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<SEC-DOCUMENT>0000788965-06-000018.txt : 20060425
<SEC-HEADER>0000788965-06-000018.hdr.sgml : 20060425
<ACCEPTANCE-DATETIME>20060425171131
ACCESSION NUMBER:		0000788965-06-000018
CONFORMED SUBMISSION TYPE:	8-K
PUBLIC DOCUMENT COUNT:		4
CONFORMED PERIOD OF REPORT:	20060419
ITEM INFORMATION:		Entry into a Material Definitive Agreement
ITEM INFORMATION:		Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant
FILED AS OF DATE:		20060425
DATE AS OF CHANGE:		20060425

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			HALLADOR PETROLEUM CO
		CENTRAL INDEX KEY:			0000788965
		STANDARD INDUSTRIAL CLASSIFICATION:	CRUDE PETROLEUM & NATURAL GAS [1311]
		IRS NUMBER:				841014610
		STATE OF INCORPORATION:			CO
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		8-K
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-14731
		FILM NUMBER:		06778801

	BUSINESS ADDRESS:	
		STREET 1:		1660 LINCOLN ST STE 2700
		CITY:			DENVER
		STATE:			CO
		ZIP:			80264
		BUSINESS PHONE:		3038395505

	MAIL ADDRESS:	
		STREET 1:		1660 LINCOLN STREET
		STREET 2:		SUITE 2700
		CITY:			DENVER
		STATE:			CO
		ZIP:			80264

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	KIMBARK OIL & GAS CO /CO/
		DATE OF NAME CHANGE:	19900102

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	KIMBARK INC
		DATE OF NAME CHANGE:	19860624
</SEC-HEADER>
<DOCUMENT>
<TYPE>8-K
<SEQUENCE>1
<FILENAME>form8k41906.htm
<DESCRIPTION>FORM 8-K 4-19-06
<TEXT>
<html>
  <head>
    <title>
      form 8-k 4-19-06
</title>
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        <hr style="MARGIN-TOP: -10px; COLOR: #000000" noshade size="1">
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman"><strong>UNITED
        STATES</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman"><strong>SECURITIES
        AND EXCHANGE COMMISSION</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Washington,
        D.C. 20549</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>________________</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman"><strong>FORM
        8-K</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">CURRENT
        REPORT</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Pursuant
        to Section 13 or 15(d) of the</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Securities
        Exchange Act of 1934</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Date
        of
        report (Date of earliest event reported): April 25, 2006 (April 19,
        2006)</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>HALLADOR
        PETROLEUM COMPANY</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(Exact
        Name of Registrant as specified in Charter)</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">0-14731</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(Commission
        File Number)</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><br></div>
      <div>
        <table cellpadding="0" cellspacing="0" width="100%">

            <tr>
              <td valign="top" width="42%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Colorado</u></font></div>
              </td>
              <td valign="top" width="31%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>84-1014610</u></font></div>
              </td>
            </tr>
            <tr>
              <td valign="top" width="42%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(State
                  or Other Jurisdiction</font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">of
                  Incorporation)</font></div>
              </td>
              <td valign="top" width="31%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(IRS
                  Employer</font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Identification
                  No.)</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><br></div>
      <div>
        <table cellpadding="0" cellspacing="0" width="100%">

            <tr>
              <td valign="top" width="42%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>1660
                  Lincoln Street, Suite 2700, Denver, Colorado</u></font></div>
              </td>
              <td valign="top" width="31%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>80264-2701</u></font></div>
              </td>
            </tr>
            <tr>
              <td valign="top" width="42%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(Address
                  of Principal Executive Offices)</font></div>
              </td>
              <td valign="top" width="31%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(Zip
                  Code)</font></div>
              </td>
            </tr>

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      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Registrant&#8217;s
        telephone number, including area code:&#160;&#160;
303-839-5504&#160;&#160;&#160;&#160; fax:&#160; 303-832-3013</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>________________</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Check
        the
        appropriate box below if the Form 8-K filing is intended to simultaneously
        satisfy the filing obligation of the registrant under any of the following
        provisions (see General Instruction A.2): </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Wingdings">&#168;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Written
        communications pursuant to Rule 425 under the Securities Act (17 CFR
        230.425)</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Wingdings">&#168;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Soliciting
        material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
        240.14a-12)</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Wingdings">&#168;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Pre-commencement
        communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
        240.14d-2(b))</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Wingdings">&#168;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Pre-commencement
        communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
        240.13e-4(c))</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">____________________________________________________________________________________________</font></div><br>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="left">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
          </div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="2">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="right">
          </div>
        </div>
      </div><br>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Item
        1.01 Entry into a Material Definitive Agreement</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">On
        April
        19, 2006, Sunrise Coal, LLC, an Indiana limited liability company (&#8220;Sunrise&#8221;)
        entered into that certain Loan and Security Agreement (the &#8220;Credit Agreement&#8221;)
        with Old National Bank (&#8220;Lender&#8221;), whereby Lender agreed to loan up to
        $30,000,000 to Sunrise. Concurrently, the registrant entered into a Continuing
        Guaranty (the &#8220;Guaranty&#8221;) in favor of the Lender </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">for
        the
        purpose of guaranteeing up to $15,000,000, or such greater amount as Hallador
        approves, </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">of
        the
        obligations incurred by Sunrise pursuant to the Credit Agreement. The
        obligations of registrant under the Guaranty are secured by that certain
        Collateral Assignment of Hallador Master Purchase/Sale Agreement, whereby
        registrant, Hallador Petroleum LLLP, a Colorado limited liability limited
        partnership, and Hallador Production Company, a Colorado Corporation, agreed
        to
        collaterally assign all of their rights to receive payment for gas delivered
        under that certain Master Purchase/Sale Agreement with Coral Energy Resources,
        L.P., dated November 12, 2001, to the Bank pursuant to the terms and conditions
        thereof. Sunrise and the registrant have also entered into that certain
        Reimbursement Agreement, whereby Sunrise is required to reimburse the registrant
        for any amounts paid to Lender pursuant to the Guaranty. As previously
        disclosed, Sunrise and registrant are currently negotiating a plan of merger
        whereby Sunrise and registrant would become wholly owned subsidiaries of
        a
        to-be-formed common parent corporation. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
        Guaranty, the Collateral Assignment of Hallador Master Purchase/Sale Agreement
        and the Reimbursement Agreement are filed as Exhibits 10.1, 10.2 and 10.3,
        respectively, to this Current Report and are incorporated herein by
        reference.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Item
        2.03 Creation of a Direct Financial Obligation or an Obligation Under an
        Off-
        Balance Sheet Arrangement of a Registrant.</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">See
        Item
        1.01 above.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div><br>
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        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="left">
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          <div style="WIDTH: 100%; TEXT-ALIGN: center">
          </div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
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          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="right">
          </div>
        </div>
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      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>SIGNATURES</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 18pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Pursuant
        to the requirements of the Securities Exchange Act of 1934, the registrant
        has
        duly caused this report to be signed on its behalf by the undersigned hereunto
        duly authorized. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div>
        <table cellpadding="0" cellspacing="0" width="100%">

