Document:

Exhibit 10.4

 

NONQUALIFIED STOCK OPTION
AGREEMENT

 

THE EXCO RESOURCES, INC.

2005 LONG-TERM INCENTIVE PLAN

 

1.             Grant
of Option. Pursuant to the EXCO Resources, Inc. 2005 Long-Term Incentive
Plan (the “Plan”) for key employees, consultants, and outside directors of EXCO
Resources, Inc., a Texas corporation (the “Company”), the Company grants to

 

 

                        

(the “Participant”),

 

an option to purchase shares of Common Stock, par value $.001 per share
(“Common Stock”), of the Company as follows:

 

On the date hereof, the Company grants to the
Participant an option (the “Option” or “Stock Option”) to purchase                                
(                    )
full shares (the “Optioned Shares”) of Common Stock at an Option Price equal to
$        per share (this amount must be equal to
or greater than the fair market value of the underlying Common Stock on the
date this Option is granted). The Date of Grant of this Stock Option is                        ,
20     .

 

The “Option Period” shall commence on the Date of Grant and shall
expire on the date immediately preceding the tenth (10th)
anniversary of the Date of Grant. The Stock Option is a Nonqualified Stock
Option. This Stock Option
is intended to comply with the provisions governing nonqualified stock options
under the final Treasury Regulations issued on April 17, 2007, in order to
exempt this Stock Option from application of 
Section 409A of the Code.

 

2.             Subject
to Plan. The Stock Option and its exercise are subject to the terms and
conditions of the Plan, and the terms of the Plan shall control to the extent
not otherwise inconsistent with the provisions of this Agreement. The
capitalized terms used herein that are defined in the Plan shall have the same
meanings assigned to them in the Plan. The Stock Option is subject to any rules
promulgated pursuant to the Plan by the Board or the Committee and communicated
to the Participant in writing. In addition, if the Plan previously has not been
approved by the Company’s stockholders, the Stock Option is granted subject to
such stockholder approval of the Plan.

 

3.             Vesting; Time of Exercise. Except as specifically provided in this
Agreement and subject to certain restrictions and conditions set forth in the
Plan, the Optioned Shares shall be vested 
and exercisable as follows:

 

a.             Twenty-five percent (25%) of the total
Optioned Shares shall be fully vested on the Date of Grant, provided the
Participant is employed by (or, if the Participant is a Consultant or an
Outside Director, is providing services to) the Company or a Subsidiary on that
date.

 

b.             Twenty-five percent (25%) of the total
Optioned Shares shall be fully vested on the first anniversary of the Date of Grant, provided the Participant
is employed by (or, if the Participant is a Consultant or an Outside Director,
is providing services to) the Company or a Subsidiary on that date.

 

 

c.             An additional twenty-five percent (25%)  of the total Optioned Shares shall be fully
vested on the second anniversary
of the Date of Grant, provided the Participant is employed by (or, if the
Participant is a Consultant or an Outside Director, is providing services to)
the Company or a Subsidiary on that date.

 

d.             An additional twenty-five percent (25%)  of the total Optioned Shares shall be shall
be fully vested on the third
anniversary of the Date of Grant, provided the Participant is employed by (or,
if the Participant is a Consultant or an Outside Director, is providing
services to) the Company or a Subsidiary on that date.

 

Notwithstanding the above, the Optioned
Shares shall be fully vested automatically upon a Change in Control (as defined
in Section 2.6 of the Plan) or upon the death of the Participant or the
Total and Permanent Disability (as defined in Section 2.41 of the Plan)
of the Participant, provided the Participant is still employed by the Company
as of the date of one of such specified events.

 

4.             Term;
Forfeiture.

 

a.             Except
as otherwise provided in this Agreement, the unexercised portion of the Stock
Option that relates to Optioned Shares which are vested will terminate and be
forfeited at the first of the following to occur:

 

i.              5 p.m. on the date
the Option Period terminates;

 

ii.             5 p.m. on the date
which is one hundred eighty (180) days following the date of the Participant’s
Termination of Service due to death or
Total and Permanent Disability;

 

iii.            5 p.m. on the date
which is ninety (90) days from the date of the Participant’s Retirement;

 

iv.            5 p.m. on the date of
the Participant’s Termination of Service by the Company for cause (as defined
herein);

 

v.             5 p.m. on the date which is thirty (30) days
following the date of the Participant’s Termination of Service for any reason
not otherwise specified in this Section 4.a.;

 

vi.            5 p.m. on the date the
Company causes any portion of the Option to be forfeited pursuant to Section 7
hereof;

 

vii.           For purposes hereof, “cause” shall mean that
the Participant shall have committed (i) an intentional material act of fraud
or embezzlement in connection with his duties in the course of his employment
with the Company; (ii) intentional wrongful material damage to property of the
Company; or (iii) intentional wrongful disclosure of material secret processes
or material confidential information of the Company. For the purposes of this
Agreement, no act, or failure to act, on the part of the Participant shall be
deemed “intentional” unless done, or omitted to be done, by the Participant not
in good faith and without reasonable belief that his action or omission was in
the best interest of the Company.

