PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT ("Agreement") dated as of September ___,
1996 by and among Abraxas Petroleum Corporation, a Nevada corporation
("Abraxas"), Acco, LLC, a Massachusetts limited liability company ("Acco"),
Massachusetts Bay Transportation Authority Retirement Fund ("MBTA"),
Metropolitan Life Insurance Company Separate Account No. 175 ("MetLife"), The
General Mills, Inc. Master Trust: Pooled Real Estate Fund ("General Mills" and,
together with MBTA and MetLife, the "SSR Investors") and State Street Research
Energy, Inc., a Massachusetts corporation ("State Street").
W I T N E S S E T H:
WHEREAS, Acco owns a 75% limited partnership interest (the "Interest") in
Portilla - 1996, L.P., a Texas limited partnership (the "Partnership");
WHEREAS, the SSR Investors are the holders of (i) promissory notes of the
Partnership dated March 20, 1996 and the date hereof in the aggregate principal
amount of $6,451,151.33 (the "Notes") and (ii) options to purchase overriding
royalty interests (the "ORI Options") in the Portilla Field, San Patricio
County, Texas ("Portilla"), and the Happy Field, Garza County, Texas ("Happy");
WHEREAS, Acco desires to sell the Interest, the SSR Investors desire to
sell the Notes and the ORI Options and Abraxas desires to purchase the
Interests, the Notes and the ORI Options;
NOW, THEREFORE, IT IS AGREED:
ARTICLE I
SALE OF INTEREST
1.01 Sale of Interest. Subject to the terms and conditions of this
Agreement, Acco and the SSR Investors (collectively, "Sellers") agree to sell,
assign, transfer and deliver to Abraxas on the Closing Date (as hereinafter
defined), and Abraxas agrees to purchase from Sellers on the Closing Date, the
Interest, the Notes and the ORI Options.
1.02 Consideration. In consideration for the purchase of the Interest, the
Notes and the ORI Options by Abraxas, at the Closing, the following payments
shall be made:
(a) Abraxas shall purchase the Interest from Acco in consideration
of the payment of $87,177.67 in cash by certified or bank cashier's check at the
Closing and the assumption by Abraxas of all of Acco's liabilities and
obligations pursuant to the loan made to Acco (the "Christiania Loan") pursuant
to that certain Credit Agreement dated as of March 20, 1996 (the "Credit
Agreement") by and between Acco and Christiania Bank og
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Kreditkasse ("Christiania") including, but not limited to, all of Acco's
obligations under the Loan Papers (as defined in the Credit Agreement) and under
Sections 7.15 and 8.13 of the Credit Agreement except as set forth in Section
9.01 hereof;
(b) Abraxas shall purchase that certain Promissory Note dated March
20, 1996 in the aggregate principal amount of $1,000,000 and payable to MBTA as
supplemented by that certain Promissory Note dated as of the date hereof in the
aggregate principal amount of $89,721.51 and payable to MBTA (together, the
"MBTA Note") in consideration of the payment of $1,089.721.51 to MBTA by
certified or bank cashier's check at the Closing;
(c) Abraxas shall purchase that certain Promissory Note dated March
20, 1996 in the aggregate principal amount of $3,920,000 and payable to MetLife
as supplemented by that certain Promissory Note dated as of the date hereof in
the aggregate principal amount of $351,708.31 and payable to MetLife (together,
the "MetLife Note") in consideration of the payment of $4,271,708.31 to MetLife
by certified or bank cashier's check at the Closing;
(d) Abraxas shall purchase that certain Promissory Note dated March
20, 1996 in the aggregate principal amount of $1,000,000 and payable to General
Mills as supplemented by that certain Promissory Note dated as of the date
hereof in the aggregate principal amount of $89,721.51 and payable to General
Mills (together, the "General Mills Note") in consideration of the payment of
$1,089,721.51 to General Mills by certified or bank cashier's check at the
Closing;
(e) Abraxas shall purchase all right, title and interest in and to
that certain Royalty Option dated March 20, 1996 in favor of MBTA (the "MBTA
Option") in consideration of the payment of $64,189.19 to MBTA in cash by
certified or bank cashier's check;
(f) Abraxas shall purchase all right, title and interest in and to
that certain Royalty Option dated March 20, 1996 in favor of MetLife (the
"MetLife Option") in consideration of the payment of $251,621.62 to MetLife in
cash by certified or bank cashier's check;
(g) Abraxas shall purchase all right, title and interest in and to
that certain Royalty Option dated March 20, 1996 in favor of General Mills (the
"General Mills Option") in consideration of the payment of $64,189.19 to General
Mills in cash by certified or bank cashier's check.
