Document:

Exhibit 10.4 Placement agent Agreement

     

      
        

      

    

     

     

    

      U.S.
        ENERGY CORP. 

      PLACEMENT
        AGENT AGREEMENT

      

      

      Dated
        as
        of: April
        __,
        2006

      

      Newbridge
        Securities Corporation

      1451
        Cypress Creek Road, Suite 204

      Fort
        Lauderdale, Florida 33309

      

      

      Ladies
        and Gentlemen:

      

      The
        undersigned, U.S. Energy Corp., a Wyoming corporation (the “Company”),
        hereby agrees with
        Newbridge Securities Corporation (the “Placement
        Agent”)
        as
        follows:

       

      1. Offering.
        The
        Company hereby engages the Placement Agent to act as its exclusive placement
        agent in connection with the Standby Equity Distribution Agreement dated
        the
        date hereof between the Company and Cornell Capital Partners, LP (the
“Investor”)
        (the
“Standby
        Equity Distribution Agreement”),
        pursuant to which the Company shall issue and sell to the Investor, from
        time to
        time, and the Investor shall purchase from the Company (the “Offering”)
        up to
        Fifty Million Dollars ($50,000,000) (the “Commitment
        Amount”)
        of the
        Company’s common stock, par value $0.01 per share (the “Common
        Stock”),
        at
        price per share equal to the Purchase Price, as that term is defined in the
        Standby Equity Distribution Agreement. The
        Placement Agent services
        shall
        consist of reviewing
        the
terms
        of
the
        Standby Equity Distribution Agreement and advising
        the
        Company with
        respect to those
        terms.
        The
        Placement Agent shall provide its advice in writing to the Company.

       

      All
        capitalized terms used herein and not otherwise defined herein shall have
        the
        same meaning ascribed to them as in the Standby Equity Distribution Agreement.
        The Investor will be granted certain registration rights with respect to
        the
        Common Stock as more fully set forth in the Registration Rights Agreement
        between the Company and the Investor dated the date hereof (the “Registration
        Rights Agreement”).
        The
        documents to be executed and delivered in connection with the Offering,
        including, but not limited, to the
        Company’s latest Quarterly Report on Form 10-Q as filed with the United States
        Securities and Exchange Commission, this
        Agreement, the Standby Equity Distribution Agreement, and the Registration
        Rights Agreement are referred to sometimes hereinafter collectively as the
        “Offering
        Materials.”
The
        Company’s Common Stock
        purchased by the Investor under
        the
        Standby Equity Distribution Agreement is sometimes referred to hereinafter
        as
        the “Securities.”
The
        Placement Agent shall not be obligated to sell any Securities.

       

      2. Compensation.

       

      A.  Upon
        the
        execution of this Agreement, the Company shall issue to the Placement Agent
        or
        its designee one thousand three hundred thirty nine (1,399) shares of the
        Company’s Common Stock (the “Placement
        Agent’s Shares”).
        The
        Placement Agent shall be 

       

       

       

      
        
           

        

        
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      entitled
        to “piggy-back” registration rights with respect to the Placement Agent’s
        Shares, which shall be triggered upon registration of any shares of Common
        Stock
        by the Company pursuant to the Registration Rights Agreement dated the date
        hereof. 

       

      3. Representations,
        Warranties and Covenants of the Placement Agent.

       

      A.  The
        Placement Agent represents, warrants and covenants as follows:

       

      (i)  The
        Placement Agent has the necessary power to enter into this Agreement and
        to
        consummate the transactions contemplated hereby.

       

      (ii)  The
        execution and delivery by the Placement Agent of this Agreement and the
        consummation of the transactions contemplated herein will not result in any
        violation of, or be in conflict with, or constitute a default under, any
        agreement or instrument to which the Placement Agent is a party or by which
        the
        Placement Agent or its properties are bound, or any judgment, decree, order
        or,
        to the Placement Agent’s knowledge, any statute, rule or regulation applicable
        to the Placement Agent. This Agreement when executed and delivered by the
        Placement Agent, will constitute the legal, valid and binding obligations
        of the
        Placement Agent, enforceable in accordance with their respective terms, except
        to the extent that (a) the enforceability hereof or thereof may be limited
        by
        bankruptcy, insolvency, reorganization, moratorium or similar laws from time
        to
        time in effect and affecting the rights of creditors generally, (b) the
        enforceability hereof or thereof is subject to general principles of equity,
        or
        (c) the indemnification provisions hereof or thereof may be held to be in
        violation of public policy.

