EXHIBIT 1
EXCO RESOURCES INC.
0000 Xxxxxxxx Xx., Xxxxx 000, Xxxxxx, Xxxxx 00000
(000)000-0000 - FAX (000)000-0000
July 16, 1998
OCM Principal Opportunities Fund, L.P.
c/o Oaktree Capital Management, LLC
000 Xxxxx Xxxx Xxxxxx
Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Re: Standby Purchase Commitment
Gentlemen:
EXCO Resources, Inc., a Texas corporation (the "Company"), hereby
confirms its agreement with Oaktree Capital Management, LLC, on behalf of OCM
Principal Opportunities Fund, L.P. (the "Purchaser") as follows:
1. OFFERING OF RIGHTS TO PURCHASE COMMON STOCK. As described in that
certain Prospectus (herein so called) of the Company, dated July 15, 1998, the
Company distributed (the "Rights Offering") to all of its recordholders of
Common Stock, par value $0.02 per share (the "Common Stock"), the right (each a
"Right" and collectively, the "Rights") to purchase authorized but unissued
shares of Common Stock at an exercise price of $6.00 per share (the "Exercise
Price"). The shares of Common Stock which are issuable upon exercise of the
rights are herein called the "Rights Shares." All unexercised rights will
expire at the close of business 45 days after the effective date of the Rights
Offering (the "Expiration Date").
One of the components of the Rights Offering is a standby commitment
(the "Standby Commitment") to exercise any Rights which have not been exercised
at or prior to the close of business on the Expiration Date. By agreement dated
July 16, 1998 (the "Standby Agreement"), Ares Management, L.P. on behalf of Ares
Leveraged Investment Fund, L.P. ("Ares") agreed to assume the Standby Commitment
for a minimum of one million shares and a maximum of two million the shares. It
is anticipated that there will be additional unexercised Rights which Purchaser
desires to acquire and exercise pursuant to the Standby Commitment. Subject to
the terms and conditions hereinafter set forth, Purchaser hereby assumes a
portion of the Standby Commitment and agrees to exercise one million (1,000,000)
rights which would otherwise expire unexercised on the Expiration Date at a
price equal to the Exercise Price. The shares of Common Stock purchased
pursuant to this agreement are hereinafter referred to as the "OCM Standby
Shares."
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents, warrants and agrees that:
(a) The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith has timely filed documents (the "Exchange Act
Documents") with the Securities and Exchange Commission (the "Commission")
since December 1, 1997. At the time such Exchange Act Documents were filed
with the Commission, they complied in all material respects with the
requirements of the Exchange Act and the rules and regulations of the
Commission thereunder (the "Rules and Regulations"), and did not include an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, and any Exchange Act Documents hereafter filed will, when they
are filed with the Commission, comply in all material respects with the
requirements of the Exchange Act and the Rules and Regulations, and will
not include an untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they are made, not misleading.
(b) Since the date of the Company's most recent Exchange Act
Document, there is no material fact, circumstance or event with respect to
the Company or any of its subsidiaries that has had or may be expected to
have a material adverse effect on the business, properties, condition
(financial or other) or results of operations of the Company and its
subsidiaries taken as a whole.
(c) The issued and outstanding shares of Common Stock of the
Company and the shares of Common Stock issuable upon exercise of the
Rights have been duly authorized. The issued and outstanding shares of
Common Stock of the Company are validly issued and outstanding, fully
paid and non-assessable, with no personal liability attaching to the
ownership thereof. There are no issued or outstanding shares of
Preferred Stock, par value $0.01 per share, of the Company. There is
not any preemptive or other right to subscribe for or to purchase, or
any lien, charge, encumbrance, restriction on voting or transfer of, or
any other claim of any third party on, any issued and outstanding shares
of Common Stock or the Rights Shares, pursuant to the Company's
corporate charter or by-laws or any agreement or other instrument to
which the Company is a party or by which the Company may be bound. The
capitalization of the Company as of the date hereof and the anticipated
capitalization of the Company after the completion of the Rights
offering are set forth in the Capitalization section of the Prospectus.