The amounts payable pursuant to paragraphs (e), (f) and (g) above shall be
reduced pro rata by the amount payable to State Street pursuant to Section 1.05
hereof.
In the event that the transactions contemplated by this Agreement have not
been consummated on or prior to October 20, 1996, in addition to the payments to
be made to the Sellers pursuant to this Section 1.02, Abraxas shall also pay
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interest to the Sellers at a rate of 10% per annum on the principal amount of
the Notes for the period from October 21, 1996 to the earlier of (i) the Closing
Date or (ii) December 31, 1996. Such interest shall be payable on the earlier of
(i) the Closing Date or (ii) January 15, 1997.
1.03 Further Assurances. Sellers agree that, from time to time, at
Abraxas' request and without further consideration, Sellers will execute and
deliver such additional instruments of transfer and take such other actions as
Abraxas may require to more effectively transfer ownership of the Interest, the
Notes and the ORI Options to Abraxas, as applicable.
1.04 Closing. The closing ("Closing") of the transactions contemplated
hereby shall take place at the offices of Cahill, Gordon & Reindel, 80 Pine
Street, New York, New York 10005 on the date that all of the conditions to
Closing set forth in Articles IV and V hereof have been satisfied or waived or
such other time and place as the parties hereto may agree. The date, as thus
determined, on which the Closing will be held is herein referred to as the
"Closing Date".
1.05 Termination of Advisory Agreement. At the Closing, the Advisory
Agreement between the Partnership and State Street shall be terminated, and
Abraxas shall pay State Street an amount equal to the expenses incurred by State
Street pursuant to Section 9.01.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLERS
Each of Acco, MBTA, MetLife, General Mills and State Street, severally for
itself, and not jointly and severally, represents, warrants and agrees, as
follows:
2.01 Ownership of Interest. (a) Acco is the lawful owner of the Interest,
free and clear of all liens, encumbrances, restrictions and claims of every kind
other than liens, encumbrances, restrictions and claims related to the
Christiania Loan. Acco has full legal right, power and authority to enter into
this Agreement and to sell, assign, transfer and convey the Interest pursuant to
this Agreement. The sale by Acco to Abraxas of the Interest pursuant to the
provisions of this Agreement will transfer to Abraxas good, valid and marketable
title thereto, free and clear of all liens, encumbrances, restrictions,
mortgages, pledges, charges or claims of every kind (collectively, "Liens").
(b) MBTA is the lawful owner of the MBTA Note and the MBTA Option, free
and clear of all liens, encumbrances, restrictions and claims of every kind.
MBTA has full legal right, power and authority to enter into this Agreement and
to sell, assign, transfer and convey the MBTA Note and the MBTA Option pursuant
to this Agreement. The sale by MBTA to Abraxas of the MBTA Note and the MBTA
Option pursuant to the provisions of this Agreement will transfer to Abraxas
good, valid and marketable title thereto, free and clear of all Liens.
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(c) MetLife is the lawful owner of the MetLife Note and the MetLife
Option, free and clear of all liens, encumbrances, restrictions and claims of
every kind. MetLife has full legal right, power and authority to enter into this
Agreement and to sell, assign, transfer and convey the MetLife Note and the
MetLife Option pursuant to this Agreement. The sale by MetLife to Abraxas of the
MetLife Note and the MetLife Option pursuant to the provisions of this Agreement
will transfer to Abraxas good, valid and marketable title thereto, free and
clear of all Liens.
