<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ x ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to ________
Commission File Number: 0-9204
EXCO RESOURCES, INC.
(formerly MINERAL DEVELOPMENT, INC.)
(Exact name of registrant as specified in its charter)
Texas 74-1492779
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9400 North Central Suite 1209, L.B. 196
Dallas, Texas 75231
(Address of principal executive offices) (Zip Code)
(214)368-2084
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has
filed all reports required to be filed by Section 13 or 15(d)
of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days.
YES X NO
--- ---
Indicate the number of shares outstanding of each of
the issuer's classes of common stock, as of July 31, 1996.
Class: Common stock, par value $0.01 per share
Outstanding at July 31, 1996: 795,300 shares
<PAGE>
EXCO RESOURCES, INC.
(Formerly MINERAL DEVELOPMENT, INC.)
INDEX
Part I. Financial Information:
Item 1. Financial Statements
Condensed Balance Sheets - June 30, 1996
and December 31, 1995 (Unaudited)
Condensed Statements of Operations
Three Month Periods Ended June 30, 1996 and 1995
and Six Month Periods Ended June 30, 1996 and 1995
(Unaudited)
Condensed Statements of Cash Flows - Six
Month Periods Ended June 30, 1996 and 1995
(Unaudited)
Notes to Financial Statements
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Part II. Other Information:
Item 4. Submission of Matters to a Vote of Security
Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signatures
<PAGE>
Part I. Financial Information
Item 1. Financial Statements
EXCO RESOURCES, INC.
(formerly MINERAL DEVELOPMENT, INC.)
CONDENSED BALANCE SHEETS (UNAUDITED)
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
-------- ------------
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash $ 29,000 $ 221,000
Accounts receivable 280,000 360,000
Other 1,000 1,000
---------- ----------
TOTAL CURRENT ASSETS 310,000 582,000
PROPERTY AND EQUIPMENT, AT COST:
Undeveloped oil and gas properties 70,000 69,000
Proved developed oil and gas properties,
based on successful efforts method 5,423,000 5,488,000
Office and field equipment 372,000 372,000
---------- ----------
5,865,000 5,929,000
Allowance for depreciation,
depletion and amortization (4,968,000) (4,980,000)
---------- ----------
897,000 949,000
DEFERRED FINANCING AND ACQUISITION
COSTS (Note 5) 70,000 0
---------- ----------
$1,277,000 $1,531,000
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 202,000 $ 476,000
Joint interest prepayments 36,000 69,000
Revenues and royalties payable 87,000 88,000
Current portion of long-term debt 28,000 28,000
Note payable 0 200,000
---------- ----------
TOTAL CURRENT LIABILITIES 353,000 861,000
LONG TERM DEBT, LESS CURRENT PORTION 26,000 40,000
STOCKHOLDERS' EQUITY:
Common stock, $0.01 par value; 25,000,000
shares authorized, 795,300 shares and
675,300 shares issued and outstanding,
respectively (Note 3) 8,000 7,000
Capital in excess of par value 9,095,000 8,871,000
Deficit (8,205,000) (8,248,000)
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 898,000 630,000
---------- ----------
$1,277,000 $1,531,000
========== ==========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
EXCO RESOURCES, INC.
(formerly MINERAL DEVELOPMENT, INC.)
CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
1996 1995 1996 1995
-------- ------- ------ ------
<S> <C> <C> <C> <C>
REVENUES:
Oil and gas $222,000 $188,000 $442,000 $ 322,000
Management fees and other 42,000 66,000 96,000 122,000
Gain (loss) on disposition
of properties 2,000 0 2,000 (4,000)
-------- -------- -------- ---------
266,000 254,000 540,000 440,000
COSTS AND EXPENSES
Oil and gas production costs 96,000 100,000 204,000 202,000
Dry hole and abandonment
costs 1,000 5,000 1,000 9,000
Depreciation, depletion and
amortization 29,000 31,000 59,000 69,000
General and administrative 125,000 151,000 225,000 299,000
Interest 2,000 1,000 8,000 3,000
-------- -------- -------- ---------
253,000 288,000 497,000 582,000
-------- -------- -------- ---------
NET INCOME (LOSS) $ 13,000 $(34,000) $ 43,000 $(142,000)
======== ======== ======== =========
INCOME (LOSS) PER COMMON SHARE $ .02 $ (.05) $ .06 $ (.23)
======== ======== ======== =========
Weighted average shares
outstanding (Note 2) 795,300 635,300 736,463 625,300
</TABLE>
See accompanying notes to financial statements.
<PAGE>
EXCO RESOURCES, INC.
(Formerly MINERAL DEVELOPMENT, INC.)
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
Six Months Ended
June 30,
----------------
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 43,000 $(142,000)
Adjustments to reconcile net income
(loss) to net cash provided (used)
by operating activities:
Depreciation, depletion and amortization 59,000 69,000
Loss (gain) on disposition of
property and equipment (2,000) 4,000
Net (increase) decrease in:
Accounts receivable 80,000 (87,000)
Other current assets -- 3,000
Net increase (decrease) in accounts
payable and other current liabilities (308,000) 315,000
-------- ---------
Net cash provided (used) by operating
activities (128,000) 162,000
Cash flows from investing activities:
Additions to property and equipment (10,000) (92,000)
Proceeds from disposition of property and
equipment 6,000 12,000
-------- ---------
Net cash used by investing
activities (4,000) (80,000)
Cash flows from financing activities:
Proceeds from long-term debt -- 9,000
Deferred financing and acquisition costs (70,000) --
Payments on long-term debt (15,000) (13,000)
Payment on note payable (200,000) --
Proceeds from issuance of common stock 225,000 --
-------- ---------
Net cash used by financing
activities (60,000) (4,000)
-------- ---------
Net increase (decrease) in cash (192,000) 78,000
Cash at beginning of year 221,000 40,000
-------- ---------
Cash at end of period $ 29,000 $ 118,000
======== =========
Supplemental information:
Interest paid $ 8,000 $ 3,000
======== =========
Federal income tax paid $ -- $ --
======== =========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
EXCO RESOURCES, INC.
