                       LLLP

                                       By:
                                          --------------------------------------
                                          Cloyce A. Talbott
                                          Chief Executive Officer

                                       G CHAPPELL

                                       -----------------------------------------
                                       Gary Chappell

                                    AX D-2-5<PAGE>   1
                                                                   EXHIBIT 10.21

March 3, 2000

FloNetwork Inc.
260 King Street East
Toronto, Ontario, Canada
M5A 1K3

Gentlemen:

This letter will confirm our understanding that SG Cowen Securities Corporation
("SG Cowen") has been engaged to act as financial advisor to FloNetwork Inc.
(the "Company"), in connection with the Company's general financial strategy and
planning.

1.    FINANCIAL ADVISORY SERVICES
      In its capacity as financial advisor and at the Company's request, SG
      Cowen will provide the Company with general financial advice and
      assistance.

2.    TERM
      SG Cowen's engagement shall terminate twelve (12) months from the date of
      this Agreement, unless extended in writing by SG Cowen and the Company.
      Either SG Cowen or the Company may terminate this Agreement at any time on
      10 days prior written notice. A "Residual Period" shall extend for twelve
      (12) months from the date of termination or expiration of this Agreement.
      Within 15 days of the termination or expiration of this Agreement, SG
      Cowen shall provide the Company with a written list of SG Cowen Parties as
      defined below.

      Nothing contained in this Agreement will require the Company to accept the
      terms of any proposal or to negotiate with any person. The Company has the
      right in its sole discretion to reject any Transaction regardless of the
      terms proposed.

3.    FEES

<PAGE>   2

FloNetwork Inc.
March 3, 2000
Page 2

      The Company agrees to pay SG Cowen as compensation for its services under
      this engagement the following cash fees net of any value-added taxes paid
      or payable hereunder:

      a.  RETAINER FEE. A non-refundable Retainer Fee of U.S. $50,000 shall be
          payable upon execution of this Agreement. The Retainer Fee shall be
          credited against any Transaction Fees or Break-Up Fees payable as
          described below.

      b.  TRANSACTION FEE. If a Transaction is consummated, or a definitive
          agreement with respect to the Transaction is executed, during the term
          of this Agreement or if during the Residual Period with a party that
          SG Cowen had contacted or with whom it had had discussions on behalf
          of the Company in connection with a Transaction with the prior
          approval of the Company (a "SG Cowen Party"), SG Cowen shall be paid a
          Transaction Fee, payable in U.S. dollars, at the closing of the
          Transaction equal to:

          (i.)    for Transactions that close prior to the effectiveness of the
                  registration statement filed with the Securities and Exchange
                  Commission in connection with the initial public offering of
                  the Company's common stock (the "Effective Time"), six tenth
                  of one percent (0.6%) of amount of aggregate consideration (as
                  defined below) up to U.S. $300 million, plus one percent
                  (1.0%) of amount of aggregate consideration in excess of U.S.
                  $300 million; or

          (ii.)   for  Transactions  that close after the  Effective  Time,  one
                  percent  (1.0%) of the amount of  aggregate consideration.

          For an Acquisition Transaction, SG Cowen shall only be entitled to the
          Transaction Fee if SG Cowen provides services in connection therewith
          at the request of the Company (it being understood that the Company
          shall be entitled to retain any investment banker or no investment
          banker to provide services to it in connection with an Acquisition
          Transaction).

<PAGE>   3

FloNetwork Inc.
March 3, 2000
Page 3

          If the Company enters into discussions during the Residual Period for
          a Transaction which SG Cowen would be entitled to a Transaction Fee SG
          Cowen shall provide the services contemplated hereby in connection
          with such Transaction, if the Company requests such services and
          provides sufficient and reasonable notice to SG Cowen.

      c.  BREAK-UP FEE. If, following or in connection with the termination,
          abandonment or failure to occur of any proposed Transaction (as to
          which SG Cowen would otherwise have been entitled to fees hereunder),
          and during the term of this Agreement or during the Residual Period,
          the Company is entitled to receive a break-up, termination, "topping,"
          expense reimbursement or similar fee or payment (including, without
          limitation, any judgment for damages or amount in settlement of any
          dispute as a result of such termination, abandonment or failure to
          occur), the Company shall pay SG Cowen a cash fee, payable promptly
          following the Company's receipt of such fee, payment, judgment or
          amount, equal to 25% of the aggregate amount of all fees, payments,
          judgments or amounts received.