 

2

 

5.             Who
May Exercise. Subject to the terms and conditions set forth in Sections
3 and 4 above, during the lifetime of the Participant, the Stock Option may
be exercised only by the Participant, or by the Participant’s guardian or
personal or legal representative. If the Participant’s Termination of Service
is due to his death prior to the date specified in Section 4.a.i.
hereof, or Participant dies prior to the termination dates specified in Sections
4.a.i., ii., iii., iv., v. or vi. hereof, and the Participant has not
exercised the Stock Option as to the maximum number of vested Optioned Shares
as set forth in Section 3 hereof as of the date of death, the
following persons may exercise the exercisable portion of the Stock Option on
behalf of the Participant at any time prior to the earliest of the dates
specified in Section 4 hereof: 
the personal representative of his estate, or the person who acquired
the right to exercise the Stock Option by bequest or inheritance or by reason
of the death of the Participant; provided that the Stock Option shall remain
subject to the other terms of this Agreement, the Plan, and applicable laws,
rules, and regulations.

 

6.             No
Fractional Shares. The Stock Option may be exercised only with respect to
full shares, and no fractional share of stock shall be issued.

 

7.             Manner
of Exercise. Subject to such administrative regulations as the Committee
may from time to time adopt, the Stock Option may be exercised by the delivery
of written notice to the Committee setting forth the number of shares of Common
Stock with respect to which the Stock Option is to be exercised, the date of
exercise thereof (the “Exercise Date”) which shall be at least three (3) days
after giving such notice unless an earlier time shall have been mutually agreed
upon. On the Exercise Date, the Participant shall deliver to the Company
consideration with a value equal to the total Option Price of the shares to be
purchased, payable as follows:  (a) cash,
check, bank draft, or money order payable to the order of the Company, (b)
Common Stock (including Restricted Stock) owned by the Participant on the
Exercise Date, valued at its Fair Market Value on the Exercise Date, and which
the Participant has not acquired from the Company within six (6) months prior
to the Exercise Date; provided, that the six (6)-month holding requirement
shall only apply to a Reporting Participant at any time following an IPO, (c)
if the Company has completed an IPO, by delivery (including by FAX) to the
Company or its designated agent of an executed irrevocable option exercise form
together with irrevocable instructions from the Participant to a broker or
dealer, reasonably acceptable to the Company, to sell certain of the shares of
Common Stock purchased upon exercise of the Stock Option or to pledge such
shares as collateral for a loan and promptly deliver to the Company the amount
of sale or loan proceeds necessary to pay such purchase price, and/or (d) in
any other form of valid consideration that is acceptable to the Committee in
its sole discretion. In the event that
shares of Restricted Stock are tendered as consideration for the exercise of a
Stock Option, a number of shares of Common Stock issued upon the exercise of
the Stock Option equal to the number of shares of Restricted Stock used as
consideration therefor shall be subject to the same restrictions and provisions
as the Restricted Stock so tendered.

 

Upon payment of all amounts due from the Participant,
the Company shall cause certificates for the Optioned Shares then being
purchased to be delivered to the Participant (or the person exercising the
Participant’s Stock Option in the event of his death) at its principal business
office within ten (10) business days after the Exercise Date. The obligation of
the Company to deliver shares of Common Stock shall, however, be subject to the
condition that if at any time the Company shall determine in its discretion
that the listing, registration, or qualification of the Stock Option or the
Optioned Shares upon any securities exchange or under any state or federal law,
or the consent or approval of any governmental regulatory body, is necessary as
a condition of, or in connection with, the Stock Option or the issuance or
purchase of shares of Common Stock thereunder, then the Stock Option may not be
exercised in whole or in part unless such listing, registration, qualification,
consent, or approval shall have been effected or obtained free of any
conditions not reasonably acceptable to the Committee.

 

3

 

If the Participant fails to pay for any of the
Optioned Shares specified in such notice or fails to accept delivery thereof,
then the Stock Option, and right to purchase such Optioned Shares may be forfeited
by the Company.

 

8.             Nonassignability.
The Stock Option is not assignable or transferable by the Participant except by
will or by the laws of descent and distribution.

 

9.             Rights
as Stockholder. The Participant will have no rights as a stockholder with
respect to any shares covered by the Stock Option until the issuance of a
certificate or certificates to the Participant for the Optioned Shares. The
Optioned Shares shall be subject to the terms and conditions of this Agreement
regarding such Shares. Except as otherwise provided in Section 10
hereof, no adjustment shall be made for dividends or other rights for which the
record date is prior to the issuance of such certificate or certificates.