(Formerly MINERAL DEVELOPMENT, INC.)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
1 - Statement by Management Concerning Interim Financial Information
The financial information included herein is unaudited and does not
include all information and footnotes required by generally accepted
accounting principles for complete financial statements; however, such
information reflects all adjustments (consisting solely of normal recurring
adjustments), which are, in the opinion of management, necessary for a fair
presentation of the results of operation for the interim period. It is
recommended that these interim financial statements be read in conjunction
with the financial statements and the notes thereto included in the Company's
Annual Report on Form 10-K for the nine month transition period ended
December 31, 1995.
2 - Income Per Common Share
Income per common share was computed by dividing the net income for each
period by the weighted average number of common shares outstanding during the
period. Common stock options are not considered to be common stock
equivalents as their effect would be anti-dilutive. The weighted average
number of common shares outstanding during the periods were retroactively
restated to give effect to the one-for-five reverse stock split effective
July 19, 1996.
3 - Changes in Stockholders' Equity
Balances in common stock and in Capital in excess of par value at June
30, 1996 reflect the issuance of 125,000 shares of common stock to a director
of the Company upon the exercise of a stock option during the first quarter
of 1996. The proceeds were used in the second quarter to repay the $200,000
note payable to a bank.
On July 11, 1996, the Company's shareholders approved a one-for-five
reverse stock split of the Company's common stock. The reverse stock split
was effective July 19, 1996. The par value of common stock and the number of
authorized shares of common stock remained unchanged. All references in the
financial statements to number of shares, per share amounts and market prices
of the Company's common stock have been retroactively restated to reflect the
decreased number of common shares outstanding.
4 - Employment Agreement
In April 1996, the Company entered into an employment agreement with an
individual for the position of President
<PAGE>
and Chief Executive Officer of the Company. The agreement provides for an
annual salary of $140,000, adjusted for incentives, as determined by the
Board of Directors for the period June 1, 1996 through June 1, 1999.
Pursuant to the employment agreement, options to purchase 100,000 shares of
the Company's common stock are to be granted at a purchase price per share of
$3.00. The options are to have a ten-year term. The employment agreement
will not become effective unless the Company is successful in raising a
minimum of $9,000,000 in its contemplated registered public offering.
5 - Deferred Financing and Acquisition Costs
The $70,000 balance in deferred financing and acquisition costs at June
30, 1996, represents legal, accounting and other costs attributable to the
Company's financing and acquisition activities. See Note 6. Deferred
financing costs will be charged against the gross proceeds of the
contemplated financing when and if received. Deferred acquisition costs will
be capitalized in the cost of the acquisition when and if completed. If the
contemplated financing and/or acquisitions are not completed, the related
costs will be expensed.
6 - Subsequent Events
On July 11, 1996, at the Company's Annual Meeting of Shareholders (the
"Annual Meeting") the shareholders of the Company approved, a one-for-five
reverse stock split of the Company's common stock. The reverse stock split
became effective July 19, 1996, upon filing of an amendment to the Company's
Articles of Incorporation with the Secretary of State of the State of Texas.
The shareholders of the Company also approved another amendment to the
Company's Articles of Incorporation that authorizes the issuance of up to
10,000,000 shares of preferred stock that the Board of Directors may issue
from time to time in one or more series. With respect to each series of
preferred stock, the amendment authorizes the Board to fix and determine by
resolution the number of shares of each series, the designation thereof and
all rights and preferences including voting, dividend, conversion, redemption
and liquidation rights.
At the Annual Meeting, the shareholders also approved the Company's
stock option plan. The stock option plan provides for the grant of incentive
stock options under Section 422 of the Internal Revenue Code of 1986, as
amended, and stock options that do not qualify under Section 422 to employees
to purchase up to an aggregate of 400,000 shares of the Company's common
stock. At the date hereof, options to purchase 280,000 shares remain
available for grant, excluding an option to purchase 100,000 shares at $3.00
per share that may be granted under an employment agreement. See Note 4.
At the Annual Meeting, the shareholders also approved a Director Stock
Option Plan, previously adopted by the Board of Directors, whereby up to
1,000,000 post-reverse stock split shares of common stock may be issued to
Directors in consideration of the common stock component of their respective
Annual Director Fee or
<PAGE>
upon exercise of their respective Director Options. The Annual Director Fee
is $12,000, payable on the first business day following the end of each
quarter beginning with the quarter ending September 30, 1996, 50% in cash and
50% in Company common stock. Each Director will be automatically granted a
Director Option, at the then current fair market value, to purchase 100,000
shares of common stock on the date the Director is initially elected or
appointed as a director, or in the case of directors at the time of approval
of the Plan, upon their election or re-election at the Annual Meeting. Each
Director Option vests in four equal amounts of 25,000 shares per year over
four years, provided that no shares subject to a Director Option will vest in
any year in which the Director attends less than 75% of the Board meetings
held for that fiscal year. To date, no Director Options have been granted
under the 1996 Director Plan.
