Document:

Exhibit
10.4

 

NONQUALIFIED STOCK OPTION
AGREEMENT

 

THE EXCO HOLDINGS INC.

2005 LONG-TERM INCENTIVE
PLAN

 

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

 

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 Awarded 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 Awarded 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 Awarded 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 Awarded 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 EXCO Holdings Inc. 2005 Long-Term Incentive Plan (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 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 and Callable Shares)
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 or Callable Shares 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 or Callable Shares used as
consideration therefor shall be subject to the same restrictions and provisions
as the Restricted Stock or Callable Shares 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.           Restrictions on Optioned
Shares.  The
Participant and any Optioned Shares he or she may acquire shall be subject to
and governed by the terms, provisions and restrictions set forth in that
certain (i) Stockholders’ Agreement (herein so called), dated as of October 3,
2005, among the Company and the Company stockholders signatory thereto, and (ii) Registration
Rights Agreement (herein so called), dated as of October 3, 2005, among
the Company and the Company stockholders signatory thereto.

 

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.           Community Property. 
Each spouse individually is bound by, and such spouse’s interest, if
any, in any Optioned Shares is subject to, the terms of this Agreement.  Nothing in this Agreement shall create a
community property interest where none otherwise exists.

 

15.           Dispute Resolution.

 

a.             Arbitration.           All disputes and controversies of every kind
and nature between any parties hereto arising out of or in connection with this
Agreement or the transactions described herein as to the construction,
validity, interpretation or meaning, performance, non-performance, enforcement,
operation or breach, shall be submitted to arbitration pursuant to the
following procedures:

 

i.              After a dispute or controversy arises, any
party may, in a written notice delivered to the other parties to the dispute,
demand such arbitration.  Such notice
shall designate the name of the arbitrator (who shall be an impartial person)
appointed by such party demanding arbitration, together with a statement of the
matter in controversy.

 

4

 

ii.             Within 30 days after receipt of such demand,
the other parties shall, in a written notice delivered to the first party, name
such parties’ arbitrator (who shall be an impartial person).  If such parties fail to name an arbitrator,
then the second arbitrator shall be named by the American Arbitration
Association (the “AAA”).  The two
arbitrators so selected shall name a third arbitrator (who shall be an impartial
person) within 30 days, or in lieu of such agreement on a third arbitrator by
the two arbitrators so appointed, the third arbitrator shall be appointed by
the AAA.  If any arbitrator appointed
hereunder shall die, resign, refuse or become unable to act before an
arbitration decision is rendered, then the vacancy shall be filled by the
method set forth in this Section for the original appointment of such
arbitrator.

 

iii.            Each party shall bear its own arbitration
costs and expenses.  The arbitration
hearing shall be held in Dallas, Texas at a location designated by a majority
of the arbitrators. The Commercial Arbitration Rules of the American
Arbitration Association shall be incorporated by reference at such hearing and
the substantive laws of the State of Texas (excluding conflict of laws
provisions) shall apply.

 

iv.            The arbitration hearing shall be concluded
within ten (10) days unless otherwise ordered by the arbitrators and the
written award thereon shall be made within fifteen (15) days after the close of
submission of evidence.  An award
rendered by a majority of the arbitrators appointed pursuant to this Agreement
shall be final and binding on all parties to the proceeding, shall resolve the
question of costs of the arbitrators and all related matters, and judgment on
such award may be entered and enforced by either party in any court of
competent jurisdiction.

 

v.             Except as set forth in Section 15.b.,
the parties stipulate that the provisions of this Section shall be a
complete defense to any suit, action or proceeding instituted in any federal,
state or local court or before any administrative tribunal with respect to any
controversy or dispute arising out of this Agreement or the transactions
described herein.  The arbitration
provisions hereof shall, with respect to such controversy or dispute, survive
the termination or expiration of this Agreement.