       

      (iii)  Upon
        receipt and execution of this Agreement, the Placement Agent will promptly
        forward copies of this Agreement to the Company or its counsel and the Investor
        or its counsel.

       

      (iv)  The
        Placement Agent will not intentionally take any action that it reasonably
        believes would cause the Offering to violate the provisions of the Securities
        Act of 1933, as amended (the “1933
        Act”),
        the
        Securities Exchange Act of 1934 (the “1934
        Act”),
        the
        respective rules and regulations promulgated thereunder
        (the
“Rules
        and Regulations”)
        or
        applicable “Blue Sky” laws of any state or jurisdiction.

       

      (v)  The
        Placement Agent is a member of the National Association of Securities Dealers,
        Inc., and is a broker-dealer registered as such under the 1934 Act and under
        the
        securities laws of the states in which the Securities will be offered or
        sold by
        the Placement Agent unless an exemption for such state registration is available
        to the Placement Agent. The Placement Agent is in material
        compliance
        with the
        rules
        and regulations applicable to the Placement Agent generally and applicable
        to
        the Placement Agent’s participation in the Offering.

       

       

       

      
        
           

        

        
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      4. Representations
        and Warranties of the Company.

       

      B.  The
        Company represents and warrants as follows:

       

      The
        representations and warranties made by the Company in Sections 4.1 through
        4.20
        of the Standby Equity Distribution Agreement incorporated by reference herein.
        

       

      (i)  Subject
        to the performance by the Placement Agent of its obligations
        hereunder
        the
        offer and sale of the Securities complies,
        and
        will continue to comply,
        in all
        material respects with the requirements of Rule 506 of Regulation D promulgated
        by the SEC pursuant to the 1933 Act and any other applicable federal and
        state
        laws, rules, regulations and executive orders. Neither the Offering Materials
        nor any amendment or supplement thereto nor any documents prepared by the
        Company in connection with the Offering will contain any untrue statement
        of a
        material fact or omit to state any material fact required to be stated therein
        or necessary to make the statements therein, in light of the circumstances
        under
        which they were made, not misleading. All statements of material facts in
        the
        Offering Materials are true and correct as of the date of the Offering
        Materials.

       

      5. Certain
        Covenants and Agreements of the Company.

       

      The
        Company covenants and agrees at its expense and without any expense to the
        Placement Agent as follows:

       

      A.  To
        advise
        the Placement Agent of
        any
        material adverse change in the Company’s financial condition, prospects or
        business or of any development materially affecting the Company or rendering
        untrue or misleading any material statement in the Offering Materials occurring
        at any time as soon as the Company is either informed or becomes aware
        thereof.

       

       

      B.  To
        comply
        with the terms of the Offering Materials.

       

      C.  Upon
        the
        effectiveness of a registration statement covering the Securities, the Company
        shall promptly provide the Placement Agent with an opinion of Counsel to
        the
        Company, which opinion shall be in form and substance reasonably satisfactory
        to
        and the Placement Agent.

       

      D.  At
        or
        prior to the Closing, the Company shall have been furnished such documents,
        certificates and opinions as it may reasonably require for the purpose of
        enabling the Placement Agent to review or pass upon the matters referred
        to in
        this Agreement and the Offering Materials, or in order to evidence the accuracy,
        completeness or satisfaction of any of the representations, warranties or
        conditions herein contained.

       

      6. Indemnification
        and
        Limitation of Liability.

       

      A.  The
        Company hereby agrees that it will indemnify and hold the Placement Agent
        and
        each officer, director, shareholder, employee or representative of the Placement
        Agent 

       

       

       

      
        
           

        

