Exhibit 10.8

 

 

Execution Copy

 

EXCHANGE AND REGISTRATION RIGHTS AGREEMENT

dated as of May 25, 2007

among

ABRAXAS PETROLEUM CORPORATION

ABRAXAS ENERGY PARTNERS, L.P.

and

THE PURCHASERS NAMED IN THIS AGREEMENT

 

EXCHANGE AND REGISTRATION RIGHTS AGREEMENT

This EXCHANGE AND REGISTRATION RIGHTS AGREEMENT (“Agreement”) is made and
entered into as of the 25th day of May, 2007, by and among Abraxas Petroleum
Corporation, a Nevada corporation (“Parent”), Abraxas Energy Partners, L.P., a
Delaware limited partnership (the “Partnership”) and each of the persons listed
on Schedule 1 attached to this Agreement (each a “Purchaser” and collectively
the “Purchasers”).

W I T N E S S E T H

WHEREAS, at or prior to the execution of this Agreement, Parent, Abraxas General
Partner, LLC, a Delaware limited liability company (the “General Partner”), the
Partnership and the other parties named therein shall enter into that certain
Contribution, Conveyance and Assumption Agreement (the “Contribution
Agreement”);

WHEREAS, in connection with the consummation of the transactions contemplated by
the Contribution Agreement, among other things (i) Parent will contribute
certain Assets to the Operating Company (the “Contribution”) in exchange for a
general partner interest and an indirect limited partner interest in the
Partnership; (ii) the Partnership and the other parties named therein shall
enter into that certain $150,000,000 Revolving Credit Facility with Société
Générale (the “Credit Agreement”) under which the Partnership will immediately
borrow $35,000,000.00; and (iii) the Partnership and the Operating Company will
assume certain of Parent’s indebtedness, and will use the proceeds from the sale
of Purchased Securities to refinance the $125,000,000 Floating Rate Senior Notes
issued by the Parent and currently outstanding (the “Floating Rate Senior
Notes”) and as otherwise contemplated in the Contribution Agreement;

WHEREAS, subject to the terms and conditions set forth in that certain Purchase
Agreement dated as of the date hereof (the “Partnership Purchase Agreement”) by
and among Parent, the Partnership, the General Partner and the Purchasers, the
Partnership has agreed to issue and sell to the Purchasers, and the Purchasers
desire to purchase from the Partnership, up to 6,002,408 Common Units of the
Partnership (the “Purchased Common Units”);

WHEREAS, pursuant to the terms of that certain Securities Purchase Agreement
dated as of the date hereof (the “Securities Purchase Agreement”) by and among
Parent and the Purchasers, (i) each Purchaser will purchase the number of shares
of the Parent’s Common Stock shown opposite such Purchaser’s name on Schedule 1
thereto (“Purchased Shares”), at a price of $3.83 per share (the “Purchase
Price”) and (ii) the Parent shall issue to each Purchaser a warrant to purchase
a number of shares of Common Stock equal to the product of (a) the number of
Purchased Shares purchased by such Purchaser, times (b) 0.20, on the additional
terms and conditions set forth in Exhibit A thereto (the “Warrants”); and

WHEREAS, it is a condition to the obligations of the Purchasers under the
Partnership Purchase Agreement and the Securities Purchase Agreement that,
contemporaneously with the sale of the Common Units and the Parent Securities,
the parties hereto execute and deliver this Agreement;

 

NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties and covenants herein contained, the parties hereto
hereby agree as follows:

1.

Definitions. The following terms have the meanings indicated:

“Affiliate” means, with respect to a specified Person, any other Person,
directly or indirectly controlling, controlled by or under direct or indirect
common control with such specified Person. For purposes of this definition,
“control” (including, with correlative meanings, “controlling,” “controlled by”
and “under common control with”) means the power to direct or cause the
direction of the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise.

“Agreement” has the meaning set forth in the preamble hereto.

“AMEX” means the American Stock Exchange.

“Applicable Number” has the meaning set forth in Section 2.

“Assets” has the meaning set forth in the Contribution Agreement.

“Black Out Period” has the meaning set forth in Section 7.3(c).

“Business Day” means any day other than a Saturday, Sunday, or a legal holiday
for commercial banks in New York, New York.

“Commission” means the Securities and Exchange Commission.

“Common Units” has the meaning assigned to such term in the Partnership
Agreement.

“Common Stock” has the meaning set forth in Section 2.

“Contribution” has the meaning set forth in the recitals hereto.

“Contribution Agreement” has the meaning set forth in the recitals hereto.

“Credit Agreement” has the meaning set forth in the recitals hereto.

“Effectiveness Date” has the meaning set forth in Section 7.1(b).

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Exchange Shares” has the meaning set forth in Section 2.

“Exchange Price” means a price per share of Common Stock equal to 0.9 times the
Market Price.

“Existing Credit Facility” means that certain Loan Agreement, dated as of
October 28, 2004, by and among the Partnership, the subsidiaries of the
Partnership signatory thereto, the

 

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lenders signatory thereto and Wells Fargo Foothill, Inc., as the Arranger and
Administrative Agent, as amended.

“Filing Date” has the meaning set forth in Section 7.1(a).

“Floating Rate Senior Notes” has the meaning set forth in the recitals hereto.

“General Partner” has the meaning set forth in the recitals hereto.

“Initial Exchange Date” has the meaning set forth in Section 3.1.

“Initial Exchange Shares” means the aggregate number of Exchange Shares equal to
19.99% of the total number of shares of Common Stock issued and outstanding on
the Trigger Date.

“IPO” means the initial public offering of Common Units by the Partnership under
the Securities Act that results in the Common Units being listed for trading on
the New York Stock Exchange, the Nasdaq Global Market or AMEX or any affiliate
of the New York Stock Exchange, the Nasdaq Global Market or AMEX.

“Law” means any federal, state, local or foreign order, writ, injunction,
judgment, settlement, award, decree, law, rule or regulation in effect as of the
date hereof.

“Liens” means mortgages, charges, pledges, liens (statutory or other), security
interests, hypothecations, assignments for security, claims, or preferences or
priorities or other encumbrances or similar agreements or preferential
agreements of any kind or nature whatsoever serving to provide security for any
obligations whether or not filed, recorded or otherwise perfected under
applicable law upon or with respect to any kind of property or asset, whether
real, personal or mixed, or tangible or intangible.

“Liquidated Damages Amount” has the meaning set forth in Section 7.2.

“Losses” means any and all losses, claims, damages, liabilities, settlement
costs and expenses, including, without limitation, reasonable attorneys’ fees.

“Management Stockholder” means any executive officer of Parent as of the date
hereof who owns Voting Securities.

“Material Adverse Effect” means with respect to any Person (i) a material
adverse effect on the legality, validity or enforceability of this Agreement,
the Purchased Shares or the Purchased Common Units, (ii) a material adverse
effect on the results of operations, assets, business, prospects or condition
(financial or otherwise) of any such Person, (iii) a material adverse effect on
the ability of such Person to perform in any material respect on a timely basis
its obligations under this Agreement or the Parent Purchase Agreement, or (iv)
an event which would reasonably be expected to subject such Person to any
material liability.

 

3

 

“Market Price” means the volume weighted average price of the Common Stock for
the ten (10) Business Days immediately prior to the Initial Exchange Date as
quoted on the principal securities exchange on which the Common Stock is then
quoted or traded.

“Operating Company” means Abraxas Operating, LLC, a Texas limited liability
company.

“Parent” has the meaning set forth in the preamble hereto.

“Parent Securities” shall mean the Purchased Shares and the Warrants.

“Parent Stockholders” has the meaning set forth in Section 3.3.

“Partnership” has the meaning set forth in the preamble hereto.

