<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934, as amended
(Amendment No. __)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2)
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
MINERAL DEVELOPMENT, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement,
if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or
14a-6(i)(2).
[ ] $500 per each party to the controversy pursuant to Exchange
Act Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
(2) Aggregate number of securities to which transaction
applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11:*
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
* Set forth amount on which the filing is calculated and state
how it was determined.
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or
Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
MINERAL DEVELOPMENT, INC.
9400 N. Central Expressway, Suite 1209
Dallas, Texas 75231
__________________________________
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held June __, 1996
To the Shareholders of Mineral Development, Inc.
NOTICE IS HEREBY GIVEN that the 1996 Annual Meeting of
Shareholders (the "Annual Meeting") of Mineral Development, Inc.,
a Texas corporation (the "Company"), will be held at the Royal Oaks
Country Club, 7915 Greenville Avenue, Dallas, Texas on June __,
1996, at 10:00 a.m., local time, for the purposes of considering
and voting upon the following:
1. To elect five (5) directors to hold office for the term
specified or until their respective successors have been duly
elected and have qualified.
2. A proposal to amend the Company's Articles of
Incorporation to change the name of the Company to EXCO Resources,
Inc.
3. A proposal to amend Article 4 of the Company's Articles
of Incorporation to effect a one-for-five reverse stock split of
the Company's common stock.
4. A proposal to amend Article 4 of the Company's Articles
of Incorporation to provide for a class of preferred stock of up to
10,000,000 shares issuable in series.
5. A proposal to amend the Company's Articles of
Incorporation to add Article 10 to provide for the elimination of
director liability for monetary damages in actions brought by the
Company or its shareholders on behalf of the Company for directors'
acts or omissions while acting in their capacity as directors of
the Company to the maximum extent permitted by Article 1302-7.06 of
the Texas Miscellaneous Corporation Laws Act.
6. A proposal to approve and ratify the adoption of the
Mineral Development, Inc. Stock Option Plan.
7. A proposal to approve and ratify the adoption of the
Mineral Development, Inc. 1996 Director Plan.
8. To transact any and all other business that may properly
be presented at the Annual Meeting or any adjournment(s) thereof.
The items of business are more fully described in the Proxy
Statement accompanying this notice.
The Board of Directors has fixed May 29, 1996, as the record
date (the "Record Date") for the determination of shareholders
entitled to notice of and to vote at the Annual Meeting or any
adjournment(s) thereof. Only shareholders of record at the close
of business on the Record Date are entitled to notice of and to
vote at the Annual Meeting. The stock transfer books will not be
closed. A list of shareholders entitled to vote at the Annual
Meeting will be available for examination at the offices of the
Company for ten days prior to the Annual Meeting.
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING.
HOWEVER, WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING IN
PERSON, YOU ARE URGED TO PROMPTLY MARK, SIGN, DATE AND RETURN THE
ACCOMPANYING PROXY IN THE ENCLOSED, SELF-ADDRESSED, STAMPED
ENVELOPE SO THAT YOUR SHARES OF STOCK MAY BE REPRESENTED AND VOTED
IN ACCORDANCE WITH YOUR DESIRES AND IN ORDER THAT THE PRESENCE OF
A QUORUM MAY BE ASSURED AT THE ANNUAL MEETING. YOUR PROXY WILL BE
RETURNED TO YOU IF YOU SHOULD BE PRESENT AT THE ANNUAL MEETING AND
SHOULD REQUEST SUCH RETURN OR IF YOU SHOULD REQUEST SUCH RETURN IN
THE MANNER PROVIDED FOR REVOCATION OF PROXIES ON THE INITIAL PAGES
OF THE ENCLOSED PROXY STATEMENT. PROMPT RESPONSE BY OUR
SHAREHOLDERS WILL REDUCE THE TIME AND EXPENSE OF SOLICITATION.
By Order of the Board of Directors
RICHARD D. COLLINS,
Corporate Secretary
Dallas, Texas
May 29, 1996
<PAGE>
MINERAL DEVELOPMENT, INC.
9400 N. Central Expressway, Suite 1209
Dallas, Texas 75231
_______________________________
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
To Be Held June __, 1996
_______________________________
SOLICITATION AND REVOCATION OF PROXIES
This Proxy Statement and the accompanying proxy are being
furnished to shareholders of Mineral Development, Inc. (the
"Company") in connection with the solicitation by the Board of
Directors of the Company of proxies to be voted at the 1996 Annual
Meeting of Shareholders (the "Annual Meeting") to be held on June
__, 1996, at the time and place and for the purposes set forth in
the accompanying Notice of Annual Meeting of Shareholders and at
any adjournment(s) of the Annual Meeting. This Proxy Statement,
the accompanying proxy and the Company's Annual Report to
shareholders for the nine month transition period ended December
31, 1995 (the "Annual Report"), are first being sent to
shareholders of the Company on or about May 29, 1996.
The accompanying form of proxy is designed to permit each
holder of the Company's common stock, par value $0.01 per share
(the "Common Stock"), to vote for or withhold voting for any or all
of the nominees for election as directors of the Company listed
under proposal 1, to vote for or against or to abstain from voting
on proposals 2, 3, 4, 5, 6 and 7 and to authorize the proxies to
vote in their discretion with respect to any other proposal brought
before the Annual Meeting. When a shareholder's executed proxy
card specifies a choice with respect to a voting matter, the shares
will be voted accordingly. If no such specifications are made, the
proxies for the Common Stock will be voted by those persons named
in the proxies at the Annual Meeting FOR the election of the
nominees under the caption "Election of Directors," FOR the
amendment to the Company's Articles of Incorporation to change the
name of the Company, FOR the amendment to Article 4 of the
Company's Articles of Incorporation to effect a one-for-five
reverse stock split of the Company's Common Stock, FOR the
amendment to Article 4 of the Company's Articles of Incorporation
to provide for a class of preferred stock of up to 10,000,000
shares issuable in series, FOR the amendment to the Company's
Articles of Incorporation to add Article 10 to provide for the
elimination of director liability for monetary damages in certain
situations, FOR the adoption of the Mineral Development, Inc. Stock
Option Plan and FOR the adoption of the Mineral Development, Inc.
1996 Director Plan. If any other matters properly come before the
Annual Meeting, the proxies will vote upon such matters according
to their judgment.
The Company encourages the personal attendance of its
shareholders at the Annual Meeting, and execution of the
accompanying proxy will not affect a shareholder's right to attend
the Annual Meeting and to vote his or her shares in person. Any
shareholder giving a proxy has the right to revoke it by giving
written notice of revocation to Mr. Richard D. Collins, Corporate
Secretary, Mineral Development, Inc., at the Company's principal
executive offices, 9400 N. Central Expressway, Dallas, Texas 75231,
at any time before the proxy is voted or by executing and
delivering a later-dated proxy, or by attending the Annual Meeting
and voting his or her shares in person. No such notice of
revocation or later-dated proxy, however, will be effective until
received by the Company at or prior to the Annual Meeting. Such
revocation will not affect a vote on any matters taken prior to the
receipt of such revocation. Mere attendance at the Annual Meeting
will not of itself revoke the proxy.
In addition to the solicitation of proxies by use of the mail,
officers, directors and regular employees of the Company may
solicit the return of proxies by personal interview, mail,
telephone and/or facsimile. These persons will not be additionally
compensated, but will be reimbursed for out-of-pocket expenses.
The Company will also request brokerage houses and other
custodians, nominees and fiduciaries to forward solicitation
material to the beneficial owners of shares held of record by such
persons and will reimburse such persons and the Company's transfer
agent for their reasonable out-of-pocket expenses in forwarding
such materials. All expenses of the Company in connection with
this solicitation will be borne by the Company.
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<PAGE>
The Annual Report, including audited financial statements, is
enclosed herewith. Except for the audited financial statements
included in the Annual Report, which are incorporated herein by
reference, the Annual Report does not form any part of the material
for the solicitation of proxies.
PURPOSES OF THE MEETING
At the Annual Meeting, the shareholders of the Company will
consider and vote upon the following matters:
1. The election of five (5) directors to hold office for the
term specified or until their respective successors have been duly
elected and have qualified.
2. A proposal to amend the Company's Articles of
Incorporation to change the name of the Company to EXCO Resources,
Inc.
3. A proposal to amend Article 4 of the Company's Articles
of Incorporation to effect a one-for-five reverse stock split of
the Company's Common Stock.
4. A proposal to amend Article 4 of the Company's Articles
of Incorporation to provide for a class of preferred stock of up to
10,000,000 shares issuable in series.
5. A proposal to amend the Company's Articles of
Incorporation to add Article 10 to provide for the elimination of
director liability for monetary damages in actions brought by the
Company or its shareholders on behalf of the Company for directors'
acts or omissions while acting in their capacity as directors of
the Company to the maximum extent permitted by Article 1302-7.06 of
the Texas Miscellaneous Corporation Laws Act (the "TMCLA").