        
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      and
        each
        person controlling, controlled by or under common control with the Placement
        Agent within the meaning of Section 15 of the 1933 Act or Section 20 of the
        1934
        Act or the SEC’s Rules and Regulations promulgated thereunder (the “Rules
        and Regulations”),
        harmless from and against any and all loss, claim, damage, liability, cost
        or
        expense whatsoever (including, but not limited to, any and all reasonable
        legal
        fees and other expenses and disbursements incurred in connection with
        investigating, preparing to defend or defending any action, suit or proceeding,
        including any inquiry or investigation, commenced or threatened, or any claim
        whatsoever or in appearing or preparing for appearance as a witness in any
        action, suit or proceeding, including any inquiry, investigation or pretrial
        proceeding such as a deposition) to which the Placement Agent or such
        indemnified person of the Placement Agent may become subject under the 1933
        Act,
        the 1934 Act, the Rules and Regulations, or any other federal or state law
        or
        regulation, common law or otherwise, arising out of or based upon (i) any
        untrue
        statement or alleged untrue statement of a material fact contained in (a)
        Section 4 of this Agreement, (b) the Offering Materials (except those written
        statements relating to the Placement Agent given by the
        Placement Agent
        for
        inclusion therein), (c) any application or other document or written
        communication executed by the Company or based upon written information
        furnished by the Company filed in any jurisdiction in order to qualify the
        Common Stock under the securities laws thereof, or any state securities
        commission or agency; (ii) the omission or alleged omission from documents
        described in clauses (a), (b) or (c) above of a material fact required to
        be
        stated therein or necessary to make the statements therein not misleading;
        or
        (iii) the breach of any representation, warranty, covenant or agreement made
        by
        the Company in this Agreement. The Company further agrees that upon demand
        by an
        indemnified person, at any time or from time to time, it will promptly reimburse
        such indemnified person for any loss, claim, damage, liability, cost or expense
        actually and reasonably paid by the indemnified person as to which the Company
        has indemnified such person pursuant hereto. Notwithstanding the foregoing
        provisions of this Paragraph 7(A), any such payment or reimbursement by the
        Company of fees, expenses or disbursements incurred by an indemnified person
        in
        any proceeding in which a final judgment by a court of competent jurisdiction
        (after all appeals or the expiration of time to appeal) is entered against
        the
        Placement Agent or such indemnified person based upon specific finding of
        fact
        that the Placement Agent or such indemnified person’s gross negligence or
        willful misfeasance will be promptly repaid to the Company.

       

      B.  The
        Placement Agent hereby agrees that it will indemnify and hold the Company
        and
        each officer, director, shareholder, employee or representative of the Company,
        and each person controlling, controlled by or under common control with the
        Company within the meaning of Section 15 of the 1933 Act or Section 20 of
        the
        1934 Act or the Rules and Regulations, harmless from and against any and
        all
        loss, claim, damage, liability, cost or expense whatsoever (including, but
        not
        limited to, any and all reasonable legal fees and other expenses and
        disbursements incurred in connection with investigating, preparing to defend
        or
        defending any action, suit or proceeding, including any inquiry or
        investigation, commenced or threatened, or any claim whatsoever or in appearing
        or preparing for appearance as a witness in any action, suit or proceeding,
        including any inquiry, investigation or pretrial proceeding such as a
        deposition) to which the Company or such indemnified person of the Company
        may
        become subject under the 1933 Act, the 1934 Act, the Rules and Regulations,
        or
        any other federal or state law or regulation, common law or otherwise, arising
        out of or based upon (i) the material
        breach of any representation, warranty, covenant or agreement made by the
        Placement Agent in this Agreement, or (ii)
        any
        false or misleading information provided to the Company in
        writing by
        

       

       

       

      
        
           

        

        
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      one
        of
        the Placement Agent’s indemnified persons
        specifically for inclusion in the Offering Materials.

       