            <tr>
              <td align="left" valign="top" width="36%">&#160;</td>
              <td align="left" valign="top" width="37%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>HALLADOR
                  PETROLEUM COMPANY</strong></font></div>
              </td>
            </tr>
            <tr>
              <td align="left" valign="top" width="36%">&#160;</td>
              <td align="left" valign="top" width="37%">&#160;</td>
            </tr>
            <tr>
              <td align="left" valign="top" width="36%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Date:
                  April 25, 2006</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;</font></div>
              </td>
              <td align="left" valign="top" width="37%" style="border-bottom: black thin solid;">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">By:</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">/s/
                  Victor P. Stabio</font></div>
              </td>
            </tr>
            <tr>
              <td align="left" valign="top" width="36%">&#160;</td>
              <td align="left" valign="top" width="37%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Victor
                  P. Stabio</font></div>
              </td>
            </tr>
            <tr>
              <td align="left" valign="top" width="36%">&#160;</td>
              <td align="left" valign="top" width="37%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Chief
                  Executive Officer and President</font></div>
              </td>
            </tr>

        </table>
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          <div style="WIDTH: 100%; TEXT-ALIGN: center">
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          </div>
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        <div id="HDR">
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          </div>
        </div>
      </div><br>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Exhibit
        No.</strong></font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Description
        of Exhibit</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>________</strong></font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>________________</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div>
        <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

            <tr valign="top" style="line-height: 1.25;">
              <td style="width: 72pt;">
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">10.1</font></div>
              </td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Continuing
                  Guaranty, dated April 19, 2006, by Hallador Petroleum Company in
                  favor of
                  Old National Bank </font></div>
              </td>
            </tr>

        </table>
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      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div>
        <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

            <tr valign="top" style="line-height: 1.25;">
              <td style="width: 72pt;">
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">10.2</font></div>
              </td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Collateral
                  Assignment of Hallador Master Purchase/Sale Agreement, dated April
                  19,
                  2006, among Hallador Petroleum Company, Hallador Petroleum LLLP,
                  and
                  Hallador Production Company and Old National
                  Bank</font></div>
              </td>
            </tr>

        </table>
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      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
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        <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