 

10.           Adjustment
of Number of Optioned Shares and Related Matters. The number of shares of
Common Stock covered by the Stock Option, and the Option Prices thereof, shall
be subject to adjustment in accordance with Articles 11 - 13 of the
Plan.

 

11.           Nonqualified
Stock Option. The Stock Option shall not be treated as an Incentive Stock
Option.

 

12.           [Reserved]

 

13.           Voting. The Participant, as record holder of some or all of the Optioned Shares
following exercise of this Stock Option, has the exclusive right to vote, or
consent with respect to, such Optioned Shares until such time as the Optioned
Shares are transferred in accordance with this Agreement; provided, however,
that this Section shall not create any voting right where the holders of such
Optioned Shares otherwise have no such right.

 

14.           Specific Performance. The parties acknowledge that remedies at
law will be inadequate remedies for breach of this Agreement and consequently
agree that this Agreement shall be enforceable by specific performance. The
remedy of specific performance shall be cumulative of all of the rights and
remedies at law or in equity of the parties under this Agreement.

 

15.           Participant’s
Representations. Notwithstanding any of the provisions hereof, the
Participant hereby agrees that he will not exercise the Stock Option granted
hereby, and that the Company will not be obligated to issue any shares to the
Participant hereunder, if the exercise thereof or the issuance of such shares
shall constitute a violation by the Participant or the Company of any provision
of any law or regulation of any governmental authority. Any determination in
this connection by the Company shall be final, binding, and conclusive. The
obligations of the Company and the rights of the Participant are subject to all
applicable laws, rules, and regulations.

 

16.           Investment
Representation. Unless the Common Stock is issued to the Participant in a
transaction registered under applicable federal and state securities laws, by
his execution hereof, the Participant represents and warrants to the Company
that all Common Stock which may be purchased hereunder will be acquired by the
Participant for investment purposes for his own account and not with any intent
for resale or distribution in violation of federal or state securities laws. Unless
the Common Stock is issued to the Participant in a transaction registered under
the applicable federal and state securities laws, all certificates issued with
respect to the Common Stock shall bear an appropriate restrictive investment
legend and shall be held indefinitely, unless they are subsequently registered
under the applicable federal and state securities laws

 

4

 

or the Participant
obtains an opinion of counsel, in form and substance satisfactory to the
Company and its counsel, that such registration is not required.

 

17.           Participant’s
Acknowledgments. The Participant acknowledges receipt of a copy of the
Plan, which is annexed hereto, and represents that he or she is familiar with
the terms and provisions thereof, and hereby accepts this Option subject to all
the terms and provisions thereof. The Participant hereby agrees to accept as
binding, conclusive, and final all decisions or interpretations of the
Committee or the Board, as appropriate, upon any questions arising under the
Plan or this Agreement.

 

18.           Law
Governing. This Agreement shall be governed by, construed, and enforced in
accordance with the laws of the State of Texas (excluding any conflict of laws rule or principle of Texas law that might refer the
governance, construction, or interpretation of this agreement to the laws of
another state).

 

19.           No
Right to Continue Service or Employment. Nothing herein shall be construed
to confer upon the Participant the right to continue in the employ or to
provide services to the Company or any Subsidiary, whether as an employee or as
a consultant or as an Outside Director, or interfere with or restrict in any
way the right of the Company or any Subsidiary to discharge the Participant as
an employee, consultant or Outside Director at any time.

 

20.           Legal
Construction. In the event that any one or more of the terms, provisions,
or agreements that are contained in this Agreement shall be held by a Court of
competent jurisdiction to be invalid, illegal, or unenforceable in any respect
for any reason, the invalid, illegal, or unenforceable term, provision, or
agreement shall not affect any other term, provision, or agreement that is
contained in this Agreement and this Agreement shall be construed in all
respects as if the invalid, illegal, or unenforceable term, provision, or
agreement had never been contained herein.

 

21.           Covenants
and Agreements as Independent Agreements. Each of the covenants and
agreements that is set forth in this Agreement shall be construed as a covenant
and agreement independent of any other provision of this Agreement. The
existence of any claim or cause of action of the Participant against the
Company, whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by the Company of the covenants and
agreements that are set forth in this Agreement.

 

22.           Entire
Agreement. This Agreement together with the Plan supersede any and all
other prior understandings and agreements, either oral or in writing, between
the parties with respect to the subject matter hereof and constitute the sole
and only agreements between the parties with respect to the said subject matter.
All prior negotiations and agreements between the parties with respect to the
subject matter hereof are merged into this Agreement. Each party to this
Agreement acknowledges that no representations, inducements, promises, or
agreements, orally or otherwise, have been made by any party or by anyone
acting on behalf of any party, which are not embodied in this Agreement or the
Plan and that any agreement, statement or promise that is not contained in this
Agreement or the Plan shall not be valid or binding or of any force or effect.