      C.  Promptly
        after receipt by an indemnified party of notice of commencement of any action
        covered by Section 7(A) or (B), the party to be indemnified shall, within
        five
        (5) business days, notify the indemnifying party of the commencement thereof;
        the omission by one (1) indemnified party to so notify the indemnifying
        party shall not relieve the indemnifying party of its obligation to indemnify
        any other indemnified party that has given such notice and shall not relieve
        the
        indemnifying party of any liability outside of this indemnification if not
        materially prejudiced thereby. In the event that any action is brought against
        the indemnified party, the indemnifying party will be entitled to participate
        therein and, to the extent it may desire, to assume and control the defense
        thereof with counsel chosen by it which is reasonably acceptable to the
        indemnified party. After notice from the indemnifying party to such indemnified
        party of its election to so assume the defense thereof, the indemnifying
        party
        will not be liable to such indemnified party under such Section 7(A) or (B),
        for
        any legal or other expenses subsequently incurred by such indemnified party
        in
        connection with the defense thereof, but the indemnified party may, at its
        own
        expense, participate in such defense by counsel chosen by it, without, however,
        impairing the indemnifying party’s control of the defense. Subject to the
        proviso of this sentence and notwithstanding any other statement to the contrary
        contained herein, the indemnified party or parties shall have the right to
        choose its or their own counsel and control the defense of any action, all
        at
        the expense of the indemnifying party if (i) the employment of such counsel
        shall have been authorized in writing by the indemnifying party in connection
        with the defense of such action at the expense of the indemnifying party,
        or
        (ii) the indemnifying party shall not have employed counsel reasonably
        satisfactory to such indemnified party to have charge of the defense of such
        action within a reasonable time after notice of commencement of the action,
        or
        (iii) such indemnified party or parties shall have reasonably concluded that
        there may be defenses available to it or them which are different from or
        additional to those available to one or all of the indemnifying parties (in
        which case the indemnifying parties shall not have the right to direct the
        defense of such action on behalf of the indemnified party or parties), in
        any of
        which events such fees and expenses of one additional counsel shall be borne
        by
        the indemnifying party; provided, however, that the indemnifying party shall
        not, in connection with any one action or separate but substantially similar
        or
        related actions in the same jurisdiction arising out of the same general
        allegations or circumstance, be liable for the reasonable fees and expenses
        of
        more than one separate firm of attorneys at any time for all such indemnified
        parties. No settlement of any action or proceeding against an indemnified
        party
        shall be made without the consent of the indemnifying party.

       

      D.  In
        order
        to provide for just and equitable contribution in circumstances in which
        the
        indemnification provided for in Section 7(A) or 7(B) is due in accordance
        with
        its terms but is for any reason held by a court to be unavailable on grounds
        of
        policy or otherwise, the Company and the Placement Agent shall contribute
        to the
        aggregate losses, claims, damages and liabilities (including legal or other
        expenses reasonably incurred in connection with the investigation or defense
        of
        same) which the other may incur in such proportion so that the Placement
        Agent
        shall be responsible for such percent of the aggregate of such losses, claims,
        damages and liabilities as shall equal the percentage of the gross proceeds
        paid
        to the Placement Agent and the Company shall be responsible for the balance;
        provided, however, that no person guilty of fraudulent misrepresentation
        within
        the meaning of Section 11(f) of the 1933 Act shall 

       

       

       

      
        
           

        

        
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      be
        entitled to contribution from any person who was not guilty of such fraudulent
        misrepresentation. For purposes of this Section 7(D), any person controlling,
        controlled by or under common control with the Placement Agent, or any partner,
        director, officer, employee, representative or any agent of any thereof,
        shall
        have the same rights to contribution as the Placement Agent and each person
        controlling, controlled by or under common control with the Company within
        the
        meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act and each
        officer of the Company and each director of the Company shall have the same
        rights to contribution as the Company. Any party entitled to contribution
        will,
        promptly after receipt of notice of commencement of any action, suit or
        proceeding against such party in respect of which a claim for contribution
        may
        be made against the other party under this Section 7(D), notify such party
        from
        whom contribution may be sought, but the omission to so notify such party
        shall
        not relieve the party from whom contribution may be sought from any obligation
        they may have hereunder or otherwise if the party from whom contribution
        may be
        sought is not materially prejudiced thereby. 

       

      E.  The
        indemnity and contribution agreements contained in this Section 7 shall remain
        operative and in full force and effect regardless of any investigation made
        by
        or on behalf of any indemnified person or any termination of this
        Agreement.

       

      F.  The
        Company hereby waives, to the fullest extent permitted by law, any right
        to or
        claim of any punitive, exemplary, incidental, indirect, special, consequential
        or other damages (including, without limitation, loss of profits) against
        the
        Placement Agent and each officer, director, shareholder, employee or
        representative of the placement agent and each person controlling, controlled
        by
        or under common control with the Placement Agent within the meaning of Section
        15 of the 1933 Act or Section 20 of the 1934 Act or the Rules and Regulations
        arising out of any cause whatsoever (whether such cause be based in contract,
        negligence, strict liability, other tort or otherwise). Notwithstanding anything
        to the contrary contained herein, the aggregate liability of the Placement
        Agent
        and each officer, director, shareholder, employee or representative of the
        Placement Agent and each person controlling, controlled by or under common
        control with the Placement Agent within the meaning of Section 15 of the
        1933
        Act or Section 20 of the 1934 Act or the Rules and Regulations shall not
        exceed
        the compensation received by the Placement Agent pursuant to Section 2 hereof.
        This limitation of liability shall apply regardless of the cause of action,
        whether contract, tort (including, without limitation, negligence) or breach
        of
        statute or any other legal or equitable obligation.

