Amended Credit Agreement

AMENDED AND RESTATED CREDIT AGREEMENT


ABRAXAS PETROLEUM CORPORATION,
as the Borrower,


the Banks named herein,


and


BANKERS TRUST COMPANY,
as Agent


and


ING (U.S.) CAPITAL CORPORATION,
as Co-Agent


AMENDED AND RESTATED CREDIT AGREEMENT


Dated as of November 14, 1996


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TABLE OF CONTENTS


PRELIMINARY STATEMENT 1


ARTICLE I DEFINITIONS, ETC. 2
Section 1.01. Certain Defined Terms 2
Section 1.02. Accounting Terms 2
Section 1.03. Computation of Time Periods 2
Section 1.04. References, Etc. 2


ARTICLE II COMMITMENTS AND TERMS OF CREDIT 2
Section 2.01. Commitments 2
Section 2.02. Borrowing Procedures; Conversions 3
Section 2.03. Issuing and Reimbursing the Letters
of Credit 5
Section 2.04. Borrowing Base 7
Section 2.05. The Notes 9
Section 2.06. Reduction of the Commitments 9
Section 2.07. Mandatory Repayment of Loans 9
Section 2.08. Interest Accrual, Payments 10
Section 2.09. Optional Prepayments 12
Section 2.10. Payments, Notice of Certain Repayments
and Computations 12
Section 2.11. Fees 13
Section 2.12. Setoff, Counterclaims and Taxes 14
Section 2.13. Funding Losses 16
Section 2.14. Change of Law 17
Section 2.15. Increased Costs 18


ARTICLE III CONDITIONS OF CREDIT 19
Section 3.01. Conditions Precedent to Effectiveness,
the Initial Borrowing 19
Section 3.02. Conditions Precedent to All Letters of
Credit and Loans 22


ARTICLE IV REPRESENTATIONS AND WARRANTIES 22
Section 4.01. Corporate Existence 23
Section 4.02. Corporate Authority; Binding Obligations 23
Section 4.03. No Conflict 23
Section 4.04. No Consent 23
Section 4.05. No Defaults or Violations of Law 24
Section 4.06. Financial Position 24
Section 4.07. Litigation 24
Section 4.08. Use of Proceeds 24
Section 4.09. Governmental Regulation 25
Section 4.10. Disclosure 25


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Section 4.11. ERISA 25
Section 4.12. Payment of Taxes 26
Section 4.13. Title and Liens 26
Section 4.14. Gas Imbalances 27
Section 4.15. Environmental Matters 27


ARTICLE V AFFIRMATIVE COVENANTS 27
Section 5.01. Reporting Requirements 28
Section 5.02. Taxes; Claims 30
Section 5.03. Compliance with Laws 30
Section 5.04. Insurance 30
Section 5.05. Corporate Existence 31
Section 5.06. Inspections 31
Section 5.07. Maintenance of Properties 31
Section 5.08. Accounting Systems 32
Section 5.09. Use of Loans 32
Section 5.10. Reserve Reports 32
Section 5.11. Title 34
Section 5.12. Additional Collateral 34
Section 5.13. Further Assurances in General 34
Section 5.14. Enforcement of Acquisition Documents 34


ARTICLE VI NEGATIVE COVENANTS 35
Section 6.01. Indebtedness Restriction 35
Section 6.02. Lien Restriction 36
Section 6.03. Derivatives 38
Section 6.04. Interest Coverage Ratio 38
Section 6.05. Current Ratio 38
Section 6.06. Tangible Net Worth 38
Section 6.07. Sales of Assets 38
Section 6.08. Consolidation and Mergers 38
Section 6.09. Restricted Disbursements 39
Section 6.10. Lines of Business 39
Section 6.11. Transactions with Affiliates 40


ARTICLE VII DEFAULT AND REMEDIES 40
Section 7.01. Events of Default 40
Section 7.02. Setoff in Event of Default 43
Section 7.03. No Waiver; Remedies 43
Section 7.04. Hydrocarbon Proceeds 43
Section 7.05. Application of Proceeds After Acceleration 44


ARTICLE VIII THE AGENT 45
Section 8.01. Authorization and Action 45
Section 8.02. Reliance, Etc. 46
Section 8.03. BTCo and Affiliates 46
Section 8.04. Bank Credit Decision 47


