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XCO > SEC Filings for XCO > Form 8-K on 9-Nov-2012All Recent SEC Filings

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Form 8-K for EXCO RESOURCES INC


9-Nov-2012

Entry into a Material Definitive Agreement, Regulation FD Disclosure, Financia


Item 1.01 Entry into a Material Definitive Agreement.

Unit Purchase and Contribution Agreement

On November 5, 2012, HGI Energy Holdings, LLC ( "HGI Energy"), a Delaware limited liability company and a wholly owned subsidiary of Harbinger Group Inc. ("HGI"), entered into a Unit Purchase and Contribution Agreement (the "Purchase Agreement") with EXCO Resources, Inc. ("EXCO Parent"), a Texas corporation, EXCO Operating Company, LP ( "EOC", and collectively with EXCO Parent, "EXCO"), a Delaware limited partnership, and EXCO/HGI JV Assets, LLC ( "MLP LLC"), a Delaware limited liability company initially formed as an indirect wholly owned subsidiary of EXCO Parent, pursuant to which, at the closing of the transactions contemplated by the Purchase Agreement (the "Closing"), which will be effective in economic terms as of July 1, 2012 (the "Effective Time"), EXCO and HGI Energy have agreed to form EXCO/HGI Production Partners, LP (the "Partnership"), a Delaware limited partnership, and its general partner, EXCO/HGI GP, LLC, a Delaware limited liability company (the "General Partner"). The Partnership will be formed for the purpose of holding producing oil, gas and mineral leases and wells located in shallow depths in the Permian Basin in West Texas and in East Texas/North Louisiana and holding certain contracts, easements, permits and rights-of-way, tangible assets, data and records, in each case, relating to such oil and gas properties (the "Contributed Properties").

Contributions to MLP LLC. Pursuant to the Purchase Agreement, prior to the Closing, EXCO Parent and EOC will contribute the Contributed Properties to MLP LLC, and MLP LLC will assume certain related liabilities, after which EXCO Parent will cause all of the issued and outstanding limited liability company interests in MLP LLC to be held by EXCO Holding MLP, Inc. ("EXCO Holding"), a Texas corporation and a wholly owned subsidiary of EXCO Parent.

Contributions to, and Distributions from, the Partnership. At the Closing, and in each case in accordance with the terms and conditions set forth in the Purchase Agreement, EXCO Parent will cause EXCO Holding to: (a) contribute and deliver all of the issued and outstanding limited liability company interests of MLP LLC to the Partnership in exchange for 12,750,000 common units representing limited partner interests in the Partnership ("Common Units") and a cash amount equal to $597,500,000 (which amounts may be adjusted as described below) and
(b) contribute 500,000 Common Units to the General Partner in exchange for 500,000 units representing limited liability company interests in the General Partner ("GP LLC Units") (which amounts may be adjusted as described below). Additionally, HGI Energy will contribute (a) a cash amount equal to $372,500,000 to the Partnership (the "HGI Energy Contribution") in exchange for 37,250,000 Common Units (which amounts may be adjusted as described below), and
(b) contribute 500,000 Common Units to the General Partner in exchange for 500,000 GP LLC Units (which amounts may be adjusted as described below). Immediately after the aggregate 1,000,000 Common Units are contributed by EXCO Holding and HGI Energy to the General Partner, such Common Units held by the General Partner will be converted into 1,000,000 notional general partner units representing general partner interests in the Partnership (which amounts may be adjusted as described below). Also at Closing, the Partnership is expected to enter into a $400,000,000 secured revolving credit facility (the "Partnership Debt"), from which an initial $225,000,000 (as may be adjusted as described below) is expected to be drawn at the Closing to fund in part the Partnership's $597,500,000 cash distribution to EXCO Holding.


Adjustment of Contributions and Distributions. Each of the amounts described above are subject to adjustments set forth in the Purchase Agreement that are intended to provide MLP LLC with the economic benefits and costs associated with the ownership of the Contributed Properties during the period from the Effective Time to the Closing and to maintain the relative equity ownership of HGI Energy, on the one hand, and EXCO Holding, on the other hand, in the Partnership and the General Partner.

Such amounts may also be adjusted, with the effect of maintaining the relative equity ownership between HGI Energy and EXCO Holding, to the extent that assets are excluded from the transaction or adjustments are made to the applicable amounts, in each case, based upon title defects, environmental defects or the failure to obtain required third party consents, waivers of applicable preferential purchase rights or waivers of maintenance of uniform interest provisions. It is a condition to each of EXCO's and HGI Energy's obligations to complete the transactions contemplated by the Purchase Agreement that the aggregate value of these adjustments do not, in the aggregate, exceed $70,000,000.

