Document:

Purchase and Sale Agreement

    
      
        

      

    

     

    EXHIBIT 10.1

     

    

    

    PURCHASE
      AND SALE AGREEMENT

     

    

    

    

    between

     

    

    

    Hallador
      Petroleum Company

     

    

    

    as
      Seller

     

    

    and

     

    

    Approach
      Oil & Gas Inc.

     

    

    as
      Buyer

     

    

    

    

    

    Dated

     

    May
      10,
      2006

     

    

     

    
      
        
          

           

        

        
        

      

      
        
        

        
          

        

      

      
        
        

        
        

      

    

    PURCHASE
      AND SALE AGREEMENT

     

    THIS
      PURCHASE AND SALE AGREEMENT
      dated
      May 10, 2006, is made by and between Hallador Petroleum Company,
      a
      Colorado corporation (“Seller”),
      and
      Approach Oil & Gas Inc., a Delaware corporation (“Buyer”).
      

     

    W
      I T N E S E T H:

     

    WHEREAS,
      Seller
      has acquired interests in certain oil and gas properties pursuant to the Oil
      and
      Gas Project Agreement dated June 3, 2005 among Global GeoData, J. Bruce Branson
      and Seller, as amended by a First Amendment dated July 7, 2005, a Marketing
      Contract dated December 15, 2005, and a Second Amendment dated
      February 28, 2006 (together, the “Global Agreement”).

     

    WHEREAS,
      Seller
      shall sell and convey the oil and gas properties acquired under the Global
      Agreement to Buyer, and Buyer shall purchase and accept title to such
      properties;

     

    WHEREAS,
      Seller
      and Buyer desire to set forth herein the purchase price for such assets and
      certain representations, warranties and covenants that shall survive the
      execution and delivery of the Conveyance;

     

    NOW,
      THEREFORE,
      Seller
      and Buyer agree as follows:

     

    
      	1.  	
              Property
                Sold and Purchased

            

    

     

    Section
      1.1.  Property
      Sold and Purchased.
      Seller
      shall contemporaneously sell and convey to Buyer and Buyer shall
      contemporaneously purchase the following:

     

    (a)  All
      of
      the right, title and interest of Seller under the oil, gas and/or mineral leases
      (collectively, “Leases”
      and
      individually a “Lease”)
      described on Exhibit
      I
      attached
      hereto;

     

    (b)  Without
      limitation of the foregoing, all of Seller’s right, title and interest (of
      whatever kind or character, whether legal or equitable, and whether vested
      or
      contingent) in and to the oil, gas and other minerals in and under or that
      may
      be produced from any and all land in Caldwell, Crittenden, Hopkins, Lyon,
      Marshall, Livingston and Trigg Counties, Kentucky (including, without
      limitation, all interests in oil, gas and/or mineral leases and fee mineral
      interests);

     

    (c)  All
      of
      Seller’s rights and obligations under the Global Agreement with respect to the
      properties, rights, and interests described in clauses (a) and (b) above and
      Buyer shall accept and assume all obligations under the Global Agreement;
      and

     

    (d)  All
      of
      Seller’s lease files, abstracts and title opinions, seismic records and surveys,
      gravity maps, electric logs, geological or geophysical data and records, and
      other files, documents and records of every kind and description which relate
      to
      the properties described above (collectively, “Seller’s
      Files”).

     

    The
      properties, rights and interests described in the foregoing subparagraphs (a),
      (b), (c), and (d) are herein sometimes collectively called the “Properties”.

     

    (e)  The
      Properties shall be conveyed by Seller to Buyer by one or more conveyances
      (whether one or more, the “Conveyance”)
      in the
      form attached hereto as Exhibit II.
      The
      Conveyances shall contain a limited warranty of title by through and under
      Seller but shall be subject to the terms and conditions of the Global
      Agreement.

     

    
      	2.  	
              Purchase
                Price

            

    

     

    Section
      2.1.  Purchase
      Price.
      Buyer
      shall pay Seller, by wire transfer of immediately available funds to an account
      designated by Seller in a bank located in the United States, an amount equal
      to
      $3,393,687.00 (“Purchase
      Price”)
      for the
      Properties.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
      	3.  	
              Representations
                and Warranties of
                Seller

            

    

     

    Seller
      represents to Buyer that as of the Effective Date: 

     

    Section
      3.1.  Organization
      and Existence.
      Seller
      is duly organized, validly existing, and in good standing under the laws of
      the
      state of its formation. Seller is duly qualified to transact business and is
      in
      good standing in the State of Kentucky.

     

    Section
      3.2.  Power
      and Authority.
      Seller
      has the authority to execute, deliver, and perform this Agreement and the
      Conveyance.

     

    Section
      3.3.  Valid
      and Binding Agreement.
      This
      Agreement and the Conveyance when executed will constitute, a valid and legally
      binding obligation of Seller, and will be enforceable against it in accordance
      with their respective terms, except that such enforceability may be limited
      by
      (a) applicable bankruptcy, insolvency, reorganization, moratorium, and similar
      laws affecting creditors’ rights generally and (b) equitable principles which
      may limit the availability of certain equitable remedies (such as specific
      performance) in certain instances. 

     

    Section
      3.4.  Non-Contravention.
      Neither
      the execution, delivery, nor performance by Seller of this Agreement and the
      Conveyance (a) violate any governing instruments of Seller, (b) violate any
      provision of, or constitute (with or without the giving of notice or the passage
      of time or both) a default under, or give rise (with or without the giving
      of
      notice or the passage of time or both) to any right of termination,
      cancellation, or acceleration under, any bond, debenture, note, mortgage or
      indenture, or the Global Agreement, or any material lease, contract, agreement,
      or other instrument or obligation to which Seller is a party or by which Seller
      or any of the Properties may be bound, (c) result in the creation or
      imposition of any lien or other encumbrance upon the Properties or
      (d) violate any applicable law, rule or regulation binding upon Seller or
      the Properties.

     

    Section
      3.5.  Approvals.
      No
      consent, approval, order, or authorization of, or declaration, filing, or
      registration with, any court or governmental agency or of any third party is
      required to be obtained or made by Seller in connection with the execution,
      delivery, or performance by Seller of this Agreement or the
      Conveyance.

     

    Section
      3.6.  Pending
      Litigation.
      There
      are no pending suits, actions, notices of violations, or other proceedings
      or
      claims filed (collectively, “Claims”)
      or, to
      Seller’s knowledge, any such threatened Claims in which Seller is or may be a
      party and which relate to the Properties, or affect the execution and delivery
      of this Agreement or the Conveyance.

     

    Section
      3.7.  Preferential
      Rights and Consents to Assign.
      There
      are no consents to assignment or waivers of preferential rights to purchase
      that
      must be obtained from third parties in order for Seller to convey the Properties
      to Buyer without violating or breaching a duty or obligation of
      Seller.

     

    Section
      3.8.  No
      Instruments Not of Record.
      Seller’s title to the Leases, as defined in the Conveyance, is not based upon or
      subject to any understanding, agreement, assignment or conveyance that is not
      recorded in the official records of the county where the lands covered by the
      Leases are located. A true, correct and complete copy of the Global Agreement
      is
      attached hereto as Exhibit
      III. Except
      as
      shown in Exhibit
      III,
      the
      Global
      Agreement has not been modified, amended or supplemented and none of Seller’s
      rights have been waived, released or otherwise extinguished.

