Document:

Exhibit
10.29

 

FORM
OF

INCENTIVE
STOCK OPTION AGREEMENT

 

THE
EXCO HOLDINGS INC.

2004
LONG-TERM INCENTIVE PLAN

 

1.             Grant
of Option.  Pursuant to the EXCO
Holdings Inc. 2004 Long-Term Incentive Plan (the “Plan”) for key employees and
outside directors of EXCO Holdings Inc., a Delaware corporation (the
“Company”), the Company grants to

 

 

(the “Participant”),

 

who is an employee of the Company, an option to purchase shares of
Class A 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
                                   ,
200    .

 

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 Option shall be fully
vested and shall become exercisable on the earlier of (i) the third anniversary
of the Date of Grant, (ii)  immediately
prior to a Change in Control, or (iii) completion of an IPO; provided, however,
that 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
such date other than, as to this proviso, in respect of a Participant whose
Termination of Service was as a result of such Participant’s death or Total and
Permanent Disability; provided, further, the Option shall become fully vested
on the date of the Participant’s Termination of Service due to death or Total
and Permanent Disability, but shall only be exercisable upon the earlier to
occur of the events described in clauses (i), (ii) or (iii) of this Section
3 subject to prior forfeiture of the Option pursuant to Section 4
hereof.

 

 

4.             Term;
Forfeiture.

 

a.             Except as otherwise provided in this Agreement or as
otherwise determined by the Board, the unexercised portion of the Stock Option
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.            Immediately upon the Participant’s
Termination of Service by the Company for cause (as defined herein);

 

v.             Immediately upon the Participant’s
voluntary Termination of Services, without the consent of the Board;

 

vi.            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’s (a) failure to substantially perform his/her duties, provided
that the Participant shall (to the extent such failure is curable) have ten
(10) business days after receipt of notice from the Company or any of its Subsidiaries
in writing specifying such failure to cure the deficiency that would constitute
“cause”, (b) failure to follow the reasonable directions of the President and
Chief Executive Officer of the Company or any of its Subsidiaries or the Board
of the Company or any of its Subsidiaries, provided that the Participant shall
(to the extent such failure is curable) have ten (10) business days after
receipt of notice from the Company or any of its Subsidiaries in writing
specifying such failure to cure the deficiency that would constitute “cause”,
(c) willful acts of dishonesty, theft or fraud resulting or intending to result
in personal gain or enrichment at the expense of the Company or any of its
Subsidiaries, (d) commission of a felony, (e) engaging in any act that is
intended, or may reasonably be expected to materially harm the reputation,
business or operations of the Company or any of its Subsidiaries, or any member
of the Company’s Board or any of its Subsidiaries, or (f) material breach of
the Participant’s employment agreement or terms of employment.

 

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

 

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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: (but in each instance,
only if permitted by applicable law) 
(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 (as defined in the
Company’s Amended and Restated Certificate of Incorporation), (c) if the
Company has completed an IPO (as defined in the Company’s Amended and Restated
Certificate of Incorporation), 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.

 

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.

 

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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.           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 July 29, 2003,
among the Company and the Company stockholders signatory thereto, (ii) Stock
Repurchase Agreement (herein so called), dated as of July 29, 2003, among
the Company and the Company stockholders signatory thereto, and (iii)
Registration Rights Agreement (herein so called), dated as of July 29,
2003, among the Company and the Company stockholders signatory thereto.

 

14.           Call Rights Upon Termination of Employment. 
Notwithstanding any other provision of this Agreement to the contrary,
the Company (or the Investor Holders, as defined in the Stock Purchase
Agreement) shall have the right at any time on or after the Participant’s
Termination of Service, upon written notice (the “Call Notice”) to the
Participant, to purchase all of the Optioned Shares upon the terms and in
accordance with the Stock Repurchase Agreement, to which Participant has joined
contemporaneously with the execution of this Agreement.  Notwithstanding any provision of said Stock
Repurchase Agreement to the contrary, the Call Notice shall be effective as of
the earlier of (i) the date it is delivered to the Participant or, if mailed,
as of the date the Call Notice is postmarked, or (ii) the date which is ninety
(90) days after the latest Exercise Date for

 

4

 

such Optioned Shares.  Other than the effective date of the Call
Notice, all other provisions of said Stock Repurchase Agreement shall govern
the repurchase of Optioned Shares by the Company or the Investor Holders,
including any lapsing of the right of repurchase.

 

15.           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.

 

16.           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.

 

17.           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.

 

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 

 

5

 

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 17.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 17 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 17.

 

18.           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.

 

19.           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.

