April 29, 1996
Dear Shareholder:
You are cordially invited to attend the Shareholder's Meeting of
Hallador Petroleum Company scheduled to be held at 9:00 a.m., Denver time,
on Wednesday, May 29, 1996, at the Company's office located at 1660 Lincoln
Street, Suite 2700, Denver, CO 80264.
The formal actions proposed to be taken at this meeting are described
in the attached Notice and Proxy Statement. We also intend to outline our
views and plans for your Company's future. We look forward to greeting those
of you who are able to attend.
Yours very truly,
Victor P. Stabio
Chief Executive Officer
and President
HALLADOR PETROLEUM COMPANY
1660 Lincoln Street
Suite 2700
Denver, Colorado 80264
303.839.5504
Fax: 303.832.3013
NOTICE OF SHAREHOLDERS MEETING
TO BE HELD WEDNESDAY, MAY 29, 1996
The Meeting of the Shareholders of Hallador Petroleum Company, a Colorado
corporation (the "Company"), will be held on Wednesday, May 29, 1996 9:00
a.m., Denver time, at the Company's office located at 1660 Lincoln Street,
Suite 2700, Denver, CO 80264 for the following purposes:
1. To elect five directors to serve until the next Shareholders
Meeting or until their successors are duly elected and qualified;
2. To adopt and ratify Amendment No. 1 to the 1993 Stock Option
Plan;
3. To amend the Company's articles of incorporation to effect a 100
for 1 reverse split of the Company's common stock followed by a 10 for 1
forward split of the Company's common stock;
4. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Only shareholders of record at the close of business on April 15, 1996
are entitled to notice of and to vote at the meeting or any adjournment
thereof. The stock transfer books will not be closed.
All shareholders are invited to attend the meeting in person. Whether
or not you plan to attend the meeting, please sign and date the enclosed
Proxy and return it promptly in the enclosed postage-paid envelope.
THE BOARD OF DIRECTORS AND THEIR AFFILIATES OWN APPROXIMATELY 94% OF
THE OUTSTANDING COMMON STOCK AND HAVE INDICATED THAT THEY WILL VOTE IN
FAVOR OF ALL MATTERS; THEREFORE, ALL DIRECTORS WILL BE ELECTED AND ALL
PROPOSALS WILL PASS.
By Order of the Board of Directors
April, 29, 1996 Teressa Jones, Secretary
Hallador Petroleum Company
1660 Lincoln Street
Suite 2700
Denver, Colorado 80264
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation
on behalf of the Board of Directors of Hallador Petroleum Company (the
"Company") of Proxies in the accompanying form to be voted at the Company's
Meeting of the Shareholders to be held on May 29, 1996, and at any
adjournment thereof, for the purposes set forth in the preceding notice.
This Proxy Statement, the 1995 Annual Report and Form 10-KSB and the enclosed
Proxy are being mailed to shareholders on or about April 29, 1996.
Proxies will be voted in accordance with the directions specified
thereon. Regarding the election of directors, stockholders may vote in favor
of all nominees or withhold their votes as to all nominees, or withhold their
votes as to specific nominees. With respect to the other proposals to be
voted upon, stockholders may vote in favor of the proposal, against the
proposal or may abstain from voting. Stockholders should specify their
choices on the enclosed form of Proxy.
Any Proxy on which no direction is specified will be voted FOR the
election of all nominees, the adoption and ratification of Amendment No. 1
to the 1993 Stock Option Plan, the reverse and forward split of the Company's
common stock, and, in the discretion of the proxies, with respect to any
other business which may properly come before the meeting.
Any shareholder returning the enclosed Proxy may revoke it prior to its
exercise by voting in person at the meeting or by filing with the Secretary
of the Company written notice of revocation or a duly executed Proxy bearing
a later date.
VOTING RIGHTS
Only owners of record of shares of the Company's common stock, par
value $.01 per share (the "Common Stock"), at the close of business on April
15, 1996 (the "Record Date") are entitled to vote at the meeting or
adjournments thereof. Each owner of record on the Record Date is entitled
to one vote for each share of the Company's Common Stock so held. At the
close of business on the Record Date, there were approximately 71 million
shares of the Company's Common Stock entitled to vote. The presence, either
in person or by Proxy, of persons entitled to vote one-third of the Company's
outstanding Common Stock constitutes a quorum for the transaction of business
at the meeting. If a quorum is present, the election of directors and other
questions shall be decided by the affirmative vote of a majority of the
shares represented at the meeting, unless otherwise required by law. THE
BOARD OF DIRECTORS AND THEIR AFFILIATES OWN APPROXIMATELY 94% OF THE
OUTSTANDING COMMON STOCK AND HAVE INDICATED THAT THEY WILL VOTE IN FAVOR OF
ALL MATTERS; THEREFORE, ALL DIRECTORS WILL BE ELECTED AND ALL PROPOSALS WILL
PASS.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information, as of April 15,
1996, with respect to shares held or controlled by the Company's directors.
This table should be read with the understanding that the Company's only
executive officer is also a director and persons owning more than 5% of the
outstanding shares are affiliated with one or more of the Company's
directors. Except as noted below, all shares are owned directly, and the
owner has sole voting and investment power with respect to such shares.
