Item 1.01
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Entry into a Material Definitive Agreement
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Basic Agreement
On December 31, 2007, Westside Energy Corporation, a Nevada corporation (the
Company
), entered into a
Contribution Agreement (the
Contribution Agreement
) with Knight Energy Group I Holding Co., LLC, a Delaware limited liability company (
Knight I Parent
), Knight Energy Group II Holding Company, LLC,
a Delaware limited liability company (
Knight II Parent
), Knight Energy Management Holding Company, LLC, a Delaware limited liability company (
Knight Energy Parent
), Hawk Energy Fund I Holding
Company, LLC, an Oklahoma limited liability company (
Hawk Parent
), RCH Energy Opportunity Fund I, L.P., a Delaware limited partnership (
RCH Parent
), David D. Le Norman (
Crusader
Management Parent
), Crusader Energy Group Holding Co., LLC, an Oklahoma limited liability company (
Crusader Energy Parent
and together with Knight I Parent, Knight II Parent, Knight Energy Parent, Hawk Parent,
RCH Parent and Crusader Management Parent, the
Crusader Parent Entities
), Knight Energy Group, LLC, a Delaware limited liability company (
Knight I
), Knight Energy Group II, LLC, a Delaware limited
liability company (
Knight II
), Knight Energy Management, LLC, a Delaware limited liability company (
Knight Energy
), Hawk Energy Fund I, LLC, an Oklahoma limited liability company
(
Hawk
), RCH Upland Acquisition, LLC, a Delaware limited liability company (
RCH
), Crusader Management Corporation, an Oklahoma corporation (
Crusader Management
), and
Crusader Energy Group, LLC, an Oklahoma limited liability company (
Crusader Energy
and together with Knight I, Knight II, Knight Energy, Hawk, RCH and Crusader Management, the
Crusader Operating
Entities
and, together with the Crusader Parent Entities,
Crusader
).
Pursuant to the Contribution
Agreement, following the fulfillment of the conditions precedent to closing (the
Closing
), the following transactions will take place:
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Knight I Parent will contribute all of the membership interests of Knight I to the Company in exchange for 100,100,000 shares of common stock, $.01 par value
(
Common Shares
) of the Company;
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Knight II Parent will contribute all of the membership interests of Knight II to the Company for 33,933,684 Common Shares;
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Knight Energy Parent will sell all of the membership interests of Knight Energy to the Company for $1,000.00 in cash;
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Hawk Parent will contribute all of the membership interests of Hawk to the Company for 14,700,000 Common Shares;
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RCH Parent will contribute all of the membership interests of RCH to the Company for 3,700,000 Common Shares;
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Crusader Management Parent will sell all of the capital stock of Crusader Management to the Company for $499,261.00 in cash; and
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Crusader Energy Parent will sell all of the membership interests of Crusader Energy to the Company for $1,000.00 in cash.
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If before Closing, Knight II Parent makes cash capital contributions to Knight II, then the number of Common Shares issuable to Knight II Parent will be
increased by one Common Share for each three dollars of capital contributed; provided that no more than 19,290,000 additional Common Shares may be so issued to Knight II Parent.
As part of the transactions contemplated by the Contribution Agreement, the Company Board (as defined below) approved the adoption of the Westside Energy
Corporation 2008 Long Term Incentive Plan (the
2008
2
LTIP
) to be put in place effective as of the Closing. The 2008 LTIP provides for the issuance of awards thereunder for up to 37,310,000
Common Shares. Options to purchase 35,000,000 Common Shares, exercisable at $3.00 per share (the
LTIP Options
), will be issued at Closing to employees of the Crusader Operating Entities who become eligible employees of the
Company or its subsidiaries at that time.
Board of Directors and Officers
All of the Companys directors have executed and delivered to the Company an irrevocable resignation of their position as a director effective as of
the Closing. If on or prior to January 31, 2008, (i) Crusader has not submitted to the Company a list of director nominees who are acceptable to the Companys Board of Directors, acting reasonably (the
Director
Nominees
), to be nominated as directors at the Company Stockholders Meeting (as defined below) such that (A) a majority of the Director Nominees are independent under the rules of the American Stock Exchange,
(B) three of the Director Nominees satisfy all applicable rules relating to membership on the Companys audit committee and (C) at least one of the Director Nominees is an audit committee financial expert as defined by the
rules of the SEC, the Company will have the right to terminate the Contribution Agreement.
At the Closing, the existing officers of the
Company will resign and will be replaced by individuals acceptable to the new board of directors.
Shareholder Approval
Under the Contribution Agreement, the Company is required to convene and hold a meeting of the Companys stockholders (the
Company
Stockholders Meeting
), for the purpose of authorizing and approving:
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the issuance of Common Shares to the Crusader Parent Entities as a result of the Transactions,
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the adoption of an amendment to the Companys Articles of Incorporation to increase the number of authorized Common Shares to 500,000,000,
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the election of the Director Nominees to the Companys board of directors,
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the approval of the adoption of the 2008 LTIP and the grant of the LTIP Options,
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the adoption of an amendment to the Companys Articles of Incorporation to change the Companys name to Crusader Energy Group Inc.
(collectively, the
Required Proposals
); and
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the approval of a 1 for 2 reverse split of the Common Shares (the
Reverse Stock Split
).
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Other Agreements
The directors and executive
officers of the Company have executed and delivered to Crusader voting agreements pursuant to which they have agreed to vote their Common Shares in favor of the transactions contemplated by the Contribution Agreement.
Each executive officer and director of the Company has executed and delivered to Crusader a Termination Agreement and Release whereby they have released
the Company and Crusader for certain liabilities associated with the termination of their positions with the Company.
At the Closing, the
Crusader Parent Entities and the Company will enter into a registration rights agreement providing for the registration under the Securities Act of 1933 of the resale of the Common Shares issuable to the Crusader Parent Entities pursuant to the
Contribution Agreement. In addition, each Crusader Parent Entity will enter into a Non-Transfer Agreement with the Company which restricts the disposition of the Common Shares acquired by such entity pursuant to the Contribution Agreement.
3
The Company has made various representations and warranties and covenants in the Contribution Agreement,
including, among others, not to (1) solicit proposals relating to alternative business combination transactions or (2) subject to certain exceptions which permit the board of directors of the Company (the
Company
Board
) to comply with its fiduciary duties, enter into discussions concerning, or provide confidential information in connection with, alternative business combination transactions. In addition, subject to certain exceptions which
permit the Company Board to comply with its fiduciary duties, the Company Board has agreed to recommend that the Companys stockholders vote in favor of adopting and approving the Contribution Agreement and the other proposals contemplated by
the Contribution Agreement. The Contribution Agreement also includes covenants pertaining to the operation of the Companys business between the date of the Contribution Agreement and the Closing.
The Contribution Agreement contains certain termination rights and provides that, upon the termination of the Contribution Agreement under specified
circumstances, the Company may be required to pay Crusader a termination fee equal to $2,000,000 plus up to $500,000 in expenses. Consummation of the transactions contemplated by the Contribution Agreement is subject to various conditions,
including, among others, approval and adoption of the Required Proposals by the Companys stockholders, the receipt of regulatory approvals, and other customary closing conditions.
Following the Closing, the Company will continue to be a reporting company under the Securities Exchange Act of 1934 and its Common Stock will continue
to be traded on the American Stock Exchange.
The foregoing description of the Contribution Agreement does not purport to be complete and
is qualified in its entirety by reference to the Contribution Agreement, which is filed as an exhibit to this Form 8-K and is incorporated by reference herein.