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Section 8.05. Indemnification 47
Section 8.06. Employees of the Agent and the Issuing Bank 48
Section 8.07. Successor Agent 48
Section 8.08. Successor Co-Agent and Successor
Issuing Bank 49
Section 8.09. Notice of Default 50
Section 8.10. Execution of Loan Documents 50


ARTICLE IX MISCELLANEOUS 50
Section 9.01. Amendments, Etc. 50
Section 9.02. Participation Agreements and Assignments 51
Section 9.03. Notices 53
Section 9.04. Costs and Expenses 54
Section 9.05. Successors and Assigns 55
Section 9.06. Independence of Covenants 55
Section 9.07. Survival of Representations and Warranties 55
Section 9.08. Separability 55
Section 9.09. Captions 55
Section 9.10. Counterparts 55
Section 9.11. Governing Law 56
Section 9.12. Submission to Jurisdiction 56
Section 9.13. Limitation on Interest 56
Section 9.14. Indemnification 57
Section 9.15. Ratification of Security Documents 58
Section 9.16. Confidentiality 58
Section 9.17. Final Agreement of the Parties 59


Exhibits and Schedules


Exhibit 2.02(a) Form of Borrowing Request
Exhibit 2.02(c) Form of Conversion Notice
Exhibit 2.03 Form of Letter of Credit Request
Exhibit 2.05 Form of Revolving Note
Exhibit 9.02 Form of Assignment and Acceptance Agreement


Schedule 4.01 List of Borrower's Subsidiaries
Schedule 4.04 Consents
Schedule 4.07 Litigation
Schedule 4.13 Titles and Liens
Schedule 4.14 Gas Imbalances
Schedule 6.01 Indebtedness


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THIS AMENDED AND RESTATED CREDIT AGREEMENT dated as of November 14, 1996 is among ABRAXAS PETROLEUM CORPORATION, a Nevada corporation (the "Borrower"), the banks named on the signature pages hereto (together with their respective successors and assigns in such capacity, the "Banks"), and BANKERS TRUST COMPANY, as agent for the Banks (together with its successors and assigns in such capacity, the "Agent"), and as the issuing bank with respect to the Letters of Credit issued hereunder (together with its successors and assigns in such capacity, the "Issuing Bank"), and ING (U.S.) CAPITAL CORPORATION (formerly known as Internationale Nederlanden (U.S.) Capital Corporation), as co-agent for the Banks (together with its successors and assigns in such capacity, the "Co-Agent"). Unless otherwise defined herein, all capitalized terms used herein and defined in Article I are used herein as so defined.


PRELIMINARY STATEMENT


A. The Borrower, the Agent and the Banks entered into that certain Credit Agreement dated as of September 30, 1996 (the "Original Credit Agreement") whereby the Banks agreed to make certain loans to the Borrower.


B. Bankers Trust Company has assigned a portion of its rights and obligations under the Original Credit Agreement to Union Bank of California, N.A., pursuant to that certain Assignment and Acceptance dated November 13, 1996.


C. In connection with the consummation of the Bond Offering (as defined herein) the Borrower has paid contemporaneously with the effectiveness of this Agreement all amounts outstanding under the Original Credit Agreement.


D. The Borrower, the Agent and the Banks desire to amend and restate the Original Credit Agreement in its entirety, to provide for among other things, the modification, extension and renewal of the "Revolving Commitments" under the Original Credit Agreement, which are the Commitments referred to herein.


Accordingly, in consideration of the foregoing and the mutual covenants set forth herein, the parties agree that the Original Credit Agreement is hereby amended and restated in its entirety to read as follows:


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ARTICLE I
DEFINITIONS, ETC.


Section 1.01. Certain Defined Terms. Capitalized terms used in this Agreement and not otherwise defined herein, shall have the respective meanings set forth in Annex A hereto (such meanings to be equally applicable to both singular and plural forms of the terms defined).


Section 1.02. Accounting Terms. All accounting terms not specifically defined herein shall be construed in accordance with generally accepted accounting principles consistent with those applied in the preparation of the consolidated financial statements referred to in Section 4.06.


Section 1.03. Computation of Time Periods. In this Agreement in the computation of periods of time from a specified date to a later specified date, the word "from" means "from and including" and the words "to" and "until" each means "to but excluding."