 

No party to an arbitration may disclose the existence or results of any
arbitration hereunder without the prior written consent of the other parties;
nor will any party to an arbitration disclose to any third party any
confidential information disclosed by any other party to an arbitration in the
course of an arbitration hereunder without the prior written consent of such
other party.

 

b.             Emergency Relief.  Notwithstanding anything in this
Section 15 to the contrary, any party may seek from a court any
provisional remedy that may be necessary to protect any rights or property of
such party pending the establishment of the arbitral tribunal or its
determination of the merits of the controversy or to enforce a party’s rights
under Section 15.

 

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 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.

 

5

 

17.           Investment
Representation. 
Unless the Common Stock is issued to him 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 him 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.           Legend.  The following legend shall
be placed on all certificates representing Optioned Shares:

 

On the face of
the certificate:

 

“Transfer of
this stock is restricted in accordance with conditions printed on the reverse
of this certificate.”

 

On the
reverse:

 

“The shares of
stock evidenced by this certificate are subject to and transferable only in
accordance with that certain EXCO Holdings Inc. 2005 Long-Term Incentive Plan,
a copy of which is on file at the principal office of the Company in Dallas,
Texas.  No transfer or pledge of the
shares evidenced hereby may be made except in accordance with and subject to
the provisions of said Plan.  By acceptance
of this certificate, any holder, transferee or pledge hereof agrees to be bound
by all of the provisions of said Plan.”

 

The following
legend shall be inserted on a certificate evidencing Common Stock issued under
the Plan if the shares were not issued in a transaction registered under the
applicable federal and state securities laws:

 

“Shares of
stock represented by this certificate have been acquired by the holder for
investment and not for resale, transfer or distribution, have been issued
pursuant to exemptions from the registration requirements of applicable state
and federal securities laws, and may not be offered for sale, sold or
transferred other than pursuant to effective registration under such laws, or
in transactions otherwise in compliance with such laws, and upon evidence
satisfactory to the Company of compliance with such laws, as to which the
Company may rely upon an opinion of counsel satisfactory to the Company.”

 

Any legend
required by any of the terms of the EXCO Holdings Inc. Stockholders’ Agreement
and the Registration Rights Agreement.

 

All Optioned
Shares and shares into which Optioned Shares may be converted owned by the
Participant shall be subject to the terms of this Agreement and shall be
represented by a certificate or certificates bearing the foregoing legend.

 

6

 

19.           Lock-up Agreement. 
The Participant agrees that in connection with any underwritten public
offering of Common Stock, including the Company’s initial public offering, the
Optioned Shares may not be sold, offered for sale, pledged or otherwise
disposed of or transferred except in accordance with the terms of the
Registration Rights Agreement.  In the
event of the declaration of a stock dividend, a spin-off, a stock split, an
adjustment in conversion ratio, a recapitalization or a similar transaction
affecting the Company’s outstanding securities without receipt of
consideration, any new, substituted or additional securities which are by
reason of such transaction distributed with respect to any Optioned Shares
subject to this Section 19 or into which such Optioned Shares
thereby become convertible shall immediately be subject to this Section 19.

 

20.           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.

 

21.           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).

 

22.           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.

 

23.           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.

 

24.           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.

 

25.           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.

 

7

 

26.           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.

 

27.           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.

 

28.           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.

 

29.           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.

 

30.           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 Holdings
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.

 

31.           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 availability, method, and timing for
filing an election to include income arising from this Agreement into the
Participant’s gross income under Section 83(b) of the Code, and the
tax consequences of such election.  By
execution of this Agreement, the Participant agrees that if the Participant
makes such an election, the Participant shall provide the Company with written
notice of such election in accordance with the regulations promulgated under
Code Section 83(b). The Company or, if applicable, any Subsidiary (for
purposes of this Section 31, 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

 

8

 

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, (B) Callable Shares,
or (C) 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 or Callable Shares, 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.