Name No. Shares % of Class (1)
David Hardie (2)
Steven Hardie (2) 37,912,430 53.4
Victor P. Stabio (3) 4,349,847 5.82
Cortlandt S. Dietler (4) 1,000,000 1.4
Bryan H. Lawrence (5) 27,000,000 38.04
All directors as a group 70,262,277 94.06
(1) Based on total outstanding shares of 70,982,723 if no options are held
by the named directors, or based on a pro forma calculation of the total
outstanding shares including shares issued upon exercise of options held by
the named director or by members of the named group. Beneficial ownership
of certain of these shares has been, or is being, specifically disclaimed by
certain directors in ownership reports filed with the SEC.
(2) The Hardie Family's and their affiliates' address is 740 University
Avenue, Suite 110, Sacramento, CA 95825. Includes 9,429,684 shares held
individually or in separate property trusts for the benefit of either Jane
Hardie, recently deceased, Robert Hardie and David Hardie. Also includes
13,751,265 shares held by JINSRO, Ltd, a California limited partnership;
2,983,119 shares held by Hallador, Inc.; 3,928,690 shares held by Hardie
Descendants Trust, and 7,819,672 shares held by Harco Investors. David
Hardie is the general partner of JINSRO, Ltd. and Harco Investors and is the
President of Hallador, Inc. David Hardie and Steven Hardie are co-trustees
of the Hardie Descendants Trust. Steven Hardie holds no other Company stock.
(3) Includes 3,720,000 shares issuable upon the exercise of certain options
through June 15, 1996 held by Mr. Stabio.
(4) Mr. Dietler's address is P. O. Box 5660, Denver, Colorado 80217. All
shares are held by Pinnacle Engine Company LLC, wholly owned by Mr. Dietler.
(5) Mr. Lawrence's address is 535 Madison Avenue, 14th Floor, New York, New
York 10022. Includes 22,785,000 shares held by Yorktown Energy Partners II,
L.P. and 100,000 shares owned by Lexington Partners IV, L.P. Mr.
Lawrence is Managing Director of Dillon, Read & Co. Inc. which is Managing
General Partner of Yorktown Energy Partners II, L.P and Lexington Partners
IV, L.P. Also includes 4,115,000 shares owned by Dillon, Read & Co. Inc.,
as agent of which 500,000 shares are owned directly by Mr. Lawrence.
SHAREHOLDERS' AGREEMENT
The Shareholders Agreement, dated as of November 15, 1995, among the
Company, Yorktown Energy Partners IV, L.P., Lexington Energy Partners IV,
L.P., Hallador, Inc., Jinsro Ltd., Harco Investors and others provides that
such parties agree to take all steps necessary to have two persons nominated
by Dillon, Read & Co. Inc and three persons nominated by the Hardie family
elected to the Company's Board of Directors. These parties own approximately
94% of the Company's Common Stock. The two nominees of Dillon, Read & Co.
Inc. are Bryan H. Lawrence and Cortlandt S. Dietler and the three nominees
of the Hardie family are David Hardie, Steven Hardie and Victor P. Stabio.
This Agreement further provides that none of the parties will transfer,
without the written consent of the Company, any shares of the Company until
January 1, 1999. This Agreement terminates upon the earlier of November 15,
2005 or a public offering of the Company's securities which generates at
least $6,500,000 of gross proceeds to the Company.
PROPOSAL 1
ELECTION OF FIVE DIRECTORS
Members of the Board of Directors of the Company who were elected at
the last meeting shareholders' meeting held on November 3, 1993 were David
Hardie (Chairman), Donald E. Hockaday, Jr. and Victor P. Stabio. Mr.
Hockaday resigned on April 15, 1994 and Mr. Steven Hardie was elected as a
director to fill the vacancy on July 27, 1994. Mr. Bryan H. Lawrence and Mr.
Cortlandt S. Dietler were elected to the Board on November 16, 1995.
A Board of Directors of five members is to be elected at the meeting,
each director to hold office until the next Meeting of the Shareholders or
until his respective successor is elected and qualified. Unless authority
to vote is withheld, shares represented by Proxies will be voted in favor of
the election as directors of the nominees named below (or, in the event,
which is not anticipated, that any of such nominees should become
unavailable, a substitute nominee). The nominees constitute all of the
current members of the Board of Directors.
Certain information as of April 15, 1996 concerning each nominee is set
forth below:
NOMINEES FOR ELECTION
DAVID HARDIE, age 45, is the Chairman of the Board and has served as
a director of the Company since July 1989. He founded Hallador, Inc. in 1979
and since that time has directed both its oil and gas and venture capital
activities as its President and Chairman. Mr. Hardie served as Chairman of
the Board and Chief Executive Officer of Hallador Exploration Company from
the time of its formation in 1988 until its merger with the Company in 1989.
Mr. Hardie is a shareholder and also serves as a director of Freedom
Communications Inc., Irvine, CA, a private company which publishes newspapers
and operates television stations. He serves as a director for Pacific Grain
Products, Inc., Woodland, CA, a private company which manufactures rice and
grain products and Icon Manufacturing, Inc., Sacramento, CA, a private paint
manufacturer. Mr. Hardie also serves as a director and partner of other
private entities which are owned by members of his family. Mr. Hardie
received a B.S. degree in Business Administration from California Polytechnic
University, San Luis Obispo in 1976 and is a 1990 graduate of the Harvard
School of Business, Owner/President Management Program.
