EnerJex Resources, Inc.
27 Corporate Woods, Suite 350
10975 Grandview Drive
Overland Park, Kansas 66210

October 30, 2010

West Coast Opportunity Fund, LLC
Montecito Venture Partners, LLC
Black Sable Energy, LLC
J&J Operating, LLC
c/o West Coast Asset Management, Inc.
ATTN:   Atticus Lowe, CIO
1205 Coast Village Road
Montecito, California 93108

 
Re:
Recapitalization of EnerJex Resources, Inc. through Asset Purchases

Gentlemen:

We are writing to summarize the binding terms and conditions of the proposed
transactions (the "Transactions") in which EnerJex Resources, Inc. (the
"Company"), will issue certain shares of its restricted common stock, $0.001 par
value per share (the "Common Stock") and pay a cash sum to acquire certain
assets from J&J Operating, LLC ("J&J"); West Coast Opportunity Fund, LLC
("WCOF"); Montecito Venture Partners, LLC, a controlled affiliate of WCOF
("MVP");  Black Sable Energy, LLC, a controlled affiliate of MVP ("BSE"); and
certain other cash investors to be identified (the Company, J&J, WCOF, MVP and
BSE are referred to herein collectively as the "Parties" and individually a
"Party").

BINDING AND ENFORCEABLE AGREEMENTS

Upon execution of counterparts of this LOI by you, the following lettered
paragraphs shall constitute the legally binding and enforceable agreement of
WCOF and the Company (in recognition of the significant costs to be borne by
WCOF and the Company in pursuing this transaction and further in consideration
of their mutual undertakings as to the matters described herein).

A.           No Public Disclosure.  None of the Parties shall make any public
disclosure concerning the matters set forth in this LOI or the negotiations with
respect to the Transactions, except either (i) with the prior written consent of
the other Parties, (ii) to the extent required by applicable law, or (iii) upon
execution of the definitive agreements setting forth the terms and conditions of
the Transactions (the “Definitive Agreements”).  Notwithstanding the foregoing,
the parties acknowledge that the members of MVP will need to consent to the
Transactions and authorize MVP to disclose the terms of the Transactions to such
members on a confidential basis for the sole purpose of obtaining their consent
to the Transactions and such related transactions as may be necessary or
convenient for enabling MVP to participate in the Transactions.  When disclosure
is permitted under this Paragraph A, the disclosing Party first shall provide
the other Parties an opportunity to review and comment upon the proposed
disclosure and shall incorporate reasonable suggestions from the other Parties.

B.           Operations.   During the period from and after the signing of this
LOI and ending on November 30, 2010 (the "Termination Date"), the Company shall
operate its business in the ordinary course consistent with past practice and
shall refrain from entering into material contracts or other material
transactions or from modifying any material contracts, including compensation or
benefit arrangements, without first discussing such matters with WCOF.

 
 

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West Coast Opportunity Fund, LLC
   
Montecito Venture Partners, LLC
   
J&J Operating, LLC
   
Black Sable Energy, LLC
2
October 30, 2010

C.           No Shop

(i)           Subject to the exception set forth in Paragraphs C(ii), C(iii) and
C(iv), below, until the earliest of (a) the execution of the Definitive
Agreements, (b) the Termination Date, or (c) the mutual termination of this LOI
(such period, the "Restricted Period"), neither the Company nor any subsidiary
of the Company nor any of the Company's officers or directors (or any
representative acting on their behalf) shall directly or indirectly solicit or
provide any information to or enter into any agreement with any corporation,
other entity, or person other than WCOF, MVP, BSE, J&J, or any of their
respective affiliates, concerning any acquisition of any of the securities of,
or all or substantially all of assets of, the Company or any merger of the
Company or any subsidiary of the Company or any sale of any material assets or
any sale of any shares of the Company or any of its affiliates, other than
pursuant to outstanding compensatory stock options, warrants, convertible
debentures, other contractual commitments made and approved by the Company's
Board of Directors prior to October 27, 2010 or with entities that have executed
non-disclosure or other agreements with the Company prior to October 27,
2010.  If, during the Restricted Period, the Company, any of its subsidiaries,
or any officer, director, employee, representative or other agent of the Company
or any of its subsidiaries, receives any inquiry or offer from any other company
or person with respect to the acquisition of the Company, its securities, or all
or any material portion of its assets (whether by stock purchase, asset
acquisition, merger, or otherwise), then the Company immediately shall advise
WCOF of such inquiry in detail or offer (including all terms thereof) and
provide to WCOF copies of all written documents memorializing or relating to
such inquiry or offer.

(ii)          Notwithstanding the provisions of Paragraph C(i), above, during
the Restricted Period, the Company shall be entitled to negotiate with investors
approved by WCOF (the "Approved Investors") regarding the terms and conditions
on which the Approved Investors may purchase shares of the Company's Common
Stock pursuant to a common stock offering contemplated under the terms of the
Transactions.