 

* * * * * * *
*

 

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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
  HOLDINGS INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:  Douglas H. Miller

  
	
   

  	
  Title:  Chairman and Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  PARTICIPANT:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Signature

  
	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Address:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
						

 

10Exhibit 10.5

 

RESTRICTED STOCK AWARD

 

EXCO HOLDINGS INC.

2005 LONG-TERM INCENTIVE
PLAN

 

1.             Award of Restricted Stock. Pursuant to the
EXCO Holdings Inc. 2005 Long-Term Incentive Plan (the “Plan”) for employees,
Consultants, and Outside Directors of EXCO Holdings Inc., a Delaware
corporation (the “Company”)
and its Subsidiaries,

 

 

(the “Participant”)

 

has been granted a Restricted Stock Award under the
Plan for                      
shares of Common Stock of the Company (the “Awarded Shares”).  The Date of Grant of this Restricted Stock
Award is                      ,
20    , and it shall be effective as of the date it is
signed and dated by both parties hereto [ or the later of the date the
agreement is signed and dated by both parties or                                    ].

 

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

 

3.             Vesting. Except as specifically provided in this Agreement and subject to certain
restrictions and conditions set forth in the Plan, the Restricted Stock awarded
shall be vested and exercisable as
follows:

 

a.                                  
percent (       %)
of the total Restricted 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.                                  
percent (       %) of the total Restricted
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                      
percent (     %) of the total Restricted 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                          
percent (     %) of the total Restricted 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 Restricted Shares shall be fully vested
automatically upon a Change in Control (as defined in Section 2.6
of the EXCO Holdings Inc. 2005 Long-Term Incentive Plan (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.

 

Except as otherwise provided in
this Section 3, the Participant shall immediately forfeit all
unvested Restricted Stock on the date of the Participant’s Termination of
Service for any reason prior to the time the Restricted Stock becomes vested in
accordance with this Section 3. 
Upon such forfeiture, the Company may, in its sole discretion in
accordance with Section 6.1 of the Plan, elect to, pay to the
Participant, as soon as practicable after the event causing forfeiture, in
cash, an amount equal to the lesser of the total consideration paid by the
Participant for such forfeited shares or the Fair Market Value of such
forfeited shares as of the date of Termination of Service, as the Committee, in
its sole discretion shall select.  Upon
any forfeiture, all rights of a Participant with respect to the forfeited
shares of Restricted Stock shall cease and terminate, without any further
obligation on the part of the Company.

 

Notwithstanding the foregoing, in the event that a Change in Control
occurs where the Participant is Involuntarily Terminated (as defined below)
upon or within one year after such Change in Control, all of the unvested
Awarded Shares shall be fully vested as of the date immediately preceding any
such Change in Control or Termination of Service without Cause.

 

For purposes of this Section 3, “Involuntary Termination” shall mean (i) without the Participant’s consent, a material reduction of or
variation in the Participant’s duties, authority or responsibilities relative
to the Participant’s duties, authority or responsibilities as in effect
immediately prior to such reduction or variation; (ii) without the
Participant’s consent, a material reduction in the base salary of the
Participant as in effect immediately prior to such reduction; (iii) without
the Participant’s consent, a material reduction by the Company in the kind or
level of employee benefits to which the Participant was entitled immediately
prior to such reduction, with the result that the Participant’s overall
benefits package is materially reduced; or (iv) without the Participant’s
consent, the relocation of the Participant to a facility or a location more
than fifty (50) miles from the Participant’s then present location.

 

For purposes of this Section 3, “Cause” means, with
respect to Participant (i) acts of fraud or dishonesty in the course of
his employment with or service to the Company or any of its Subsidiaries, (ii) substance
abuse causing harm to the Company or any of its Subsidiaries or impairing the
Participant’s performance of his regular duties, (iii) conviction of a
felony involving moral turpitude, or (iv) insubordination, dereliction of
duties, habitual absenteeism, materially deficient performance after (solely in
the case of this clause (iv)) notice to Participant and Participant’s failure
to correct same within the time period specified in the notice, which time
period shall be not less than 10 business days, or (v) any event described
as “cause” (or in any other term or phrase having similar import) in any
written employment agreement between the Option Holder and the Company (or any
Subsidiary).  A termination by the
Company of Participant’s employment with or services to the Company for any
reason other than as set forth in the above definition of Cause shall be
considered a termination without Cause.