6. A proposal to approve and ratify the adoption of the
Mineral Development, Inc. Stock Option Plan.
7. A proposal to approve and ratify the adoption of the
Mineral Development, Inc. 1996 Director Plan.
8. Such other and further business as may properly be
presented at the Annual Meeting or any adjournment(s) thereof.
VOTING SECURITIES AND PRINCIPAL SHAREHOLDERS
General
The Board of Directors of the Company has fixed May 29, 1996,
as the record date (the "Record Date") for the Annual Meeting.
Only holders of record of the outstanding shares of Common Stock at
the close of business on the Record Date are entitled to notice of,
and to vote at, the Annual Meeting or any adjournment(s) thereof.
At the close of business on the Record Date, the Company had issued
and outstanding 3,975,721 shares of Common Stock. The Common Stock
is the only class of stock entitled to vote at the Annual Meeting.
A shareholder is entitled to one vote, in person or by proxy, at
the Annual Meeting for each share of Common Stock held of record in
his or her name at the close of business on the Record Date.
Quorum and Required Vote
The presence, in person or by proxy, of the holders of a
majority of the issued and outstanding shares of Common Stock
entitled to vote at the Annual Meeting or any adjournment(s) of the
Annual Meeting is necessary to constitute a quorum to transact
business at the Annual Meeting. Assuming the presence of a quorum,
(1) the affirmative vote of the holders on the Record Date of a
plurality of the outstanding shares of Common Stock present, in
person or by proxy, at the Annual Meeting is necessary for the
election of directors, (2) the affirmative vote of the holders on
the Record Date of two-thirds of the issued and outstanding shares
of Common Stock is required on the four matters relating to
proposed amendments to the Company's Articles of Incorporation and
(3)
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<PAGE>
the affirmative vote of the holders on the Record Date of a
majority of shares of Common Stock represented in person or by
proxy at the Annual Meeting is required to approve or ratify each
of the other proposals relating to the option plans of the Company
to be presented at the Annual Meeting.
Security Ownership of Management
The following table and notes to the table set forth certain
information with respect to the shares of Common Stock beneficially
owned by (i) each director and nominee for director of the Company,
(ii) each executive officer of the Company included in the Summary
Compensation Table set forth under the caption "Executive
Compensation" below, and (iii) all directors and executive officers
of the Company as a group, as of the Record Date:
<TABLE>
<CAPTION>
Amount and
Nature of Percent of
Beneficial Class Owned
Name of Beneficial Owner Ownership(1) Beneficially(2)
- ------------------------ ------------ ---------------
<S> <C> <C>
Richard D. Collins 165,983 4.18
David N. Fitzgerald 717,386(3) 18.04
Charles W. Gleeson 0(4) 0.00
William R. Granberry 400,000 10.06
John A. Schlensker 103,721(5) 2.61
Glenn L. Seitz 358,695 9.02
NOTE: Two additional nominees
for Director have yet to be
determined and will be included
in the Definitive Proxy
Statement.
All directors and executive
officers as a group (5 persons) 1,745,785 43.91
__________________________
<FN>
(1) Beneficial ownership as reported in the above table has been
determined in accordance with Rule 13d-3 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). Unless
otherwise indicated, each of the persons named has sole voting
and investment power with respect to the shares reported.
(2) The percentages of Common Stock indicated are based on
3,975,721 shares of Common Stock issued and outstanding on the
Record Date.
(3) Includes 45,623 shares held by Frances Fitzgerald, Mr.
Fitzgerald's wife, 102,120 shares held by Dave Fitzgerald,
Inc., a company of which Mr. Fitzgerald is president, and
23,059 shares held by Sunsuzli, Ltd., a limited partnership of
which Mr. Fitzgerald is the general partner.
(4) Mr. Gleeson will be entitled to acquire 500,000 shares of
Common Stock upon the exercise of a stock option to be granted
should Mr. Gleeson's Employment Contract with the Company
become effective. See "Executive Compensation - Employment
Contracts."
(5) Includes 26,400 shares held by Schlensker Drilling Corp., a
corporation of which Mr. Schlensker is president and sole
owner, and 7,021 shares held by D. Diane Schlensker, Mr.
Schlensker's wife.
</FN>
</TABLE>
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<PAGE>
Security Ownership of Certain Beneficial Owners
The following table sets forth information concerning the
beneficial ownership of shares of the Company's Common Stock by all
persons or entities known to the Company to be the beneficial
owners of more than 5% of the outstanding Common Stock on the
Record Date:
<TABLE>
<CAPTION>
Amount and
Nature of Percent of
Beneficial Class Owned
Name of Beneficial Owner Ownership(1) Beneficially(2)
- ------------------------ ------------ ---------------
<S> <C> <C>
David N. Fitzgerald 717,386(3) 18.04
Charles W. Gleeson 0(4) 0.00
William R. Granberry 400,000 10.06
Glenn L. Seitz 358,695 9.02
__________________
<FN>
(1) Beneficial ownership as reported in the above table has been
determined in accordance with Rule 13d-3 under the Exchange
Act. Unless otherwise indicated, each of the persons named
has sole voting and investment power with respect to the
shares reported.
(2) The percentages of Common Stock indicated are based on
3,975,721 shares of Common Stock issued and outstanding on the
Record Date.
(3) Includes 45,623 shares held by Frances Fitzgerald, Mr.
Fitzgerald's wife, 102,120 shares held by Dave Fitzgerald,
Inc., a company of which Mr. Fitzgerald is president, and
23,059 shares held by Sunsuzli, Ltd., a limited partnership of
which Mr. Fitzgerald is the general partner.
(4) Mr. Gleeson will be entitled to acquire 500,000 shares of
Common Stock upon the exercise of a stock option to be granted
should Mr. Gleeson's Employment Contract with the Company
become effective. See "Executive Compensation - Employment
Contracts."
</FN>
</TABLE>
ITEM 1. ELECTION OF DIRECTORS
Nominees
The Bylaws of the Company provide that the Board of Directors
shall be determined by resolution of the Board of Directors at any
meeting. The Board of Directors of the Company has set the number
of directors comprising the Board of Directors at five and has
nominated for directors the five individuals named below to be
elected at the Annual Meeting to hold office until his or her
successor has been duly elected and has qualified.
The tables below set forth for each nominee for director and
for each continuing director, the name, age and the principal
occupation of each nominee or continuing director, the
directorships in public companies, if any, held by each nominee or
continuing director and the year the nominee first became a
director of the Company.
-4-
<PAGE>
<TABLE>
<CAPTION>
Year First
Became a
Director of Business Experience
Name and Age the Company During Last Five Years
- ------------ ----------- ----------------------
<S> <C> <C>
David N. Fitzgerald 1993(1) Chairman of the Board,
Chief Executive Officer
and President of the
Company since January
1996; President of Dave
Fitzgerald, Inc. and Exit
Oilfield Equipment, Inc.
Charles W. Gleeson New Nominee Independent Oil and Gas
Consultant (1995-1996);
various executive
positions with Parker and
Parsley Petroleum Co.
("P&P") from 1991-1995,
including Senior Vice
President, Vice President
- Gas Processing,
President of Parker and
Parsley Gas Processing
Co., Managing Director of
Bridge Oil Ltd. (P&P's
Australian subsidiary)
and Senior Vice
President-Permian
Production Region; Vice-
President-Production of
Damson Oil Corporation
(1983-1991)(2)
Richard D. Collins 1993(3) Secretary of the Company
since May 1994 and
Director of the Company
since January 1993;
Independent Financial
Consultant since 1988;
Director of International
Star Resources, Ltd. and
Minute Man of America,
Inc. since 1994.
NOTE: Two additional nominees for Director have yet to be
determined and will be included in the Definitive Proxy
Statement.
___________________________
<FN>
(1) Mr. Fitzgerald served as a director of the Company from 1977
to 1985.
(2) Under the terms of his Employment Contract with the Company,
Charles W. Gleeson will become President and Chief Executive
Officer of the Company effective June 1, 1996 if the Company
is successful in raising a minimum of $9,000,000 of capital in
a contemplated registered public offering. See "Executive
Compensation - Employment Contracts."
(3) Mr. Collins served as a director of the Company from 1976 to
1984.
</FN>
</TABLE>
Unless otherwise indicated on any duly executed and dated
proxy, the persons named in the enclosed proxy intend to vote the
shares that it represents for the election of the nominees listed
in the table above for the term specified. Although the Company
does not anticipate that any of the above-named nominees will
refuse or be unable to accept or serve as a director of the
Company, the persons named in the enclosed proxy intend, if any
nominee is unable or unwilling to serve as a director, to vote the
shares represented by the proxy for the election of such other
person or persons as may be nominated or designated by management,
unless they are directed by the proxy to do otherwise.