 

23.           Parties
Bound. The terms, provisions, and agreements that are contained in this
Agreement shall apply to, be binding upon, and inure to the benefit of the
parties and their respective heirs, executors, administrators, legal
representatives, and permitted successors and assigns, subject to the
limitation on assignment expressly set forth herein. No person or entity shall be permitted to acquire any Optioned Shares
without first executing and delivering an agreement in the form satisfactory to
the Company making such person or entity subject to the restrictions on
transfer contained herein.

 

5

 

24.           Modification.
No change or modification of this Agreement shall be valid or binding upon the
parties unless the change or modification is in writing and signed by the
parties. Notwithstanding the preceding sentence, the Company may amend the Plan
or revoke this Stock Option to the extent permitted by the Plan.

 

25.           Headings.
The headings that are used in this Agreement are used for reference and
convenience purposes only and do not constitute substantive matters to be
considered in construing the terms and provisions of this Agreement.

 

26.           Gender
and Number. Words of any gender used in this Agreement shall be held and
construed to include any other gender, and words in the singular number shall
be held to include the plural, and vice versa, unless the context requires
otherwise.

 

27.           Notice.
Any notice required or permitted to be delivered hereunder shall be deemed to
be delivered only when actually received by the Company or by the Participant,
as the case may be, at the addresses set forth below, or at such other
addresses as they have theretofore specified by written notice delivered in
accordance herewith:

 

a.             Notice to the Company
shall be addressed and delivered as follows:

 

EXCO Resources, Inc.

12377 Merit Dr., Suite 1700

Dallas, Texas 
75251

Attn:  Chief
Financial Officer

Facsimile: 
(214) 368-2087

 

b.             Notice to the
Participant shall be addressed and delivered as set forth on the signature
page.

 

28.           Tax
Requirements. The Participant is hereby advised to consult immediately with
his or her own tax advisor regarding the tax consequences of this Agreement, including,
without limitation, potential tax consequences to the  Participant under Section 409A of the Code. The
Company or, if applicable, any Subsidiary (for purposes of this Section 28,
the term “Company”
shall be deemed to include any applicable Subsidiary), shall have the right to
deduct from all amounts hereunder paid in cash or other form, any Federal,
state, local, or other taxes required by law to be withheld in connection with
this Award. The Company may, in its sole discretion, also require the
Participant receiving shares of Common Stock issued under the Plan to pay the
Company the amount of any taxes that the Company is required to withhold in
connection with the Participant’s income arising with respect to this Award. Such
payments shall be required to be made when requested by the Company and may be
required to be made prior to the delivery of any certificate representing
shares of Common Stock. Such payment may be made (i) by the delivery of cash to
the Company in an amount that equals or exceeds (to avoid the issuance of
fractional shares under (iii) below) the required tax withholding obligations
of the Company; (ii) if the Company, in its sole discretion, so consents in
writing, the actual delivery by the exercising Participant to the Company of
shares of Common Stock other than (A) Restricted Stock, or (B) Common Stock that the Participant
has not acquired from the Company within six (6) months prior to the date of
exercise, which shares so delivered have an aggregate Fair Market Value that
equals or exceeds (to avoid the issuance of fractional shares under (iii)
below) the required tax withholding payment; (iii) if the Company, in its sole
discretion, so consents in writing, the Company’s withholding of a number of
shares to be delivered upon the exercise of the Stock Option other than shares
that will constitute Restricted Stock, which shares so withheld have an
aggregate fair market value that equals (but does not exceed) the

 

6

 

required tax withholding
payment; or (iv) any combination of (i), (ii), or (iii). The Company may, in
its sole discretion, withhold any such taxes from any other cash remuneration
otherwise paid by the Company to the Participant.

 

* * * * * * * *

 

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IN WITNESS WHEREOF, the Company has caused this
Agreement to be executed by its duly authorized officer, and the Participant,
to evidence his consent and approval of all the terms hereof, has duly executed
this Agreement, as of the date specified in Section 1 hereof.

 

	
  

  	
  COMPANY:

  
	
   

  	
   

  
	
   

  	
  EXCO RESOURCES, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
   

  
	
   

  	
  Name: J. Douglas Ramsey, Ph.D.

  
	
   

  	
  Title: Vice President and Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  PARTICIPANT:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Signature

  
	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Address:

  	
   

  
	
   

  	
   

  	
   

  
					

 

8Exhibit 10.5

 

INCENTIVE STOCK OPTION AGREEMENT

 

THE EXCO RESOURCES, INC.

