SUBSCRIPTION AGREEMENT
This Subscription Agreement (this "Agreement") is made as of December
20, 2005 by and between HALLADOR PETROLEUM COMPANY, a Colorado corporation
(the "Corporation") and YORKTOWN ENERGY PARTNERS VI, L.P. ("Subscriber").
1. Subscription.
(a) Subscriber hereby subscribes for 1,893,169 shares (the
"Shares") of the Corporation's common stock, par value $0.01 per share
(the "Common Stock"), at a subscription price of $2.20 per share (the
"Per Share Subscription Price"), for a total subscription price of
$4,164,971.80 (the "Total Subscription Price").
(b) The closing of the sale and purchase of the Shares will
take place in the offices of Morgan, Lewis & Bockius LLP, 300 S. Grand
Avenue, Suite 2200, Los Angeles, California 90071 at 10:00 a.m. local
time on such date within five (5) business days of the date hereof as
agreed to by the Corporation and Subscriber, or such later date and time
as the Corporation and Subscriber agree (the "Closing"). At the Closing,
(i) the Corporation will deliver to Subscriber a copy of this Agreement
countersigned by the Corporation, and (ii) Subscriber will pay the Total
Subscription Price to the Corporation by wire transfer of immediately
available funds to an account designated by the Corporation to Subscriber
in writing. Subject to the Closing, the Corporation shall cause its
transfer agent to issue a certificate representing the Shares in the
name of Subscriber and to deliver such certificate to Subscriber at the
address set forth on the signature page hereto, within five (5) business
days after the date on which the Closing occurs.
2. Acknowledgments. Subscriber hereby acknowledges that Subscriber,
either alone or together with Subscriber's advisors (if any), has read,
understands and agrees with and to the following:
(a) AN INVESTMENT IN THE SHARES INVOLVES A HIGH DEGREE OF RISK;
THE CORPORATION MAY NEED ADDITIONAL CAPITAL IN THE FUTURE TO REACH ITS
GROWTH OBJECTIVES OR MEET ITS EXPENSES AND THE SHARES MAY LOSE ANY VALUE OR
MAY NOT GAIN ANY VALUE; THE SHARES ARE NOT REGISTERED AND MAY NOT BE SOLD
EXCEPT IN COMPLIANCE WITH STATE AND FEDERAL SECURITIES LAWS AND REGULATIONS.
(b) Subscriber acknowledges and agrees that the Corporation may
at any time sell shares of its capital stock at a price greater or less than
the Per Share Subscription Price pursuant to this Agreement. Subscriber
acknowledges and agrees that the Shares may ultimately prove to be worth
significantly more or significantly less than Subscriber perceives them to be
worth now, and that no representation or warranty is made by the Corporation
as to the "fair value" of the Shares or the interest in the Corporation that
they represent, either now or in the future.
(c) The Shares have not been registered under the Securities Act
of 1933, as amended (the "Securities Act"), or any state securities laws by
reason of specific exemptions under the provisions thereof which depend in
part upon the representations made by Subscriber in this Agreement. The
Corporation is relying upon Subscriber's representations contained in this
Agreement for the purpose of determining whether this transaction meets the
requirements for such exemptions.
(d) The Shares are "restricted securities" under applicable
federal securities laws and the Securities Act and the rules of the
Securities and Exchange Commission provide, in substance, that Subscriber
may only dispose of the Shares pursuant to an effective registration
statement under the Securities Act or an exemption from such
registration if available. The Corporation has no obligation or intention
to register any of the Shares under, or to take action so as to permit
sales pursuant to, the Securities Act. Accordingly, Subscriber may
dispose of the Shares only in certain transactions that are exempt from
registration under the Securities Act, including "private placements,"
in which event the transferee will acquire "restricted securities"
subject to the same limitations as in the hands of Subscriber.
Additionally, applicable state securities laws may allow sales of the
Shares only if the Shares are registered or the transaction is subject
to an applicable exemption. As a consequence, Subscriber must bear
the economic risks of an investment in the Shares for an indefinite
period of time.
(e) The certificate(s) evidencing the Shares will bear the
following legend, which shall be in addition to any other legends
required by law or contract:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 OR ANY STATE SECURITIES LAWS AND MAY NOT BE
SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM UNDER THE
SECURITIES ACT OF 1933 AND APPLICABLE STATE
SECURITIES LAWS.
(f) Neither the Corporation nor any person acting on its
behalf has offered or sold the Shares to Subscriber by any form of general
solicitation, general or public media advertising or mass mailing.
3. Representations and Warranties. Subscriber hereby represents
and warrants to the Corporation as follows:
(a) Subscriber has all necessary power and authority under all
applicable provisions of law to execute and deliver this Agreement and
to carry out its provisions. All action on Subscriber's part required for
the lawful execution and delivery of this Agreement has been taken. Upon
the execution and delivery of this Agreement, this Agreement will be a
valid and binding obligation of Subscriber, enforceable in accordance
with its terms, except as limited by (a) applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general
application affecting enforcement of creditors' rights, and (b) general
principles of equity that restrict the availability of equitable
remedies.