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              <td style="width: 72pt;">
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">10.3</font></div>
              </td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Reimbursement
                  Agreement, dated April 19, 2006, between Hallador Petroleum Company
                  and
                  Sunrise Coal, LLC</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
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<DOCUMENT>
<TYPE>EX-10.1
<SEQUENCE>2
<FILENAME>guaranty.htm
<DESCRIPTION>CONTINUING GUARANTY
<TEXT>
<html>
  <head>
    <title>
      Continuing Guaranty
</title>
<!-- Licensed to: Hallador Petroleum Company-->
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    <div>
      <div>
        <hr style="COLOR: black" align="left" noshade size="1" width="100%">
      </div><br>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>CONTINUING
        GUARANTY</u></strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">FOR
        VALUE
        RECEIVED and in consideration of credit given or to be given, and of other
        financial accommodations afforded or to be afforded to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>SUNRISE
        COAL, LLC</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
        an
        Indiana limited liability company</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>&#160;</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(hereinafter
        referred to as "Borrower"), pursuant to that certain Credit Agreement dated
        April 19, 2006, (the "Credit Agreement"), and other credit and collateral
        documents (hereinafter collectively referred to as "Loan Documents") executed
        or
        to be executed by and between the Borrower and </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>OLD
        NATIONAL BANK</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
        (hereinafter referred to as "Bank"), the receipt and sufficiency of which
        consideration is hereby acknowledged, and as an inducement to the Bank to
        extend
        such financial accommodations to the Borrower, the undersigned, </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>HALLADOR
        PETROLEUM COMPANY</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
        a
        Colorado corporation (hereinafter referred to as "Guarantor"), hereby guaranties
        the full and complete payment, when due, whether at maturity, by acceleration
        or
        otherwise, of any and all indebtedness of the Borrower to the Bank pursuant
        to
        the Credit Agreement, that certain Line of Credit Note, dated of even date
        herewith, payable to the order of the Bank in the original aggregate principal
        amount of Thirty Million and No/100 Dollars ($30,000,000.00) and that certain
        Term Loan Note to be executed and delivered by the Borrower in favor of the
        Bank
        at a future date as specified in the Credit Agreement (collectively the "Note")
        and all extensions, renewals, re-amortizations, restatements, modifications
        and
        amendments thereof, together with all costs, expenses and attorneys' fees
        (the
        above-described obligations and liabilities are hereinafter referred to as
        "Liabilities"), all without relief from valuation and appraisement laws;
        provided that the Guarantor shall not be responsible or liable for any advances
        or loans made by the Bank that exceed $15,000,000 unless Guarantor shall
        have
        approved in writing, such advances or loans (the &#8220;Guaranty
        Limitation&#8221;).</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">If
        a
        Default (as such term is defined in the Credit Agreement) exists under the
        Credit Agreement, then immediately upon written demand by the Bank, the
        Guarantor shall pay the Liabilities as if such Liabilities constituted the
        direct and primary debts and obligations of the Guarantor, subject to the
        Guaranty Limitation. Except as provided herein, the Bank shall not be required
        to make any demand upon or pursue or exhaust any of its rights or remedies
        against the Borrower or others, including, without limitation, other guarantors,
        with respect to the payment or performance of any of the Liabilities or to
        pursue or exhaust any of its rights or remedies with respect to any collateral
        held by the Bank.</font></div>
      <div>&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">This
        Guaranty shall remain fully enforceable irrespective of any defenses which
        the
        Borrower may assert on the underlying Liabilities (other than the defense
        of
        payment of the Liabilities), including, without limitation, the failure of
        consideration, breach of warranty, statute of frauds, statute of limitations,
        accord and satisfaction, and usury.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">This
        Guaranty shall be secured by a collateral assignment of the Guarantor&#8217;s rights
        in certain gas wells located in the San Juan Basin, New Mexico, as evidenced
        by
        that certain Master Purchase/Sale Agreement by and between Hallador Petroleum
        LLP</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>&#160;</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">and
        Coral
        Energy Resources, L.P., dated November 12, 2001. </font></div><br>
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        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="left">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">1</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="2">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="right">
          </div>
        </div>
      </div><br>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">This
        Guaranty shall continue in force with respect to the Guarantor until the
        Bank
        receives written notice of the Guarantor's election not to guaranty any new
        Liabilities arising after receipt of such notice. Any such notice shall not
        in
        any way affect or limit either (i) the promise of the Guarantor giving such
        notice to pay all Liabilities existing at the time such notice is received
        by
        the Bank or (ii) the promises, obligations and undertakings of the remaining
        guarantors, if any, with respect to any Liabilities, including without
        limitation, those arising after the date of such notice. Regardless of when
        a
        renewal or extension of pre-termination Liabilities occurs (with or without
        adjustment of interest rate or other terms), the Liabilities shall be deemed
        to
        have been incurred prior to the termination to the extent of the renewal
        or
        extension and to be fully covered and included within this
        Guaranty.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
        Guarantor waives (a) notice to the Guarantor or the Borrower or other guarantors
        of (i) acceptance of this Guaranty by the Bank, (ii) the Borrower incurring
        additional Liabilities (but subject to the provision above regarding the
        Guaranty Limitation), and (iii) the amount of the Liabilities at any time
        outstanding; (b) except as provided herein, presentment for payment, demand,
        protest, notice to the Guarantor, the other guarantors or the Borrower of
        dishonor, nonpayment, default and non-performance with respect to any of
        the
        Liabilities; (c) the right to require proration among the Guarantor and other
        guarantors; (d) any and all rights to require the Bank to marshal assets
        of the
        Borrower or any other guarantor or other party providing any security for
        the
        Liabilities; (e) any defense which the Borrower or other guarantors have
        against
        the Bank other than payment; (f) all defenses given to sureties or guarantors
        at
        law or in equity other than payment; and (g) all errors and omissions in
        connection with the Bank's administration of the Liabilities, except actions
        or
        inactions which amount to bad faith, gross negligence</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>&#160;</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">or
        willful misconduct. All remedies or actions by the Bank for payment or
        fulfillment of the Liabilities are cumulative and the pursuit of one shall
        not
        preclude the exercise of any other rights or remedies.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
        Guarantor hereby grants to the Bank full power, in its uncontrolled discretion
        and without notice to the Guarantor, the other guarantors or the Borrower,
        to
        deal in any manner with the Liabilities, including, without limitation, the
        following powers: (a) to modify or otherwise change any terms of the
        Liabilities, or the rate of interest thereon, or to grant any extension or
        renewal thereof, and any other indulgence with respect thereto, and to effect
        any release, compromise, or settlement with respect thereto, all in accordance
        with the terms of the Loan Documents; (b) to forbear from enforcing payment
        or
        any term of the Liabilities; or (c) to release any other guarantor or surety
        of
        the Liabilities; provided, however, that (i) the Guarantor shall not be liable
        for any increase in debt, interest rate, or fees unless approved in writing
        by
        Guarantor; and (ii) the Bank shall not release any Collateral unless approved
        in
        writing by Guarantor. The obligations of the Guarantor hereunder shall not
        be
        released, discharged, or in any way affected, nor shall the Guarantor have
        any
        rights or recourse against the Bank by reason of any action the Bank may
        take,
        omit to take, or delay in taking under the foregoing powers. The obligations
        of
        the Guarantor under this Guaranty shall be joint and several obligations
        of the
        Guarantor and any other guarantors (now existing or hereafter arising) of
        the
        obligations of the Borrower to the Bank.</font></div><br>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="left">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">2</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="2">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="right">
          </div>
        </div>
      </div><br>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Without
        limiting the foregoing waivers by the Guarantor of right to notice, and without
        obligating the Bank to follow the following procedure if demand is made after
        the occurrence of a Default, the Bank may at any time demand payment from
        the
        Guarantor by mailing to the Guarantor written demand therefor addressed to
        any
        address set forth below and the Guarantor agrees that the sending of such
        written demand as herein provided shall be sufficient demand for payment
        hereunder.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Any
        notice required or permitted to be given under this Guaranty may be, and
        shall
        be deemed effective if made in writing and delivered to the recipient's address,
        telex number or facsimile number addressed to Borrower, Guarantor or Bank
        at the
        addresses indicated below, or as changed or modified in writing delivered
        to the
        other hereafter, by any of the following means: (a) hand delivery, (b) United
        States first class mail, postage prepaid, (c) registered or certified mail,
        postage prepaid, with return receipt requested, (d) by a reputable overnight
        delivery service, or (e) by telegraph or telex when delivered to the appropriate
        office for transmission, charges prepaid, with request for assurance of receipt
        in a manner typical with respect to communication of that type. Notice made
        in
        accordance with this paragraph shall be deemed given upon receipt if delivered
        by hand or wire transmission, three (3) Banking Days after mailing if mailed
        by
        first class, registered or certified mail, or one (1) Banking Day after deposit
        with an overnight courier service if delivered by overnight courier. Borrower,
        Guarantor and Bank may each change the address for service of notice upon
        it by
        a notice in writing to the other parties hereto.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div>
        <table cellpadding="0" cellspacing="0" width="100%">

            <tr>
              <td align="left" valign="top" width="27%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">If
                  to the Bank:</font></div>
              </td>
              <td align="left" valign="top" width="39%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Old
                  National Bank</font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2
                  West Main Street</font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Danville,
                  Illinois 61832</font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Attn:
                  Dan Laughner, Vice President</font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Telephone:
                  (217) 477-5344</font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Facsimile:
                  (217) 477-5896</font></div>
              </td>
              <td align="left" valign="top" width="14%">&#160;</td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
      <div>
        <table cellpadding="0" cellspacing="0" width="100%">

