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EXHIBIT 1
July 16, 1998
Ares Management, L.P.
1999 Avenue of the Stars
Suite 1900
Los Angeles, California 90067
Attn: Xxxx Xxxxx
Re: Standby Purchase Commitment
Gentlemen:
EXCO Resources, Inc., a Texas corporation (the "Company"), hereby
confirms its agreement with Ares Management, L.P., on behalf of Ares Leveraged
Investment 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 16, 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 on August 12, 1998 (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. Subject to the
terms and conditions hereinafter set forth, Purchaser hereby assumes the Standby
Commitment and agrees to exercise any and all Rights which would otherwise
expire unexercised on the Expiration Date (up to a maximum of 2 million Rights)
at a price equal to the Exercise Price. The shares of Common Stock purchased
pursuant to the Standby Commitment are hereinafter referred to as the "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
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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 Standby Shares will, when issued and sold to the
Purchaser as contemplated hereby, be validly authorized, issued and
outstanding, fully paid and non-assessable 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 exercise 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
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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 register 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 Standby Shares for its own
account and not with any intention of selling or transferring the Standby 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 Standby Shares at a purchase price equal
to the aggregate applicable Exercise Price of the Standby Shares.
Delivery of and payment for the 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
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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 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 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
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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
the Standby Commitment shall be no less than
1,000,000 shares and no greater than 2,000,000
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 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 3,000,000 shares are purchased pursuant
to the Rights Offering.
(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 material 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 fulfilled 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 Ares Management, L.P., on
behalf of Ares Leveraged Investment Fund, L.P. (telecopy (000) 000-0000),
attention of Xxxx Xxxxx; 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.
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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 Standby Shares to the
Purchaser for any reason permitted under this Agreement or if the Purchaser
shall decline to purchase the 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 Standby Shares, and upon demand the Company shall pay
the full amount thereof to the Purchaser; provided, however, that if this
Agreement is terminated by notice from the Purchaser pursuant to the second
sentence of the prior paragraph, the Company shall not be obligated to reimburse
the Purchaser on account of these expenses. 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 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 (a) 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 TEXAS. 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.
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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,
EXCO RESOURCES, INC.
By: /s/ XXXXXXX X. XXXXXX
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Name: Xxxxxxx X. Xxxxxx
Title: Chairman and Chief Executive Officer
Accepted and agreed to this 21st, day of July, 1998.
Ares Management, L.P. on behalf of
Ares Leveraged Investment Fund
By: /s/ XXXX XXXXX
-----------------------------------------
Name: Xxxx Xxxxx
Title: Principal
