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EXHIBIT 1
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT, (the "Agreement") is entered into as of
May 1, 1998, by and between EXCO Resources, Inc., a Texas corporation ("EXCO"),
and X. X. Xxxxxx, Xx. ("Xxxxxx"),
RECITALS
WHEREAS, Xxxxxx is the owner at the date hereof of 1,910,000 shares of
the issued and outstanding capital stock of Gladstone Resources, Inc.
("Gladstone"), which are hereinafter referred to as the "Gladstone Stock"; and
WHEREAS, EXCO and Gladstone are entering into that certain Agreement
and Plan of Merger dated as of even date herewith (the "Merger Agreement"); and
WHEREAS, as both a condition to EXCO's execution of the Merger
Agreement and an inducement to EXCO to execute the Merger Agreement and
undertake the actions and incur the significant costs necessary to consummate
the transactions contemplated by the Merger Agreement, Xxxxxx desires to grant
to EXCO the Option (as defined below).
AGREEMENT
NOW THEREFORE, in consideration of (i) the foregoing; (ii) the sum of
$100,000 paid by EXCO to Xxxxxx; and (iii) the respective representations,
warranties, covenants and agreements set forth herein and in the Merger
Agreement, Exco and Xxxxxx agree as follows:
1. Grant of Option.
Subject to the terms and conditions set forth herein, Xxxxxx does
hereby grant to EXCO an exclusive and irrevocable option (the "Option") to
acquire the Gladstone Stock for the sum of $0.33 per share (or a total of
$630,300.00, which is hereinafter referred to as the "Exercise Price").
2. Exercise of Option
(a) Term. EXCO may exercise the Option at any time following the
execution hereof by Xxxxxx and EXCO; provided that the right to exercise the
Option pursuant to this Section 2 shall expire and be of no further force and
effect at the earliest to occur of (i) 5:00 p.m., Dallas, Texas time, on the
40th business day following approval of the transactions contemplated by the
Merger Agreement by Gladstone's stockholders; or (ii) September 1, 1998.
(b) Written Notice. In the event EXCO wishes to exercise the Option,
it shall send to Xxxxxx a written notice (the "Notice"; the date of such notice
being herein referred to as the "Notice Date") specifying (i) EXCO's desire to
exercise the Option and (ii) a place and date not
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earlier than seven business days nor later than 15 business days from the
Notice Date for the closing of such acquisition (the "Closing Date"); provided
that, if the closing of the acquisition pursuant to the exercise of the Option
(the "Closing") cannot be consummated within such time period by reason of any
applicable law, the period of time that otherwise would run pursuant to this
sentence shall run instead from the date on which such restriction on
consummation has expired or been terminated; and provided further, without
limiting the foregoing, that if prior notification to or approval of any
governmental or regulatory authority, agency, court or other entity (a
"Governmental Entity") is required in connection with such acquisition, EXCO
and Xxxxxx hereby respectively covenant to one another at EXCO's expense to
promptly file the required notice or application for approval (and cooperate in
the preparation of the same) and shall expeditiously process the same, and the
period of time that otherwise would run pursuant to this sentence shall run
instead from the date on which, as the case may be (i) any required
notification period has expired or been terminated or (ii) such approval has
been obtained, and in either event, any requisite waiting period has passed.
(c) Expiration. Notwithstanding Section 2(b), in no event shall
the Closing Date be more than 12 months after the related Notice Date, and if
the Closing Date shall not have occurred within 12 months after the related
Notice Date due to the failure to obtain any such required approval, the
exercise of the Option effected on the Notice Date shall be deemed to have
expired.
3. Payment and Delivery of Certificates
(a) Payment of Purchase Price. On the Closing Date, EXCO shall
pay to Xxxxxx, in immediately available funds by certified check or by wire
transfer to a bank account designated by Xxxxxx, an amount equal to the
Exercise Price.