2005 LONG-TERM INCENTIVE PLAN

 

1.             Grant
of Option. Pursuant to the EXCO Resources, Inc. 2005 Long-Term Incentive
Plan (the “Plan”) for key employees of EXCO Resources, Inc., a Texas corporation
(the “Company”), the Company grants to

 

                                       

(the “Participant”),

 

who is an employee of the Company, an option to purchase shares of
Common Stock, par value $.001 per share (“Common Stock”), of the Company as follows:

 

On the date hereof, the Company grants to the
Participant an option (the “Option” or “Stock Option”) to purchase                               
(                       )
full shares (the “Optioned Shares”) of Common Stock at an Option Price equal to
$             
per share (being the Fair Market Value per share of the Common Stock on this
Date of Grant or 110% of such Fair Market Value, in the case of a ten percent
(10%) or more stockholder as provided in Code Section 422). The Date of Grant
of this Stock Option is                           ,
20        .

 

The “Option Period” shall commence on the Date of Grant and shall
expire on the date immediately preceding the tenth (10th)
anniversary of the Date of Grant (or the date immediately preceding the fifth
(5th) anniversary of the Date of Grant, in the case of a ten percent
(10%) or more stockholder as provided in Code Section 422). The Stock Option is
intended to be an Incentive Stock Option.

 

2.             Subject
to Plan. The Stock Option and its exercise are subject to the terms and
conditions of the Plan, and the terms of the Plan shall control to the extent
not otherwise inconsistent with the provisions of this Agreement. The
capitalized terms used herein that are defined in the Plan shall have the same
meanings assigned to them in the Plan. The Stock Option is subject to any rules
promulgated pursuant to the Plan by the Board or the Committee and communicated
to the Participant in writing. In
addition, if the Plan previously has not been approved by the Company’s
stockholders, the Stock Option is granted subject to such stockholder approval.

 

3.             Vesting; Time of Exercise. Except as specifically provided in this
Agreement and subject to certain restrictions and conditions set forth in the
Plan, the Optioned Shares shall be vested 
and exercisable as follows:

 

a.             Twenty-five percent (25%) of the total
Optioned Shares shall be fully vested on the Date of Grant, provided the
Participant is employed by the Company or a Subsidiary on that date.

 

b.             Twenty-five percent (25%) of the total
Optioned Shares shall be fully vested on the first anniversary of the Date of Grant, provided the Participant
is employed by the Company or a Subsidiary on that date.

 

c.             An additional twenty-five percent (25%)  of the total Optioned Shares shall be fully
vested on the second anniversary
of the Date of Grant, provided the Participant is employed by the Company or a
Subsidiary on that date.

 

 

d.             An additional twenty-five percent (25%)  of the total Optioned Shares shall be shall
be fully vested on the third
anniversary of the Date of Grant, provided the Participant is employed by the
Company or a Subsidiary on that date.

 

Notwithstanding the above, the Optioned
Shares shall be fully vested automatically upon a Change in Control (as defined
in Section 2.6 of the Plan) or upon the death of the Participant or the
Total and Permanent Disability (as defined in Section 2.41 of the Plan)
of the Participant, provided the Participant is still employed by the Company
as of the date of one of such specified events.

 

4.             Term;
Forfeiture.

 

a.             Except
as otherwise provided in this Agreement, the unexercised portion of the Stock
Option that relates to Optioned Shares which are vested will terminate and be
forfeited at the first of the following to occur:

 

i.              5 p.m. on the date
the Option Period terminates;

 

ii.             5 p.m. on the date
which is one hundred eighty (180) days following the date of the Participant’s
Termination of Service due to death or
Total and Permanent Disability;

 

iii.            5 p.m. on the date which
is ninety (90) days from the date of the Participant’s Retirement;

 

iv.            5 p.m. on the date of
the Participant’s Termination of Service by the Company for cause (as defined
herein);

 

v.             5 p.m. on the date which is thirty (30) days
following the date of the Participant’s Termination of Service for any reason
not otherwise specified in this Section 4.a.;

 

vi.            5 p.m. on the date the
Company causes any portion of the Option to be forfeited pursuant to Section 7
hereof.

 

vii.           For purposes hereof, “cause” shall mean that
the Participant shall have committed (i) an intentional material act of fraud
or embezzlement in connection with his duties in the course of his employment
with the Company; (ii) intentional wrongful material damage to property of the
Company; or (iii) intentional wrongful disclosure of material secret processes
or material confidential information of the Company. For the purposes of this
Agreement, no act, or failure to act, on the part of the Participant shall be
deemed “intentional” unless done, or omitted to be done, by the Participant not
in good faith and without reasonable belief that his action or omission was in
the best interest of the Company.

 

5.             Who
May Exercise. Subject to the terms and conditions set forth in Sections
3 and 4 above, during the lifetime of the Participant, the Stock Option may
be exercised only by the Participant, or by the Participant’s guardian or
personal or legal representative. If the Participant’s Termination of Service
is due to his death prior to the date specified in Section 4.a.i.
hereof, or Participant dies prior to the termination dates specified in Sections
4.a.i., ii., iii., iv., v. or vi. hereof, and the Participant has not
exercised the Stock Option as to the maximum number of vested Optioned Shares as
set forth in Section 3 hereof as of the date of death, the

 

2

 

following persons may
exercise the exercisable portion of the Stock Option on behalf of the
Participant at any time prior to the earliest of the dates specified in Section 4
hereof:  the personal representative of
his estate, or the person who acquired the right to exercise the Stock Option
by bequest or inheritance or by reason of the death of the Participant;
provided that the Stock Option shall remain subject to the other terms of this
Agreement, the Plan, and applicable laws, rules, and regulations.