“Partnership Agreement” means that First Amended and Restated Agreement of
Limited Partnership of the Partnership, dated May 25, 2007.

“Partnership Purchase Agreement” has the meaning set forth in the recitals
hereto.

“Person” means any individual or corporation, partnership, trust, incorporated
or unincorporated association, joint venture, limited liability company, joint
stock company, government (or an agency or subdivision thereof) or any court or
other federal, state, local or other governmental authority or other entity of
any kind.

“Per Unit Purchase Price” shall mean $16.66, subject to appropriate adjustment
in the event the Partnership effects a distribution, subdivision or combination
of Common Units.

“Preliminary Prospectus or Preliminary Prospectuses” has the meaning set forth
in Section 7.1(e).

“Proceeding” means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial proceeding, such as
a deposition), whether commenced or threatened.

“Pro Rata Share” means a fraction, the numerator of which is the number of
Common Units purchased by a Purchaser pursuant to the Partnership Purchase
Agreement and the denominator of which is the total number of Common Units
purchased by all Purchasers.

“Prospectus” has the meaning set forth in Section 7.1(c).

“Purchased Common Units” has the meaning set forth in the recitals hereto.

“Purchased Securities” means the Purchased Common Units and the Purchased
Shares.

“Purchased Shares” has the meaning set forth in the recitals hereto.

“Purchase Price” has the meaning set forth in the recitals hereto.

 

4

 

“Purchaser” and “Purchasers” has the meaning set forth in the preamble hereto.

“Purchaser Underwriter Registration Statement” has the meaning set forth in
Section 7.1.

“Registration Statement” has the meaning set forth in Section 7.1(a) and Section
7.4(a)(ii).

“Rule 144” means Rule 144 promulgated by the Commission pursuant to the
Securities Act, as such rules may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such rule.

“SEC Filings” has the meaning set forth in the Securities Purchase Agreement.

“Securities Act” means the Securities Act of 1933, as amended from time to time,
and the rules and regulations of the Commission promulgated thereunder.

“Securities Purchase Agreement” has the meaning set forth in the recitals
hereto.

“Selling Stockholder” has the meaning set forth in Section 7.4(a)(i).

“Selling Stockholder Indemnified Parties” has the meaning set forth in Section
7.4(b).

“Short Sales” means, without limitation, all “short sales” as defined in Rule
200 promulgated under Regulation SHO under the Exchange Act, whether or not
against the box, and all types of direct and indirect stock pledges, forward
sale contracts, options, puts, calls, short sales, swaps, “put equivalent
positions” (as defined in Rule 16a-1(h) under the Exchange Act) and similar
arrangements (including on a total return basis), and sales and other
transactions through non-U.S. broker dealers or foreign regulated brokers.

“Stockholder Approval” means the approval by the holders of the requisite number
of shares of Common Stock to the issuance of shares of Common Stock pursuant to
the terms of this Agreement at a duly called meeting of the Stockholders in
accordance with the rules of the AMEX or such other securities exchange on which
the Common Stock is then quoted or traded and all other Laws.

“Stockholders’ Meeting” has the meaning set forth in Section 3.3.

“Suspension” has the meaning set forth in Section 7.3(c).

“Suspension Notice” has the meaning set forth in Section 7.3(c).

“Termination Date” has the meaning set forth in Section 10.

“Transfer Agent” has the meaning set forth in the Partnership Agreement.

“Trigger Date” has the meaning set forth in Section 3.1.

“Underwritten Offering” has the meaning set forth in the Securities Purchase
Agreement.

 

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“Voting Securities” means the Common Stock and all other securities of any class
of Parent entitling the holders thereof to vote in the election of, or to
appoint, members of the Board of Directors of Parent.

“Warrants” has the meaning set forth in the recitals hereto.

2.            Agreement to Exchange Securities. Subject to the terms and
conditions set forth in this Agreement, Parent agrees, from and after the
Trigger Date until the Termination Date, to exchange a number of shares of
common stock, par value $.01 per share of Parent (“Common Stock”), for each
Purchased Common Unit (collectively, the “Exchange Shares”) in an amount equal
to the Per Unit Purchase Price divided by the Exchange Price (the “Applicable
Number”).

3.

Mechanics of Exchange.

3.1          Subject to the terms of this Section 3, if the IPO has not been
consummated on or before 5:00 p.m. on November 15, 2008 (the “Trigger Date”),
then beginning on the Business Day immediately after the Trigger Date (the
“Initial Exchange Date”) and ending at the close of business on the Termination
Date, each of the Purchasers shall have the right to exchange each of the
Purchased Common Units into the Applicable Number of Exchange Shares.

3.2          Notwithstanding Section 3.1 above, each Purchaser shall have the
option, during the period beginning on the Initial Exchange Date and ending on
the date that Stockholder Approval is received by Parent, to exchange each
Purchased Common Unit then owned by such Purchaser into the Applicable Number of
Exchange Shares; provided, however, that the maximum number of Exchange Shares a
Purchaser may receive in connection with an exchange effectuated pursuant to
this Section 3.2 shall be equal to such Purchaser’s Pro Rata Share of the
Initial Exchange Shares.

3.3          On the Initial Exchange Date, Parent shall take all action
necessary to convene a meeting of its stockholders (the “Parent Stockholders”)
to consider and vote upon the issuance of the aggregate number of shares of
Common Stock issuable upon exchange of the Purchased Common Units for shares of
Common Stock pursuant to this Agreement in excess of the Initial Exchange Shares
as soon as practicable, but in any event not later than 60 days after the
Trigger Date (the “Stockholders’ Meeting”). Except as provided in this Section
3.3, the board of directors of Parent shall, in connection with such meeting,
recommend approval of the issuance of shares of Common Stock in excess of the
Initial Exchange Shares and take all other lawful action to solicit the approval
of the issuance of shares of Common Stock in excess of the Initial Exchange
Shares by the Parent Stockholders; provided, however, that the board of
directors of Parent shall not be required to recommend such approval if it
advised by counsel that such recommendation would violate its fiduciary duties
to Parent’s stockholders under applicable Law.

3.4          In order to exchange the Purchased Common Units for the Exchange
Shares, the holder thereof shall surrender at the office of the Transfer Agent,
the certificate or certificates therefor, duly endorsed or assigned to Parent or
in blank, and give written notice to Parent in accordance with Section 8 hereof,
together with the letter attached hereto as Exhibit A, that such holder elects
to convert the number of Purchased Common Units specified by such holder in

 

6

 

such notice. Purchased Common Units shall be deemed to have been exchanged
immediately prior to the close of business on the day of surrender of the
certificates for such Purchased Common Units for exchange in accordance with the
foregoing provisions, and at such time the rights of the holder of such
Purchased Common Units as holders thereof shall cease and from and after such
time the person or persons entitled to receive the Exchange Shares issuable upon
such conversion shall be treated for all purposes as the record holder or
holders of such Exchange Shares. As promptly as practicable on or after the
Initial Exchange Date, Parent shall cause the Transfer Agent to issue and
deliver at such office a certificate or certificates for the number of full
shares of Common Stock issuable upon such exchange, together with payment in
lieu of any fraction of a share, as provided in Section 3.7, to the person or
persons entitled to receive the same. If fewer than all the Purchased Common
Units represented by a certificate are exchanged, upon such exchange the
Partnership shall (or cause the Transfer Agent for the Purchased Common Units
to) issue a new certificate representing the Purchased Common Units not so
exchanged.