VICTOR P. STABIO, age 48, the Company's only executive officer, is the
President, Chief Executive Officer (CEO), Chief Financial Officer and a
director of Hallador Petroleum Company. Mr. Stabio joined the Company on
March 15, 1991 and was appointed President and CEO on March 20, 1991. Mr.
Stabio was founder, President and a director of Mountain & Plains Oil Company
until its merger with Adobe Oil & Gas Corporation in 1980. Mr. Stabio served
as Executive Vice-President of operations for High Plains Oil Corporation
from 1983 to 1987. Mr. Stabio was working as a self-employed independent
investor and financial consultant before joining the Company. He graduated
from Eastern Montana College in 1971 with a B.S. Degree in Business
Administration.
STEVEN HARDIE, age 42, was appointed to the Board of the Directors on
July 27, 1994. Mr. Hardie and David Hardie are brothers. For the last 13
years Mr. Hardie has been a self-employed film producer. Mr. Hardie is a
shareholder in Freedom Communications Inc., a private company which publishes
newspapers and operates television stations and also serves as a director of
Hallador, Inc. Mr. Hardie graduated from the University of Arizona in 1977
with a Bachelor of Arts in Journalism.
CORTLANDT S. DIETLER, 74, has been a Director of the Company since
November 1995. Since April 1995, he has been the President and Chief
Executive Officer of TransMontaigne Oil Company. Mr. Dietler was the founder
of Associated Natural Gas Corporation and he served as its Chairman and Chief
Executive Officer until February 28, 1995. Mr. Dietler serves as a director
of Key Production Company, Grease Monkey Holding Corporation and PanEnergy
Corporation. Mr. Dietler graduated from the University of Tulsa in 1947 with
a B.S. Degree in Business Administration.
BRYAN H. LAWRENCE, age 53, has been a Director of the Company since
November 1995. He has been employed by Dillon, Read & Co. Inc., an
investment banking firm (Dillon Read), since January 1966; and is currently
a Managing Director. Mr. Lawrence also serves as a Director of Vintage
Petroleum, Inc., D&K Wholesale Drug, Inc., Benson Petroleum Ltd. (a Canadian
public company) and certain non-public companies in which affiliates of
Dillon Read hold equity interests including Meenan Oil Co., Inc.,
TransMontaigne Oil Company, Fintube Limited Partnership, Interenergy
Corporation, Willbros Group, Inc., Cavell Energy Corporation, PetroSantander
Inc., and Strega Energy Inc. Mr. Lawrence is a graduate of Hamilton College
and also has a M.B.A. from Columbia University.
BOARD AND COMMITTEE INFORMATION
The Board of Directors of the Company held a total of three meetings
during calendar year 1995.
The Board of Directors has an Executive Committee consisting of Messrs.
Hardie (Chairman) and Stabio. When the Board of Directors is not in session,
the Executive Committee may exercise all the powers of the Board of Directors
which may be delegated to a committee under Colorado law. The Executive
Committee held no meetings during calendar year 1995.
The Board of Directors has an Audit Committee consisting of Messrs.
David Hardie (Chairman) and Steven Hardie. The Audit Committee held no
meetings during calendar year 1995. The Audit Committee's purpose is to
oversee the Company's accounting and financial reporting policies and
practices and to assist the Board in fulfilling its fiduciary corporate
accountability responsibilities. The Company's independent public
accountants periodically meet with the Audit Committee and always have
unrestricted access directly to the Audit Committee members.
The Board of Directors has a Compensation Committee consisting of
Messrs. David Hardie (Chairman), Bryan H. Lawrence and Steven Hardie. The
Compensation Committee generally is charged with administering, monitoring
and evaluating the overall compensation policies of the Company. The
Compensation Committee held one meeting during 1995.
Each director attended all the 1995 meetings.
COMPENSATION OF DIRECTORS
- - -------------------------
Through November 16, 1995, non-employee directors were paid $10,000
annually. Currently, directors receive no compensation for their services.
SUMMARY COMPENSATION TABLE
Long-term
Compensation
Annual Compensation ----------
Name and ----------------------------------------- Securities
Principal Other Annual Underlying
Position (3) Year Salary Bonus (1) Compensation (2) Options
- - ------------ ---- ------ --------- ---------------- ----------
Victor P. Stabio 1995 $96,154 $27,446 $3,931 6,200,000
President 1994 86,217 36,024 3,365 57,465
1993 77,250 47,552 2,704 319,250
(1) Includes amounts, payment of which is deferred, pursuant to the Key
Employee Bonus Plan.
(2) Company's contribution to the 401-K Plan.
(3) The Company has no other executive officers.