 

6.             No
Fractional Shares. The Stock Option may be exercised only with respect to
full shares, and no fractional share of stock shall be issued.

 

7.             Manner
of Exercise. Subject to such administrative regulations as the Committee
may from time to time adopt, the Stock Option may be exercised by the delivery
of written notice to the Committee setting forth the number of shares of Common
Stock with respect to which the Stock Option is to be exercised, the date of
exercise thereof (the “Exercise Date”) which shall be at least three (3) days
after giving such notice unless an earlier time shall have been mutually agreed
upon, and whether the Optioned Shares to be exercised will be considered as
deemed granted under an Incentive Stock Option as provided in Section 11.
On the Exercise Date, the Participant shall deliver to the Company
consideration with a value equal to the total Option Price of the shares to be
purchased, payable as follows:  (a) cash,
check, bank draft, or money order payable to the order of the Company, (b)
Common Stock (including Restricted Stock) owned by the Participant on the
Exercise Date, valued at its Fair Market Value on the Exercise Date, and which
the Participant has not acquired from the Company within six (6) months prior
to the Exercise Date; provided, that the six (6)-month holding requirement
shall only apply to a Reporting Participant at any time following an IPO, (c)
if the Company has completed an IPO, by delivery (including by FAX) to the
Company or its designated agent of an executed irrevocable option exercise form
together with irrevocable instructions from the Participant to a broker or
dealer, reasonably acceptable to the Company, to sell certain of the shares of
Common Stock purchased upon exercise of the Stock Option or to pledge such
shares as collateral for a loan and promptly deliver to the Company the amount
of sale or loan proceeds necessary to pay such purchase price, and/or (d) in
any other form of valid consideration that is acceptable to the Committee in
its sole discretion. In the event that
shares of Restricted Stock are tendered as consideration for the exercise of a
Stock Option, a number of shares of Common Stock issued upon the exercise of
the Stock Option equal to the number of shares of Restricted Stock used as
consideration therefor shall be subject to the same restrictions and provisions
as the Restricted Stock so tendered.

 

Upon payment of all amounts due from the Participant,
the Company shall cause certificates for the Optioned Shares then being
purchased to be delivered to the Participant (or the person exercising the
Participant’s Stock Option in the event of his death) at its principal business
office within ten (10) business days after the Exercise Date. The obligation of
the Company to deliver shares of Common Stock shall, however, be subject to the
condition that if at any time the Company shall determine in its discretion
that the listing, registration, or qualification of the Stock Option or the
Optioned Shares upon any securities exchange or under any state or federal law,
or the consent or approval of any governmental regulatory body, is necessary as
a condition of, or in connection with, the Stock Option or the issuance or
purchase of shares of Common Stock thereunder, then the Stock Option may not be
exercised in whole or in part unless such listing, registration, qualification,
consent, or approval shall have been effected or obtained free of any
conditions not reasonably acceptable to the Committee.

 

If the Participant fails to pay for any of the
Optioned Shares specified in such notice or fails to accept delivery thereof,
then the Stock Option, and right to purchase such Optioned Shares may be
forfeited by the Company.

 

3

 

8.             Nonassignability.
The Stock Option is not assignable or transferable by the Participant except by
will or by the laws of descent and distribution.

 

9.             Rights
as Stockholder. The Participant will have no rights as a stockholder with
respect to any shares covered by the Stock Option until the issuance of a
certificate or certificates to the Participant for the Optioned Shares. The
Optioned Shares shall be subject to the terms and conditions of this Agreement
regarding such Optioned Shares. Except as otherwise provided in Section 10
hereof, no adjustment shall be made for dividends or other rights for which the
record date is prior to the issuance of such certificate or certificates.

 

10.           Adjustment
of Number of Optioned Shares and Related Matters. The number of shares of
Common Stock covered by the Stock Option, and the Option Prices thereof, shall
be subject to adjustment in accordance with Articles 11 - 13 of the
Plan.

 

11.           Incentive
Stock Option. Subject to the provisions of the Plan, this Stock Option is
an Incentive Stock Option. To the extent the number of Optioned Shares exceeds
the limit set forth in Section 6.3 of the Plan, such Optioned Shares
shall be deemed granted pursuant to a Nonqualified Stock Option. Unless
otherwise indicated by the Participant in the notice of exercise pursuant to Section
7, upon any exercise of this Stock Option, the number of exercised Optioned
Shares that shall be deemed to be exercised pursuant to an Incentive Stock
Option shall equal the total number of Optioned Shares so exercised multiplied
by a fraction, (i) the numerator of which is the number of unexercised Optioned
Shares that could then be exercised pursuant to an Incentive Stock Option and
(ii) the denominator of which is the then total number of unexercised Optioned
Shares.

