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                                                                     EXHIBIT 4.1


                            STATEMENT OF DESIGNATION

                                       OF

                         5% CONVERTIBLE PREFERRED STOCK

                                       OF

                              EXCO RESOURCES, INC.

                        (PURSUANT TO SECTION 2.13 OF THE
                         TEXAS BUSINESS CORPORATION ACT)

         EXCO Resources, Inc., a Texas corporation (the "Company"), hereby
certifies that the following resolution was adopted by the Board of Directors of
the Company on May 21, 2001:

         RESOLVED, that pursuant to the authority expressly granted to and
vested in the Board of Directors of the Company by the provisions of the
Restated Articles of Incorporation of the Company (the "Articles of
Incorporation"), there is hereby created, out of the 10,000,000 shares of
Preferred Stock, par value $0.01 per share, of the Company authorized in Article
Fourth of the Articles of Incorporation (the "Preferred Stock"), a series of the
Preferred Stock consisting of 7,168,634 shares, which series shall have the
following powers, designations, preferences and other rights, and the following
qualifications, limitations and restrictions (in addition to the powers,
designations, preferences and other rights, and the qualifications, limitations
and restrictions, set forth in the Articles of Incorporation that are applicable
to the Preferred Stock):

         SECTION 1. Definitions. For purposes of this Statement of Designation,
the following definitions shall apply:

         "Arrearage" shall have the meaning ascribed to it in Section 4 herein.

         "Articles of Incorporation" shall mean the Company's Restated Articles
of Incorporation.

         "Board of Directors" shall mean the Board of Directors of the Company
or any authorized committee of the Board of Directors.

         "Business Day" shall mean any day other than a Saturday or a Sunday, a
day on which banking institutions in New York, New York are authorized or
required by law or executive order to remain closed, or a day on which the
corporate trust office of the Transfer Agent is closed for business.

         "Code" shall have the meaning ascribed to it in Section 11 herein.

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         "Common Stock" shall mean the Common Stock, par value $0.02 per share,
of the Company.

         "Company" shall mean EXCO Resources, Inc., a Texas corporation.

         "Conversion Date" shall mean, in the case of a Mandatory Conversion,
the Mandatory Conversion Date, and, in the case of an Optional Conversion, the
Business Day on which certificates representing shares of Convertible Preferred
Stock are surrendered pursuant to Section 6(c) or the date on which an agreement
regarding lost, stolen or destroyed shares is accepted by the Company.

         "Conversion Rate" shall have the meaning ascribed to it in Section 6
herein.

         "Convertible Preferred Stock" shall mean the Company's 5% Convertible
Preferred Stock, par value $0.01 per share.

         "Dividend Payment Date" shall have the meaning ascribed to it in
Section 4 herein.

         "Dividend Rate" shall have the meaning ascribed to it in Section 4
herein.

         "Exchange Act" shall have the meaning ascribed to it in Section 18
herein.

         "Fair Market Value" of publicly traded shares of Common Stock as of a
particular date shall mean the average of the last reported sale prices as
reported on the Nasdaq National Market of the National Association of Securities
Dealers, Inc. Automated Quotation System, or such other exchange or trading
system on which the Common Stock is then traded, for 30 consecutive Business
Days commencing 45 days before such date. If the Common Stock is not listed or
admitted to trading or quoted on any national securities exchange or quotation
system, "Fair Market Value" shall be the average of the average of the closing
bid and asked prices of the Common Stock for such 30 consecutive Business Days
as furnished by two members of the National Association of Securities Dealers,
Inc. selected by the Company for that purpose. If the Common Stock is not traded
in a manner such that the quotations referred to above are available, "Fair
Market Value" shall be deemed to be the fair market value per share of the
Common Stock as determined by the Board of Directors in the good faith exercise
of its reasonable business judgment.

         "Issue Date" shall mean the date that shares of Convertible Preferred
Stock are first issued by the Company.

         "Junior Securities" shall mean any capital stock of the Company other
than the Convertible Preferred Stock, any Parity Securities or any Senior
Securities.

         "Mandatory Conversion" shall have the meaning ascribed to it in Section
6 herein.

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         "Mandatory Conversion Date" shall have the meaning ascribed to it in
Section 6 herein.

         "Optional Conversion" shall have the meaning ascribed to it in Section
6 herein.

         "Parity Securities" shall mean any class or series of capital stock of
the Company authorized after the Issue Date which is entitled to receive assets
upon liquidation, dissolution or winding up of the affairs of the Company on a
parity with the Convertible Preferred Stock.

         "Person" shall mean an individual, partnership, corporation, limited
liability company, incorporated organization, trust or joint venture, or a
governmental agency or political subdivision thereof.