(d) The OCM Standby Shares will, when issued and sold to the
Purchaser as contemplated hereby, be validly authorized, issued and
outstanding, fully paid and nonassessable with no personal liability
attaching to the ownership thereof and will conform to the description of
the Common Stock contained in the Exchange Act Documents.
(e) Each Right is convertible into one share of Common Stock.
(f) As of the close of business on the second business day preceding
the date hereof, there were 594,336 shares of Common Stock outstanding; the
issuance of all the Rights has been duly authorized by the Company.
(g) This Agreement has been duly authorized, executed and delivered
by the Company, constitutes the valid and binding agreement of the Company
and is enforceable against the Company in accordance with its terms. No
further approval or authorization of the shareholders or the Board of
Directors of the Company or any other entity will be required for the
issuance and sale of Common Stock referred to in subparagraph (d) above.
Neither such issuance nor the consummation of any other transactions herein
contemplated will result in a breach by the Company of any terms of, or
constitute a default under, any other agreement or undertaking of the
Company, which breach or default might be expected to have a material
adverse effect on such Common Stock, the Company or the transactions
contemplated herein. Other than as contemplated herein, no person has the
right to require the Company or any subsidiary of the Company to require
any capital stock for offering and sale under the Securities Act of 1933,
as amended (the "Securities Act").
(h) The Company and its subsidiary each have been duly incorporated
and each is a validly existing corporation in good standing under the laws
of its jurisdiction of incorporation and is duly qualified and in good
standing in each jurisdiction in which its ownership of property or the
conduct of its business requires such qualification (except where the
failure to so qualify would not have a material adverse effect upon the
Company and its subsidiary taken as a whole). The Company and its
subsidiary each have the corporate power and authority and holds all valid
permits and other required authorizations from governmental authorities
necessary to carry on business as now conducted and as to be conducted on
the Delivery Date (as hereinafter defined) except such permits and
authorizations that are not singly or in the aggregate, material to the
Company and its subsidiary taken as a whole; neither entity has received
any notice relating to the revocation or modification of any such permits
or authorizations that are singly or in the aggregate material to the
Company and its subsidiary taken as a whole.
(i) Except as described in the Exchange Act Documents, there is no
action, suit or proceeding pending before any court, arbitrator or
governmental body, nor, to the knowledge of the Company, is any such action
threatened, which (i) might affect the consummation of the transactions
contemplated by this Agreement, (ii) is required to be disclosed under the
Exchange Act or the Rules and Regulations or, in the case of any threatened
action, would be required to be so disclosed if such action were pending or
(iii) would be likely to result in any material adverse change in the
financial position, results of operations or business of the Company and
its subsidiaries taken as a whole.
3. REPRESENTATIONS AND WARRANTIES OF PURCHASER. The Purchaser represents
and warrants that it is purchasing the OCM Standby Shares for its own account
and not with any intention of selling or transferring the OCM Shares in
violation of the Securities Act, subject, nevertheless, to the understanding
that the disposition of Purchaser's property shall at all times be and remain
within Purchaser's control.
4. PURCHASE, DELIVERY AND PAYMENT OF CONVERSION SHARES. Purchaser agrees
to purchase from the Company the OCM Standby Shares at a purchase price equal to
the aggregate applicable exercise price of the OCM Standby Shares.