 

12.           Disqualifying
Disposition. In the event that Common Stock acquired upon exercise of this
Stock Option is disposed of by the Participant in a “Disqualifying Disposition,”
such Participant shall notify the Company in writing within thirty (30) days
after such disposition of the date and terms of such disposition. For purposes
hereof, “Disqualifying Disposition” shall mean a disposition of Common Stock
that is acquired upon the exercise of this Stock Option (and that is not deemed
granted pursuant to a Nonqualified Stock Option under Section 11) prior
to the expiration of either two years from the Date of Grant of this Stock
Option or one year from the transfer of shares to the Participant pursuant to
the exercise of this Stock Option.

 

13.           [Reserved]

 

14.           Voting. The Participant, as record holder of some or all of the Optioned Shares
following exercise of this Stock Option, has the exclusive right to vote, or
consent with respect to, such Optioned Shares until such time as the Optioned
Shares are transferred in accordance with this Agreement; provided, however,
that this Section shall not create any voting right where the holders of such
Optioned Shares otherwise have no such right.

 

15.           Specific Performance. The parties acknowledge that remedies at
law will be inadequate remedies for breach of this Agreement and consequently
agree that this Agreement shall be enforceable by specific performance. The
remedy of specific performance shall be cumulative of all of the rights and
remedies at law or in equity of the parties under this Agreement.

 

16.           Participant’s
Representations. Notwithstanding any of the provisions hereof, the
Participant hereby agrees that he will not exercise the Stock Option granted
hereby, and that the Company will not be obligated to issue any shares to the
Participant hereunder, if the exercise thereof or the issuance of such shares
shall constitute a violation by the Participant or the Company of any provision
of any law or regulation of any

 

4

 

governmental authority. Any
determination in this connection by the Company shall be final, binding, and
conclusive. The obligations of the Company and the rights of the Participant
are subject to all applicable laws, rules, and regulations.

 

17.           Investment
Representation. Unless the Common Stock is issued to the Participant in a
transaction registered under applicable federal and state securities laws, by
his execution hereof, the Participant represents and warrants to the Company
that all Common Stock which may be purchased hereunder will be acquired by the
Participant for investment purposes for his own account and not with any intent
for resale or distribution in violation of federal or state securities laws. Unless
the Common Stock is issued to the Participant in a transaction registered under
the applicable federal and state securities laws, all certificates issued with
respect to the Common Stock shall bear an appropriate restrictive investment
legend and shall be held indefinitely, unless they are subsequently registered
under the applicable federal and state securities laws or the Participant
obtains an opinion of counsel, in form and substance satisfactory to the
Company and its counsel, that such registration is not required.

 

18.           Participant’s
Acknowledgments. The Participant acknowledges receipt of a copy of the
Plan, which is annexed hereto, and represents that he or she is familiar with
the terms and provisions thereof, and hereby accepts this Option subject to all
the terms and provisions thereof. The Participant hereby agrees to accept as
binding, conclusive, and final all decisions or interpretations of the
Committee or the Board, as appropriate, upon any questions arising under the
Plan or this Agreement.

 

19.           Law
Governing. This Agreement shall be governed by, construed, and enforced in
accordance with the laws of the State of Texas (excluding any conflict of laws rule or principle of Texas law that might refer the
governance, construction, or interpretation of this agreement to the laws of
another state).

 

20.           No
Right to Continue Service or Employment. Nothing herein shall be construed
to confer upon the Participant the right to continue in the employ or to
provide services to the Company or any Subsidiary, whether as an employee or as
a consultant or as an Outside Director, or interfere with or restrict in any
way the right of the Company or any Subsidiary to discharge the Participant as an
employee, consultant or Outside Director at any time.

 

21.           Legal
Construction. In the event that any one or more of the terms, provisions,
or agreements that are contained in this Agreement shall be held by a Court of
competent jurisdiction to be invalid, illegal, or unenforceable in any respect
for any reason, the invalid, illegal, or unenforceable term, provision, or
agreement shall not affect any other term, provision, or agreement that is
contained in this Agreement and this Agreement shall be construed in all
respects as if the invalid, illegal, or unenforceable term, provision, or
agreement had never been contained herein.

 

22.           Covenants
and Agreements as Independent Agreements. Each of the covenants and
agreements that is set forth in this Agreement shall be construed as a covenant
and agreement independent of any other provision of this Agreement. The
existence of any claim or cause of action of the Participant against the
Company, whether predicated on this Agreement or otherwise, shall not constitute
a defense to the enforcement by the Company of the covenants and agreements
that are set forth in this Agreement.