         "Preferred Stock" shall mean the Preferred Stock, par value $0.01 per
share, of the Company.

         "Registered Holders" shall have the meaning ascribed to it in Section 4
herein.

         "SEC" shall have the meaning ascribed to it in Section 18 herein.

         "Senior Securities" shall mean any class or series of capital stock of
the Company authorized after the Issue Date ranking senior to the Convertible
Preferred Stock in respect of the right to participate in any distribution upon
liquidation, dissolution or winding up of the affairs of the Company.

         "Stated Value" shall mean $21.00 per share.

         "Transfer Agent" shall mean Continental Stock Transfer & Trust Company
until any redesignation is made, if at all, pursuant to Section 17.

         SECTION 2. Designation and Amount. The shares of such series shall be
designated as "5% Convertible Preferred Stock" and the authorized number of
shares constituting such series shall be 7,168,634.

         SECTION 3. Ranking. For the purposes of determining whether any
dividend will be paid, and whether there will be any distribution of assets upon
liquidation, dissolution or winding up of the Company, whether voluntary or
involuntary, the Convertible Preferred Stock will rank:

                  (a) junior to all of the Company's existing and future
         indebtedness and other obligations;

                  (b) senior to the Common Stock; and



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                  (c) senior to any other classes of Common Stock or series of
         Preferred Stock that the Company may establish after the issuance of
         the Convertible Preferred Stock.

         SECTION 4. Dividends.

                  (a) General. The holders of shares of Convertible Preferred
         Stock shall be entitled to receive dividends at a rate of 5% of the
         Stated Value per annum (the "Dividend Rate"), which dividends shall be
         fully cumulative and paid quarterly in arrears in cash, in four equal
         installments on March 31, June 30, September 30 and December 31 of each
         year (commencing September 30, 2001), or if any such date is not a
         Business Day, the Business Day next following such day (each such date,
         regardless of whether any dividends have been paid or declared and set
         aside for payment on such date, the "Dividend Payment Date"), to
         holders of record (the "Registered Holders") as they appear on the
         stock record books of the Company on the fifteenth day prior to the
         relevant Dividend Payment Date. Dividends shall be paid only when, as
         and if declared by the Board of Directors out of funds at the time
         legally available for the payment of dividends. Dividends shall begin
         to accumulate on outstanding shares of Convertible Preferred Stock from
         the Issue Date and shall be deemed to accumulate from day to day
         whether or not declared until paid. Dividends shall accumulate on the
         basis of a 360-day year consisting of twelve 30-day months (four 90-day
         quarters) and the actual number of days elapsed in the period for which
         the dividend is payable.

                  (b) Accumulation. Dividends on the Convertible Preferred Stock
         shall be cumulative, and from and after any Dividend Payment Date on
         which any dividend that has accumulated or been deemed to have
         accumulated through such date has not been paid in full, additional
         dividends shall accumulate at 7% per annum on the amount of such unpaid
         dividends (the "Arrearage"). Such additional dividends in respect of
         any Arrearage shall be deemed to accumulate from day to day whether or
         not declared until the Arrearage is paid, shall be calculated as of
         such successive Dividend Payment Date, and shall constitute an
         additional Arrearage from and after any Dividend Payment Date to the
         extent not paid on such Dividend Payment Date. References in any
         Section herein to dividends that have accumulated or that have been
         deemed to have accumulated with respect to the Convertible Preferred
         Stock shall include the amount, if any, of any Arrearage together with
         any dividends accumulated or deemed to have accumulated on such
         Arrearage pursuant to this Section 4(b). Additional dividends in
         respect of any Arrearage may be declared and paid at any time, in whole
         or in part, without reference to any regular Dividend Payment Date, to
         Registered Holders as they appear on the stock record books of the
         Company on such record date as may be fixed by the Board of Directors
         (which record date shall be no less than 10 days prior to the
         corresponding payment date). Dividends in respect of any Arrearage
         shall be paid in cash.

                  (c) Method of Payment. Dividends paid on the shares of
         Convertible Preferred Stock in an amount less than the total amount of
         such dividends at the time


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         accumulated and payable on all outstanding shares of Convertible
         Preferred Stock shall be allocated pro rata on a share-by-share basis
         among all such shares then outstanding. Dividends that are declared and
         paid in an amount less than the full amount of dividends accumulated on
         the Convertible Preferred Stock (and on any Arrearage) shall be applied
         first to the earliest dividend which has not theretofore been paid. All
         cash payments of dividends on the shares of Convertible Preferred Stock
         shall be made in such coin or currency of the United States of America
         as at the time of payment is legal tender for payment of public and
         private debts.