 

4.             Restrictions on Transfer.  Subject to the provisions of the Plan and the
terms of this Agreement, the Participant shall not be permitted to sell,
transfer, pledge, assign or otherwise dispose of in any way shares of
Restricted Stock other than by will or the laws of decent and distribution
until the release of such Awarded Shares from these restrictions in accordance
with Section 10 of this Agreement.

 

2

 

5.             Repurchase Rights.  Notwithstanding any other provision of this
Agreement to the contrary, subject to Section 10 of this Agreement, the
Company shall have the right at any time upon written notice (“Repurchase Notice”)
to the Participant to purchase all of the Awarded Shares, including any
community property interest relating thereto, at a purchase price equal to the
Fair Market Value on the applicable date of the Repurchase Notice.  The Repurchase Notice shall be effective
immediately upon the giving of the Repurchase Notice.  The purchase price shall be paid in cash, and
such purchase shall take place at a Closing held within thirty (30) days after
the Repurchase Notice.

 

6.             Legend. 
The following legend shall be placed on all certificates representing
Awarded Shares (in addition to any legend required under applicable state
securities laws):

 

On the face of
the certificate:

 

“TRANSFER OF
THIS STOCK IS RESTRICTED IN ACCORDANCE WITH CONDITIONS PRINTED ON THE REVERSE
OF THIS CERTIFICATE.”

 

On the
reverse:

 

“THE SHARES
OF STOCK EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO AND TRANSFERABLE ONLY IN
ACCORDANCE WITH THAT CERTAIN EXCO HOLDINGS INC. 2005 LONG-TERM INCENTIVE PLAN,
A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY IN DALLAS,
TEXAS.  NO TRANSFER OR PLEDGE OF THE
SHARES EVIDENCED HEREBY MAY BE MADE EXCEPT IN ACCORDANCE WITH AND SUBJECT
TO THE PROVISIONS OF SAID PLAN.  BY
ACCEPTANCE OF THIS CERTIFICATE, ANY HOLDER, TRANSFEREE OR PLEDGEE HEREOF AGREES
TO BE BOUND BY ALL OF THE PROVISIONS OF SAID PLAN.”

 

 “THE SHARES
REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE, AND MAY NOT
BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL
REGISTERED UNDER SUCH ACT AND/OR APPLICABLE STATE SECURITIES LAWS, OR UNLESS
THE CORPORATION HAS RECEIVED AN OPINION OF COUNSEL OR OTHER EVIDENCE,
REASONABLY SATISFACTORY TO THE CORPORATION AND ITS COUNSEL, THAT SUCH
REGISTRATION IS NOT REQUIRED.”

 

Any Shares issued prior to the IPO shall
also carry the legend of and be subject to the terms of the EXCO Holdings Inc.
Stockholders Agreement and the Registration Rights Agreement.

 

All Awarded
Shares and Shares into which Awarded Shares may be converted owned by the
Participant shall be subject to the terms of this Agreement and shall be
represented by a certificate or certificates bearing the foregoing legend.

