UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported): July 21, 2005
CRIMSON EXPLORATION INC.
(Exact Name of Registrant as Specified in Charter)
Delaware 1-12108 87-0444770
(State or Other Jurisdiction of (Commission File Number) (IRS Employer
Incorporation) Identification No.)
480 N. Sam Houston Parkway E., Suite 300, Houston Texas 77060
(Address of Principal Executive Offices)
(281) 820-1919
(Registrant's telephone number, including area code)
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Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
|_| Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
|_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
|_| Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 14d-2(b))
|_| Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
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Item 1.01 Entry into a Material Definitive Agreement.
On July 15, 2005, Crimson Exploration Inc. (the "Company") entered into a
$100 million senior secured revolving credit facility with Wells Fargo Bank,
National Association. The Credit Agreement is attached as Exhibit 10.1, and the
press release announcing the credit facility is attached as Exhibit 99.1, and
each is hereby incorporated herein by reference. On July 21, 2005 the
outstanding balance under the Credit Agreement was $1.5 million.
Borrowings under the new credit facility will be subject to a borrowing
base limitation based on the Company's current proved oil and gas reserves. The
initial borrowing base is set at $20 million and will be subject to semi-annual
redeterminations, with the first redetermination to be December 1, 2005. The
facility will be secured by a lien on all the assets of the Company and its
subsidiaries, as well as a security interest in the stock of all the Company's
subsidiaries. The credit facility has a term of three years, and all principal
amounts, together with all accrued and unpaid interest, will be due and payable
in full on June 30, 2008. Proceeds from extensions of credit under the facility
will be for acquisitions of oil and gas properties and for general corporate
purposes. The facility also provides for the issuance of letters-of-credit up to
a $3 million sub-limit.
Advances under the facility will be in the form of either base rate loans
or Eurodollar loans. The interest rate on the base rate loans fluctuates based
upon the higher of (1) the lender's "prime rate" and (2) the Federal Funds rate,
plus a margin of 0.50%, plus a margin of between 0.0% and 0.5% depending on the
percent of the borrowing base utilized at the time of the credit extension. The
interest rate on the Eurodollar loans fluctuates based upon the rate at which
Eurodollar deposits in the London Interbank market ("Libor") are quoted for the
maturity selected, plus a margin of 1.25% to 2.00% depending on the percent of
the borrowing base utilized at the time of the credit extension. Eurodollar
loans of one, three and six months may be selected by the Company. A commitment
fee of 0.375% on the unused portion of the borrowing base will accrue, and be
payable quarterly in arrears.
The Credit Agreement includes usual and customary affirmative covenants for
credit facilities of this type and size, as well as customary negative
covenants, including, among others, limitations on liens, hedging, mergers,
asset sales or dispositions, payments of dividends, incurrence of additional
indebtedness, certain leases and investments outside of the ordinary course of
business. The Credit Agreement also requires the Company to maintain a ratio of
current assets to current liabilities of at least 1.0 to 1.0, an interest
coverage ratio of EBITDAX (earnings before interest, taxes, depreciation and
amortization and exploration expense) to cash interest expense of 3.0 to 1.0 and
a tangible net worth of at least $45 million, subject to adjustment based on
future results of operations and any sales of equity securities. EBITDAX and
tangible net worth are calculated without consideration of unrealized gains and
losses related to stock derivatives accounted for under variable accounting
rules or to commodity hedges.
On June 1, 2005, the board approved a compensation plan for non-employee
directors providing for a $10,000 annual retainer, with a $2,000 ($1,000 if by
telephone) meeting attendance fee, for a maximum of $8,000 per director per
year, with an additional fee payable for attendance of committee meetings held
on days other than those on which the board meets. The chairman of the audit and
compensation committee is entitled to receive an annual retainer of $5,000 and
$2,500, respectively. Under the Plan, effective June 1, 2005, each non-employee
director was entitled to receive $15,000 of restricted stock, with a two year
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vesting schedule, and upon re-election is entitled to receive $10,000 in
restricted stock, with a one year vesting schedule. The number of shares are
determined based on the fair market value of the Company's common stock on the
date of grant. In addition, the Plan provides for reimbursement of expenses for
all directors in the performance of their duties, including reasonable travel
expenses incurred attending meetings. At the June 1, 2005 meeting, each
non-employee director, B. James Ford, Skardon F. Baker, Lee B. Backsen and Lon
McCain, in accordance with the Plan, was granted a restricted stock award
representing 17,045 shares of the Company's common stock. The shares of common
stock underlying the awards will become transferable and non-forfeitable two
years from the date of grant, and are forfeitable in the event a director
resigns before the end of the two year period. However, B. James Ford and
Skardon F. Baker elected not to receive such awards and they were subsequently
rescinded by the board of directors. The form of director restricted stock award
is attached as Exhibit 10.2 and incorporated herein by reference.