3.5          Notwithstanding anything to the contrary set forth in this
Agreement, prior to the receipt of Stockholder Approval, in no event shall the
total number of Exchange Shares that Parent shall be required to issue pursuant
to this Agreement exceed the maximum number of shares of Common Stock that
Parent can issue without Stockholder Approval pursuant to any rule of AMEX, or
any other national exchange on which Parent’s Common Stock is then traded
including, without limitation, Section 713 of the AMEX Listing Standards,
Policies and Requirements, subject to equitable adjustments from time to time
for stock-splits, stock dividends, combinations, capital reorganizations and
similar events relating to the Common Stock occurring after the date of this
Agreement.

3.6          If Parent at any time shall consolidate or merge with or sell or
convey all or substantially all of its assets to any other Person, the Purchaser
shall thereafter be entitled to exchange its Purchased Common Units into such
number and kind of securities and property as would have been issuable or
distributable on account of such consolidation, merger, sale or conveyance upon
or with respect to the securities to be received upon an exchange of Purchased
Common Units immediately prior to such consolidation, merger, sale or
conveyance. Parent shall take such steps in connection with such consolidation
or merger or sale as may be necessary to assure that the provisions hereof shall
thereafter be applicable, as nearly as reasonably may be, in relation to any
securities or property thereafter deliverable upon an exchange of Purchased
Common Units. The foregoing provisions shall similarly apply to successive
transactions of a similar nature by any such successor or purchaser. Without
limiting the generality of the foregoing, the registration rights provisions
hereof shall apply to the securities of such successor or purchaser after any
such consolidation, merger, sale or conveyance.

3.7          No fractional shares of Common Stock of Parent will be issued in
connection with an exchange of Purchased Common Units, but in lieu of such
fractional shares, Parent shall make a cash payment thereafter upon the basis of
the Market Price of its Common Stock on the date of such exchange.

3.8          Each Management Stockholder hereby agrees to (i) vote all such
Management Stockholder’s Voting Securities and (ii) take all other necessary or
desirable actions within such Management Stockholder’s control (whether in such
Management Stockholder’s capacity as a

 

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stockholder of Parent or otherwise, and including, without limitation,
attendance at meetings, in person or by proxy, for purposes of obtaining a
quorum and execution of written consents in lieu of meetings), in each case, in
favor of exchange of the Purchased Common Units for shares of Common Stock in
excess of the Initial Exchange Shares.

3.9          From and after the date hereof, Parent shall use its commercially
reasonable efforts to obtain the agreement of each of the directors of Parent to
the terms of Section 3.8.

4.            Parent’s Representations and Warranties. Parent hereby represents
and warrants to the Purchasers that:

4.1          Corporate Existence; Authority. Parent is a corporation duly
organized, validly existing and in good standing under the laws of Nevada, and
it has all requisite corporate power and authority to carry on its business as
it is now being conducted. The individual executing and delivering this
Agreement on behalf of Parent has been duly authorized to execute and deliver
this Agreement on behalf of Parent, and the signature of such individual is
binding upon Parent. All corporate action on the part of the Parent, its
officers, directors and stockholders necessary for the authorization of this
Agreement, the performance of all obligations of the Parent hereunder and the
authorization, sale, issuance and delivery of the Exchange Shares pursuant
hereto has been taken.

4.2          Enforceability. Parent has duly executed and delivered this
Agreement and (subject to its execution by the Purchasers) it constitutes a
valid and binding agreement of Parent enforceable in accordance with its terms
against Parent, except as such enforceability may be limited by principles of
public policy, and subject to laws of general application relating to
bankruptcy, insolvency and the relief of debtors generally and general
principles of equity governing specific performance, injunctive relief or other
equitable remedies and except to the extent that the enforceability of the
indemnification and contribution provisions of Section 7.4 relating to
registration rights granted hereunder may be limited by applicable laws.

4.3          Capitalization. The authorized capital of Parent consists, or will
consist immediately prior to the Closing, of:

(a)          1,000,000 shares of Preferred Stock, par value $0.01 per share, of
which (i) 100,000 shares have been designated Series A Preferred Stock, par
value $100.00 per share, of which no shares are issued and outstanding; (ii)
45,741 shares have been designated Series B 8% Cumulative Convertible Preferred
Stock, par value $100.00 per share, of which no shares are issued or
outstanding; and (iii) 45,471 shares have been designated as Series 1995-B 8%
Cumulative Convertible Preferred Stock, par value $.01 per share, of which no
shares are issued and outstanding.

(b)          200,000,000 shares of Common Stock of which 42,878,725 shares are
issued and outstanding as of the date of this Agreement.

(c)          All of the outstanding shares of Common Stock of Parent (i) have
been duly and validly issued and are fully paid, non-assessable and not subject
to any preemptive or similar rights and (ii) were issued in compliance with all
applicable state and Federal laws concerning the issuance of securities or
pursuant to valid exemptions therefrom. The Exchange

 

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Shares have been duly authorized and when issued and delivered to the Purchasers
as provided by this Agreement, will be validly issued, fully paid and
non-assessable and the issuance of such Exchange Shares will not be subject to
any preemptive or similar rights.

(d)          Prior to giving effect to the transactions set forth herein, there
are no outstanding subscriptions, options, warrants, convertible securities,
calls, commitments, agreements or rights to purchase or otherwise acquire from
Parent any shares of, or any securities convertible into, the capital stock of
Parent except as disclosed in the SEC Filings.

4.4          No Conflicts. The issuance and sale of the Exchange Shares to the
Purchasers as contemplated hereby and the performance of this Agreement will not
violate or conflict with Parent’s Articles of Incorporation, as amended, or
Bylaws, as amended, or any material agreements to which Parent is a party or by
which it is otherwise bound or any statute, rule or regulation (federal, state,
local or foreign) to which it is subject, except, in the case of (iii) above,
where such violation or conflict could not reasonably be expected to have a
Material Adverse Effect.

5.            Covenants of Parent. Parent covenants and agrees that until the
Termination Date it will reserve from its authorized and unissued Common Stock a
sufficient number of shares to provide for the issuance of Exchange Shares upon
an exchange of Purchased Common Units. Parent will take all such actions as may
be necessary to insure that all shares issuable upon an exchange of Purchased
Common Units will be duly and validly authorized and issued and fully paid and
non-assessable.

6.

Restrictions on Transfer.

6.1          Resale Restrictions. Each Purchaser understands that the Exchange
Shares to be received by the Purchasers in accordance with the terms of this
Agreement have not been registered under the Securities Act or under any state
laws. Each Purchaser agrees, severally and not jointly, with the other
Purchasers, not to offer, sell or otherwise transfer the Exchange Shares, or any
interest in the Exchange Shares, unless (i) the offer and sale is registered
under the Securities Act, (ii) the Exchange Shares may be sold in accordance
with the applicable requirements and limitations of Rule 144 under the
Securities Act and any applicable state laws and, if American Stock Transfer &
Trust Company, as transfer agent for the Parent, reasonably requests, such
Purchaser delivers to Parent an opinion of counsel to such effect, or (iii) such
Purchaser delivers to Parent an opinion of counsel (at the expense of Parent)
reasonably satisfactory to Parent that the offer and sale is otherwise exempt
from Securities Act registration. Notwithstanding the foregoing subsections (ii)
and (iii), no opinion shall be required for transfers by a Purchaser to its
Affiliates.

6.2          Short Selling Acknowledgement and Agreement. Each Purchaser
understands and acknowledges, severally and not jointly with any other
Purchaser, that the Commission currently takes the position that coverage of
short sales of securities “against the box” prior to the effective date of a
registration statement is a violation of Section 5 of the Securities Act. Each
Purchaser agrees, severally and not jointly, that it will not engage in any
Short Sales that result in the disposition of the Exchange Shares acquired
hereunder by the Purchaser until such time as the Registration Statement is
declared effective. No Purchaser makes any representation, warranty or

 

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covenant hereby that it will not engage in Short Sales in the securities of
Parent otherwise owned by such Purchaser or borrowed from a broker after the
time that the transactions contemplated by this Agreement are first publicly
announced.