-5-
<PAGE>
Assuming the presence of a quorum, the affirmative vote of the
holders of a plurality of the shares of Common Stock, present or
represented by proxy at the Annual Meeting, is required for the
election of directors. Assuming the receipt by each such person of
the affirmative vote of at least a plurality of the shares of
Common Stock present or represented at the Annual Meeting, the five
persons receiving the greatest number of votes will be elected as
directors. Proxies will be voted for the nominees in accordance
with specifications marked thereon and, if no specification is
made, will be voted "FOR" the above nominees for the term noted.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
THE ELECTION OF EACH OF THE INDIVIDUALS
NOMINATED FOR ELECTION AS A DIRECTOR
Meetings and Committees of the Board of Directors
The Board of Directors conducts its business through meetings
of the Board of Directors and through its committees. In
accordance with the Bylaws of the Company, the Board of Directors
has established the Option Plan Committee. During the nine month
transition period ended December 31, 1995, the Board of Directors
held three regular meetings and took action on five separate
occasions by unanimous consents in lieu of a special meeting. Each
director attended all of the meetings of the Board of Directors.
The Option Plan Committee did not meet during the nine month
period.
Option Plan Committee
The Option Plan Committee is made up of two disinterested
persons appointed by the Board. The Option Plan Committee is
responsible for administering the Stock Option Plan, which grants
the Option Plan Committee broad authority to grant options to
certain employees of the Company, to determine the number of shares
subject to options and the exercise price of such options and to
provide for other option features such as time or date of grant,
the appropriate exercise periods and methods of exercise and
requirements regarding the vesting of options. David N. Fitzgerald
and Richard D. Collins served as members of the Option Plan
Committee in 1995 and will continue to serve in such capacity until
the Annual Meeting.
Director Compensation
In 1995, each non-employee director was paid $250 for each
regular and special directors' meeting of the Company attended.
Director fees will remain at $250 per meeting until the Annual
Meeting.
Certain Transactions and Relationships
See "Executive Compensation--Transactions with Management" for
certain transactions and relationships between directors and the
Company or its subsidiaries or affiliates.
ITEM 2. PROPOSAL TO AMEND THE COMPANY'S
ARTICLES OF INCORPORATION TO CHANGE NAME OF THE COMPANY
General
The Board of Directors of the Company has approved and
recommends that the shareholders adopt the proposed amendment to
Article 1 of the Articles of Incorporation of the Company, which
will change the name of the Company to EXCO Resources, Inc.
The Board of Directors believes it is in the best interest of
the Company and its shareholders to change the name of the Company
in order to provide for greater name recognition in the public
market as the Company will attempt to list its Common Stock on the
Nasdaq National Market under the proposed new trading symbol
"EXCO." In addition, the recommended name has the advantage of
symbolizing a new start for the Company, which would begin with the
Company's proposed registered public offering. If the offering is
successfully registered and sold, of which there is no assurance,
the Company would raise a significant amount of equity capital,
allowing the
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<PAGE>
Company to focus on larger producing property acquisitions that,
historically, have been unavailable to the Company due to capital
limitations.
Approval
Assuming the presence of a quorum, the affirmative vote of the
holders of two-thirds of the outstanding shares of Common Stock is
required for the approval of the proposal to amend the Company's
Articles of Incorporation to change the name of the Company to EXCO
Resources, Inc. Proxies will be voted for or against such approval
in accordance with the specifications marked thereon and, if no
specification is made, will be voted "FOR" such approval.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
THE PROPOSAL TO AMEND THE COMPANY'S ARTICLES
OF INCORPORATION TO CHANGE THE NAME OF
THE COMPANY TO EXCO RESOURCES, INC.
ITEM 3. PROPOSAL TO AMEND ARTICLE 4 OF THE COMPANY'S ARTICLES OF
INCORPORATION TO EFFECT A ONE-FOR-FIVE REVERSE STOCK SPLIT OF
THE COMPANY'S COMMON STOCK
General
The Board of Directors of the Company has approved and
recommends that the shareholders adopt the proposed amendment to
Article 4 of the Articles of Incorporation of the Company to effect
a one-for-five reverse stock split of the presently issued and
outstanding shares of the Company's Common Stock, and to provide
for the issuance of one share of Common Stock for each fractional
share otherwise issuable in connection therewith. Under the
proposal, the par value of the Common Stock will remain at $0.01
per share and the number of shares authorized under the Articles of
Incorporation will remain at 25,000,000. As a result, the "Common
Stock" account on the Company's Balance Sheet ($39,757 at April 30,
1996) will be reduced to one-fifth its present amount with the
"Capital in excess of par value" account being credited with the
amount by which the Common Stock account is reduced. The complete
text of the proposed amendment to Article 4 of the Company's
Articles of Incorporation to effect the reverse stock split is set
forth as Exhibit A to this proxy statement. If the reverse stock
split is approved by the shareholders, each holder of record of
Common Stock on the effective date of the reverse stock split will
thereafter be deemed to hold one share of Common Stock for every
five presently issued and outstanding shares of Common Stock held
of record on that date.
Purpose and Effect
The principal effect of the proposed reverse stock split will
be to decrease the number of outstanding shares of Common Stock
from 3,975,721 shares to approximately 795,144 shares. The Board
of Directors is of the opinion that the reverse stock split is
advisable and in the best interests of the Company and its
shareholders. In conjunction with the development of market makers
and a better market for the Common Stock, the Company will attempt
to have the Common Stock listed on the Nasdaq National Market
although the Company cannot insure that it will be successful in
any of its efforts. The reverse stock split is expected to assist
the Company in meeting the Nasdaq National Market's minimum bid per
share requirement. At the present time, the Common Stock has no
established market, although periodic quotations for the Common
Stock have been published on the OTC Bulletin Board. The Board of
Directors also believes that, if the Company is successful in
listing its Common Stock on the Nasdaq National Market, the Company
would more likely be successful in raising additional working
capital through the issuance of new shares.
The Board of Directors believes that the total number of
shares currently outstanding is disproportionately large relative
to the Company's present market capitalization. Moreover, when
such a large number of shares is outstanding, earnings per share is
only affected by a significant change in net earnings. If a
smaller number of shares were outstanding, management would be more
likely to see its revenue efforts and cost savings reflected in the
Company's earnings per share.
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<PAGE>
The Board of Directors believes that the proposed one-for-five
reverse stock split may result in a broader market for the Common
Stock than currently exists due to the increase of the per share
price. The Board of Directors believes that the present level of
per share market prices of the Common Stock impairs the
acceptability of the stock by portions of the financial community
and the investing public. Theoretically, the price per share of
stock should not, of itself, affect the marketability of the stock,
the type of investor who acquires the stock or a company's
reputation in the financial community. However, in practice, the
price per share does affect the stock because many investors look
upon low priced stock as unduly speculative in nature, and, as a
matter of policy, avoid investment in such stocks. The increased
price per share may encourage interest and trading in the Company's
Common Stock and possibly promote greater liquidity for the
Company's shareholders, although such liquidity could be adversely
affected by the reduced number of shares outstanding after the
proposed reverse stock split. Nonetheless, there is no assurance
that these effects will occur, or that the per share price level of
the Common Stock immediately after the proposed reverse stock split
will be maintained for any period of time.
Based upon the 3,975,721 shares of Common Stock outstanding on
May 29, 1996, the proposed reverse stock split will decrease the
outstanding shares of Common Stock by 80%, and thereafter
approximately 795,144 shares of Common Stock will be outstanding,
held by approximately 1,770 shareholders of record. Other than as
set forth above, the reverse stock split will not affect any
shareholder's proportionate equity interest in the Company. The
Common Stock issued pursuant to the reverse stock split will be
fully paid and nonassessable, and the voting rights and other
rights that accompany the Common Stock will not be altered by the
change. Further, the number of shareholders of record of Common
Stock will not be reduced by this transaction.
Any tax liability to shareholders resulting from the reverse
stock split will likely be insubstantial. The receipt of Common
Stock in the reverse stock split should not result in any taxable
gain or loss to shareholders for federal income tax purposes. If
the proposed reverse stock split is approved, the tax basis of
Common Stock received in the reverse stock split will be equal, in
the aggregate, to the basis of the shares exchanged for the Common
Stock. For tax purposes, the holding period of the shares
immediately prior to the effective date of the reverse stock split
will be included in the holding period of the Common Stock received
in the reverse stock split.
If the proposal is approved by the shareholders, the Company
will promptly file, with the Secretary of State of the State of
Texas, an amendment to its Articles of Incorporation, incorporating
the reverse stock split. The proposed reverse stock split will
become effective on the date of such filing.
Certificates and Fractional Shares
The certificates presently representing shares of Common Stock
will be deemed to represent one-fifth the number of shares of
Common Stock after the reverse stock split. No fractional shares
of Common Stock will be issued and, in lieu thereof, shareholders
holding a number of shares of Common Stock not evenly divisible by
five, and shareholders holding less than five shares of Common
Stock, upon surrender of their certificates, will be issued one
additional share for each fractional share.
Upon the effectiveness of the reverse stock split, the Company
will mail to each shareholder a letter of transmittal with
instructions for the surrender of each shareholders' shares of
Common Stock. Please do not transmit shares of Common Stock for
exchange prior to receiving the letter of transmittal.