Delivery of and payment for the OCM Standby Shares shall be made at
the offices of Xxxxxx and Xxxxx, LLP, 000 Xxxx Xxxxxx, Xxxxx 0000, Xxxxxx,
Xxxxx, at 9:00 A.M., Dallas time on August 11, 1998, or on such later date (but
not later than three business days after the Expiration Date) as may be
specified by written notice from the Purchaser, to the company given not more
than two business days prior to the Expiration Date (such delivery and payment
date being the Delivery Date"). The date and time for such delivery and payment
are herein sometimes referred to as the Delivery Date. On the Delivery Date,
the Company shall deliver to the Purchaser certificates for the OCM Standby
Shares against payment of the purchase price therefor by wire transfer to an
account designated by the Company to the Purchaser at least one business day
prior to the delivery date. Such certificates shall be registered in such name
or names and in such number of shares of common stock as the Purchaser shall
request in writing not less than two full business days prior to the delivery
date. For purposes of expediting the checking and packaging of the certificates
to be so delivered, the Company shall make such certificates available for
inspection by the Purchaser in Dallas, Texas, not later than 5:00 P.M., Dallas
time, on the business day prior to the delivery date.
5. FURTHER AGREEMENTS OF THE COMPANY. THE COMPANY AGREES:
(a) To timely file all documents, and any amendments of previously
filed documents, required to be filed by it pursuant to Section 13, 14 or
15(d) of the Exchange Act;
(b) To direct the Transfer Agent to advise you daily of the number of
Rights exercised for Common Stock on the preceding day;
(c) To take no action the effect of which would be to require an
adjustment in the exercise price of the shares of Common Stock from the
present price set above;
(d) As soon as practicable after the completion of the Rights
Offering and Purchaser's purchase of the OCM Standby Shares pursuant to
this agreement, the Company will take all necessary actions (including
solicitation of consent from shareholders, if necessary) to increase the
number of directors of the Company's board of directors such that the
Purchaser may designate one additional director to serve on the board (the
"Purchaser's Designee"), which designation shall be reasonably acceptable
to the Company. As long as the Purchaser owns at least ten percent (10%)
of the Company's issued and outstanding common stock, the Purchaser shall
have the right to nominate the Purchaser's Designee to the Company's board
of directors.
6. CONDITIONS OF THE PURCHASER'S OBLIGATIONS. The obligations of the
Purchaser hereunder are subject to the accuracy in all material respects, when
made and on the Delivery Date, of the representations and warranties of the
Company contained herein, to performance by
the Company of its obligations hereunder and to each of the following
additional terms and conditions:
(a) The legality and sufficiency of the exercise of the Rights for
shares of Common Stock, the validity and form of the certificates
representing the Common Stock deliverable to the Purchaser hereunder, all
corporate proceedings and other legal matters incident to the foregoing and
to the authorization, form and validity of this Agreement and all other
legal matters relating to this Agreement and the transactions contemplated
hereby shall be reasonably satisfactory in all material respects to
purchaser and its counsel and the Company shall have furnished to such
counsel all documents and information that such counsel shall reasonably
request to enable them to pass upon such matters.
(b) The number of unexercised Rights which are subject to this
Agreement shall be 1,000,000 shares.
(c) The Company shall have furnished such additional documents and.
certificates as the Purchaser or its counsel may reasonably request.
(d) The Purchaser shall have no obligation to purchase any of the OCM
Standby Shares unless and until:
(i) Xxxxxxx X. Xxxxxx purchases a minimum of 250,000 shares
pursuant to the Rights he receives in the Rights Offering;
and
(ii) At least 2,000,000 shares are purchased pursuant to the
Rights Offering (inclusive of shares purchased by Xxxxxxx
X. Xxxxxx, but exclusive of shares purchased by Xxxx).
(iii) Ares shall have purchased at least one million (1,000,000)
shares pursuant to the terms of the Standby Agreement and
any additional shares required to be purchased by Ares
thereunder.