6.3          Restrictive Legend. Each Purchaser understands and agrees that a
legend in substantially the following form will be placed on the certificates or
other documents representing the Exchange Shares:

“THE SHARES OF COMMON STOCK EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”),
OR UNDER ANY STATE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT COVERING SUCH
SHARES UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS, OR UNLESS
THE OFFER AND SALE IS EXEMPT FROM SECURITIES ACT REGISTRATION, AND THE TERMS OF
SECTION 6.1 OF THE EXCHANGE AND REGISTRATION RIGHTS AGREEMENT PURSUANT TO WHICH
THE SHARES OF COMMON STOCK WERE ORIGINALLY ACQUIRED AND APPLICABLE STATE
SECURITIES LAWS HAVE BEEN COMPLIED WITH. A COPY OF THE EXCHANGE AND REGISTRATION
RIGHTS AGREEMENT IS ON FILE AT THE CORPORATE OFFICE OF THE CORPORATION.”

6.4          Illiquid Investment. Each Purchaser acknowledges and agrees that it
must bear the economic risk of its investment in the Exchange Shares for an
indefinite period of time, until such time as the Exchange Shares are registered
or an exemption from registration is available.

7.

Registration of the Common Stock; Compliance with the Securities Act.

 

7.1

Registration Procedures and Other Matters. Parent shall:

(a)          subject to receipt of necessary information from the Purchasers
after prompt request from Parent to the Purchasers to provide such information,
no later than the 30th day following the Trigger Date (the “Filing Date”),
prepare and file with the Commission a registration statement on Form S-3 or
such other successor form (except that if Parent is not then eligible to
register for resale the Exchange Shares on Form S-3, in which case such
registration shall be on Form S-1 or any successor form) (a “Registration
Statement”) to enable the resale of the Exchange Shares, by the Purchasers or
their transferees from time to time over the AMEX or any other national exchange
on which Parent’s Common Stock is then traded, or in privately-negotiated
transactions. No Purchaser may include any Exchange Shares in the Registration
Statement pursuant to this Agreement unless such Purchaser furnishes to Parent
in writing within ten (10) business days after receipt of request therefor, such
requested information;

(b)          use its commercially reasonable efforts, subject to receipt of
necessary information from the Purchasers after prompt request from Parent to
the Purchasers to provide such information, to cause the Registration Statement
to become effective prior to the 120th day following the Trigger Date; provided,
however, that if Parent has filed the Registration Statement by the Filing Date
and the Commission has not declared the Registration Statement effective

 

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prior to the date that is specified in Rule 3-12 of Regulation S-X promulgated
by the Commission, then the time period for becoming effective shall be extended
to the 180th day following the Trigger Date (the “Effectiveness Date”);

(c)          use its commercially reasonable efforts to cause such Registration
Statement to remain continuously effective and prepare and file with the
Commission such amendments and supplements to the Registration Statement and the
prospectus used in connection therewith (the “Prospectus”) (and the applicable
Exchange Act reports incorporated therein by reference, so filed on a timely
basis) as may be necessary to keep the Registration Statement current, effective
and free from any material misstatement or omission to state a material fact for
a period ending on the date that is, with respect to each Purchaser’s Exchange
Shares purchased hereunder, the earlier of (i) the date on which the Purchaser
may sell all Exchange Shares then held by the Purchaser without restriction
under Rule 144(k), or (ii) such time as all Exchange Shares received by such
Purchaser pursuant to this Agreement have been sold or otherwise transferred
pursuant to a registration statement or otherwise;

(d)          so long as a Purchaser holds Exchange Shares received pursuant to
this Agreement, provide copies to and permit single legal counsel designated by
the Purchasers to review the Registration Statement and all amendments and
supplements thereto, no fewer than three (3) business days prior to their filing
with the Commission, and not file any Registration Statement, amendment or
supplement thereto to which a holder of the Exchange Shares reasonably objects
in writing within such three (3) business day period;

(e)          furnish to the Purchasers with respect to the Exchange Shares
included in the Registration Statement such number of copies of the Registration
Statement, Prospectuses and preliminary Prospectuses (“Preliminary Prospectuses”
and individually, “Preliminary Prospectus”) in conformity with the requirements
of the Securities Act and such other documents as the Purchasers may reasonably
request, in order to facilitate the public sale or other disposition of all or
any of the Exchange Shares by the Purchasers; provided, however, that the
obligation of Parent to deliver copies of Prospectuses or Preliminary
Prospectuses to the Purchasers shall be subject to the receipt by Parent of
reasonable assurances from the Purchasers that the Purchasers will comply with
the applicable prospectus delivery requirements under the Securities Act and of
such other securities or blue sky laws as may be applicable in connection with
any use of such Prospectuses or Preliminary Prospectuses;

(f)           file documents required of Parent for customary blue sky clearance
in states specified in writing by the Purchasers and use its commercially
reasonable efforts to maintain such blue sky qualifications during the period
Parent is required to maintain the effectiveness of the Registration Statement
pursuant to Section 7.1(c); provided, however, that Parent shall not be required
to qualify to do business or consent to service of process in any jurisdiction
in which it is not now so qualified or has not so consented;

(g)          promptly notify the Purchasers after it receives notice of the time
when the Registration Statement has been declared effective by the Commission,
or when a supplement or amendment to any Registration Statement has been filed
with the Commission;

 

11

 

(h)          advise the Purchasers, promptly: (i) after it shall receive notice
or obtain knowledge of the issuance of any stop order by the Commission delaying
or suspending the effectiveness of the Registration Statement or of the
initiation or threat of any proceeding for that purpose; and it will promptly
use its commercially reasonable efforts to prevent the issuance of any stop
order or to obtain its withdrawal at the earliest possible moment if such stop
order should be issued; and (ii) at any time when a Prospectus relating to the
Exchange Shares is required to be delivered under the Securities Act, upon
discovery that, or upon the happening of an event as a result of which, the
Prospectus included in the Registration Statement, 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;

(i)           upon request and subject to appropriate confidentiality
obligations, furnish to each Purchaser copies of any and all transmittal letters
or other correspondence with the Commission or any other governmental agency or
self-regulatory body or other body having jurisdiction (including any domestic
or foreign securities exchange) relating to such offering of Exchange Shares;

(j)           in the case of an Underwritten Offering, furnish upon request,
(i) an opinion of counsel for Parent dated the effective date of the applicable
registration statement or the date of any amendment or supplement thereto, and a
letter of like kind dated the date of the closing under the underwriting
agreement, and (ii) a “cold comfort” letter, dated the date of the applicable
registration statement or the date of any amendment or supplement thereto and a
letter of like kind dated the date of the closing under the underwriting
agreement, in each case, signed by the independent public accountants who have
certified Parent’s financial statements included or incorporated by reference
into the applicable registration statement, and each of the opinion and the
“cold comfort” letter shall be in customary form and covering substantially the
same matters with respect to such registration statement (and the prospectus and
any prospectus supplement included therein) as are customarily covered in
opinions of issuer’s counsel and in accountants’ letters delivered to the
underwriters in Underwritten Offerings of securities and such other matters as
such underwriters or Purchasers may reasonably request;

(k)          otherwise use its commercially reasonable efforts to comply with
all applicable rules and regulations of the Commission, and make available to
its security holders, as soon as reasonably practicable, an earnings statement,
which earnings statement shall satisfy the provisions of Section 11(a) of the
Securities Act and Rule 158 promulgated thereunder;

(l)           make available to the appropriate representatives of the managing
underwriter and Purchasers access to such information and Parent personnel as is
reasonable and customary to enable such parties to establish a due diligence
defense under the Securities Act; provided, however, that Parent need not
disclose any such information to any such representative unless and until such
representative has entered into or is otherwise subject to a confidentiality
agreement with Parent satisfactory to Parent; and

(m)         cause all the Exchange Shares registered pursuant to this Agreement
to be listed on each securities exchange or nationally recognized quotation
system on which similar securities issued by Parent are then listed.