Approval
Assuming the presence of a quorum, the affirmative vote of the
holders of two-thirds of the issued and outstanding shares of
Common Stock is required for the approval of the proposal to amend
Article 4 of the Company's Articles of Incorporation to effect a
one-for-five reverse stock split. Proxies will be voted for or
against such approval in accordance with the specifications marked
thereon and, if no specification is made, will be voted "FOR" such
approval.
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<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL
TO AMEND ARTICLE 4 OF THE COMPANY'S ARTICLES OF
INCORPORATION TO EFFECT A ONE-FOR-FIVE
REVERSE STOCK SPLIT OF THE COMPANY'S
COMMON STOCK
ITEM 4. PROPOSAL TO AMEND ARTICLE 4 OF THE COMPANY'S ARTICLES OF
INCORPORATION TO PROVIDE FOR A CLASS OF PREFERRED STOCK
ISSUABLE IN SERIES
General
The Board of Directors of the Company has approved and
recommends that the shareholders adopt the proposed amendment to
Article 4 of the Articles of Incorporation of the Company providing
for a class of Preferred Stock consisting of up to 10,000,000
shares that the Board of Directors may issue from time to time in
one or more series. The proposed amendment to Article 4 of the
Articles of Incorporation, if adopted, would authorize the issuance
of up to 10,000,000 shares of Preferred Stock, par value $0.01 per
share (the "Preferred Stock"), and would grant authority to the
Board of Directors to authorize the issuance of the Preferred Stock
from time to time in one or more series. Further, with respect to
each series of the Preferred Stock, the amendment authorizes the
Board to fix and determine by resolution providing for the issuance
thereof, the number of shares that will constitute each 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; (iv) 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. The complete text of the proposed amendment to
Article 4 of the Company's Articles of Incorporation is set forth
as Exhibit B to this Proxy Statement.
Purpose and Effect
The Board of Directors deems 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.
The ability of the Board of Directors to issue additional
shares of Preferred Stock in a private transaction to a holder who
would side with management and vote against a particular business
combination or a change in the composition of the Board could
impede or discourage a person or entity seeking to effect a hostile
business combination with or desiring to obtain control of the
Company. In addition, the power of the Board of Directors to issue
Preferred Stock with purchase, voting or other rights that might
impede or discourage a takeover attempt may make the Company a less
attractive takeover candidate and may deter takeover attempts not
approved by the Board of Directors. It should be noted that the
voting rights, if any, to be accorded to any series of Preferred
Stock are fixed by the Board of Directors. Accordingly, if the
Board of Directors so authorizes, any holders of Preferred Stock
may be entitled to vote separately as a class in connection with
approval of certain extraordinary corporate transactions in
circumstances where Texas law does not require such class vote, or
might be given a disproportionately large number of votes. Such
Preferred Stock could also be convertible into a large number of
shares of Common Stock under certain circumstances or have other
terms, such as dilutive purchase rights, that may make acquisition
of a controlling interest in the Company more difficult or costly.
Potentially, the Preferred Stock could be used to create voting
impediments or to frustrate persons seeking to effect a merger or
otherwise to gain control of the Company. Issuance of Preferred
Stock as an anti-takeover device might preclude shareholders from
taking advantage of a situation that might be favorable to their
interests. The Board, however, has no present intent to issue
shares of Preferred Stock for such purposes.
Approval
Assuming the presence of a quorum, the affirmative vote of
two-thirds of the issued and outstanding shares of Common Stock is
required for the approval of the proposal to amend Article 4 of the
Company's Articles of
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<PAGE>
Incorporation to provide for a class of preferred stock of up to
10,000,000 shares issuable in series. Proxies will be voted for or
against such approval in accordance with the specifications marked
thereon and, if no specification is made, will be voted "FOR" such
approval.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL
TO AMEND ARTICLE 4 OF THE COMPANY'S ARTICLES OF
INCORPORATION TO PROVIDE FOR A CLASS OF
PREFERRED STOCK OF UP TO 10,000,000
SHARES ISSUABLE IN SERIES.
ITEM 5. PROPOSAL TO AMEND THE ARTICLES OF INCORPORATION TO
ELIMINATE DIRECTOR LIABILITY FOR MONETARY DAMAGES IN CERTAIN
SITUATIONS
General
The Board of Directors of the Company has approved and
recommends that the shareholders adopt the proposed amendment to
its Articles of Incorporation to add Article 10, which eliminates
directors' personal liability to the Company and its shareholders
for monetary damages in certain situations. Proposed Article 10 is
consistent with Article 1301-7.06 of the TMCLA, which provides that
personal liability of directors of corporations may be limited or
eliminated in certain circumstances. The primary purpose of the
law is to encourage qualified individuals to serve as directors of
Texas corporations by permitting Texas corporations to include in
their articles of incorporation a provision limiting or eliminating
directors' liability to the corporation or its shareholders for an
act or omission in the director's capacity as a director, with
certain exceptions as set forth below. The Texas statute is an
enabling provision only, and an amendment to a corporation's
articles of incorporation must be approved by its shareholders in
order to effect the permitted limitation or elimination of
liability.
Proposed Article 10 to the Company's Articles of Incorporation
will eliminate a director's liability for monetary damages to the
Company or its shareholders for acts or omissions in the director's
capacity as a director, however, the amendment will not eliminate
or limit the liability of a director for (1) a breach of a
director's duty of loyalty to the Company 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.
Proposed Article 10 also will not eliminate directors' liability
resulting from suits by parties other than the Company or its
shareholders. The complete text of proposed Article 10 is set
forth as Exhibit C to this Proxy Statement.
Purpose and Effect
Proposed Article 10 relates only to elimination of monetary
damages and will not affect the Company or its shareholders'
ability to obtain equitable remedies such as an injunction or a
rescission of an agreement or transaction deemed improper.
Equitable relief, however, may not provide a suitable alternative
to damages in all situations.
Directors of corporations are often required to make important
and difficult decisions affecting such corporations and their
shareholders. Directors may obtain no personal benefit (other than
as shareholders) from such decisions, but their determinations may
cause them to be exposed to substantial personal liability and to
be subject to enormous expense in defending their actions even when
their business judgments are made in good faith and do not involve
improper personal gain. Presently, the Directors enjoy certain
indemnification rights as provided in Article 2.02-1 of the Texas
Business Corporation Act, including, among other things, (1) the
permissive indemnification of persons who meet certain standards of
conduct and certain nonliability criteria, (2) mandatory
indemnification of directors and officers if successful in the
defense of proceedings brought against them and (3) permissive
advancement of reasonable expenses. In the past, the Company has
not maintained directors' and officers' liability insurance
although it is currently considering the purchase of directors' and
officers' liability insurance. The market for directors' and
officers' liability insurance has been characterized by a
combination of great increases in premiums, higher deductibles and
reductions in the scope of coverage. Some companies have found
such insurance unavailable while most, if not all, companies have
encountered some or all of the enumerated conditions. A number of
companies have foregone directors' and officers' liability
insurance for economic reasons. Further, some companies have been
adversely affected in their ability to recruit and retain corporate
directors when
-10-
<PAGE>
adequate directors' and officers' liability insurance is not
provided by the company. Although the Company has not directly
experienced this problem to date, the Board of Directors believes
that it is essential for the Company to take every action possible
to insure that the Company will continue to attract and retain the
best qualified individuals as directors and to allow such
individuals to exercise their independent business judgment on
behalf of the Company without suffering personal liability. It is
for these primary reasons that the Board of Directors is
recommending the approval of proposed Article 10.
The Board of Directors recommends that the shareholders adopt
the proposed amendment in order to take full advantage of the
provisions of Article 1301-7.06 of the TMCLA eliminating director
personal liability for monetary damages in the circumstances
described above. Given the expense of defending lawsuits (which
expense would, in most circumstances, now be borne by the Company),
the frequency with which unwarranted litigation is brought and the
time-consuming nature of litigation, the Board of Directors
believes that it is in the best interests of the Company and its
shareholders to adopt the proposal to amend the Articles of
Incorporation to add new Article 10.
Under current Texas law, absent adoption of the proposed
amendment, a director may be personally liable to the Company and
its shareholders for damages for conduct alleged to be a breach of
a fiduciary duty as a director. Under proposed Article 10, if
adopted by the shareholders, directors will not have any liability
for monetary damages to the Company or its shareholders for such a
breach in certain circumstances. Adoption of this amendment may
have the unintended effect of reducing the likelihood of derivative
litigation against directors and might discourage or deter
shareholders or management from bringing suit against directors for
breach of their duty of care, even though such an action, if
successful, might otherwise have benefitted the Company and its
shareholders. The Board, however, firmly believes that the
exercise of care and diligence by directors results primarily from
their desire to act in the best interest of the Company, and
therefore, the Board believes that the level of care and diligence
will not be diminished by the approval of proposed Article 10.