(d) General Mills is the lawful owner of the General Mills Note and the
General Mills Option, free and clear of all liens, encumbrances, restrictions
and claims of every kind. General Mills has full legal right, power and
authority to enter into this Agreement and to sell, assign, transfer and convey
the General Mills Note and the General Mills Option pursuant to this Agreement.
The sale by General Mills to Abraxas of the General Mills Note and the General
Mills Option pursuant to the provisions of this Agreement will transfer to
Abraxas good, valid and marketable title thereto, free and clear of all Liens.
2.02 Power and Authority. Acco has the power and authority to make,
execute, deliver and perform this Agreement, and this Agreement has been duly
authorized and approved by all required action. State Street has the power and
authority to make, execute, deliver and perform this Agreement on behalf of each
of MBTA, MetLife and General Mills, and this Agreement has been duly authorized
and approved by all required action of each of MBTA, MetLife and General Mills.
2.03 Broker's or Finder's Fees. No agent, broker, person or firm acting on
behalf of the Sellers are, or will be, entitled to any commission or broker's or
finder's fees from any of the Sellers.
2.04 Receipt of Information. Acco and State Street (acting on its own
behalf and on behalf of the SSR Investors) acknowledge the receipt of a letter
dated July 15, 1996 from Abraxas relating to Portilla and copies of the reserve
report prepared by DeGoyler and MacNaughton relating to Portilla and Happy dated
June 30, 1996. Each of Acco and State Street (acting on its own behalf and on
behalf of the SSR Investors) has had the opportunity to review such information
and has had the opportunity to ask questions of and receive answers from Abraxas
concerning the Partnership, Portilla and Happy and the future plans and
prospects thereof. Each of Acco, MBTA, MetLife, General Mills and State Street
is an Accredited Investor (as defined in Rule 501 promulgated under the
Securities Act of 1933, as amended). Each of Acco and State Street (acting on
its own behalf and on behalf of the SSR Investors) has engaged such professional
advisers including, without limitation, legal, tax and petroleum engineering
advisers, as it deemed necessary in connection with the transactions
contemplated hereby.
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ARTICLE III
REPRESENTATIONS OF ABRAXAS
Abraxas represents, warrants and agrees as follows:
3.01 Existence and Good Standing of Abraxas. Abraxas is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Nevada.
3.02 Power and Authority. Abraxas has the corporate power and authority to
make, execute, deliver and perform this Agreement, and this Agreement has been
duly authorized and approved by all required corporate action of Abraxas.
3.03 Broker's or Finder's Fees. No agent, broker, person or firm acting on
behalf of Abraxas is, or will be, entitled to any commission or broker's or
finder's fees from Abraxas.
3.04 No Net Income. The Partnership has not had any net taxable income
since its inception.
ARTICLE IV
CONDITIONS TO ABRAXAS' OBLIGATIONS
All obligations of Abraxas to be discharged under this Agreement at the
Closing are subject to the fulfillment, prior to or at the Closing, of each of
the following conditions, unless waived in writing by Abraxas prior to or at the
Closing:
4.01 Truth of Representations and Warranties. The representations and
warranties of Acco, the SSR Investors and State Street contained in this
Agreement shall be true and correct on and as of the Closing Date with the same
effect as though such representations and warranties had been made on and as of
such date and Acco, the SSR Investors and State Street shall have each delivered
to Abraxas a certificate, dated the Closing Date, to such effect.
4.02 No Litigation Threatened. No action or proceedings shall have been
instituted or, to the best knowledge of Sellers, threatened before a court or
other government body or by any public authority to restrain or prohibit any of
the transactions contemplated hereby.
4.03 Proceedings. All proceedings to be taken in connection with the
transactions contemplated by this Agreement and all documents incident thereto
shall be reasonably satisfactory in form and substance to Abraxas, and Abraxas
shall have received copies of all such documents and other evidences as it or
its counsel may reasonably request in order to establish the consummation of
such transactions and the taking of all proceedings in connection therewith.
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4.04 Mutual Release. Sellers and Abraxas shall have executed and delivered
a Mutual Release in substantially the form of Exhibit "A" hereto (the
"Release").