 

7.             Voting; Capital Adjustment(s); No Fractional Shares.  Subject to the terms and
conditions of this Agreement, Participant shall be entitled to vote Shares and
to receive any dividends or other distributions paid on the Shares.  The Shares shall be adjusted, if and as the
board of directors of the Company determines (at the option and in the sole and
absolute discretion of the board of directors of the Company) is appropriate,
to

 

3

 

reflect any
dividend, distribution, split, recapitalization, reclassification, exchange,
combination, or change in par value in, on, of, or with respect to all shares
of common stock of the Company or resulting from or in connection with any
recapitalization, reclassification, exchange, combination, merger,
reorganization, consolidation, liquidation, or other restructuring of or by the
Company; provided, however, that any fractional shares resulting
from such adjustment shall be eliminated. 
Any adjustments determined by the board of directors of the Company
shall be final, binding and conclusive. 
No fractional shares of capital stock shall be issued pursuant to this
Agreement.  The board of directors of the
Company may determine whether cash, other awards, or other property shall be
issued or paid in lieu of any fractional share(s) resulting from any
adjustment(s) or whether such fractional shares and/or any rights thereto shall
be forfeited or otherwise eliminated.

 

8.             Taxes; 83(b) Election.  The Participant shall be responsible and
liable for the payment of any and all taxes that become due as a result of this
Agreement, the grant or issuance of the Awarded Shares, or as a result of the
transfer or other disposition of the Awarded Shares.  The Company may, at the option and in the
sole and absolute discretion of the Company, no later than the date as of which
the value of any Awarded Shares first becomes includable in the gross income of
the Participant for federal, state, and/or local tax purposes, either withhold
amount(s), as appropriate, in connection with, or make arrangements with the
Participant regarding the payment of, any federal, state, and/or local taxes of
any kind required by law to be withheld with respect to the restricted stock
grant hereunder.  The Company shall, to
the extent permitted by law, have the right to deduct any such taxes from any
payment of any kind otherwise due to the Participant or require the Participant
to pay to the Company the amount of any such taxes.  If the Participant makes any election under Section 83(b) of
the Internal Revenue Code of 1986, as amended, with respect to the Awarded
Shares, the Participant shall immediately give notice to the Company of such
election.  The Participant shall be
solely responsible for making any such election and the Company shall not be
liable for any such election made or the failure to make such election.

 

9.             Notices. 
Any communication(s) to be given hereunder by either party to the other
shall be deemed to have been duly given if given in writing and personally
delivered or sent by mail, registered or certified, postage prepaid with return
receipt requested, or via fax as follows:

 

	
  Company:

  	
  EXCO
  Holdings Inc.

  	
  Participant:

  	
   

  	
   

  
	
   

  	
  Attn: Chief
  Financial Officer

  	
   

  	
   

  	
   

  
	
   

  	
  12377 Merit
  Drive, Suite 1700

  	
   

  	
   

  	
   

  
	
   

  	
  Dallas, TX
  75251

  	
   

  	
   

  	
   

  
	
   

  	
  Fax: (214)
  368-2087

  	
   

  	
  Fax:

  	
   

  	
   

  
						

 

Notices delivered personally shall be
deemed communicated as of actual receipt; mailed notices shall be deemed
communicated as of three (3) days after mailing.  A fax shall be deemed communicated on the
date it is actually received.

 

10.           Entire
Agreement; Modification.  This Agreement terminates, supersedes, and
replaces all prior written and oral agreements between the parties hereto with
respect to the subject matter of this Agreement and constitutes a complete and
exclusive statement of the terms of the agreement by and among the parties
hereto with respect to the subject matter of this Agreement.  This Agreement may not be amended, restated,
supplemented, or otherwise modified except by a written agreement executed by
any and all parties to be charged with or otherwise affected by any such
amendment.

 

11.           Assignments,
Successors, and No Third-Party Rights.  Neither
this Agreement nor any portion hereof may be assigned by the Participant
without the prior express written consent of the Company.  This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective heirs,
successors, and

 

4

 

permitted
assigns.  Nothing expressed or referred
to in this Agreement shall be construed to give any party other than the
parties to this Agreement any legal or equitable right, remedy, or claim under
or with respect to this Agreement or any provision of this Agreement.  This Agreement and all of its provisions and
conditions are for the sole and exclusive benefit of the parties to this
Agreement and the successors, heirs, personal representatives, and permitted
assigns of the parties hereto.  Neither
this Agreement nor any action taken hereunder shall (a) be construed as
giving the Participant any right(s) to remain in the employ of the Company or
any other employment right(s) or (b) interfere with or restrict in any way
the right of the Company to discharge the Participant as an employee at any
time.