OPTION/SAR GRANTS IN THE LAST FISCAL YEAR
Number of
Securities % of Total
Underlying Options Granted
Options to Employees in Exercise Expiration
Name Granted Fiscal Year Price Date
- - ---------------- ---------- --------------- --------- ----------
Victor P. Stabio 6,200,000 90% $.10 December 31, 2006
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
- - ------------------------------------------------------------------------
There were no options exercised during 1995. As of December 31, 1995,
Mr. Stabio had 3,720,000 exercisable options and 2,480,000 unexerciable
options. Based on a December 31, 1995 bid price of $.07, the options have
no intrinsic value. Using the average of the bid and ask price on December
31, 1995 of $.125, the exercisable options have an intrinsic value of $93,000
and the unexercisable options have an intrinsic value of $62,000.
CHANGE-IN-CONTROL ARRANGEMENTS
- - ------------------------------
As of December 31, 1995, Mr. Stabio has accrued $127,000 pursuant to
the Company's deferred bonus plan which on the merger of the Company into
another entity or the sale by the Company of substantially all of its assets
will become payable.
REPORT ON REPRICING OF OPTIONS
- - ------------------------------
On December 13, 1995, the Board of Directors effectively cancelled
substantially all options outstanding which had exercise prices of $.20 per
share and replaced them with new options with an exercise price of $.10 per
share. Due to the reorganization in November 1995 which requires new
managerial responsibilities, the Board concluded that in order to retain
and to provide incentive for management, the old options which had no
intrinsic value, and little or no fair value, needed to be revised.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. Lawrence, one of the Company's directors, is a Managing Director
of Dillon, Read & Co. Inc., an investment banking firm. On November 28,
1995, the Company sold 28 million shares to an investor group affiliated with
Dillon, Read & Co. Inc. for $2.8 million. Concurrently, the convertible debt
due the Hardie family and certain others was converted to common stock at
$.15 per share, resulting in 35.3 million shares being issued. During 1995,
the Company paid the Hardie family and their affiliates approximately
$329,000 of interest in the form of common stock and $39,000 in cash. The
Hardie family and their affiliates own approximately 53% of the common stock
and the Dillon, Read group owns approximately 38%. Mr. Dietler, one the
Company's directors, also purchased 1,000,000 shares for $100,000 November
28, 1995.
SECTION 16(a) REPORTS
Under the federal securities laws, the Company's directors, executive
officers and any persons holding more than 10% of the Company's Common Stock
are required to report their ownership of the Company and any changes in that
ownership to the Securities and Exchange Commission. Specific due dates for
these reports have been established, and the Company is required to report
in this Proxy Statement any failure to file by these dates during 1995. The
Company believes that all of these filing requirements were satisfied by its
directors, only executive officer, and 10% shareholders, except for Mrs. Jane
Hardie who passed away in January 1996. Her estate filed a Form 4 late with
respect to certain December 1995 transactions.
PROPOSAL 2
ADOPTION AND RATIFICATION OF AMENDMENT NO. 1
TO THE 1993 STOCK OPTION PLAN
In 1993, the Company's Board of Directors and shareholders adopted the
Company's 1993 Stock Option Plan (the "Plan"). On November 28, 1995, the
Company's Board of Directors adopted Amendment No. 1 to the Plan, subject to
approval and ratification by the Company's shareholders. The Board of
Directors has proposed and is unanimously recommending approval of Amendment
No. 1 to the Plan.
Amendment No. 1 eliminates Sections 5.1 and 5.2 and the second sentence
of Section 5.4 which contains the formula described below for determining the
number of shares which could be optioned; and substituted the following:
"5.1 Number. The aggregate number of shares of Common Stock
which may be issued under Options granted pursuant to the Plan shall be
7,500,000, subject to adjustment as hereinafter provided."
The old formula provided that the maximum number of shares of common stock
which could be issued under options granted pursuant to the Plan was 15% of
the total outstanding shares of the Company's Common Stock as of the
effective date of the Plan, as adjusted from time to time to reflect the
issuance by the Company of additional shares of its common stock.
The Company's Board of Directors adopted Amendment No. 1 to fix the
maximum number of shares of the Company's Common Stock which may be issued
on exercise of options. The Board of Directors recommends a vote to
adopt and ratify Amendment No. 1 to the Plan.
OTHER PROVISIONS OF THE PLAN
- - ----------------------------
The other major features of the Plan are summarized below, but such
summary is qualified in its entirety by the full text of the Plan, as
amended, which will be furnished upon request.
PURPOSE OF THE PLAN
- - -------------------
The purpose of the Plan is to aid the Company in attracting and
retaining qualified and competent employees, directors and consultants. The
Board of Directors believes that the Plan will continue to constitute an
important incentive to those employees of the Company who are responsible for
the conduct and management of its business or who are involved in endeavors
significant to its success.
ADMINISTRATION OF THE PLAN
- - --------------------------
The Plan is administered by the Compensation Committee of the Board of
Directors, consisting of not less than two directors who are not also
employees of the Company, the members of which are appointed by and serve at
the pleasure of the Board of Directors (the "Committee").
Subject to the terms of the Plan, the Committee has full and exclusive
power to grant and determine terms and conditions of all options granted
under the Plan, and to prescribe, amend or rescind rules and regulations
concerning the administration of the Plan.
