Exhibit 10.3

 

ANGELO GORDON ENERGY SERVICER, LLC

245 Park Avenue

New York, New York 10167

 

June 25, 2020

 

Abraxas Petroleum Corporation

18803 Meisner Drive

San Antonio, Texas 78258

Attention: Steve Harris, Chief Financial Officer

 

Dear Mr. Harris: 

 

This letter relates to that certain Waiver and Second Amendment to Term Loan
Credit Agreement (the “Second Amendment”) dated as of the date of this letter to
that Term Loan Credit Agreement dated as of November 13, 2019 among Abraxas
Petroleum Corporation (the “Borrower”), the lenders party thereto from time to
time, and Angelo Gordon Energy Servicer, LLC (“AGES”), as administrative agent
for such Lenders (as amended, supplemented, restated or otherwise modified from
time to time, the “Loan Agreement”). Capitalized terms not defined in this
letter have the meaning ascribed to them in the Loan Agreement. Section
references are to references of the Loan Agreement unless otherwise noted.

 

In connection with the Second Amendment and to induce the Lenders to enter into
the Second Amendment, the Borrower agrees as follows:

 

1.     Exit Fee. To pay to the Administrative Agent, for the account of the
Lenders, an Exit Fee (the “Exit Fee”) equal to $10,000,000, to be shared by the
Lenders ratably in accordance with the aggregate amount of principal of the
Loans. The Exit Fee shall be due and payable in cash on the earliest to occur of
(a) the Maturity Date, (b) the date the Loans are accelerated or otherwise
become due in accordance with Section 10.02 or 10.03 and (c) the date the Loans
are paid in full in cash.

 

2.     Warrants.

 

(a)     To issue, within 30 days of the date hereof (or such longer period of
time as the Administrative Agent, in its sole discretion, may permit), to the
Administrative Agent, for the account of the Lenders as designated by the
Administrative Agent, warrants (the “Warrants”) having an exercise price of
$0.01 per common share in an amount equal to 19.9% of the issued and outstanding
common equity of the Borrower. The Borrower shall use its reasonable best
efforts to obtain approval from NASDAQ for the issuance of the Warrants and, if
required by NASDAQ, the Borrower’s shareholders. Any changes to the terms of the
Warrants requested or required by NASDAQ in connection with obtaining such
approvals shall be subject to the approval of the Administrative Agent acting in
its sole discretion. The Warrants shall expire on the earliest to occur of
(i) the date that is five (5) years after the date on which the Warrants are
granted and (ii) that date that is two (2) years after the first date on which
the Obligations have been paid in full in cash. The parties agree that the
Warrants shall be accompanied by customary demand and piggyback registration
rights, shall contain customary anti-dilution provisions and other protective
rights in favor of the Lenders and that they shall cooperate in good faith to
structure the warrants in a tax efficient manner for all parties. The terms of
the Warrants shall otherwise be satisfactory in form and substance to the
Administrative Agent in its sole discretion.

 

 

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(b)      If the Warrants cannot be issued on terms satisfactory to the
Administrative Agent in its sole discretion, the Borrower and the Administrative
Agent shall negotiate in good faith an alternative financial arrangement that
would afford the Administrative Agent, for the account of the Lenders, an
economic benefit equivalent in value to the value of the Warrants that would
have been issued pursuant to Section 2(a). If the Borrower and the
Administrative Agent are unable to agree on the amount of the alternative
financial arrangement, the Administrative Agent may initiate an arbitration
proceeding before a nationally recognized investment bank or valuation firm
selected by the Administrative Agent in its sole discretion to determine such
amount. Costs and expenses of the arbitration proceeding shall be borne by the
Borrower.

 

(c)     The Borrower represents and warrants to AGES that, (a) prior to the
effectiveness of this letter, the board of directors of the Borrower and the
Borrower have taken all action necessary to render Nevada Revised Statutes
78.411 through 78.444 (Combinations with Interested Stockholders) inapplicable
to the transactions contemplated by this letter and (b) the Borrower does not
conduct business in the State of Nevada either directly or through an affiliated
corporation.

 

3.     Governance. To use commercially reasonably efforts to take such steps as
is reasonably necessary to grant the Lenders, to be exercised at the Lenders’
option, either (a) the right to appoint one member to the Borrower’s Board of
Directors or (b) Board observation rights reasonably satisfactory to the
Administrative Agent. Once such rights are granted, the Lenders can exercise
such option any time after execution of the Second Amendment.

 

4.     Abraxas Stock. The common stock of Borrower (the “AXAS Stock”) is
publicly held and traded. AGES and its representatives will or may have access
to “material inside information” in connection with the Second Amendment, the
Loan Agreement or otherwise in the course of dealing between the parties
pursuant to the Loan Agreement. AGES also acknowledges that it is familiar with
the prohibitions against the use or disclosure of material inside information.

 

5.     Assignment. Neither party may assign any of its rights or delegate any of
its obligations (i) under Section 1 or Section 2 hereof other than to an
Eligible Assignee or (ii) under Section 3 hereof without the prior written
consent of the other party. Any purported assignment or delegation in violation
of this Section 5 shall be null and void. No assignment or delegation shall
relieve the assigning or delegating party of any of its obligations hereunder.
This letter agreement is for the sole benefit of the parties hereto and their
respective successors and permitted assigns and nothing herein, express or
implied, is intended to or shall confer upon any other person or entity any
legal or equitable right, benefit or remedy of any nature whatsoever under or by
reason of this letter agreement.

 

6.     Miscellaneous.

 

The Borrower agrees that, once paid, the fees or any part thereof payable
hereunder shall not be refundable under any circumstances, except as otherwise
agreed in writing. All fees payable hereunder shall be paid in immediately
available funds, shall not be subject to reduction by way of withholding, setoff
or counterclaim or be otherwise affected by any claim or dispute related to any
other matter and shall be in addition to reimbursement of AGES’ expenses. The
Borrower agrees that AGES may, in its sole discretion, share all or a portion of
any of the fees payable pursuant to this letter with any of the Lenders.

 

It is understood and agreed that this letter shall not constitute or give rise
to any obligation to provide any financing. This letter may not be amended or
waived except by an instrument in writing signed by each of AGES and the
Borrower. This letter shall be governed by, and construed in accordance with,
the law of the State of New York. This letter may be executed in any number of
counterparts, each of which shall be an original, and all of which, when taken
together, shall constitute one agreement. Delivery of an executed signature page
of this fee letter by facsimile transmission or other electronic transmission
shall be effective as delivery of a manually executed counterpart hereof.

 

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The Borrower agrees that this letter and its contents are confidential and may
not be disclosed except as required by law or judicial process (it being
understood that the Borrower may disclose this letter as part of any required
filing with the SEC in connection with the Second Amendment and may disclose
constituent elements of the letter or the letter itself in future SEC filings as
deemed reasonably necessary by Borrower and its counsel). The provisions of this
letter shall survive the funding of the Loan Agreement, and shall remain in full
force and effect regardless of whether definitive documentation relating to the
Loan Agreement shall be executed and delivered.

 

[Remainder of page intentionally left blank.]

 

 

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