                  (d) Restrictions on Dividends. So long as any shares of the
         Convertible Preferred Stock are outstanding, the Board of Directors
         shall not declare, and the Company shall not pay or set apart for
         payment, any dividend or other payments on any Junior Securities or
         Parity Securities or make any payment on account of, or set apart for
         payment, money for a sinking or other similar fund for, the repurchase,
         redemption or other retirement of, any Junior Securities or Parity
         Securities or any warrants, rights or options exercisable for or
         convertible into any Junior Securities or Parity Securities (other than
         the repurchase, redemption or other retirement of debentures or other
         debt securities that are convertible or exchangeable into any Junior
         Securities or Parity Securities), or make any distribution in respect
         of the Junior Securities or Parity Securities, either directly or
         indirectly, whether in cash, obligations or shares of the Company or
         other property (other than distributions or dividends in Junior
         Securities or Parity Securities to the holders of the Junior Securities
         or Parity Securities, respectively, or any payment of cash to settle
         fractional shares that might otherwise be issuable upon Junior
         Securities or Parity Securities in respect of stock dividends, stock
         splits and the like), and shall not permit any corporation or other
         entity directly or indirectly controlled by the Company to purchase or
         redeem any Junior Securities or Parity Securities or any warrants,
         rights, calls or options exercisable for or convertible into any Junior
         Securities or Parity Securities (other than the repurchase, redemption
         or other retirement of debentures or other debt securities that are
         convertible or exchangeable into any Junior Securities or Parity
         Securities or the repurchase, redemption or other retirement of Junior
         Securities or Parity Securities in exchange for Junior Securities or
         Parity Securities, respectively) unless prior to or concurrently with
         such declaration, payment, setting apart for payment, repurchase,
         redemption or other retirement or distribution, as the case may be, all
         accumulated and unpaid dividends on shares of the Convertible Preferred
         Stock not paid on the dates provided for in paragraph (a) of Section 4
         hereof (including Arrearages and accumulated dividends thereon) shall
         have been paid, except that when dividends are not paid in full as
         aforesaid upon the shares of Convertible Preferred Stock, all dividends
         declared on the Convertible Preferred Stock and any series of Parity
         Securities shall be declared and paid pro rata so that the amount of
         dividends so declared and paid on Convertible Preferred Stock and such
         series of Parity Securities shall in all cases bear to each other the
         same ratio that accumulated dividends (including interest accrued on or
         additional dividends accumulated in respect of such accumulated
         dividends) on the shares of Convertible Preferred Stock and such Parity
         Securities bear to each other.



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         SECTION 5. Liquidation Preference.

                  (a) General. In the event of any voluntary or involuntary
         liquidation, dissolution or winding up of the affairs of the Company,
         the holders of the shares of Convertible Preferred Stock then
         outstanding shall be entitled to receive out of the assets of the
         Company available for distribution to its shareholders, whether such
         assets are capital or surplus of any nature, an amount per share equal
         to the sum of (i) the unpaid dividends, if any, accumulated or deemed
         to have accumulated thereon to the date of final distribution to such
         holders, whether or not such dividends are declared; and (ii) the
         Stated Value thereof, before any payment shall be made or any assets
         distributed to the holders of any Junior Securities. After any such
         payment in full, the holders of Convertible Preferred Stock shall not,
         as such, be entitled to any further participation in any distribution
         of assets of the Company.

                  (b) Parity Securities. All the assets of the Company available
         for distribution to shareholders after the liquidation preferences of
         any Senior Securities shall be distributed ratably (in proportion to
         the full distributable amounts to which holders of Convertible
         Preferred Stock and Parity Securities, if any, are respectively
         entitled upon such dissolution, liquidation or winding up) among the
         holders of the then-outstanding shares of Convertible Preferred Stock
         and Parity Securities, if any, when such assets are not sufficient to
         pay in full the aggregate amounts payable thereon.

                  (c) Merger Not A Liquidation. Neither a consolidation nor a
         merger of the Company with or into any other Person or Persons, nor a
         sale, conveyance, lease, exchange or transfer of all or part of the
         Company's assets for cash, securities or other property to a Person or
         Persons shall be deemed to be a liquidation, dissolution or winding up
         of the Company for purposes of this Section 5, but the holders of
         shares of Convertible Preferred Stock shall nevertheless be entitled
         from and after any such consolidation, merger or sale, conveyance,
         lease, exchange or transfer of all or part of the Company's assets to
         the rights provided by this Section 5 following any such transaction.
         Notice of any voluntary or involuntary liquidation, dissolution or
         winding up of the Company, stating the payment date or dates when, and
         the place or places where, the amounts distributable to each
         shareholder of Convertible Preferred Stock in such circumstances shall
         be payable, shall be given by first-class mail, postage prepaid, mailed
         not less than 30 days prior to any payment date stated therein, to
         holders of record as they appear on the stock record books of the
         Company as of the date such notices are first mailed.