On August 13, 1996, the Company entered into a Letter of Intent with
Coda Energy, Inc. ("Coda") to purchase all of the stock of Taurus Energy
Corp., a wholly owned subsidiary of Coda. Taurus is actively engaged in the
gathering, processing and marketing of natural gas and natural gas liquids.
At the time of closing, Taurus Energy would own the Hamlin and Shackelford
gas gathering systems located in west Texas, as well as certain other assets.
Total revenues for these systems were approximately $35 million and $20
million for the year ended December 31, 1995 and the six month period ended
June 30, 1996, respectively.
The consideration for the Taurus shares would be $35,000,000 in cash and
that number of shares of unregistered Company common stock equal to the
quotient resulting from dividing $10,000,000 by the offering price per share
in the Company's contemplated underwritten offering. The transaction is
subject to certain conditions, including, among other things, the
negotiation, execution and delivery of a definitive purchase agreement,
satisfactory due diligence investigations by both parties, the receipt by the
Company of $25,000,000 in net proceeds from the sale of Company stock in an
underwritten public offering, the establishment by the Company of a credit
facility with at least $10,000,000 of borrowing capacity, receipt by the
Company's Board of Directors of a satisfactory fairness opinion, the receipt
by Coda of any required waivers or approvals under an indenture, the receipt
of all necessary governmental approvals and approvals of the Boards of
Directors of both the Company and Coda. Any offering of the Company's
securities will be made only by means of a prospectus.
As proposed, Coda would have certain termination rights, certain rights
to board representation and certain registration rights with respect to
shares of Company common stock received in the proposed transaction.
<PAGE>
Item 2.
EXCO RESOURCES, INC.
(Formerly MINERAL DEVELOPMENT, INC.)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations - Comparison of Three Month Periods and Six Month
Periods Ended June 30, 1996 and 1995
Net income for the quarter ended June 30, 1996 was $13,000 compared to
a loss of $34,000 for the corresponding quarter of 1995, representing $.02
and $(.05) per share, respectively. Net income for the six month period
ended June 30, 1996 was $43,000 compared to a loss of $142,000 for the
corresponding six month period of 1995. These amounts represented $.06 and
$(.23) per share, respectively. All earnings per share figures are based on
restated weighted average shares outstanding after the retroactive effect of
the one-for-five reverse stock split approved at the shareholders' meeting
held July 11, 1996. The reverse stock split became effective July 1996, upon
filing an Amendment to the Company's Articles of Incorporation with the
Secretary of State of the State of Texas.
Revenues for the three month period ended June 30, 1996 were $266,000
compared with $254,000 from the corresponding period in 1995, a 5% increase.
Revenues increased 23% for the six month period ended June 30, 1996 to
$540,000 from $440,000 for the six month period ended June 30, 1995. These
improvements in revenues were primarily due to the increases in oil and gas
revenues, which resulted from higher oil and gas prices during the relative
periods. Also contributing to the increases in revenues were oil and gas
volumes produced from new wells that more than offset normal production
declines. Offsetting these increases, management fees and other income were
down for both the three and six month periods in 1996 versus the same periods
in 1995 due to decreased drilling and completion activity.
Costs and expenses for the three month period ended June 30, 1996, and
the six month period ended June 30, 1996 decreased $35,000 and $85,000,
respectively, versus the corresponding periods of 1995. These decreases of
12% and 15% from $288,000 to $253,000 and from $582,000 to $497,000 for the
three and six month comparative periods were due primarily to reductions in
general and administrative costs. These reductions were primarily related to
the elimination of certain executive costs for the first five months of the
current year, which more than offset additional expenses in the current six
month period for accounting, legal and associated costs related to the change
of the Company's fiscal year from March 31 to December 31.
<PAGE>
Liquidity and Capital Resources
The Company's working capital at June 30, 1996 was a negative $43,000
compared to a negative $279,000 at December 31, 1995. This increase in
working capital relates primarily to capital received upon the exercise of a
stock option by a director of the Company during the first quarter of 1996.
The option exercise resulted in $225,000 in cash for the Company. This
addition to working capital was utilized primarily to pay off the Company's
note payable in the second quarter of the current year.
Also impacting the Company's working capital was positive earnings
before interest, taxes, depreciation, depletion and amortization ("EBITDDA").
EBITDDA for the three month and six month periods ended June 30, 1996 was
$44,000, or $.06 per share, and $110,000, or $.15 per share, respectively, as
compared to a negative $2,000 and a negative $70,000 for the corresponding
periods of the prior year. This cash flow was used primarily for
expenditures attributable to the Company's capital raising and acquisition
activities. These costs through the second quarter of the current year were
$70,000 and are listed as Deferred financing and acquisition costs on the
Company's Condensed Balance Sheet dated June 30, 1996. There is no assurance
that any financing will be completed.
Management is of the opinion that the Company's cash flow and ability to
raise additional capital will be adequate to meet its current obligations as
well as fund additional property acquisitions, new projects, and generation
and/or participation in new drilling and recompletion work. The Company is
also currently working on a short-term credit facility with a bank to fund
additional costs expected to be incurred relative to the Company's finance
and acquisition activities. On August 13, 1996, the Company entered into a
letter of intent with Coda Energy, Inc. ("Coda") to acquire all of the stock
of Taurus Energy Corp., a wholly owned subsidiary of Coda. See Note 6,
Subsequent Events, to the Company's financial statements. The sale of common
stock by the Company could result in dilution of the percentage ownership of
public shareholders to finance a portion of the purchase price. There is no
assurance that any acquisition will be consummated.