            <tr>
              <td align="justify" valign="top" width="27%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">With
                  a copy</font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(which
                  shall not constitute</font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">notice
                  hereunder) to</font></div>
              </td>
              <td align="justify" valign="top" width="39%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Bingham
                  McHale LLP</font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2700
                  Market Tower</font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Indianapolis,
                  Indiana 46204-4900</font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Attn:
                  Brett J. Miller, Esq.</font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Facsimile:
                  (317) 236-9907</font></div>
              </td>
              <td align="justify" valign="top" width="14%">&#160;</td>
            </tr>
            <tr>
              <td align="justify" valign="top" width="27%">&#160;</td>
              <td align="justify" valign="top" width="39%">&#160;</td>
              <td align="justify" valign="top" width="14%">&#160;</td>
            </tr>
            <tr>
              <td align="justify" valign="top" width="27%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">If
                  to the Borrower:</font></div>
              </td>
              <td align="left" valign="top" width="39%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Sunrise
                  Coal, LLC</font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: -72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">6641
                  S. State Road 46</font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: -72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Terre
                  Haute, Indiana 47802</font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: -72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Attn:
                  Brent Bilsland </font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Telephone:
                  (812) 894-3480</font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: -72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 72pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Facsimile:
                  (812) 894-3665</font></div>
              </td>
              <td align="justify" valign="top" width="14%">&#160;</td>
            </tr>
            <tr>
              <td align="justify" valign="top" width="27%">&#160;</td>
              <td align="left" valign="top" width="39%">&#160;</td>
              <td align="justify" valign="top" width="14%">&#160;</td>
            </tr>
            <tr>
              <td align="left" valign="top" width="27%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">With
                  copies</font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(which
                  shall not constitute </font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">notice
                  hereunder) to:</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font></div>
              </td>
              <td align="left" valign="top" width="39%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Krieg
                  DeVault LLP </font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">One
                  Indiana Square, Suite 2800</font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Indianapolis,
                  Indiana 46204</font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Attn:
                  Michael Messaglia, Esq</font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Facsimile:
                  (317) 636-1507</font></div>
              </td>
              <td align="justify" valign="top" width="14%">&#160;</td>
            </tr>
            <tr>
              <td align="justify" valign="top" width="27%">&#160;</td>
              <td align="left" valign="top" width="39%">&#160;</td>
              <td align="justify" valign="top" width="14%">&#160;</td>
            </tr>
            <tr>
              <td align="justify" valign="top" width="27%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">If
                  to the Guarantor</font></div>
              </td>
              <td align="left" valign="top" width="39%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Hallador
                  Petroleum Company</font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1660
                  Lincoln Street, Suite 2700</font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Denver,
                  CO 80264</font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Attn:
                  Victor Stabio</font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Facsimile:
                  (303) 832-3013</font></div>
              </td>
              <td align="justify" valign="top" width="14%">&#160;</td>
            </tr>
            <tr>
              <td align="justify" valign="top" width="27%">&#160;</td>
              <td align="left" valign="top" width="39%">&#160;</td>
              <td align="justify" valign="top" width="14%">&#160;</td>
            </tr>
            <tr>
              <td align="justify" valign="top" width="27%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">With
                  copies</font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(which
                  shall not constitute</font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">notice
                  hereunder) to:</font></div>
              </td>
              <td align="left" valign="top" width="39%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Morgan,
                  Lewis &amp; Bockius LLP</font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">300
                  South Grand Avenue, Suite 2200</font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Los
                  Angeles, CA 90071</font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Attn:
                  Ingrid A. Myers, Esq.</font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Facsimile:
                  (213) 612-2501</font></div>
              </td>
              <td align="justify" valign="top" width="14%">&#160;</td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Whenever
        possible, each provision of this Guaranty shall be interpreted in such a
        manner
        as to be effective and valid under applicable law, but if such provision
        shall
        be prohibited by or invalid under applicable law, such provision shall be
        ineffective to the extent of such prohibition or invalidity, without
        invalidating the remainder of such provision or remaining provisions of this
        or
        any related agreement or instrument.</font></div><br>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="left">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">3</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="2">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="right">
          </div>
        </div>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Notwithstanding
        any other terms or conditions set forth in this Guaranty, the Guarantor
        subordinates (until such time as the Bank has been paid in full with respect
        to
        the Liabilities) any claim or other right which it might now have or hereafter
        acquire against the Borrower or any other person that is primarily or
        contingently liable on the Liabilities that arise from the existence or
        performance of the Guarantor's obligations under the Guaranty, including,
        without limitation, any right of subrogation, reimbursement, exoneration,
        contribution, indemnification, any right to participate in any claim or remedy
        of the Bank against the Borrower or any collateral security therefore which
        the
        Bank now has or hereafter acquires, whether or not such claim, remedy, or
        right
        arises in equity, or under contract, statute, or common law.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">After
        the
        occurrence of a default under the Loan Documents, Guarantor shall have the
        right
        (but not the obligation) to purchase the Liabilities, which exist at the
        time of
        such default at a price equal to the outstanding amount of such Liabilities
        (the
&#8220;Purchase Price&#8221;), and the Bank shall be obligated to sell such Liabilities on
        the terms and conditions set forth herein. The Liabilities may be purchased
        by
        Guarantor upon the following terms:</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(a)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
        Purchase Price shall be payable to Guarantor in immediately available funds
        within ten (10) days after Guarantor notifies the Bank in writing of its
        election to purchase the Liabilities;</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(b)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
        transfer of title to the Liabilities shall be evidenced by a loan assignment
        agreement and such other agreements, notices, and documents as Guarantor
        reasonably requests to complete and sale the assignment of all of the Bank&#8217;s
        right, title, and interest in and to the Liabilities and all collateral securing
        such Liabilities; provided that such sale and assignment shall be without
        recourse and without representation or warranty (express or implied) whatsoever;
        and</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(c)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
        Bank
        shall sell and assign the Liabilities, together with all collateral for such
        liabilities, free and clear of any rights or participants or other parties
        in
        such Liabilities and collateral.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
        Guarantor represents to and for the benefit of the Bank, upon which the Bank
        is
        entitled to rely and the Guarantor acknowledges that the Bank is relying,
        that
        (i) the execution, delivery, and performance hereof will not violate any
        law or
        any other material contract, agreement, or understanding which is binding
        upon
        the Guarantor; (ii) this Guaranty is the valid and binding obligation of
        the
        Guarantor, enforceable in accordance with its terms; and (iii) the financial
        statements of the Guarantor provided as of the date hereof and to be provided
        hereafter to the Bank are and will be true, accurate, and complete, have
        been
        and will continue to be prepared on a consistent basis, and currently and
        will
        continue to fairly present the financial position of the Guarantor as of
        the
        date hereof and as of the dates of such future financial statements of the