     

    Section
      3.9.  Leases
      and Global Agreement.

     

    (a)  To
      Seller’s knowledge, no breach or default by Seller or any third party (or
      situation which with the passage of time or giving of notice would create a
      breach or default) exists under any Lease, or the Global Agreement, to the
      extent such breach or default (whether by Seller or such a third party) could
      reasonably be expected to materially adversely affect the ownership,
      exploration, development, operation, maintenance, value or use of the Properties
      or the Global Agreement, after the Effective Date 

     

    (b)  Any
      payments owing under each Lease or the Global Agreement have been and are being
      made (timely, and before the same became delinquent) by Seller where the
      non-payment of same could materially and adversely affect the ownership,
      exploration, development, operation, maintenance, value or use of any of the
      Properties or the rights of Buyer under the Global Agreement after the Effective
      Date. Without limitation of the foregoing, all Acreage Fees, Project Fees,
      bonuses, rental and other payments that are to be paid under the Global
      Agreement or the Leases for or in connection with the acquisition of the Leases
      have been paid.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    For
      the
      purposes of the representations contained in this Section (and without
      limitation of such representations), the non-payment of an amount, or
      non-performance of an obligation, where such non-payment, or non-performance,
      could result in the forfeiture or termination of rights of Seller under a Lease
      or the Global Agreement, shall be considered material and to materially
      adversely affect the ownership, exploration, development, operation,
      maintenance, value or use of such Lease or the Global Agreement. The remedy
      for
      such breach shall be a monetary damages claim based on $52.00 per acre and
      shall
      not be the basis for a claim for rescission or cancellation of this Agreement.
      

     

    Section
      3.10.  No
      Sales or Other Contracts.
      There
      exist no agreements or arrangements for the sale of production from the Leases
      or under which production from the Leases is dedicated or committed for sale,
      gathering, transportation, processing, treating, or any other
      services.

     

    Section
      3.11.  No
      Area of Mutual Interest, Tax Partnerships and Other
      Agreements.
      Except
      for the Global Agreement, no Property is subject to (or has related to it)
      any
      area of mutual interest agreements. No Property is subject to (or has related
      to
      it) any farm-out or farm-in agreement under which any party thereto is entitled
      to receive assignments not yet made, or could earn additional assignments after
      the Effective Date. No Property is subject to (or has related to it) any tax
      partnership. No Property is subject to any unitization, pooling, or
      communization agreements.

     

    Section
      3.12.  Payment
      of Expenses.
      Any
      expenses and taxes relating to the ownership of the Properties, have been,
      and
      are being, paid (timely, and before the same become delinquent) by
      Seller.

     

    Section
      3.13.  Compliance
      with Laws.
      To the
      knowledge of Seller, the ownership of the Properties has been in conformity,
      in
      all material respects, with all applicable laws, rules, regulations guidelines
      and orders of all governmental agencies having jurisdiction, relating to the
      Properties.

     

    Section
      3.14.  No
      Alienation.
      Seller
      has not sold, assigned, conveyed, or transferred or contracted to sell, assign,
      convey or transfer any right or title to, or interest in, the
      Leases.

     

    Section
      3.15.  Information.
      Except
      for the land maps which will be revised periodically to reflect new information,
      to Seller’s knowledge, all of the information (written or oral) heretofore or
      hereafter furnished by Seller with respect to the Properties is true and correct
      in all material respects, and, to Seller’s knowledge, does not omit any
      information that is necessary to prevent such information from being misleading
      in any material respect.

     

    Section
      3.16.  No
      Oral Contracts.
      Seller
      has not entered into any material oral contract with respect to the Properties
      which is still in force and effect. 

     

    Section
      3.17.  No
      ORRI.
      Without
      limitation of the special warranty contained on the Conveyance, the Leases
      are
      not subject to any overriding royalties or any other burdens except for the
      royalties provided in the Leases as filed of record and the overriding royalty
      provided for in the Global Agreement.

     

    
    

    
      	4.  	
              Representations
                and Warranties of
                Buyer

            

    

     

    Buyer
      represents to Seller that: 

     

    Section
      4.1.  Organization
      and Existence.
      Buyer
      is duly organized, legally existing and in good standing under the laws of
      its
      state of formation, and is or, after Closing will promptly become, qualified
      to
      do business in the State of Kentucky.

     

    Section
      4.2.  Power
      and Authority.
      Buyer
      has all necessary and appropriate authority to execute, deliver, and perform
      this Agreement and each other document executed by Buyer in connection with
      the
      transactions contemplated hereby. The execution, delivery, and performance
      by
      Buyer of this Agreement and each other document executed by Buyer in connection
      with the transactions contemplated hereby have been duly authorized by all
      necessary action of Buyer.

     

    Section
      4.3.  Valid
      and Binding Agreement.
      This
      Agreement has been duly executed and delivered by Buyer and constitutes a valid
      and legally binding obligation of Buyer, enforceable against it in accordance
      with their respective terms, except that such enforceability may be limited
      by
      (a) applicable bankruptcy, insolvency, reorganization, moratorium, and similar
      laws affecting creditors’ rights generally and (b) equitable principles which
      may limit the availability of certain equitable remedies (such as specific
      performance) in certain instances. 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Section
      4.4.  Non-Contravention.
      The
      execution, delivery, and performance by Buyer of this Agreement and the
      acquisition of the Properties will not (a) violate any provision of any
      governing instruments of Buyer, or (b) violate any applicable law, rule or
      regulation binding upon Buyer.

     

    Section
      4.5.  Approvals.
      No
      consent, approval, order, or authorization of, or declaration, filing, or
      registration with, any court or governmental agency or of any third party is
      required to be obtained or made by Buyer in connection with the execution,
      delivery, or performance by Buyer of this Agreement.

     

    Section
      4.6.  Pending
      Litigation.
      There
      are no pending suits, actions, or other proceedings in which Buyer is a party
      which affect the execution and delivery of this Agreement.

     

    
      	5.  	
              Closing
                of Transaction

            

    

     

    Section
      5.1.  Conveyance
      of Properties.
      Contemporaneous with the execution and delivery of this Agreement, Seller shall
      execute, acknowledge and deliver the Conveyance to Buyer. The date of the
      Conveyance shall be referred to herein as the “Effective
      Date”.

     

    Section
      5.2.  Payment
      of Purchase Price.
      Contemporaneous with the execution and delivery of this Agreement, Buyer shall
      deliver the Purchase Price to the Seller, by wire transfer to the an account
      to
      be designated by Hallador in writing. 

     

    Section
      5.3.  Delivery
      of Files.
      No later
      than five (5) business days after the execution and delivery of this Agreement,
      and the performance of the obligations of the parties under Sections
      5.1 and
      5.2
      (collectively herein called the “Closing”)
      Seller
      shall deliver Seller’s Files, as defined in the Conveyance, to Buyer.