Proposed Article 10 will limit directors' liability only for
future acts or omissions and will not limit their liability for
conduct prior to its adoption by the shareholders. At the present
time, the Company has no knowledge of any pending or threatened
claims for which directors' liability would be eliminated if the
proposed amendment was in effect. Proposed Article 10 authorizes
elimination of monetary damages only for directors' actions as
directors, but does not limit the liability of a director for
actions taken in a capacity other than as a director, such as that
of an officer or employee, nor does it apply to officers, employees
or agents.
Under proposed Article 10, if applicable law or regulations
are amended subsequent to shareholder approval 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 Company will be eliminated or limited to the maximum extent
permitted by law. No repeal or modification of Article 10, if
adopted by the shareholders, may adversely affect any right or
protection of a director or officer of the Company existing by
virtue of Article 10 at the time of such repeal or modification.
Approval
Assuming the presence of a quorum, the affirmative vote of the
holders of two-thirds of the issued and outstanding shares of
Common Stock is required for the approval of the proposal to amend
the Company's Articles of Incorporation to add a new Article 10 to
provide for the elimination of director liability for monetary
damages in actions brought by the Company or its shareholders on
behalf of the Company. Proxies will be voted for or against such
approval in accordance with the specifications marked thereon and,
if no specification is made, will be voted "FOR" such approval.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL TO
AMEND THE COMPANY'S ARTICLES OF INCORPORATION TO ADD ARTICLE 10
TO PROVIDE FOR THE ELIMINATION OF DIRECTOR LIABILITY
FOR MONETARY DAMAGES IN CERTAIN SITUATIONS
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<PAGE>
ITEM 6. APPROVAL AND RATIFICATION OF THE ADOPTION
OF THE MINERAL DEVELOPMENT, INC. STOCK OPTION PLAN
General
On August 28, 1994, the Board of Directors of the Company
approved the Mineral Development, Inc. Stock Option Plan (the
"Option Plan"). The purpose of the Option Plan is to promote the
interests of the Company and its shareholders by attracting,
retaining and stimulating the performance of selected employees and
giving such employees the opportunity to acquire a proprietary
interest in the Company and an increased personal interest in the
Company's continued success and progress. The Option Plan provides
for the grant of incentive stock options ("ISOs"), under Section
422 of the Internal Revenue Code of 1986, as amended (the "Code"),
and the grant of nonqualified stock options that do not qualify
under Section 422 of the Code ("NQSOs"). Under the terms of the
Option Plan, as amended by the Board on April 9, 1996, 2,000,000
shares of Common Stock were reserved for the granting of options.
At May 29, 1996, options to purchase 1,400,000 shares remained
available for granting under the Option Plan. However, the Company
has agreed to grant a stock option to purchase 500,000 at an
exercise price of $.60 per share (prior to the Company's
contemplated one-for-five reverse stock split) to Mr. Charles W.
Gleeson, a nominee for director. See "Executive Compensation -
Employment Contracts." Stock issued under the Option Plan may be
newly issued or treasury shares. If any option granted under the
Option Plan expires or terminates for any reason without having
been exercised in full, new options may thereafter be granted
covering such shares.
Administration
The Option Plan is administered by a committee (the "Option
Plan Committee") of two or more "disinterested persons" (as defined
by Rule 16b-3 of the Exchange Act) appointed by the Board. The
Option Plan Committee currently consists of two members of the
Board, David N. Fitzgerald and Richard D. Collins. The Option Plan
grants broad authority to the Option Plan Committee to grant
options to any regular salaried officer or key employee of the
Company and its affiliates selected by the Option Plan Committee,
to determine the number of shares subject to options and the
exercise price of the options and to provide for other option
features such as the time or date of grant, the appropriate
exercise periods and methods of exercise and requirements regarding
the vesting of options.
Terms of Options
The option price per share with respect to ISOs is determined
by the Option Plan Committee, but shall in no instance be less than
100% of the fair market value of the Common Stock on the date of
grant, or 110% of the fair market value with respect to any ISO
issued to a holder of 10% or more of the Company's shares. There
is no price requirement for NQSOs, other than the option price must
exceed the par value of the Common Stock. The Option Plan
Committee oversees the methods of exercise of options, with
attention being given to compliance with appropriate securities
laws and regulations. The Option Plan permits the use of already
owned Common Stock as payment for the exercise price of options.
The duration of options granted under the Option Plan cannot exceed
ten years (five years with respect to a holder of 10% or more of
the Company's shares in the case of an ISO). Options granted under
the Option Plan are not assignable or transferable, other than by
will or by the laws of descent and distribution or pursuant to a
qualified domestic relations order. During the lifetime of an
optionee, the options granted under the Option Plan are exercisable
only by the optionee or his or her guardian or legal
representative.
Adjustments
The Option Plan Committee may make such adjustments in the
option price and the number of shares covered by outstanding
options that are required to prevent any dilution or enlargement of
the rights of the holders of such options that would otherwise
result from any reorganization, recapitalization, stock split,
stock dividend, combination of shares, merger, consolidation,
issuance of rights or any other change in the capital structure of
the Company. The Option Plan Committee may also make such
adjustments in the aggregate number of shares subject to options
which are appropriate to reflect any transaction or event described
in the preceding sentence.
Amendment and Termination
The Board of Directors may at any time suspend or terminate
the Option Plan or may amend it from time to time in such respects
as the Board of Directors may deem advisable in order that the
options granted thereunder may conform to any changes in the law or
in any other respect that the Board of Directors may deem to be in
the best interests of the Company; provided, however, that without
approval by the shareholders of the Company voting the proper
percentage of its voting power, no such amendment shall make any
change in the Option Plan for which shareholder approval is
required of the Company in order to comply with (i) Rule 16b-3, as
amended, promulgated under the Exchange Act, (ii) the Code or
regulatory provisions dealing with ISOs, or (iii) any other
applicable rule or law. Unless sooner terminated, the Option Plan
shall terminate on August 29, 2004. Except in connection with
satisfaction of withholding requirements of any federal, state or
local withholding tax, no amendment, suspension or termination of
the Option Plan shall, without an optionee's consent,
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<PAGE>
impair or negate any of the rights or obligations under any option
theretofore granted to such optionee under the Option Plan.
Certain Federal Income Tax Consequences
The following is intended only as a general guide as to
certain federal income tax consequences under current law for
participation in the Option Plan and does not attempt to describe
all potential tax consequences. Furthermore, tax consequences are
subject to change and a taxpayer's particular situation may be such
that some variation of the described rules is applicable.
No tax obligation will arise for the optionee or the Company
upon the granting of either ISOs or NQSOs under the Option Plan.
Upon exercise of a NQSO, an optionee will recognize ordinary income
in an amount equal to the excess, if any, of the fair market value
on the date of exercise of the stock acquired over the exercise
price of the option. The Company will be entitled to a tax
deduction in an amount equal to the ordinary income recognized by
the optionee. Any additional gain or loss realized by an optionee
on disposition of the shares generally will be capital gain or loss
to the optionee and will not result in any additional tax deduction
to the Company. Because a NQSO cannot be exercised prior to six
months from the date of grant, the taxable event arising from
exercise of NQSOs by officers of the Company subject to Section
16(b) of the Exchange Act occurs on the date the option is
exercised. The income recognized at the end of any deferred period
will include any appreciation in the value of the stock during that
period, and the capital gain holding period of the stock for
purposes of obtaining long-term capital gain treatment will not
begin until the completion of such period.
Upon the exercise of an ISO, an optionee recognizes no
immediate taxable income. The tax cost is deferred until the
optionee ultimately sells the shares of stock. If the optionee
does not dispose of the option shares within two years from the
date the option was granted and within one year after the exercise
of the option ("holding periods"), and the ISO is exercised no
later than three months after the termination of the optionee's
employment, the gain on the sale will be treated as long-term
capital gain. Subject to the limitations in the Option Plan,
certain of these holding periods and employment requirements are
liberalized in the event of the optionee's death or disability
while employed by the Company. The Company is not entitled to any
tax deduction, except that if the stock is disposed of prior to
satisfying the holding periods described above, the gain on the
sale of such stock equal to the lesser of (i) the fair market value
of the stock on the date of exercise minus the option price or (ii)
the amount realized on disposition minus the option price will be
taxed to the optionee as ordinary income and the Company will be
entitled to a deduction in the same amount. Any additional gain or
loss recognized by an optionee upon disposition of shares prior to
the expiration of the holding periods outlined above generally will
be capital gain or loss to the optionee and will not result in any
additional tax deduction to the Company. The "spread" between the
fair market value of the option stock and the option price upon
exercise of an ISO is an item of adjustment used in the computation
of the "alternative minimum tax" of the optionee under the Code.
The tax benefits which might otherwise accrue to an optionee may be
affected by the imposition of such tax if applicable in the
optionee's individual circumstances.