 

12

 

Parent agrees that, if any Purchaser could reasonably be deemed to be an
“underwriter”, as defined in Section 2(a)(11) of the Securities Act, in
connection with the registration statement in respect of any registration of
Exchange Shares of any Purchaser pursuant to this Agreement, and any amendment
or supplement thereof (any such registration statement or amendment or
supplement a “Purchaser Underwriter Registration Statement”), then Parent will
cooperate with such Purchaser in allowing such Purchaser to conduct customary
“underwriter’s due diligence” with respect to Parent and satisfy its obligations
in respect thereof. In addition, at any Purchaser’s request, Parent will furnish
to such Purchaser, on the date of the effectiveness of any Purchaser Underwriter
Registration Statement and thereafter from time to time on such dates as such
Purchaser may reasonably request, (i) a letter, dated such date, from Parent’s
independent certified public accountants in form and substance as is customarily
given by independent certified public accountants to underwriters in an
underwritten public offering, addressed to such Purchaser, and (ii) an opinion,
dated as of such date, of counsel representing Parent for purposes of such
Purchaser Underwriter Registration Statement, in form, scope and substance as is
customarily given in an underwritten public offering, including standard “10b-5”
assurances for such offering, addressed to such Purchaser. Parent will also
permit legal counsel to such Purchaser to review and comment upon any such
Purchaser Underwriter Registration Statement at least five (5) business days
prior to its filing with the Commission and all amendments and supplements to
any such Purchaser Underwriter Registration Statement within a reasonable number
of days prior to their filing with the Commission and not file any Purchaser
Underwriter Registration Statement or amendment or supplement thereto in a form
to which such Purchaser’s legal counsel reasonably objects.

7.2          Failure of Registration Statement to Become Effective. Parent and
the Purchasers agree that the Purchasers will suffer damages if the Registration
Statement is not declared effective on or prior to Effectiveness Date. Parent
and the Purchasers further agree that it would not be feasible to ascertain the
extent of such damages with precision. Accordingly, if the Registration
Statement is not declared effective on or prior to the Effectiveness Date,
Parent shall pay as Liquidated Damages, and not as a penalty, 1% of (i) the
Purchase Price multiplied by (ii) the number of Exchange Shares held by such
Purchaser (such product being the “Liquidated Damages Amount”) per thirty (30)
day period (which shall be pro rated for such periods less than thirty (30)
days) until the Registration Statement is declared effective. The Liquidated
Damages Amount will be paid in cash, unless Parent certifies that such cash
payment would result in a breach under its credit facility or other documents
evidencing indebtedness, then Parent may pay the Liquidated Damages Amount in
kind in the form of additional Common Stock. The determination of the number of
shares of Common Stock to be issued as the Liquidated Damages Amount shall be
equal to the Liquidated Damages Amount divided by the lesser of (i) the Purchase
Price per share; and (ii) the closing price of Parent’s Common Stock on the AMEX
on the date on which the Liquidated Damages payment is due. In no event shall
Parent be required to issue fractional shares pursuant to the terms of this
Section 7.2 and all fractional shares shall be rounded down to the next lowest
number of whole shares. The parties agree that the amounts set forth in this
Section 7.2 represent a reasonable estimate on the part of the parties, as of
the date of this Agreement, of the amount of damages that will be incurred by
the Purchasers if the Registration Statement is not declared effective on or
prior to the Effectiveness Date. Notwithstanding anything to the contrary set
forth in this Agreement, in no event shall the total

 

13

 

number of Exchange Shares that Parent shall be required to issue pursuant to
this Agreement exceed the maximum number of shares of Common Stock that Parent
can issue without Stockholder Approval pursuant to any rule of AMEX, or any
other national exchange on which Parent’s Common Stock is then traded including,
without limitation, Section 713 of the AMEX Listing Standards, Policies and
Requirements, subject to equitable adjustments from time to time for
stock-splits, stock dividends, combinations, capital reorganizations and similar
events relating to the Common Stock occurring after the date of this Agreement.

 

7.3

Transfer of Shares After Registration; Suspension.

(a)          Each Purchaser agrees that it will not effect any disposition of
the Exchange Shares that would constitute a sale within the meaning of the
Securities Act except as contemplated in the Registration Statement referred to
in Section 7.1 and as described below or as otherwise permitted by law, and that
it will promptly notify Parent in writing of any changes in the information set
forth in the Registration Statement regarding the Purchaser or its plan of
distribution.

(b)          Except in the event that paragraph (c) below applies, Parent shall
if deemed necessary by Parent: (i) prepare and file from time to time with the
Commission a post-effective amendment to the Registration Statement or a
supplement to the related Prospectus or a supplement or amendment to any
document incorporated therein by reference or file any other required document
so that such Registration Statement will not contain an untrue statement of a
material fact or omit 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, and so that, as thereafter delivered to
purchasers of the Common Stock being sold thereunder, such Prospectus will not
contain an untrue statement of a material fact or omit 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, (ii)
provide the Purchasers copies of any documents filed pursuant to Section
7.3(b)(i), and (iii) inform each Purchaser that Parent has complied with its
obligations in Section 7.3(b)(i) (or that, if Parent has filed a post-effective
amendment to the Registration Statement which has not yet been declared
effective, Parent will notify the Purchasers to that effect, will use its
commercially reasonable efforts to secure the effectiveness of such
post-effective amendment as promptly as possible and will promptly notify the
Purchaser pursuant to Section 7.3(b)(i) hereof when the amendment has become
effective).

(c)          In the event of (i) any request by the Commission or any other
federal or state governmental authority during the period of effectiveness of
the Registration Statement for amendments or supplements to a Registration
Statement or related Prospectus or for additional information; (ii) the issuance
by the Commission or any other federal or state governmental authority of any
stop order suspending the effectiveness of a Registration Statement or the
initiation of any proceedings for that purpose; (iii) the receipt by Parent of
any notification with respect to the suspension of the qualification or
exemption from qualification of any of the Exchange Shares for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose; or (iv) any event or circumstance which, upon the advice of its
counsel, necessitates the making of any changes in the Registration Statement or
Prospectus, or any document incorporated or deemed to be incorporated therein by
reference, so that, in the case of the Registration Statement, it will not
contain any untrue statement of a material fact or any

 

14

 

omission to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, and that in the case of the
Prospectus, it will not contain any untrue statement of a material fact or any
omission to state a material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading, then Parent shall promptly deliver a notice in
writing to the Purchasers (the “Suspension Notice”) to the effect of the
foregoing and, upon receipt of such Suspension Notice, the Purchasers will
refrain from selling any Exchange Shares pursuant to the Registration Statement
(a “Suspension”) until the Purchasers’ receipt of copies of a supplemented or
amended Prospectus prepared and filed by Parent, or until the Purchasers are
advised in writing by Parent that the current Prospectus may be used, and have
received copies of any additional or supplemental filings that are incorporated
or deemed incorporated by reference in any such Prospectus. In the event of any
Suspension, Parent will use its commercially reasonable efforts to cause the use
of the Prospectus so suspended to be resumed as promptly as practicable after
the delivery of a Suspension Notice to the Purchasers. Notwithstanding the
foregoing, Parent shall not be required to amend or supplement the Registration
Statement, any related Prospectus or any document incorporated therein by
reference in the event that, and for a period (a “Black Out Period”) not to
exceed, for so long as this Agreement is in effect, thirty (30) days
consecutively in any ninety (90) day period or ninety (90) days in any twelve
(12) month period if either (A) any action by Parent pursuant to this Section
7.4(c) would violate applicable law or (B) (x) an event occurs and is continuing
as a result of which the Registration Statement, any related Prospectus or any
document incorporated therein by reference as then amended or supplemented
would, in Parent’s good faith judgment, contain an untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, and (y) (1) Parent determines in good faith that the
disclosure of such event at such time would have a material adverse effect on
the business, operations or prospects of Parent or (2) the disclosure otherwise
relates to a material business transaction which has not yet been publicly
disclosed in any relevant jurisdiction.