     

    
      	6.  	
              No
                Sales Taxes 

            

    

     

    No
      sales,
      transfer or similar tax have been collected at Closing from Buyer in connection
      with this transaction. If, however, this transaction is later deemed to be
      subject to sales, transfer or similar tax, at any time, for any reason, Seller
      shall indemnify and hold Buyer and its affiliates, and its and their directors,
      officers, employees, attorneys, contractors and agents harmless, for any and
      all
      sales, transfer or other similar taxes (including related penalty, interest
      or
      legal costs) due by virtue of this transaction and the Seller shall remit such
      taxes at that time. Seller and Buyer shall cooperate with each other in
      demonstrating that the requirements for any exemption from such taxes have
      been
      met.

     

    
      	7.  	
              Post
                Closing Obligations 

            

    

     

    Section
      7.1.  Indemnification
      Obligations.

     

    (a)  Subject
      to Section
      9.1,
      Seller
      shall, remain responsible for and indemnify and hold Buyer harmless from and
      against any and all claims, obligations, actions, liabilities, damages, expenses
      or losses, including without limitation attorney’s fees and court costs
      (collectively, “Buyer’s
      Losses”)
      (i) resulting from any misrepresentation or breach of any warranty,
      covenant or agreement of Seller contained in this Agreement; (ii) arising
      out of, or caused by, the Seller’s ownership of the Properties before the
      Effective Date provided that Seller shall not be obligated to indemnify or
      hold
      Buyer harmless for any of Seller’s Losses; or (iii)  arising out of or
      resulting from any agreement, arrangement or understanding alleged to have
      been
      made by, or on behalf of, Seller with any broker or finder in connection with
      this Agreement or the purchase and sale of the Properties.

     

    (b)  Subject
      to Section
      9.1,
      Buyer
      agrees to indemnify and hold Seller harmless from and against any and all
      claims, obligations, actions, liabilities, damages, costs, expenses, or losses
      including without limitation attorney’s fees and court costs (collectively,
“Seller’s
      Losses”)
      (i)
      resulting from any misrepresentation or breach of any warranty, covenant or
      agreement of Buyer contained in this Agreement; (ii) arising out of, or caused
      by, Buyer’s ownership or operation of the Properties after the Effective Date,
      provided that Buyer shall not be obligated to indemnify or hold Seller harmless
      for any of Buyer’s Losses; or (iii) arising out of or resulting from any
      agreement, arrangement or understanding alleged to have been made by, or on
      behalf of, Buyer with any broker or finder in connection with this Agreement
      or
      the purchase and sale of the Properties.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Section
      7.2.  Notice
      of Claim.
      If
      indemnification pursuant to Section 7.1(a)
      or
7.1(b)
      is
      sought, the party seeking indemnification (the “Indemnitee”)
      shall
      give written notice to the indemnifying party of an event giving rise to the
      obligation to indemnify, describing in reasonable detail the factual basis
      for
      such claim, and shall allow the indemnifying party to assume and conduct the
      defense of the claim or action with counsel reasonably satisfactory to the
      Indemnitee, and cooperate with the indemnifying party in the defense thereof;
      provided, however, that the omission to give such notice to the indemnifying
      party shall not relieve the indemnifying party from any liability which it
      may
      have to the Indemnitee, except to the extent that the indemnifying party is
      prejudiced by the failure to give such notice. The Indemnitee shall have the
      right to employ separate counsel to represent the Indemnitee if the Indemnitee
      is advised by counsel that an actual conflict of interest makes it advisable
      for
      the Indemnitee to be represented by separate counsel and the reasonable expenses
      and fees of such separate counsel shall be paid by the indemnifying
      party.

     

    Section
      7.3.  Participation
      Rights. 

     

    (a)  Drilling
      Obligation.
      Buyer
      shall drill three exploratory wells each at a location chosen by Buyer, in
      its
      sole discretion, on the lands covered by the Leases to a depth sufficient in
      Buyer’s sole opinion to test the New Albany Shale (each a “Commitment
      Well” and
      collectively the“Commitment
      Wells” ).
      The
      first Commitment Well shall be commenced no later than May 1, 2007. Buyer shall
      commence the second and third Commitment Wells on or before the later of May
      1,
      2008, or within one year from commencement of the first Commitment Well.

     

    (b)  Well
      by Well Participation.
      When
      the drilling rig is released from the third Commitment Well that is commenced
      pursuant to the obligations described in Section 7.3(a) or if Buyer fails to
      drill all three Commitment Wells then when the drilling rig is released from
      the
      last of the Commitment Wells drilled hereunder (“Rig
      Release”),
      Buyer
      shall promptly notify Seller in writing and Seller shall thereupon have a
      one-time option on a well-by-well basis to take assignment of a one-third (1/3)
      working interest in each Commitment Well and the Properties covering the
      drillsite spacing unit or proration unit for the Commitment Well; provided
      that
      Seller may not exercise such option unless Seller simultaneously therewith
      exercises its Repurchase Option (as defined below) under Section 7.3(c). The
      Properties acquired shall also include any real or personal property interests
      acquired for the development of the well and pursuant to the AMI under the
      Global Agreement. In order to exercise such option, Seller must (1) give Buyer
      written notice of its exercise within 60 days after receipt of notice of the
      Rig
      Release or such option shall expire and (2) simultaneously therewith exercise
      its Repurchase Option under Section 7.3(c). Within 5 business days after
      Seller’s receipt of payment by Buyer for the exercise of its Repurchase Option
      under Section 7.3(c), Buyer shall convey a one-third (1/3) working interest
      in
      each Commitment Well in which Buyer has elected to participate and the
      Properties covering the drillsite spacing unit or proration unit for such
      Commitment Wells by a conveyance that contains the special warranty in the
      Conveyance.
      The
      assignment shall be effective on the first day of the month following the date
      on which Rig Release occurs (the “Option Exercise Date”) and shall be free and
      clear of any lien or encumbrance or any additional royalty burdens on the Leases
      arising after the Effective date.

     

    (c)  Lease
      Acreage Acquisition.
      In the
      event either (i) Seller gives notice of its election to participate in a
      Commitment Well under Section 7.3(b) or (ii) Buyer drills three Commitment
      Wells
      in accordance with the terms of this Agreement, then upon Rig Release, Seller
      shall have a one time option (the “Repurchase Option”) to repurchase a one third
      working interest in all of the Properties and any real or personal property
      interests acquired pursuant to the AMI under the terms of the Global Agreement,
      excluding, however, the Properties described in Section 7.3(b) with respect
      to
      the Commitment Wells. It being understood that Seller may exercise the
      Repurchase Option without participating in any Commitment Well, but that Seller
      may not participate in any Commitment Well without exercising its Repurchase
      Option. In order to exercise the Repurchase Option, Seller must give Buyer
      written notice of its exercise on the earlier to occur of (i) the date Seller
      gives notice of its election to participate in a Commitment Well under Section
      7.3(b) or (ii) the sixtieth (60th)
      day
      after the Rig Release Date for the third Commitment Well that is commenced
      pursuant to the foregoing obligations or the Repurchase Option shall expire.
      Within 5 business days of the giving of written notice exercising the Repurchase
      Option, Seller shall pay Buyer for the Properties being acquired pursuant to
      the
      exercise of the Repurchase Option an amount equal to fifty two dollars ($52.00)
      per Net Leasehold Acre. “Net
      Leasehold Acres”
shall
      mean the sum of the net leasehold acres being acquired by Seller which sum
      shall
      be determined as follows for each such Lease, (a) the number of acres of land
      that are described and covered by such Lease (i.e. gross acres), multiplied
      by
      (b) the lessor’s mineral interest in the land described and covered by such
      Lease, multiplied by (c) Buyer’s undivided interest in such Lease (provided that
      if items (b) and (c) vary as to different areas covered by the Lease, a separate
      calculation shall be done for each such area). Within 5 business days after
      receipt of such payment, Buyer shall convey such Properties to Seller by a
      conveyance that contains the special warranty in the Conveyance. The assignment
      shall be effective on
      the
      Option Exercise Date and shall be free and clear of any lien or encumbrance
      or
      any additional royalty burdens on the Leases arising after the Effective date.
      