(e) On the Delivery Date, the Company shall have furnished to the
Purchaser a certificate dated the Delivery Date, signed by the Company's
counsel, to the effect that the signer of such certificate has examined the
Exchange Act Documents and that, in his opinion, (i) as of the date of the
Exchange Act Documents, the statements made in the Exchange Act Documents
were true and correct, and none of the Exchange Act Documents omits to
state a material fact required to be stated therein or necessary in order
to make the statements therein not misleading in light of the circumstances
under which they were made, (ii) since the date of the Exchange Act
Documents no event has occurred which should have been set forth in an
amendment of or supplement to the Exchange Act Documents but which has not
been so set forth, (iii) neither the Company nor any of its subsidiaries
has any contingent obligation which is not disclosed in the Exchange Act
Documents and (iv) the representations and warranties of the Company herein
are true and correct as of the Delivery Date, the Company has complied with
all its agreements contained herein and the conditions on its part to be
set forth herein have been fulfilled.
7. NOTICES. The Company shall be entitled to act and rely upon any
request, consent, notice or agreement given or made by the Purchaser. Any
notice to the Purchaser shall be sufficient if given in writing by telecopy,
overnight courier service or personal delivery addressed to Oaktree Capital
Management, LLC, on behalf of OCM Principal Opportunities Fund, L.P. (telecopy
(000) 000-0000), attention of Xxxxxxx X. Xxxxxx; and any notice to the Company
shall be sufficient if given in writing by telecopy, overnight courier service
or personal delivery addressed to the Company at EXCO Resources, Inc., 0000
Xxxxxxxx Xxxxx, Xxxxx 000 (telecopy (000) 000-0000), attention of Xxxxxxx X.
Xxxxxx.
8. EFFECTIVE DATE OF TERMINATION. This Agreement may not be terminated
except by the written agreement of the Purchaser and the Company.
If the Company shall fail to deliver the OCM Standby Shares to the
Purchaser for any reason permitted under this Agreement or if the Purchaser
shall decline to purchase the OCM Standby Shares for any reason permitted under
this Agreement, the Company shall reimburse the Purchaser for the reasonable
fees and expenses of its counsel incurred in connection with this Agreement and
the proposed purchase of the OCM Standby Shares, and upon demand the Company
shall pay the full amount thereof to the Purchaser. The Company shall not be
liable to the Purchaser under any circumstances for damages on account of the
loss of anticipated profits from the sale of OCM Standby Shares. In any event,
the Company shall pay its own expenses.
9. PERSONS ENTITLED TO BENEFIT OF AGREEMENT. This Agreement shall inure
to the benefit of and be binding upon the Purchaser, the Company and their
respective successors. This Agreement and the terms and provisions hereof are
for the sole benefit of only those persons, except that the representations,
warranties, and agreements of the Company contained in this Agreement shall also
be deemed to be for the benefit of the person or persons, if any, who control
the Purchaser within the meaning of the Securities Act. Nothing in this
Agreement is intended or shall be construed to give any person other than the
persons mentioned in the preceding two sentences any legal or equitable right,
remedy or claim under or in respect of this Agreement or any provision contained
herein.
10. CERTAIN DEFINITIONS. For purposes of this Agreement, (a) "business
day" means any day on which the New York Stock Exchange is open for trading and
"close of business" means 5:00 p.m., Dallas time, (b) "subsidiary" has the
meaning set forth in Rule 405 of the rules and regulations promulgated under the
Securities Act.
11. GOVERNING LAW: COUNTERPARTS. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. This Agreement
may be executed in one or more counterparts and, if executed in more than one
counterpart, the executed counterparts shall together constitute a single
instrument.
If the foregoing correctly sets forth the agreement between the
Company and the Purchaser, please indicate your acceptance in the space provided
for that purpose below.
Very truly yours,
By: /s/ XXXXXXX X. XXXXXX
------------------------------
Xxxxxxx X. Xxxxxx
Chairman and Chief Executive Officer
Accepted and agreed this 16th
of July, 1998.
OCM Principal Opportunities Fund, L.P.
By: Oaktree Capital Management, LLC
Its General Partner
By: /s/ XXXXXXX X. XXXXXX
--------------------------------
Xxxxxxx X. Xxxxxx
Principal
By: /s/ XXXXXXX X. XXXXXX
--------------------------------
Xxxxxxx X. Xxxxxx
Managing Director