Section 1.04. References, Etc. The words "hereof," "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. All references herein to Sections, Annexes, Exhibits and Schedules shall, unless the context requires a different construction, be deemed to be references to the Sections of this Agreement and the Annexes, Exhibits and Schedules attached hereto and made a part hereof. In this Agreement, unless a clear contrary intention appears the word "including" (and with correlative meaning "include") means including, without limiting the generality of any description preceding such term. No provision of this Agreement shall be interpreted or construed against any Person solely because that Person or its legal representative drafted such provision.


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ARTICLE II
COMMITMENTS AND TERMS OF CREDIT


Section 2.01. Commitments. (a) (i) Each Bank severally agrees, on the terms and conditions hereinafter set forth, to make one or more loans (the "Loans") to the Borrower from time to time on any Business Day during the period from the Effective Date up to, but excluding, the Maturity Date in an aggregate amount outstanding for such Bank not to exceed at any time an amount equal to such Bank's Commitment. Each Loan shall be made as either a Base Rate Loan or a Eurodollar Rate Loan and as part of a single Borrowing made on the same day by the Banks ratably according to their respective Commitment Percentages. Each Base Rate Borrowing shall be in an aggregate amount not less than $2,000,000, or, if less, the entire unfunded portion of the Total Commitment. Each Eurodollar Rate Borrowing shall be in an aggregate amount not less than $2,000,000 or an integral multiple of $1,000,000 in excess thereof. Within the limits set forth above and subject to the terms and conditions of this Agreement, the Borrower may borrow, repay pursuant to Section 2.07 or prepay pursuant to Section 2.09 and reborrow under this Section 2.01(a).


(ii) The Issuing Bank agrees, on the terms and conditions hereinafter set forth, to issue standby or commercial letters of credit for the account of the Borrower (the "Letters of Credit") from time to time on any one or more Business Days during the period from the Effective Date up to, but excluding, the ninetieth (90th) day preceding the Maturity Date in an aggregate amount for all Outstanding Letters of Credit not exceeding at any time the Letter of Credit Limit. Each Letter of Credit shall be denominated in Dollars, shall expire no later than the date set forth in Section 2.03(a), and shall be in such form as approved from time to time by the Issuing Bank and the Borrower. Each Bank severally agrees, on the terms and conditions hereinafter set forth, to purchase participations in the Letters of Credit issued by the Issuing Bank pursuant to this Agreement in an amount equal to such Bank's Commitment Percentage of the face amount of such Letter of Credit. Upon the issuance of each Letter of Credit, the Issuing Bank shall be deemed, without further action by any party hereto, to have sold to each Bank, and each Bank shall be deemed, without further action by any party hereto, to have purchased from the Issuing Bank, a participation, to the extent of such Bank's Commitment Percentage, in such Letter of Credit, the obligations of the Issuing Bank thereunder and in the reimbursement obligations of the Borrower due in respect of drawings made under such Letter of Credit. Subject to the terms of the Loan Documents, the Banks will execute any other documents the Issuing Bank may reasonably request to evidence the purchase of such participation. On each day during the period commencing with the issuance by the Issuing Bank of any Letter of Credit and ending on the date when such Letter of Credit shall have expired or been terminated, and, irrespective of whether such Letter of Credit has expired or terminated if such Letter of Credit has been drawn upon and the amount so drawn has not been reimbursed to the Issuing Bank, the Commitment of each Bank shall be deemed to be utilized for all purposes hereof in an amount equal to such Bank's Commitment Percentage of the Outstanding Letters of Credit.


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(iii) Notwithstanding any other term or provision hereof (A) no Loan shall be made and no Letter of Credit shall be issued if after giving effect to the making of such Loan or issuance of such Letter of Credit the aggregate amount of Credit Outstanding would exceed the Total Commitment and (B) no Letter of Credit shall be issued if after giving effect to the issuance of such Letter of Credit the aggregate amount of Outstanding Letters of Credit would exceed the Letter of Credit Limit.


(b) Loans of more than one Type may be outstanding at the same time, but the Borrower shall not be entitled to request any Borrowing or to Convert Loans comprising any Borrowing into Loans of another Type, if after giving effect to such Borrowing or Conversion, as the case may be, any Bank would have outstanding (i) at any one time more than four (4) different Types of Loans. Loans having different Interest Periods, regardless of whether they commence on the same date or have the same type of interest rate, shall be considered different Types of Loans; provided, however, that all Base Rate Loans are the same type of Loan so long as they remain Base Rate Loans.


