Exhibit 10.4
NONQUALIFIED STOCK OPTION
AGREEMENT
THE
EXCO RESOURCES, INC.
2005
LONG-TERM INCENTIVE PLAN
1.
Grant of Option . Pursuant to the EXCO Resources, Inc. 2005
Long-Term Incentive Plan (the “Plan”) for key
employees, consultants, and outside directors of EXCO Resources,
Inc., a Texas corporation (the “Company”), the Company
grants to
(the
“Participant”),
an option to purchase
shares of Common Stock, par value $.001 per share (“Common
Stock”), of the Company as follows:
On the date hereof, the
Company grants to the Participant an option (the
“Option” or “Stock Option”) to purchase
( )
full shares (the “Optioned Shares”) of Common Stock at
an Option Price equal to $ per
share (this amount must be equal to or greater than the fair market
value of the underlying Common Stock on the date this Option is
granted). The Date of Grant of this Stock Option is
,
20 .
The “Option
Period” shall commence on the Date of Grant and shall expire
on the date immediately preceding the tenth (10 th )
anniversary of the Date of Grant. The Stock Option is a
Nonqualified Stock Option. This Stock Option is intended to
comply with the provisions governing nonqualified stock options
under the final Treasury Regulations issued on April 17, 2007, in
order to exempt this Stock Option from application of Section
409A of the Code.
2.
Subject to Plan . The Stock Option and its exercise are
subject to the terms and conditions of the Plan, and the terms of
the Plan shall control to the extent not otherwise inconsistent
with the provisions of this Agreement. The capitalized terms used
herein that are defined in the Plan shall have the same meanings
assigned to them in the Plan. The Stock Option is subject to any
rules promulgated pursuant to the Plan by the Board or the
Committee and communicated to the Participant in writing. In
addition, if the Plan previously has not been approved by the
Company’s stockholders, the Stock Option is granted subject
to such stockholder approval of the Plan.
3.
Vesting; Time of Exercise . Except as specifically provided
in this Agreement and subject to certain restrictions and
conditions set forth in the Plan, the Optioned Shares shall be
vested and exercisable as follows:
a.
Twenty-five percent (25%) of the total Optioned Shares shall be
fully vested on the Date of Grant, provided the Participant is
employed by (or, if the Participant is a Consultant or an Outside
Director, is providing services to) the Company or a Subsidiary on
that date.
b.
Twenty-five percent (25%) of the total Optioned Shares shall be
fully vested on the first anniversary of the Date of Grant,
provided the Participant is employed by (or, if the Participant is
a Consultant or an Outside Director, is providing services to) the
Company or a Subsidiary on that date.
c.
An additional twenty-five percent (25%) of the total Optioned
Shares shall be fully vested on the second anniversary of the Date
of Grant, provided the Participant is employed by (or, if the
Participant is a Consultant or an Outside Director, is providing
services to) the Company or a Subsidiary on that date.
d.
An additional twenty-five percent (25%) of the total Optioned
Shares shall be shall be fully vested on the third anniversary of
the Date of Grant, provided the Participant is employed by (or, if
the Participant is a Consultant or an Outside Director, is
providing services to) the Company or a Subsidiary on that
date.
Notwithstanding the
above, the Optioned Shares shall be fully vested automatically upon
a Change in Control (as defined in Section 2.6 of the Plan)
or upon the death of the Participant or the Total and Permanent
Disability (as defined in Section 2.41 of the Plan) of the
Participant, provided the Participant is still employed by the
Company as of the date of one of such specified events.
4.
Term; Forfeiture .
a.
Except as otherwise provided in this Agreement,
the unexercised portion of the Stock Option that relates to
Optioned Shares which are vested will terminate and be forfeited at
the first of the following to occur:
i.
5 p.m. on the date the Option Period terminates;
ii.
5 p.m. on the date which is one hundred eighty (180) days following
the date of the Participant’s Termination of Service due to
death or Total and Permanent Disability;
iii.