       

      7. Payment
        of Expenses.

       

      The
        Company hereby agrees to bear all of the expenses in connection with the
        Offering, including, but not limited to the following: filing fees, printing
        and
        duplicating costs, advertisements, postage and mailing expenses with respect
        to
        the transmission of Offering Materials, registrar and transfer agent fees,
        escrow agent fees and expenses, fees of the Company’s counsel and accountants,
        issue and transfer taxes, if any. 

       

      8. Termination.

       

      This
        Agreement shall be co-terminus with, and terminate upon the same terms and
        conditions as those set forth in the Standby Equity Distribution Agreement.
        

       

       

       

      
        
           

        

        
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      9. Miscellaneous.

       

      A.  This
        Agreement may be executed in any number of counterparts, each of which shall
        be
        deemed to be an original, but all which shall be deemed to be one and the
        same
        instrument.

       

      B.  Any
        notice required or permitted to be given hereunder shall be given in writing
        and
        shall be deemed effective when deposited in the United States mail, postage
        prepaid, or when received if personally delivered or faxed (upon confirmation
        of
        receipt received by the sending party), addressed as follows
        to such
        other address of which written notice is given to the others):

       

      
        	
                If
                  to Placement Agent, to:

              	
                Newbridge
                  Securities Corporation

              
	 	
                1451
                  Cypress Creek Road, Suite 204

              
	 	
                Fort
                  Lauderdale, Florida 33309

              
	 	
                Attention: Doug
                  Aguililla

              
	 	
                Telephone: (954)
                  334-3450

              
	 	
                Facsimile: (954)
                  229-9937

              
	 	 
	
                If
                  to the Company, to:

              	
                U.S.
                  Energy Corp. 

              
	 	
                877
                  North 8th
                  West

              
	 	
                Glen
                  L. Larsen Building

              
	 	
                Riverton,
                  WY 82501

              
	 	
                Attention:
                  Mark J. Larsen

              
	 	
                Telephone:
                  (307)
                  856-9271

              
	 	
                Facsimile:
                  (307)
                  857-3050

              
	 	 
	
                With
                  a copy to:

              	
                The
                  Law Office of Stephen E. Rounds

              
	 	
                1544
                  York Street, Suite 110

              
	 	
                Denver,
                  CO 80206

              
	 	
                Attention
                  : Stephen E. Rounds

              
	 	
                Telephone:
                  (303) 377-6997

              
	 	
                Facsimile:
                  (303) 377-0231

              
	 	 
	 	 

      

      

      C.  This
        Agreement shall be governed by and construed in all respects under the laws
        of
        the State of New Jersey, without reference to its conflict of laws rules
        or
        principles. Any suit, action, proceeding or litigation arising out of or
        relating to this Agreement shall be brought and prosecuted in such federal
        or
        state court or courts located within the State of New Jersey as provided
        by law.
        The parties hereby irrevocably and unconditionally consent to the jurisdiction
        of each such court or courts located within the State of New Jersey and to
        service of process by registered or certified mail, return receipt requested,
        or
        by any other manner provided by applicable law, and hereby irrevocably and
        unconditionally waive any right to claim that any suit, action, proceeding
        or
        litigation so commenced has been commenced in an inconvenient
        forum.

       

       

       

      
        
           

        

        
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      D.  This
        Agreement and the other agreements referenced herein contain the entire
        understanding between the parties hereto and may not be modified or amended
        except by a writing duly signed by the party against whom enforcement of
        the
        modification or amendment is sought.

       

      E.  If
        any
        provision of this Agreement shall be held to be invalid or unenforceable,
        such
        invalidity or unenforceability shall not affect any other provision of this
        Agreement.

       

      [REMAINDER
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      IN
        WITNESS WHEREOF,
        the
        parties hereto have executed this Placement Agent Agreement as of the date
        first
        written above.

       

      
        	 	 
	 	
                U.S.
                  Energy Corp.

