<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
EXCO Resources, 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] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] 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:
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(2) Form, Schedule or Registration Statement No.:
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(4) Date Filed:
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<PAGE> 2
[LOGO]
EXCO Resources, Inc.
NOTICE OF 2000
ANNUAL MEETING
OF SHAREHOLDERS
AND PROXY STATEMENT
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PLEASE COMPLETE, SIGN, DATE
AND RETURN YOUR PROXY PROMPTLY
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WEDNESDAY, APRIL 26, 2000
9:00 A.M.
ROYAL OAKS COUNTRY CLUB
7915 GREENVILLE AVENUE
DALLAS, TEXAS
<PAGE> 3
[LOGO] EXCO RESOURCES, INC.
5735 Pineland Dr. o Suite 235 o Dallas, Texas 75231
(214) 368-2084 o FAX (214) 368-2087
March 21, 2000
Dear EXCO Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders
of EXCO Resources, Inc. The meeting will be held at 9:00 a.m. on Wednesday,
April 26, 2000, at the Royal Oaks Country Club, 7915 Greenville Avenue, Dallas,
Texas. Your Board of Directors and management look forward to greeting those of
you able to attend in person. We have included a map and directions to the
meeting site on the back page of this proxy statement.
o You will find enclosed a Notice of Meeting that identifies
the sole proposal to be presented for your action.
o At the meeting we will present a report on EXCO's 1999
business results and on other matters of current interest to
you.
o You will find enclosed the 1999 Annual Report, which includes
our financial statements.
Your vote is important. The Board of Directors appreciates and
encourages shareholder participation in the Company's affairs. Whether or not
you can attend the meeting, please read the Proxy Statement carefully, then
SIGN, DATE AND RETURN THE ENCLOSED PROXY promptly in the envelope provided, so
that your shares will be represented at the meeting.
On behalf of the Board of Directors, thank you for your cooperation
and continued support.
Sincerely,
/s/ DOUGLAS H. MILLER
Douglas H. Miller
Chairman of the Board and Chief Executive Officer
<PAGE> 4
EXCO RESOURCES, INC.
5735 Pineland Drive, Suite 235
Dallas, Texas 75231
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 26, 2000
----------------------
The 2000 Annual Meeting of Shareholders of EXCO Resources, Inc. will
be held at 9:00 a.m. on April 26, 2000 at the Royal Oaks Country Club, 7915
Greenville Avenue, Dallas, Texas to elect eight directors.
You must be a shareholder of record at the close of business on
February 29, 2000 to be entitled to vote at the annual meeting.
Your participation in the Company's affairs is important. Officers of
the Company will be present to respond to questions from shareholders. To
ensure your representation, if you do not expect to be present at the meeting,
please sign and date the enclosed proxy and return it to the Company promptly.
A stamped envelope has been provided for your convenience. The prompt return of
proxies will ensure a quorum and save the Company the expense of future
solicitation.
By Order of the Board of Directors,
/s/ RICHARD E. MILLER
Richard E. Miller
General Counsel and Secretary
March 21, 2000
<PAGE> 5
EXCO RESOURCES, INC.
5735 Pineland Drive, Suite 235
Dallas, Texas 75231
Telephone: (214) 368-2084
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 26, 2000
March 21, 2000
INTRODUCTION
The Board of Directors is soliciting your proxy to encourage your
participation in the voting at the annual meeting and to obtain your support of
the sole proposal. You are invited to attend the annual meeting and vote your
shares directly. However, even if you do not attend, you may vote by proxy,
which allows you to direct another person to vote your shares at the meeting on
your behalf.
THIS PROXY SOLICITATION
There are two parts to this solicitation: the proxy card and this
proxy statement. The proxy card is the means by which you actually authorize
another person to vote your shares in accordance with your instructions. We
will begin sending this notice, proxy statement, and proxy card on March 21,
2000 to all shareholders entitled to vote.
This proxy statement provides you with a variety of information on the
proposal and other matters that you may find useful in determining how to vote.
It is divided into six sections following this Introduction:
o "Voting", page 3.
o "Proposal to be Voted Upon", page 4.
o "Our Meetings and Committees", page 6.
o "Certain Relationships Between the
Company and Directors, Officers or
Shareholders", page 7.
o "Audit Committee Report", page 9.
o "Executive Compensation", page 10.
We have supplemented these sections with tables and other information,
all of which appear in the appendices beginning on page 14. For your reference,
a table showing the performance of the Company's stock over the past five years
is included in Appendix A.
The Company will pay for soliciting these proxies. Our directors,
officers and employees may solicit proxies in person, by telephone or by other
electronic means of communication. We have also retained Continental Stock
Transfer & Trust Co. to assist in distributing proxy solicitation materials and
soliciting proxies at a cost of approximately $1,100, plus reasonable
out-of-pocket expenses. We will reimburse brokers and other nominees for
reasonable out-of-pocket expenses they incur in forwarding these proxy
materials to you if you are a beneficial owner.
THE ANNUAL MEETING
The annual meeting will be held on Wednesday, April 26, 2000, in
Dallas, Texas beginning at 9:00 a.m. A quorum of shareholders is necessary to
hold a valid meeting. A majority of the Company's common stock must be
represented at the annual meeting, whether in person or by proxy, for a quorum
to exist.
<PAGE> 6
Abstentions and broker non-votes will be counted in determining
whether or not there is a quorum at the annual meeting. A broker non-vote
occurs when a broker votes on some matters on the proxy card but not on others
because he does not have the authority to do so. Neither abstentions nor broker
non-votes will be counted when tabulating the votes cast on the proposal.
Representatives of Ernst & Young LLP, the Company's independent
accountants, are expected to be present at the annual meeting. They will have
the opportunity to make a statement at the meeting if they desire to do so and
are expected to be available to respond to appropriate questions.
SHAREHOLDER PROPOSALS
There were no shareholder proposals submitted for the annual meeting.
To be considered for presentation at the 2001 Annual Meeting of the
Shareholders and to be included in the proxy statement, the Company must
receive shareholder proposals at its principal executive offices no later than
November 15, 2000. We will consider a shareholder proposal submitted outside of
Securities and Exchange Commission Rule 14(a)-8 untimely if we receive the
proposal after January 30, 2001.
SHAREHOLDERS
On February 29, 2000, the Company had 6,817,696 issued and outstanding
shares of common stock, held by approximately 1,380 record shareholders, and
the closing price for the Company's stock was $6.625. Based on the latest
information provided to the Company, Ares Leveraged Investment Fund, L.P.
beneficially owns approximately 16% of the Company's outstanding common stock,
OCM Principal Opportunities Fund, L.P. beneficially owns approximately 15%,
Lord, Abbett & Co. beneficially owns approximately 10%, Douglas H. Miller
beneficially owns approximately 8%, and State Street Research & Management
Company, Inc. beneficially owns approximately 6%. "Beneficial ownership" means
shares over which a person has sole or shared voting or investment power.
You will find more information regarding the shareholders who own more
than 5% of the Company's stock in Appendix B.
You are entitled to one vote at the annual meeting for each share of
the Company's common stock that you owned of record at the close of business on
February 29, 2000. The number of shares you own (and may vote) is listed at the
top of the back of the enclosed proxy card.