     

    (d)  Failure
      to drill Commitment Wells.
      In the
      event that Buyer fails to drill the first Commitment Well in the time and manner
      as set forth herein then Seller shall have the option of having Buyer reassign
      to Seller all of the Properties, less the wellbore interest of any previously
      drilled well, free and clear of any lien or encumbrance or any additional
      royalty burdens on the Leases arising after the Effective Date. In the event
      that Buyer fails to drill the second Commitment Well in the time and manner
      as
      set forth herein then Seller shall have the option of having Buyer reassign
      to
      Seller an undivided two-thirds interest in the Properties, less the wellbore
      interest of any previously drilled well, free and clear of any lien or
      encumbrance or any additional royalty burdens on the Leases arising after the
      Effective Date. In the event that Buyer fails to drill the third Commitment
      Well
      in the time and manner as set forth herein then Seller shall have the option
      of
      having Buyer reassign to Seller an undivided one-third interest in all of the
      Properties, less the wellbore interest of any previously drilled well, free
      and
      clear of any lien or encumbrance or any additional royalty burdens on the Leases
      arising after the Effective Date. 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Section
      7.4.  JOA
      and Carried Costs.
      If
      Seller exercises its option pursuant to Section
      7.3,
      Seller
      and Buyer shall enter into a Joint Operating Agreement in the form attached
      hereto on Exhibit
      IV,
      in
      which Buyer or its affiliate or designee shall be the operator (“JOA”).
      The
      initial well provided for in Article VI A of the JOA shall be the first
      Commitment Well. Seller shall assume its proportionate share of the obligations
      and costs under the JOA and receive its proportionate share of the revenue
      arising after the Option
      Exercise Date with respect to the options under Section 7.3(b) or
      7.3(c). Buyer
      shall be the responsible for and shall assume all
      obligations, costs and revenues arising under the JOA or attributable to the
      Properties before the Option
      Exercise Date with respect to the options under Section 7.3(b) or 7.3(c).

     

    Section
      7.5.  Access
      to Information.
      Seller
      shall be given thirty (30) days notice prior to commencement of all drilling
      operations. Seller’s representative (as appointed by Seller) shall have the
      right, at Seller’s risk, to have access to the derrick floor and to observe all
      operations on all wells drilled on the Leases or leases pooled therewith. Buyer
      shall promptly furnish Seller’s representative a copy of all applications and
      reports pertaining to the Leases, all seismic data pertaining to the Properties,
      daily drilling reports, and each well log, core analysis or other data taken
      from wells located on the Leases or acreage pooled therewith. Buyer agrees,
      at
      Seller’s request, to furnish Seller’s representative true and correct
      information pertaining to each well, the production therefrom (including true
      and complete copies of all contracts or agreements and all amendments and
      modifications thereof) for sale, processing or other disposition of any product
      produced from the well(s) and such technical information as Buyer may acquire
      with respect to sands, coals and formations encountered. Seller’s representative
      shall have the right to be present when wells are tested and/or tanks are gauged
      and shall have the right to examine all run tickets and to have full information
      as to production and runs, including copies of all run tickets upon request.
      Seller agrees, until the termination of this agreement or for a period not
      to
      exceed the period that a particular matter is held confidential by the
      appropriate federal or state agency, whichever is the shorter period of time,
      not to disclose any information or data provided to Seller pursuant to this
      Section 7.5 to any third party unless and until such time as such information
      or
      data becomes available to the public. This shall not be interpreted to require
      Buyer to furnish Seller or Seller’s representative with any information or data
      which Buyer is obligated to keep confidential.

     

    Section
      7.6.  Further
      Assurances.
      After
      the
      Closing, Seller shall execute and deliver, and shall otherwise cause to be
      executed and delivered, from time to time, such further instruments, notices,
      division orders, transfer orders and other documents, and do such other and
      further acts and things, as may be reasonably necessary to more fully and
      effectively grant, convey and assign the Properties,
      including
      without limitation the Leases,
      to
      Buyer.

     

    
      	8.  	
              Notices

            

    

     

    Section
      8.1.  Notices.
      All
      notices and other communications required under this Agreement shall (unless
      otherwise specifically provided herein) be in writing and be delivered
      personally, by recognized commercial courier or delivery service (which provides
      a receipt), by telecopier (with receipt acknowledged), or by registered or
      certified mail (postage prepaid), at the following addresses:

     

    If
      to
      Seller:  Hallador
      Petroleum Company

    
      	 	 	 	 	
              1660
                Lincoln Street, Suite 2700

            

    

    
      	 	 	 	 	
              Denver,
                CO 82064

            

    

    
      	 	 	 	 	
              Attention:
                Victor Stabio

            

    

    Fax
      No.:
      303-832-3013

    

    If
      to
      Buyer:  Approach
      Oil & Gas Inc.

    6300
      Ridglea Place, Suite 1107

    Fort
      Worth, TX 76116

    Attention:
      J. Ross Craft

    Fax
      No.:
      (817) 989-9001

    

    and
      shall
      be considered delivered on the date of receipt, provided that facsimile
      deliveries received after business hours or a non business day shall be deemed
      to have been received the next business day. Either Buyer or Seller may specify
      as its proper address any other post office address within the continental
      limits of the United States by giving notice to the other party, in the manner
      provided in this Article, at least ten (10) days prior to the effective date
      of
      such change of address. 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	9.  	
              Miscellaneous
                Matters

            

    

     

    Section
      9.1.  Survival
      of Provisions.
      All
      representations and warranties of Seller and Buyer contained in this Agreement
      shall survive the Closing shall survive the closing for a period of one year
      (“Survival
      Period”).
      All
      covenants of Seller and Buyer contained in this Agreement shall survive the
      Closing, except (a) any covenant of indemnification (whether based on a breach
      or representation or warranty or otherwise) which shall only survive for the
      Survival Period, and (b) any covenant which by its terms terminates as of a
      specific date, or is only made for a specified period. Notwithstanding the
      foregoing, the indemnity obligation of each party hereto shall continue after
      the expiration of the Survival Period with respect to any indemnified matter
      for
      which the party seeking indemnity shall have given the other party written
      notice as provided herein prior to the expiration of the Survival
      Period.