At the 1996 Annual Meeting of Shareholders, the shareholders of the
Company approved an amendment to the Company's Articles of Incorporation to
authorize the issuance of up to 10,000,000 shares of preferred stock that the
Board of Directors may issue from time to time in one or more series. With
respect to each series of preferred stock, the amendment authorizes the Board
to fix and determine by resolution the number of shares of each series, the
designation thereof and all rights and preferences including voting,
dividend, conversion, redemption and liquidation rights. The Board of
Directors deemed it in the best interest of the Company to provide for a
class of series preferred stock in order to provide flexibility for corporate
planning and to have shares available for future equity financings through
issuance to the general public, future acquisitions, stock dividends or
splits, or for other corporate purposes for which the issuance of preferred
shares may be advisable.
<PAGE>
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
At the Annual Meeting of the Company's shareholders held July 11, 1996,
the shareholders approved the following items with the number of votes
cast (prior to giving effect to the reverse stock split) for, against or
withheld, and abstentions:
(1) Directors. All nominees for director were elected.
(2) Name Change. The shareholders voted to amended the Company's
Articles of Incorporation to change the name of the Company from
Mineral Development, Inc. to EXCO Resources, Inc. The votes were
cast as follows:
For Against Abstain
3,021,400 3,740 66,293
(3) Reverse Stock Split. The shareholders voted to amend the Company's
Articles of Incorporation to effect a one-for-five reverse stock
split of the Company's common stock. The votes were cast as
follows:
For Against Abstain
3,006,771 23,808 70,154
(4) Preferred Stock. The shareholders voted to amend the Company's
Articles of Incorporation to provide for a class of Preferred Stock
of up to 10,000,000 shares issuable in series. The votes were cast
as follows:
For Against Abstain
2,783,611 42,455 73,116
(5) Directors' Liability. The shareholders voted to amend the
Company's Articles of Incorporation to eliminate directors'
liability for monetary damages in certain situations. The votes
were cast as follows:
For Against Abstain
2,865,277 49,131 72,985
(6) Stock Option Plan. The shareholders voted to approve the adoption
of the Company's Stock Option Plan. The votes were cast as
follows:
For Against Abstain
2,871,564 35,513 91,770
<PAGE>
(7) 1996 Director Plan. The shareholders voted to approve the adoption
of the Company's 1996 Director Plan. The votes were cast as
follows:
For Against Abstain
2,763,161 54,485 84,030
No other matters were considered at the Annual Meeting.
Item 5. Other Information
For other information regarding the Company, please see Note 6,
Subsequent Events, to the Company's financial statements.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3.1 Articles of Amendment to the Articles of Incorporation of the
Company dated July 19, 1996 (filed herewith)
10.1 Employment Agreement dated April 17, 1996 between the Company
and Charles W. Gleeson (filed as Exhibit 10.6 to the Company's
Annual Report on Form 10-K for the Nine Month Transition
Period Ended December 31, 1995)
10.2 Amendment dated April 10, 1996 to the Company's Stock Option
Plan (filed as Exhibit 10.2 to the Company's Annual Report on
Form 10-K for the Nine Month Transition Period Ended December
31, 1995)
10.3 1996 Director Plan of the Company (filed herewith)
27.1 Financial Data Schedule (filed herewith)
(b) Reports on Form 8-K
None
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed in its behalf by the
undersigned thereunto duly authorized.
EXCO RESOURCES, INC.
(Registrant)
Date: August 14, 1996 /s/ Glenn L. Seitz
Glenn L. Seitz, Treasurer
INDEX TO EXHIBITS
Exhibit
No. Item
3.1 Articles of Amendment to the Articles of Incorporation of the
Company dated July 19, 1996 (filed herewith)
10.1 Employment Agreement dated April 17, 1996 between the Company and
Charles W. Gleeson (filed as Exhibit 10.6 to the Company's Annual
Report on Form 10-K for the Nine Month Transition Period Ended
December 31, 1995)
10.2 Amendment dated April 10, 1996 to the Company's Stock Option Plan
(filed as Exhibit 10.2 to the Company's Annual Report on Form 10-K
for the Nine Month Transition Period Ended December 31, 1995)
10.3 1996 Director Plan of the Company (filed herewith)
27.1 Financial Data Schedule (filed herewith)
<PAGE>
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
MINERAL DEVELOPMENT, INC.
- ----------------------------------------------------------------------------
Pursuant to the provisions of Article 4.04 of the Texas Business
Corporation Act (the "Act"), the undersigned adopts the following Articles of
Amendment to its Articles of Incorporation:
ARTICLE ONE
The name of the corporation is MINERAL DEVELOPMENT, INC.
ARTICLE TWO
The following amendments to the Articles of Incorporation were adopted
by the Shareholders of the Corporation on July 11, 1996:
ARTICLE ONE is hereby amended to read, in its entirety, as follows:
"1. The name of the corporation is EXCO Resources, Inc."
ARTICLE FOUR is hereby amended to read, in its entirety, as follows:
"4. The aggregate number of shares of all classes of stock
that the corporation shall have authority to issue is Thirty-
Five Million (35,000,000), of which Twenty-Five Million
(25,000,000) shares of the par value of $0.01 per share shall
be Common Stock and Ten Million (10,000,000) shares of the par
value of $0.01 per share shall be Preferred Stock issuable in
series.