2
<PAGE> 7
VOTING
HOW TO VOTE YOUR SHARES
You may vote your shares at the annual meeting in person or by proxy.
To vote in person, you must attend the annual meeting, and obtain and submit a
ballot, which will be provided at the meeting. To vote by proxy, you must
complete and return the enclosed proxy card.
The proxy card is fairly simple to complete, with specific
instructions right on the card. By completing and submitting it, you will
direct the designated persons (known as "proxies") to vote your shares at the
annual meeting in accordance with your instructions. The board has appointed
Douglas H. Miller, J. Douglas Ramsey and Richard E. Miller to serve as the
proxies for the annual meeting.
Your proxy will be valid only if you sign, date and return it before
the annual meeting. If you complete all of the proxy card except the voting
instructions, then the designated proxies will vote your shares "for" the
election of the nominated directors. If any nominee for election to the board
is unable to serve, which is not anticipated, or if any other matters properly
come before the meeting, then the designated proxies will vote your shares in
accordance with their best judgment.
You may revoke your proxy at any time before it is exercised by any of
the following means:
o Notifying the Company's Secretary in writing;
o Submitting a later dated proxy; or
o Attending the annual meeting and voting in person. Your
attendance at the annual meeting will not by itself revoke a
proxy; you must vote your shares.
HOW TO VOTE UNDER 401(k) PLANS
If you are a Company employee participating in the Company's 401(k)
plan, then you may be receiving this material because of shares held for you in
the plan. In that case, you may use the enclosed proxy card to instruct the
plan trustees how to vote those shares. The trustees will vote the shares in
accordance with your instructions and the terms of the plan.
The plan trustees may vote the shares held for you even if you do not
direct them how to vote. The trustees will vote any shares for which they do
not receive instructions in the same proportion as they vote the shares for
which they receive instructions.
WHERE TO FIND VOTING RESULTS
The Company will publish the voting results in its Quarterly Report on
Form 10-Q for the first quarter of 2000, which it will file with the Securities
and Exchange Commission in May 2000.
3
<PAGE> 8
PROPOSAL TO BE VOTED UPON
1. ELECTION OF DIRECTORS
The only proposal on the agenda for the annual meeting will be the
election of eight directors, constituting the entire Board of Directors, to
serve for one-year terms beginning at this annual meeting and expiring at the
next annual meeting of shareholders. The eight nominees receiving the greatest
number of votes cast will be elected. So, if you do not vote for a particular
nominee on your proxy card, your vote will not count either "for" or "against"
the nominee. A "broker-non-vote" will also have no effect on the outcome since
only a plurality of votes actually cast is required to elect a director. Each
nominee is currently serving as one of our directors. On August 18, 1998 Mr.
Benjamin was designated by OCM Principal Opportunities, L.P. and Jeff M. Moore
was designated by Ares Leveraged Investment Fund, L.P. to represent them on the
Board of Directors. Effective March 17, 2000, Mr. Moore resigned as a member of
our Board of Directors, and will not be standing for re-election. Following Mr.
Moore's resignation, the size of the Board of Directors was reduced to eight
seats. Based on an agreement with the Company, OCM and Ares have the right to
designate one board member each as long as they own at least 10% of our stock.
Though Ares owns more than 10% of our stock, Ares has not notified the Company
of its new designee.
The Board of Directors has nominated:
o Douglas H. Miller
o T. W. Eubank
o J. Douglas Ramsey
o Jeffrey D. Benjamin
o Earl E. Ellis
o J. Michael Muckleroy
o Boone Pickens
o Stephen F. Smith
for re-election as directors. You will find information on their holdings of
the Company's stock in Appendix B.
DOUGLAS H. MILLER, 52, was elected Chairman and Chief Executive
Officer of EXCO in December 1997. Mr. Miller was Chairman of the Board and
Chief Executive Officer of Coda Energy, Inc., an independent oil and gas
company, from October 1989 until November 1997 and served as a director of Coda
from 1987 until November 1997.
T. W. EUBANK, 57, was elected President, Treasurer and director of
EXCO in December 1997. Mr. Eubank was a consultant to various private companies
from February 1996 to December 1997. Mr. Eubank served as President of Coda
from March 1985 until February 1996. He was a director of Coda from 1981 until
February 1996.
J. DOUGLAS RAMSEY, PH.D., 39, was elected a Vice President and Chief
Financial Officer of EXCO in December 1997. Dr. Ramsey has been a director of
EXCO since March 1998. Dr. Ramsey most recently was Financial Planning Manager
of Coda and has worked in various capacities for Coda from 1992 until 1997. Dr.
Ramsey also teaches finance at Southern Methodist University.
JEFFREY D. BENJAMIN, 38, has been a director of EXCO since August
1998. He has been Co-Chief Executive Officer of U. S. Bancorp Libra, a division
of U. S. Bancorp Investments, Inc., an investment banking firm since May 1998.
From May 1996 to May 1998, Mr. Benjamin was Managing Director at UBS Securities
LLC, a securities investment firm. From January 1996 to May 1996, Mr. Benjamin
was a Managing Director at Bankers Trust Company, a financial services company.
From 1992 to January 1996, Mr. Benjamin was an officer of Apollo Capital
Management, Inc. and Lion Capital Management, Inc., which act as general
partners of Apollo Advisors, L.P. and Lion Advisors, L.P., respectively. Apollo
Advisors, L.P. and Lion Advisors, L.P., act as managing general partners of
Apollo Investment Fund, L.P. and AIF II, L.P. respectively, securities
investment funds, and a financial advisor to and representative for certain
institutional investors with respect to securities investments. Mr. Benjamin is
also a director of Multigraphics, Inc., which provides equipment, supplies and
service to the worldwide graphics markets.
4
<PAGE> 9
EARL E. ELLIS, 58, has been a director of EXCO since March 1998. He
served as a Director of Coda from 1992 until 1996. Currently Mr. Ellis serves
as a managing partner of the firm of Benjamin Jacobson & Sons, LLC, specialists
on the New York Stock Exchange. He has been associated with Benjamin Jacobson &
Sons, LLC since 1977.
J. MICHAEL MUCKLEROY, 69, has been a director of EXCO since March
1998. He is currently an independent oil and gas producer and acts as manager
of his family's stock portfolios. Mr. Muckleroy served as President of Houston
Natural Gas Liquids from 1984 until the end of 1985. From 1985 until his
retirement in 1993, Mr. Muckleroy served as Chairman and Chief Executive
Officer of Enron Liquid Fuels.
BOONE PICKENS, 71, has been a director of EXCO since March 1998. Mr.
Pickens is currently the Chairman of BP Capital LLC and Pickens Fuel Corp. He
was the founder of Mesa, Inc., an independent oil and natural gas exploration
and production company, is a graduate of Oklahoma State University with a B.S.
in geology and served as a director of Mesa from its inception. From January
1992 to August 1996, he served as Chairman and Chief Executive Officer of Mesa.
Mr. Pickens served as a director of Pioneer Natural Resources Company, the
successor to Mesa from August 1997 to December 1998.