        Guarantor delivered to the Bank.</font></div><br>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="left">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">4</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="2">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="right">
          </div>
        </div>
      </div><br>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">While
        the
        Liabilities are outstanding, the Guarantor agrees to provide true and correct
        copies of any and all filings made by it with the SEC, including without
        limitation, all 10-K and 10-Q filings. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
        Guarantor acknowledges that (i) the Guarantor is capable of and responsible
        for
        obtaining information on and keeping informed as to all aspects of the
        Borrower's business, including, without limitation, its financial affairs
        and
        business prospects, and the status of the Liabilities from time to time and
        (ii)
        the Bank has no responsibility to so inform the Guarantor.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
        Guarantor acknowledges that separate guaranties may be given in connection
        with
        the Liabilities (including other guaranties by the Guarantor) and this Guaranty
        shall not be modified, amended, limited (other than in accordance with the
        terms
        hereof) or extinguished if one or more of the terms of the other guaranty
        agreements differ from those of this Guaranty or are subsequently amended,
        modified, limited, and extinguished. The execution of this Guaranty shall
        not
        affect the validity or enforceability of any existing guaranties, which
        guaranties shall remain in full force and effect. All obligations hereunder
        shall continue, notwithstanding the incapacity or lack of authority of the
        other
        guarantors, and any failure by the Bank to file, pursue, or enforce a claim
        against any of the other guarantors, or any waiver, release, consent, or
        other
        accommodation given or provided to any of the other guarantors, shall not
        operate to release the Guarantor or other guarantors from liability hereunder,
        or limit the rights of the Bank against the Guarantor or any other guarantor.
        The failure of any other person to sign this Guaranty or any other guaranty
        shall not release or affect the liability of the signer hereof. The Loan
        Documents have been submitted to the Guarantor for examination, and the
        Guarantor acknowledges that, by execution of this Guaranty, the Guarantor
        has
        reviewed and approved the Loan Documents.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">This
        writing is intended by the parties hereto as a final expression of this Guaranty
        and is also intended as a complete and exclusive statement of the terms of
        that
        agreement. No course of dealing, course of performance or trade usage, and
        no
        parole evidence of any nature, shall be used to supplement or modify any
        terms
        hereof.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
        Guarantor further agrees that, to the extent that the Borrower makes a payment
        or payments to the Bank, or the Bank receives any proceeds of collateral,
        which
        payment or payments or any part thereof are subsequently invalidated, declared
        to be fraudulent or preferential, set aside, or otherwise is required to
        be
        repaid to the Borrower, its estate, trustee, receiver or any other party,
        including, without limitation, under any bankruptcy law, state or federal
        law,
        common law or equitable cause, then to the extent of such payment or repayment,
        the Liabilities or part thereof which has been paid, reduced, or satisfied
        by
        such amount shall be reinstated and continued in full force and effect as
        of the
        date such initial payment, reduction, or satisfaction occurred. The Guarantor
        shall defend and indemnify the Bank from any claim or loss under this paragraph
        with respect to the Liabilities, including the Bank's attorneys' and paralegal's
        fees and expenses and other expenses in the defense of any such action or
        suit.</font></div><br>
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          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">5</font></div>
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            <hr style="COLOR: black" noshade size="2">
          </div>
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        <div id="HDR">
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      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
        Guarantor agrees that the Guarantor's responsibility under the Guaranty to
        pay
        to the Bank the Liabilities and any payments thereof repaid as preferences
        shall
        not be extinguished or modified by any release of the Borrower or other party
        primarily liable on the Liabilities, whether by voluntary release, settlement
        of
        litigation, settlement of a claim not yet resulting in litigation, settlement
        of
        a preference claim or otherwise. In all events the responsibility of the
        Guarantor to pay the Bank and the Bank's right to recover from the Guarantor
        the
        full amount of the Liabilities shall extend until the Bank has received actual
        payment in full in cash, and performance, of all of the Liabilities, without
        regard to any modification or a release thereof, and shall continue until
        such
        payment, by the passage of time and the statute of limitations, cannot be
        recovered by the Borrower, the Borrower as debtor in possession, a trustee
        in
        bankruptcy of the Borrower or any other person or organization.</font></div>
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      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">This
        Guaranty shall extend to and bind the successors and assigns of the Guarantor.
        This Guaranty shall inure to the benefit of all affiliates, transferees,
        assignees, and/or endorsees of the Bank of any part or parts or all of the
        liabilities and of the Bank's successors and assigns.</font></div>
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      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">THE
        VALIDITY OF THIS GUARANTY, ITS CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT
        AND
        THE RIGHTS OF THE PARTIES HERETO SHALL BE DETERMINED UNDER, GOVERNED BY,
        AND
        CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INDIANA, WITHOUT REGARD
        TO
        PRINCIPLES OF CONFLICTS OF LAW. THE GUARANTOR AGREES THAT ALL ACTIONS OR
        PROCEEDINGS ARISING IN CONNECTION WITH THIS GUARANTY SHALL BE TRIED AND
        LITIGATED ONLY IN THE STATE COURTS LOCATED IN THE COUNTY OF MARION, STATE
        OF
        INDIANA, OR THE FEDERAL COURTS WHOSE VENUE INCLUDES THE COUNTY OF BOONE,
        STATE
        OF INDIANA, OR, AT THE SOLE OPTION OF THE BANK, IN ANY OTHER COURT IN WHICH
        BANK
        SHALL INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT MATTER
        JURISDICTION OVER THE MATTER IN CONTROVERSY. THE GUARANTOR AND THE BANK (BY
        ITS
        ACCEPTANCE HEREOF) HEREBY VOLUNTARILY, KNOWINGLY, IRREVOCABLY, AND
        UNCONDITIONALLY WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY
        DISPUTE (WHETHER BASED UPON CONTRACT, TORT, OR OTHERWISE) BETWEEN OR AMONG
        THE
        GUARANTOR AND THE BANK ARISING OUT OF OR IN ANY WAY RELATED TO THIS DOCUMENT,
        ANY OTHER RELATED DOCUMENT, OR ANY RELATIONSHIP BETWEEN THE BANK AND THE
        GUARANTOR. THIS PROVISION IS A MATERIAL INDUCEMENT TO THE BANK TO PROVIDE
        THE
        FINANCING DESCRIBED HEREIN OR IN THE LOAN DOCUMENTS.</font></div>
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      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
        Guaranty shall terminate and be of no further force and effect upon payment
        in
        full of the amounts due under the Note. </font></div><br>
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          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">6</font></div>
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      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>IN
        WITNESS WHEREOF</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
        the
        undersigned has executed this Continuing Guaranty effective as of this
        19</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>TH
        </sup></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">day
        of
        April, 2006.</font></div>
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            <tr>
              <td align="justify" valign="top" width="32%">&#160;</td>
              <td align="justify" valign="top" width="49%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">HALLADOR
                  PETROLEUM COMPANY</font></div>
              </td>
            </tr>
            <tr>
              <td align="justify" valign="top" width="32%">&#160;</td>
              <td align="justify" valign="top" width="49%">&#160;</td>
            </tr>
            <tr>
              <td align="justify" valign="top" width="32%">&#160;</td>
              <td align="justify" valign="top" width="49%">&#160;</td>
            </tr>
            <tr>
              <td align="justify" valign="top" width="32%">&#160;</td>
              <td align="justify" valign="top" width="49%">
                <div style="DISPLAY: block; MARGIN-LEFT: 180pt; TEXT-INDENT: -180pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">By:
                  /S/VICTOR P. STABIO</font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 27pt; TEXT-INDENT: -180pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 54pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Victor
                  P. Stabio, </font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 27pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">President,
                  Chief Executive Officer and</font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 27pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Chief
                  Financial Officer</font></div>
              </td>
            </tr>
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              <td align="justify" valign="top" width="49%">&#160;</td>
            </tr>
            <tr>
              <td align="justify" valign="top" width="32%">&#160;</td>
              <td align="justify" valign="top" width="49%">
                <div style="DISPLAY: block; MARGIN-LEFT: 180pt; TEXT-INDENT: -180pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">U.S.
                  Employer Identification Number:
                  84-1014610</font></div>
              </td>
            </tr>