ELIGIBILITY
- - -----------
All full- or part-time salaried employees of the Company and its
subsidiaries who are responsible for the conduct and management of the
Company's business or who are involved in endeavors significant to the
Company's success are eligible to receive incentive or nonqualified stock
options under the Plan. Directors and consultants who are not full- or part-
time employees but who are nonetheless involved in endeavors significant to
the Company's success are eligible to receive only nonqualified stock options
under the Plan.
GRANT AND EXERCISE OF OPTIONS
- - -----------------------------
The Committee may in its discretion determine which of the eligible
participants should receive options, the type of options to be granted, the
number of shares of common stock subject to the options, and the date on
which the options are granted. No employee may be granted incentive stock
options to the extent that the aggregate fair market value of the common
stock with respect to which the options are exercisable for the first time
during a calendar year would exceed $100,000.
The excise price for all incentive stock options granted under the Plan
may not be less than 100% of the fair market
value of the shares subject to the option (or 110% of the fair market value,
if the optionee owns stock representing more
than 10% of the total combined voting power of all classes of stock of the
Company). The exercise price of all nonqualified options granted under the
Plan may not be less than the par value of the shares subject to the option.
For purposes of the Plan, there are a variety of definitions of fair market
value that apply in different situations. If the Company's common stock is
listed on an established stock exchange, fair market value per share is
deemed to be the average of the quoted closing prices on the day for which
the determination is made, or if no sale of common stock shall have been made
on the exchange on that day, on the next preceding day on which there was a
sale. If the Company's common stock is traded in the NASDAQ National Market
System, fair market value is deemed to be the closing price on the day for
which the determination is made, or the next preceding day on which there was
trading. If the Company's common stock is actively traded on the NASDAQ
System, fair market value per share is deemed to be the mean between the
dealer "bid" and "ask" closing prices on the option is granted, or on the
next preceding day on which there was trading. If the Company's common stock
is not listed upon an established stock exchange, is not traded in the
National Market System, and is not actively traded on the NASDAQ System, fair
market value is deemed to be an amount as determined in good faith by the
Committee by applying any reasonable valuation method.
The term of all options granted pursuant to the Plan may not be more
than ten years from the date of grant (or 5 years, if the optionee owns stock
representing more than 10% of the total combined voting power of all classes
of stock of the Company), and may be earlier terminated as a result of
termination of the optionee's employment.
In an optionee's employment is terminated for any reason other than
death or disability, the optionee may exercise his or her options at any time
within the next three months, to the extent that the optionee was entitled
to do so at the time of termination, provided the options do not expire. If
an optionee dies while in the employ of the Company or any subsidiary, or
within a period of three months after the termination of his or her
employment for other reasons, the personal representative of the optionee's
estate may exercise the option at any time within the next year to the extent
the optionee was entitle to do so at the time of his or her death, provided
the options do not expire. If an optionee is terminated because of the
optionee's disability, the optionee may exercise his or her option at any
time within the next year, to the extent the optionee was entitled to do so
at the time of termination, provided the options do not expire.
In its sole discretion, the Committee may extend the termination date
of an option granted under the Plan, provided that no extension can be made
beyond the maximum duration for the option under the plan. Moreover, no
extension of the termination date of an option can be made for incentive
stock options prior to the termination of the optionee's employment, or
without the approval of the optionee. Any extension of the termination date
of an incentive stock option shall be deemed to be the granting of a new
option.
Options are evidenced by agreements in such form as the Committee
determines is consistent with the Plan (the "Option Agreements"). Option
Agreements may include vesting restrictions on exercise based on the passage
of time or the occurrence of other events. Notwithstanding any vesting
requirements relating to the passage of time, all options will be immediately
vested and exercisable in the event of certain changes in control of the
Company or its assets, as described in the Plan. Options granted under the
Plan may not be transferred other than by will or the laws of descent and
distribution, and may be exercised during the optionee's lifetime only by the
optionee.
Options are exercisable for such number of shares and at such intervals
as the Committee may determine. The full price of the shares must be paid
at the time the option is exercised in chase, by check or in shares of the
Company's common stock; provided that payment must be in such form as the
Committee designates. Payment for the shares must be accompanied by payment
in cash or by check of such amount as the Company shall determine to be
sufficient to satisfy any liability it may have for any withholding of
federal, state or local income or other taxes incurred by reason of the
extension.
ANTIDILUTION PROTECTION FOR OPTIONEES
- - -------------------------------------
The Plan is structured so that the options granted pursuant to the Plan
are adjusted for any reverse or forward stock splits, stock dividends and
similar events.
AMENDMENT AND TERMINATION
- - -------------------------
The Company's Board of Directors may at any time terminate, suspend or
amend the Plan or any part thereof, provided that no such action may impair
outstanding options. Without the approval of the shareholders, no amendment
may increase the maximum number of shares for which Options may be granted
under the Plan, reduce the price at which Common Stock may be offered under
the Plan below that set forth in the Plan, or materially modify the
eligibility requirements for participation in the Plan. Subject to the terms
of the Plan, the Board of Directors may modify, extend or renew outstanding
options granted under the Plan, or accept the surrender of outstanding
options to the extent not exercised and authorize the grant of new options
in substitution therefor.