STEPHEN F. SMITH, 58, has been a director of EXCO since March 1998. He
was a co-founder in 1996 of Energy Consolidation, Inc., a company engaged in
the acquisition of oil and natural gas service companies, and has served as its
President since inception. He is also a principal shareholder of the Abbey
Group, a consolidator of event production and party equipment rental companies.
From 1980 to 1996, Mr. Smith was a co-founder, Executive Vice President and
Chief Operating Officer of Sandefer Oil & Gas, Inc., an independent oil and gas
exploration and production company. Prior to 1980, Mr. Smith was an Audit
Partner with Arthur Andersen LLP.
The Board of Directors recommends that you vote FOR the election of
Messrs. Miller, Eubank, Ramsey, Benjamin, Ellis, Muckleroy, Pickens and Smith.
OUR INDEPENDENT ACCOUNTANTS
Ernst & Young LLP served as our independent accountants for fiscal
years 1997, 1998 and 1999. The Company has been informed by Ernst & Young LLP
that they are independent with respect to the Company within the meaning of the
applicable published rules and regulations of the Securities and Exchange
Commission, the pronouncements of the Independence Standards Board, and Rule 101
of the American Institute of Certified Public Accountants' Code of Professional
Conduct, its interpretations and rulings.
The audit committee recommended to the board that Ernst & Young be
reappointed for fiscal year 2000, and the board has reappointed Ernst & Young.
A representative of Ernst & Young will attend the annual meeting to
answer your questions.
OTHER MATTERS
Neither the Company nor its directors intend to bring before the annual
meeting any matters other than the election of the eight directors.
5
<PAGE> 10
OUR MEETINGS AND COMMITTEES
During 1999, the Board of Directors held 8 meetings and took action by
written consent 1 time. All directors attended at least 75% of both their board
and committee meetings in 1999.
AUDIT COMMITTEE
The audit committee of the Board of Directors was established in 1998
and consisted of Earl E. Ellis, Jeff M. Moore and Stephen F. Smith. Concurrent
with the resignation of Mr. Moore from our Board of Directors effective March
17, 2000, Mr. Moore also resigned as a member of our audit committee. Messrs.
Ellis and Smith continue to serve as members of the committee. Messrs. Ellis and
Smith are independent directors, and Mr. Moore was an independent director, as
required by Rule 4200 (a)(15) of the listing standards of the National
Association of Securities Dealers. During 1999, the audit committee held 1
meeting. On March 16, 2000, the Board of Directors approved for adoption an
Audit Committee Charter, a copy of which is attached to this proxy statement as
Appendix D. As a result of Mr. Moore's resignation, and the adoption by our
Board of Directors of the Audit Committee Charter which requires that the
committee consist of three independent directors, the audit committee currently
has one vacancy. We expect to fill this vacancy upon the recommendation of the
Board of Directors of another qualified independent director. Pursuant to this
charter, the duties of the audit committee are generally:
o To recommend to the board, independent auditors to audit
annually the Company's books and records;
o To provide an open avenue of communication between
management, the independent auditors and the Board of
Directors;
o To review the activities of and reports of the Company's
independent auditors;
o To review the activities of the Company's internal audit
staff and the adequacy of the Company's internal controls;
o To review the financial information contained in the
Company's filings with the Securities and Exchange
Commission; and
o To report the results of its reviews to the Board of
Directors.
COMPENSATION COMMITTEE
The board also has a standing compensation committee, consisting of
Jeffrey D. Benjamin, J. Michael Muckleroy and Boone Pickens (all outside
directors). During 1999, the compensation committee held 2 meetings. The duties
of the compensation committee are generally:
o To recommend to the board the remuneration arrangements for
senior management and directors;
o To recommend to the board compensation plans in which
officers or directors are eligible to participate;
o To grant awards under the Company's stock option plan; and
o To administer the director compensation plan.
NOMINATING COMMITTEE
The Company has no nominating committee. The board of directors as a
whole oversees the nominating function. If you desire to nominate a director
you should forward your nomination to the Company's Secretary.
DIRECTOR COMPENSATION
All directors of the Company receive directors' fees of $15,000 per
year, payable quarterly. In 1999, Dr. Ramsey took half his fees in cash and half
in common stock of the Company, while the rest of the directors took all of
their fees in common stock of the Company. Each director also receives an option
to purchase 50,000 shares of common stock when the director is initially elected
or appointed to the board. In addition, the Company reimburses its directors for
expenses, including travel, they incur in connection with attending board or
committee meetings.
6
<PAGE> 11
CERTAIN RELATIONSHIPS BETWEEN THE COMPANY
AND DIRECTORS, OFFICERS OR SHAREHOLDERS
DOUGLAS H. MILLER. Mr. D. H. Miller, a director and executive officer,
received a loan in the form of a promissory note from the Company for $450,000
on September 15, 1998 which remains outstanding as of March 20, 2000. The loan
is secured by a pledge of 75,000 shares of Mr. D. H. Miller's common stock in
the Company. The pledged stock is worth approximately $450,000. The Company
loaned the money to Mr. Miller in order to enable him to exercise options
granted to him under the 1998 Stock Option Plan. Mr. Miller is obligated to pay
the Company accrued interest at the lower of either 6.8125% or the maximum
nonusurious annual interest rate allowed under Texas law. The accrued interest
must be paid annually on the anniversary of the loan date. The unpaid principal
balance of the loan is due and payable on September 15, 2001.
Mr. D. H. Miller also received a loan in the form of a promissory note
from the Company for $465,625 on November 29, 1999 which remains outstanding as
of March 20, 2000. The loan is secured by a pledge of 77,500 shares of Mr. D. H.
Miller's common stock in the Company. The pledged stock is worth approximately
$465,625. The Company loaned the money to Mr. Miller in order to enable him to
exercise options granted to him under the 1998 Stock Option Plan. Mr. Miller is
obligated to pay the Company accrued interest at the lower of either 7.0% or the
maximum nonusurious annual interest rate allowed under Texas law. The accrued
interest must be paid annually on the anniversary of the loan date. The unpaid
principal balance of the loan is due and payable on November 29, 2002.
T. W. EUBANK. Mr. Eubank, a director and executive officer, received a
loan in the form of a promissory note from the Company for $225,000 on September
15, 1998 which remains outstanding as of March 20, 2000. The loan is secured by
a pledge of 37,500 shares of Mr. Eubank's common stock in the Company. The
pledged stock is worth approximately $225,000. The Company loaned the money to
Mr. Eubank in order to enable him to exercise options granted to him under the
1998 Stock Option Plan. Mr. Eubank is obligated to pay the Company accrued
interest at the lower of either 6.8125% or the maximum nonusurious annual
interest rate allowed under Texas law. The accrued interest must be paid
annually on the anniversary of the loan date. The unpaid principal balance of
the loan is due and payable on September 15, 2001.
Mr. Eubank also received a loan in the form of a promissory note from
the Company for $240,625 on November 29, 1999 which remains outstanding as of
March 20, 2000. The loan is secured by a pledge of 40,000 shares of Mr. Eubank's
common stock in the Company. The pledged stock is worth approximately $240,625.
