SUBSCRIPTION AGREEMENT
This Subscription Agreement (this "Agreement") is made as of
February 22, 2006 by and between HALLADOR PETROLEUM COMPANY, a Colorado
corporation (the "Corporation") and Yorktown Energy Partners VI, LP
("Subscriber").
1. Subscription.
(a) Subscriber hereby subscribes for 2,727,272 shares (the
"Shares") of the Corporation's common stock, par value $0.01 per share
(the "Common Stock"), at a subscription price of $2.20 per share (the
"Per Share Subscription Price"), for a total subscription price of
$5,999,998 (the "Total Subscription Price").
(b) The closing of the sale and purchase of the Shares
(the "Closing") will take place in the offices of Morgan, Lewis & Bockius
LLP, 300 S. Grand Avenue, Suite 2200, Los Angeles, California 90071 at
10:00 a.m. local time on February 24, 2006, or such later date and time
as the Corporation and Subscriber agree (the "Closing Date"). 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 investment only and not with a view to or in connection with any
resale or distribution of the Shares, and Subscriber has no present intention
of making any sale, assignment, pledge, gift, transfer or other disposition of
the Shares or any interest therein. Subscriber understands that the Shares
have not been registered under the Securities Act or any state securities laws
by reason of specific exemptions which depend upon, among other things, the
bona fide nature of the investment intent and the accuracy of Subscriber's
representations as expressed herein.
(f) Subscriber understands that any public market for any of the
securities issued by the Corporation is limited and that there is no assurance
that an active public market will ever exist for such securities.
(g) Subscriber is an "Accredited Investor" within the meaning of
Rule 501 promulgated under the Securities Act, and has completed or will
complete and deliver an Accredited Investor Questionnaire to the Corporation on
or before the Closing Date.
(h) Subscriber is a limited partnership and the office or offices
of Subscriber in which its investment decision was made is located at the
address or addresses of Subscriber set forth on the signature page hereof.
4. Covenant. Subscriber hereby agrees to furnish any additional
information requested by the Corporation to assure compliance of this
transaction with applicable federal and state securities laws, and to make any
filings with the Securities and Exchange Commission as may be required of
Subscriber pursuant to the Securities Exchange Act of 1934, as amended, and the
rules promulgated thereunder.
5. General Provisions.
(a) Governing Law; Jurisdiction. This Agreement shall be
governed, construed and interpreted in accordance with the laws of the State
of Colorado, without giving effect to principles of conflicts of law and choice
of law that would cause the laws of any other jurisdiction to apply.
(b) Successors and Assigns. This Agreement may not be assigned,
conveyed or transferred without the prior written consent of the Corporation.
Subject to the foregoing, the rights and obligations of the Corporation and
Subscriber under this Agreement shall be binding upon and benefit their
respective permitted successors, assigns, heirs, administrators and
transferees. The terms and provisions of this Agreement are for the sole
benefit of the parties hereto and their respective permitted successors and
assigns, and are not intended to confer any third-party benefit on any other
person.
(c) Entire Agreement. This Agreement constitutes the full and
entire understanding and agreement between the parties with regard to the
subjects hereof and no party shall be liable or bound to any other in any
manner by any representations, warranties, covenants and agreements except as
specifically set forth herein.
(d) Severability. In case any provision of the Agreement shall
be invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
(e) Amendment or Waiver. This Agreement may not be amended, and
no term or provision of this Agreement may be waived, except upon the written
consent of the Corporation and Subscriber.
(f) Expenses. Each party shall pay all costs and expenses that
it incurs with respect to the negotiation, execution, delivery and
performance of the Agreement.
(g) Titles and Subtitles. The titles of the sections and
subsections of the Agreement are for convenience of reference only and shall
not be considered in construing this Agreement.
(h) Counterparts. This Agreement may be executed in any number
of counterparts and by facsimile, each of which shall be an original, but all
of which together shall constitute one instrument. If executed by facsimile,
the parties shall subsequently exchange original signed copies by mail or
courier service.
[SIGNATURES ON FOLLOWING PAGE]
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 LP
By:Bryan H. Lawrence
Name:
Title:
Address:
E-Mail Address:
FEIN:
CORPORATION:
HALLADOR PETROLEUM COMPANY
By:/S/VICTOR P. STABIO
Name: Victor P. Stabio
Title: Chief Executive Officer
and President