4.05 Documents and Instruments. Sellers shall have executed such documents
and instruments as may be reasonably requested by Abraxas to effectively sell,
transfer, assign and convey the Interest, the Notes and the ORI Options to
Abraxas.
4.06 Financing. Abraxas shall have received financing on such terms and
conditions as may be reasonably satisfactory to Abraxas.
ARTICLE V
CONDITIONS TO SELLERS'S OBLIGATIONS
All obligations of Sellers to be discharged under this Agreement at the
Closing are subject to the fulfillment, prior to or at the Closing, of each of
the following conditions, unless waived in writing by Sellers prior to or at the
Closing:
5.01 Truth of Representations and Warranties. The representations and
warranties of Abraxas contained in this Agreement shall be true and correct on
and as of the Closing Date with the same effect as though such representations
and warranties had been made on and as of such date, and Abraxas shall have
delivered to Sellers a certificate, dated the Closing Date, to such effect.
5.02 No Litigation Threatened. No action or proceeding shall have been
instituted or, to the best knowledge of Abraxas, threatened before a court or
other government body or by any public authority to restrain or prohibit any of
the transactions contemplated hereby.
5.03 Proceedings. All proceedings to be taken in connection with the
transactions contemplated by this Agreement and all documents incident thereto,
shall be reasonably satisfactory in form and substance to Sellers and its
counsel, and Sellers shall have received copies of all such documents and other
evidences as it or its counsel may reasonably request in order to establish the
consummation of such transactions and the taking of all proceedings in
connection therewith.
5.04 Mutual Release. Sellers and Abraxas shall have executed and delivered
the Release.
5.05 Documents and Instruments. Abraxas shall have executed and delivered
such documents and instruments as may be reasonably requested by Acco to
effectuate the assumption of the Christiania Loan by Abraxas and, in the event
that Abraxas does not repay the Christiania Loan and assume all of Acco's
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obligations under the Loan Papers except as set forth in Section 9.01 hereof
substantially simultaneously with the consummation of the transactions
contemplated hereby, Abraxas shall have obtained the release of Acco by
Christiania.
ARTICLE VI
COVENANTS
6.01 Reasonable Efforts. Abraxas will use its reasonable efforts to obtain
the necessary financing through a private placement of debt securities to be
closed on or before September 30, 1996. If Abraxas is unable to complete the
offering by September 30, 1996, Abraxas agrees to continue to use its reasonable
efforts to pursue alternative financing arrangements and, in all events, will
attempt to complete the purchase of the Interest, the Notes and the ORI Options
no later than December 31, 1996.
6.02 Public Announcements. Upon execution and delivery of this Agreement,
Abraxas will issue a press release reasonably satisfactory to Abraxas and
Sellers. Otherwise, none of the parties hereto shall, prior to the Closing, make
any public announcement or disclosure relating to the transactions contemplated
hereby without the prior consent of each other party hereto; provided, however,
that each party shall consult with the other in advance of making any disclosure
required by law, but the agreement of the other parties hereto shall not be
required.
6.03 Pre-Closing Operations. Prior to the Closing, Abraxas will contribute
to the Partnership all monies necessary for the Partnership (a) to pay its
operating expenses and (b) to make the minimum distributions necessary for Acco
to make required payments on the Christiania Loan; provided, however, that
Abraxas shall not be obligated to make contributions pursuant to this Section
6.03 after December 31, 1996.
ARTICLE VII
TAX MATTERS, DISTRIBUTIONS AND ALLOCATIONS
7.01 Liquidation and/or Sale of Interest. For federal income tax purposes,
it is the intention of the parties that the purchase and sale of the Interest be
treated as a sale of Acco's interest in the Partnership pursuant to Sections 741
of Subchapter K of the Internal Revenue Code of 1986, as amended.
7.02 Allocations of Profits and Losses. Abraxas and Acco agree that Acco
shall be allocated its pro-rata share (in accordance with Acco's Capital
Percentage and Capital Ratio, as such terms are defined in the limited
partnership agreement of the Partnership) of the Partnership's cumulative
profits and/or losses for the portion of the 1996 taxable year that were
generated from March 20, 1996 to and including the Closing Date.