The Company loaned the money to Mr. Eubank in order to enable him to exercise
options granted to him under the 1998 Stock Option Plan. Mr. Eubank is obligated
to pay the Company accrued interest at the lower of either 7.0% or the maximum
nonusurious annual interest rate allowed under Texas law. The accrued interest
must be paid annually on the anniversary of the loan date. The unpaid principal
balance of the loan is due and payable on November 29, 2002.
J. DOUGLAS RAMSEY. Dr. Ramsey, a director and executive officer,
received a loan in the form of a promissory note from the Company for $150,000
on September 15, 1998 which remains outstanding as of March 20, 2000. The loan
is secured by 25,000 shares of Dr. Ramsey's common stock in the Company. The
pledged stock is worth approximately $150,000 which Dr. Ramsey owns. The Company
loaned the money to Dr. Ramsey in order to enable him to exercise options
granted to him under the 1998 Stock Option Plan. Dr. Ramsey is obligated to pay
the Company accrued interest at the lower of either 6.8125% or the maximum
nonusurious annual interest rate allowed under Texas law. The accrued interest
must be paid annually on the anniversary of the loan date. The unpaid principal
balance of the loan is due and payable on September 15, 2001.
Under the terms of each of the promissory notes, Messrs. D. H. Miller,
Eubank and Ramsey have timely paid all accrued interest due and payable.
7
<PAGE> 12
J. MICHAEL MUCKLEROY. Mr. Muckleroy, a director, owns working,
royalty, and overriding royalty interests in some wells operated by us. Mr.
Muckleroy does not receive payments in excess of $60,000 per year from these
interests.
RICHARD E. MILLER. Mr. R. E. Miller, Secretary and General Counsel of
the Company owns working and royalty interests in some wells operated by us.
Mr. R. E. Miller does not receive payments in excess of $60,000 per year from
these interests.
OCM PRINCIPAL OPPORTUNITIES FUND, L.P.
On October 9, 1998, we formed a $50 million joint venture with OCM
Principal Opportunities Fund, L.P. to acquire oil and gas related assets and
securities. We were required to contribute 5% of any capital expenditures. At
December 31, 1998, the joint venture had invested $6.8 million in debt
securities. We had contributed $341,000 to the total investment. A board of
managers comprised of two representatives from OCM and one representative from
the Company made all investment and acquisition decisions for the joint
venture.
In November 1999, the debt securities held by the joint venture were
sold for a profit, and the proceeds were distributed on a pro-rata basis after
expenses to OCM and EXCO. The joint venture was dissolved on December 3, 1999.
ARES MANAGEMENT, L.P. AND OAKTREE CAPITAL MANAGEMENT, LLC
On July 16, 1998, we commenced a rights offering to our existing
shareholders. Each shareholder received ten rights for each share of our common
stock held. Each right entitled the shareholder to purchase one share of common
stock for $6.00 per share. We also executed agreements with Ares Leveraged
Investment Fund, L.P. and OCM Principal Opportunities Fund, L.P. to act as
standby purchasers.
As a condition to the standby purchase, we granted both Ares and OCM
the right to nominate one person to serve on our board of directors. Mr. Jeffrey
D. Benjamin, representative of OCM, is currently a director and has been
renominated for election at this annual meeting. Mr. Jeff M. Moore, the
designated representative of Ares, was a director until his resignation from the
Board of Directors on March 17, 2000. Ares has not notified the Company
of its new designee.
The rights offering concluded on August 12, 1998 and resulted in the
sale of 5,943,360 shares of the Company's common stock at $6.00 per share for
total gross proceeds to the Company in the amount of approximately $35.7 million
(net $35.2 million). For more information regarding the share ownership of
directors and officers please review Appendix B.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's executive officers, directors and persons who own more than 10% of the
Company's stock to file reports with the Securities and Exchange Commission and
to provide copies to us of ownership and changes in ownership. The SEC
regulations require the Company to identify anyone who filed a required report
late during the most recent fiscal year. We prepared and filed on Mr. Douglas H.
Miller's behalf a Form 4 dated December 1999 which inadvertently did not include
two open market purchases he made in December 1999 totaling 4,000 shares. We
subsequently reported these transactions on his Form 5 dated December 31, 1999.
Based upon a review of our records, we believe that all other 1999 filing
requirements were met.
8
<PAGE> 13
AUDIT COMMITTEE REPORT
The audit committee of the Board of Directors, which was established
in 1998, oversees the external audit of the Company's financial statements and
reviews the internal audit, control and financial reporting procedures of the
Company. A full description of the activities of the audit committee is
contained in the Audit Committee Charter, which is attached to this proxy
statement as Appendix D. For 1999 and for the purposes of this report, the
audit committee was composed of Earl E. Ellis, Jeff M. Moore and Stephen F.
Smith.
In 1999, the audit committee met with representatives of Ernst & Young
LLP, the Company's independent accountants, to review the results of the 1998
audit and to review the scope of the 1999 audit.
In March 2000, the audit committee met with Ernst & Young to review
the results of the 1999 audit. The committee will meet with Ernst & Young again
in 2000 to review the scope of the 2000 audit. At the March 2000 meeting, the
committee reviewed the results of the 1999 audit with the members of the Ernst
& Young engagement team. The committee also discussed the 1999 audited
financial statements and the results of the 1999 audit with the Company's
management.
During the March 2000 meeting, the audit committee discussed the
matters required to be discussed by Statements on Auditing Standards No. 61
with Ernst & Young, including the restrictions on ownership of securities
imposed as part of the independence standards that the Ernst & Young engagement
team must observe. The committee received during the March 2000 meeting the
written disclosures and letter from Ernst & Young required by Independence
Standards Board Standard No. 1. Standard No. 1 requires auditors to
communicate, in writing, at least annually all relationships between the
auditor and the Company that, in the auditor's professional judgment, may
reasonably be thought to affect the auditor's independence. The committee has
received this written disclosure and has discussed with Ernst & Young its
independence.
Based upon these reviews, discussions and disclosures, the audit
committee made a recommendation to the Board of Directors that the 1999 audited
financial statements be included in the Company's Annual Report on Form 10-K
for the year ending December 31, 1999.
By the Audit Committee:
Earl E. Ellis
Jeff M. Moore
Stephen F. Smith
By Order of the Board of Directors,
Douglas H. Miller
Chairman of the Board and Chief Executive Officer
March 16, 2000
9
<PAGE> 14
EXECUTIVE COMPENSATION
This section provides summary information regarding the compensation
of Douglas H. Miller, Chairman, and the four most highly compensated officers
other than Mr. D. H. Miller: T. W. Eubank, President; J. Douglas Ramsey, Chief
Financial Officer; Richard E. Miller, General Counsel; and Charles R. Evans,
Vice President.
This section also includes a report of the Board's compensation
committee (see page 11), which discusses the general compensation principles
used by the committee, as well as the specific factors used to determine Mr. D.
H. Miller's and Mr. Eubank's compensation.
You will find additional information regarding executive officers'
salaries, bonuses, options and other compensation in Appendix C.
SALARY AND BONUS
Messrs. D. H. Miller, Eubank, Ramsey, R. E. Miller, and Evans had their
salaries reviewed in 1999. This is consistent with the Company's compensation
principles for executive officers (which are described in more detail in the
compensation committee's report).
