Stock Repurchase Agreement
This Stock
Repurchase Agreement (this "Agreement") is made
and entered into, effective as of December 31, 2010 (the "Effective Date"), by
and between EnerJex
Resources, Inc., a Nevada
corporation (the "Company"), and Working
Interest Holding, LLC, a Kansas limited liability company ("Holder"), with
reference to the following facts:
Recitals:
A. As
of the Effective Date of this Agreement, the Company is issuing to Holder
eighteen million seven hundred fifty thousand (18,750,000) shares of
Holder’s Common Stock, and the Company has agreed that if it hereafter raises
equity capital through the issuance of additional shares of its Common Stock
after the Effective Date of this Agreement, then Holder may elect to require the
Company to repurchase up to three million seven hundred fifty thousand
(3,750,000) shares of such Common Stock at the "Repurchase Price" (as such term
is defined below).
B. The
parties have agreed to execute this Agreement to memorialize such Stock
Repurchase obligation.
Agreements:
Now,
Therefore, the parties hereto, intending to be legally bound, do hereby
agree as follows:
1. Definitions. For
purposes of this Agreement, the term:
1.1 “Additional
Issuance” means the offering, issuance and sale of shares of the
Company’s Common Stock that is designed primarily to generate cash working
capital for the Company. For the avoidance of doubt, the term
"Additional Issuance" shall not include (a) the grant or issuance of
compensatory stock options or shares to employees or other Persons providing
services to the Company, (b) the issuance or sale of preferred equity securities
of the Company, or (c) the issuance or sale of any debt securities of the
Company, regardless whether such debt securities are convertible into equity
securities of the Company, or (d) any warrants, options, or other "equity
kickers" or "equity sweeteners (or shares issuable upon exercise or conversion
of any such instruments) incident to the offering, issuance or sale of any
securities described in the foregoing clauses (c) or (d).
1.2 "Common
Stock" means the Common Stock of the Company, par value $0.001 per
share.
1.3 "Person"
means a natural individual and a corporation, limited liability company, limited
partnership, general partnership, trust, fiduciary, governmental entity, and
each other entity or status that is recognized as a separate legal person under
applicable law.
1.4 “Property
Contribution Transaction” means that certain transaction in which certain
parties are contributing assets to the Company and the Company is issuing shares
and paying cash therefor, as further described in the SPAA.
1.5 “Maximum
Repurchase Amount” means, subject to reduction pursuant to Section 3.1(c),
below, the excess (if any) of:
(a) One
Million Five Hundred Thousand Dollars ($1,500,000), reduced by
(b) The
amount, if any, by which (x) the total amount of cash that the Company pays to
Holder under the SPAA at the closing of the Property Contribution Transactions,
exceeds (y) One Million
Five Hundred Thousand Dollars ($1,500,000).
1.6 “Repurchase
Period” means the period of one (1) year commencing on the Effective Date
of this Agreement and expiring on the first annual anniversary
thereof.
1.7 "Repurchase
Price" shall mean Forty Cents ($0.40) per Share.
1.8 "Shares"
shall mean shares of the Company's Common Stock.
1.9 "SPAA"
shall mean that certain “Securities Purchase and Asset Acquisition Agreement”
dated concurrently herewith by and among the Company; Holder; West Coast
Opportunity Fund, LLC, a Delaware limited liability company; Montecito Venture
Partners, LLC, a Delaware limited liability company; RGW Energy, LLC, a Texas
limited liability company; J&J Operating Company, LLC, a Kansas limited
liability company; and Xxxx Living Trust.
2. Notice of
Additional Share Issuances
2.1 Initial
Notice. If, at any time during the Repurchase Period, the
Company enters into any written agreement to conduct an Additional Issuance,
then promptly following the execution of that written agreement, the Company
shall deliver to Holder written notice of the such Additional Issuance,
including (a) the contemplated closing date for that issuance, and (b) the gross
amount of gross cash offering proceeds that the Company expects to receive in
that Additional Issuance.