              
	 	 
	 	
                By: /s/
                  Mark J. Larsen   

              
	 	
                Name: 
                  Mark J. Larsen

              
	 	
                Title: 
                  President

              
	 	 
	 	 
	 	 
	 	
                Newbridge
                  Securities Corporation

              
	 	 
	 	
                By: /s/
                  Guy S. Amico   

              
	 	
                Name: Guy
                  S. Amico

              
	 	
                Title: President

              
	 	 
	 	 

      

      

      

      
        
           

        

        
          9Unassociated Document

    SUBSCRIPTION
      AGREEMENT

     

    This
      Subscription Agreement (this “Agreement”)
      is made
      as of February 14, 2006 by and between HALLADOR PETROLEUM COMPANY, a Colorado
      corporation (the “Corporation”)
      and
      Hallador Alternative Assets Fund LLC (“Subscriber”).

     

    1.  Subscription.
      

     

    (a)  Subscriber
      hereby subscribes for 227,272 shares (the “Shares”)
      of the
      Corporation’s common stock, par value $0.01 per share (the “Common
      Stock”),
      at a
      subscription price of $2.20 per share (the “Per
      Share Subscription Price”),
      for a
      total subscription price of $499,998.40 (the “Total
      Subscription Price”).
      

     

    (b)  The
      closing of the sale and purchase of the Shares (the “Closing”)
      will
      take place in the offices of Morgan, Lewis & Bockius LLP, 300 S. Grand
      Avenue, Suite 2200, Los Angeles, California 90071 at 10:00 a.m. local time
      on
      February 14, 2006, or such later date and time as the Corporation and Subscriber
      agree (the “Closing
      Date”).
      At
      the Closing, (i) he Corporation will deliver to Subscriber a copy of this
      Agreement countersigned by the Corporation, and (ii) Subscriber will pay the
      Total Subscription Price to the Corporation by wire transfer of immediately
      available funds to an account designated by the Corporation to Subscriber in
      writing. Subject to the Closing, the Corporation shall cause its transfer agent
      to issue a certificate representing the Shares in the name of Subscriber and
      to
      deliver such certificate to Subscriber at the address set forth on the signature
      page hereto, within five (5) business days after the date on which the Closing
      occurs. 

     

    2.  Acknowledgments.
      Subscriber hereby acknowledges that Subscriber, either alone or together with
      Subscriber’s advisors (if any), has read, understands and agrees with and to the
      following:

     

    (a)  AN
      INVESTMENT IN THE SHARES INVOLVES A HIGH DEGREE OF RISK; THE CORPORATION MAY
      NEED ADDITIONAL CAPITAL IN THE FUTURE TO REACH ITS GROWTH OBJECTIVES OR MEET
      ITS
      EXPENSES AND THE SHARES MAY LOSE ANY VALUE OR MAY NOT GAIN ANY VALUE; THE SHARES
      ARE NOT REGISTERED AND MAY NOT BE SOLD EXCEPT IN COMPLIANCE WITH STATE AND
      FEDERAL SECURITIES LAWS AND REGULATIONS.

     

    (b)  Subscriber
      acknowledges and agrees that the Corporation may at any time sell shares of
      its
      capital stock at a price greater or less than the Per Share Subscription Price
      pursuant to this Agreement. Subscriber acknowledges and agrees that the Shares
      may ultimately prove to be worth significantly more or significantly less than
      Subscriber perceives them to be worth now, and that no representation or
      warranty is made by the Corporation as to the “fair value” of the Shares or the
      interest in the Corporation that they represent, either now or in the
      future.

     

    (c)  The
      Shares have not been registered under the Securities Act of 1933, as amended
      (the “Securities
      Act”),
      or
      any state securities laws by reason of specific exemptions under the provisions
      thereof which depend in part upon the representations made by Subscriber in
      this
      Agreement. The Corporation is relying upon Subscriber’s representations
      contained in this Agreement for the purpose of determining whether this
      transaction meets the requirements for such exemptions.