In 1999, Messrs. D. H. Miller, Eubank, Ramsey, and R. E. Miller
received bonuses of approximately 10% of their 1999 gross salaries. Mr. Evans
received a bonus of 20% of his 1999 gross salary.
STOCK OPTIONS
The Company awarded 99,633 options to these executive officers in
1999.
OTHER COMPENSATION AND BENEFITS
This group of executive officers receives medical, group life
insurance and other benefits (including matching contributions under the
Company's 401(k) plans) that are available generally to all of the Company's
salaried employees.
10
<PAGE> 15
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The compensation committee of the Board of Directors, which was
established in 1998, oversees the Company's executive compensation program and
approves the base salaries and incentive bonuses of the senior executive
officers. For 1999 and for purposes of this report, the compensation committee
was composed of Jeffrey D. Benjamin, J. Michael Muckleroy and Boone Pickens.
EXECUTIVE COMPENSATION -- PHILOSOPHY AND PROGRAM COMPONENTS
The Company's philosophy is to provide a comprehensive compensation
program to attract, retain and reward key members of management who contribute
to the Company's success and to motivate the management team in the development
and execution of current and long-term business strategies and goals. The three
primary components of executive compensation are: base salary, cash bonuses and
stock incentives. Stock options are made available to key employees under the
EXCO Resources, Inc. 1998 Stock Option Plan. Executives also participate in
certain benefit plans available to all salaried employees. The Company believes
that a significant portion of the executive officers' compensation should be
placed at risk and, in keeping with that objective, a substantial portion of
the compensation package is comprised of a performance-based cash bonus.
Incentive stock options awarded from time to time under the stock option plan
are another important risk-related compensation element. The Company believes
that employee ownership of the Company's stock is one of the most effective
ways to align employee and shareholder interests in the mutual goal of creating
value for our shareholders. During 1999, the committee directed management to
submit a proposal to recommend levels of stock ownership for key members of
management.
BASE SALARY
In 1999, base salaries for senior executive officers were based upon
the individual's responsibilities, experience and expected performance, taking
into account, among other things, the individual's initiative, contributions to
the Company's overall performance, managerial ability and handling of special
projects. These same factors are applied by the Chairman and President, with
the assistance of the senior executive officers to establish base salaries for
other key management employees. Base salaries for senior executives generally
are reviewed periodically for possible adjustment, but are not necessarily
changed that often. The committee also uses industry comparisons to ensure that
the base salaries of the senior executive officers remain competitive in
keeping with the objective of retaining key members of management.
BONUS
The compensation committee reviewed the 1999 bonus awards to the
employees that were recommended by the Chairman and the President. After
considering the Company's progress during the 1999 calendar year the committee
approved them without change.
11
<PAGE> 16
STOCK OPTION PLAN AWARDS
In March 1998, the Company adopted the 1998 Stock Option Plan. The
stated purpose of the stock option plan is to provide financial incentives to
selected employees of the Company and its subsidiaries to promote long-term
growth and financial success of the Company by:
o attracting and retaining employees of outstanding ability;
o strengthening the Company's capability to develop, maintain
and direct a competent management team;
o providing an effective means for selected employees to
acquire an ownership interest in the Company;
o motivating key employees to achieve long-range performance
goals and objectives; and
o providing incentive compensation competitive with other
similar companies.
The compensation committee administers the stock option plan and makes grants
under this plan, however, the full Board of Directors makes grants to senior
executive officers who are also directors. All grants under the stock option
plan are approved by a majority of the members of the committee or the Board of
Directors, as the case may be, who are "disinterested persons" as that term is
used in Rule 16b-3 of the Securities and Exchange Commission. Awards under the
stock option plan can consist of incentive stock options and non-qualified
stock options.
In 1999, we granted options covering 268,309 shares to employees,
including executive officers, under the terms of the 1998 Stock Option Plan.
Directors and employees exercised options covering a total of 117,500 shares in
1999.
At various times in the past, the Company has adopted certain
broad-based employee benefit plans in which the senior executive officers and
other key management employees have been permitted to participate, including the
employees' 401(k) savings plan and the life and health insurance benefit plans
available to all salaried employees. Other than with respect to common stock
held as an investment option under the 401(k) savings plan, benefits under these
plans are not directly or indirectly tied to the Company's performance.
12
<PAGE> 17
CHIEF EXECUTIVE OFFICER COMPENSATION
For fiscal year 1999, a bonus was paid to Mr. D. H. Miller. As with
all senior executive officers, Mr. Miller's bonus compensation is linked to
individual performance and the Company's profitability.
By the Compensation Committee:
Jeffrey D. Benjamin
J. Michael Muckleroy
Boone Pickens
By Order of the Board of Directors,
Douglas H. Miller
Chairman of the Board and
Chief Executive Officer
March 16, 2000
13
<PAGE> 18
APPENDIX A -- PERFORMANCE GRAPH
The following graph compares the cumulative total return (what $100
invested in 1994 would be worth today) on the Company's common stock with the
cumulative total return on the S&P 500 Index and the SIC Code Index for crude
petroleum and natural gas stocks. The comparisons in this table are required by
the Securities and Exchange Commission and are not a forecast of future
performance of the common stock or the referenced indexes.
COMPARE 5-YEAR CUMULATIVE TOTAL RETURN
AMONG EXCO RESOURCES, INC.,
S&P 500 INDEX AND SIC CODE INDEX
[GRAPH]
1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ----
EXCO Resources, Inc. 100.0 77.5 146.7 166.7 193.3 193.3
SIC Code Index 100.0 110.0 146.2 148.2 118.7 145.0
S&P 500 Index 100.0 137.6 169.2 225.6 290.1 351.1
14
<PAGE> 19
APPENDIX B -- SHAREHOLDERS
This Appendix B contains shareholder information for persons known to
the Company to be large shareholders (5% or more), directors, or executive
officers of the Company.
Ownership of the Company's common stock is shown in terms of
"beneficial ownership." A person generally "beneficially owns" shares if he has
either the right to vote those shares or dispose of them. More than one person
may be considered to beneficially own the same shares.
In this proxy statement, unless otherwise noted, a person has sole
voting and dispositive power for those shares shown as beneficially owned by
him. Shares shown as beneficially owned by the Company's executive officers
include shares that they have the right to acquire by exercising options on or
before April 30, 2000. The percentages shown in this proxy statement compare
the person's beneficially owned shares with the total number of shares of the
Company's common stock outstanding on February 29, 2000 (6,817,696 shares),
plus shares that can be acquired by exercising options on or before April 30,
2000 (346,457 shares).
CERTAIN SHAREHOLDERS
The following table shows the beneficial ownership of the Company's
common stock as of February 29, 2000, for persons known to the Company to own
five percent or more of the Company's common stock.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY OWNED
----------------------
NAMES AND ADDRESS NUMBER PERCENT
-------------------------------------------------------------- ------------ ---------
<S> <C> <C>
Ares Leveraged Investment Fund, L.P. ......................... 1,112,491 15.5%
1999 Avenue of the Stars, #1900
Los Angeles, California 90067
OCM Principal Opportunities Fund, L.P. ....................... 1,000,000 14.0%
c/o Oaktree Capital Management, LLC
333 South Grand Avenue, 28th Floor
Los Angeles, California 90071
Lord, Abbett & Co. ........................................... 650,000 9.1%
767 Fifth Avenue
New York, NY 10153
Douglas H. Miller ............................................ 572,077 8.0%
c/o EXCO Resources, Inc.