 

12.           Jurisdiction;
Service of Process; Governing Law.  Any action or other proceeding seeking to
enforce any provision of, or based on any right arising out of, this Agreement
may be brought against any of the parties in the courts of the State of Texas
and each of the parties consents to the jurisdiction of such court(s) (and of
the appropriate appellate courts) in any such action or other proceeding and
waives any objection to venue laid therein. 
The validity, construction, interpretation, and effect of this Agreement
shall be exclusively governed by and determined in accordance with the laws of
the State of Texas without regard to conflict of laws principles.  The Company shall not be obligated to issue
any Awarded Shares to the Participant hereunder if the issuance of such Awarded
Shares may constitute a violation by the Company or the Participant of any
provision of any applicable law or regulation of any governmental authority.  The obligations and obligations of the
Company and the rights and obligations of the Participant are subject to all
applicable laws, rules, and regulations.

 

13.           Severability;
Reformation. 
In the event that any sentence, paragraph, provision, section, or article of
this Agreement is declared to be void by a court of competent jurisdiction,
such sentence, paragraph, provision, section, or article shall be deemed
severed from the remainder of this Agreement and the balance of this Agreement
shall remain in effect.  In the event any
court of competent jurisdiction holds any provision of this Agreement to be
invalid, unenforceable, and/or unreasonable as written, the court may reform
the Agreement to make it valid, enforceable, and reasonable and the Agreement
shall remain in full force and effect as reformed by the court.

 

14.           Fees
and Expenses. 
If any civil action, whether at law or in equity, is necessary to
enforce or interpret any of the terms of this Agreement, the prevailing party
shall be entitled to reasonable attorneys’ fees, court costs, and other
reasonable expenses of litigation, in addition to any other relief to which
such party may be entitled.

 

15.           Time
of the Essence. 
With regard to all dates and time periods set forth or referred to in
this Agreement, time is of the essence.

 

16.           Waiver.  Neither the failure to
exercise, nor any delay by any party in exercising, any right, power, or
privilege under this Agreement shall operate as a waiver of such right, power,
or privilege, and no single or partial exercise of any such right, power, or
privilege shall preclude any other or further exercise of such right, power, or
privilege or the exercise of any other right, power, or privilege.  To the maximum extent permitted by applicable
law, (a) no claim or right arising out of this Agreement may be discharged
by one (1) party, in whole or in part, by a waiver or renunciation of the
claim or right unless in writing signed by each other party hereto, (b) no
waiver that may be given by any party hereto shall be applicable except in the
specific instance when and for which such waiver is given, and (c) no
notice to or demand on one (1) party shall be deemed to be a waiver of any
obligation of such party or of the right of the party giving such notice or
demand to take further action without notice or demand as provided in this
Agreement.

 

17.           Section Headings;
Construction. 
The headings of Sections in this Agreement are provided for convenience
only and shall not affect the construction or interpretation of this
Agreement.  All references to

 

5

 

“Section” or “Sections”
refer to the corresponding Section or Sections of this Agreement.  All words used in this Agreement shall be
construed to be of such gender or number as the circumstances require.  Unless otherwise expressly provided, the word
“including” does not limit the preceding words or terms.

 

18.           Counterparts.  This Agreement may be
executed in one or more counterparts, each of which shall be deemed to be an
original copy of this Agreement and all of which, when taken together, shall be
deemed to constitute one (1) and the same agreement.