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      <div align="left">
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            <tr>
              <td align="justify" valign="top" width="8%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">STATE
                  OF</font></div>
              </td>
              <td align="right" valign="top" width="11%" style="border-bottom: black thin solid;">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</font></div>
              </td>
              <td align="justify" valign="top" width="6%">&#160;</td>
              <td align="justify" valign="top" width="75%">&#160;</td>
            </tr>
            <tr>
              <td align="justify" valign="top" width="8%">&#160;</td>
              <td align="right" valign="top" width="11%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</font></div>
              </td>
              <td align="justify" valign="top" width="6%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">SS:</font></div>
              </td>
              <td align="justify" valign="top" width="75%">&#160;</td>
            </tr>
            <tr>
              <td align="justify" valign="top" width="8%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">COUNTY
                  OF</font></div>
              </td>
              <td align="right" valign="top" width="11%" style="border-bottom: black thin solid;">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</font></div>
              </td>
              <td align="justify" valign="top" width="6%">&#160;</td>
              <td align="justify" valign="top" width="75%">&#160;</td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">BEFORE
        ME, a Notary Public in and for said County and State, personally appeared
        Victor
        P. Stabio, the duly authorized President, Chief Executive Officer and Chief
        Financial Officer of HALLADOR PETROLEUM COMPANY, a Colorado corporation,
        who
        executed the foregoing instrument on behalf of such corporation and acknowledged
        the signing and execution of said instrument to be his voluntary act and
        deed.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">IN
        TESTIMONY WHEREOF, I have hereunto subscribed my name and affixed my notarial
        seal, on this 19</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>TH</sup></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
        day of
        April, 2006. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div>
        <table cellpadding="0" cellspacing="0" width="100%">