5735 Pineland Drive, Suite 235
Dallas, Texas 75231
State Street Research & Management Company ................... 380,500 5.3%
One Financial Center, 30th Floor
Boston, MA 02111-2690
</TABLE>
15
<PAGE> 20
DIRECTORS AND EXECUTIVE OFFICERS
The following table contains stockholder information for the nominees
for election as directors, the Company's executive officers listed in Appendix C
and the directors and executive officers as a group.
<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK
BENEFICIALLY OWNED
---------------------
NAME NUMBER PERCENT
--------------------------------------------------------------- ----------- ---------
<S> <C> <C>
Douglas H. Miller (2)(7) ..................................... 577,077 8.1%
T. W. Eubank (7) .............................................. 145,101 2.0%
J. Douglas Ramsey (8) ......................................... 89,001 1.2%
Jeffrey D. Benjamin (3)(6) .................................... 77,952 1.1%
Earl E. Ellis ................................................. 185,201 2.6%
J. Michael Muckleroy (4)(6) .................................. 84,751 1.2%
Boone Pickens (6) ............................................. 83,701 1.2%
Stephen F. Smith (6) .......................................... 76,801 1.1%
Charles R. Evans (5)(9) ....................................... 33,423 (1)
Richard E. Miller (10) ........................................ 33,644 (1)
All directors and executive officers as a group (12 persons) 1,503,384 21.0%
-------------------------
</TABLE>
(1) Less than 1%.
(2) Does not include 16,500 shares owned by The Miller
Children's Trust of which Mr. D. H. Miller is
neither the trustee nor the beneficiary.
(3) Excludes 1,000,000 shares held by OCM Principal
Opportunities Fund, L.P. of which shares he
disclaims beneficial ownership.
(4) Includes 50,000 shares held by Paine Webber, Inc.
Cust FBO Richard Sinz Marital Trust and Paine
Webber, Inc., Cust FBO Dorothy Sinz, for both of
which Mr. Muckleroy is trustee.
(5) Includes 200 shares held by Mr. Evans as custodian
for his children.
(6) Includes 25,000 shares currently exercisable under
the 1998 Director Compensation Plan.
(7) Includes 5,000 shares currently exercisable under
the 1998 Stock Option Plan.
(8) Includes 32,500 shares currently exercisable under
the 1998 Stock Option Plan.
(9) Includes 31,744 shares currently exercisable under
the 1998 Stock Option Plan.
(10) Includes 32,786 shares currently exercisable under
the 1998 Stock Option Plan.
The following is a brief description of the business background of all
of our executive officers. For the business background of our directors,
including those directors who are also executive officers, see Section 1 --
Election of Directors.
CHARLES R. EVANS, 46, joined the Company in February 1998 and became a
Vice President in March 1998. Mr. Evans graduated from Oklahoma University with
a B.S. degree in Petroleum Engineering in 1976. After working for Sun Oil Co.,
he joined TXO Production Corp. in 1979 and was appointed Vice President of
Engineering and Evaluation in 1989 and Vice President of Engineering and Project
Development for Delhi Gas Pipeline Corporation, a natural gas gathering,
processing and marketing company, in 1990. Mr. Evans most recently was
Director-Environmental Affairs and Safety for Delhi until December 1997.
16
<PAGE> 21
JOHN D. JACOBI, 46, became a Vice President of EXCO in February 1999.
Mr. Jacobi received his B.S. degree from West Texas State University. He
co-founded Jacobi-Johnson Energy, Inc., an independent oil and natural gas
producer, in 1991 and was its President until January 1997. He then served as
its Vice President and Treasurer until May 8, 1998, when the company was sold to
EXCO.
DANIEL A. JOHNSON, 48, became a Vice President of EXCO in February
1999. Mr. Johnson graduated from Texas A&M University with a B.S. degree in
Petroleum Engineering. In 1991, he co-founded Jacobi-Johnson Energy, Inc., an
independent oil and natural gas producer. He served as its President from
January 1997 until the company was sold to EXCO on May 8, 1998.
RICHARD E. MILLER, 46, became General Counsel and General Land Manager
and was elected Secretary of EXCO in December 1997. Mr. Miller was a senior
partner and head of the Energy Section of Gardere & Wynne, L.L.P., a Dallas
based law firm, from December 1991 to September 1994. Mr. Miller practiced law
as a sole practitioner from September 1994 to December 1997.
17
<PAGE> 22
APPENDIX C -- EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table provides compensation information for the fiscal
years 1999 and 1998 for the Company's Chief Executive Officer, Douglas H.
Miller, and the four most highly compensated executive officers other than Mr.
D. H. Miller: T. W. Eubank, J. Douglas Ramsey, Richard E. Miller, and Charles
R. Evans. Please note that the Company's executive management changed at the
end of fiscal 1997 and that none of the current officers served as officers
prior to December 1997.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
---------------------------------------- --------------
OTHER SECURITIES
FISCAL ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS COMPENSATION
- ------------------------------- -------- ----------- ---------- --------------- -------------- ---------------
($)(1) ($) ($) (#)(2) ($)
<S> <C> <C> <C> <C>
Douglas H. Miller ............. 1999 $100,000 $10,000 $ -- 20,000 $ 2,000
Chairman and 1998 $103,562 $10,000 $ -- 250,000 $ --
Chief Executive Officer
T. W. Eubank .................. 1999 $100,000 $10,000 $ -- 20,000 $ 2,000
President and Treasurer 1998 $103,562 $10,000 $ -- 100,000 $ --
J. Douglas Ramsey ............. 1999 $100,000 $10,000 $ -- 20,000 $ 2,000
Vice President and 1998 $100,000 $10,000 $ -- 50,000 $ --
Chief Financial Officer
Richard E. Miller ............. 1999 $111,456 $11,146 $ -- 21,146 $ 2,000
Secretary and General Counsel 1998 $100,000 $10,000 $ -- 50,000 $ --
Charles R. Evans .............. 1999 $100,000 $20,000 $ -- 18,487 $ 2,000
Vice President 1998 $ 84,872 $ 8,520 $ -- 50,000 $ --
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes $3,562 each for services rendered and not paid in 1997 to
Messrs. D. H. Miller and Eubank. Their salaries for 1998 were
$100,000.
(2) Does not include options granted to Messrs. D. H. Miller, Eubank and
Ramsey under the 1998 Director Compensation Plan.
The compensation described in this table does not include medical,
group life insurance or other benefits that are available generally to all of
the Company's salaried employees. It also does not include certain perquisites
and other personal benefits, securities or property received by these executive
officers, not material in amount.
The "Salary" column includes salary reduction elections made under the
Company's 401(k) plan for salaried employees. The "All Other Compensation"
column includes the Company's matching contributions under the Company's 401(k)
plan.