FEDERAL INCOME TAX CONSEQUENCES
- - -------------------------------
The principal tax consequences of the grant and exercise of the
incentive stock options and the nonqualified stock
options under current provision of the Federal income tax laws may be
summarized as follows:
1. Incentive Stock Options. The grant of an Incentive Stock Option
does not produce taxable income to the employee or a tax deduction to the
Company. Upon exercise of an Incentive Stock Option, the excess of the fair
market value of the shares acquired over the amount paid by the employee for
the shares will be an item of tax preference to the employee, which may be
subject to a 20% alternative minimum tax for the taxable year of exercise.
If no disposition of the stock is made within two years from the date of
grant of the Incentive Stock Option nor within one year after the transfer
of the shares of the employee, the employee will not realize income as a
result of the exercise of the Incentive Stock Option. The tax basis of the
shares received by the employee will be the amount paid by the employee for
the shares. Under these circumstances, the Company is not entitled to any
deduction as a result of the exercise.
If the employee disposes of the shares within the two-year or one-year
periods referred to above, the excess of the fair market value of the shares
at the time of exercise (or the proceeds of distribution, if less) over the
amount paid by the employee for the shares will at that time be taxable to
the employee as ordinary income. The same amount will generally be
deductible by the Company.
2. Nonqualified Stock Options. The grant of a Nonqualified Stock
Option under the Plan does not produce taxable income to the optionee or a
tax deduction to the Company. Except as described below, upon exercise of
a Nonqualified Stock Option, the excess of the fair market value of the
shares acquired over the amount paid will be taxable to the optionee as
ordinary income and deductible by the Company.
If the optionee is an officer, director or more than 10%
beneficial owner of any class of the Company's equity securities registered
under the Securities Exchange Act of 1934, no income will be recognized by
such optionee at the time the Nonqualified Stock Option is exercise. Instead,
the optionee will recognize ordinary income six months after the date of
exercise in an amount equal to the fair market value of the stock at that
time less the amount of the exercise of the Nonqualified Stock Option, the
optionee will recognize ordinary income at the time of exercise of the Option
in the same manner as other persons.
EXISTING GRANTS OF OPTION
- - -------------------------
On January 4, 1996 options representing 6,845,000 shares of common
stock were granted pursuant to the Plan, as authorized by the Board of
Directors on December 13, 1995. These options have an exercise price of $.10
per share, which was the fair market value as of the date of grant as
determined in good faith by the Compensation Committee. The following
received grants in the amounts indicated:
Name Type Issued Amount Vested Amount
- - ----------------- ---- ------------- -------------
Victor P. Stabio NQSO 5,200,000 3,120,000
Victor P. Stabio ISO 1,000,000 600,000
Oher employees ISO 645,000 397,000
--------- ---------
Total 6,845,000 4,117,000
========= =========
In connection with the grant of new options on January 4, 1996, the following
options were canceled:
Name Type Base Amount Total Granted
- - -------------- ---- ----------- -------------
David Hardie NQSO 75,343 375,000
Victor P. Stabio ISO 376,715 1,850,000
Other employees ISO 95,685 476,250
------- ---------
Total 547,743 2,726,250
======== ==========
PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE VOTED "FOR"
APPROVAL AND RATIFICATION OF THE 1993 STOCK OPTION PLAN UNLESS A SHAREHOLDER
SPECIFIES OTHERWISE.
PROPOSAL THREE
TO AMEND THE COMPANY'S ARTICLES OF INCORPORATION
TO EFFECT A 100 FOR 1 REVERSE SPLIT OF THE
COMPANY'S COMMON STOCK FOLLOWED BY A 10 FOR 1
FORWARD SPLIT OF THE COMPANY'S COMMON STOCK.
DESCRIPTION OF THE REVERSE SPLIT AND THE FORWARD SPLIT
- - ------------------------------------------------------
The Board of Directors has adopted a resolution to approve an amendment
to the Company's Articles to effect a 100 for 1 reverse split of the
presently issued and outstanding shares of Common Stock (the "Reverse
Split"). Pursuant to the terms of the Reverse Split, each holder of record
of Common Stock on the effective date of the Reverse Split will thereafter
be deemed to hold one share of Common Stock for every one hundred presently
issued and outstanding shares of Common Stock held of record on that date.
On the day after the filing of the Articles of Amendment, each of the then
issued and outstanding shares of the Common Stock will be forward split on
a ten to one basis (the "Forward Split") so that each holder of record of
Common Stock on such date will thereafter be deemed to hold ten shares of
Common Stock for every one share issued and outstanding share of Common Stock
held of record on that date.
The Board of Directors has adopted the following resolution for
submission to the shareholders for approval:
RESOLVED, that, upon the filing of these Articles of Amendment
to the Articles of Incorporation, each one hundred (100) shares
of the Corporation's Common Stock issued and outstanding at the
time Articles of Amendment containing this amendment are filed
with the Secretary of State of Colorado shall be and hereby are
automatically changed and reclassified without further action
into one (1) fully paid and nonassessable share of the
Corporation's Common Stock, provided that no fractional shares
shall be issued pursuant to such change and reclassification.
The Corporation shall pay to each shareholder who would otherwise
be entitled to a factional share as a result of such change and
reclassification the cash value of such fractional share based
upon the average of the closing bid and asked quotations on the
National Association of Securities Dealers Automated Quotations
System, as reported by the NASD OTC Bulletin Board Service, for
the trading period commencing on May 13, 1996 and continuing
until the day preceding the date Articles of Amendment containing
this amendment are filed with the Secretary of State of Colorado.