      Unless otherwise specified in this Agreement, compensation which is
      payable to SG Cowen pursuant to this Agreement shall be paid by the
      Company to SG Cowen at the closing of a Transaction, except that
      compensation attributable to that part of the aggregate consideration
      which is contingent upon the occurrence of some future event shall be paid
      by the Company to SG Cowen at the receipt of such aggregate consideration.

      In the event the Transaction involves less than all of the voting
      securities or assets of the Company or Target (as defined herein), as the
      case may be, but 50% or more of such securities or assets, aggregate
      consideration shall be calculated as if all such securities or assets were
      being acquired, and in any event the Transaction shall be deemed
      consummated upon the acquisition of a majority of the securities or assets
      to be acquired pursuant to such Transaction.

4.    OUT-OF-POCKET EXPENSES

<PAGE>   4

FloNetwork Inc.
March 3, 2000
Page 4

      The Company shall, upon request, reimburse SG Cowen for travel and all
      other reasonable out-of-pocket expenses (including the reasonable fees and
      disbursements of SG Cowen's counsel, if any) incurred in connection with
      the engagement; provided that in no event shall such expenses exceed
      $25,000 without the Company's prior written consent, which consent shall
      not be unreasonably withheld.

5.    CERTAIN DEFINITIONS

      TRANSACTION.  A "Transaction" shall mean an "Acquisition Transaction"
      and/or a "Sale Transaction."

      An "Acquisition Transaction" shall mean one or a series of transactions
      whereby, directly or indirectly, control of or a material interest in an
      entity (the "Target") or any of its businesses or assets are transferred
      to or combined with the Company or any person or one or more persons
      formed by or affiliated with the Company (collectively, an "Acquisition
      Affiliate"), including, without limitation, a disposition or exchange of
      capital stock or assets, a merger or consolidation, a tender or exchange
      offer, a leveraged buyout, or the formation of a joint venture or
      partnership or any similar transaction.

      A "Sale Transaction" shall mean one or a series of transactions whereby,
      directly or indirectly, control of or a material interest in the Company
      or any of its businesses or assets are transferred to or combined with
      that of any person or one or more persons formed by or affiliated with
      such person (collectively, the "Purchaser"), including, without
      limitation, a disposition or exchange of capital stock or assets, a merger
      or consolidation, a tender or exchange offer, a leveraged buyout, or the
      formation of a joint venture or partnership or any similar transaction.

      AGGREGATE CONSIDERATION. For purposes hereof, the term "aggregate
      consideration" means the total amount of cash and the fair market value
      (on the date of payment) of all other consideration paid or payable
      (including amounts paid into escrow) by (i) (in the case of an Acquisition
      Transaction) an Acquisition Affiliate or any other person to the Target or

<PAGE>   5

FloNetwork Inc.
March 3, 2000
Page 5

      its securityholders in connection with the Transaction (or any related
      transaction), including amounts paid or payable in respect of convertible
      securities, warrants, stock appreciation rights, options or similar
      rights, whether or not vested, plus the principal amount of all
      indebtedness for borrowed money as set forth in the most recent
      consolidated balance sheet of the Target prior to consummation of the
      Transaction or, in the case of a purchase of assets, all indebtedness for
      borrowed money assumed by the Acquisition Affiliate or any other person
      and/or (ii) (in the case of a Sale Transaction) a Purchaser or any other
      person to the Company or its securityholders in connection with the
      Transaction (or any related transaction), including amounts paid or
      payable in respect of convertible securities, warrants, stock appreciation
      rights, options or similar rights, whether or not vested, plus the
      principal amount of all indebtedness for borrowed money as set forth in
      the most recent consolidated balance sheet of the Company prior to
      consummation of the Transaction or, in the case of a sale of assets, all
      indebtedness for borrowed money assumed by the Purchaser or any other
      person.