Common Stock. Each five (5) shares of previously
authorized Common Stock of the corporation, par value $0.01
per share, issued and outstanding immediately prior to the
time of the filing and recording of these Articles of
Amendment ("Amendment") in the Office of the Secretary of
State of the State of Texas, shall, upon the filing and
recording of this Amendment in the Office of the Secretary of
State of the State of Texas, thereby and thereupon
automatically be combined without any further action into one
(1) validly issued, fully paid and nonassessable share of
Common Stock of the corporation, par value $0.01 per share.
Further, every right, option and warrant to acquire five (5)
shares of Common Stock of the corporation, outstanding
immediately prior to the time of filing and recording of this
Amendment in the Office of the Secretary of State of the State
of Texas, shall upon filing and recording of this Amendment in
the Office of the Secretary of State of the State of Texas,
thereby and thereupon automatically be converted without any
further action into the right to acquire one (1) share of
Common Stock of the corporation, upon the
<PAGE>
terms of the right, option or warrant, except that the purchase
price of the Common Stock, upon exercising the right, option or
warrant, shall be proportionately increased. The corporation shall
not issue fractional shares with respect to the combination or
conversion. To the extent that a shareholder holds a number of
shares of Common Stock immediately prior to the filing and
recording of this Amendment that is not evenly divisible by five
(5), such shareholder shall receive one additional share of Common
Stock for each fractional share otherwise issuable. As a result of
this Amendment, the corporation's Common Stock account will be
reduced from (a) $0.01 multiplied by the number of shares of Common
Stock issued and outstanding prior to the filing and recording of
the Amendment to (b) $0.01 multiplied by the number of shares of
Common Stock issued and outstanding immediately after the filing
and recording of the Amendment. The Capital in excess of par value
account will be credited with the amount by which the Common Stock
account is reduced. The number of shares of authorized Common
Stock of the corporation will remain at 25,000,000 and will not be
affected by the Amendment.
Preferred Stock. Shares of Preferred Stock may be issued
from time to time in one or more series, the shares of each
series to have such designations, powers, preferences, rights,
qualifications, limitations and restrictions as are stated and
expressed herein and in the resolution or resolutions
providing for the issue of such series adopted by the Board of
Directors as hereafter provided.
Authority is hereby expressly granted to the Board of
Directors to authorize the issuance of the Preferred Stock
from time to time in one or more series, and with respect to
each series of the Preferred Stock, to fix and determine by
the resolution or resolutions from time to time adopted
providing for the issuance thereof the number of shares to
constitute the series and the designation thereof and any one
or more of the following rights and preferences: (i) the rate
of dividend; (ii) the price at and terms and conditions on
which shares may be redeemed; (iii) the amount payable upon
shares in the event of involuntary liquidation; (iv) the
amount payable upon shares in the event of voluntary
liquidation; (v) sinking fund provisions (if any) for the
redemption or repurchase of the shares; (vi) the terms and
conditions on which shares may be converted, if the shares of
any series are issued with the privilege of conversion; and
(vii) voting rights (included the number of votes per share,
the matters on which the shares can vote, and the
contingencies that make the voting rights effective). The
shares of each series of the Preferred Stock may vary from the
shares of any other series thereof in any or all of the
foregoing respects. The Board of Directors may increase the
number of shares designated for any existing series by adding
to such series authorized and unissued shares not designated
for any other series. The Board of Directors may decrease the
number of shares designated for any existing series by
subtracting from such series unissued shares designated for
such series, and the shares so subtracted shall become
authorized and unissued shares of Preferred Stock."
<PAGE>
ARTICLE 10 is hereby added to the Articles of Incorporation to read, in
its entirety, as follows:
"10. To the maximum extent permitted by applicable law and
regulations, a Director of the corporation shall not be liable
to the corporation or its shareholders for monetary damages
for an act or omission in the Director's capacity as a
Director, except that this Article 10 does not eliminate or
limit the liability of a Director for:
(1) a breach of a Director's duty of loyalty to the
corporation or its shareholders,
(2) an act or omission not in good faith or that
involves intentional misconduct or a knowing violation of the
law,
(3) a transaction from which a Director received an
improper benefit, whether or not the benefit resulted from an
action taken within the scope of the Director's office,
(4) an act or omission for which the liability of a
Director is expressly provided for by statute, or
(5) an act related to an unlawful share repurchase or
payment of a dividend.
If applicable law or regulations are amended after approval by
the corporation's shareholders of this Article 10 to authorize
corporate action further eliminating or limiting the personal
liability of Directors or eliminating or limiting the personal
liability of officers, the liability of a Director or officer
of the corporation shall be eliminated or limited to the
maximum extent permitted by law. No repeal or modification of
this Article 10 by the shareholders shall adversely affect any
right or protection of a Director or officer of the
corporation existing by virtue of this Article 10 at the time
of such repeal or modification."
ARTICLE THREE
The number of shares of the corporation outstanding at the time of such
adoption was 3,975,721 shares of Common Stock, and the number of shares
entitled to vote thereon was 3,975,721 shares of Common Stock. The Common
Stock was the only class of stock entitled to vote on the amendments.