Approval
Assuming the presence of a quorum, the affirmative vote of the
holders of a majority of the shares of Common Stock, present or
represented in person or by proxy at the Annual Meeting, is
required for the approval and ratification of the Mineral
Development, Inc. Stock Option Plan. Proxies will be voted for or
against such approval in accordance with the specifications marked
thereon and, if no specification is made, will be voted "FOR" such
approval.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE
PROPOSAL TO APPROVE AND RATIFY THE ADOPTION
OF THE MINERAL DEVELOPMENT, INC.
STOCK OPTION PLAN
ITEM 7. APPROVAL AND RATIFICATION OF THE ADOPTION
OF THE MINERAL DEVELOPMENT, INC. 1996 DIRECTOR PLAN
On May __, 1996, the Board of Directors adopted, subject to
shareholder approval, the Company's 1996 Director Plan (the
"Director Plan"), the text of which is attached as Exhibit D to
this Proxy Statement. Unless the Director Plan is approved by the
shareholders of the Company within 12 months after May __, 1996,
the Director
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<PAGE>
Plan and all options granted pursuant to the Director Plan will be
null and void. The material features of the Director Plan are
discussed below, but the description is subject to and is qualified
in its entirety by the full text of the Director Plan.
General
The purpose of the Director Plan is to attract and retain
qualified and competent directors upon whose efforts and judgment
the success of the Company is largely dependent, and to stimulate
the active interest of these persons in the development and
financial success of the Company by providing for stock ownership
in the Company. In furtherance of this purpose, the Director Plan
provides for the payment of an Annual Director Fee (as defined
below) and the grant of nonincentive stock options ("Director
Options") to purchase Common Stock to all of the directors of the
Company. Under the Director Plan, the maximum number of shares of
Common Stock that may be issued in consideration of the Common
Stock component of the Annual Director Fee or subject to Director
Options is 1,000,000 shares. If any Director Option granted
terminates, expires or is cancelled or surrendered as to any shares
of Common Stock, such shares will thereafter be available for the
payment of the Common Stock component of the Annual Director Fee
and for the granting of Director Options.
Administration
To the extent any administration is required, the Director
Plan will be administered by the Board. The Director Plan grants
the Board authority to adopt any rules or regulations deemed
necessary for carrying out the purpose of the Director Plan;
however, the Director Plan may not be amended more than once every
six months.
Annual Director Fee
The Director Plan provides that each director will receive an
annual director fee of $12,000 to be paid 50% percent in cash and
50% percent in Common Stock of the Company (the "Annual Director
Fee"). The Annual Director Fee will be payable in four equal
quarterly amounts on the first business day following the end of
each fiscal quarter beginning with the fiscal quarter ended
September 30, 1996. 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.
Terms of Option
The Director Plan provides that a Director Option to purchase
100,000 shares of Common Stock will automatically be granted to
each director on a nondiscriminatory basis on the date the director
is initially elected or appointed as a director of the Company, or
in the case of current directors, upon their election or reelection
at the Annual Meeting. Each Director Option will vest 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 fiscal
year in which the director attends less than 75% of the Board
meetings held for that fiscal year. Failure to attend the
requisite number of Board meetings will cause a forfeiture of the
25,000 shares subject to the Director 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 Director Option
will not accelerate, and the Director Option only will be
exercisable for the number of shares that vested prior to the
director ceasing to serve as a director of the Company. A Director
Option will automatically expire on the tenth anniversary of the
date of grant.
The option price per share of any Director Option granted to
a director elected at the Annual Meeting will be equal to the
greater of $3.00 per share or the fair market value of a share of
Common Stock on the date following the Annual Meeting after taking
into account the proposed one-for-five reverse stock split. The
option price per share for all Director Options granted thereafter
will be equal to 100% of the fair market value per share of the
Common Stock on the date of grant. The option price of any shares
purchased pursuant to a Director Option may be paid only in cash,
by check or money order, or by a combination of the above. A
Director Option is not assignable or transferable other than by
will or by the laws of descent and distribution or pursuant to a
qualified domestic relations order. During the lifetime of an
optionee, a Director Option is exercisable only by the optionee,
his guardian or legal representative.
Adjustments
In the event that the number of issued and outstanding shares
of Common Stock are increased or decreased as a result of a stock
dividend, stock split or any other recapitalization, the Director
Plan provides for appropriate adjustments to be made to the maximum
number of shares subject to the Director Plan and the number of
shares and the option price of any outstanding Director Options.
In the event of a merger, consolidation or any other reorganization
of the Company, the Director Plan requires that an appropriate
substitution be made for the stock subject to each Director Option
then outstanding.
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<PAGE>
Termination
The unexercised portion of a Director Option will terminate
automatically and without notice on the date of the earliest to
occur of the following: (i) three months after the date that the
optionee ceases to be a director, except for reason of death or
permanent disability, (ii) fifteen months after the date the
director ceases to be a director by reason of death or six months
after the director dies if such death occurred during the three
month period described in (i), (iii) twelve months after the date
the director ceases to be a director by reason of permanent
disability, or (ii) ten years from the date of grant of the
Director Option.
Certain Federal Income Tax Consequences
The following is intended only as a general guide as to
certain federal income tax consequences under current law for
participation in the Director Plan and does not attempt to describe
all potential tax consequences. Furthermore, tax consequences are
subject to change and a taxpayer's particular situation may be such
that some variation of the described rules is applicable.
The amount of the Annual Director Fee received in cash and as
Common Stock will be taxable upon receipt. The Common Stock will
be valued at its fair market value on the date of receipt. The
grant of a Director Option will not be taxable to an optionee.
Generally, upon the exercise of a Director Option that has been
held by the optionee for at least six months, the optionee will
recognize ordinary income at the time of exercise in an amount
equal to the excess of the then fair market value of the shares of
Common Stock purchased over the option price. For Directors who
are also employees of the Company, the Company will withhold any
amounts required under federal tax laws with respect to the
ordinary income recognized from the exercise of a Director Option
or with respect to receipt of the Annual Director Fee. When shares
of Common Stock received upon the exercise of a Director Option
subsequently are disposed of in a taxable transaction, the optionee
generally will recognize capital gain (or loss) in the amount by
which the amount realized exceeds (or is less than) the fair market
value of the Common Stock on the date the Director Option was
exercised. Such capital gain (or loss) will be long- or short-term
depending upon the optionee's holding period for the Common Stock
acquired upon exercise of the Director Option.
Approval
Assuming the presence of a quorum, the affirmative vote of the
holders of a majority of the shares of Common Stock, present or
represented in person or by proxy at the Annual Meeting, is
required for the approval and ratification of the Mineral
Development, Inc. 1996 Director Plan. Proxies will be voted for or
against such approval in accordance with the specifications marked
thereon and, if no specification is made, will be voted "FOR" such
approval.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE
PROPOSAL TO APPROVE AND RATIFY THE ADOPTION
OF THE MINERAL DEVELOPMENT, INC.
1996 DIRECTOR PLAN
ITEM 8. ON PROXY
OTHER MATTERS THAT MAY COME BEFORE THE ANNUAL MEETING
The Board of Directors of the Company is not aware of any
matters, other than those referred to in the accompanying Notice of
Annual Meeting of Shareholders, which properly may come before the
Annual Meeting. However, if any other matter should be properly
presented for consideration and voting at the Annual Meeting or any
adjournment(s) thereof, it is the intention of the persons named as
proxies on the enclosed proxy card to vote the proxy cards in
accordance with their judgment.
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<PAGE>
EXECUTIVE OFFICERS
Executive Officers
The table below sets forth at the date of this Proxy Statement
the name, age, current positions with the Company, principal
occupation during the last five years of each principal executive
officer of the Company and the year he or she first became an
executive officer of the Company:
<TABLE>
<CAPTION>
Executive Principal
Officer of Occupation
Current Position the Company During Last
Name and Age with the Company Since Five Years
- ------------ ---------------- ----------- -----------
<S> <C> <C> <C>
David N. Fitzgerald (73) President, Chief Executive 1996 President of Dave Fitzgerald, Inc.
Officer and Chairman of and Exit Oilfield Equipment, Inc.;
the Board Chairman of the Board of the
Company (Oct. 1993-Aug. 1994)
Glenn L. Seitz (39) Treasurer and Director of 1987 Treasurer of the Company;
the Company President of the Company (1989-1994)
Richard D. Collins (63) Secretary and Director 1994 Independent Financial Consultant
</TABLE>
Term of Office
Executive officers of the Company are elected by the Board of
Directors at its annual meeting and hold office until the next
annual meeting of the Board of Directors or until their respective
successors are duly elected and have qualified.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth certain information regarding
compensation paid by the Company for services rendered during the
nine month transition period ended December 31, 1995 and the fiscal
years ended March 31, 1995 and 1994 by the Company's Chief
Executive Officer. None of the other executive officers of the
Company received total salary and bonus, in excess of $100,000
during the nine month transition period ended December 31, 1995.