      Aggregate consideration shall also include (A) (in the case of an
      Acquisition Transaction) the aggregate amount of any dividends or other
      distributions declared by the Target after the date hereof, other than
      normal quarterly cash dividends, and, in the case of a sale of assets, the
      net value of any current assets not sold by the Target and (B) (in the
      case of a Sale Transaction) the aggregate amount of any dividends or other
      distributions declared by the Company after the date hereof, other than
      normal quarterly cash dividends, and, in the case of a sale of assets, the
      net value of any current assets not sold by the Company.

      The fair market value of any securities (whether debt or equity) or other
      property shall be determined as follows:

      a.  the value of securities that are freely tradable in an established
          public market will be determined on the basis of the average closing
          market prices on the fifteen trading days prior to the closing of the
          Transaction; and

<PAGE>   6

FloNetwork Inc.
March 3, 2000
Page 6

      b.  the value of securities that are not freely tradable or have no
          established public market, and the value of aggregate consideration
          that consists of other property, shall be the fair market value as
          determined in good faith by SG Cowen and the Company.

6.    INFORMATION
      The Company will furnish, or cause to be furnished, to SG Cowen (and will
      request that any potential Target and Purchaser furnish SG Cowen) such
      information as SG Cowen reasonably believes appropriate to its engagement
      hereunder (all such information, the "Information"), and the Company
      represents that all such Information furnished by it will be accurate and
      complete in all material respects at the time furnished. The Company will
      notify SG Cowen promptly after becoming aware of it of any change that may
      be material in such Information.

      It is understood that SG Cowen will be entitled to rely on and use the
      Information and other information that is publicly available without
      independent verification, and will not be responsible in any respect for
      the accuracy, completeness or reasonableness of all such Information or to
      conduct any independent verification or any appraisal or physical
      inspection of properties or assets.

      SG Cowen will assume that all financial forecasts have been reasonably
      prepared and reflect the best then currently available estimates and
      judgments of the Company's or the potential Target's or Purchaser's
      management as to the expected future financial performance of the Company
      or any potential Target or Purchaser.

7.    DISCLOSURE
      The Company acknowledges that all advice given by SG Cowen in connection
      with its engagement hereunder is for the benefit and use of the Board of
      Directors of the Company in considering the Transaction. The Company
      agrees that no such advice shall be used for any other purpose or be
      disclosed, reproduced, disseminated, quoted or referred to at any time, in
      any manner or for any purpose, nor shall any public references to SG Cowen
      be made by or on behalf of the Company, in each

<PAGE>   7

FloNetwork Inc.
March 3, 2000
Page 7

      case without SG Cowen's prior written consent, which consent shall not be
      unreasonably withheld except as may be required to comply with law.

      SG Cowen shall not make any representation or deliver any material to any
      person without the prior consent of the Company.

8.    NO THIRD PARTY BENEFICIARIES
      The Company acknowledges and agrees that SG Cowen has been retained to act
      as financial advisor to the Company, and not as an advisor to or agent of
      any other person, and that the Company's engagement of SG Cowen is not
      intended to confer rights upon any person not a party to this Agreement
      (including shareholders, employees or creditors of the Company) as against
      SG Cowen or its affiliates, or their respective directors, officers,
      employees or agents.

9.    INDEPENDENT CONTRACTOR
      SG Cowen shall act as an independent contractor under this Agreement, and
      any duties arising out of its engagement shall be owed solely to the
      Company.

10.   INDEMNIFICATION
      The Company and SG Cowen agree to the provisions with respect to the
      Company's indemnity of SG Cowen and other matters set forth in Schedule I,
      the terms of which are incorporated herein in their entirety.

11.   PUBLICITY
      The Company acknowledges that upon completion of a Transaction, SG Cowen
      may, at its own expense, place an announcement in such newspapers and
      periodicals as it may choose, stating that SG Cowen has acted as financial
      advisor to the Company in connection with such Transaction.