Section 2.02. Borrowing Procedures; Conversions. (a) (i) Each Borrowing shall be made upon the written, telecopied or facsimile transmitted request of the Borrower, given to the Agent not later than 11:00 a.m. (New York time) on (A) the third Business Day prior to the proposed Borrowing Date in the case of a Eurodollar Rate Borrowing, or (B) the Business Day immediately preceding the proposed Borrowing Date in the case of a Base Rate Borrowing, and the Agent shall give each other member of the Bank Group prompt notice of such request by telecopier, telex or cable.


(ii) Each request for a Borrowing (a "Borrowing Request")
made by the Borrower shall be in substantially the form of Exhibit
2.02(a), specifying therein (A) the Borrowing Date for such Borrowing, (B)
the Type of Loans comprising such Borrowing, (C) the aggregate amount of
such Borrowing and (D) in the case of a Eurodollar Rate Borrowing, the
Interest Period for the Loans comprising such Borrowing. Each Bank shall,
before 12:00 Noon (New York time) on the date of such Borrowing, make
available for the account of its Applicable Lending Office to the Agent at
its address referred to in Section 9.03, in same day funds, such Bank's
ratable portion of such Borrowing. After the Agent's receipt of such funds
and upon fulfillment of the applicable conditions set forth in Article
III, the Agent will make such funds available to the Borrower at the
Agent's aforesaid address. Each Borrowing Request shall be irrevocable and
binding on the Borrower.


(b) Unless the Agent shall have received notice from a Bank prior to the date of any Borrowing that such Bank will not make available to the Agent such Bank's ratable portion of such Borrowing, the Agent may assume that such Bank has made such portion available to the Agent on the date of such Borrowing in accordance with subsection (a) of this Section 2.02 and the Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If and to the extent that such Bank shall not have


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so made such ratable portion available to the Agent, such Bank and the Borrower severally agree to repay to the Agent forthwith on demand such corresponding amount, together with interest thereon for each day from the date such amount is made available to the Borrower until the date such amount is repaid to the Agent at (i) in the case of the Borrower, the interest rate applicable at the time to the Loans comprising such Borrowing and (ii) in the case of such Bank, the Federal Funds Rate. If such Bank shall repay to the Agent such corresponding amount, such amount so repaid shall constitute such Bank's Loan as part of such Borrowing for purposes of this Agreement, and Borrower shall be relieved of Borrower's obligation to repay such amount under this Section 2.02(b). The failure of any Bank to make the Loan to be made by it as part of any Borrowing shall not relieve any other Bank of its obligation, if any, hereunder to make its Loan on the date of such Borrowing or any subsequent Borrowing Date, but no Bank shall be responsible for the failure of any other Bank to make the Loan to be made by such other Bank on the date of any Borrowing.


(c) The Borrower may, subject to the terms of this Agreement, on any Business Day, upon written, telecopied or facsimile transmitted notice to the Agent, given not later than 11:00 a.m. (New York time) on (i) the third Business Day prior to the proposed Conversion Date in the case of a Conversion of Loans into Eurodollar Rate Loans, or (ii) the Business Day immediately preceding the proposed Conversion Date in the case of a Conversion of Loans into Base Rate Loans, Convert Loans into Borrowings comprised of Loans of another Type, and the Agent shall promptly transmit the contents of such notice to each other member of the Bank Group by telecopier, telex or cable. Notwithstanding any other term or provision hereof, after giving effect to any such Conversion, the size of all Borrowings outstanding hereunder, and the number of different Types of Loans outstanding hereunder, shall conform to the requirements of Section 2.01. In the event of any Conversion of Eurodollar Rate Loans on any day other than the last day of the Interest Period applicable thereto, the Borrower shall be obligated to reimburse the Banks in respect thereof pursuant to Section 2.13. Each notice of a Conversion (a "Conversion Notice") given by the Borrower shall be in substantially the form of Exhibit 2.02(c) hereto, specifying therein (A) the Conversion Date for such Conversion, (B) the Loans to be Converted, (C) the Type of Loans to which such Loans are to be Converted and (D) in the case of a Conversion into Eurodollar Rate Loans, the Interest Period for such Converted Loans. If the Borrower shall fail to give a timely Conversion Notice conforming to the requirements of this Agreement with respect to any Eurodollar Rate Loans prior to the expiration of the Interest Period applicable thereto, such Eurodollar Rate Loans shall, automatically on the last day of such Interest Period, be Converted into Base Rate Loans.