(d)          Provided that a Suspension or a Black Out Period is not then in
effect, the Purchasers may sell Exchange Shares received pursuant to this
Agreement under the Registration Statement in the manner set forth under the
caption “Plan of Distribution” in the Prospectus, provided that each arranges
for delivery of a current Prospectus to the transferee of the Exchange Shares.
Upon receipt of a request therefor, Parent agrees to provide an adequate number
of current Prospectuses to the Purchasers and to supply copies to any other
parties requiring such Prospectuses.

 

7.4

Indemnification.

 

(a)

For the purpose of this Section 7.4:

(i)           the term “Selling Stockholder” shall include the Purchasers and
their respective Affiliates;

(ii)          the term “Registration Statement” shall include the Prospectus in
the form first filed with the Commission pursuant to Rule 424(b) of the
Securities Act or filed as part of the Registration Statement at the time of
effectiveness if no

 

15

 

Rule 424(b) filing is required, any exhibit, supplement or amendment included in
or relating to the Registration Statement referred to in Section 7.1; and

(iii)        the term “untrue statement” shall include any untrue statement or
alleged untrue statement of a material fact in the Registration Statement, or
any omission or alleged omission to state in the Registration Statement a
material fact required to be stated therein or necessary to make the statements
therein not misleading.

(b)          Parent agrees to indemnify and hold harmless each Selling
Stockholder and its officers, directors, members and their respective successors
and assigns (collectively, the “Selling Stockholder Indemnified Parties”) from
and against any third party losses, claims, damages or liabilities to which such
Selling Stockholder Indemnified Parties may become subject (under the Securities
Act or otherwise) insofar as such losses, claims, damages or liabilities (or
actions or proceedings in respect thereof) arise out of, or are based upon (i)
any breach of the representations or warranties of Parent contained herein, or
failure to comply with the covenants and agreements of Parent contained herein,
(ii) any untrue statement of a material fact contained in the Registration
Statement as amended at the time of effectiveness or any omission of 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, or
(iii) any failure by Parent to fulfill any undertaking included in the
Registration Statement as amended at the time of effectiveness, and Parent will
reimburse such Selling Stockholder Indemnified Parties for any reasonable legal
or other expenses reasonably incurred in investigating, defending or preparing
to defend any such action, proceeding or claim, provided, however, that Parent
shall not be liable in any such case to the extent that such loss, claim, damage
or liability arises out of, or is based upon, (1) an untrue statement made in
such Registration Statement or any omission of a material fact required to be
stated therein or necessary to make the statements therein not misleading in
reliance upon and in conformity with written information furnished to Parent by
or on behalf of such Selling Stockholder Indemnified Parties specifically for
use in preparation of the Registration Statement, (2) a breach of any
representations or warranties made by such Selling Stockholder herein, or the
failure of such Selling Stockholder Indemnified Parties to comply with its
covenants and agreements contained in this Agreement hereof or (3) the use by
the Selling Stockholder Indemnified Party of an outdated or defective Prospectus
after Parent has notified such Selling Stockholder Indemnified Party in writing
that the Prospectus is outdated or defective and prior to the receipt by such
Selling Stockholder Indemnified Party of a supplemented Prospectus or written
notice from Parent that the use of the applicable Prospectus may be resumed.
Parent shall reimburse each Selling Stockholder Indemnified Party for the
amounts provided for herein on demand as such expenses are incurred.

(c)          Each Purchaser agrees to indemnify and hold harmless Parent (and
each person, if any, who controls Parent within the meaning of Section 15 of the
Securities Act, each officer of Parent who signs the Registration Statement and
each director of Parent) from and against any third party losses, claims,
damages or liabilities to which Parent (or any such officer, director or
controlling person) may become subject (under the Securities Act or otherwise),
insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) arise out of, or are based upon, (i) any breach
of the representations and warranties of such Purchaser contained herein or in
Exhibit A hereto, (ii) any failure to comply with the covenants

 

16

 

and agreements of such Purchaser contained herein, or (iii) any untrue statement
of a material fact contained in the Registration Statement or any omission of a
material fact required to be stated therein or necessary to make the statements
therein not misleading if such untrue statement or omission was made in reliance
upon and in conformity with written information furnished by or on behalf of
such Purchaser specifically for use in preparation of the Registration
Statement, and such Purchaser will reimburse Parent (or such officer, director
or controlling person), as the case maybe, for any reasonable legal or other
expenses reasonably incurred in investigating, defending or preparing to defend
any such action, proceeding or claim; provided, however, that such Purchaser’s
obligation to indemnify Parent or any other persons hereunder shall be limited
to the amount by which the net amount received by such Purchaser from the sale
of the Exchange Shares to which such loss relates exceeds the amount of any
damages which such Purchaser has otherwise been required to pay by reason of
such untrue statement or omission, provided further that, with respect to any
indemnification obligation arising under clause (iii) of this paragraph (b),
such obligation shall be limited to the net amount received by such Purchaser
from the sale of the Exchange Shares included in the Registration Statement in
question.

(d)          Promptly after receipt by any indemnified person of a notice of a
claim or the commencement of any action in respect of which indemnity is to be
sought against an indemnifying person pursuant to this Section 7.4, such
indemnified person shall notify the indemnifying person in writing of such claim
or of the commencement of such action, but the omission to so notify the
indemnifying person will not relieve it from any liability which it may have to
any indemnified person under this Section 7.4 (except to the extent that such
omission materially and adversely affects the indemnifying person’s ability to
defend such action or such failure results in the forfeiture by the indemnifying
party of substantial rights or defenses) or from any liability otherwise than
under this Section 7.4. Subject to the provisions hereinafter stated, in case
any such action shall be brought against an indemnified person, the indemnifying
person shall be entitled to participate therein, and, to the extent that it
shall elect by written notice delivered to the indemnified person promptly after
receiving the aforesaid notice from such indemnified person, shall be entitled
to assume the defense thereof, with counsel reasonably satisfactory to such
indemnified person. After notice from the indemnifying person to such
indemnified person of its election to assume the defense thereof, such
indemnifying person shall not be liable to such indemnified person for any legal
expenses subsequently incurred by such indemnified person in connection with the
defense thereof. Notwithstanding the indemnifying party’s election to appoint
counsel to represent the indemnified party in an action, the indemnified party
shall have the right to employ separate counsel (including local counsel), and
the indemnifying party shall bear the reasonable fees, costs and expenses of
such separate counsel (and local counsel) only in the event that (i) the use of
counsel chosen by the indemnifying party to represent the indemnified party
would, in the opinion of counsel for the indemnified party, present such counsel
with a potential or actual conflict of interest, (ii) the actual or potential
defendants in, or targets of, any such action include both the indemnified party
and the indemnifying party and the indemnified party shall have reasonably
concluded that there may be legal defenses available to it and/or other
indemnified parties which are different from or additional to those available to
the indemnifying party, (iii) the indemnifying party shall not have employed
counsel satisfactory to the indemnified party to represent the indemnified party
within a reasonable time after notice of the institution of such action or (iv)
the indemnifying party shall authorize the indemnified party to employ separate
counsel at the expense of the indemnifying party. In no event shall any
indemnifying person be liable in respect of any amounts paid in

 

17

 

settlement of any action unless the indemnifying person shall have approved the
terms of such settlement; provided that such consent shall not be unreasonably
withheld. No indemnifying person shall, without the prior written consent of the
indemnified person, effect any settlement of any pending or threatened
proceeding in respect of which any indemnified person is or could have been a
party and indemnification could have been sought hereunder by such indemnified
person, unless such settlement includes an unconditional release of such
indemnified person from all liability on claims that are the subject matter of
such proceeding.