At the June 1, 2005 meeting of the board of directors, the execution of
indemnification agreements, effective April 1, 2005 (March 1, 2005 in the case
of E. Joseph Grady), was approved for each of E. Joseph Grady, Senior Vice
President and Chief Financial Officer, Thomas R. Kaetzer, Senior Vice President
of Operations, Tracy Price, Senior Vice President of Operations, Tommy Atkins,
Senior Vice President - Exploration, Jay S. Mengle, Senior Vice President -
Engineering, Richard L. Creel, Vice President of Finance and Controller, and Jim
C. Bigham, Vice President and Secretary. Similar agreements were approved at
such meeting for the Company's two new directors, Lon McCain and Lee B. Backsen,
elected at the 2005 shareholders' meeting, effective June 1, 2005. The
agreements were executed during June 2005. The indemnification agreements
generally provide for the indemnification of and the advancement of expenses to
each party thereto by the Company in connection with certain proceedings
relating to such party's service to the Company, and require the Company to
maintain insurance on behalf of such party relating to the same. The form of
indemnification agreement executed by each party is attached as Exhibit 10.3 and
incorporated herein by reference.
Item 4.01. Changes in Registrant's Certifying Accountant
The Audit Committee of the Board of Directors of the Company has
recommended and approved the selection of the accounting firm of Grant Thornton
LLP ("Grant Thornton") to replace the firm of Weaver and Tidwell, L.L.P. as the
Company's independent accountants for the calendar year ended December 31, 2005
and December 31, 2004. Grant Thornton has informed the Company that it has
accepted the engagement.
Weaver and Tidwell did not resign or decline to stand for reelection, but
was dismissed effective July 19, 2005, to allow the appointment of Grant
Thornton as the Company's principal accountants as of the same date. Weaver and
Tidwell's opinion regarding the financial statements of the Company for the last
two fiscal years did not contain an adverse opinion or disclaimer of opinion,
nor was qualified or modified as to uncertainty, audit scope or accounting
principles, except its report dated March 19, 2004, included in the Company's
Annual Report on Form 10-K for the year ended December 31, 2003, raised
substantial doubt regarding the Company's ability to continue as a going
concern. The Company is not aware of any disagreements with the Company's former
accountant during the past two most recent fiscal years and the subsequent
interim period up to the date of dismissal on any matter of accounting
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principals or practices, financial statement disclosure or auditing scope or
procedure which disagreements, if not resolved to the satisfaction of Weaver and
Tidwell, would have caused it to make reference to the subject matter of the
disagreements in connection with its report. Additionally, there were no
reportable events pursuant to Item 304(a)(v) of Regulation S-K under the
Securities Act of 1933.
During the Company's last two fiscal years and the subsequent interim
period up to the date of engagement, the Company did not consult with Grant
Thornton regarding (i) the application of accounting principles to a specific
transaction, either completed or proposed, or the type of audit opinion that
might be rendered on the Company's financial statements, in each case where
written or oral advice was provided, that Grant Thornton concluded was an
important factor considered by the Company in reaching a decision as to the
accounting, auditing or financial reporting issue or (ii) any matter that was
either the subject of a disagreement or reportable event, as those terms are
described in Item 304(a)(iv) and Item 304(a)(v), respectively, of Regulation S-K
under the Securities Act of 1933.
The Company has provided Weaver and Tidwell with a copy of the disclosures
the Company is making in this Form 8-K report in response to the disclosures
required by Regulation S-K, Item 304(a), under the Securities Act of 1933. The
former accountant has been provided an opportunity to furnish the Company with a
letter addressed to the Securities and Exchange Commission stating its agreement
and absence of any disagreement with the statements made by the Company in
response to this Item. A letter to such effect is attached as Exhibit 99.2.
Item 9.01 Financial Statements and Exhibits.
Exhibits
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Exhibit Number Description
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10.1 Credit Agreement, dated July 15, 2005, among Crimson
Exploration Inc., Wells Fargo Bank, National Association, as
agent and a lender, and each lender from time to time party
thereto.
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10.2 Form of Restricted Stock Award.
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10.3 Form of Indemnification Agreement.
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99.1 Press Release dated July 18, 2005.
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99.2 Notification letter dated July 21, 2005 from Weaver and
Tidwell to the Securities and Exchange Commission regarding
change of certifying accountant for Crimson Exploration Inc.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
CRIMSON EXPLORATION INC.
Date: July 21, 2005 /s/ Allan D. Keel
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Allan D. Keel
President and Chief Executive Officer
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Exhibit Index
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Exhibit Number Description
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10.1 Credit Agreement, dated July 15, 2005, among Crimson
Exploration Inc., Wells Fargo Bank, National Association, as
agent and a lender, and each lender from time to time party
thereto.
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10.2 Form of Restricted Stock Award.
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10.3 Form of Indemnification Agreement.
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99.1 Press Release dated July 18, 2005.
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99.2 Notification letter dated July 21, 2005 from Weaver and
Tidwell to the Securities and Exchange Commission regarding
change of certifying accountant for Crimson Exploration Inc.
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