 

20.           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:

 

6

 

“The shares of stock evidenced by this certificate are subject to and
transferable only in accordance with that certain EXCO Holdings Inc. 2004
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, the Registration Rights Agreement or the Stock
Repurchase 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.

 

21.           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 21
or into which such Optioned Shares thereby become convertible shall immediately
be subject to this Section 21.

 

22.           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.

 

23.           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).

 

7

 

24.           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.

 

25.           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.

 

26.           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.

 

27.           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.

 

28.           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.

 

29.           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.

 

30.           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.

 

31.           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.

 

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32.           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.

 

33.           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 33,
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
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, 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:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  PARTICIPANT:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Signature

  
	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Address:

  	
   

  
	
   

  	
   

  	
   

  
							

 

10Exhibit 10.31

 

ADOPTED PLAN

 

EXCO
HOLDINGS INC.

 

EMPLOYEE
BONUS RETENTION PLAN

 

 

July 29,
2003

 

 

SECTION 1

General

 

1.1                                 Purpose. 
This EXCO Holdings Inc. Employee Bonus Retention Plan (the “Plan”) is
established by the Board of Directors (the “Board”) of EXCO Holdings Inc. (the
“Company”) to promote the long-term financial interests of the Company by
providing certain employees of the Company and its Affiliates (as such term is
defined in the Stockholders’ Agreement dated as of the date hereof among the Company
and the stockholders of the Company listed on the signature pages attached
thereto) with an incentive to remain employed with the Company and its
Affiliates so they can continue to actively perform their job functions and
duties with full attention and dedication.

 

1.2                                 Plan Administration.  The authority to control and manage the
operation and administration of the Plan shall be vested in the Board.

 

1.3                                 Action
by the Company.  Any action required
or permitted to be taken by the Company under the Plan shall be by resolution
of its Board or by writing of a duly authorized officer of the Company.

 

1.4                                 Effective Date of Plan.  This Plan shall become effective on the
“Closing Date,” as defined in the Merger Agreement, dated March 11, 2003,
by and among EXCO Resources, Inc., EXCO Holdings Inc. and ER Acquisition, Inc.

 

SECTION 2

Participation

 

2.1                                 Participation.  The individuals listed on Exhibit A are eligible to participate
in the Plan (“Participant”).

 

SECTION 3

Retention
Bonus

 

3.1                                 Entitlement to and Payment of Retention Bonus.  Subject to the terms of Section 4 and 5
of the Plan, a Participant shall receive the Retention Bonus (as defined in
Section 3.2 below) as follows:  (i)
6.25% of the Retention Bonus, less applicable federal, state and local withholdings,
paid in cash, in a lump sum payment, within five (5) days after each three
month anniversary of the Closing Date until the date that is the four year
anniversary of the Closing Date; provided, however, that the unpaid Retention
Bonus payments, less applicable federal, state and local withholdings, shall be
paid in cash, in a lump sum payment, to a Participant upon the occurrence of
any of the events described in subsections (i)-(iii) of the definition of
Change of Control set forth in the Stock Repurchase Agreement of even date
herewith by and among the Company and the persons listed on the signature pages
attached thereto.  Except as otherwise
set forth in Section 4.1 below, a Participant must be employed with the
Company or one of its Affiliates at the time each portion of the bonus payments
are made to receive the Retention Bonus.

 

 

3.2                                 Definition of Retention Bonus.  For purposes of this Plan, “Retention Bonus”
shall mean the amount listed on the Participation Agreement, attached hereto as
Exhibit B, for the Participant.

 

SECTION 4

Termination

 

4.1                                 Effect of Termination.  If a Participant terminates his/her
employment by voluntary resignation without Good Reason (as defined in
Section 4.3 below) or is terminated by the Company or any of its Affiliates
for Cause (as defined in Section 4.2 below), the Participant shall not be
entitled to receive any Retention Bonus payment or any portion thereof, not
already paid to the Participant as of the date of termination.  If a Participant terminates his/her
employment for Good Reason (as defined in Section 4.3 below), is
terminated by the Company or any of its Affiliates without Cause, or terminates
his/her employment as a result of death or Disability (as defined in
Section 4.4 below), the Participant shall continue to receive the unpaid
Retention Bonus payments in the manner set forth in Section 3.1, subject
to the terms of Section 5.

