Registration Rights Agreement

REGISTRATION RIGHTS AGREEMENT


Dated as of November 14, 1996


By and Among


ABRAXAS PETROLEUM CORPORATION


and


CANADIAN ABRAXAS PETROLEUM LIMITED,


as Issuers


and


BT SECURITIES CORPORATION,
JEFFERIES & COMPANY, INC.,
BANKERS TRUST INTERNATIONAL PLC
ING BARING (U.S.) SECURITIES CORPORATION,
as Initial Purchasers


11 1/2% Senior Notes due 2004


TABLE OF CONTENTS


Page


1. Definitions....................................................... 1


2. Exchange Offer.................................................... 5


3. Shelf Registration................................................ 9


4. Additional Interest............................................... 11


5. Registration Procedures........................................... 13


6. Registration Expenses............................................. 25


7. Indemnification................................................... 26


8. Rules 144 and 144A................................................ 31


9. Underwritten Registrations........................................ 31


10. Miscellaneous..................................................... 32


(a) No Inconsistent Agreements.................................. 32
(b) Adjustments Affecting Registrable Notes..................... 32
(c) Amendments and Waivers...................................... 32
(d) Notices..................................................... 33
(e) Successors and Assigns...................................... 33
(f) Release of Subsidiary Guarantors............................ 34
(g) Counterparts................................................ 34
(h) Headings.................................................... 34
(i) Governing Law............................................... 34
(j) Severability................................................ 34
(k) Securities Held by the Issuers or Their
Affiliates............................................... 34
(l) Third Party Beneficiaries................................... 34
(m) Entire Agreement............................................ 35
(n) Information Supplied by the Participants.................... 35
(o) Subsidiary Guarantor a Party................................ 35


i


REGISTRATION RIGHTS AGREEMENT


This Registration Rights Agreement (the "Agreement") is dated as of November 14, 1996, by and among ABRAXAS PETROLEUM CORPORATION, a Nevada corporation (the "Company"), and CANADIAN ABRAXAS PETROLEUM LIMITED, Canada corporation and a wholly owned subsidiary of the Company ("Canadian Abraxas" and, together with the Company, the "Issuers"), as issuers, and BT SECURITIES CORPORATION, BANKERS TRUST INTERNATIONAL PLC, JEFFERIES & COMPANY, INC. and ING BARING (U.S.) SECURITIES CORPORATION, as initial purchasers (the "Initial Purchasers").


This Agreement is entered into in connection with the Purchase Agreement, dated as of November 14, 1996, by and among the Issuers and the Initial Purchasers (the "Purchase Agreement"), which provides for the sale by the Issuers to the Initial Purchasers of $215,000,000 aggregate principal amount of the Issuer's 11 1/2% Senior Notes due 2004 (the "Notes"), unconditionally guaranteed on a senior basis by each of the Company's future Restricted Subsidiaries (as defined in the Indenture) (collectively, the "Subsidiary Guarantors"). In order to induce the Initial Purchasers to enter into the Purchase Agreement, the Issuers have agreed to provide the registration rights set forth in this Agreement for the benefit of the Initial Purchasers and any subsequent holder or holders of the Notes. The execution and delivery of this Agreement is a condition to the Initial Purchasers' obligation to purchase the Notes under the Purchase Agreement.


The parties hereby agree as follows:


1. Definitions


As used in this Agreement, the following terms shall have the following meanings:


Additional Interest: See Section 4 hereof.


Advice: See Section 5 hereof.


Agreement: See the introductory paragraphs hereto.


Applicable Period: See Section 2 hereof.


Canadian Abraxas: See the introductory paragraphs hereto.


Company: See the introductory paragraphs hereto.


Effectiveness Date: With respect to any Registration Statement, the 75th day after the Filing Date with respect thereto.


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Effectiveness Period: See Section 3 hereof.


Event Date: See Section 4 hereof.


Exchange Act: The Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC promulgated thereunder.


Exchange Notes: See Section 2 hereof.


Exchange Offer: See Section 2 hereof.


Exchange Offer Registration Statement: See Section 2 hereof.