(e)          If the indemnification provided for in this Section 7.4 is
unavailable to or insufficient to hold harmless an indemnified person under
subsection (b) or (c) above in respect of any losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) referred to therein,
then each indemnifying person, in lieu of indemnifying such indemnified person,
shall contribute to the amount paid or payable by such indemnified person as a
result of such losses, claims, damages or liabilities (or actions in respect
thereof) in such proportion as is appropriate to reflect the relative fault of
Parent, on the one hand, and the Purchaser(s), on the other, in connection with
the statements or omissions or other matters which resulted in such losses,
claims, damages or liabilities (or actions in respect thereof), as well as any
other relevant equitable considerations. The relative fault shall be determined
by reference to, among other things, in the case of an untrue statement, whether
the untrue statement relates to information supplied by Parent, on the one hand,
or the Purchaser(s), on the other, and the parties’ relative intent, knowledge,
access to information and opportunity to correct or prevent such untrue
statement. Parent and the Purchasers agree that it would not be just and
equitable if contribution pursuant to this subsection (e) were determined by pro
rata allocation (even if the Purchasers were treated as one entity for such
purpose) or by any other method of allocation which does not take into account
the equitable considerations referred to above in this subsection (e). The
amount paid or payable by an indemnified person as a result of the losses,
claims, damages or liabilities (or actions in respect thereof) referred to above
in this subsection (e) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified person in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
subsection (e), a Purchaser shall not be required to contribute any amount in
excess of the amount by which the net amount received by such Purchaser from the
sale of the Exchange Shares to which such loss relates exceeds the amount of any
damages which such Purchaser has otherwise been required to pay by reason of
such untrue statement. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. Each Purchaser’s obligations in this subsection (e) to
contribute shall be in proportion to its sale of Exchange Shares to which such
loss relates and shall not be joint with any other Selling Stockholders.

(f)           The parties to this Agreement hereby acknowledge that they are
sophisticated business persons who were represented by counsel during the
negotiations regarding the provisions hereof including, without limitation, the
provisions of this Section 7.4, and are fully informed regarding said
provisions. They further acknowledge that the provisions of this Section 7.4
fairly allocate the risks in light of the ability of the parties to investigate
Parent and its business in order to assure that adequate disclosure is made in
the Registration Statement as required by the Securities Act. The parties are
advised that federal or state public policy as interpreted by the courts in
certain jurisdictions may be contrary to certain of the

 

18

 

provisions of this Section 7.4, and the parties hereto hereby expressly waive
and relinquish any right or ability to assert such public policy as a defense to
a claim under this Section 7.4 and further agree not to attempt to assert any
such defense.

7.5          Registration Expenses. Parent will bear all expenses incident to or
incurred in connection with the preparation and filing of the Registration
Statement whether or not declared effective, including, without limitation, all
registration and filing fees and expenses, fees and expenses of compliance with
federal and state securities laws or with blue sky laws as provided in Section
7.1(f), any NASD filing fees required to be made in connection with an
underwritten offering of the Exchange Shares, application and filing fees and
expenses, duplicating and printing expenses, and fees and disbursements of
counsel to Parent (including expenses of legal opinions) and all independent
accountants, but excluding fees and expenses of counsel to any of the
Purchasers, fees and expenses of any accountants, engineers, consultants or any
other advisers to the Purchasers, any underwriting discount or commission and
any broker-dealer sales commission that the Purchasers may incur in disposing of
their Exchange Shares.

7.6          Termination of Conditions and Obligations. The conditions precedent
imposed by this Agreement upon the transferability of the Exchange Shares, shall
cease and terminate as to any particular Exchange Share when the sale of the
Exchange Share shall have been effectively registered under the Securities Act
and sold or otherwise disposed of in accordance with the intended method of
disposition set forth in the Registration Statement covering the sale of the
Exchange Share or at such time as an opinion of counsel reasonably satisfactory
to Parent shall have been rendered to the effect that such conditions are not
necessary in order to comply with the Securities Act.

8.            Notices. All notices, requests, consents and other communications
hereunder shall be in writing, shall be mailed (A) if within the United States
by first-class registered or certified airmail, or nationally recognized
overnight express courier, postage prepaid, or by facsimile, or (B) if delivered
from outside the United States, by International Federal Express or facsimile,
and shall be deemed given (i) if delivered by first-class registered or
certified mail, three (3) business days after so mailed, (ii) if delivered by
nationally recognized overnight carrier, one (1) business day after so mailed,
(iii) if delivered by International Federal Express, two (2) business days after
so mailed, (iv) if delivered by facsimile, upon electronic confirmation of
receipt and shall be delivered as addressed as set forth in the Partnership
Purchase Agreement.

9.            Reliance. Each Purchaser and Parent understand and agree that the
other party and its respective officers, directors, employees and agents may,
and will, rely on the accuracy of the other party’s respective representations
and warranties in this Agreement to establish compliance with applicable
securities laws. Each Purchaser and Parent agree to indemnify and hold harmless
all such parties against all losses, claims, costs, expenses and damages or
liabilities which they may suffer or incur caused or arising from their reliance
on such representations and warranties.

10.

Termination. This Agreement shall terminate upon the earliest to occur of:

 

(a)

the consummation of the IPO;

 

19

 

(b)          as to any Purchaser, the agreement of Parent and such Purchaser to
terminate this Agreement;

 

(c)

the liquidation and dissolution of the Partnership; or

(d)          the date that the Registration Statement is declared effective by
the Commission;

provided, however, that in the event that this Agreement is terminated pursuant
to this Section 7 prior to the time specified in Section 7.1(c), the terms of
Article 7 shall survive until the time specified in Section 7.1(c).

The date of the termination of this Agreement is referred to in this Agreement
as the “Termination Date.”

11.

Miscellaneous.

11.1       Survival. The representations and warranties made in this Agreement
shall survive the closing of the transactions contemplated by this Agreement.

11.2       Assignment. This Agreement is not transferable or assignable, except
that the rights of the Purchasers set forth in Section 7 hereof shall be
transferable by a Purchaser to its Affiliate.

11.3       Execution and Delivery of Agreement. Parent shall be entitled to rely
on delivery by facsimile transmission of an executed copy of this Agreement, and
acceptance by Parent of such facsimile copy shall create a valid and binding
agreement between the Purchaser and Parent.

11.4       Titles. The titles of the sections and subsections of this Agreement
are for the convenience of reference only and are not to be considered in
construing this Agreement.

11.5       Severability. The invalidity or unenforceability of any particular
provision of this Agreement shall not affect or limit the validity or
enforceability of the remaining provisions of this Agreement.

11.6       Entire Agreement. This Agreement constitutes the entire agreement and
understanding between the parties with respect to the subject matters herein and
supersedes and replaces any prior agreements and understandings, whether oral or
written, between them with respect to such matters.