 

4.2                                 Cause. 
“Cause” shall mean the Participant’s (a) failure to substantially
perform his/her duties, provided that the Participant shall (to the extent such
failure is curable) have ten (10) business days after receipt of notice from
the Company or any of its Affiliates in writing specifying such failure to cure
the deficiency that would constitute “Cause”, (b) failure to follow the
reasonable directions of the President and Chief Executive Officer of the
Company or any of its Affiliates or the Board of the Company or any of its
Affiliates, provided that the Participant shall (to the extent such failure is
curable) have ten (10) business days after receipt of notice from the Company
or any of its Affiliates in writing specifying such failure to cure the
deficiency that would constitute “Cause”, (c) willful acts of dishonesty, theft
or fraud resulting or intending to result in personal gain or enrichment at the
expense of the Company or any of its Affiliates, (d) commission of a felony,
(e) engaging in any act that is intended, or may reasonably be expected to
materially harm the reputation, business or operations of the Company, any of
its Affiliates, or any member of the Company’s Board or any of its Affiliates
or (f) material breach of the Participant’s employment agreement or terms of
employment.

 

4.3                                 Termination for Good Reason.  “Good Reason” shall mean (1) a reduction in
base salary or any material agreed upon benefit without the Participant’s
consent; provided, that the Company or any of its Affiliates may at any time or
from time to time amend, modify, suspend or terminate any bonus, incentive
compensation or other benefit plan or program provided to the Participant for
any reason and without the Participant’s consent if such modification,
suspension or termination is consistent with modifications, suspensions or
terminations for other senior executive employees of the Company or any of its
Affiliates, (2) a material adverse reduction in the Participant’s
responsibilities, without his/her prior consent; provided, that,
a change in job title shall not be Good Reason and provided  further
that the Company or any of its Affiliates shall have thirty (30) days after
receipt of notice from the Participant to cure the deficiency that would result
in a termination with Good Reason or (3) relocation of Participant’s 

 

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principal place of employment outside of a 50 mile radius of its
location as of the effective date of the Plan set forth in Section 1.4
hereof.

 

4.4                                 Disability.  “Disability” shall mean a determination by the Company or any of
its Affiliates in accordance with applicable law that, as a result of a
physical or mental illness, the Participant is unable to perform the essential
functions of his or her job, with or without reasonable accommodation.

 

SECTION 5

Confidentiality and Non–Competition

 

5.1                                 Confidentiality and Non-Competition – General.  Any benefits payable under this Plan are
conditioned upon and subject to the terms of this Section 5.  To the extent that a Participant violates
any provision of this Section 5, the Company will have no further
obligation to provide any benefit or payment due hereunder, and will also have
any other remedies available to the Company for such violation including but
not limited to a preliminary injunction, temporary restraining order or other
equivalent relief.

 

5.2                                 Confidential Information.  The Participant agrees that:

 

(1)                                  Except as may be
required by law, by lawful judicial, governmental or regulatory authority, or
by lawful order of a court or agency of competent jurisdiction, or except to
the extent required to perform the Participant’s duties during the course of
his/her employment with the Company or any of its Affiliates, or to the extent
that the Participant has express written authorization from the Company, the
Participant at all times during and after employment with the Company or any of
its Affiliates (i) shall keep secret and confidential all Confidential
Information (as defined below), (ii) shall not disclose the same, either
directly or indirectly, to any other person, and (iii) shall not use it in any
way.

 

(2)                                  For purposes of this
Plan, the term “Confidential Information” means all non-public information
concerning the Company and its Affiliates that was acquired by or disclosed to
the Participant during the course of employment with the Company or any of its
Affiliates, or during the course of consultation with the Company or any of its
Affiliates following the Participant’s date of termination, including, without
limitation:

 

(i)                                     any non-public
information regarding the Company’s and its Affiliates’ customers, services,
processes, costs, operations and methods, whether past, current or planned, as
well as knowledge and data relating to business plans, marketing and sales
information originated, owned, controlled or possessed by the Company or its
Affiliates; and

 

3

 

(ii)                                  information regarding
litigation and pending litigation involving or affecting the Company or its
Affiliates.

 

(3)                                  To the extent that
the Participant obtains information on behalf of the Company or any of its
Affiliates that may be subject to attorney-client privilege as to the Company’s
or its Affiliates’ attorneys, the Participant shall take reasonable steps to
maintain the confidentiality of such information and to preserve such
privilege.

 

(4)                                  The Participant
agrees that effective with the date of termination, the Participant will
deliver to the Company all papers, books, manuals, lists, correspondence,
documents, computer programs, computer spreadsheets, data captured on
machine-readable media, and other material containing or relating to the
Confidential Information, together with all copies thereof, that are in the
Participant’s possession or control, other than such materials as shall be
necessary to permit the Participant to prepare the Participant’s tax returns.