            <tr>
              <td align="left" valign="top" width="40%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">My
                  Commission Expires:</font></div>
              </td>
              <td align="left" valign="top" width="40%">&#160;</td>
            </tr>
            <tr>
              <td align="left" valign="top" width="40%">&#160;</td>
              <td align="left" valign="top" width="40%" style="border-bottom: black thin solid;">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">_______________________,
                  Notary Public</font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">and
                  Resident of _______________ County</font></div>
              </td>
            </tr>

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<DOCUMENT>
<TYPE>EX-10.2
<SEQUENCE>3
<FILENAME>collateral.htm
<DESCRIPTION>COLLATERAL ASSIGNMENT
<TEXT>
<html>
  <head>
    <title>
      Collateral Assignment
</title>
<!-- Licensed to: Hallador Petroleum Company-->
<!-- Document Created using EDGARizer HTML 3.0.4.0 -->
<!-- Copyright 2006 EDGARfilings, Ltd., an IEC company.-->
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</head>
  <body bgcolor="#ffffff">
    <div>
      <hr style="COLOR: black" align="left" noshade size="1" width="100%">
    </div><br>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>COLLATERAL
      ASSIGNMENT OF HALLADOR MASTER </u></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PURCHASE/SALE
      AGREEMENT</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">THIS
      COLLATERAL ASSIGNMENT OF HALLADOR MASTER PURCHASE/SALE AGREEMENT (the
&#8220;Assignment&#8221;) is made by HALLADOR PETROLEUM COMPANY, a Colorado corporation
      (&#8220;Hallador&#8221;), and certain of its affiliates and subsidiaries made a party
      hereto, to OLD NATIONAL BANK, a national banking association (&#8220;Bank&#8221;).
</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">W
      I T N E
      S S E T H:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">WHEREAS,
      pursuant to that certain Credit Agreement, dated April 19th, 2006, between
      Sunrise Coal, LLC (the &#8220;Borrower&#8221;) and Bank (the &#8220;Credit Agreement&#8221;), Bank has
      agreed to make to Borrower, and Borrower has agreed to accept from Bank, certain
      loans in the total maximum amount of Thirty Million and 00/100 Dollars
      ($30,000,000.00) </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(collectively,
      the &#8220;Loans&#8221;);</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">WHEREAS,
      Bank has agreed to make the Loans to Borrower upon certain terms and conditions,
      including, among other things, that Hallador guaranty the Loans pursuant to
      that
      certain Continuing Guaranty executed by Hallador in favor of the Bank, dated
      of
      even date herewith (the &#8220;Guaranty&#8221;); </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">WHEREAS,
      Hallador Production Company, a Colorado corporation (&#8220;Hallador Production&#8221;) and
      Hallador are the sole partners of Hallador Petroleum LLLP, a Colorado limited
      liability limited partnership (&#8220;Hallador LLLP&#8221;);</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">WHEREAS,
      Hallador Production is a wholly owned subsidiary of Hallador (for purposes
      hereof, Hallador, Hallador Production and Hallador LLLP shall be collectively
      referred to herein as the &#8220;Assignor&#8221;);</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">WHEREAS,
      Hallador LLLP has entered into that certain Master Purchase/Sale Agreement
      with
      Coral Energy Resources, L.P. (&#8220;Coral&#8221;), dated November 12, 2001, a copy of which
      is attached hereto as </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Exhibit
      A</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      (the
&#8220;Gas Contract&#8221;);</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">WHEREAS,
      in consideration of the Loans to Borrower and as collateral security for
      Guarantor&#8217;s obligations to Bank pursuant to the Guaranty, Assignor has agreed to
      collaterally assign all of its rights to receive payment for Gas delivered
      (as
      described in the Gas Contract) under the Gas Contract to the Bank pursuant
      to
      the terms and conditions of this Assignment.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>NOW,
      THEREFORE,</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      in order
      to induce the Bank to extend the Loans, and for other good and valuable
      consideration, the Assignor, intending to be legally bound, hereby covenants
      in
      favor of the Bank and agrees as follows:</font></div>
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      </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      Assignor has collaterally granted, transferred and assigned, and does hereby
      collaterally grant, transfer and assign unto the Bank, its successors and
      assigns, Assignor&#8217;s rights to receive payment for Gas delivered pursuant to the
      Gas Contract (the &#8220;Right to Payment&#8221;), as amended, extended, modified,
      supplemented, and all right of the Assignor thereto, to have and to hold unto
      the Bank as security for Hallador&#8217;s Guaranty obligations</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      and any
      amendments to the Guaranty, and all out-of-pocket costs and expenses of the
      Bank
      incurred in the documentation, negotiation, modification, enforcement,
      collection and otherwise in connection with any of the foregoing, including
      reasonable attorneys&#8217; fees and expenses (hereinafter referred to collectively as
      the &#8220;Obligations&#8221;). </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      Assignor agrees that the Bank shall have the rights stated in this Assignment
      with respect to the Gas Contract, in addition to the other rights which the
      Bank
      may have by law. The Assignor represents and warrants that: (a)&#160;the
      Assignor has not executed any prior assignment of any of its rights under the
      Gas Contract; (b)&#160;to Assignor&#8217;s knowledge the Gas Contract and the
      obligations thereunder are valid and enforceable and the Assignor has not done
      anything which might prevent the Bank from or limit the Bank in operating under
      any of the provisions of this Assignment; (c)&#160;payments provided for under
      the Gas Contract have not been collected in advance of the time when the same
      became due under terms of the Gas Contract; (d)&#160;there is no present default
      under the Gas Contract; (e)&#160;the Assignor is the sole owner of the entire
      interest in the Gas Contract; (f)&#160;the Gas Contract is in full force and
      effect and have not been altered, amended or modified, and (g) Assignor will
      provide notice of this Assignment to Coral as required pursuant to
      Section&#160;13.2 of the Gas Contract.</font></div>
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      of Gas Contract by Assignor</u></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>.
      </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      Assignor agrees to faithfully abide by, perform and discharge each and every
      obligation of the Gas Contract that is to be performed by the Assignor. As
      long
      as no Default (as defined in the Credit Agreement) exists, Assignor shall be
      entitled to enforce all of its rights under the Gas Contract, including the
      Right to Payment. The Assignor shall use its best efforts to enforce or secure
      the performance of each and every term of the Gas Contract. The Assignor agrees
      to provide prompt written notice to the Bank of the occurrence or existence
      of
      any default by any party to either Gas Contract.</font></div>
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      to Modify the Gas Contract</u></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>.</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      The
      Assignor hereby expressly releases, relinquishes and surrenders all of the
      Assignor&#8217;s right, power and authority to in any material way, amend or modify
      any of the financial terms of the Gas Contract or Assignor&#8217;s Right to Payment,
      in either case without the Bank&#8217;s prior written consent, which consent shall not
      be unreasonably withheld, conditioned or delayed. Any attempt on the part of
      the
      Assignor to exercise any such right, power or authority without the Bank&#8217;s prior
      written consent shall constitute a default hereunder.</font></div>
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    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25"><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>Assignment
      of the Gas Contract</u></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>.</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      The
      Assignor will not make additional assignments of the Right to Payment under
      the
      Gas Contract or assign the Gas Contract or any part thereof without the Bank&#8217;s
      prior written consent. No such assignment shall discharge the Assignor from
      its
      liability hereunder, or arising out of the Obligations or under any other
      agreement between the Assignor and the Bank.</font></div>
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      Right to Make Payments Under the Gas Contract</u></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>.</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      If the
      Assignor fails to make any payment or to do any act as provided herein or in
      the
      Gas Contract, then the Bank may, but shall not be obligated to, make or do
      the
      same in such manner and to such extent as the Bank may deem necessary to protect
      the Right to Payment and the security hereof. </font></div>
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      Right to Enforce and Perform Under the Gas Contract</u></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>.
      </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Upon
      the
      occurrence of and during the continuance of a Default, the Bank, in addition
      to
      its rights and remedies under the Credit Agreement and the agreements and
      instruments executed in connection therewith (collectively, the &#8220;Loan
      Documents&#8221;) evidencing and securing the Loans and applicable law may, at its
      option, upon at least 48 hours prior written notice to the Assignor, and without
      waiving or releasing any Obligations, either in person or by agent with or
      without bringing any action or proceeding or by a receiver to be appointed
      by a
      court, to the extent permitted by law and the express requirements of the Gas