     

    (d)  The
      Shares are “restricted securities” under applicable federal securities laws and
      the Securities Act and the rules of the Securities and Exchange Commission
      provide, in substance, that Subscriber may only dispose of the Shares pursuant
      to an effective registration statement under the Securities Act or an exemption
      from such registration if available. The Corporation has no obligation or
      intention to register any of the Shares under, or to take action so as to permit
      sales pursuant to, the Securities Act. Accordingly, Subscriber may dispose
      of
      the Shares only in certain transactions that are exempt from registration under
      the Securities Act, including “private placements,” in which event the
      transferee will acquire “restricted securities” subject to the same limitations
      as in the hands of Subscriber. Additionally, applicable state securities laws
      may allow sales of the Shares only if the Shares are registered or the
      transaction is subject to an applicable exemption. As a consequence, Subscriber
      must bear the economic risks of an investment in the Shares for an indefinite
      period of time.

     

    (e)  The
      certificate(s) evidencing the Shares will bear the following legend, which
      shall
      be in addition to any other legends required by law or contract:

     

    THE
      SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
      SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD OR
      TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER
      THE SECURITIES ACT OF 1933 AND APPLICABLE STATE SECURITIES LAWS.

     

    (f)  Neither
      the Corporation nor any person acting on its behalf has offered or sold the
      Shares to Subscriber by any form of general solicitation, general or public
      media advertising or mass mailing.

     

    3.  Representations
      and Warranties.
      Subscriber hereby represents and warrants to the Corporation as
      follows:

     

    (a)  Subscriber
      has all necessary power and authority under all applicable provisions of law
      to
      execute and deliver this Agreement and to carry out its provisions. All action
      on Subscriber’s part required for the lawful execution and delivery of this
      Agreement has been taken. Upon the execution and delivery of this Agreement,
      this Agreement will be a valid and binding obligation of Subscriber, enforceable
      in accordance with its terms, except as limited by (a) applicable bankruptcy,
      insolvency, reorganization, moratorium or other laws of general application
      affecting enforcement of creditors’ rights, and (b) general principles of equity
      that restrict the availability of equitable remedies. 

     

    (b)  Subscriber
      has such knowledge, skill and experience in investment financial and business
      matters that Subscriber is capable of evaluating the merits and risks of the
      purchase of the Shares and of protecting Subscriber’s interests in connection
      therewith. Subscriber is able to fend for itself in connection with the
      transactions contemplated by this Agreement and has the ability to bear the
      economic risk of the investment, including complete loss of the investment.
      Subscriber understands that no federal or state agency has passed upon the
      Shares or made any finding or determination concerning the fairness or
      advisability of this investment. To the extent that Subscriber has deemed it
      appropriate to do so, Subscriber has retained, and relied upon, appropriate
      professional advice regarding the tax, legal and financial merits and
      consequences of an investment in the Shares.

     

    (c)  Subscriber,
      either alone or together with Subscriber’s advisors (if any), has made such
      independent investigation of the Corporation, its management and related matters
      as Subscriber deems to be, or such advisors (if any) have advised to be,
      necessary or advisable in connection with an investment in the Shares.
      Subscriber and Subscriber’s advisors (if any) have received all information and
      data that Subscriber and such advisors (if any) believe to be necessary in
      order
      to reach an informed decision as to the advisability of an investment in the
      Shares.

     

    (d)  Subscriber,
      either alone or together with Subscriber’s advisors (if any), has reviewed
      Subscriber’s financial condition and commitments and, based on such review,
      Subscriber is satisfied that (i) Subscriber has adequate means of providing
      for
      Subscriber’s financial needs and possible contingencies and has assets or
      sources of income which, taken together, are more than sufficient so that
      Subscriber could bear the risk of loss of Subscriber’s entire investment in the
      Shares, (ii) Subscriber has no present or contemplated future need to dispose
      of
      all or any portion of the Shares to satisfy any existing or contemplated
      undertaking, need or indebtedness, and (iii) Subscriber is capable of bearing
      the economic risk of an investment in the Shares for the indefinite
      future.

     

    (e)  Subscriber
      is acquiring the Shares for Subscriber’s own account, for investment only and
      not with a view to or in connection with any resale or distribution of the
      Shares, and Subscriber has no present intention of making any sale, assignment,
      pledge, gift, transfer or other disposition of the Shares or any interest
      therein. Subscriber understands that the Shares have not been registered under
      the Securities Act or any state securities laws by reason of specific exemptions
      which depend upon, among other things, the bona fide nature of the investment
      intent and the accuracy of Subscriber’s representations as expressed
      herein.