Filing Date: (A) If no Registration Statement has been filed by the Company pursuant to this Agreement, the 45th day after the Issue Date; provided, however, that if a Shelf Notice is given within 10 days of the Filing Date, then the Filing Date with respect to the Initial Shelf Registration shall be the 15th calendar day after the date of the giving of such Shelf Notice; and (B) in each other case (which may be applicable notwithstanding the consummation of the Exchange Offer), the 30th day after the delivery of a Shelf Notice.


Holder: Any holder of a Registrable Note or Registrable Notes.


Indemnified Person: See Section 7(c) hereof.


Indemnifying Person: See Section 7(c) hereof.


Indenture: The Indenture, dated as of November 14, 1996, by and among the Issuers and IBJ SCHRODER BANK & TRUST COMPANY, as trustee, pursuant to which the Notes are being issued, as the same may be amended or supplemented from time to time in accordance with the terms thereof.


Initial Purchasers: See the introductory paragraphs hereto.


Initial Shelf Registration: See Section 3(a) hereof.


Inspectors: See Section 5(o) hereof.


Issue Date: November 6, 1996, the date of original issuance of the Notes.


Issuers: See the introductory paragraphs hereto.


NASD: See Section 5(t) hereof.


Participant: See Section 7(a) hereof.


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Participating Broker-Dealer: See Section 2 hereof.


Person: An individual, trustee, corporation, partnership, joint stock company, trust, unincorporated association, union, business association, firm or other legal entity.


Private Exchange: See Section 2 hereof.


Private Exchange Notes: See Section 2 hereof.


Prospectus: The prospectus included in any Registration Statement (including, without limitation, any prospectus subject to completion and a prospectus that includes any information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated under the Securities Act and any term sheet filed pursuant to Rule 434 under the Securities Act), as amended or supplemented by any prospectus supplement, and all other amendments and supplements to the Prospectus, including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such Prospectus.


Purchase Agreement: See the introductory paragraphs hereof.


Records: See Section 5(o) hereof.


Registrable Notes: Each Note upon its original issuance and at all times subsequent thereto, each Exchange Note as to which Section 2(c)(iv) hereof is applicable upon original issuance and at all times subsequent thereto and each Private Exchange Note upon original issuance thereof and at all times subsequent thereto, until (i) a Registration Statement (other than, with respect to any Exchange Note as to which Section 2(c)(iv) hereof is applicable, the Exchange Offer Registration Statement) covering such Note, Exchange Note or Private Exchange Note has been declared effective by the SEC and such Note, Exchange Note or such Private Exchange Note, as the case may be, has been disposed of in accordance with such effective Registration Statement, (ii) such Note has been exchanged pursuant to the Exchange Offer for an Exchange Note or Exchange Notes that may be resold without restriction under state and federal securities laws, (iii) such Note, Exchange Note or Private Exchange Note, as the case may be, ceases to be outstanding for purposes of the Indenture or (iv) such Note, Exchange Note or Private Exchange Note, as the case may be, may be resold without restriction pursuant to Rule 144 under the Securities Act.


Registration Statement: Any registration statement of the Issuers and the Subsidiary Guarantors (if any) that covers any of the Notes, the Exchange Notes or the Private Exchange Notes filed with the SEC under the Securities Act, including the Prospectus, amendments and supplements to such registration statement, including post-effective amendments, all exhibits, and all material incorporated by reference or deemed to be incorporated by reference in such registration statement.


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Rule 144: Rule 144 promulgated under the Securities Act, as such Rule may be amended from time to time, or any similar rule (other than Rule 144A) or regulation hereafter adopted by the SEC providing for offers and sales of securities made in compliance therewith resulting in offers and sales by subsequent holders that are not affiliates of an issuer of such securities being free of the registration and prospectus delivery requirements of the Securities Act.


Rule 144A: Rule 144A promulgated under the Securities Act, as such Rule may be amended from time to time, or any similar rule (other than Rule 144) or regulation hereafter adopted by the SEC.


Rule 415: Rule 415 promulgated under the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the SEC.


SEC: The Securities and Exchange Commission.


Securities Act: The Securities Act of 1933, as amended, and the rules and regulations of the SEC promulgated thereunder.


Shelf Notice: See Section 2 hereof.


Shelf Registration: See Section 3(b) hereof.


Subsequent Shelf Registration: See Section 3(b) hereof.