     

    Section
      9.2.  Binding
      Effect; Successors and Assigns.
      The
      Agreement shall be binding on the parties hereto and their respective successors
      and permitted assigns. Neither party shall have the right to assign its rights
      under this Agreement, without the prior written consent of the other party
      first
      having been obtained.

     

    Section
      9.3.  Expenses.
      Each
      party shall bear and pay all expenses incurred by it in connection with the
      transaction contemplated by this Agreement.

     

    Section
      9.4.  Entire
      Agreement - Amendment.
      This
      Agreement contains the entire understanding of the parties hereto with respect
      to subject matter hereof and supersedes all prior agreements, understandings,
      negotiations, and discussions among the parties with respect to such subject
      matter, including without limitation the letter of intent between the parties.
      This Agreement may only be amended or waived in writing.

     

    Section
      9.5.  Governing
      Law.
      This
      Agreement shall be governed by and construed in accordance with the internal
      laws of the State of Texas applicable to a contract executed and performed
      in
      such State, without giving effect to conflicts of laws principles requiring
      the
      application of the law of another State.

     

    Section
      9.6.  Multiple
      Counterparts; Fax.
      This
      instrument may be executed in a number of identical counterparts, each of which
      for all purposes is to be deemed an original, and all of which constitute
      collectively, one instrument. It is not necessary that each party hereto execute
      the same counterpart so long as identical counterparts are executed by each
      such
      party hereto. This instrument may be validly executed and delivered by facsimile
      or other electronic transmission.

     

    Section
      9.7.  Confidentiality.
      Seller
      shall keep all information related to the Properties in strict confidence.
      Seller shall not disclose such information to any person except to their
      accountants, attorneys and other representatives and the extent such disclosure
      is required by applicable law and shall not use such information to its
      competitive advantage when in competition with Buyer.

     

    IN
      WITNESS WHEREOF,
      this
      Agreement is executed by the parties hereto on the date set forth
      above.

     

    SELLER:

    HALLADOR
      PETROLEUM COMPANY 

    

    By:        
      /S/VICTOR P. STABIO   

    
      	 	
              Name:

            	
              Victor
                P. Stabio

            

    

    
      	 	
              Title:

            	
              CEO
                & President

            

    

     

    BUYER:

    

    APPROACH
      OIL & GAS INC.

    

    

    By:          /S/J.
      ROSS CRAFT    

    
      	 	
              Name:

            	
              J.
                Ross Craft

            

    

    
      	 	
              Title:

            	
              President

            

    

    
       

    

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Exhibit
      I Leases

     

    Exhibit
      II Form
      of
      Conveyance

     

    Exhibit
      III Global
      Agreement

     

    Exhibit
      IV Form
      of
      JOA

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Exhibit
      II

     

    CONVEYANCE

     

    Hallador
      Petroleum Company,
      a
      Colorado corporation (herein called “Grantor”),
      whose
      address is 1660 Lincoln, Suite 2700, Denver, Colorado 80264, for Ten Dollars
      and
      other good and valuable consideration (the receipt and sufficiency of which
      are
      hereby acknowledged), does hereby GRANT, BARGAIN, SELL, CONVEY, ASSIGN,
      TRANSFER, SET OVER, and DELIVER unto Approach
      Oil & Gas Inc.,
      (herein
      called “Grantee”),
      whose
      address is 6300 Ridglea Place, Suite 1107, Fort Worth, Texas 76116 the following
      described properties, rights and interests:

     

    (a)  All
      of
      the right, title and interest of the lessee under the oil, gas and/or mineral
      leases (collectively, “Leases”
      and
      individually a “Lease”)
      described on Exhibit
      A attached
      hereto and made part hereof; and

     

    (b)  Without
      limitation of the foregoing, all of Grantor’s right, title and interest (of
      whatever kind or character, whether legal or equitable, and whether vested
      or
      contingent) in and to the oil, gas and other minerals in and under or that
      may
      be produced from any and all land in Caldwell, Crittenden, Hopkins, Lyon,
      Marshall, Livingston and Trigg Counties, Kentucky (including, without
      limitation, all interests in oil, gas and/or mineral leases and fee mineral
      interests).

     

    (c)  All
      of
      Grantor’s rights and obligations under the Oil and Gas Project Agreement dated
      June 3, 2005 among Global GeoData, J. Bruce Branson and Grantor (the
“Global
      Agreement”)
      with
      respect to the properties, rights, and interests described in clauses (a) and
      (b) above; and

     

    (d)  All
      of
      Grantor’s lease files, abstracts and title opinions, seismic records and
      surveys, gravity maps, electric logs, geological or geophysical data and
      records, and other files, documents and records of every kind and description
      which relate to the properties described above (collectively, “Seller’s
      Files”).

     

    The
      properties, rights and interests described in the foregoing subparagraphs (a)
      and (b) are herein sometimes collectively called the “Properties”.
      

     

    TO
      HAVE
      AND TO HOLD the Properties unto Grantee, its successors and assigns,
      forever.

     

    EXCEPT
      FOR THE RIGHTS OF THE PARTIES UNDER THE GLOBAL AGREEMENT, GRANTOR AGREES TO
      WARRANT AND FOREVER DEFEND TITLE TO THE PROPERTIES, UNTO GRANTEE, ITS SUCCESSORS
      AND ASSIGNS, AGAINST THE CLAIMS AND DEMANDS OF ALL PERSONS CLAIMING, OR TO
      CLAIM
      THE SAME, OR ANY PART THEREOF, BY, THROUGH OR UNDER GRANTOR, BUT NOT OTHERWISE.
      

     

    Grantor
      agrees to execute and deliver to Grantee, from time to time, such other and
      additional instruments, and other documents, and to do all such other and
      further acts and things as may be necessary to more fully and effectively grant,
      convey and assign to Grantee the Properties.

     

    This
      Conveyance may be executed in several counterparts all of which are identical.
      All of such counterparts together shall constitute one and the same
      instrument.

     

    This
      Conveyance is made subject to that certain Purchase and Sale Agreement between
      Grantor and Grantee dated May 10, 2006. Such Agreement contains certain
      representations, warranties, covenants and agreements between the parties,
      which
      survive the delivery of this Conveyance, as more particular provided for
      therein, but third parties may conclusively rely on this Conveyance to vest
      title to the Properties in Grantee. The covenants of the Agreement include
      the
      right of Grantor to obtain reassignment of the leases if the drilling
      obligations are not satisfied and the option to participate as to a one-third
      interest in the leases.

     

    Without
      limitation of Grantor’s obligations under said Purchase and Sale Agreement,
      Grantee assumes all of Grantor’s obligations under the Global
      Agreement.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF this Conveyance has been executed by Grantor on the date of
      its
      acknowledgement.

     

    “GRANTOR”

    

    HALLADOR
      PETROLEUM COMPANY

    

    By:  
      /s/VICTOR P. STABIO      

    Name:
       
      Victor
      P. Stabio

    Title:   
       CEO & President

    ACKNOWLEDGEMENT

     

    STATE
      OF
      COLORADO§

     

                                              
      §

     

    COUNTY
      OF
      DENVER §

     

    The
      foregoing instrument was acknowledged before me this 10th day of May by Victor
      P. Stabio, CEO and President of Hallador Petroleum Company, a Colorado
      corporation, on behalf of such corporation.