18
<PAGE> 23
OPTION GRANTS IN FISCAL 1999
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------------------------------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE GRANT DATE
OPTIONS EMPLOYEES IN PRICE EXPIRATION PRESENT
NAME GRANTED FISCAL YEAR PER SHARE DATE VALUE (3)
- -------------------------------- --------- ------------- --------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Douglas H. Miller .............. 10,000 (1) 3.7% $ 6.25 04/26/09 $ 31,800
10,000 (2) 3.7% $ 6.00 11/29/09 $ 30,500
T. W. Eubank ................... 10,000 (1) 3.7% $ 6.25 04/26/09 $ 31,800
10,000 (2) 3.7% $ 6.00 11/29/09 $ 30,500
J. Douglas Ramsey .............. 10,000 (1) 3.7% $ 6.25 04/26/09 $ 31,800
10,000 (2) 3.7% $ 6.00 11/29/09 $ 30,500
Richard E. Miller .............. 10,000 (1) 3.7% $ 6.25 04/26/09 $ 31,800
11,146 (2) 4.2% $ 6.00 11/29/09 $ 33,995
Charles R. Evans ............... 8,487 (1) 3.2% $ 6.25 04/26/09 $ 26,989
10,000 (2) 3.7% $ 6.00 11/29/09 $ 30,500
</TABLE>
(1) These options were granted on April 26, 1999, and become exercisable
for 25% of the shares on April 26, 1999, 25% on April 26, 2000, 25% on
April 26, 2001, and 25% on April 26, 2002. If a change in control of
the Company occurs, the options become exercisable in full.
(2) These options were granted on November 29, 1999, and become
exercisable for 25% of the shares on November 29, 1999, 25% on
November 29, 2000, 25% on November 29, 2001, and 25% on November 29,
2002. If a change in control of the Company occurs, the options become
exercisable in full.
(3) We calculated this amount using the Black-Scholes option pricing
model, a complex mathematical formula that uses six different
market-related factors to estimate the value of stock options. The
factors are the fair market value of the stock at date of grant,
option exercise price, option term, risk-free rate of return, stock
volatility and dividend yield. The Black-Scholes model generates an
estimate of the value of the right to purchase a share of stock at a
fixed price over a fixed period. The actual value, if any, an
executive realizes will depend on whether the stock price at exercise
is greater than the grant price, as well as the executive's continued
employment through the three-year vesting period and the 10-year
option term. The following assumptions were used to calculate the
Black-Scholes value:
<TABLE>
<S> <C> <C>
Fair market value of stock
at date of grant = $6.25 for options granted on April 26, 1999
$6.00 for options granted on November 29, 1999
Option exercise price = $6.25 for options granted on April 26, 1999
$6.00 for options granted on November 29, 1999
Option term = 10 years
</TABLE>
19
<PAGE> 24
<TABLE>
<S> <C> <C>
Risk-free rate of return = Based on 10-year U.S. Treasury Notes
Company stock volatility = Based on daily stock prices from January 1, 1998 through
December 31, 1999
Company dividend yield = 0%
Calculated Black-Scholes value = $3.18 per option for those granted on April 26, 1999
$3.05 per option for those granted on November 29,
1999
</TABLE>
There is no assurance that the value received by the named executive officers
or the Company's shareholders will be at or near the estimated value derived by
the Black-Scholes model.
OPTION VALUES AT FISCAL YEAR END
The following table shows the number of shares covered by both
exercisable and non-exercisable stock options held by Messrs. D. H. Miller,
Eubank, Ramsey, R. E. Miller, and Evans as of December 31, 1999. This table
also shows the value on that date of their "in-the-money" options, which is the
positive spread, if any, between the exercise price of existing stock options
and $7.25 per share (the closing market price of the common stock on December
31, 1999). In 1999, 77,500 options were exercised by Mr. D. H. Miller and
40,000 options were exercised by Mr. Eubank.
<TABLE>
<CAPTION>
SHARES
ACQUIRED VALUE NUMBER OF SECURITIES VALUE OF UNEXERCISED
ON REALIZED UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
EXERCISE (LOSS) OPTIONS AT FISCAL YEAR-END AT FISCAL YEAR-END
---------- --------- ----------------------------- -----------------------------
(#) ($) (#) ($)
---------- --------- ----------------------------- -----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------- ------------ -------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Douglas H. Miller......... 77,500 $(625) 2,500 165,000 $ 3,125 $204,375
T. W. Eubank.............. 40,000 $(625) 2,500 90,000 $ 3,125 $110,625
J. Douglas Ramsey......... -- -- 30,000 65,000 $36,875 $ 79,375
Richard E. Miller......... -- -- 30,286 40,860 $37,233 $ 49,200
Charles R. Evans.......... -- -- 29,622 38,865 $36,497 $ 46,990
</TABLE>
20
<PAGE> 25
APPENDIX D -- AUDIT COMMITTEE CHARTER
The Audit Committee (the "Committee") of EXCO Resources, Inc. (the "Company")
is a committee of the Board of Directors. Its primary function is to assist the
Board of Directors in fulfilling its oversight responsibilities by reviewing
(i) the financial information which will be provided to the shareholders,
potential shareholders, the investment community and others; (ii) the systems
of internal controls which management and the Board of Directors have
established; and (iii) the audit process.
In meeting its responsibilities, the Committee is expected to:
1. Provide an open avenue of communication between the internal auditor,
the independent accountant and the Board of Directors, including
meeting with the internal auditor, the independent accountant and
management in separate executive sessions to discuss any matters that
the Committee or any of these persons believe should be discussed
privately with the Committee.
2. Review and update the Committee's charter annually.
3. Confirm the independent accountant's ultimate accountability
to the Board of Directors and the Audit Committee, as representatives
of the shareholders. Select and recommend to the Board of Directors
the independent accountant to be proposed for shareholder approval,
approve the compensation of the independent accountant, review and
evaluate the independent accountant, and recommend to the Board of
Directors the discharge of the independent accountant.
4. Review and concur in the appointment, replacement, reassignment or
dismissal of the Company's audit staff.
5. Confirm and assure the independence of the internal auditor.
6. Take action, or recommend that the full Board of Directors take
action, to oversee the independence of the independent accountant by,
among other things, (i) receiving from the independent accountant a
formal written statement delineating all relationships between the
accountant and the Company, consistent with Independence Standards
Board Standard No. 1, and (ii) actively engaging in a dialogue with the
accountant with respect to any disclosed relationships or services
that may impact the objectivity and independence of the accountant.
7. Inquire of management, the internal auditor and the independent
accountant about significant risks or exposures and assess the steps
management has taken to minimize such risk to the Company.
8. Review with the Company's audit staff the audit scope and plan,
including the coordination of the audit effort between the internal
auditor and the independent accountant, to assure completeness of
coverage, reduction of redundant efforts and the effective use of
audit resources.
9. Consider with management and the independent accountant the rationale
for employing audit firms other than the principal independent
accountant.
10. Review Management's Discussion and Analysis (MD&A) included in Form
10-K.