TIA: The Trust Indenture Act of 1939, as amended.


Trustee: The trustee under the Indenture and the trustee (if any) under any indenture governing the Exchange Notes and Private Exchange Notes.


Underwritten registration or underwritten offering: A registration in which securities of the Issuers are sold to an underwriter for reoffering to the public.


2. Exchange Offer


(a) To the extent permitted by applicable law or applicable interpretation of the staff of the Division of Corporation Finance of the SEC, the Issuers shall file with the SEC, no later than the Filing Date, a Registration Statement (the "Exchange Offer Registration Statement") on an appropriate registration form with respect to a registered offer (the "Exchange Offer") to exchange any and all of the Registrable Notes for a like aggregate principal amount of notes (the "Exchange Notes") of the Issuers (the guarantees, if any, of the Subsidiary Guarantors) that are identical in all material respects to the Notes except that the Exchange Notes (and the guarantees, if any, of the Subsidiary Guarantors) shall contain no restrictive legend thereon. The Exchange Offer shall comply with all


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applicable tender offer rules and regulations under the Exchange Act and other applicable law. The Issuers shall use their respective best efforts to (x) cause the Exchange Offer Registration Statement to be declared effective under the Securities Act on or before the Effectiveness Date; (y) keep the Exchange Offer open for at least 30 days (or longer if required by applicable law) after the date that notice of the Exchange Offer is mailed to Holders; and (z) consummate the Exchange Offer on or prior to the 135th day following the date on which the Exchange Offer Registration Statement is declared effective by the SEC. If, after the Exchange Offer Registration Statement is initially declared effective by the SEC, the Exchange Offer or the issuance of the Exchange Notes thereunder is interfered with by any stop order, injunction or other order or requirement of the SEC or any other governmental agency or court, the Exchange Offer Registration Statement shall be deemed not to have become effective for purposes of this Agreement.


Each Holder that participates in the Exchange Offer will be required to represent that any Exchange Notes to be received by it will be acquired in the ordinary course of its business, that at the time of the consummation of the Exchange Offer such Holder will have no arrangement or understanding with any Person to participate in the distribution of the Exchange Notes in violation of the provisions of the Securities Act, and that such Holder is not an affiliate of any of the Issuers within the meaning of the Securities Act.


Upon consummation of the Exchange Offer in accordance with this Section 2, the provisions of this Agreement shall continue to apply, mutatis mutandis, solely with respect to Registrable Notes that are Private Exchange Notes, Exchange Notes as to which Section 2(c)(iv) is applicable and Exchange Notes held by Participating Broker-Dealers (as defined), and the Issuers shall have no further obligation to register Registrable Notes (other than Private Exchange Notes and other than in respect of any Exchange Notes as to which clause 2(c)(iv) hereof applies) pursuant to Section 3 hereof.


No securities other than the Exchange Notes shall be included in the Exchange Offer Registration Statement.


(b) The Issuers shall include within the Prospectus contained in the Exchange Offer Registration Statement a section entitled "Plan of Distribution," reasonably acceptable to the Holders, which shall contain a summary statement of the positions taken or policies made by the staff of the SEC with respect to the potential "underwriter" status of any broker-dealer that is the beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of Exchange Notes received by such broker-dealer in the Exchange Offer (a "Participating Broker-Dealer"), whether such positions or policies have been publicly disseminated by the staff of the SEC or such positions or policies represent the prevailing views of the staff of the SEC. Such "Plan of Distribution" section shall also expressly permit, to the extent permitted by applicable policies and regulations of the SEC, the use of the Prospectus by all Persons subject to the prospectus delivery requirements of the Securities Act, including, to the extent permitted by applicable policies and regulations of the SEC, all Participating Broker-Dealers, and include a statement describing the means by which


5 145391.01


Participating Broker-Dealers may resell the Exchange Notes in compliance with the Securities Act.


The Issuers shall use their respective best efforts to keep the Exchange Offer Registration Statement effective and to amend and supplement the Prospectus contained therein in order to permit such Prospectus to be lawfully delivered by all Persons subject to the prospectus delivery requirements of the Securities Act for such period of time as is necessary to comply with applicable law in connection with any resale of the Exchange Notes covered thereby; provided, however, that such period shall not exceed 180 days after such Exchange Offer Registration Statement is declared effective (or such longer period if extended pursuant to the last paragraph of Section 5 hereof) (the "Applicable Period").