(b) Delivery of Certificates. At such Closing, simultaneously
with the delivery of the consideration specified in Section 3(a), Xxxxxx shall
deliver to EXCO a certificate or certificates representing the Gladstone Stock
(duly executed in blank or accompanied by duly executed stock powers if the
Gladstone Stock is delivered by Xxxxxx), which Gladstone Stock shall be free
and clear of all Liens.
4. Representations and Warranties of Xxxxxx.
Xxxxxx hereby represents and warrants to EXCO that:
(a) Authorization and Validity of Agreement. Xxxxxx has full
right, power, capacity and lawful authority to execute and deliver this
Agreement and to consummate and perform the transactions contemplated hereby.
This Agreement has been duly and validly executed and delivered by Xxxxxx and,
assuming the due execution and delivery by EXCO, this Agreement constitutes the
legal, valid, and binding obligation of Xxxxxx, enforceable against Xxxxxx in
accordance with its terms.
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(b) Good Title. The Gladstone Stock to be transferred to EXCO
upon due exercise of the Option, shall be validly issued, fully paid and
nonassessable, and shall be delivered free and clear of all Liens, and the
delivery of the certificates representing the Gladstone Stock to EXCO pursuant
hereto will transfer to EXCO good and valid title to such Gladstone Stock free
and clear of all Liens.
(c) No Conflict. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will
violate or result in any violation of or be in conflict with or constitute a
default under any term of the Articles of Incorporation or Bylaws of Gladstone,
or of any agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to Gladstone, except as stated in the Merger
Agreement.
(c) No Consent. No authorization, consent or approval of, or any
filing with, any public body or authority is necessary for consummation by it
of the transactions contemplated by this Agreement.
5. Representations and Warranties of EXCO.
EXCO hereby represents and warrants to Xxxxxx as follows:
(a) Authority. EXCO has full corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action on the part of EXCO. This
Agreement has been duly and validly executed and delivered by EXCO and,
assuming the due execution and delivery by Xxxxxx, this Agreement constitutes a
valid and binding obligation of EXCO, enforceable against EXCO in accordance
with its terms.
6. Adjustment upon Share Issuances, Changes in Capitalization,
Etc.
(a) In the event of any change in Gladstone Stock by reason of,
without limitation, a stock dividend, split-up, recapitalization, combination,
exchange of shares or similar transaction, the type and number of shares or
securities to be delivered by Xxxxxx shall be adjusted appropriately, and
proper provision shall be made in the agreements governing such transaction, so
that EXCO shall receive upon exercise of the Option the number and class of
shares or other securities or property that EXCO would have received if the
Option had been exercised immediately prior to such event, or the record date
therefor, as applicable.
(b) In the event that Gladstone shall enter into an agreement (i)
to consolidate with or merge into any person, other than EXCO or one of its
subsidiaries, and shall not be the continuing or surviving corporation of such
consolidation or merger, (ii) to permit any person, other than EXCO or one of
its subsidiaries, to merge into Gladstone and Gladstone shall be the continuing
or surviving corporation, but, in connection with such merger, the then
outstanding shares of
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Gladstone Stock shall be changed into or exchanged for stock or other
securities of Gladstone or any other person or cash or any other property, or
the then outstanding shares of Gladstone Stock shall after such merger
represent less than 50% of the outstanding shares and share equivalents of the
merged company or (iii) to sell or otherwise transfer all or substantially all
of its assets to any person, other than EXCO or one of its subsidiaries, then,
and in each such case, the agreement governing such transaction shall make
proper provision so that the Option shall, upon the consummation of any such
transaction and upon the terms and conditions set forth in this Agreement, be
converted into, or exchanged for, an option to acquire the same consideration
received by the holders of Gladstone Stock pursuant to such a transaction had
the Option been exercised in full prior to the consummation of such
transaction. The provisions of this Agreement, including Sections 1, 2 and 6,
shall apply with appropriate adjustments to any securities for which the Option
becomes exercisable pursuant to this Section 6.