Representations and Warranties; Covenants; Indemnities. The Purchase Agreement contains customary representations and warranties, covenants and indemnities by EXCO and HGI Energy.

Title and Environmental Matters. With limited exceptions, HGI Energy's exclusive remedy for title and environmental matters is through a customary title and environmental defect mechanism, which includes customary thresholds and deductibles. HGI Energy will have until January 7, 2013 to conduct its diligence of title and environmental matters relating to the Contributed Properties.

Equity Ownership of the Partnership. Upon completion of the Closing, HGI Energy will hold 74.5% of the Common Units and EXCO Holding will hold 25.5% of the Common Units, in each case directly or through their interest in the General Partner. In addition, each of HGI Energy, on the one hand, and EXCO Holding, on the other hand, will hold 50% of the GP LLC Units. The General Partner will, in turn, own a 2% general partner interest in the Partnership and all of the incentive distribution rights in the Partnership (the "Incentive Distribution Rights"). The Incentive Distribution Rights will entitle the General Partner to receive (a) quarterly distributions of available cash (as defined in the Amended and Restated Agreement of Limited Partnership of the Partnership to be entered into at Closing (the "Partnership Agreement"), which will include all sources of cash after giving effect to reserves, but will exclude cash from capital contributions) equal to 23% of the amount of such distributions after distributions to the General Partner and holders of Common Units exceed $1.00 per unit per fiscal year, and (b) net proceeds from distributions of the proceeds of sales of certain capital assets equal to 23% of the amount of such distributions to the General Partner and holders of Common Units following the return of 110% of invested capital with respect to Common Units.


Management of the General Partner. Following the Closing, the General Partner will be the sole general partner of the Partnership. The General Partner will be managed by the Board of Directors of the General Partner (the "Board"), which will initially consist of two members designated by HGI Energy and two members designated by EXCO Holding. Under the terms of the Amended and Restated Limited Liability Company Agreement of the General Partner (the "LLC Agreement") that will be entered into at Closing, certain material actions of the General Partner, the Partnership and their subsidiaries will require the approval of at least one HGI Energy appointee to the Board and at least one EXCO Holding appointee to the Board.

Certain Business Opportunities. In addition, the LLC Agreement will require each of EXCO Parent and certain of its affiliates (the "EXCO Group") and HGI and certain of its affiliates (the "HGI Group") to present certain business opportunities to the Partnership. If the EXCO Group or the HGI Group desires to purchase, acquire or otherwise obtain oil and gas properties meeting certain specified criteria, including that such oil and gas properties (a) are located onshore in the United States of America, (b) have proved developed reserves that comprise at least 65% of proved reserves and projected decline rates of 12.5% or less on an annualized basis in the three calendar years post-acquisition,
(c) include undeveloped acreage that contributes less than 30% of the value of such oil and gas properties, (d) with respect to future development opportunities, substantially all of such future development opportunities could economically occur through drilling vertical wells, (e) are in the aggregate reasonably estimated to generate cash flow sufficient to cover the cost of future development and (f) are valued at an amount equal to or less than the aggregate amount of then-existing financing reasonably available to the Partnership ("Partnership Appropriate Oil and Gas Properties"), such group will be obligated to give notice of such potential acquisition to the Partnership, which must be delivered at least 40 days prior to the closing of the potential acquisition. For a period of 30 days after such notice and all information . . .



Item 7.01 Regulation FD Disclosure.

On November 5, 2012, EXCO issued a press release, a copy of which is furnished as Exhibit 99.1, announcing the signing of the Purchase Agreement.

In accordance with General Instruction B.2 of Form 8-K, the information furnished pursuant to Item 7.01 (including the information in Exhibit 99.1) shall not be deemed to be "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to the liabilities of that section, nor shall such information be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.




Item 9.01 Financial Statements and Exhibits.

(d) Exhibits.

Exhibit
Number       Description

2.1*         Unit Purchase and Contribution Agreement, dated November 5, 2012, by
             and among EXCO Resources, Inc., EXCO Operating Company, LP, EXCO/HGI
             JV Assets, LLC and HGI Energy Holdings, LLC.

10.1         Form of Amended and Restated Agreement of Limited Partnership of
             EXCO/HGI Production Partners, LP.

10.2         Form of Amended and Restated Limited Liability Company Agreement of
             EXCO/HGI GP, LLC.

10.3         Appalachia Letter Agreement, dated as of November 5, 2012, by and
             among EXCO Resources, Inc., EXCO Operating Company, LP, HGI Energy
             Holdings, LLC and Harbinger Group Inc.

99.1         Press Release, dated November 5, 2012.

* Schedules and exhibits omitted pursuant to Item 601(b)(2) of Regulation S-K. EXCO agrees to furnish supplementally a copy of any omitted schedule or exhibit to the Securities and Exchange Commission upon request.


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