If, prior to consummation of the Exchange Offer, any Holder holds any Notes acquired by it that have, or that are reasonably likely to be determined to have, the status of an unsold allotment in an initial distribution, or any Holder is not entitled to participate in the Exchange Offer, the Issuers upon the request of any such Holder shall simultaneously with the delivery of the Exchange Notes in the Exchange Offer, issue and deliver to any such Holder, in exchange (the "Private Exchange") for such Notes held by any such Holder, a like principal amount of notes (the "Private Exchange Notes") of the Issuers that are identical in all material respects to the Exchange Notes and the Subsidiary Guarantors if any shall guarantee such Private Exchange Notes. The Private Exchange Notes shall be issued pursuant to the same indenture as the Exchange Notes and bear the same CUSIP number as the Exchange Notes.


Interest on the Exchange Notes and the Private Exchange Notes will accrue from (A) the later of (i) the last interest payment date on which interest was paid on the Notes surrendered in exchange therefor or (ii) if the Notes are surrendered for exchange on a date in a period which includes the record date for an interest payment date to occur on or after the date of such exchange and as to which interest will be paid, the date of such interest payment date or (B) if no interest has been paid on the Notes, from the date of the original issuance of the Notes.


In connection with the Exchange Offer, the Issuers shall:


(1) mail, or cause to be mailed, to each Holder entitled to
participate in the Exchange Offer a copy of the Prospectus forming part of
the Exchange Offer Registration Statement, together with an appropriate
letter of transmittal and related documents;


(2) keep the Exchange Offer open for not less than 30 days after the
date that notice of the Exchange Offer is mailed to Holders (or longer if
required by applicable law);


(3) utilize the services of a depositary for the Exchange Offer with
an address in the Borough of Manhattan, The City of New York;


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(4) permit Holders to withdraw tendered Notes at any time prior to
the close of business, New York time, on the last business day on which
the Exchange Offer shall remain open; and


(5) otherwise comply in all material respects with all applicable
laws, rules and regulations.


As soon as practicable after the close of the Exchange Offer and the Private Exchange, if any, the Issuers shall:


(1) accept for exchange all Registrable Notes validly tendered and
not validly withdrawn pursuant to the Exchange Offer and the Private
Exchange, if any;


(2) deliver to the Trustee for cancellation all Registrable Notes so
accepted for exchange; and


(3) cause the Trustee to authenticate and deliver promptly to each
Holder of Notes, Exchange Notes or Private Exchange Notes, as the case may
be, equal in principal amount to the Notes of such Holder so accepted for
exchange.


The Exchange Offer and the Private Exchange shall not be subject to any conditions, other than that (i) the Exchange Offer or Private Exchange, as the case may be, does not violate applicable law or any applicable interpretation of the staff of the SEC, (ii) no action or proceeding shall have been instituted or threatened in any court or by any governmental agency which might materially impair the ability of the Issuers to proceed with the Exchange Offer or the Private Exchange, and no material adverse development shall have occurred in any existing action or proceeding with respect to the Issuers and (iii) all governmental approvals shall have been obtained, which approvals the Issuers deem necessary for the consummation of the Exchange Offer or Private Exchange.


The Exchange Notes and the Private Exchange Notes shall be issued under (i) the Indenture or (ii) an indenture identical in all material respects to the Indenture and which, in either case, has been qualified under the TIA or is exempt from such qualification and shall provide that the Exchange Notes shall not be subject to the transfer restrictions set forth in the Indenture. The Indenture or such indenture shall provide that the Exchange Notes, the Private Exchange Notes and the Notes shall vote and consent together on all matters as one class and that none of the Exchange Notes, the Private Exchange Notes or the Notes will have the right to vote or consent as a separate class on any matter.