(iii)        Notwithstanding the provisions of Paragraph C(i), above, if at any
time during the Restricted Period, the Company receives a written proposal from
a third party for the acquisition of a majority of the Company’s securities or
assets, a merger of the Company with or into any other entity, or any other
similar transaction with the Company (an “Acquisition Proposal”), and if the
Board of Directors of the Company determines in good faith, after consultation
with independent financial advisors and outside legal counsel, that such action
is required in order for the Board of Directors of the Company to comply with
its fiduciary obligations to the Company’s stockholders under Nevada law, and
that such Acquisition Proposal constitutes or is reasonably expected to lead to
a "Superior Proposal" (as defined below), then the Company may (x) furnish,
pursuant to an acceptable confidentiality agreement, information with respect to
the Company to the third party who has made such Acquisition Proposal; provided
that the Company shall promptly (and in no event later than 24 hours) provide
WCOF any material information concerning the Company that is provided to any
third party given such access which was not previously provided to the Parties;
and (y) engage in or otherwise participate in discussions or negotiations with
the third party making such Acquisition Proposal; provided, further, that the
Company shall promptly (and in no event later than 24 hours) provide to WCOF
(i) a written summary of the material terms of such Acquisition Proposal
(including the pricing, terms, conditions and other material provisions and the
identity of the proposed party or parties to such proposed Acquisition
Transaction) and (ii) if such Acquisition Proposal is in writing, a copy of such
Acquisition Proposal.   For purposes of the foregoing, the term “Superior
Proposal” means an unsolicited, bona fide written offer made by a third party to
consummate an Acquisition Proposal that the Board of Directors of the Company
has determined in its good faith judgment is reasonably likely to be consummated
in accordance with its terms, taking into account all legal, regulatory and
financial aspects of the proposal and the third party making the proposal, and
if consummated, would result in a transaction in which (i) the Company’s senior
secured debentures are redeemed in full for cash at maturity without requiring
the debenture holders to forfeit any Company shares of common stock, and (ii)
the Company’s Board of Directors unanimously agree that the value of the
Company’s common shares would exceed the value resulting from completion of the
Transactions),

 
 

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West Coast Opportunity Fund, LLC
   
Montecito Venture Partners, LLC
   
J&J Operating, LLC
   
Black Sable Energy, LLC
3
October 30, 2010

 
(iv)          Notwithstanding the provisions of Paragraph C(i), above, the Board
of Directors of the Company may enter into a definitive agreement with respect
to an Acquisition Proposal, if and only if, prior to taking such action, the
Board of Directors of the Company has determined in good faith, after
consultation with independent financial advisors and outside legal counsel,
(x) that such action is required in order for the Board of Directors of the
Company to comply with its fiduciary obligations to the Company’s stockholders
under Nevada law, and (y) that such Acquisition Proposal constitutes a Superior
Proposal; provided, however, that (w) the Company has given the Parties at least
ten (10) Business Days’ prior written notice of its intention to take such
action (which notice shall specify the material terms and conditions of any such
Superior Proposal (including the identity of the party making such Superior
Proposal) and has contemporaneously provided a copy of the relevant proposed
transaction agreements with the party making such Acquisition Proposal to the
Parties), (x) the Company has negotiated in good faith with the Parties during
such notice period to the extent the Parties wish to negotiate, to enable the
Parties to revise the terms of this LOI such that it would cause the Superior
Proposal to no longer constitute a Superior Proposal, (y) following the end of
such notice period, the Board of Directors of the Company shall have considered
in good faith any changes to this LOI proposed in writing by the Parties, and
shall have determined that the Superior Proposal would continue to constitute a
Superior Proposal if such revisions were to be given effect, and (z) in the
event of any material change to the material terms of such Superior Proposal,
the Company shall, in each case, have delivered to the Parties an additional
notice and the notice period shall have recommenced, except that the notice
period shall be at least two (2) business days.

D.           Break-up Fee.  As the sole remedy of WCOF, MVP, BSE and J&J, if the
Company either breaches its obligations under this LOI (including but not
limited to the "no shop" provisions in Paragraph C, above) or the Definitive
Agreements, or exercises the "fiduciary out" described in Paragraph C(iii) and
C(iv), above, and fails to close the Transactions contemplated herein, and
within 120 days after the date of the last day of the Restricted Period, the
Company signs a letter of intent or other agreement relating to the acquisition
of all or substantially all of the Company's assets or any of the securities of
the Company (except for outstanding compensatory stock options, warrants,
convertible debentures, or other contractual commitments made and approved by
the Company's Board of Directors prior to October 27, 2010), whether directly or
indirectly and whether through purchase, merger, consolidation, or otherwise,
and such transaction is ultimately consummated, then immediately upon the
closing of such transaction, the Company shall pay to WCOF a transaction
break-up fee equal to Seven Hundred Fifty Thousand Dollars ($750,000).