         SECTION 6. Conversion. The holders of the Convertible Preferred Stock
will have the following rights with respect to the conversion of the Convertible
Preferred Stock into shares of Common Stock:


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                  (a) Optional Conversion. Subject to and in compliance with the
         provisions of this Section 6, each share of Convertible Preferred Stock
         may, at the option of the holder, be converted at any time into
         fully-paid and nonassessable shares of Common Stock (an "Optional
         Conversion") at the rate of one share of Common Stock for each share of
         Convertible Preferred Stock so converted, subject to adjustment as
         provided in this Section 6 (as so adjusted, the "Conversion Rate").

                  (b) Mandatory Conversion. Effective at 5:00 p.m., New York
         time, on June 30, 2003 (the "Mandatory Conversion Date"), each
         outstanding share of Convertible Preferred Stock shall be automatically
         converted into a number of shares of Common Stock determined by the
         Conversion Rate then in effect (a "Mandatory Conversion") without any
         further action by the holders of such shares and whether or not the
         certificates representing such shares are surrendered to the Company or
         its Transfer Agent; provided, however, that the Company will not be
         obligated to issue certificates evidencing the shares of Common Stock
         issuable upon such conversion unless and until the certificates
         evidencing such shares of Convertible Preferred Stock are either
         delivered to the Company or its Transfer Agent as provided in Section
         6(c) below or the holder notifies the Company or the Transfer Agent
         that such certificates have been lost, stolen or destroyed and executes
         an agreement satisfactory to the Company to indemnify the Company from
         any loss incurred by it in connection with such certificates.

                  (c) Mechanics of Conversion. Each holder of Convertible
         Preferred Stock who desires or is obligated to convert the same into
         shares of Common Stock pursuant to this Section 6 will surrender the
         certificate or certificates therefor, duly endorsed, at the principal
         office of the Company or any Transfer Agent for the Convertible
         Preferred Stock, or the holder will notify the Company or the Transfer
         Agent that such certificates have been lost, stolen or destroyed and
         execute an agreement satisfactory to the Company to indemnify the
         Company from any loss incurred by it in connection with such
         certificates, and will give written notice to the Company at such
         office that such holder elects or is obligated to convert the same.
         Such notice will state the number of shares of Convertible Preferred
         Stock being converted and will specify the name or names (with address
         or addresses) in which a certificate or certificates evidencing shares
         of Common Stock are to be issued. Thereupon, the Company will promptly
         issue and deliver at such office to such holder a certificate or
         certificates for the number of shares of Common Stock which equals the
         number of shares of Common Stock to which such holder is entitled under
         the then-effective Conversion Rate, together with a cash adjustment in
         respect of any fraction of a share of Common Stock as provided in
         Section 6(h). In the event that there shall have been surrendered a
         certificate or certificates representing Convertible Preferred Stock,
         only part of which are to be converted, the Company will promptly issue
         and deliver, in the manner set forth in the preceding sentence, a new
         certificate or certificates representing the number of shares of
         Convertible Preferred Stock which shall not have been converted. In
         addition, upon any such conversion the holder of the shares of
         Convertible Preferred Stock being converted who held such shares of
         Convertible Preferred Stock at 5:00 p.m., New York time, on any
         Dividend Record Date shall be paid all accrued but unpaid dividends on
         the shares of


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         Convertible Preferred Stock being converted (whether or not authorized
         or declared), such amount of dividends being determined as of the last
         preceding Dividend Record Date prior to the Conversion Date, in cash on
         or before the fifth Business Day after the Conversion Date. Such
         conversion will be deemed to have been made at the close of business on
         the Conversion Date, and the Person entitled to receive the shares of
         Common Stock issuable upon such conversion will be treated for all
         purposes as the record holder of such shares of Common Stock on such
         date.

                  (d) Adjustment for Changes in Common Stock. If the Company at
         any time or from time to time after the Issue Date (i) pays a dividend
         in or makes a distribution in shares of Common Stock; (ii) subdivides
         its outstanding shares of Common Stock; or (iii) combines its
         outstanding shares of Common Stock into a smaller number of shares, the
         Conversion Rate in effect immediately prior thereto shall be adjusted
         so that the holder of a share of Convertible Preferred Stock thereafter
         surrendered for conversion shall be entitled to receive the number of
         shares of Common Stock which it would have owned or have been entitled
         to receive after the happening of any of the events described above had
         such share of Convertible Preferred Stock been converted on or
         immediately prior to the record date for such dividend or the effective
         date of such subdivision, combination or reclassification, as the case
         may be.