<TABLE>
<CAPTION>
Long-Term
Compensation
Other Annual Awards
Name and Period Annual Compensation Compensation Securities Underlying
Principal Position Ended Salary($) Bonus($) ($) Options(#)
- ------------------ ------ --------- -------- ------------ ----------------------
<S> <C> <C> <C> <C> <C>
William R. Granberry 12/31/95(2) $117,000 $ 0 $ 0 0
Chairman of the Board, 3/31/95 92,696 0 0 600,000
President and Chief 3/31/94 N/A N/A N/A N/A
Executive Officer(1)
- -----------------------
<FN>
(1) Mr. Granberry held these positions from August 1994 to December 1995.
(2) Represents nine month transition period.
</FN>
</TABLE>
-16-
<PAGE>
Stock Option Grants in Fiscal 1995
The following table sets forth certain information relating to
the stock options granted to the named Chief Executive Officer
during the nine months ended December 31, 1995 and the fiscal year
ended March 31, 1995.
<TABLE>
<CAPTION>
Individual Grants
------------------------- Potential Realizable
Number of % of Value at Assumed Rates
Securities Total Exercise of Stock Price
Underlying Options or Base Appreciation
Period Options Granted to Price Expiration for Option Term(1)
Name Ended Granted Employees ($/Sh) Date 5%($) 10%($)
- ---- ------ ------- ---------- ------ ---- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C>
William R. December 31, 1995 0 -- -- -- -- --
Granberry March 31, 1995 600,000(2) 100% $.375 03/31/96(3) $243,240 $262,147
_______________
<FN>
(1) Calculation based on stock option exercise price over period of option assuming annual compounding. The columns
present estimates of potential values based on certain mathematical assumptions. The actual value, if any, that an
executive officer may realize is dependent upon the market price on the date of option exercise.
(2) Represents a grant under the Company's Stock Option Plan. See "Stock Option Plan."
(3) The expiration date of this option became March 31, 1996 as a result of Mr. Granberry's resignation effective December
31, 1995.
</FN>
</TABLE>
Aggregate Stock Option Exercises in Fiscal 1995 and Fiscal Year End
Option Values
The following table sets forth certain information related to
the number and value of shares of Common Stock acquired upon the
exercise of stock options by the Chief Executive Officer during the
nine months ended December 31, 1995 and the fiscal year ended March
31, 1995, and the number and the value of stock options held during
each period.
<TABLE>
<CAPTION>
Number of Securities
Shares Underlying Unexercised Value of Unexercised
Acquired Options(#) In-the-Money Options($)(1)
Upon Value _________________________ _________________________
Name Period Ended Exercise(#) Realized(#) Exercisable Unexercisable Exercisable Unexercisable
- ---- ------------ ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
William R. December 31, 1995 0 $0 600,000(2) 0 0 $ 0
Granberry March 31, 1995 0 $0 600,000 0 $150,000 $N/A
____________________
<FN>
(1) Market value of the underlying Common Stock at December 31, 1995, minus exercise price.
(2) All of these options were exercised prior to March 31, 1996.
</FN>
</TABLE>
Employment Contracts
On August 23, 1994, the Company entered into an employment
agreement with William R. Granberry, Chairman of the Board,
President and Chief Executive Officer. The agreement provided a
two-year term, subject to extension upon mutual agreement of the
parties. During the employment term, the Company was required to
cause the employee to be nominated for election as a director at
each annual or applicable special meeting of shareholders of the
Company, and the Company was required to use its best efforts,
consistent with its fiduciary responsibilities to the shareholders,
to cause the election of Mr. Granberry as a director. The
employment agreement was subject to early termination as provided
therein, including termination by the Company for "cause" (as
defined in the employment agreement). The employment agreement
provided for an annual base salary of $156,000 and such bonuses or
other discretionary compensation as the Board may determine. The
employment agreement also provided for medical and dental benefits
and term life insurance in the amount of $500,000 for beneficiaries
of Mr. Granberry's choosing, even if not provided to other
employees of the Company. In addition, the employment agreement
provided, among other things, for expense reimbursement and the
grant of stock options to purchase up to 600,000 shares of Common
Stock.
-17-
<PAGE>
The employment agreement grants certain transferable piggyback
registration rights with respect to all shares of Common Stock that
Mr. Granberry from time to time beneficially owns even after
termination of employment. All costs of registration rights will
be borne by the Company and the Company will indemnify Mr.
Granberry with respect to certain losses, claims, damages and
liabilities arising from such registration. During the term of the
employment agreement and thereafter without limitation of time, the
Company is required to indemnify and advance expenses to Mr.
Granberry to the fullest extent permitted by the laws of the State
of Texas from time to time in effect. Mr. Granberry resigned as
Chairman of the Board, President and Chief Executive Officer of the
Company effective December 31, 1995, and the employment agreement
terminated at that time.
Effective April 17, 1996, the Company entered into an
employment agreement with Charles W. Gleeson to serve as President
and Chief Executive Officer of the Company. The agreement provides
for a three-year term, subject to extension upon mutual agreement
of the parties, provided, however, that the employment agreement
shall not become effective until the Company is successful in
raising at least $9,000,000 of capital in a contemplated registered
public offering. Beginning with the 1996 Annual Meeting and during
the employment term, the Company is required to cause Mr. Gleeson
to be nominated for election as a director at each annual or
applicable special meeting of shareholders of the Company, and the
Company is required to use its best efforts, consistent with its
fiduciary responsibilities to the shareholders, to cause the
election of Mr. Gleeson as a director. The employment agreement is
subject to early termination as provided therein, including
termination by the Company for "cause" (as defined in the
employment agreement) or termination by Mr. Gleeson for "good
reason upon change of control" (as defined in the employment
agreement). The employment agreement provides for an annual base
salary of $140,000 and such bonuses or other discretionary
compensation as the Board may determine. The employment agreement
also entitles Mr. Gleeson to participate in employee benefit plans,
programs and arrangements provided by the Company including medical
and dental benefits. In addition, the employment agreement
provides, among other things, for expense reimbursement and the
grant of stock options to purchase up to 500,000 shares of Common
Stock for an exercise price of $0.60 per share (prior to the
Company's contemplated one-for-five reverse stock split).
The employment agreement provides that if at any time within
twelve months of a change of control, the Company terminates the
employment agreement without cause or if Mr. Gleeson resigns for
"good reason upon change of control," Mr. Gleeson will be entitled
to, within 45 days of the severance of employment, a lump-sum
payment equal to his base salary for the unexpired term of his
employment agreement.
A change of control is deemed to have occurred if (i) after
the consummation of the currently planned registered public
offering, more than 30% of the combined voting power of the
Company's then outstanding securities is acquired, directly or
indirectly, by any person or entity, or (ii) at any time during the
24-month period commencing after a tender offer, merger,
consolidation, sale of assets or contested election, or any
combination of such transactions, individuals who at the beginning
of each period constitute at least a majority of the Company's
Board of Directors cease to be "continuing directors" (meaning
directors of the Company who either were directors prior to such
transaction or who subsequently became directors and whose
election, or nomination for election by the Company's shareholders,
was approved by a vote of at least two-thirds of the directors then
still in office who were directors prior to such transaction), or
(iii) the shareholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than
a merger or consolidation that would result in the voting
securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity) at
least 60% of the total voting power represented by the voting
securities of the Company or such surviving entity which are
outstanding immediately after such merger or consolidation, or (iv)
the shareholders of the Company approve a plan of complete
liquidation of the Company or an agreement of sale or disposition
by the Company of all or substantially all of the Company's assets.
Transactions with Management
During August 1994, the Company sold an aggregate of 100,000
shares of its Common Stock to David N. Fitzgerald, a director, for
a price of $.50 per share and 200,000 shares of its Common Stock to
William Granberry, former Chairman of the Board, Chief Executive
Officer and President, for a price of $.375 per share.
-18-
<PAGE>
In October 1995, the Company borrowed, in the form of a short-
term note, $100,000 from William Granberry, then Chairman of the
Board and President, at an interest rate of 8.75%. The Company
pledged certain oil and gas properties to Mr. Granberry to receive
this loan. Subsequently, the Company borrowed $200,000 from a bank
in the form of a demand note and repaid the loan from Mr. Granberry
with the proceeds, at which time the security interest in the
Company's oil and gas properties was released. Mr. Granberry
pledged certain assets as collateral for the bank note and, in
addition, Mr. Granberry personally guaranteed the note. This note
was repaid by the Company in April 1996 through proceeds received
from Mr. Granberry upon the exercise of his outstanding stock
options.
INDEPENDENT AUDITORS
The Board of Directors of the Company engaged the firm of
Belew Averitt LLP as the Company's independent public accountants
for the nine month transition period ended December 31, 1995.
The Board of Directors of the Company has not yet selected
independent auditors to examine the Company's financial statements
for the fiscal year ended December 31, 1996. Representatives of
Belew Averitt LLP who audited the Company's financial statements
for the nine month transition period ended December 31, 1995, are
expected to be present at the Annual Meeting with the opportunity
to make a statement if they desire to do so and to be available to
respond to appropriate questions.
