Unassociated Document


    SUBSCRIPTION
      AGREEMENT

     

    This
      Subscription Agreement (this “Agreement”)
      is made
      as of February 14, 2006 by and between HALLADOR PETROLEUM COMPANY, a Colorado
      corporation (the “Corporation”)
      and TECOVAS PARTNERS V, L.P., a Texas limited partnership 
(“Subscriber”).

     

    1.  Subscription.
      

     

    (a)  Subscriber
      hereby subscribes for 90,909 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 $199,999.80 (the “Total
      Subscription Price”).
      

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    5.  General
      Provisions.

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    [SIGNATURES
      ON FOLLOWING PAGE]

    


     


    
      
        
          1-LA/866241.2 

        

        
        

      

      
        
        

        
          

        

      

      
        
        

        
        

      

    



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

     

    SUBSCRIBER:
      

    

      TECOVAS
        PARTNERS V, L.P., a Texas limited partnership 

       

      
        	 	
                By:
                  

              	
                Marsh
                  Operating Company, its general partner


              


      

       

      By:

      Name:

      Title:
        

       

      Address:
        

       

      Tecovas
        Partners V, L.P. c/o Marsh Operating Company 300 Crescent Court, Suite 900
        Dallas, Texas 75201 Attention: Jim Crain 

       

      E-Mail
        Address: jim@tmarsh.com 

       

      
        	 	
                FEIN:
                  

              	
                20-3803836
                  

              


      

       

      

        HALLADOR
          PETROLEUM COMPANY

         

        
          	 	
                   

                	
                


        

         

        By:/S/VICTOR
          P. STABIO

        Name:
          VICTOR P. STABIO

        Title: 
          PRESIDENT