 

(5)                                  Nothing in this
Section 5.2 shall be construed so as to prevent the Participant from
using, in connection with his/her employment for himself or an employer other
than the Company or any of its Affiliates, knowledge that was acquired by
Participant during the course of his/her employment with the Company and its
Affiliates, and which is generally known to persons of his/her experience in
other companies in the same industry.

 

5.3                                 Noncompetition and Nonsolicitation.  Each Participant who becomes eligible for a
Retention Bonus under this Plan agrees as further consideration for such
benefit and in consideration of the receipt of Confidential Information from
the Company or any of its Affiliates, for the longer of (i) one (1) year after
the date of termination, or (ii) the period during which the Participant
receives Retention Bonus payments under Section 4.1, the Participant shall
not (i) to the extent Participant is listed on Exhibit A-1 hereto, be employed
by, or otherwise engage or be interested in, any business which is competitive
with any business of the Company or of any of its Affiliates in which the
Participant was engaged during his/her employment prior to his/her termination,
(ii) solicit, directly or indirectly, any prospective acquisition target of the
Company or its Affiliates, the knowledge of which was acquired by Participant
during the course of his/her employment with the Company and its Affiliates,
for the purpose of acquiring such prospective acquisition target or otherwise
providing such target any services or products offered by or available from the
Company or its Affiliates; or (iii) employ or solicit, directly or indirectly,
for employment any person who is an employee of the Company or any of its
Affiliates or who was an employee of the Company or any of its Affiliates at
any time during the 12 month period immediately prior to any such solicitation
or employment.  Notwithstanding the
foregoing, it is understood that the Participant may beneficially own
securities in any corporation whose securities are 

 

4

 

publicly traded, provided that such ownership shall be less than two
(2%) percent of the equity securities of any such corporation.

 

SECTION 6

Amendment
or Termination

 

6.1                                 Amendment and Termination.  The Board may, from time to time, make
amendments to the Plan, and may terminate this Plan at any time; provided,
however that no such amendment shall have any adverse effect on the Retention
Bonus grants made as of the effective date of the Plan.

 

6.2                                 Successors.  The obligations of the Company under the Plan shall be binding
upon any assignee or successor in interest thereto.

 

SECTION 7

MISCELLANEOUS

 

7.1                                 Adjustment for Tax Effects.  If any payments or the value of any benefits
received or to be received by the Participant under this Plan, after taking
into account all other payments and all other benefits to which the Participant
is entitled, are subject to an excise tax under Section 4999 of the
Internal Revenue Code of 1986 (the “Code”) or any successor provision to that
Section, the payments and benefits to which the Participant is entitled under
this Plan shall be reduced to the extent required to avoid such excise
tax.  The Participant shall be entitled
to select the order in which payments are to be reduced in accordance with the
preceding sentence.

 

7.2                                 Mitigation and Set-Off.  No Participant shall be required to mitigate
the amount of any payment provided for in this Plan by seeking other employment
or otherwise.  The Company shall be
entitled to set off against the amounts payable to any Participant under this
Plan any amounts owed to the Company by the Participant, including, without
limitation, any amounts owed to the Company by the Participant under the terms
of any promissory note dated as of the date hereof executed by the Participant
but, subject to Section 5, above, shall not be entitled to set off against
the amounts payable to any Participant under this Plan any amounts earned by
the Participant in other employment after termination of the Participant’s
employment with the Company or any of its Affiliates, or any amount which might
have been earned by the Participant in other employment had he/she sought such
other employment.

 

7.3                                 Non-Alienation.  Participants shall not have any right to pledge, hypothecate,
anticipate or in any way create a lien upon any amounts provided under this
Plan; and no benefits payable hereunder shall be assignable in anticipation of
payment either by voluntary or involuntary acts or by operation of law.  Nothing in this Section shall limit a
Participant’s rights or powers to dispose of the Participant’s property by will
or limit any rights or powers which the Participant’s executor or administrator
would otherwise have.

 

5

 

7.4                                 Withholding.  All payments to a Participant under this Plan will be subject to
all applicable withholding of state, local, provincial and federal taxes.

 

7.5                                 Source of Payments.  The obligations of the Company under the
Plan are solely contractual, and any amount payable under the terms of the Plan
shall be paid from the general assets of the Company or from one or more
trusts, the assets of which are subject to the claims of the Company’s general
creditors.

 

7.6                                 Notices. 
Any notice or document required to be given under the Plan shall be
considered to be given if actually delivered or mailed by certified mail,
postage prepaid, if to the Company, to 6500 Greenville Avenue, Suite 600,
Dallas, TX 75206 or, if to a Participant, at the last address of such
Participant filed with the Company.