2.2 Closing
Notice. Within ten (10) days following the closing of any
Additional Issuance during the Repurchase Period, the Company shall deliver to
Holder written notice of such closing date and the amount of gross cash offering
proceeds received by the Company in that Additional Issuance.
3. Repurchase
of Shares
3.1 Election to
Require Repurchase.
(a) Written
Election. At any time during the period of fifteen (15) days
following the Company’s delivery of a written notice under Section 2, above,
Holder may deliver to the Company a written election requiring the Company to
purchase from Holder a number of shares not exceeding the Maximum Repurchase
Amount, reduced (i) by the cumulative Repurchase Price theretofore paid by the
Company to Holder for the purchase of Shares under this Agreement, and (ii) to
the extent provided in Section 3.1(c),
below, provided that
(x) no such written election may be delivered after the expiration of the
Repurchase Period and (y) for the avoidance of doubt, the rights and duties of
the parties under this Agreement shall not apply to any Additional Issuance that
closes after the expiration of the Repurchase Period.
(b) Obligation
to Purchase. If Holder timely delivers its written election
under Section
3.1(a), then subject to satisfaction of the conditions set forth in Section 3.2, below,
the Company shall be obligated to purchase from Holder, at the Repurchase Price
per Share, a number of Shares equal to the lesser of (i) the number of Shares
specified in Holder’s written election, or (ii) a number equal to the quotient
determined by dividing (x) the unused portion of the Maximum Repurchase Amount
by (y) the Repurchase Price. For the avoidance of doubt, in no event
shall the Company be obligated to pay to Holder, cumulatively, for the purchase
of Shares under this Agreement, more than the Maximum Repurchase
Amount.
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(c) Holder
Waiver: Reduction in Maximum Repurchase Amount. If
the Company delivers to Holder written notice of an Additional Issuance pursuant
to Section 2,
above, and Holder fails to timely elect pursuant to Section 3.1(a),
above, to require the Company to purchase all of the Shares that Holder was
entitled to have the Company purchase hereunder by reason of such Additional
Issuance, then the Maximum Repurchase Amount shall be reduced by the Repurchase
Price that would have been payable by the Company for the Shares that Holder
failed to timely elect to have the Company purchase hereunder by reason of such
Additional Issuance.
3.2 Conditions
to Purchase. The obligations of the Company to purchase
Shares from Holder are subject to the satisfaction of the following
conditions:
(a) Lawful. The
purchase of such Shares shall not be prohibited by any statutory limits imposed
under the laws of the jurisdiction in which the Company is incorporated,
including but not limited to any solvency-type limitation measured by reference
to the assets and liabilities of the Company.
(b) Lender
Consent. The purchase of such shares (i) shall not
be prohibited by the terms of the Company’s loan agreements with any
institutional bank lender with which the Company then has any outstanding loans,
or (ii) if such loan agreements prohibit such purchase, the Company’s
institutional bank lender shall have consented to such purchase.
(c) Limit on
Cumulative Repurchase Price. The Company shall not have paid
to Holder, cumulatively under this Agreement, more than the amount of the
Maximum Repurchase Amount, reduced to the extent provided in Section 2.1(c),
above.
3.3 Closing. Subject
to the conditions set forth in Section 3.2, above,
the closing of the Company’s purchase of Shares from Holder shall occur at the
offices of the Company or its counsel, as designated by the Company, on a
mutually acceptable date within fifteen (15) days following the date on which
the Company receives Holder’s written election under Section 3.1(a),
above. At the closing:
(a) If
the there is no certificate evidencing the Shares, then Holder shall execute and
deliver in commercially reasonable form acceptable to the Company an assignment
sufficient to vest in the Company or its assignee title to the Shares being
repurchased under this Section 3.3, free and
clear of all liens, claims, and encumbrances whatsoever (other than any liens,
claims, or encumbrances). If there is one or more certificates
evidencing such Shares, then Holder shall tender the Assignment Separate from
Certificate endorsed for the number of Shares being repurchased by the Company
hereunder, together with the certificates for the Shares being repurchased by
the Company.
(b) The
Company shall pay the purchase price for the Shares being repurchased hereunder
in cash or immediately available funds.