                  (e) Adjustments for Other Dividends and Distributions. If the
         Company at any time or from time to time after the Issue Date makes, or
         fixes a record date for the determination of holders of Common Stock
         entitled to receive, a dividend or other distribution payable in
         securities of the Company other than shares of Common Stock, in each
         such event provision will be made so that the holders of the
         Convertible Preferred Stock will receive upon conversion thereof, in
         addition to the number of shares of Common Stock receivable thereupon,
         the amount of the other securities of the Company which they would have
         received had their Convertible Preferred Stock been converted into
         Common Stock on the date of such event and had they thereafter, during
         the period from the date of such event to and including the Conversion
         Date, retained such securities receivable by them as aforesaid during
         such period, subject to all other adjustments called for during such
         period under this Section 6(e) with respect to the rights of the
         holders of the Convertible Preferred Stock or with respect to such
         other securities by their terms.

                  (f) General. An adjustment made pursuant to this Section 6
         shall become effective immediately after the record date (in the case
         of a dividend or distribution in shares of capital stock) and shall
         become effective immediately after the effective date (in the case of a
         subdivision, combination or reclassification). No adjustment in
         accordance with this Section 6 shall be required unless such adjustment
         would require an increase or decrease in the Conversion Rate of at
         least 1.0%; provided, however, that any adjustments which by reason of
         this clause are not required to be made shall be carried



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         forward and taken into account in any subsequent adjustment. Any
         calculations under this Section 6 shall be made to the nearest
         one-thousandth of a share.

                  (g) Notices of Record Date. Upon (1) any taking by the Company
         of a record of the holders of any class of securities for the purpose
         of determining the holders thereof who are entitled to receive any
         dividend or other distribution (other than in connection with the
         declaration and payment or regular quarterly dividends in cash on the
         Convertible Preferred Stock), or (2) any capital reorganization of the
         Company, any reclassification or recapitalization of the capital stock
         of the Company, any merger or consolidation of the Company with or into
         any other corporation, or any voluntary or involuntary dissolution,
         liquidation or winding up of the Company, the Company will cause to be
         mailed to each holder of Convertible Preferred Stock, at such holder's
         address as it appears on the stock record books of the Company, at
         least twenty (20) days prior to the record date specified therein a
         notice specifying (1) the date on which any such record is to be taken
         for the purpose of such dividend or distribution and a description of
         such dividend or distribution, (2) the date on which any such
         reorganization, reclassification, recapitalization, merger,
         consolidation, dissolution, liquidation or winding up is expected to
         become effective, and (3) the date, if any, that is to be fixed as to
         when the holders of record of Common Stock (or other securities) will
         be entitled to exchange their shares of Common Stock (or other
         securities) for securities or other property deliverable upon such
         reorganization, reclassification, recapitalization, merger,
         consolidation, dissolution, liquidation or winding up (but no failure
         to mail such notice or any defect therein or in the mailing thereof
         shall affect the validity of the corporate action required to be
         specified in such notice).

                  (h) Fractional Shares. No fractional shares of Common Stock
         will be issued upon conversion of Convertible Preferred Stock. All
         shares of Common Stock (including fractions thereof) issuable upon
         conversion of more than one share of Convertible Preferred Stock by a
         holder thereof will be aggregated for purposes of determining whether
         the conversion would result in the issuance of any fractional shares.
         If, after the aforementioned aggregation, the conversion would result
         in the issuance of any fractional share, the Company will, in lieu of
         issuing any fractional share, pay cash equal to the product of such
         fraction multiplied by the Common Stock's Fair Market Value on the date
         of conversion.

                  (i) Reservation of Stock Issuable Upon Conversion. The Company
         will at all times reserve and keep available out of its authorized but
         unissued shares of Common Stock, solely for the purpose of effecting
         the conversion of the shares of the Convertible Preferred Stock, such
         number of its shares of Common Stock as will from time to time be
         sufficient to effect the conversion of all outstanding shares of
         Convertible Preferred Stock. If at any time the number of authorized
         but unissued shares of Common Stock is not sufficient to effect the
         conversion of all then outstanding shares of Convertible Preferred
         Stock, the Company will take such corporate action as may, in the
         opinion of its


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         counsel, be necessary to increase its authorized but unissued shares of
         Common Stock to such number of shares as will be sufficient for such
         purpose.

                  (j) Payment of Taxes. The Company will pay all taxes (other
         than taxes based upon income) and other governmental charges that may
         be imposed with respect to the issuance or delivery of shares of Common
         Stock upon conversion of shares of Convertible Preferred Stock. The
         Company shall not, however, be required to pay any tax or other charge
         imposed in connection with any transfer involved in the issuance or
         delivery of shares of Common Stock in a name other than that in which
         the shares of Convertible Preferred Stock so converted were registered
         and shall not be required to make such issuance or delivery unless and
         until the person entitled to such issuance or delivery has paid to the
         Company the amount of any such tax or has established, to the
         satisfaction of the Company, that such tax has been paid or is not
         payable.