(c) If, (i) because of any change in law or in currently prevailing interpretations of the staff of the SEC, the Issuers are not permitted to effect the Exchange Offer, (ii) the Exchange Offer is not consummated within 150 days of the Issue Date, (iii) any holder of Private Exchange Notes so requests in writing to the Issuers within 60 days after the consummation of the Exchange


7 145391.01



Offer, or (iv) in the case of any Holder that participates in the Exchange Offer, such Holder does not receive Exchange Notes on the date of the exchange that may be sold without restriction under state and federal securities laws (other than due solely to the status of such Holder as an affiliate of any of the Issuers within the meaning of the Securities Act) and so notifies the Issuers within 30 days after such Holder first becomes aware of such restrictions, in the case of each of clauses (i) to and including (iv) of this sentence, then the Issuers shall promptly deliver to the Holders and the Trustee written notice thereof (the "Shelf Notice") and shall file a Shelf Registration pursuant to Section 3 hereof.


3. Shelf Registration


If at any time a Shelf Notice is delivered as contemplated by Section 2(c) hereof, then:


(a) Shelf Registration. The Issuers shall file with the SEC a Registration Statement for an offering to be made on a continuous basis pursuant to Rule 415 covering all of the Registrable Notes not exchanged in the Exchange Offer, Private Exchange Notes and Exchange Notes as to which Section 2(c)(iv) is applicable (the "Initial Shelf Registration"). The Issuers shall use their respective diligent best efforts to file with the SEC the Initial Shelf Registration on or before the applicable Filing Date. The Initial Shelf Registration shall be on Form S-1 or another appropriate form permitting registration of such Registrable Notes for resale by Holders in the manner or manners designated by them (including, without limitation, one or more underwritten offerings). The Issuers shall not permit any securities other than the Registrable Notes to be included in the Initial Shelf Registration or any Subsequent Shelf Registration (as defined below).


The Issuers shall use their respective best efforts to cause the Initial Shelf Registration to be declared effective under the Securities Act on or prior to the Effectiveness Date and to keep the Initial Shelf Registration continuously effective under the Securities Act until the date which is three years from the Effectiveness Date, subject to extension pursuant to the last paragraph of Section 5 hereof (the "Effectiveness Period"), or such shorter period ending when (i) all Registrable Notes covered by the Initial Shelf Registration have been sold in the manner set forth and as contemplated in the Initial Shelf Registration or (ii) a Subsequent Shelf Registration covering all of the Registrable Notes covered by and not sold under the Initial Shelf Registration or an earlier Subsequent Shelf Registration has been declared effective under the Securities Act; provided, however, that the Effectiveness Period in respect of the Initial Shelf Registration shall be extended to the extent required to permit dealers to comply with the applicable prospectus delivery requirements of Rule 174 under the Securities Act and as otherwise provided herein and shall be subject to reduction to the extent that the applicable provisions of Rule 144 are amended or revised.


No holder of Registrable Notes may include any of its Registrable Notes in any Shelf Registration Statement pursuant to this Agreement unless and until such holder furnishes to the Issuers in writing, within 30 days after


8 145391.01



receipt of a request therefor, such information as the Issuers may reasonably request for use in connection with any Shelf Registration Statement or Prospectus or preliminary prospectus included therein. No holder of Registrable Notes shall be entitled to Additional Interest pursuant to Section 4 hereof unless and until such holder shall have provided all such reasonably requested information. Each holder of Registrable Notes as to which any Shelf Registration Statement is being effected agrees to furnish promptly to the Issuers all information required to be disclosed in order to make information previously furnished to the Issuers by such Holder not materially misleading.


(b) Subsequent Shelf Registrations. If the Initial Shelf Registration or any Subsequent Shelf Registration ceases to be effective for any reason at any time during the Effectiveness Period (other than because of the sale of all of the securities registered thereunder), the Issuers shall use their respective best efforts to obtain the prompt withdrawal of any order suspending the effectiveness thereof, and in any event shall within 30 days of such cessation of effectiveness amend the Initial Shelf Registration in a manner to obtain the withdrawal of the order suspending the effectiveness thereof, or file an additional "shelf" Registration Statement pursuant to Rule 415 covering all of the Registrable Notes covered by and not sold under the Initial Shelf Registration or an earlier Subsequent Shelf Registration (each, a "Subsequent Shelf Registration"). If a Subsequent Shelf Registration is filed, the Issuers shall use their respective best efforts to cause the Subsequent Shelf Registration to be declared effective und ...