3.4 Assignment
of Purchase Rights. The Company may assign its rights under
this Section 3 to
such person(s), and for such consideration, as the Company deems appropriate,
provided that such
assignment shall not relieve the Company of the obligation to effect the
purchase of Holder’s tendered Shares in accordance with Sections 3.1, 3.2, and 3.3, above, except to
the extent that such assignee actually purchases Holder’s
Shares.
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4. Additional
Agreements
4.1 Acknowledgment
Re Income Tax Matters. Holder acknowledges that (a) this
Agreement is being executed by the Company in connection with the Property
Contribution Transaction in which Holder and certain other parties are seeking
to apply Section 351 of the Code to the contribution of assets to the Company,
and (b) the Company is not providing to Holder any assurances regarding whether
the existence of Holder’s rights under this Agreement causes any portion of the
Shares issued to Holder in that Property Contribution Transaction to be treated
as taxable “boot” under Section 351 of the Code.
4.2 Assignment
of Holder’s Rights. The parties (a) acknowledge that
Holder may elect to assign to one or more of its members a portion of the Shares
received by Holder in the Property Contribution Transaction, and (b) agree that
Holder may assign therewith all or any portion of its rights under this
Agreement, provided that (i) Holder provides written notice to the Company of
such assignment, and (ii) Holder, the assignee, and the Company execute an
“Acknowledgement” in the form attached hereto as Appendix
1.
5. Miscellaneous
5.1 Notices. All
notices permitted or required by this Agreement shall be in writing, and shall
be deemed to have been delivered and received (a) when personally
delivered, or (b) on the third (3rd)
business day after the date on which deposited in the United States mail,
postage prepaid, certified or registered mail, return receipt requested, or (c)
on the next business day following the date on which transmitted by facsimile or
other electronic means generating a receipt confirming delivery of the notice
(provided that on that
same date a copy of such notice is deposited in the United States mail, postage
prepaid, certified or registered mail, return receipt requested), to the mailing
address appearing on the signature page of this Agreement, or such other mailing
address, facsimile number, or email address, notice of which is given in a
manner permitted by this Section 5.1.
5.2 Further
Assurances. Each party agrees, upon the request of another
party, to make, execute, and deliver, and to take such additional steps as may
be necessary to effectuate the purposes of this Agreement.
5.3 Attorneys'
Fees. If any action is commenced to construe or enforce the
terms and conditions of this Agreement or the rights and duties created
hereunder, then the party prevailing in such action shall be entitled to recover
its attorneys' fees and the costs of enforcing any judgment entered
therein.
5.4 Partial
Invalidity. If at any time any provision of this Agreement is
or becomes illegal, invalid or unenforceable in any respect under the law of any
jurisdiction, neither the legality, validity or enforceability of the remaining
provisions hereof, nor the legality, validity, or enforceability of such
provision under the law of any other jurisdiction, will in any way be affected
or impaired thereby, and the remainder of the provisions of this Agreement will
remain in full force and effect.
5.5 Governing
Law, Jurisdiction, and Venue. This Agreement shall be governed
by and construed in accordance with the internal laws of the State of Nevada,
without regard to the application of its conflict-of-law
principles.
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5.6 Entire
Agreement; Amendment. This Agreement (a) represents the
entire understanding of the parties with respect to the subject matter hereof,
and supersedes all prior and contemporaneous understandings, whether written or
oral, regarding the subject matter hereof, and (b) may not be modified or
amended, except by a written instrument, executed by the party against whom
enforcement of such amendment may be sought.
5.7 Binding
Effect. This Agreement shall be binding upon and shall inure
to the benefit of each of the parties hereto, as well as their respective heirs,
successors, and assigns.
5.8 Counterparts;
Electronic Signatures. This Agreement 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 Agreement 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.
[Signatures
appear on the following page.]
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In Witness
Whereof, the parties hereto have executed this Agreement, effective as of
the "Effective Date" set forth above.