11.7       Waiver and Amendment. Except as otherwise provided herein, the
provisions of this Agreement may be waived, altered, amended or repealed, in
whole or in part, only upon the mutual written agreement of Parent and
Purchasers acquiring in the aggregate a majority of the Exchange Shares pursuant
to this Agreement and if any such amendment, modification, restatement or
supplement would adversely affect the rights or increase the obligations of any
Purchaser hereunder, the approval of such Purchaser will be required for such
amendment, modification, restatement or supplement. This Section 11.7 shall not
be amended, modified,

 

20

 

restated or supplemented without the written approval of 100% of the Purchasers.
No waiver of any provision of this Agreement shall be valid unless in writing
and signed by the party against who that waiver is sought to be enforced. No
failure or delay on the part of any of the parties in exercising any right,
power or privilege hereunder, and no course of dealing between or among any of
the parties, shall operate as a waiver of any right, power or privilege
hereunder. No single or partial exercise of any right, power or privilege
hereunder shall preclude any other or further exercise thereof or the exercise
of any other right, power or privilege hereunder. No notice to or demand on any
of the parties in any case shall entitle such party to any other or further
notice or demand in similar or other circumstances or constitute a waiver of the
rights of any party to any other or further action in any circumstances without
notice or demand.

11.8       Counterparts. This Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which counterparts, when so executed and delivered, shall be deemed to be an
original and all of which counterparts, taken together, shall constitute but one
and the same Agreement. In the event that this Agreement is delivered by
facsimile transmission or by e-mail delivery of a “.pdf” format date file, such
signature shall create a valid and binding obligation of the party executing (or
on whose behalf such signature is executed) with the same force and effect as if
such facsimile or “.pdf” signature page were an original thereof.

11.9       Governing Law. This Agreement is governed by and shall be construed
in accordance with the laws of the State of New York.

 

11.10

Submission to Jurisdiction

 

11.11

. Each of the parties to this Agreement hereby (a) irrevocably submits to the
non-exclusive personal jurisdiction of any New York state or federal court, over
any claim arising out of or relating to this Agreement and irrevocably agrees
that all such claims may be heard and determined in such New York state or
federal court, and (b) irrevocably waives, to the fullest extent permitted by
applicable law, any objection it may now or hereafter have to the laying of
venue in any proceeding brought in a New York state or federal court, and any
claim that any such proceeding brought in a New York state or federal court, has
been brought in an inconvenient forum; provided, however, that nothing in this
paragraph is intended to waive the right of any of the parties to remove any
such action or proceeding commenced in any a New York state court to an
appropriate New York federal court to the extent the basis for such removal
exists under applicable law. Each of the parties hereby irrevocably agrees that
service of process may be made on him, her or it by mailing, by certified mail,
a copy of such process to such party at his, her or its address for notices
specified herein. Each of the parties agrees that a final judgment in any such
action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
Nothing in this paragraph shall affect the right of any of the parties to serve
legal process in any other manner permitted by law or affect the right of any of
the parties to bring any action or proceeding in the courts of any other
jurisdictions, domestic or foreign.

 

21

 

11.11     Attorney’s Fees. In any action or proceeding brought to enforce any
provision of this Agreement, or where any provision hereof is validly asserted
as a defense, the successful party shall be entitled to recover reasonable
attorney’s fees (including any fees incurred in any appeal) in addition to its
costs and expenses and any other available remedy.

11.12     Independent Nature of Purchaser’s Obligations and Rights. The
obligations of each Purchaser under this Agreement are several and not joint
with the obligations of any other present or subsequent purchaser of the
Exchange Shares, and each Purchaser shall not be responsible in any way for the
performance of the obligations of any other Purchaser under this Agreement. The
decision of each Purchaser to exchange Purchased Common Units for Exchange
Shares pursuant to this Agreement will be made by such Purchaser independently
of any other Purchaser of the Exchange Shares and independently of any
information, materials, statements or opinions as to the business, affairs,
operations, assets, properties, liabilities, results of operations, condition
(financial or otherwise) or prospects of Parent or the Partnership that may have
been made or given by any other Purchaser or by any agent or employee of any
such Purchaser, and no Purchaser or any of its agents or employees shall have
any liability to any other Purchaser (or any other Person) relating to or
arising from any such information, materials, statements or opinions. Nothing
contained herein and no action taken by any Purchaser pursuant hereto, shall be
deemed to constitute such Purchaser as a partnership, an association, a joint
venture or any other kind of entity, or create a presumption that such Purchaser
is in any way acting in concert or as a group with respect to such obligations
or the transactions contemplated by this Agreement. Each Purchaser acknowledges
that no other Purchaser has acted as agent for such Purchaser in connection with
making an investment in the Exchange Shares and that no other Purchaser will be
acting as agent of such Purchaser in connection with monitoring its investment
in the Exchange Shares. Each Purchaser shall be entitled to independently
protect and enforce its rights, including without limitation the rights arising
out of this Agreement and it shall not be necessary for any other Purchaser to
be joined as an additional party in any proceeding for such purpose. Each
Purchaser represents that it has been represented by its own separate legal
counsel in its review and negotiations of this Agreement.

 

11.12

Successors and Assigns

 

11.13

. Except as otherwise expressly provided herein, the provisions hereof shall
inure to the benefit of, and be binding upon, the successors, assigns, heirs,
executors and administrators of the parties hereto and shall inure to the
benefit of and be enforceable by each person who shall be a holder of the
Exchange Shares from time to time.

 

1.14

Remedies

 

1.15

. The Parties agree that the covenants and obligations in this Agreement relate
to special, unique and extraordinary matters and that a violation of any of the
terms hereof would cause irreparable injury in an amount which would be
impossible to estimate or determine and for which any remedy at law would be
inadequate. As such, the parties agree that if any of the parties fails or
refuses to fulfill any of its obligations under this Agreement or to make any
payment or deliver any instrument required hereunder, then the other parties
shall have the remedy of

 

22

 

specific performance, which remedy shall be cumulative and nonexclusive and
shall be in addition to any other rights and remedies otherwise available under
any other contract or at law or in equity and to which such party might be
entitled.

 

23

 

IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
the date first above mentioned.

ABRAXAS PETROLEUM CORPORATION

 

By:              /s/ Chris E. Williford 

Name: Chris E. Williford

 

Title:

Executive Vice President, Chief Financial

 

Officer and Treasurer

 

ABRAXAS ENERGY PARTNERS, L.P.

 

By:

Abraxas General Partner, LLC, General Partner

 

By:    /s/ Barbara M. Stuckey 

 

Name: Barbara M. Stuckey

 

Title:

President and Chief Operating Officer

 

 

[Purchaser Signature Pages to Follow]

 

 

[Signature Page to Exchange and Registration Rights Agreement]

MANAGEMENT STOCKHOLDERS:

THE UNDERSIGNED AGREE TO THE PROVISIONS OF SECTION 3.8.

 

 

 

/S/ ROBERT L.G. WATSON

ROBERT L.G. WATSON

 

 

 

/S/ CHRIS E. WILLIFORD

CHRIS E. WILLIFORD

 

 

 

/S/ STEVEN T. WENDEL

STEVEN T. WENDEL

 

 

 

/S/ LEE BILLINGSLEY

LEE BILLINGSLEY

 

 

 

/S/ WILLIAM WALLACE

WILLIAM WALLACE

 

 

 

/S/ BARBARA M. STUCKEY

BARBARA M. STUCKEY

 

 

[Signature Page to Exchange and Registration Rights Agreement]

DIRECTORS:

 

 

 

/S/ FRANKLIN A. BURKE

Franklin A. Burke

 

 

[Signature Page to Exchange and Registration Rights Agreement]

 

 

 

 

[Signature Page to Exchange and Registration Rights Agreement]