FURTHER RESOLVED, that, on the day after the filing of these
Articles of Amendment to the Articles of Incorporation, each
share of Common Stock shall automatically be forward split and
each such share shall become ten shares of Common Stock.
As of April 15, 1996, there were approximately 71 million shares
of Common Stock outstanding, held of record by 1,550 holders.
Following the Reverse and Forward Split, the Company estimates
that it will have 7.1 million shares of Common Stock outstanding,
held of record by 503 holders. The Company's Common Stock will
continue to be registered under the Securities Exchange Act of
1934, as amended, and the Company will remain obligated to
comply with the reporting obligations of such Act.
PURPOSE OF THE REVERSE SPLIT AND FORWARD SPLIT
- - ----------------------------------------------
The Board of Directors believes that the proposed Reverse and Forward
Split is advisable and in the best interests of the Company and its
shareholders in an effort to raise the trading price of the Common Stock,
decreasing the Company's number of shareholders and their associated costs
and allowing small shareholders to receive cash for their holdings without
incurring brokerage fees. In discussions between the Company's management
with members of the brokerage and investment banking industries, the Company
has been advised that brokerage firms might be more willing to evaluate the
Company's securities as a possible investment opportunity for their clients
and may be more willing to act as a market maker in the Company's securities
if the price range for the Common Stock were higher. Management believes
that additional interest by the investment community in the Common Stock, of
which there can be no assurance, is desirable and could result in a better
trading market for the Common Stock.
The Company also believes that existing low trading prices of the
Common Stock may have an adverse impact upon the current efficient level of
the trading market for the Common Stock. In particular, brokerage firms
often charge higher commissions for transactions involving low-priced stocks
than they would for the same dollar amount of securities with a higher per
share price. Some brokerage firms will not recommend purchases of low-priced
stocks to their clients or make a market in such stocks, which tendencies may
adversely affect the liquidity for current shareholders and Company's ability
to obtain additional equity financing.
There can be no assurance that the Reverse and Forward Split will not
adversely impact the market price of the Common Stock, that the marketability
of the Common Stock will improve or that the Reverse and Forward Split will
otherwise have any of the effects described herein.
EFFECT OF THE REVERSE AND FORWARD SPLIT
- - ---------------------------------------
Theoretically, due to the decrease in the number of outstanding shares
of Company's Common Stock and no change in the underlying book value of such
shares, the market price of the Company's Common Stock should increase
following the Reverse and Forward Split, but the effect of the Reverse and
Forward Split upon the market price for the Company's Common Stock cannot be
accurately predicted.
The Reverse and Forward Split will decrease of the number of issued and
outstanding shares of the Common Stock from approximately 71 million to
approximately 7.1 million shares. The Common Stock will be fully paid and
nonassessable. The voting rights and other rights that accompany the Common
Stock prior to the Reverse Split will not be altered by the Reverse and
Forward Split.
The Company's currently outstanding options will be adjusted so that
the shares of Common Stock so optioned will be decreased 90% and the price
increased by a factor of ten.
CERTIFICATES AND FRACTIONAL SHARES
- - ----------------------------------
The certificates currently representing issued and outstanding shares
of Common Stock will be deemed to represent one-tenth the number of shares
of Common Stock after the effective date of the Reverse and Forward Split.
New shares of Common Stock will be issued in due course as old shares are
tendered to the transfer agent for exchange or transfer. No factional shares
of Common Stock will be issued and, in lieu thereof, shareholders holding a
number of shares of Common Stock not evenly divisible by one hundred upon
surrender of their old certificates will receive cash in lieu of fractional
shares of Common Stock. The price payable by the Company will be determined
by multiplying the fraction of a new share by the equivalent of the average
closing prices per old share of Common Stock for the trading period
commencing on May 13, 1996 and continuing until the day preceding the filing
of the Articles of Incorporation, as reported by the NASD OTC Bulletin Board
Service.
Shareholders are not required to exchange their certificate(s) of
pre-split Common Stock for post-split Common Stock. Shareholders may,
however, exchange their certificates for shares of post-split Common Stock
by surrendering their old certificates representing shares of pre-split
Common Stock to the Company's transfer agent. Upon surrender to the transfer
agent of the share certificate(s) representing shares of pre-split Common
Stock and the applicable transfer fee, which presently is $15.00 per
certificate, the holder will receive a share certificate representing the
appropriate number of shares of post-split Common Stock.
SOURCE OF FUNDS
- - ---------------
The funds required to purchase the fractional shares are available and
will be paid from the current cash reserves of the Company. The Company's
shareholder list indicates that a portion of the outstanding Common Stock is
registered in the names of clearing agencies and broker nominees. It is,
therefore, not possible to predict with certainty the number of fractional
shares and the total amount the Company will be required to pay to redeem
such fractional shares. However, it is not anticipated that the funds
necessary to effect the cancellation of fractional shares will be material.