<PAGE>
ARTICLE FOUR
The number of shares voted for such amendments, and the number of shares
voted against such amendments were as follows:
Number of Shares Voted
Amendment Class FOR AGAINST
- --------- ----- --- -------
Article 1 - Name Change Common Stock 3,021,400 3,740
Article 4 - Reverse Stock Split Common Stock 3,006,771 28,808
Article 4 - Preferred Stock Common Stock 2,783,611 42,455
Article 10 - Director Liability Common Stock 2,865,277 49,131
IN WITNESS WHEREOF, the undersigned has executed these Articles of
Amendment to the Articles of Incorporation of MINERAL DEVELOPMENT, INC., as
of the 11th day of July, 1996.
MINERAL DEVELOPMENT, INC.
By: /s/ Charles W. Gleeson
-----------------------------------------
Name: Charles W. Gleeson
Title: President & CEO
<PAGE>
1996 DIRECTOR PLAN OF
MINERAL DEVELOPMENT, INC.
1. Purpose. The purpose of this Plan is to attract and retain to
Mineral Development, Inc., a Texas corporation (the "Company"), qualified and
competent directors, upon whose efforts and judgment the success of the
Company is largely dependent, and of stimulating the active interest of these
persons in the development and financial success of the Company by providing
for stock ownership in the Company by such persons.
2. Definitions. As used herein, the following terms shall have the
meaning indicated:
(a) "Annual Director Fee" shall mean an annual fee of $12,000
payable in four (4) equal quarterly amounts to each Director on the first
business day following the end of each fiscal quarter beginning with the
fiscal quarter ended September 30, 1996 (collectively, such four (4) business
days being the "Quarterly Payment Dates"), paid fifty percent (50%) in cash
and fifty percent (50%) in Common Stock of the Company.
(b) "Board" shall mean the Board of Directors of the Company.
(c) "Common Stock" shall mean the common stock, par value $0.01
per share, of the Company.
(d) "Date of Grant" shall mean the date on which an Option is
granted to a Director pursuant to Section 5 hereof.
(e) "Director" shall mean a member of the Board.
(f) "Fair Market Value" of a Share on any date of reference shall
be the average closing price of the Common Stock over the five (5) trading
days immediately preceding such date. For this purpose, the closing price of
the Common Stock on any business day shall be (i) if the Common Stock is
listed or admitted for trading on any United States national securities
exchange, the last reported sale price of Shares on such exchange, as
reported in any newspaper of general circulation, (ii) if actual transactions
in the Common Stock are included in the Nasdaq National Market ("Nasdaq-NMS")
or are reported on a consolidated transaction reporting system, the last
sales price of the Common Stock on such system, (iii) if the Common Stock is
otherwise quoted on Nasdaq or any similar system of automated dissemination
of quotations of securities prices in common use, the mean between the
closing high bid and low asked quotations for such day of the Common Stock on
such system, (iv) if none of clause (i), (ii) or (iii) is applicable, the
mean between the high bid and low asked quotations for the Common Stock as
reported by the National Daily Quotation Service if at least two securities
dealers have inserted both bid and asked quotations for the Common Stock on
at least five (5) of the ten (10) preceding trading days.
(g) "Internal Revenue Code" or "Code" shall mean the Internal
Revenue Code of 1986, as it now exists or may be amended from time to time.
(h) "Nonqualified Stock Option" shall mean an option that is not
an incentive stock option as defined in Section 422 of the Internal Revenue
Code.
(i) "Option" (when capitalized) shall mean any stock option
granted under Section 5 of this Plan.
(j) "Optionee" shall mean a person to whom an Option is granted
under this Plan or any successor to the rights of such person under this Plan
by reason of the death of such person.
(k) "Plan" shall mean this 1996 Director Plan of Mineral
Development, Inc.
<PAGE>
(l) "Quarterly Payment Dates" shall have the meaning set forth in
Section 2(a).
(m) "Share(s)" shall mean a share or shares of the Common Stock.
(n) "Share Price" shall mean the greater of $3.00 per Share or the
Fair Market Value of a Share of Common Stock on the day following the 1996
Annual Meeting of Shareholders.
(o) "Subsidiary" shall mean any corporation (other than the
Company) in any unbroken chain of corporations beginning with the Company if,
at the time of the granting of the Option, each of the corporations other
than the last corporation in the unbroken chain owns stock possessing more
than fifty percent (50%) of the total combined voting power of all classes of
stock in one of the other corporations in such chain.
3. Shares and Options. The maximum number of Shares to be issued in
consideration of the Common Stock component of the Annual Director Fee paid
under Section 4 or pursuant to Options granted under Section 5 of this Plan
shall be One Million (1,000,000) Shares. Shares issued in consideration of
the Common Stock component of the Annual Director Fee or pursuant to Options
granted under this Plan may be issued from Shares held in the Company's
treasury or from authorized and unissued Shares. If any Option granted under
this Plan shall terminate, expire, or be cancelled or surrendered as to any
Shares, such Shares shall thereafter be available for the payment of the
Common Stock component of the Annual Director Fee and for the granting of
Options hereunder. Any Option granted hereunder shall be a Nonqualified
Stock Option.
4. Annual Director Fee. On each of the Quarterly Payment Dates, each
Director shall receive one-fourth of the Annual Director Fee, fifty percent
(50%) paid in cash and fifty percent (50%) paid in Common Stock. For
purposes of payment of the Common Stock component of the Annual Director Fee,
the value of the Common Stock will be the Fair Market Value of the Common
Stock on the first business day following the end of each fiscal quarter.