     

    (f)  Subscriber
      understands that any public market for any of the securities issued by the
      Corporation is limited and that there is no assurance that an active public
      market will ever exist for such securities. 

     

    (g)  Subscriber
      is an “Accredited Investor” within the meaning of Rule 501 promulgated under the
      Securities Act, and has completed or will complete and deliver an Accredited
      Investor Questionnaire to the Corporation on or before the Closing
      Date.

     

    (h)  Subscriber
      is a limited partnership and the office or offices of Subscriber in which its
      investment decision was made is located at the address or addresses of
      Subscriber set forth on the signature page hereof.

     

    4.  Covenant.
      Subscriber hereby agrees to furnish any additional information requested by
      the
      Corporation to assure compliance of this transaction with applicable federal
      and
      state securities laws, and to make any filings with the Securities and Exchange
      Commission as may be required of Subscriber pursuant to the Securities Exchange
      Act of 1934, as amended, and the rules promulgated thereunder. 

     

    5.  General
      Provisions.

     

    (a)  Governing
      Law; Jurisdiction.
      This
      Agreement shall be governed, construed and interpreted in accordance with the
      laws of the State of Colorado, without giving effect to principles of conflicts
      of law and choice of law that would cause the laws of any other jurisdiction
      to
      apply. 

     

    (b)  Successors
      and Assigns.
      This
      Agreement may not be assigned, conveyed or transferred without the prior written
      consent of the Corporation. Subject to the foregoing, the rights and obligations
      of the Corporation and Subscriber under this Agreement shall be binding upon
      and
      benefit their respective permitted successors, assigns, heirs, administrators
      and transferees. The terms and provisions of this Agreement are for the sole
      benefit of the parties hereto and their respective permitted successors and
      assigns, and are not intended to confer any third-party benefit on any other
      person.

     

    (c)  Entire
      Agreement.
      This
      Agreement constitutes the full and entire understanding and agreement between
      the parties with regard to the subjects hereof and no party shall be liable
      or
      bound to any other in any manner by any representations, warranties, covenants
      and agreements except as specifically set forth herein.

     

    (d)  Severability.
      In case
      any provision of the Agreement shall be invalid, illegal or unenforceable,
      the
      validity, legality and enforceability of the remaining provisions shall not
      in
      any way be affected or impaired thereby.

     

    (e)  Amendment
      or Waiver.
      This
      Agreement may not be amended, and no term or provision of this Agreement may
      be
      waived, except upon the written consent of the Corporation and
      Subscriber.

     

    (f)  Expenses.
      Each
      party shall pay all costs and expenses that it incurs with respect to the
      negotiation, execution, delivery and performance of the Agreement.

     

    (g)  Titles
      and Subtitles.
      The
      titles of the sections and subsections of the Agreement are for convenience
      of
      reference only and shall not be considered in construing this
      Agreement.

     

    (h)  Counterparts.
      This
      Agreement may be executed in any number of counterparts and by facsimile, each
      of which shall be an original, but all of which together shall constitute one
      instrument. If executed by facsimile, the parties shall subsequently exchange
      original signed copies by mail or courier service.

     

    [SIGNATURES
      ON FOLLOWING PAGE]

    

     

    
      
        
          1-LA/866241.2 

        

        
        

      

      
        
        

        
          

        

      

      
        
        

        
        

      

    

    IN
      WITNESS WHEREOF, the undersigned has caused this Subscription Agreement to
      be
      executed as of the date first written above. 

     

    SUBSCRIBER:
      

     

    HALLADOR
      ALTERNATIVE ASSETS FUND LLC 

     

    By:/s/DAVID
      HARDIE

     

    Name:
      David Hardie 

     

    Title:
      Managing Member 

     

    

     

    By:/S/STEVEN
      HARDIE

     

    Name:
      Steven Hardie 

     

    Title:
      Managing Member 

     

    

     

    Address:
      

     

    

     

    Hallador
      Alternative Assets Fund LLC 

     

    c/o
      David
      Hardie 

     

    555
      Dale
      Drive 

     

    Incline
      Village, NV 89451 

     

    

     

    E-Mail
      Address: david@hallador.com

     

    

     

    FEIN:
      20-1064809 

     

    

     

    

    CORPORATION:
      

     

    HALLADOR
      PETROLEUM COMPANY 

     

    
      By:/s/VICTOR
        P. STABIO

      Title: 
        President

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