12.   AMENDMENTS AND SUCCESSORS
      This Agreement may not be waived, amended, modified or assigned, in any
      way, in whole or in part, including by operation of law, without the prior
      written consent of the Company and SG Cowen. The provisions of

<PAGE>   8

FloNetwork Inc.
March 3, 2000
Page 8

      this Agreement shall inure to the benefit of and be binding upon the
      successors and assigns of the Company and SG Cowen.

13.   ENTIRE AGREEMENT
      This Agreement constitutes the entire agreement between SG Cowen and the
      Company, and supersedes any prior agreements and understandings, with
      respect to the subject matter of this Agreement. The Company acknowledges
      that the execution of this Agreement or any act of SG Cowen under this
      Agreement does not constitute a commitment by SG Cowen or any of its
      affiliates to provide any type of financing or to purchase any type of
      securities.

14.   NO BROKERS
      The Company acknowledges and agrees that there are no brokers, agents,
      representatives or other parties that have an interest in compensation
      paid or payable to SG Cowen hereunder.

15.   TERMINATION & EXPIRATION
      Upon termination or expiration, this Agreement shall have no further force
      or effect, except that the provisions concerning the Company's obligations
      to SG Cowen and certain related persons provided in Schedule I, the
      Company's obligation to pay SG Cowen fees and expenses as described in
      this Agreement, the status of SG Cowen as an independent contractor, the
      limitation on to whom SG Cowen shall owe any duties, governing law, choice
      of forum, successors and assigns, and waiver of the right to trial by jury
      shall survive any such termination or expiration of this Agreement.

16.   GOVERNING LAW AND JURISDICTION
      This letter and any claim or dispute of any kind or nature whatsoever
      arising out of or in any way relating to this Agreement, directly or
      indirectly (including any claim concerning advice provided pursuant to
      this Agreement), shall be governed by and construed in accordance with the
      laws of the State of New York. Any rights to trial by jury with respect
      to any claim or proceeding related to, or arising out of, this agreement
      are waived by SG Cowen and the Company.

<PAGE>   9

FloNetwork Inc.
March 3, 2000
Page 9

We are pleased to accept this engagement and look forward to working with the
Company. Please confirm that the foregoing is in accordance with your
understanding by signing and returning to us the enclosed duplicate of this
letter, which shall thereupon constitute a binding Agreement.

Very truly yours,

SG COWEN SECURITIES CORPORATION

By:      /s/ Georges Azzam
         -------------------------------
         Georges Azzam
         Managing Director

Agreed as of the date hereof

FLONETWORK INC.

By:      /s/ Eric Goodwin
         -------------------------------
Name:
Title:

<PAGE>   10

                                   SCHEDULE I

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

         The Company agrees to indemnify SG Cowen, each controlling person and
each of their respective directors, officers, employees, agents, affiliates and
representatives (each of the foregoing, an "Indemnified Party") and hold each of
them harmless against any and all losses, claims, damages, expenses,
liabilities, joint or several (collectively, "Liabilities") to which the
Indemnified Parties may become subject arising in any manner out of or in
connection with the letter agreement to which this Schedule I is attached (the
"Letter Agreement"), unless it is finally judicially determined that the
Liabilities resulted primarily from the gross negligence or willful misconduct
of an Indemnified Party. The Company further agrees to reimburse each
Indemnified Party immediately upon request for all expenses (including
attorneys' fees and expenses) as they are incurred in connection with the
investigation of, preparation for, defense of, or providing evidence in, any
commenced or threatened action, claim, proceeding or investigation (including,
without limitation, usual and customary per diem compensation for any
Indemnified Party's involvement in discovery proceedings or testimony), in
connection with or as a result of either SG Cowen's engagement or any matter
referred to in the Letter Agreement whether or not SG Cowen is a party to such
proceeding. The Company also agrees that no Indemnified Party shall have any
liability (whether direct or indirect, in contract or tort or otherwise) to the
Company or its securityholders or creditors related to or arising out of the
engagement of SG Cowen pursuant to, or the performance by SG Cowen of the
services contemplated by, the Letter Agreement, unless it is finally judicially
determined that such liability resulted primarily from the gross negligence or
willful misconduct of SG Cowen. The Company and SG Cowen will promptly notify
the other party in writing of the assertion against it or any other person of
any claim or the commencement of any action, proceeding or investigation
relating to or arising out of any matter referred to in the Letter Agreement,
including an Indemnified Party's services thereunder; provided that SG Cowen's
failure to notify will not affect the Indemnified Parties' right to
indemnification except to the extent the Company is materially prejudiced
thereby.