SECTION 16(a) REPORTING
Section 16(a) of the Exchange Act requires the Company's
directors and officers, and persons who own more than 10% of the
Company's Common Stock, to file with the Securities and Exchange
Commission (the "Commission") initial reports of ownership and
reports of changes in ownership of Common Stock and other equity
securities of the Company. Officers, directors and greater than
10% shareholders are required by Commission regulations to furnish
the Company with copies of all Section 16(a) reports they file with
the Commission. To the Company's knowledge, based solely on review
of the copies of such reports furnished to the Company, during the
nine month transition period ended December 31, 1995, all Section
16(a) filing requirements applicable to its officers, directors and
greater than 10% beneficial owners were complied with.
SHAREHOLDER PROPOSALS
Pursuant to Rule 14a-8 of the Exchange Act, shareholders may
present proper proposals for inclusion in the Company's proxy
statement for consideration at its 1997 Annual Meeting of
Shareholders by submitting proposals to the Company in a timely
manner. In order to be so included for the 1997 Annual Meeting of
Shareholders, shareholder proposals must be received by the Company
no later than January 31, 1997, and must otherwise comply with the
requirements of Rule 14a-8.
COPIES OF THE ANNUAL REPORT ON FORM 10-K
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
THE COMPANY, WITHOUT CHARGE, WILL PROVIDE TO EACH SHAREHOLDER,
ON WRITTEN REQUEST, A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM
10-K, BUT WITHOUT EXHIBITS, REQUIRED TO BE FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION FOR THE TRANSITION PERIOD ENDED
DECEMBER 31, 1995. WRITTEN REQUESTS FOR SUCH FORM 10-K SHOULD BE
DIRECTED TO MR. RICHARD D. COLLINS, CORPORATE SECRETARY, MINERAL
DEVELOPMENT, INC., 9400 N. CENTRAL EXPRESSWAY, SUITE 1209, DALLAS,
TEXAS 75231.
By Order of the Board of Directors
Richard D. Collins,
Corporate Secretary
-19-
<PAGE>
Dallas, Texas
May 29, 1996
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY.
SHAREHOLDERS WHO DO NOT EXPECT TO ATTEND THE ANNUAL MEETING AND
WISH THEIR STOCK TO BE VOTED ARE URGED TO DATE, SIGN AND RETURN THE
ACCOMPANYING PROXY IN THE ENCLOSED SELF-ADDRESSED ENVELOPE. NO
POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
-20-
<PAGE>
EXHIBIT A
If the proposal entitled "Item 3. Proposal to Amend Article
4 of the Company's Articles of Incorporation to Effect a One-for-
Five Reverse Stock Split" is approved by the affirmative vote of
two-thirds of the issued and outstanding shares of Common Stock,
then Article 4 of the Articles of Incorporation of the corporation
will be amended by replacing the last paragraph of Article 4 with
the following new paragraph, to read, in its entirety, as follows:
"Each five (5) shares of previously authorized
Common Capital 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 Capital Stock of the
corporation, par value $0.01 per share. Further, every
right, option and warrant to acquire five (5) shares of
Common Capital 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 Capital Stock of the
corporation, upon the terms of the right, option or
warrant, except that the purchase price of the Common
Capital 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
Capital 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 Capital 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 Capital 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 Capital
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 Capital Stock of the
Corporation will remain at 25,000,000 and will not be
affected by the Amendment."
<PAGE>
EXHIBIT B
If the proposal entitled "Item 4. Proposal to Amend Article
4 of the Company's Articles of Incorporation to Provide for a Class
of Preferred Stock of up to 10,000,000 Issuable in Series" is
approved by the affirmative vote of two-thirds of the issued and
outstanding shares of Common Stock, then Article 4 will be amended
by replacing the first paragraph of Article 4 with the following
new paragraphs, such new paragraphs to read, in their entirety, as
follows:
"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.
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>
EXHIBIT C
If the proposal entitled "Item 5. Proposal to Amend the
Company's Articles of Incorporation to Eliminate Director Liability
for Monetary Damages" is approved by the affirmative vote of the
majority of the issued and outstanding shares of Common Stock, then
Article 10 will be added to the Articles of Incorporation such
provision to read, in its entirety, as follows:
"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 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."
<PAGE>
EXHIBIT D
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.
1
<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
2
<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 __,
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.
3
<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.
SE
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.
4
<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 __, 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.
<PAGE>
MINERAL DEVELOPMENT, INC.
9400 N. Central Expressway, Suite 1209
Dallas, Texas 75231
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints David N. Fitzgerald, Richard
D. Collins and Glenn L. Seitz and each or any of them, as Proxies,
each with the power to appoint his substitute, and hereby
authorizes each of them to represent and vote, as designated below,
all of the shares of the Common Stock of Mineral Development, Inc.
(the "Company") held of record by the undersigned on May 29, 1996,
at the Annual Meeting of Shareholders to be held on June __, 1996,
or any adjournment(s) thereof.
1. PROPOSAL TO ELECT AS DIRECTORS OF THE COMPANY THE
FOLLOWING PERSONS, TO HOLD OFFICE FOR THE TERM INDICATED OR UNTIL
THEIR SUCCESSORS HAVE BEEN DULY ELECTED AND HAVE QUALIFIED.
[ ] FOR all nominees listed below (except as marked to the
contrary below)
[ ] WITHHOLD AUTHORITY to vote all nominees listed below
David N. Fitzgerald Charles W. Gleeson Richard D. Collins
[Note: two additional directors to be
added on Definitive Proxy Card]
(INSTRUCTION: To withhold authority to vote for any individual
nominee, write that nominee's name on the space provided below.)
- ------------------------------------------------------------------
2. PROPOSAL TO AMEND THE COMPANY'S ARTICLES OF INCORPORATION
TO CHANGE THE NAME OF THE COMPANY TO EXCO RESOURCES, INC.
3. PROPOSAL TO AMEND ARTICLE 4 OF THE COMPANY'S ARTICLES OF
INCORPORATION TO EFFECT A ONE-FOR-FIVE REVERSE STOCK SPLIT OF THE
COMPANY'S COMMON STOCK.
4. PROPOSAL TO AMEND ARTICLE 4 OF THE COMPANY'S ARTICLES OF
INCORPORATION TO PROVIDE FOR A CLASS OF PREFERRED STOCK OF UP TO
10,000,000 SHARES ISSUABLE IN SERIES.
5. PROPOSAL TO AMEND THE COMPANY'S ARTICLES OF INCORPORATION
TO ADD ARTICLE 10 TO PROVIDE FOR THE ELIMINATION OF DIRECTOR
LIABILITY FOR MONETARY DAMAGES IN CERTAIN SITUATIONS.
6. PROPOSAL FOR THE ADOPTION OF THE MINERAL DEVELOPMENT, INC.
STOCK OPTION PLAN.
(Please sign on the other side)
(Continued from front)
7. PROPOSAL FOR THE ADOPTION OF THE MINERAL DEVELOPMENT, INC.
1996 DIRECTOR PLAN.
8. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE
UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
Please execute this proxy as your name appears hereon. When shares
are held by joint tenants, both should sign. When signing as
attorney, executor, administrator, trustee or guardian, please give
full title as such. If a corporation, please sign in full
corporate name by the president or other authorized officer. If a
partnership, please sign in partnership name by authorized persons.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE
ENCLOSED ENVELOPE.
This proxy, when properly executed, will be voted in the manner
directed herein by the undersigned shareholder(s). IF NO DIRECTION
IS MADE, THIS PROXY WILL BE VOTED "FOR" THE ELECTION OF THE
NOMINEES UNDER PROPOSAL 1, "FOR" THE AMENDMENT TO THE COMPANY'S
ARTICLES OF INCORPORATION TO CHANGE THE NAME OF THE COMPANY, "FOR"
THE AMENDMENT TO ARTICLE 4 OF THE COMPANY'S ARTICLES OF
INCORPORATION TO EFFECT A ONE-FOR-FIVE REVERSE STOCK SPLIT, "FOR"
THE AMENDMENT TO AMEND ARTICLE 4 OF THE COMPANY'S ARTICLES OF
INCORPORATION TO PROVIDE FOR A CLASS OF PREFERRED STOCK OF UP TO
10,000,000 SHARES ISSUABLE IN SERIES, "FOR" THE AMENDMENT TO THE
COMPANY'S ARTICLES OF INCORPORATION TO ADD ARTICLE 10 TO PROVIDE
FOR THE ELIMINATION OF DIRECTOR LIABILITY FOR MONETARY DAMAGES IN
CERTAIN SITUATIONS, "FOR" THE ADOPTION OF THE MINERAL DEVELOPMENT,
INC. STOCK OPTION PLAN, "FOR" THE ADOPTION OF THE MINERAL
DEVELOPMENT, INC. 1996 DIRECTOR PLAN AND IN THE DISCRETION OF THE
PROXIES WITH RESPECT TO ANY OTHER MATTER THAT IS PROPERLY PRESENTED
AT THE MEETING.
DATED:______________________________, 1996
__________________________________________
Signature
__________________________________________
Signature if Held Jointly