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“Company:”
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"Holder:"
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corporation
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Working
Interest Holding, LLC, a Kansas
limited
liability company
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By
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/s/
Xxx Xxxx
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By
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/s/
C. Xxxxxxx Xxxxxxxxx
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Xxx
Xxxx, Manager
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C.
Xxxxxxx Xxxxxxxxx, Chief Executive Officer
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12/31/10
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Address,
Facsimile No., & Email for
Notices:
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Date
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Address,
Facsimile & Email for
Notices:
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ATTN: Chief
Executive Officer
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00
Xxxxxxxxx Xxxxx, Xxxxx 000
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Working
Interest Holding, LLC
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00000
Xxxxxxxxx Xxxxx
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c/o
J&J Operating Company, LLC
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Xxxxxxxx
Xxxx, XX 00000
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ATTN: Messrs.
Xxx Xxxxx, Xxxxx X.
Xxxxxxxxxxx
and Xxxx Xxxxxxxxxxx
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00000
X 000xx Xx.
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Telephone
No.: (913)
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Xxxxxxx,
XX 00000
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Facsimile
No.: (000) 000-0000
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Email:
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Telephone
No.: (000) 000-0000
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Facsimile
No.: (___)
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with
a copy to:
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Email: xxxxxxxxxx@xxxxx.xxx
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XXXXXXX
X. XXXXXX
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Attorney
at Law
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DeMint
Law, PLLC
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3753
Xxxxxx Xxxxxx Parkway
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Xxxxxx
Xxxxx, Xxxxx 000
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Xxx
Xxxxx, XX 00000
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Telephone
No.: (000) 000-0000
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Facsimile
No.: (000) 000-0000
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Email: xxxxxxx@xxxxxxxxx.xxx
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Appendix
1
Acknowledgement
of Assignment
[See
following page.]
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This
Acknowledgement of Assignment (the “Acknowledgement”) is
made and executed, effective as of ________________, 2011, by and among EnerJex
Resources, Inc., a Nevada corporation (the "Company"), and Working
Interest Holding, LLC, a Kansas limited liability company ("Original Holder"),
and ____________________ (“Assignee”), with reference to the following
facts:
Recitals:
The
Company and Original Holder previously executed that certain Stock Repurchase
Agreement dated effective December [__], 2010 (the “Repurchase
Agreement”), pursuant to which the Company granted o Original Holder the
right to require the Company to purchase from Holder up to 3,750,000 shares of
the Company’s Common Stock (the “Shares”) at a cash
price of $0.40 per share (the “Repurchase
Price”). Concurrently with the execution of this
Acknowledgement, Original Holder is assigning to Assignee certain Shares, and
the parties have agreed to execute this Acknowledgment to confirm that Original
Holder has assigned to Assignee the right to require the Company to purchase up
to _____________ (______) Shares pursuant to the Repurchase
Agreement.
Agreements:
Now,
Therefore, the parties acknowledge and agree as follows:
1. Holder
has assigned to Assignee the right to require the Company to purchase up to
_____________ (______) Shares (such Shares, the “Assigned Shares”)
pursuant to the Repurchase Agreement.
2. On
the terms and subject to the conditions set forth in the Repurchase Agreement,
the Company agrees to purchase the Assigned Shares from Assignee pursuant to the
Repurchase Agreement.
3. This
Acknowledgement and the Repurchase Agreement (a) represent the entire
understanding between the parties regarding the subject matter hereof, and
supersedes and replaces all prior and contemporaneous understandings, whether
oral or written, regarding such subject matter, and (b) may not be modified or
amended, except by a written agreement executed after the effective date hereof
by the party sought to be charged by such modification or
amendment. This Acknowledgement 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 Acknowledgement 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.
In Witness
Whereof, the parties have executed this Acknowledgment on the date(s) set
forth below.
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Working
Interest Holding, LLC, a Kansas limited liability
company
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EnerJex
Resources, Inc., a Nevada
corporation
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By
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J&J
Operating Company, LLC, a Kansas
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By
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By
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Xxxxx
X. Xxxxxxxxxxx, Member
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By
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Xxxx
Xxxxxxxxxxx, Member
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“Assignee:”
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