         SECTION 7. Voting Rights.

                  (a) So long as any shares of the Convertible Preferred Stock
         are outstanding, (i) each share of Convertible Preferred Stock shall
         entitle the holder thereof to vote on all matters voted on by holders
         of Common Stock; and (ii) the shares of Convertible Preferred Stock
         shall vote together with shares of Common Stock as a single class. Each
         share of Convertible Preferred Stock will entitle the holder to the
         number of votes per share equal to the full number of shares of Common
         Stock into which each share of Convertible Preferred Stock is
         convertible on the record date for such vote.

                  (b) Without the affirmative vote of the holders of at least a
         majority of the then-issued and outstanding shares of Convertible
         Preferred Stock, the Company shall not authorize, create or issue, or
         reclassify any authorized stock of the Company into, or increase the
         authorized amount of, (i) any Senior Securities or Parity Securities or
         (ii) any class or series of capital stock or any security convertible
         into or exercisable or exchangeable for any class or series of capital
         stock, redeemable mandatorily or redeemable at the option of the
         holders thereof. Such vote shall be taken in accordance with the
         procedures specified in Section 7(d) below.

                  (c) Without the affirmative vote of the holders of at least a
         majority of the then-issued and outstanding shares of Convertible
         Preferred Stock, the Company shall not (i) increase or decrease the
         aggregate number of authorized shares of such class or series; (ii)
         increase or decrease the par value of the shares of such class,
         including changing shares having a par value into shares without par
         value, or shares without par value into shares with par value; (iii)
         effect an exchange, reclassification, or cancellation of all or part of
         the shares of such class or series; (iv) effect an exchange, or create
         a right of exchange, of all or any part of the shares of another class
         into the shares of such class or series; (v) change the designations,
         preferences, limitations, or relative rights of the shares of such
         class or series, (vi) change the shares of such class or series,
         whether with or



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         without par value, into the same or a different number of shares,
         either with or without par value, of the same class or series or
         another class or series; (vii) create a new class or series of shares
         having rights and preferences equal, prior, or superior to the shares
         of such class or series, or increase the rights and preferences of any
         class or series having rights and preferences equal, prior, or superior
         to the shares of such class or series, or increase the rights and
         preferences of any class or series having rights or preferences later
         or inferior to the shares of such class or series in such a manner as
         to become equal, prior, or superior to the shares of such class or
         series; (viii) divide the shares of such class into series and fix and
         determine the designation of such series and the variations in the
         relative rights and preferences between the shares of such series; or
         (ix) cancel or otherwise affect dividends on the shares of such class
         or series which had accrued but had not been declared. Such vote shall
         be taken in accordance with the procedures specified in Section 7(d)
         below.

                  (d) The foregoing rights of holders of Convertible Preferred
         Stock to take any actions as provided in this Section 7 may be
         exercised at any annual meeting of shareholders or at a special meeting
         of shareholders held for such purpose as hereinafter provided or at any
         adjournment thereof.

                  (e) The Company shall not enter into any agreement or issue
         any security that prohibits, conflicts or is inconsistent with, or
         would be breached by, the Company's performance of its obligations
         hereunder.

         SECTION 8. Exclusion of Other Rights. Except as may otherwise be
required by law, the shares of Convertible Preferred Stock shall not have any
preferences or relative, participating, option or other special rights, other
than those specifically set forth in this Statement of Designation. The shares
of Convertible Preferred Stock shall have no preemptive or redemption rights
pursuant to this Statement of Designation.

         SECTION 9. Reissuance. Shares of the Convertible Preferred Stock
acquired by the Company by conversion or otherwise will be deemed authorized but
unissued shares of preferred stock that is undesignated as to series and may be
redesignated and reissued as part of any series of preferred stock, but not as
the Convertible Preferred Stock.

         SECTION 10. Reorganization, Reclassification, Merger, Consolidation, or
Disposition of Assets. In the event the Company is a party to:

                  (a) any reclassification or change of outstanding shares of
         Common Stock issuable upon conversion of shares of Convertible
         Preferred Stock (other than a change in par value, or from par value to
         no par value, or from no par value to par value, or as a result of a
         subdivision or combination of the Common Stock),



                                      -11-
<PAGE>   12

                  (b) any consolidation or merger other than a merger in which
         the Company is the continuing corporation and which does not result in
         any reclassification, conversion, exchange or cancellation of, or
         change (other than a change in name, or par value, or from par value to
         no par value, or from no par value to par value, or as a result of a
         subdivision or combination of the Common Stock) in, outstanding shares
         of Common Stock or