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7.03 Tax Returns and Information Statements. Abraxas shall be responsible
for the preparation and timely filing of the Partnerships income tax returns for
the 1996 calendar year including, but not limited to, any information statements
related to the sale and/or liquidation of the Interest. Abraxas agrees to
provide to Acco, in a timely fashion, any information reasonably requested by
Acco in order for Acco to accurately report and reflect the sale of the Interest
on Acco's 1996 income tax return including, but not limited to, the reporting of
Acco's proportionate share of profits and/or losses from the Partnership.
ARTICLE VIII
SURVIVAL OF REPRESENTATIONS; INDEMNITY;
LIMITATION OF LIABILITY
8.01 Survival of Representations. The representations and warranties of
each of the parties hereto contained in this Agreement shall survive the
purchase and sale of the Interest, the Notes and the ORI Options contemplated
hereby.
8.02 Indemnification by the Sellers and Management. Sellers agree
severally, and not jointly and severally, to indemnify and hold Abraxas, its
directors, officers, employees and agents harmless from damages, losses or
expenses (net of any insurance proceeds) (collectively, "Damages") suffered or
paid, directly or indirectly, by Abraxas as a result of any and all claims,
demands, suits, causes of action, proceedings, judgments and liabilities
(whether asserted directly or as a common law or statutory claim for
contribution or indemnity), including, without limitation, reasonable counsel
fees and costs incurred in litigation or otherwise, assessed, incurred or
sustained by or against any of them with respect to or arising out of the
failure of any representation or warranty made by Sellers in this Agreement to
be true and correct in all respects as of the date of this Agreement and as of
the Closing Date or the breach of any covenant made by the Sellers hereunder.
8.03 Indemnification by Abraxas. Abraxas agrees to indemnify and hold
Sellers harmless from Damages suffered or paid, directly or indirectly, as a
result of any and all claims, demands, suits, causes of action, proceedings,
judgments and liabilities, including reasonable counsel fees incurred in
litigation or otherwise, assessed, incurred or sustained by or against any of
them with respect to or arising out of the failure of any representation or
warranty made by Abraxas in this Agreement to be true and correct in all
respects as of the date of this Agreement and as of the Closing Date or the
breach of any covenant made by Abraxas hereunder.
8.04 Notice of Claim. If indemnification pursuant to Sections 8.02 or 8.03
is sought, the indemnified party shall give notice to the indemnifying party of
an event giving rise to the obligation to indemnify, allow the indemnifying
party to assume and conduct the defense of the claim or action with counsel
reasonably satisfactory to the indemnified party, and cooperate with the
indemnifying party in the defense thereof; provided, however, that the omission
to give such notice to the indemnifying party shall not relieve the indemnifying
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party from any liability which it may have to the indemnified party, except to
the extent that the indemnifying party is prejudiced by the failure to give such
notice. The indemnified party shall have the right to employ separate counsel to
represent the indemnified party if the indemnified party is advised by counsel
that a conflict of interest makes it advisable for the indemnified party to be
represented by separate counsel and the reasonable expenses and fees of such
separate counsel shall be paid by the indemnifying party. If the party obligated
to indemnify and hold the other harmless wrongfully refuses to assume the
defense of the party seeking indemnification, the party refusing to indemnify
shall be responsible, for all legal and other expenses incurred by the other
party in connection with the investigation or defense of such claim or action
including, without limitation, expenses incurred in enforcing such obligation to
indemnify.
ARTICLE IX
MISCELLANEOUS
9.01 Expenses. The parties hereto shall pay all of their own expenses
relating to the transactions contemplated by this Agreement, including, without
limitation, the fees and expenses of their respective counsel and financial
advisers; provided, however, Abraxas shall pay all filing and recording fees and
expenses in connection with the purchase and sale of the Interest, the Notes and
the ORI Options. Notwithstanding anything to the contrary set forth in this
Agreement, Acco shall be responsible for the fees and expenses, including fees
and expenses of counsel, of Christiania incurred in connection with the Credit
Agreement and the transactions contemplated hereby up to a maximum of $25,000;
provided, however, that if Christiania's fees and expenses exceed $25,000, the
parties hereto agree to negotiate in good faith regarding the payment of the
fees and expenses in excess of $25,000.