21
<PAGE> 26
11. Review with management and the independent accountant at the
completion of the annual examination:
a. The Company's annual financial statements and related
footnotes.
b. The independent accountant's audit of the financial
statements and his or her report thereon.
c. Any significant changes required in the independent
accountant's audit plan.
d. Any serious difficulties or disputes with management
encountered during the course of the audit.
e. Other matters related to the conduct of the audit which are
to be communicated to the Committee under generally accepted
auditing standards or any other concerns.
f. The Company's compliance with its loan agreements.
g. The existence of significant estimates and the rationale
behind those estimates as well as any significant changes in
such estimates.
h. All fees paid to the independent accountant for the previous
fiscal year.
i. Any significant transactions that were not a normal part of
the Company's business.
j. Any change in accounting principles.
k. Any prior period adjustments.
l. The initial reporting of any significant loss or gain
contingency (or significant change in the magnitude of any
contingency).
m. The "Management Letter" from the independent accountants.
12. Consider and review with management, the independent accountant and
the internal auditor:
a. The adequacy of the Company's internal controls, including
the adequacy of controls and security for management
information systems and other information technology.
b. Any related significant findings and recommendations of the
independent accountant and internal auditor together with
management's responses thereto.
13. Consider and review with management and the internal auditor:
a. Significant findings during the year and management's
responses thereto.
b. Any difficulties encountered in the course of their audits,
including any restrictions on the scope of their work or
access to required information.
c. Any changes required in the planned scope of their audit
plan.
22
<PAGE> 27
d. The internal auditing department budget and staffing.
e. The internal audit department charter.
f. The internal auditor's compliance with the Institute of
Internal Auditors Standards for the Professional Practice of
Internal Audits.
14. Review filings with the SEC and other published documents containing
the Company's financial statements and consider whether the
information contained in these documents is consistent with the
information contained in the financial statements.
15. Review with management, the independent accountant and the internal
auditor each Form 10-Q before it is filed with the SEC.
16. Review the Company's policies relating to compliance with laws and
regulations; the Company's code of conduct; ethics; officers' expense
accounts, perquisites, and use of corporate assets; conflict of
interest and the investigation of misconduct or fraud. Determine the
extent to which the planned audit scope of the internal auditor and
independent accountant can be relied on to detect fraud.
17. Review legal and regulatory matters that may have a material impact on
the financial statements, the Company's related compliance policies
and programs, and reports received from regulators.
18. Report actions of the Committee to the Board of Directors with such
recommendations as the Committee may deem appropriate.
19. Review with management and the Company's independent public
accountants the applicability and impact of any new pronouncements (or
exposure drafts) issued by the Financial Accounting Standards Board or
other applicable regulatory agencies.
20. Review with the internal auditor and independent accountant the
appropriateness, not just the acceptability, of accounting principles
and financial disclosure practices used or proposed by the Company and
the related degree of aggressiveness or conservatism of its accounting
principles and underlying estimates.
21. Review with management the Company's policies and controls, including
reporting controls over derivative transactions, including foreign
currency exposures and hedging activities.
22. The Committee shall meet at least four times per year or more
frequently as circumstances require. The Committee may ask members of
management or others to attend the meeting and provide pertinent
information as necessary.
23. The Committee shall have the power to conduct or authorize
investigations into any matters within the Committee's scope of
responsibilities. The Committee shall be empowered to retain
independent counsel, accountants or others to assist it in the conduct
of any investigation.
24. The Committee will perform such other functions as assigned by law,
the Company's charter or bylaws, or the Board of Directors.
23
<PAGE> 28
The Committee shall have at least three members, who shall serve at the
pleasure of the Board of Directors. All members shall be independent directors,
except that, in exceptional and usual circumstances, one member of the
Committee may not be an independent director if he or she is neither a current
employee of the Company nor a family member of an employee of the Company and
the Board of Directors determines that the person's Committee membership is
required by the best interest of the Company and its shareholders. An
"independent director" is a person who:
(a) is not employed by the Company or any of its affiliates for the
current year or any of the past three years,
(b) does not accept any compensation from the Company or any of its
affiliates in excess of $60,000 during the previous fiscal year, other
than compensation for board service, benefits under a tax re-qualified
retirement plan, or non-discretionary compensation;
(c) is not a member of the immediate family* of an individual who is,
or has been in any of the past three years, employed by the Company or
any of its affiliates as an executive officer,
(d) is not a partner in, or a controlling shareholder or an executive
officer of, any for-profit business organization to which the Company
made, or from which the Company received, payments (other than those
arising solely from investments in the Company's securities) that
exceeded 5% of the Company's or the business organization's
consolidated gross revenues for that year, or $200,000, whichever is
more, in any of the past three years,
(e) is not employed as an executive of another entity where any of the
Company's executives serve on that entity's compensation committee,
and
(f) does not have a relationship that, in the opinion of the Board of
Directors of the Company, would interfere with the exercise of
independent judgment in carrying out the responsibilities of a
director.
*Immediate family includes a person's spouse, parents,
children, siblings, mother-in-law, father-in-law,
brother-in-law, sister-in-law, son-in-law, daughter-in-law,
and anyone who resides in that person's home.
The Committee members and the Committee chairman shall be designated by the
full Board of Directors. The duties and responsibilities of a member of the
Committee are in addition to those duties set out for a member of the Board of
Directors. In carrying out these responsibilities, the Audit Committee believes
its policies and procedures should remain flexible in order for it to best
react to changing conditions and environment and to assure the Board of
Directors and shareholders that the Company accounting practices are in
accordance with all requirements and are of the highest quality.
24
<PAGE> 29
EXCO'S ANNUAL MEETING OF SHAREHOLDERS
ROYAL OAKS COUNTRY CLUB
7915 GREENVILLE AVENUE
DALLAS, TEXAS 75231
(214) 691-6091
[MAP]
25
<PAGE> 30
PROXY
EXCO RESOURCES, INC.
5735 Pineland Drive, Suite 235
Dallas, Texas 75231
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Douglas H. Miller, J. Douglas Ramsey and
Richard E. Miller as Proxies, each with the power to appoint his substitute, and
hereby authorizes them to represent and to vote, as designated below, all the
shares of Common Stock, par value $.02 per share, of EXCO Resources, Inc. held
of record by the undersigned on February 29, 2000 at the annual meeting of
shareholders to be held on April 26, 2000 or any adjournment or postponement
thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR PROPOSAL 1.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE
PROPOSAL. PLEASE REVIEW CAREFULLY THE PROXY STATEMENT DELIVERED WITH THIS PROXY.
1. Proposal to elect DOUGLAS H. MILLER, T.W. EUBANK, J. DOUGLAS RAMSEY,
JEFFREY D. BENJAMIN, EARL E. ELLIS, J. MICHAEL MUCKLEROY, BOONE PICKENS
and STEPHEN F. SMITH as directors until the next Annual Meeting or until
their successors have been duly qualified and elected.
<TABLE>
<S> <C> <C> <C>
[ ] FOR all nominees listed above [ ] WITHHOLD AUTHORITY
(except as marked to the contrary below) to vote for all nominees listed above
</TABLE>
- --------------------------------------------------------------------------------
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE WRITE
THAT NOMINEE'S NAME IN THE SPACE PROVIDED ABOVE)
(Please See Reverse Side)
<PAGE> 31
The Proxies are authorized to vote, in their discretion, upon such other
business as may properly come before the meeting.
Dated:
-----------------------------, 2000
--------------------------------------------
Signature
--------------------------------------------
Signature (if held jointly)
Please sign exactly as 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 an authorized person.
