Exhibit 10.4

 

EXCO Resources, Inc.

12377 Merit Drive, Suite 1700

Dallas, TX 75251

 

March 28, 2007

 

Ares Corporate Opportunities Fund, L.P.

ACOF EXCO, L.P.

ACOF EXCO 892 Investors, L.P.

Ares Corporate Opportunities Fund II, L.P.

Ares EXCO, L.P.

Ares EXCO 892 Investors, L.P.

c/o Ares Management LLC

1999 Avenue of the Stars, Suite 1900

Los Angeles, California 90067

 

Re:                               Nomination of Designee to the Board of
Directors

 

Ladies and Gentlemen:

 

Reference is hereby made to that certain Preferred Stock Purchase Agreement (the
“Purchase Agreement”), dated as of the date hereof, by and among EXCO Resources,
Inc. (“EXCO”) and the Purchasers named therein. All capitalized terms used but
not otherwise defined herein shall have the respective meanings set forth in the
Purchase Agreement. For purposes of this letter, “Ares” means, collectively,
Ares Corporate Opportunities Fund, L.P. (“ACOF”), ACOF EXCO, L.P. (“ACOF EXCO”),
ACOF EXCO 892 Investors, L.P. (“ACOF 892”), Ares Corporate Opportunities Fund
II, L.P. (“ACOF II”),  Ares EXCO, L.P. (“Ares EXCO”), Ares EXCO 892 Investors,
L.P. (“Ares 892”) and any other investment fund or account, whether now in
existence or hereafter formed, which is managed or controlled by Ares Management
LLC (“Ares Management”) or any of its affiliates (as such term is defined in
Rule 12b-2 of the Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder), or of which Ares Management or any of its
affiliates is an advisor.

 

This is the letter referred to in Section 2.04(d) of the Purchase Agreement.
EXCO hereby agrees, subject to the fiduciary duties of its board of directors,
for the benefit of ACOF, ACOF EXCO, ACOF 892, ACOF II, Ares EXCO and Ares 892
that following such time when: (i) Ares ceases to have the right to elect a
director to serve on the Board of Directors pursuant to Section 5(c) of the
Series C 7.0% Preferred Statement of Designation and (ii) there ceases to be
twenty-five percent (25%) or more of the Initial Preferred Shares (as defined in
the Statements of Designation) outstanding, EXCO shall cause an individual
designated by ACOF II (or its designee) to be nominated for election to serve on
the Board of Directors at any annual meeting of the shareholders or special
meeting held to elect directors, for so long as Ares beneficially

 

--------------------------------------------------------------------------------

 

 

owns an aggregate of at least 10,000,000 shares of Common Stock (including,
without limitation, Common Stock issuable upon conversion or exchange of
Convertible Securities), subject to adjustment to reflect stock dividends, stock
splits, stock combinations and other similar events occurring after the date
hereof; provided, however, that ACOF II may assign the right to nominate an
individual to serve on the Board of Directors to (i) Ares or (ii) any other
investment fund or account, whether now in existence or hereafter formed, which
is managed or controlled by Ares Management or any of its affiliates. In no
respect shall this letter obligate EXCO or its directors to recommend that its
shareholders elect such individual or impair their power and ability to
recommend that its shareholders not elect such individual.

 

This letter is being executed in connection with the Purchase Agreement, and
Sections 7.01, 7.02, 7.06, 7.08 and 7.10 of the Purchase Agreement are
incorporated by reference herein. This letter shall be governed by, and
construed in accordance with, the laws of the State of Texas without regard to
principles of conflicts of law. The terms of this letter may not be amended,
modified or supplemented, and waivers or consents to departures from the terms
hereof may not be given, except by the written consent of all of the parties
hereto. This letter may be executed by the parties hereto in separate
counterparts, each of which when so executed and delivered shall be an original,
but all such counterparts together shall constitute one and the same instrument.

 

[Signature Page Follows]

 

2

--------------------------------------------------------------------------------

 

 

If the foregoing accurately sets forth our understanding, please acknowledge by
signing in the space provided below.

 

 

Sincerely,

 

 

 

 

EXCO RESOURCES, INC.

 

 

 

 

By:

/s/ J. Douglas Ramsey, PH.D.

 

 

 

Name: J. Douglas Ramsey, Ph.D.

 

 

Title: Vice President and Chief Financial Officer

 

SIGNATURE PAGE

SIDE LETTER

 

--------------------------------------------------------------------------------

 

 

AGREED TO AND ACCEPTED

as of the date set forth above

 

ARES CORPORATE OPPORTUNITIES FUND, L.P.

 

By:

ACOF Operating Manager, L.P.

Its:

Manager

 

 

 

By:

    /s/ Jeff Serota

 

 

Name:   Jeff Serota

 

Title:  Vice President

 

 

ACOF EXCO, L.P.

 

By:

ACOF Operating Manager, L.P.

Its:

Manager

 

 

 

By:

    /s/ Jeff Serota

 

 

Name:   Jeff Serota

 

Title:  Vice President

 

 

ACOF EXCO 892 INVESTORS, L.P.

 

By:

ACOF Operating Manager, L.P.

Its:

Manager

 

 

 

By:

    /s/ Jeff Serota

 

 

Name:   Jeff Serota

 

Title:  Vice President

 

 

ARES CORPORATE OPPORTUNITIES FUND II, L.P.

 

By:

ACOF Operating Manager II, L.P.

Its:

Manager

 

 

 

By:

    /s/ Jeff Serota

 

 

Name:   Jeff Serota

 

Title:  Vice President

 

SIGNATURE PAGE
SIDE LETTER

 

--------------------------------------------------------------------------------

 

ARES EXCO, L.P.

 

By:

ACOF Operating Manager II, L.P.

Its:

Manager

 

 

 

By:

    /s/ Jeff Serota

 

 

Name:   Jeff Serota

 

Title:  Vice President

 

 

 

ARES EXCO 892 INVESTORS, L.P.

 

By:

ACOF Operating Manager II, L.P.

Its:

Manager

 

 

 

By:

    /s/ Jeff Serota

 

 

Name:   Jeff Serota

 

Title:  Vice President

 

SIGNATURE PAGE
SIDE LETTER

 

--------------------------------------------------------------------------------