     

    IN
      WITNESS WHEREOF, given under my hand and official seal this `10th day of May,
      2006.

     

     

     

    Notary
      Public in the State of Colorado

     

    My
      Commission Expires:___________

     

    [SEAL]<PAGE>

                                                                    EXHIBIT 10.1

                         BRIDGE LOAN SECURITY AGREEMENT

          THIS BRIDGE LOAN SECURITY AGREEMENT, dated as of January 12, 2006, is
entered into by and among GENELINK, INC., a Pennsylvania corporation, having an
address at Newport Financial Center, 113 Povonia Avenue, No. 313, Jersey City,
New Jersey 07310 ("Borrower"); DAVID BARRETT, INC., a California corporation,
having an address at 10430 Wilshire Blvd., Ste 1103, Los Angeles, CA 9024, Attn:
Barry Plost; ROBERT HOEKSTRA, an individual, having an address at 300 Sheoah
Blvd., #601, Winter Springs, FL, 32708; BERNARD L. KASTEN JR., an individual,
having an address at 4380 27th Court SW, Apt 104, Naples FL, 34116; JAMES
KREISSMAN, an individual, having an address at 1100 Union Street, Apt. 200, San
Francisco, CA 94109; KENNETH R. LEVINE, an individual, having an address at 1776
Broadway, Ste 1403, New York, NY 10019;and STRANCO INVESTMENTS, LTD., a British
Virgin Islands company, having an address at Idriss Building, 4th floor, Bashir
Kassar Street, Verdun, Beirut, Lebanon (each a "Bridge Lender" and collectively
the "Bridge Lenders"); and KAREN LEVINE, an individual residing at 170 West 74th
Street, New York, New York 10023, as Collateral Agent for the Bridge Lenders
("Collateral Agent").

                                    RECITALS:

          A. Borrower has requested that each Bridge Lender lend it a Bridge
Loan (each a "Bridge Loan" and collectively the "Bridge Loans") as set forth in
and evidenced by the CONVERTIBLE SECURED PROMISSORY NOTE executed and delivered
by Borrower to each Bridge Lender concurrently with its execution and delivery
hereof (each a "Bridge Loan Note" and collectively the "Bridge Loan Notes").
Each Bridge Lender has agreed to make such a loan to Borrower on the terms and
conditions of the Bridge Loan Note issued to it and on condition that Borrower
execute and deliver this Security Agreement to Collateral Agent and grant the
security interest set forth herein.

          B. Borrower has agreed to grant to Collateral Agent for the benefit of
the Bridge Lenders a first priority security interest in its Patents, as
described in Schedule 1 hereto (the "Collateral").

          C. The Bridge Lenders have agreed that this Security Agreement shall
also constitute an intercreditor agreement among them, establishing their mutual
rights with respect to the Collateral and proceeds therefrom.

          NOW, THEREFORE, in consideration of the mutual covenants, conditions,
and agreements herein contained, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:

Section 1. GRANT OF SECURITY INTEREST. Borrower hereby grants to Collateral
Agent, for the benefit of the Bridge Lenders, a first priority security interest
in and lien on (which security interest and lien shall be continuing), and
pledges and assigns as security to Collateral Agent, all

<PAGE>

of Borrower's right, title and interest in and to the Collateral, for the
purpose of securing, in such order of priority as Lender shall elect, all
Obligations, and Collateral Agent shall have all rights of a secured party with
respect to the Collateral.

Section 2. COVENANTS OF BORROWER.

(a) No Transfers or Liens. Except as expressly permitted under this Agreement or
the other documents executed by Borrower in connection with this Agreement or
the Bridge Loan (the "Loan Documents") or any Qualifying Loan Agreement (as that
term is defined in the Bridge Loan Notes), Borrower agrees that it will not,
without the prior written consent of Collateral Agent, (i) sell, assign (by
operation of law or otherwise) or otherwise dispose of any of the Collateral or
any interest in the Collateral, or (ii) create or suffer to exist any lien,
security interest, encumbrance or other charge upon or with respect to any
Collateral; provided, however, that Borrower shall be entitled to license any of
the Collateral that constitutes intellectual property in arm's length
transactions to bona fide third parties in the ordinary course of business
without seeking the consent of the Collateral Agent; provided further that
Borrower shall notify Collateral Agent of any such licensing (in reasonable
detail) as soon as practical thereafter.

(b) Prior Notice. Borrower will give Collateral Agent prior written notice of
any change in its address or the office where it keeps its records concerning
the Collateral.

(c) Defense of Title. Borrower shall, at its expense, defend the Collateral
Agent's right, title and security interest in and to the Collateral against any
and all claims of any entity, except to the extent arising out of Collateral
Agent's gross negligence or willful misconduct.

(d) Further Actions. Borrower shall not take or fail to take any action when
requested by Collateral Agent or expressly required by the Loan Documents to do
so which Borrower knows would impair the enforceability of Collateral Agent's
security interest in any Collateral.

(e) No Further Assignments. Borrower shall have no right to further assign its
rights and/or its obligations under this Agreement or to further pledge or
otherwise encumber its interest in the Collateral, and any such attempted
assignment, pledge or encumbrance shall be null and void.

Section 3. INDEMNITY. Borrower shall indemnify, defend and hold harmless
Collateral Agent and each Bridge Lender from and against any and all claims,
losses and liabilities growing out of or resulting from this Agreement,
including, without limitation, (i) enforcement of any right under this Agreement
and (ii) any liability for taxes in respect of income from any Collateral
received by or on behalf of Borrower.

Section 4. EVENTS OF DEFAULT; REMEDIES.

(a) Events of Default. Each of the following shall constitute an "Event of
Default" under this Agreement:

                                        2

<PAGE>

          (i) If Borrower shall fail to pay when due and payable any payment
          required to be made under any Bridge Loan Note or hereunder; or

          (ii) If Borrower shall fail to perform any obligation required
          hereunder within ten (10) business days of receiving notice of such
          failure by the Collateral Agent; or

          (iii) if any default beyond the expiration of any applicable grace and
          notice periods shall occur under any other Loan Document.

(b) Remedies. Upon the happening of any Event of Default, Collateral Agent shall
have the right, if such Event of Default shall then be continuing, in addition
to all of the remedies conferred upon Collateral Agent by law or equity or by
the terms of any of the Loan Documents (including, without limitation, the right
to declare the Bridge Loan Notes to be immediately due and payable as provided
therein (unless such Note shall have been automatically declared immediately due
and payable as provided therein)) to exercise in respect of the Collateral, on
behalf of the Bridge Lenders all of the rights and remedies of a secured party
on default under the Uniform Commercial Code of the State of New York, and each
other State with applicable jurisdiction, then in effect.

(c) Interim Use of Patents. Pending appropriate disposition of the Collateral in
accordance herewith, upon the occurrence and during the continuance of an Event
of Default, Collateral Agent shall have the exclusive right, but not the duty,
with respect to all Patents that are part of the Collateral, from time to time
to enforce or use the Patents or to grant or issue any exclusive or
non-exclusive license under the Patents to any third party, upon such terms as
it may in its sole discretion deem commercially reasonable.