Section 2.03. Issuing and Reimbursing the Letters of Credit. (a) Each Letter of Credit shall, subject to the terms of this Agreement, be issued upon the written or facsimile transmitted request (an original of which shall be immediately forwarded by overnight courier to the Issuing Bank) of the Borrower given to the Agent not later than 11:00 a.m. (New York time) on the third Business Day prior to the proposed date of issuance of such Letter of


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Credit. Each such request for a Letter of Credit (a "Letter of Credit Request") made by the Borrower shall be in substantially the form of Exhibit 2.03 hereto and shall specify the Business Day on which such Letter of Credit is to be issued, the beneficiary of such Letter of Credit, the amount of such Letter of Credit, the draw conditions applicable thereto and shall provide for an expiry date which is not later than thirty days prior to the Maturity Date.


(b) Upon satisfaction of the applicable terms and conditions set forth in Article III, the Issuing Bank shall issue such Letter of Credit to the specified beneficiary not later than the close of business (New York time) on the date so specified. The Issuing Bank shall provide each other member of the Bank Group with a copy of each Letter of Credit so issued, but any failure of the Issuing Bank to provide such Persons with a copy of such Letter of Credit shall not in any way affect the Borrower's obligation to reimburse the Issuing Bank for any amount paid by the Issuing Bank under any Letter of Credit or the Banks' obligation to reimburse the Issuing Bank for such amount, to the extent provided herein, in the event the Borrower fails to do so. Each such Letter of Credit shall (i) provide for the payment of drafts or other forms of payment to be presented for honor thereunder by the beneficiary in accordance with the terms thereon, at sight when accompanied by the documents described therein and (ii) be subject to the Uniform Customs and Practice for Documentary Credits (1993 Revision), International Chamber of Commerce Publication No. 500, (and any subsequent revisions thereof approved by a Congress of the International Chamber of Commerce and adhered to by the Issuing Bank) (the "UCP") and shall, as to matters not governed by the UCP, be governed by, and construed and interpreted in accordance with, the governing law specified in this Agreement.


(c) Upon presentment to the Issuing Bank of any draft for honor under any Letter of Credit by the beneficiary thereof and the determination by the Issuing Bank that such draft is in order, the Issuing Bank shall give prompt notice (a "Reimbursement Notice") to the Borrower of (i) the Letter of Credit to which such Reimbursement Notice relates, (ii) the amounts to be paid on account of such draft (the "Reimbursement Amount") and (iii) the date on which such amounts are to be paid (the "Reimbursement Date"), but any failure to so notify the Borrower shall not in any way affect the Borrower's obligations to reimburse the Issuing Bank for any amount paid by the Issuing Bank under any Letter of Credit.


(d) Upon receipt of any Reimbursement Notice, the Borrower shall reimburse the Issuing Bank by forthwith paying to the Agent for the benefit of the Issuing Bank (who shall promptly notify the Issuing Bank of such payment) no later than 10:00 a.m. (New York time) on the Reimbursement Date specified in such Reimbursement Notice an amount equal to the Reimbursement Amount specified in such Reimbursement Notice, and, if the Issuing Bank is not fully reimbursed by the Borrower on such Reimbursement Date, together with interest from such Reimbursement Date until such reimbursement is made by the Borrower at a fluctuating rate per annum equal to the lesser of (i) the Highest Lawful Rate and (ii) the Base Rate in effect during the time such reimbursement


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obligation remains unpaid plus the Applicable Margin for Base Rate Loans from such Reimbursement Date until the third day immediately following the delivery of such Reimbursement Notice by the Issuing Bank to Borrower and (B) thereafter, the Default Rate. To the extent availability may then exist, and upon compliance with the relevant terms and conditions of this Agreement, the Borrower may repay any or all of the obligations described in this paragraph by requesting a Borrowing and applying the proceeds thereof accordingly.


(e) If the Borrower shall fail to reimburse the Issuing Bank for any payment by the Issuing Bank under a Letter of Credit by 12:00 noon. (New York time) on the Reimbursement Date specified in the Reimbursement Notice related thereto, the Agent shall give prompt notice thereof to each other member of the Bank Group. Upon receipt of such notice, each Bank shall, notwithstanding any other provision of this Agreement (including the occurrence and continuance of a Default or an Event of Default), make available to the Agent for ...