7. Termination.
In the event the Merger is not consummated on or before September 1,
1998, Xxxxxx shall be obligated to return to EXCO the $100,000.00 payment
referred to in the recital of consideration on page 1 hereof; provided,
however, Xxxxxx shall be under no obligation to return such payment if the
failure to consummate the Merger is attributable to EXCO's failure to obtain
financing for the Merger.
8. Miscellaneous:
(a) Expenses.
Except as otherwise provided in the Merger Agreement, each of the
parties hereto shall bear and pay all costs and expenses incurred by it or on
its behalf in connection with the transactions contemplated hereunder,
including fees and expenses of its own counsel.
(b) Waiver and Amendment.
Any provision of this Agreement may be waived at any time by the party
that is entitled to the benefits of such provision. This Agreement may not be
modified, amended, altered or supplemented except upon the execution and
delivery of a written agreement executed by the parties hereto.
(c) Entire Agreement; No Third-Party Beneficiary; Severability.
Except as otherwise set forth in the Merger Agreement, this Agreement
(including other documents and instruments referred to herein or therein) (i)
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, between the parties with respect to the
subject matter hereof and (ii) is not intended to confer upon any person other
than the parties hereto any rights or remedies hereunder. If any term,
provision, covenant or
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restriction of this Agreement is held by a court of competent jurisdiction or a
governmental entity to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated.
(d) Governing Law.
This Agreement shall be governed by and construed in accordance with
the laws of the State of Texas without regard to any applicable conflicts of
law rules.
(e) Descriptive Headings; Gender.
The descriptive headings contained herein are for convenience of
reference only and shall not affect in any way the meaning or interpretation of
this Agreement. Whenever required by the context of this Agreement, the
singular shall mean the plural, the male gender shall include the female gender
and the neuter, and vice versa.
(f) Notices.
All notices and other communications hereunder shall be in writing and
shall be deemed given if delivered personally, telecopied (with confirmation)
or mailed by registered or certified mail (return receipt requested) to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
If to EXCO: EXCO Resources, Inc.
0000 Xxxxxxxx Xxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Attention: X.X. Xxxxxx, President
Telephone: 000-000-0000
Facsimile: 000-000-0000
If to Xxxxxx: Xx. X. X. Xxxxxx, Xx.
000 Xxxxxxx Xxxxxxxx
Xxxxxx, Xxxxx 00000
(g) Counterparts.
This Agreement and any amendments hereto may be executed in multiple
counterparts, each of which shall be considered one and the same agreement and
shall become effective when all counterparts have been signed by each of the
parties and delivered to the other party, it being understood that both parties
need not sign the same counterpart.
(h) Assignment.
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Neither this Agreement nor any of the rights, interests or obligations
hereunder or under the Option shall be assigned by Xxxxxx or EXCO (whether by
operation of law or otherwise) without the prior written consent of the other
parties hereto; provided, however, EXCO may assign its rights, interests or
obligations under this Agreement or the Option to any wholly-owned subsidiary
of EXCO without the consent of Xxxxxx. Subject to the first sentence of this
Section, this Agreement shall be binding upon, inure to the benefit of and be
enforceable by the parties and their respective successors and permitted
assigns.
(i) Further Assurances.
In the event of any exercise of the Option by EXCO, Xxxxxx and EXCO
shall execute and deliver all other documents and instruments and take all
other action that may be reasonably necessary in order to consummate the
transactions provided for by such exercise.
(j) Specific Performance.
The parties hereto agree that this Agreement may be enforced by either
party through specific performance, injunctive relief and other equitable
relief. Both parties further agree to waive any requirement for the securing
or posting of any bond in connection with the obtaining of any such equitable
relief and that this provision is without prejudice to any other rights that
the parties hereto may have for any failure to perform this Agreement.
IN WITNESS WHEREOF, the undersigned have caused this Stock Option
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the date first written above.
EXCO Resources, Inc.
By:/s/ XXXXXXX X. XXXXXX
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Xxxxxxx X. Xxxxxx
Chief Executive Officer
/s/ X. X. XXXXXX, XX.
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X. X. Xxxxxx, Xx.
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