Section 5. ATTORNEY-IN-FACT. Borrower hereby irrevocably appoints Collateral
Agent as Borrower's attorney-in-fact and agent, said appointment to be
irrevocable during the term hereof and to be coupled with an interest, with full
authority in the place and stead of Borrower and in the name of Borrower, upon
the occurrence of an Event of Default and acceleration to take any action and to
execute any instrument which Collateral Agent, in its sole discretion, may deem
necessary to perfect or protect the first priority perfected security interest
created hereby, including, without limitation by means of executing and
delivering financing and continuation statements and any extensions,
modifications and refilings thereof, with the right (but not the duty) from time
to time to create, prepare, complete, execute, deliver, endorse or file, in the
name and on behalf of Borrower, any and all instruments, documents, applications
and other agreements and writings required to be obtained, executed, delivered
or endorsed by Borrower to give effect to the matters contemplated by this
Agreement, or necessary as the secured party after an Event of Default, to
enforce or use the Patents or to grant or issue any exclusive or non-exclusive
license under the Patents to any third party, or to sell, assign, transfer,
pledge, encumber or otherwise transfer title in or dispose of the Patents to any
third party. Borrower hereby ratifies all that such attorney shall lawfully do
or cause to be done by virtue hereof. The power of attorney granted herein shall
terminate upon the payment and performance of all obligations of Borrower under
the Loan Documents.

                                        3

<PAGE>

Section 6. COLLATERAL AGENT.

(a) Appointment of Collateral Agent. By its execution hereof, each Bridge Lender
hereby designates and appoints Karen Levine as its agent to receive on its
behalf the grant of security and assignment of interest in the Collateral to
secure Borrower's repayment of the principal and interest of the Bridge Loan
made by such Bridge Lender, and all other obligations to such Bridge Lender in
respect of its Bridge Loan and this Agreement and the other Loan Documents (the
"Security Interest"). By her acceptance hereof, Karen Levine accepts such
designation and appointment and agrees to act as the agent for each Bridge
Lender pro rata as its interest may appear in (i) accepting and holding the
Security Interest, (ii) protecting and defending the Security Interest, (iii)
enforcing the rights conferred upon the Collateral Agent by this Agreement
against the Collateral, and (iv) distributing the proceeds from the realization
of such enforcement among the Bridge Lenders according to the percentage equal
to the percentage that the principal amount of the Bridge Loan such Bridge
Lender made to Borrower constitutes of the aggregate of all Bridge Loans made
(such percentage being such Bridge Lender's "Sharing Percentage"). Collateral
Agent agrees that it will comply with the terms hereof and exercise reasonable
care to assure the safe custody of the Collateral under its control and in
carrying out its other duties under this Agreement; provided, however, that
Collateral Agent may at any time and from time to time condition its undertaking
of any action or executing any document upon the provision to it by Borrower
and/or the Bridge Lenders of such assurances or financial accommodations as it
may reasonably determine to be necessary for the protection of its interest.

(b) Indemnification of Collateral Agent; Standard of Care. Notwithstanding the
indemnity of Borrower provided hereinabove, each Bridge Lender, severally
according to its Sharing Percentage, hereby agrees to indemnify and hold
harmless the Collateral Agent from and against any and all claims, losses and
liabilities growing out of or resulting from this Agreement, including, without
limitation, (i) enforcement of any right under this Agreement and (ii) any
liability for taxes in respect of income from any Collateral received by or on
behalf of Borrower. Collateral Agent shall be at all times indemnified hereunder
for any action taken or document executed by it with respect to which it had
received the written instruction or approval of Bridge Lenders with Sharing
Percentages of at least 51%, except to the extent of her willful misconduct or
gross negligence.

Section 7. INTERCREDITOR AGREEMENT. By its execution hereof, each Bridge Lender
hereby agrees to and for the exclusive benefit of each other Bridge Lender that:

(a) It will not seek to enforce its Bridge Loan Note against the Collateral or
otherwise without providing the other Bridge Lenders at least five (5) business
days' prior written notice thereof, and will desist from taking any enforcement
action if so requested in writing by other Bridge Lenders with Sharing
Percentages totaling at least 51%; provided, however, that if the underlying
Event of Default with respect to which it sought to enforce its Bridge Loan Note
is not cured within thirty (30) days after having received such a desist
request, it shall be able to take such enforcement action on its own behalf as
it deems necessary or appropriate.

                                        4

<PAGE>

(b) If any Bridge Lender receives from Borrower or any third party any payment
in cash or property in respect of its Bridge Loan Note, whether by direct
payment, enforcement action or otherwise, other than in a distribution which it
has valid reason to believe was made pro rata to all Bridge Lenders according to
their respective Sharing Percentages, such Bridge Lender shall hold such payment
IN TRUST for all the Bridge Lenders and use commercially reasonable efforts to
assure that each Bridge Lender receives directly from such Bridge Lender or from
Borrower or such third party either additional funds or such portion of the
payment received by such Bridge Lender (net of costs of administration thereof)
as to cause each Bridge Lender to receive its Sharing Percentage of such
payment.

Section 8. MISCELLANEOUS.

(a) Notices. Except as otherwise expressly provided herein, any communications,
requests or notices required or appropriate to be given under this Agreement,
whether or not stated herein to be "in writing" or "written", shall be in
writing and either personally delivered, delivered by overnight courier, or
mailed by certified, registered, or express mail, return receipt requested,
deposited in the United States mail postage prepaid, addressed to the party for
whom the notice is intended as follows:

To Borrower:             GENELINK, INC.
                         Newport Financial Center
                         113 Povonia Avenue, No. 313
                         Jersey City, New Jersey 07310
                         Attn: Monte Taylor, Jr., President
                         Telephone: 407-260-1989

To Collateral Agent:     KAREN LEVINE
                         170 West 74th Street, Apt. 509
                         New York, New York 10023
                         Telephone: 212-579-3065

To each Bridge Lender:   To their respective address set forth above or as
                         otherwise notified to the Collateral Agent and the
                         other Bridge Lenders.

     These addresses may be changed by notice as provided herein. All notices
shall be deemed to have been received on the earlier of actual receipt, or, if
given by mail, four (4) business days following the postmark date thereof unless
sent by overnight mail in which event they shall be deemed to have been received
one (1) business day following the date of sending thereof.

(b) No Waivers; Approvals. Any failure by Borrower or Collateral Agent to
insist, or election by either party not to insist, upon the strict performance
of any of the terms and provisions of this Agreement, shall not be deemed to be
a waiver of any of the terms and provisions hereof by such party, and such
party, notwithstanding any such failure(s), shall have the right thereafter to
insist upon the strict performance by the other party of any and all of the
terms and provisions of this Agreement to be performed by the other party. The
parties hereby specifically agree that no provision of this Agreement can be
waived by course of conduct.

                                        5
<PAGE>

(c) Further Assurances.

     (i) Borrower agrees that at any time and from time to time, at its expense,
     it will promptly execute and deliver all further instruments and documents
     and take all further actions as Collateral Agent may reasonably request in
     order to perfect and protect any assignment, pledge, lien and security
     interest purported to be created hereby or to effectuate the terms of this
     Agreement.