9.02 Governing Law. The interpretation and construction of this Agreement,
and all matters relating hereto, shall be governed by the laws of the State of
Texas.
9.03 Captions. The Article and Section captions used herein are for
reference purposes only, and shall not in any way affect the meaning or
interpretation of this Agreement.
9.04 Notices. Any notice or other communications required or permitted
hereunder shall be sufficiently given if delivered in person or sent by
registered or certified mail, postage prepaid, if to:
If to Abraxas:
Abraxas Petroleum Corporation
500 North Loop 1604 East, Suite 100
San Antonio, Texas 78232
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Attention: Robert L. G. Watson
With a copy to:
Cox & Smith Incorporated
112 E. Pecan Street, Suite 1800
San Antonio, Texas 78205
Attention: Steven R. Jacobs
If to Sellers:
State Street Research Energy, Inc.
One Financial Center
31st Floor
Boston, MA 02109
Attention: Tom Moore
With a copy to:
Mintz, Levin, Cohen, Ferris, Glovsky and Popeo, P.C.
One Financial Center
Boston, Massachusetts 02111
Attention: Thomas J. Kelly
and
Baker & Botts, L.L.P.
One Shell Plaza
910 Louisiana
Houston, Texas 77002-4995
Attention: Frank W. R. Hubert, Jr.
or such other address as shall be furnished in writing by any such party, and
such notice or communication shall be deemed to have been given as of the date
so delivered or mailed.
9.05 Parties in Interest. This Agreement may not be transferred, assigned,
pledged or hypothecated by any party hereto other than by operation of law. This
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective heirs, executors, administrators, successors and
assigns.
9.06 Counterparts. This Agreement may be executed in two or more
counterparts, all of which taken together shall constitute one instrument.
9.07 Entire Agreement. This Agreement, including the other documents
referred to herein which form a part hereof or any other written agreements that
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the parties enter into pursuant to or relating to the transactions contemplated
by this Agreement, contains the entire understanding of the parties hereto with
respect to the subject matter contained herein and therein. This Agreement
supersedes all prior agreements and understandings between the parties with
respect to such subject matter. All exhibits and schedules referred to herein
and attached hereto are incorporated herein by reference.
9.08 Amendments. This Agreement may not be changed orally, but only by an
agreement in writing signed by all of the parties hereto.
9.09 Severability. In case any provision in this Agreement shall be held
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions hereof will not in any way be affected or impaired
thereby.
9.10 Third Party Beneficiaries. Each party hereto intends that this
Agreement shall not benefit or create any right or cause of action in or on
behalf of any person other than the parties hereto.
9.11 Arbitration. The parties hereto agree that all disputes,
controversies or claims that may arise among them (including their agents and
employees) including, without limitation, any dispute, controversy or claim
arising out of or relating to this Agreement or any other agreement, or the
breach, termination or invalidity thereof, whether entered into or arising
prior, on or subsequent to the date hereof, shall be submitted to, and
determined by, binding arbitration. Such arbitration shall be conducted in
accordance with the terms of Section 12.9 of the Partnership Agreement of the
Partnership.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement to be
effective as of the day and year first above written.
ABRAXAS PETROLEUM CORPORATION
By:
Robert L. G. Watson,
Chairman of the Board, President
and Chief Executive Officer
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ACCO, LLC
By:
Title:
STATE STREET RESEARCH ENERGY, INC.,
Creditors Representative of Massachusetts
Bay Transportation Authority Retirement
Fund, Metropolitan Life Insurance Company
Separate Account No. 175 and The General
Mills, Inc. Master Trust: Pooled Real Estate
Fund
By:
Title:
STATE STREET RESEARCH ENERGY, INC.
By:
Title:
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