 

7.7                                 Gender and Number.  Where the context permits, words in any
gender shall include any other gender, words in the singular shall include the
plural, and the plural shall include the singular.

 

7.8                                 No Right to Employment or Continuation of
Relationship.  Nothing in
this Plan shall confer upon or be construed as giving any Participant any right
to remain in the employ of the Company or any of its Affiliates.  The Company or any of its Affiliates may, at
any time, dismiss a Participant from employment free from any liability or any
claim except as expressly provided in this Plan.  No employee of the Company or any of its Affiliates shall have
any claim to be designated a Participant and there is no obligation for
uniformity of treatment of any employee of the Company or any of its
Affiliates.

 

7.9                                 Governing Law.  EXCEPT AS TO MATTERS RELATING TO THE INTERNAL AFFAIRS OF THE
COMPANY WHICH SHALL BE GOVERNED BY THE DELAWARE GENERAL CORPORATION LAW, THE
VALIDITY, CONSTRUCTION AND EFFECT OF THIS PLAN AND ANY RULES AND REGULATIONS
RELATING TO THIS PLAN SHALL BE DETERMINED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES
THEREOF AND WILL, TO THE MAXIMUM EXTENT PRACTICABLE, BE DEEMED TO CALL FOR
PERFORMANCE IN THE CITY OF NEW YORK.

 

7.10                           Severability.  If any provision of this Plan is or becomes or is deemed to be
invalid, illegal or unenforceable in any jurisdiction or as to any individual
Participant, or would disqualify this Plan under any law deemed applicable by
the Board, such provision shall be construed or deemed amended to conform to
applicable law, or if it cannot be construed or deemed amended without, in the
sole determination of the Board, materially altering the intent of this Plan,
such provision shall be stricken as to such jurisdiction or Participant and the
remainder of this Plan shall remain in full force and effect.

 

6

 

7.11                           No Limitation Upon the Rights of the Company.  This Plan shall not affect in any way the
right or power of the Company to make adjustments, reclassifications, or
changes of its capital or business structure; to merge, convert or consolidate;
to dissolve or liquidate; or sell or transfer all or any part of its business
or assets.

 

7.12                           No Liability for Good Faith Determinations.  The members of the Board shall not be liable
for any action, failure to act, omission or determination taken or made in good
faith with respect to this Plan.  The
Board shall have the discretion, subject to the terms of Plan, to make
determinations and interpretations of the Plan which need not be the same with
respect to each Participant.

 

7

 

ADOPTED PLAN

 

EXHIBIT A

 

List of Participants

 

 

	
  Name of

  Participant

  
	
  Douglas H. Miller

  
	
  T.W. Eubank

  
	
  J. Douglas Ramsey

  
	
  Charles R. Evans

  
	
  J. David Choisser

  
	
  Richard E. Miller

  
	
  James M. Perkins

  
	
  Richard L. Hodges

  
	
  John Jacobi

  
	
  Daniel Johnson

  
	
  Harold L. Hickey

  
	
  Stephen E. Puckett

  
	
  Russell Romoser

  
	
  Laurel A. Cocharo

  
	
  Jimmie L.Pulis

  
	
  Scott Studdard

  
	
  Paul Rudnicki

  
	
  Gary Nelson

  
	
  Gary Parker

  
	
  Wayne Gifford

  

 

 

ADOPTED PLAN

 

EXHIBIT A-1

 

Douglas Miller

 

Ted Eubank

 

 

ADOPTED PLAN

 

EXHIBIT B

 

PARTICIPATION AGREEMENT

 

You have been designated by the Board of
Directors as a Participant in the Employee Bonus Retention Plan (the “Plan”)
with the following Retention Bonus:

 

Name of
Participant: 

Position: 

Retention
Bonus: 

 

Your participation in the Plan is subject to
and in accordance with the express terms and conditions of the Plan.  In consideration of receipt of amounts under
the Plan and receipt of confidential information from the Company, you agree to
be bound by the terms and conditions of the Plan, including, but not limited
to, the non-competition and non-solicitation provisions in Section 5.3 of
the Plan, and acknowledge that you have received a copy of the Plan.

 

You also hereby acknowledge and agree that to
the extent the Plan conflicts with any provision of your Participation
Agreement the Plan shall control.

 

Capitalized terms not defined in this
Participation Agreement will have the same meanings assigned to them in the
Plan.

 

Dated as of July 29, 2003.

 

 

	
   

  	
  EXCO HOLDINGS INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Douglas H. Miller, Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
  Participant:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Signature

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Printed Name

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