 

23.           Entire
Agreement. This Agreement together with the Plan supersede any and all
other prior understandings and agreements, either oral or in writing, between
the parties with respect to the subject matter hereof and constitute the sole
and only agreements between the parties with respect to the said subject matter.
All prior negotiations and agreements between the parties with respect to the
subject matter hereof are merged into this Agreement. Each party to this
Agreement acknowledges that no representations, inducements,

 

5

 

promises, or agreements,
orally or otherwise, have been made by any party or by anyone acting on behalf
of any party, which are not embodied in this Agreement or the Plan and that any
agreement, statement or promise that is not contained in this Agreement or the
Plan shall not be valid or binding or of any force or effect.

 

24.           Parties
Bound. The terms, provisions, and agreements that are contained in this
Agreement shall apply to, be binding upon, and inure to the benefit of the
parties and their respective heirs, executors, administrators, legal
representatives, and permitted successors and assigns, subject to the
limitation on assignment expressly set forth herein. No person or entity shall be permitted to acquire any Optioned Shares
without first executing and delivering an agreement in the form satisfactory to
the Company making such person or entity subject to the restrictions on
transfer contained herein.

 

25.           Modification.
No change or modification of this Agreement shall be valid or binding upon the
parties unless the change or modification is in writing and signed by the
parties. Notwithstanding the preceding sentence, the Company may amend the Plan
or revoke this Stock Option to the extent permitted by the Plan.

 

26.           Headings.
The headings that are used in this Agreement are used for reference and
convenience purposes only and do not constitute substantive matters to be
considered in construing the terms and provisions of this Agreement.

 

27.           Gender
and Number. Words of any gender used in this Agreement shall be held and
construed to include any other gender, and words in the singular number shall
be held to include the plural, and vice versa, unless the context requires
otherwise.

 

28.           Notice.
Any notice required or permitted to be delivered hereunder shall be deemed to
be delivered only when actually received by the Company or by the Participant,
as the case may be, at the addresses set forth below, or at such other
addresses as they have theretofore specified by written notice delivered in
accordance herewith:

 

a.             Notice to the Company
shall be addressed and delivered as follows:

 

EXCO Resources, Inc.

12377 Merit Dr., Suite 1700

Dallas, Texas 75251

Attn:  Chief
Financial Officer

Facsimile: 
(214) 368-2087

 

b.             Notice to the
Participant shall be addressed and delivered as set forth on the signature
page.

 

29.           Tax
Requirements. The Participant is hereby advised to consult immediately with
his or her own tax advisor regarding the tax consequences of this Agreement. The
Company or, if applicable, any Subsidiary (for purposes of this Section 29,
the term “Company”
shall be deemed to include any applicable Subsidiary), shall have the right to
deduct from all amounts hereunder paid in cash or other form, any Federal,
state, local, or other taxes required by law to be withheld in connection with
this Award. The Company may, in its sole discretion, also require the
Participant receiving shares of Common Stock issued under the Plan to pay the
Company the amount of any taxes that the Company is required to withhold in
connection with the Participant’s income arising with respect to this Award. Such
payments shall be required to be made when requested by the Company and may be
required to be made prior to the delivery of any certificate representing

 

6

 

shares of Common Stock. Such
payment may be made (i) by the delivery of cash to the Company in an amount
that equals or exceeds (to avoid the issuance of fractional shares under (iii)
below) the required tax withholding obligations of the Company; (ii) if the
Company, in its sole discretion, so consents in writing, the actual delivery by
the exercising Participant to the Company of shares of Common Stock other than
(A) Restricted Stock, or (B) Common
Stock that the Participant has not acquired from the Company within six (6)
months prior to the date of exercise, which shares so delivered have an
aggregate Fair Market Value that equals or exceeds (to avoid the issuance of
fractional shares under (iii) below) the required tax withholding payment;
(iii) if the Company, in its sole discretion, so consents in writing, the
Company’s withholding of a number of shares to be delivered upon the exercise
of the Stock Option other than shares that will constitute Restricted Stock,
which shares so withheld have an aggregate fair market value that equals (but
does not exceed) the required tax withholding payment; or (iv) any combination
of (i), (ii), or (iii). The Company may, in its sole discretion, withhold any
such taxes from any other cash remuneration otherwise paid by the Company to
the Participant.

 

* * * * * * * *

 

7

 

IN WITNESS WHEREOF, the Company has caused this
Agreement to be executed by its duly authorized officer, and the Participant,
to evidence his consent and approval of all the terms hereof, has duly executed
this Agreement, as of the date specified in Section 1 hereof.

 

	
   

  	
  COMPANY:

  
	
   

  	
   

  
	
   

  	
  EXCO RESOURCES, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name: J. Douglas Ramsey

  
	
   

  	
  Title: Vice President and Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  PARTICIPANT:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Signature

  
	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Address:

  	
   

  
	
   

  	
   

  	
   

  
					

 

8

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