E.           Access.  Subject to the terms and conditions of that certain
"Confidentiality Agreement" among BSE, J&J, West Coast Asset Management, Inc.
("WCAM"), and the Company previously executed (the "Nondisclosure Agreement"),
the Company shall afford WCAM's, WCOF's, J&J's, and Approved Investors'
employees, auditors, legal counsel, and other authorized representatives all
reasonable opportunity and access during normal business hours to inspect,
investigate, and audit the assets, contracts, operations, and other records of
the Company and its subsidiaries before Closing.  WCAM, WCOF, J&J, Approved
Investors, and their respective representatives shall conduct such inspection,
investigation, and audit in a reasonable manner during regular business hours.

 
 

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West Coast Opportunity Fund, LLC
   
Montecito Venture Partners, LLC
   
J&J Operating, LLC
   
Black Sable Energy, LLC
4
October 30, 2010

F.           Consents.  The Company, WCOF, MVP, and BSE shall cooperate with one
another and proceed, as promptly as is reasonably practicable, to seek to obtain
all necessary consents and approvals from lenders and others, and to endeavor to
comply with all other legal or contractual requirements for or preconditions to
the execution and consummation of the Transactions contemplated by this LOI and
the Definitive Agreements.

G.           Reasonable Business Efforts.   The Company, WCOF, MVP, J&J and BSE
shall negotiate in good faith and use their reasonable business efforts to
arrive at a mutually acceptable Definitive Agreements for approval, execution,
and delivery on the earliest reasonably practicable date.   The Company, WCOF,
MVP, J&J and BSE shall thereupon use their reasonable business efforts to effect
the Closing and to proceed with the transactions contemplated by the Definitive
Agreement as promptly as is reasonably practicable.

H.            Costs and Risk.  The Company, WCOF, MVP, J&J and BSE each shall be
solely responsible for and bear all of their own respective expenses, including,
without limitation, expenses of legal counsel, accountants, and other advisers,
incurred at any time in connection with pursuing or consummating the Definitive
Agreements and the transactions contemplated thereby and each assume the risk
and expense of attempting to negotiate the Definitive Agreements and close the
Transactions.

I.           Termination. In addition to termination pursuant to Paragraph B,
above, either Party hereto may terminate this LOI if the Definitive Agreements
are not signed on or before the Termination Date, and thereafter this LOI shall
have no force and effect and the Parties shall have no further obligations
hereunder except with respect to the provisions of Paragraph H, above, which
shall survive the termination of this LOI (provided that the termination of this
LOI shall not affect the right and power of a Party to enforce against the other
Party any claims for such other Party’s breach of these Binding and Enforceable
Agreements prior to such termination).

J.           Governing Law.   This LOI and the Definitive Agreements shall be
governed by and construed in accordance with the internal laws of the State of
Nevada, without regard to application of the conflict of law principles
thereunder.

K.           Miscellaneous.  This LOI (i) constitutes the entire agreement among
the Parties concerning the subject matter hereof, except for that certain
non-binding letter of intent of an even date hereof, and supersedes all prior
and contemporaneous understandings, whether oral or written, regarding such
subject matter, and (ii) these Binding and Enforceable Provisions may not be
modified or amended, except by a written instrument hereafter executed by the
Party sought to be charged by such modification or amendment.   This LOI may be
executed in counterparts, each of which shall be deemed an original and both of
which, taken together, shall constitute one and the same instrument, binding on
each signatory thereto.  A copy of this LOI that is executed by a party and
transmitted by that party to the other party by facsimile or as an attachment
(e.g., in ".tif" or ".pdf" format) to an email shall be binding upon the
signatory to the same extent as a copy hereof containing that party's original
signature.

 
 

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West Coast Opportunity Fund, LLC
   
Montecito Venture Partners, LLC
   
J&J Operating, LLC
   
Black Sable Energy, LLC
5
October 30, 2010

If the provisions of this LOI are acceptable, then please sign and date this LOI
in the spaces provided below and return a copy to me.  If this LOI is not so
accepted and delivered to me prior to 1:00 p.m., Central Time, on Saturday
October 30, 2010, then it shall expire at that time.

We look forward to hearing from you.

 
Sincerely,
       
EnerJex Resources, Inc., a Nevada corporation
       
By:
/s/ Steve Cochennet
   
Steve Cochennet, CEO/President

[Acceptance appears on the following page.]

 
 

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West Coast Opportunity Fund, LLC
   
Montecito Venture Partners, LLC
   
J&J Operating, LLC
   
Black Sable Energy, LLC
6
October 30, 2010

Acceptance

The undersigned agrees to and accepts the foregoing terms and conditions of this
LOI, and agrees to be legally bound by the provisions of the lettered paragraphs
under the heading "Binding and Enforceable Provisions," above.

West Coast Opportunity Fund, LLC
 
Montecito Venture Partners, LLC
     
By         West Asset Management, Inc.,
   
              its Manager
         
By/s/ Atticus Lowe                                                  
 
By/s/ Atticus Lowe                                                     
      Atticus Lowe, Chief Investment Officer
 
     Atticus Lowe, Manager
     
J&J Operating, LLC
  
Black Sable Energy, LLC
     
By: /s/ John Loeffelbein                                                         
 
By:  /s/ Robert Watson                                                  
       John Loeffelbein, Member
 
       Robert Watson, Chief Executive Officer

 
 

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