                  (c) any sale or conveyance of all or substantially all of the
         property or business of the Company as an entirety (including, in the
         case of any of the foregoing events, any statutory exchange of
         securities with another corporation), pursuant to which the Common
         Stock is converted into the right to receive other securities, cash or
         other property,

then lawful provisions shall be made as part of the terms of such transaction
whereby each share of Convertible Preferred Stock then outstanding shall be
convertible into the kind and amount of shares of stock and other securities,
cash and other property receivable upon such reclassification, change,
consolidation, merger, sale, conveyance or statutory exchange by a holder of the
number of shares of Common Stock into which such share of Convertible Preferred
Stock was convertible immediately prior to such reclassification, change,
consolidation, merger, sale, conveyance or statutory exchange. In any such
event, effective provision shall be made (and it shall be a condition precedent
to any such reclassification, change, consolidation, merger, sale, conveyance or
statutory exchange that effective provision be made), in the articles or
certificate of incorporation or other constituent document of the resulting or
surviving corporation or other corporation issuing or delivering such shares of
stock, other securities, cash or other property or otherwise, so that the
provisions set forth herein for the protection of the conversion rights of the
Convertible Preferred Stock shall thereafter be applicable, as nearly as
reasonably may be, to any such other shares of stock and other securities, cash
or other property deliverable upon conversion of Convertible Preferred Stock
remaining outstanding or other convertible stock or securities received by the
holders of Convertible Preferred Stock in place thereof, and any such resulting
or surviving corporation or other corporation issuing or delivering such shares
of stock, other securities, cash or other property shall expressly assume the
obligation to deliver, upon the exercise of the conversion privilege, such
shares of stock, other securities, cash or other property as the holders of
shares of Convertible Preferred Stock remaining outstanding, or other
convertible stock or securities received by the holders of shares of Convertible
Preferred Stock in place thereof, shall be entitled to receive, pursuant to the
provisions hereof, and to make provision for the protection of the conversion
right as above provided. In case shares of stock, other securities, cash or
other property are deliverable upon conversion as aforesaid, then all references
to shares of Common Stock in this Section 10 shall be deemed to apply, so far as
provided and as nearly as is reasonable, to any such shares, other securities,
cash or other property. The provisions of this Section 10 shall similarly apply
to successive reclassifications, changes, consolidations, mergers, sales,
conveyances or statutory exchanges.



                                      -12-
<PAGE>   13

         SECTION 11. Dividend Received Deduction. The Company shall treat
dividends on the Convertible Preferred Stock as dividends for federal income tax
purposes, to the extent of the Company's current and accumulated earnings and
profits (as determined for federal income tax purposes). In addition, the
Company covenants not to take any action voluntarily that could reasonably be
expected to cause such dividends on the Convertible Preferred Stock to fail to
be eligible for the dividends received deduction in the case of a corporate
holder pursuant to Section 243 of the Internal Revenue Code of 1986, as amended
from time to time (the "Code").

         SECTION 12. Prohibition on Action by Written Consent. Any action by the
holders of shares of Convertible Preferred Stock shall be taken at any annual or
special meeting of such holders of Convertible Preferred Stock of the Company
and may not be taken without a meeting by written consent.

         SECTION 13. Identical Rights. Each share of the Convertible Preferred
Stock shall have the same relative rights and preferences as, and shall be
identical in all respects with, all other shares of the Convertible Preferred
Stock.

         SECTION 14. Amendments. Any provision of these terms of the Convertible
Preferred Stock may be amended, modified or waived if and only if holders of a
majority of the then-issued and outstanding shares of Convertible Preferred
Stock have consented by an affirmative vote to such amendment, modification or
waiver of any such provision of this Statement of Designation and upon obtaining
of such affirmative vote, such amendment, modification or waiver shall be
binding on all holders of the Convertible Preferred Stock.

         SECTION 15. Severability of Provisions. Whenever possible, each
provision hereof shall be interpreted in a manner as to be effective and valid
under applicable law, but if any provision hereof is held to be prohibited by or
invalid under applicable law, such provision shall be ineffective only to the
extent of such prohibition or invalidity, without invalidating or otherwise
adversely affecting the remaining provisions hereof. If a court of competent
jurisdiction should determine that a provision hereof would be valid or
enforceable if a period of time were extended or shortened or a particular
percentage were increased or decreased, then such court may make such change as
shall be necessary to render the provision in question effective and valid under
applicable law.