         If any such claim, action, proceeding or investigation shall be brought
against an Indemnified Party, and SG Cowen shall notify the Company, the Company
shall be entitled to participate therein and, to the extent that it wishes,
assume the defense thereof with counsel reasonably satisfactory to SG Cowen.
After notice from the Company to SG Cowen of its election to assume the defense
of such claim, action, proceeding or investigation, the Company shall not be
liable to the Indemnified Party under the indemnification provisions of the
Letter Agreement for any legal or other expenses subsequently incurred by the
Indemnified Parties in connection with the defense thereof other than reasonable
costs of investigation; provided, however, that the Indemnified Parties shall
have the right to retain separate counsel, but the fees and expenses of such
counsel shall be at the expense of the Indemnified Parties, unless (i) the
employment of such counsel has been specifically authorized in writing by the
Company, (ii) the Company has failed to assume the defense and employ counsel as
required above, or (iii) the named parties to any such action (including any
impleaded

<PAGE>   11

parties) include both (a) the Indemnified Parties and (b) the Company, and the
Indemnified Parties shall have reasonably determined that the defenses available
to them are not available to the Company and/or may not be consistent with the
best interests of the Company or the Indemnified Parties (in which case the
Company shall not have the right to assume the defense of such action on behalf
of the Indemnified Parties); it being understood, however, that the Company
shall not, in connection with any one such action or separate, substantially
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the reasonable fees and
expenses of more than one separate firm of attorneys for the Indemnified
Parties, which firm shall be designated in writing by SG Cowen.

         The Company agrees that, without an Indemnified Party's prior written
consent, which consent shall not be unreasonably withheld, it will not settle,
compromise or consent to the entry of any judgment in any commenced or
threatened claim, action, proceeding or investigation in respect of which
indemnification could be sought under the indemnification provisions of the
Letter Agreement (whether or not SG Cowen or any other Indemnified Party is an
actual or potential party to such claim, action, proceeding or investigation)
unless (a) such settlement, compromise or consent includes an unconditional
release of SG Cowen and each Indemnified Party from all liability arising from
such claim, action, proceeding or investigation, and (b) the parties to the
settlement, compromise or consent agree that the terms of such settlement,
compromise or consent shall remain confidential to the extent permitted by law.

         The Company and SG Cowen agree that if any indemnification or
reimbursement sought pursuant to the preceding paragraph is for any reason
unavailable or insufficient to hold it harmless (except by reason of the gross
negligence or willful misconduct of an Indemnified Party) then, whether or not
SG Cowen is the person entitled to indemnification or reimbursement, the Company
and SG Cowen shall contribute to the Liabilities for which such indemnification
or reimbursement is held unavailable in such proportion as is appropriate to
reflect (a) the relative benefits to the Company on the one hand, and SG Cowen
on the other hand, in connection with the transaction to which such
indemnification or reimbursement relates, (b) the relative fault of the parties,
and (c) other equitable considerations; provided, however, that in no event
shall the amount to be contributed by SG Cowen exceed the fees actually received
by SG Cowen under the Letter Agreement. The Company agrees that for the purposes
of this paragraph the relative benefits to the Company and any Indemnified Party
of the contemplated transaction (whether or not such transaction is consummated)
shall be deemed to be in the same proportion that the aggregate cash
consideration and value of securities or any other property payable,
exchangeable or transferable (or contemplated to be payable, exchangeable or
transferable) in such transaction bears to the fees paid or payable to SG Cowen
under the Letter Agreement.

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

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