5. Automatic Grant of Options.
(a) An Option to purchase ONE HUNDRED THOUSAND (100,000) Shares of
the Common Stock shall automatically be granted to each Director on a
nondiscriminatory basis on the date such Director is initially elected or
appointed a Director of the Company, or, in the case of current Directors,
upon their election or reelection at the 1996 Annual Meeting of Shareholders.
(b) Each Option shall be evidenced by an option agreement (an
"Option Agreement"), which shall contain such terms as are not inconsistent
with this Plan or any applicable law. Any person who files with the Board,
in a form satisfactory to the Board, a written waiver of eligibility to
receive any Option under this Plan shall not be eligible to receive any
Option under this Plan for the duration of such waiver.
(c) Options automatically granted to Directors pursuant to this
Section 5 shall be in addition to the Annual Director Fee or any other
benefits with respect to the Director's position with the Company or its
Subsidiaries. Neither the Plan nor any Option granted under the Plan shall
confer upon any person any right to continue to serve as a Director.
(d) An Option shall vest in four (4) equal amounts of 25,000
Shares per year over four (4) years, provided that no Shares subject to a
Director's Option shall vest in any fiscal year in which the Director attends
less than seventy-five percent (75%) of the Board meetings held for that
fiscal year. Failure to attend the requisite number of meetings during a
given year will cause a forfeiture of the 25,000 Shares subject to the Option
that were eligible to vest in that year. In the event a Director ceases to
serve as such for any reason, the unvested Shares subject to the Option will
not accelerate, and the Option shall only be exercisable for the number of
Shares that vested prior to the Director ceasing to serve as a Director.
(e) Except for the automatic grants of Options under subparagraph
(a) of this Section 5 and the issuance of Shares of Common Stock to Directors
under Section 4 above, no Options or Shares shall otherwise
<PAGE>
be granted hereunder, and the Board shall not have any discretion with
respect to the grant of Options or issuance of Shares of Common Stock within
the meaning of Rule 16b-3 promulgated under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), or any successor rule.
6. Option Price. The option price per Share of any Option granted
pursuant to this Plan to Directors elected at the June 13, 1996 Annual
Meeting of Shareholders shall be the Share Price, and, thereafter, shall be
one hundred percent (100%) of the Fair Market Value per Share on the Date of
Grant.
7. Exercise of Options. Options may be exercised at any time after
the date on which the Options, or any portion thereof, are vested until the
Option expires pursuant to Section 8; provided, however, that no Option shall
be exercisable prior to six (6) months from the Date of Grant. An Option
shall be deemed exercised when (i) the Company has received written notice of
such exercise in accordance with the terms of the Option Agreement, (ii) full
payment of the aggregate option price of the Shares as to which the Option is
exercised has been made and (iii) arrangements that are satisfactory to the
Company in its sole discretion have been made for the Optionee's payment to
the Company of the amount, if any, that the Company determines to be
necessary for the Company to withhold in accordance with applicable federal
or state income tax withholding requirements. The option price of any Shares
purchased shall be paid solely in cash, by check or money order, or by a
combination of the above.
8. Termination of Option Period. The unexercised portion of an Option
shall automatically and without notice terminate and become null and void at
the time of the earliest to occur of the following:
(a) three (3) months after the date that an Optionee ceases to be
a Director regardless of the reason therefor other than as a result of such
termination by death or permanent disability of the Optionee;
(b) fifteen (15) months after the date that an Optionee ceases to
be a Director by reason of death of the Optionee or six (6) months after the
Optionee shall die if such death shall occur during the three (3) month
period described in Subsection 8(a);
(c) twelve (12) months after the date that an Optionee ceases to
be a Director by reason of the permanent disability of the Optionee; or
(d) the tenth (10th) anniversary of the Date of Grant of the
Option.
9. Adjustment of Shares. (a) If at any time while this Plan is in
effect or unexercised Options are outstanding, there shall be any increase or
decrease in the number of issued and outstanding Shares through the
declaration of a stock dividend or through any recapitalization resulting in
a stock split-up, combination or exchange of Shares, then and in such event:
(i) appropriate adjustment shall be made in the maximum
number of Shares then subject to being issued or optioned under
this Plan, so that the same proportion of the Company's issued and
outstanding Shares shall continue to be subject to being so issued
or optioned; and
(ii) appropriate adjustment shall be made in the number of
Shares and the option price per Share thereof then subject to any
outstanding Option, so that the same proportion of the Company's
issued and outstanding Shares shall remain subject to purchase at
the same aggregate option price.
(b) Pursuant to the Plan, the number of shares subject to an
Option and the applicable option price are subject to proportionate
adjustment in the event of stock dividends, stock splits or any other
recapitalizations effected without receipt of consideration by the Company.
In the event of merger, consolidation or other like reorganization of the
Company, an appropriate substitution for the stock subject to each Option
shall be made. An appropriate substitution of stock shall also be made in
the event of a merger, consolidation or reorganization in which the Company
is not the surviving or resulting corporation.
<PAGE>
(c) Except as otherwise expressly provided herein, the issuance by
the Company of shares of its capital stock of any class, or securities
convertible into shares of capital stock of any class, either in connection
with a direct sale or upon the exercise of rights or warrants to subscribe
therefor, or upon conversion of shares or obligations of the Company
convertible into such shares or other securities, shall not affect, and no
adjustment by reason thereof shall be made with respect to, the number of or
option price of Shares then subject to outstanding Options granted under this
Plan.