 

19.           Dispute
Resolution; Arbitration; Emergency Relief.  All
claims, disputes, and controversies of any kind, character, and nature between
any parties to this Agreement relating to or arising out of or in connection
with this Agreement or any transaction(s) contemplated by this Agreement as to
the construction, validity, interpretation, meaning, performance,
non-performance, enforcement, operation, or breach shall be submitted to
arbitration pursuant to the following procedures:

 

(a)           After a claim, dispute, or controversy arises, any such party may, in a
written notice delivered to the other party to this Agreement, demand such
arbitration and name the arbitrator (who shall be an impartial person)
appointed by the demanding party in such notice together with a statement of
the matter(s) claimed or in dispute or controversy.

 

(b)           Within thirty (30) calendar days after receipt of such demand, the other
party to this Agreement shall, in a written notice delivered to the demanding
party, name the arbitrator (who shall be an impartial person) appointed by the
receiving party.  If any party to this
Agreement fails to name and appoint an arbitrator, then the arbitrator of such
party shall be named and appointed by the American Arbitration Association (the
“AAA”).  The two arbitrators so appointed shall name
and appoint a third arbitrator (who shall be an impartial person) within thirty
(30) calendar days or, if the two arbitrators so appointed shall fail to name a
third arbitrator within such thirty (30) day period, the third arbitrator shall
be named and appointed by the AAA.  If
any arbitrator appointed hereunder shall die, resign, refuse, or become unable
to act before an arbitration decision is rendered, then the vacancy shall be
filled by the method set forth in this Section 16(b) for the original
appointment of such arbitrator.

 

(c)           Each party shall bear its own arbitration costs and expenses.  The arbitration hearing shall be held in
Dallas, Texas at a location designated by a majority of the arbitrators.  The Commercial Arbitration Rules of the
American Arbitration Association shall be incorporated by reference at such
hearing and the substantive laws of the State of Texas (without regard to conflict of laws principles) shall apply.

 

(d)           The arbitration hearing shall be concluded within ten (10) calendar
days unless otherwise ordered by the arbitrators and a written award thereon
shall be made within fifteen (15) calendar days after the close of submission
of evidence.  An award rendered by a
majority of the arbitrators appointed pursuant to this Agreement shall be final
and binding on all parties to the proceeding, shall resolve the question of costs
of the arbitrators and all related matters, and judgment on such award may be
entered and enforced by either party in any court of competent jurisdiction.

 

(e)           Except as set forth in Section 19(g), the parties to this
Agreement agree, intend, and expressly stipulate that the provisions of this Section 19
shall be a complete defense to any suit, action, or proceeding instituted in
any federal, state, or local court or before any administrative tribunal with
respect to any claim, controversy, or dispute relating to or arising out of or
in connection with this Agreement or any transaction(s) contemplated by this
Agreement.  The arbitration provisions of
this

 

6

 

Agreement shall, with respect to any such claim, controversy, or dispute,
survive the termination or expiration of this Agreement.

 

(f)            No party to an arbitration may disclose the existence or results of any
arbitration hereunder without the prior express written consent of the other
party to this Agreement nor shall any party to an arbitration disclose to any
third party any confidential information disclosed by any other party to such
arbitration in the course of an arbitration hereunder without the prior express
written consent of such other party.

 

(g)           Notwithstanding anything in this Section 19 to the contrary,
any party may seek from a court any provisional remedy that may be necessary to
protect any rights or property of such party pending the establishment of the
arbitral tribunal or its determination of the merits of the claim, controversy,
or dispute or to enforce the rights of such party under this Section 19.

 

IN WITNESS
WHEREOF, the undersigned parties have executed this Restricted Stock Grant
Agreement effective as of the day and year first above written.

 

	
   

  	
  COMPANY:

  
	
   

  	
   

  
	
   

  	
  EXCO
  HOLDINGS INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Douglas H.
  Miller

  
	
   

  	
  Title:

  	
  Chairman and
  Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  PARTICIPANT:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Signature

  
	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Address:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
							

 

7

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