     (ii) Borrower hereby authorizes Collateral Agent to file, whether or not an
     Event of Default shall have occurred without the signature of Borrower
     where permitted by law, one or more financing or continuation statements,
     and amendments thereto, relating to the Collateral.

(d) Governing Law. This Agreement shall be governed by, and construed and
enforced in accordance with, the law of the State of New York, except to the
extent the law of another jurisdiction is required to control the validity,
attachment and/or perfection of any security interest granted hereunder by the
choice of law principles of the Uniform Commercial Code of the State of New
York.

(e) Borrower irrevocably consents that any legal action or proceeding against it
under, arising out of or in any manner relating to this agreement may be brought
in any court of the State of New York, County of New York, or in the United
States District Court for the State of New York. Borrower, by the execution and
delivery of this agreement, expressly and irrevocably assents and submits to the
personal jurisdiction of any of such Court in any such action or proceeding.
Each of Borrower, Collateral Agent and the Bridge Lenders agrees that any and
all legal action relating to this agreement shall be brought, and maintained,
only in such Courts. The Borrower further irrevocably consents to the service of
any complaint, summons, notice or other process relating to any such action or
proceeding by delivery thereof to it at the address set forth above or such
other address as Borrower shall have theretofore notified the Collateral Agent
in writing or in any other manner permitted by law. In the event service on
Borrower is effected as set forth in the preceding sentence, Borrower hereby
expressly and irrevocably waives any claim or defense in any such action or
proceeding based on any alleged lack of personal jurisdiction, improper venue,
forum non conveniens, or any similar basis. Borrower shall not be entitled in
any action or proceeding to assert any defense given or allowed under the law of
any State other than the State of New York unless such defense is also given or
allowed by the law of the State of New York.

(f) Severability. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. Where provisions of any law or regulation resulting in any
such prohibition or unenforceability may be waived they are hereby waived by the
parties hereto to the full extent permitted by law so that this Agreement shall
be deemed a valid, binding agreement, enforceable in accordance with its terms.

                                       6

<PAGE>

(g) Continuing Security Interest; Successors and Assigns; Termination.

     (i) This Agreement shall create a continuing security interest in the
     Collateral and shall (A) remain in full force and effect until the
     satisfaction and repayment of all Obligations shall have occurred, (B) be
     binding on and inure to the benefit of Borrower and its permitted
     successors and assigns, and (C) with respect to Collateral Agent, be
     binding on and inure, together with all rights and remedies of Collateral
     Agent hereunder, to the benefit of, Collateral Agent and her successors,
     transferees and assigns. Notwithstanding the foregoing, each of Borrower
     and Collateral Agent, as the case may be, may only assign or otherwise
     transfer any of its rights hereunder to a party to whom all of its rights
     and obligations under the Loan Documents are assigned and provided such
     party assumes all of such obligations, and upon such assumption, such other
     party shall thereupon become vested with all of the benefits in respect of
     each of Borrower and Collateral Agent, as the case may be, herein or
     otherwise. Except as provided in the preceding sentence, none of the rights
     or obligations of Borrower and Collateral Agent hereunder may be assigned
     or otherwise transferred.

     (ii) Upon the payment and performance in full of all Obligations,
     Collateral Agent shall, upon the written request of and at the sole expense
     of Borrower, deliver the Collateral under her control to Borrower (together
     with all documents reasonably requested by Borrower to transfer the
     Collateral under her control to Borrower and to terminate any instrument of
     record confirming the Borrower's rights in the Collateral under her
     control).

(h) Cross-Default. Any Event of Default under this Agreement shall be deemed to
be an Event of Default under each of the other Loan Documents, entitling
Collateral Agent, subject to the express restrictions, if any, contained
therein, to exercise any or all remedies available to Collateral Agent under the
terms of any or all such Loan Documents in accordance with the terms of such
documents.

(i) Survival. All of the representations, warranties, terms, covenants,
agreements and conditions contained in this Agreement shall specifically survive
the execution and delivery of this Agreement and the other Loan Documents and
shall, unless otherwise expressly provided, continue in full force and effect
until the Loan, together with Interest thereon, and all other costs, charges and
other sums payable hereunder or thereunder, are paid in full, and until the
Obligations have been satisfied.

(j) Counterparts. This Agreement may be executed in any number of counterparts
each of which shall be deemed an original but all of which together shall
constitute a single instrument.

(k) Entire Agreement. This Agreement and the documents referred to herein
constitute the entire agreement between the parties hereto as to the matters
contemplated herein and therein and this Agreement may not be modified or
amended in any manner other than by written agreement executed by the parties
against whom enforcement of such modification or amendment shall be sought.

                                       7

<PAGE>

(l) No Release; Waiver or Election of Remedies. Anything in this Agreement to
the contrary notwithstanding, (i) the exercise by the Collateral Agent of any of
her rights hereunder shall not release the Borrower from its obligations under
the Loan Documents, nor shall it constitute an election of remedies by
Collateral Agent or a waiver by the Collateral Agent of any of her rights and
remedies under the Loan Documents, and (ii) the Collateral Agent shall not be
obligated to perform any of the obligations or duties of the Borrower hereunder
or to take any action to collect or enforce any claim for payment assigned
hereunder.

(m) Attorneys' Fees. If either Collateral Agent or Borrower fails to perform any
of its obligations under this Agreement or if any dispute arises between
Collateral Agent and Borrower concerning the meaning or interpretation of any
provision of this Agreement, then the defaulting party or the party not
prevailing in such dispute, as the case may be, shall pay any and all costs and
expenses incurred by the other party on account of such default and/or in
enforcing or establishing its rights hereunder, including, without limitation,
court costs and reasonable attorneys' fees and disbursements. Any such
attorneys' fees and other expenses incurred by Collateral Agent or Borrower in
enforcing a judgment in its favor under this Agreement shall be recoverable
separately from and in addition to any other amount included in such judgment,
and such attorneys' fees obligation is intended to be severable from the other
provisions of this Agreement and to survive and not be merged into any such
judgment.

                                       8

<PAGE>

     IN WITNESS WHEREOF, the parties hereto caused this Agreement to be executed
as of the day and year first above written.

                                        GENELINK, INC.

                                        By: /s/ Monte E. Taylor, Jr.
                                            ------------------------------------
                                        Its: Acting Chief Executive Officer

DAVID BARRETT, INC.           [Sharing Percentage 20%]

By: /s/ Barry Plost
    -------------------------
Its: President

ROBERT HOEKSTRA               [Sharing Percentage 10%]

/s/ Robert Hoekstra
-----------------------------

BERNARD L. KASTEN JR.         [Sharing Percentage 20%]

/s/ Bernard L. Kasten, Jr.
-----------------------------

JAMES KREISSMAN               [Sharing Percentage 10%]

/s/ James Kreissman
-----------------------------

STRANCO INVESTMENTS, LTD.     [Sharing Percentage 20%]

By: /s/ Gazwa Yousif
    -------------------------
Its: Director

KENNETH R. LEVINE             [Sharing Percentage 20%]

/s/ Kenneth R. Levine
-----------------------------

COLLATERAL AGENCY ACCEPTED AND AGREED TO:

/s/ Karen Levine
-----------------------------
KAREN LEVINE

                                        9

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