(b) Subscriber has such knowledge, skill and experience in
investment financial and business matters that Subscriber is capable of
evaluating the merits and risks of the purchase of the Shares and of
protecting Subscriber's interests in connection therewith. Subscriber
is able to fend for itself in connection with the transactions
contemplated by this Agreement and has the ability to bear the economic
risk of the investment, including complete loss of the investment.
Subscriber understands that no federal or state agency has passed upon
the Shares or made any finding or determination concerning the fairness
or advisability of this investment. To the extent that Subscriber has
deemed it appropriate to do so, Subscriber has retained, and relied upon,
appropriate professional advice regarding the tax, legal and financial
merits and consequences of an investment in the Shares.
(c) Subscriber, either alone or together with Subscriber's
advisors (if any), has made such independent investigation of the
Corporation, its management and related matters as Subscriber deems to
be, or such advisors (if any) have advised to be, necessary or advisable
in connection with an investment in the Shares. Subscriber and
Subscriber's advisors (if any) have received all information and data
that Subscriber and such advisors (if any) believe to be necessary in
order to reach an informed decision as to the advisability of an investment
in the Shares.
(d) Subscriber, either alone or together with Subscriber's advisors
(if any), has reviewed Subscriber's financial condition and commitments and,
based on such review, Subscriber is satisfied that (i) Subscriber has adequate
means of providing for Subscriber's financial needs and possible contingencies
and has assets or sources of income which, taken together, are more than
sufficient so that Subscriber could bear the risk of loss of Subscriber's
entire investment in the Shares, (ii) Subscriber has no present or
contemplated future need to dispose of all or any portion of the Shares to
satisfy any existing or contemplated undertaking, need or indebtedness, and
(iii) Subscriber is capable of bearing the economic risk of an investment in
the Shares for the indefinite future.
(e) Subscriber is acquiring the Shares for Subscriber's own
account, for in vestment only and not with a view to or in connection with
any resale or distribution of the Shares, and Subscriber has no present
intention of making any sale, assignment, pledge, gift, transfer or other
disposition of the Shares or any interest therein. Subscriber understands
that the Shares have not been registered under the Securities Act or any
state securities laws by reason of specific exemptions which depend upon,
among other things, the bona fide nature of the investment intent and the
accuracy of Subscriber's representations as expressed herein.
(f) Subscriber understands that any public market for any of
the securities issued by the Corporation is limited and that there is no
assurance that an active public market will ever exist for such securities.
(g) Subscriber is an "Accredited Investor" within the meaning
of Rule 501 promulgated under the Securities Act.
(h) Subscriber is a limited partnership and the office or offices
of Subscriber in which its investment decision was made is located at the
address or addresses of Subscriber set forth on the signature page hereof.
4. Covenant. Subscriber hereby agrees to furnish any additional
information requested by the Corporation to assure compliance of this
transaction with applicable federal and state securities laws, and to make
any filings with the Securities and Exchange Commission as may be required
of Subscriber pursuant to the Securities Exchange Act of 1934, as amended,
and the rules promulgated thereunder.
5. General Provisions.
(a) Governing Law; Jurisdiction. This Agreement shall be
governed, construed and interpreted in accordance with the laws of the State
of Colorado, without giving effect to principles of conflicts of law and
choice of law that would cause the laws of any other jurisdiction to apply.
(b) Successors and Assigns. This Agreement may not be assigned,
conveyed or transferred without the prior written consent of the Corporation.
Subject to the foregoing, the rights and obligations of the Corporation and
Subscriber under this Agreement shall be binding upon and benefit their
respective permitted successors, assigns, heirs, administrators and transferees.
The terms and provisions of this Agreement are for the sole benefit of the
parties hereto and their respective permitted successors and assigns, and are
not intended to confer any third-party benefit on any other person.
(c) Entire Agreement. This Agreement constitutes the full and
entire understanding and agreement between the parties with regard to the
subjects hereof and no party shall be liable or bound to any other in any
manner by any representations, warranties, covenants and agreements except as
specifically set forth herein.
(d) Severability. In case any provision of the Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
(e) Amendment or Waiver. This Agreement may not be amended, and no
term or provision of this Agreement may be waived, except upon the written
consent of the Corporation and Subscriber.
(f) Expenses. Each party shall pay all costs and expenses that it
ncurs with respect to the negotiation, execution, delivery and performance of
the Agreement.
(g) Titles and Subtitles. The titles of the sections and
subsections of the Agreement are for convenience of reference only and shall
not be considered in construing this Agreement.
(h) Counterparts. This Agreement may be executed in any number of
counterparts and by facsimile, each of which shall be an original, but all of
which together shall constitute one instrument. If executed by facsimile, the
parties shall subsequently exchange original signed copies by mail or
courier service.
[SIGNATURES ON FOLLOWING PAGE]
IN WITNESS WHEREOF, the undersigned has caused this Subscription Agreement to
be executed as of the date first written above.
SUBSCRIBER:
YORKTOWN ENERGY PARTNERS VI, L.P.
YORKTOWN ENERGY PARTNERS VI, LP
By: Yorktown VI Company LP,
its general partner
By: Yorktown VI Associates LLC,
its general partner
By:
Name:
Title:
Address: 410 Park Avenue
19th Floor
New York, NY 10022
E-Mail Address:
FEIN:
CORPORATION:
HALLADOR PETROLEUM COMPANY
By: /S/VICTOR P. STABIO
PRESIDENT AND CEO
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