         SECTION 16. Certificates. So long as any shares of the Convertible
Preferred Stock are outstanding, there shall be set forth on the face or back of
each stock certificate issued by the Company the following legend:

                  "The Articles of Incorporation of the Corporation on file in
         the office of the Secretary of State of Texas set forth a full
         statement of (1) (A) all of the designations, preferences, limitations
         and relative rights of the shares of each class of shares authorized to
         be issued and (B) the authority of the Board of Directors to fix and
         determine the relative rights and preferences of the shares of
         Preferred Stock that the



                                      -13-
<PAGE>   14

         Corporation is authorized to issue in series and, if and to the extent
         that they have been fixed and determined, the relative rights and
         preferences of any such series and (2) a full statement of denial or
         limitation of the preemptive rights of Shareholders. The Statement of
         Designation of the 5% Convertible Preferred Stock on file in the office
         of the Secretary of State of Texas set forth a full statement of (1)
         (A) all of the designations, preferences, limitations and relative
         rights of the shares of each class of shares authorized to be issued
         and (B) the Preferred Stock that the Corporation is authorized to issue
         in series and, if and to the extent that they have been fixed and
         determined, the relative rights and preferences of any such series and
         (2) a full statement of the denial or limitation of the preemptive
         rights of Shareholders. The Corporation will furnish a copy of such
         statement(s) to the record holder of this certificate without charge on
         written request to the Corporation at its principal place of business
         or registered office."


         SECTION 17. Transfer Agent. The Company has initially appointed the
Transfer Agent to act as the dividend paying agent and conversion agent for the
Convertible Preferred Stock. At any time, the Company may terminate the
appointment of any Transfer Agent and appoint additional or other paying agents
and conversion agents, provided that until the Convertible Preferred Stock has
been delivered to the Company for cancellation, or moneys sufficient to pay the
Arrearage, if any, on the Convertible Preferred Stock have been made available
for payment and either paid or returned to the Company as provided in this
Statement of Designation, the Company will maintain an office or agency in New
York, New York for surrender of Convertible Preferred Stock for conversion. All
moneys deposited with any paying agent or held by the Company in trust for the
payment of any dividends on any shares of the Convertible Preferred Stock that
remain unclaimed at the end of two years after this payment has become due and
payable will be repaid to the Company or released from such trust to the
Company, and the holder of those shares of the Convertible Preferred Stock will
only be entitled to look to the Company for payment.

         SECTION 18. Reports. So long as any shares of the Convertible Preferred
Stock are outstanding, the Company will furnish to holders of the then
outstanding shares of Convertible Preferred Stock:

                  (a) all quarterly and annual financial information that would
         be required to be contained in a filing by the Company with the
         Securities and Exchange Commission (the "SEC") on Forms 10-Q and 10-K
         under the Securities Exchange Act of 1934 (the "Exchange Act"), and,
         with respect to the annual information only, a report by the Company's
         certified independent accountants, and

                  (b) all information that would be required to be contained in
         a current report filed by the Company with the SEC on Form 8-K under
         the Exchange Act.


                                      -14-
<PAGE>   15

In the event the Company files any of these reports with the SEC, the Company
will only be required to furnish the reports to holders who request a copy of
such reports. Unless prohibited by the SEC, the Company will make the reports
publicly available.

         SECTION 19. Notices. Any notice referred to herein shall be in writing
and, unless first-class mail shall be specifically permitted for such notices
under the terms hereof, shall be delivered personally, by telecopier, or by
registered or certified mail, postage prepaid, and shall be deemed to have been
given upon personal delivery thereof, upon transmittal of such notice by
telecopy (with confirmation of receipt by telecopy or telex) or seventy-two (72)
hours after transmittal by registered or certified mail, postage prepaid,
addressed as follows:

                  (a) if to the Company:

                        EXCO Resources, Inc.
                        Attention: General Counsel
                        6500 Greenville Avenue,
                        Suite 600, LB 17
                        Dallas, Texas 75206

                  (b) if to a holder of the Convertible Preferred Stock, to such
         holder at the address of such holder as listed in the stock record
         books of the Company (which may include the records of any Transfer
         Agent for the Convertible Preferred Stock); or

                  (c) to such other address as the Company or such holder, as
         the case may be, shall have designated by notice given in accordance
         with the foregoing.

         SECTION 20. Headings of Subdivisions. The headings of the various
subdivisions hereof are for convenience of reference only and shall not affect
the interpretation of any of the provisions hereof.


                  [Remainder of Page Intentionally Left Blank]



                                      -15-
<PAGE>   16

         IN WITNESS WHEREOF, the Company has caused this Statement of
Designation to be signed by J. Douglas Ramsey, its Vice President on this 21(st)
day of June of 2001.

                                      EXCO RESOURCES, INC.

                                      By: /s/ J. DOUGLAS RAMSEY
                                          --------------------------------------
                                          J. Douglas Ramsey
                                          Vice President



                                      -16-