(d) Without limiting the generality of the foregoing, the
existence of outstanding Options granted under this Plan shall not affect in
any manner the right or power of the Company to make, authorize or consummate
(i) any or all adjustments, recapitalizations, reorganizations or other
changes in the Company's capital structure or its business; (ii) any merger
or consolidation of the Company; (iii) any issue by the Company of debt
securities, or preferred or preference stock that would rank above the Shares
subject to outstanding Options; (iv) the dissolution or liquidation of the
Company; (v) any sale, transfer or assignment of all or any part of the
assets or business of the Company; or (vi) any other corporate act or
proceeding, whether of a similar character or otherwise.
10. Transferability of Options. Each Option Agreement shall provide
that such Option shall not be transferable by the Optionee otherwise than by
will or the laws of descent and distribution or pursuant to a qualified
domestic relations order and that so long as an Optionee lives, only such
Optionee or his or her guardian or legal representative shall have the right
to exercise the related Option.
11. Issuance of Shares. No person shall be, or have any of the rights
or privileges of, a shareholder of the Company with respect to any of the
Shares subject to an Option unless and until certificates representing such
Shares shall have been issued and delivered to such person. As a condition
of any transfer of the certificate for Shares, the Board may obtain such
agreements or undertakings, if any, as it may deem necessary or advisable to
assure compliance with any provision of this Plan, any Option Agreement or
any law or regulation, including, but not limited to, the following:
(i) A representation, warranty or agreement by the Optionee
to the Company, at the time any Option is exercised, if applicable,
that he or she is acquiring the Shares to be issued to him or her
for investment and not with a view to, or for sale in connection
with, the distribution of any such Shares; and
(ii) A representation, warranty or agreement, if applicable,
to be bound by any legends that are, in the opinion of the Board,
necessary or appropriate to comply with the provisions of any
securities law deemed by the Board to be applicable to the issuance
of the Shares and are endorsed upon the Share certificates.
Share certificates issued to an Optionee who is a party to any
shareholder agreement or a similar agreement shall bear the legends contained
in such agreements.
12. Administration of the Plan. (a) To the extent any administration
is required, this Plan shall be administered by the Board.
(b) The Board, from time to time, may adopt rules and regulations
for carrying out the purposes of this Plan. The determinations and the
interpretation and construction of any provision of this Plan by the Board
shall be final and conclusive.
(c) Any and all decisions or determinations of the Board shall be
made either (i) by a majority vote of the members of the Board at a meeting
or (ii) without a meeting by the written approval of a majority of the
members of the Board.
<PAGE>
(d) This Plan is intended and has been drafted to comply with Rule
16b-3, as amended, under the Exchange Act. If any provision of this Plan
does not comply with Rule 16b-3, as amended, this Plan shall be automatically
amended to comply with Rule 16b-3, as amended.
13. Interpretation. (a) If any provision of this Plan is held invalid
for any reason, such holding shall not affect the remaining provisions
hereof, but instead this Plan shall be construed and enforced as if such
provision had never been included in this Plan.
(b) THIS PLAN SHALL BE GOVERNED BY THE SUBSTANTIVE LAWS OF THE
STATE OF TEXAS, WITHOUT REFERENCE TO CONFLICT OF LAW PROVISIONS.
(c) Headings contained in this Plan are for convenience only and
shall in no manner be construed as part of this Plan.
(d) Any reference to the masculine, feminine or neuter gender
shall be a reference to such other gender as is appropriate.
14. Amendment. The shareholders of the Company or the Board may alter
or discontinue the Plan, provided that such action may not materially affect
outstanding Options theretofore granted or Common Stock theretofore issued
and provided that no such action of the Board may, without the approval of
shareholders, alter the provisions of the Plan so as to (i) increase the
total number of Shares that may be purchased pursuant to any Option (except
to reflect stock dividends, stock splits or similar recapitalizations), (ii)
decrease the option price of any Option, (iii) extend the option period for
any Option, or (iv) materially increase the benefits under the Plan. This
Plan shall not be amended more than once every six (6) months, other than to
comport with applicable changes to the Internal Revenue Code, the Employee
Retirement Income Security Act of 1974, as amended, or the rules thereunder.
15. Effective Date and Termination Date. The effective date of this
Plan or any amendment thereto is the date on which the Board adopted this
Plan or such amendment; provided, however, if this Plan is not approved by
the shareholders of the Company within twelve (12) months after the effective
date, then, in such event, this Plan and all Options granted pursuant to this
Plan shall be null and void. This Plan shall terminate on May 17, 2006, and
any Option outstanding on such date will remain outstanding until it has
either expired or has been exercised, but in no event longer than ten (10)
years from the Date of Grant.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
unaudited financial statements for EXCO Resources, Inc. as of and for the
six-month period ended June 30, 1996 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 29,000
<SECURITIES> 0
<RECEIVABLES> 280,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 310,000
<PP&E> 5,865,000
<DEPRECIATION> 4,968,000
<TOTAL-ASSETS> 1,277,000
<CURRENT-LIABILITIES> 353,000
<BONDS> 0
0
0
<COMMON> 8,000
<OTHER-SE> 890,000
<TOTAL-LIABILITY-AND-EQUITY> 1,277,000
<SALES> 442,000
<TOTAL-REVENUES> 540,000
<CGS> 0
<TOTAL-COSTS> 497,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,000
<INCOME-PRETAX> 43,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 43,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 43,000
<EPS-PRIMARY> .06
<EPS-DILUTED> .06
</TABLE>
