Get Started for Free Contexxia identifies hard-to-find pieces of information in SEC filings. No more highlighters, no more redlining, no more poring over huge documents. CRIMSON EXPLORATION INC. (813779) 10-Q published on Aug 07, 2013 at 5:40 pm
Reporting Period: Jun 29, 2013
The Merger Agreement contains certain termination rights for both Crimson and Contango, including, among others, if (i) the Merger is not consummated on or before October 31, 2013; (ii) the requisite approval of the stockholders of either Crimson or Contango is not obtained; and (iii) the other party breaches a representation, warranty or covenant, and such breach results in the failure of closing conditions to be satisfied. The Merger Agreement further provides that for the payment of a termination fee upon the termination of the Merger Agreement under specified circumstances, including termination by Contango or Crimson as a result of (1) an adverse change in the recommendation of the other party’s board of directors or (2) a third-party’s “superior proposal.” The termination fee is $7.0 million (if payable by Crimson) and $28.0 million (if payable by Contango). The Merger Agreement also provides that Crimson or Contango may be required to pay the other party $4.5 million for expense reimbursement if such party’s stockholder approval is not obtained.
Additionally, simultaneously with the execution of the Merger Agreement, Contango entered into a support agreement (each, a “Crimson Support Agreement,” and, together with the Contango Support Agreements, the “Support Agreements”) with each of Allan D. Keel, E. Joseph Grady, Thomas H. Atkins, A. Carl Isaac, Jay S. Mengle, John A. Thomas, OCM GW Holdings, LLC, and OCM Crimson Holdings, LLC (each, a “Crimson Stockholder”). The Crimson Support Agreements provide that, upon the terms and conditions set forth therein, each Crimson Stockholder will vote all shares of Crimson Common Stock beneficially owned by such Crimson Stockholder (i) in favor of the approval of the Merger Agreement, the Merger and any other matter that is required to be approved by the stockholders of Crimson in order to effect the Merger; and (ii) against certain other specified alternative transactions or actions. Each Crimson Support Agreement terminates upon the earliest to occur of (1) the termination of the Merger Agreement in accordance with its terms; (2) the Effective Time; and (3) any reduction of the Merger Consideration or change in the form of the Merger Consideration.
the range of $250—$275 million which is significantly larger than that under our Senior Credit Agreement and reflects the combined company’s proved crude oil and natural gas reserves. It is also expected that the obligations under the Combined Company Senior Credit Facility will be secured by a pledge of the assets of the combined company, including the capital stock of the subsidiaries of the combined company. Although we and Contango have not finalized the terms of any amendment, restatement or replacement of our respective credit facilities (including with respect to interest rates, restrictive covenants, events of default, guarantees and prepayment provisions) to date, extensive discussions have been held with a number of prospective lenders regarding the Combined Company Senior Credit Facility and lenders appear to view the Merger positively and wish to participate in a Combined Company Senior Credit Facility of the size noted above. However, no assurance may be given that a Combined Company Senior Credit Facility may be negotiated and completed.
It is also anticipated that, at or immediately following the effective time of the Merger, our Second Lien Credit Agreement will be terminated and any indebtedness thereunder repaid. The prepayment of indebtedness under the Second Lien Credit Agreement will require the payment of a prepayment fee equal to 1% of the principal amount repaid at or immediately following the effective time of the Merger. The combined company currently plans to fund the repayment of the indebtedness under the Second Lien Credit Agreement from Contango’s existing cash on hand and borrowings under the Combined Company Senior Credit Facility.
The known plaintiffs in the Consolidated Action appear, based on the most current information of Crimson, to collectively own a very small percentage of the total outstanding shares of Crimson common stock. The lawsuits allege, among other things, that Crimson’s board of directors failed to take steps to obtain a fair price, failed to properly value Crimson, failed to protect against alleged conflicts of interest, failed to conduct a reasonably informed evaluation of whether the transaction was in the best interests of stockholders, failed to fully disclose all material information to stockholders, acted in bad faith and for improper motives, engaged in self-dealing, discouraged other strategic alternatives, took steps to avoid competitive bidding, and agreed to allegedly unreasonable deal protection mechanisms, including the no-shop and fiduciary-out provisions and termination fee. The lawsuits seek damages and injunctive relief. Additionally, on July 13, 2013, a separate and similar complaint was filed in the District Court of Harris County Texas, in the matter of Fisichella Family Trust v. Crimson Exploration Inc. It is possible that additional, similar lawsuits may be filed.
Uncertainties associated with the Merger may cause a loss of management personnel and other key employees, which could adversely affect the future business and operations of the combined company.
We are dependent on the experience and industry knowledge of our officers and other key employees to execute our business plans. Our success until the Merger and the combined company’s success after the Merger will depend in part upon our ability to retain key management personnel and other key employees. Current and prospective employees of Crimson may experience uncertainty about their roles within the combined company following the Merger, which may have an adverse effect on our ability to attract or retain key management and other key personnel. Accordingly, no assurance can be given that the combined company will be able to attract or retain key management personnel and other key employees of Crimson to the same extent that Crimson had previously been able to attract or retain its own employees.