EFFECTIVE DATE OF THE REVERSE AND FORWARD SPLIT
The Reverse Split will become effective on the date the Articles of
Amendment are filed, which is expected to be filed as soon as practicable
after the shareholders' meeting. The Forward Split will become effective on
the next day after such filing.
TRANSFER AGENT
- - --------------
The transfer agent for the Common Stock is American Securities
Transfer, Inc. Their address is 938 Quail Street, Suite 101, Lakewood,
Colorado 80215, phone number 303.234.5300.
FEDERAL INCOME TAX CONSEQUENCES OF THE REVERSE AND FORWARD SPLIT
- - ----------------------------------------------------------------
Any tax liability to shareholders resulting from the split will likely
not be substantial. The shares of Common Stock received in the split should
not result in any taxable gain or loss to shareholders for federal income tax
purposes. The tax basis of the Common Stock received by shareholders as a
result of the split will be equal, in the aggregate, to the basis of the
shares exchanged for the Common Stock. For tax purposes, the holding period
of the shares immediately prior to the effective date of the split will be
included in the holding period of the Common Stock received as a result of
the split. Shareholders who receive cash in lieu of fractional shares of
Common Stock will be treated as receiving cash as payment for their
fractional shares of Common Stock, and they will recognize capital gain or
loss in an amount equal to the differences between the amount of cash
received and the adjusted basis of the fractional shares surrendered for
cash.
The foregoing discussion regarding the tax consequences of the split
is provided for informational purposes only and is not based upon the opinion
of legal counsel or other tax experts. The Company recommends that
shareholders discuss the tax consequences of the split with their own tax
advisors.
INDEPENDENT PUBLIC ACCOUNTANTS
The Board, upon recommendation of the Audit Committee of the Board, has
selected Arthur Andersen & Co. LLP to audit the 1996 financial statements.
This firm has audited the Company's financial statements for the last six
years and will be present at the annual meeting.
SOLICITATION OF PROXIES
The Company will pay all costs of solicitation of Proxies. In addition
to solicitations by mail, solicitations may be made personally or by
telephone or other means of communication by directors, officers and
employees of the Company, who will not receive additional compensation for
doing so. Brokers, nominees, fiduciaries and other custodians will be
reimbursed their reasonable out-of-pocket expenses for forwarding Proxy
materials to beneficial owners.
SHAREHOLDER PROPOSALS
Proposals by shareholders intended to be presented at the next
Shareholders's Meeting must be received by the Company on or before December
31, 1996, to be considered for inclusion in the Company's proxy statement and
proxy card for that meeting.
OTHER MATTERS
The Company's Board of Directors does not know of any other matters
that will be presented at the Shareholders Meeting. However, if any other
business is properly presented at the Shareholders Meeting for action, the
persons named in the enclosed Proxy will vote thereon in accordance with
their best judgment.
BY ORDER OF THE BOARD OF DIRECTORS
Denver, Colorado Teressa Jones, Secretary
April 29, 1996
PROXY HALLADOR PETROLEUM COMPANY PROXY
This Proxy is solicited on behalf of the Board of Directors.
The undersigned hereby appoints David Hardie and Victor P. Stabio, or either
of them, as the attorneys and Proxies of the undersigned, with full power of
substitution, to vote all the shares of Hallador Petroleum Company which the
undersigned may be entitled to vote at the Shareholders' Meeting of the
Company to be held Wednesday, May 29, 1996, at 9:00 a.m., Denver time, at the
1660 Lincoln Street, Suite 2700, Denver, Colorado 80264, and at any
adjournment thereof, and the undersigned hereby instructs said attorneys and
Proxies to vote upon the following proposal as indicated below:
WHEN PROPERLY EXECUTED THIS PROXY WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED "FOR" THE FOLLOWING PROPOSALS. THIS PROXY MUST BE SIGNED AND DATED.
(1) - ELECTION OF DIRECTORS [] FOR all nominees listed below (except
as marked to the contrary below). [] WITHHOLD AUTHORITY to vote for all
nominees listed below
Nominees: David Hardie, Steven Hardie, Bryan H. Lawrence, Cortlandt S.
Dietler and Victor P. Stabio. (INSTRUCTION: To withhold authority to vote
for any individual nominee, write that nominee's name in the space provided
below.)
(2) - To adopt and ratify Amendment No. 1 to the 1993 Stock Option Plan
[] FOR [] AGAINST [] ABSTAIN
(3) - To amend the Company's articles of incorporation to effect a 100
for 1 reverse split of the Company's common
stock followed by a 10 for 1 forward split of the Company's common stock.
[] FOR [] AGAINST [] ABSTAIN
(4) - In their discretion, the Proxies are authorized to vote on such
other business as may properly come before
the meeting or any adjournment thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR THE ELECTION OF THE NOMINEES AS DIRECTORS AND FOR THE PROPOSALS.
DATE:__________________________________
_______________________________________
SIGNATURE
_______________________________________
SIGNATURE
This Proxy should be dated and signed exactly as your name appears hereon.
All joint owners must sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title. If a
corporation, please sign in full corporate name by President or other
authorized officer. If a partnership, please sign in partnership name by
authorized person. THE PERSON SIGNING ABOVE ACKNOWLEDGES RECEIPT OF THE
PROXY STATEMENT DATED APRIL 29, 1996.