5 p.m. on the date which is ninety (90) days from the date of the
Participant’s Retirement;
iv.
5 p.m. on the date of the Participant’s Termination of
Service by the Company for cause (as defined herein);
v.
5 p.m. on the date which is thirty (30) days following the date of
the Participant’s Termination of Service for any reason not
otherwise specified in this Section 4.a. ;
vi.
5 p.m. on the date the Company causes any portion of the Option to
be forfeited pursuant to Section 7 hereof;
vii.
For purposes hereof, “cause” shall mean that the
Participant shall have committed (i) an intentional material act of
fraud or embezzlement in connection with his duties in the course
of his employment with the Company; (ii) intentional wrongful
material damage to property of the Company; or (iii) intentional
wrongful disclosure of material secret processes or material
confidential information of the Company. For the purposes of this
Agreement, no act, or failure to act, on the part of the
Participant shall be deemed “intentional” unless done,
or omitted to be done, by the Participant not in good faith and
without reasonable belief that his action or omission was in the
best interest of the Company.
2
5.
Who May Exercise . Subject to the terms and conditions set
forth in Sections 3 and 4 above, during the lifetime of the
Participant, the Stock Option may be exercised only by the
Participant, or by the Participant’s guardian or personal or
legal representative. If the Participant’s Termination of
Service is due to his death prior to the date specified in
Section 4.a.i. hereof, or Participant dies prior to the
termination dates specified in Sections 4.a.i., ii., iii., iv.,
v. or vi. hereof, and the Participant has not exercised the
Stock Option as to the maximum number of vested Optioned Shares as
set forth in Section 3 hereof as of the date of death,
the following persons may exercise the exercisable portion of the
Stock Option on behalf of the Participant at any time prior to the
earliest of the dates specified in Section 4
hereof: the personal representative of his estate, or the
person who acquired the right to exercise the Stock Option by
bequest or inheritance or by reason of the death of the
Participant; provided that the Stock Option shall remain subject to
the other terms of this Agreement, the Plan, and applicable laws,
rules, and regulations.
6.
No Fractional Shares . The Stock Option may be exercised
only with respect to full shares, and no fractional share of stock
shall be issued.
7.
Manner of Exercise . Subject to such administrative
regulations as the Committee may from time to time adopt, the Stock
Option may be exercised by the delivery of written notice to the
Committee setting forth the number of shares of Common Stock with
respect to which the Stock Option is to be exercised, the date of
exercise thereof (the “Exercise Date”) which shall be
at least three (3) days after giving such notice unless an earlier
time shall have been mutually agreed upon. On the Exercise Date,
the Participant shall deliver to the Company consideration with a
value equal to the total Option Price of the shares to be
purchased, payable as follows: (a) cash, check, bank draft,
or money order payable to the order of the Company, (b) Common
Stock (including Restricted Stock) owned by the Participant on the
Exercise Date, valued at its Fair Market Value on the Exercise
Date, and which the Participant has not acquired from the Company
within six (6) months prior to the Exercise Date; provided, that
the six (6)-month holding requirement shall only apply to a
Reporting Participant at any time following an IPO, (c) if the
Company has completed an IPO, by delivery (including by FAX) to the
Company or its designated agent of an executed irrevocable option
exercise form together with irrevocable instructions from the
Participant to a broker or dealer, reasonably acceptable to the
Company, to sell certain of the shares of Common Stock purchased
upon exercise of the Stock Option or to pledge such shares as
collateral for a loan and promptly deliver to the Company the
amount of sale or loan proceeds necessary to pay such purchase
price, and/or (d) in any other form of valid consideration that is
acceptable to the Committee in its sole discretion. In the event
that shares of Restricted Stock are tendered as consideration for
the exercise of a Stock Option, a number of shares of Common Stock
issued upon the exercise of the Stoc
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