      Contract, cure defaults in the Assignor&#8217;s performance under the Gas Contract,
      negotiate with the other parties to the Gas Contract regarding the Right to
      Payment, and do any and all other acts which the Bank deems reasonably necessary
      to protect the Right to Payment, the security hereof and the lien hereof.
</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25"><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>Bank
      Not Obligated to Perform</u></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>.</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      This
      Assignment is given only as collateral security, and the Bank shall not be
      obligated to perform or discharge any obligation or liability of the Assignor
      under the Gas Contract. No payment, action or inaction of the Bank under or
      in
      connection with the Gas Contract shall in any manner release the Assignor from
      its obligations under this Assignment or the Obligations. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25"><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>Indemnity</u></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>.</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      The
      Assignor agrees to indemnify each of the Bank, each legal entity, if any, who
      controls the Bank and each of their respective directors, officers and employees
      (collectively, the &#8220;Indemnified Parties&#8221; and each individually an &#8220;Indemnified
      Party&#8221;), and to hold each Indemnified Party harmless from and against, any and
      all claims, damages, losses, liabilities and expenses (including all reasonable
      fees and charges of counsel with whom any Indemnified Party may consult and
      all
      reasonable expenses of litigation and preparation therefor) which any
      Indemnified Party may incur, or which may be asserted against any Indemnified
      Party by any person, entity or governmental authority (including any person
      or
      entity claiming derivatively on behalf of the Assignor), in connection with
      or
      arising out of or relating to the Gas Contract or arising out of or by reason
      of
      this Assignment, whether: (a)&#160;arising from or incurred in connection with
      any breach of a representation, warranty or covenant by the Assignor; or
      (b)&#160;arising out of or resulting from any suit, action, claim, proceeding or
      governmental investigation, pending or threatened, whether based on statute,
      regulation or order, or tort, or contract or otherwise, before any court or
      governmental authority; provided, however, that the foregoing indemnity
      agreement shall not apply to any claims, damages, losses, liabilities and
      expenses solely attributable to an Indemnified Party&#8217;s gross negligence or
      willful misconduct. The indemnity agreement contained in this Section shall
      survive the termination of this Assignment, payment of any Loans and assignment
      of any rights hereunder. The Assignor may participate at its expense in the
      defense of any such action or claim.</font></div>
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    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25"><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>Default</u></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>.
      </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">If
      any
      Default or any default by Assignor under either Gas Contract exists, then,
      and
      at any time thereafter: (a)&#160;the Bank shall have, in addition to any
      remedies provided herein or by any applicable law or in equity, all the remedies
      of a secured party under the Indiana Uniform Commercial Code as the same may
      be
      amended from time to time; and (b)&#160;the Bank may, at its election and in
      addition to all other remedies, declare this Assignment to be absolute and
      not
      merely a collateral assignment, and thereupon this Assignment shall become
      and
      be absolute and in full force and effect.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25"><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>Power
      of Attorney</u></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>.</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      The
      Assignor hereby irrevocably constitutes and appoints the Bank and any officer
      thereof, with full power of substitution, as its true and lawful
      attorney-in-fact with full irrevocable power and authority in the place and
      stead of the Assignor or in its name, from time to time in the Bank&#8217;s discretion
      for the purpose of carrying out the terms of this Assignment, to take any and
      all appropriate action and to execute any and all documents and instruments
      which may be necessary or desirable to accomplish the purposes of this
      Assignment and, without limiting the generality of the foregoing, the Assignor
      hereby gives the Bank the power and right on behalf of the Assignor, during
      a
      Default, and without notice to or assent by the Assignor, to do the
      following:</font></div>
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    <div style="MARGIN-LEFT: 36pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25"><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">to
      receive payment of, endorse, and receipt for, any and all monies, claims and
      other amounts due and to become due at any time in respect of or arising out
      of
      the Gas Contract;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="MARGIN-LEFT: 36pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25"><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">to
      commence and prosecute any suits, actions or proceeding at law or in equity
      in
      any court of competent jurisdiction to collect any amounts due under the Gas
      Contract and to enforce any other right in respect of the Right of Payment
      pursuant to the Gas Contract;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="MARGIN-LEFT: 36pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25"><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">to
      settle, compromise or adjust any suit, action or proceeding described above,
      and, in connection therewith, to give such discharges or releases as the Bank
      may deem appropriate; </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="MARGIN-LEFT: 36pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25"><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">to
      negotiate with, enter into further agreements with, and otherwise deal with
      the
      other parties to the Gas Contract with respect to the Right of Payment pursuant
      to the Gas Contract and the subject matter thereof; and</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="MARGIN-LEFT: 36pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25"><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">to
      do at
      any time, or from time to time, all acts and things which the Bank deems
      necessary to protect or preserve the Right of Payment pursuant to the Gas
      Contract and the Bank&#8217;s security interest and rights therein in order to effect
      the intent of this Assignment, all as fully and effectively as the Assignor
      might do.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      Assignor hereby ratifies all that such attorneys shall lawfully do or cause
      to
      be done by virtue hereof. This power of attorney is a power coupled with an
      interest, will be irrevocable and shall terminate only upon payment in full
      of
      the Obligations and the termination of this Assignment. The powers conferred
      upon the Bank hereunder are solely to protect the Bank&#8217;s interests in the Gas
      Contract and will not impose any duty upon it to exercise any such powers.
      The
      Bank will be accountable only for amounts that it actually receives as a result
      of the exercise of such powers.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25"><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>Notices</u></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>.</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      All
      notices, demands, requests, consents, approvals and other communications
      required or permitted hereunder (&#8220;Notices&#8221;) must be in writing and will be
      effective upon receipt. Notices may be given in any manner to which the parties
      may separately agree, including electronic mail. Without limiting the foregoing,
      first-class mail, facsimile transmission and commercial courier service are
      hereby agreed to as acceptable methods for giving Notices. Regardless of the
      manner in which provided, Notices may be sent to a party&#8217;s address as set forth
      in the Credit Agreement or to such other address as any party may give to the
      other for such purpose in accordance with this section.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25"><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>Preservation
      of Rights</u></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>.</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;&#160;No
      delay or omission on the Bank&#8217;s part to exercise any right or power arising
      hereunder will impair any such right or power or be considered a waiver of
      any
      such right or power, nor will the Bank&#8217;s action or inaction impair any such
      right or power. The Bank&#8217;s rights and remedies hereunder are cumulative and not
      exclusive of any other rights or remedies which the Bank may have under other
      agreements, at law or in equity.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25"><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>Illegality</u></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>.
      </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">If
      any
      provision contained in this Agreement should be invalid, illegal or
      unenforceable in any respect, it shall not affect or impair the validity,
      legality and enforceability of the remaining provisions of this
      Agreement.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25"><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>Changes
      in Writing</u></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>.
      </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">No
      modification, amendment or waiver of, or consent to any departure by the
      Assignor from, any provision of this Agreement will be effective unless made
      in
      a writing signed by the Bank, and then such waiver or consent shall be effective
      only in the specific instance and for the purpose for which given. No notice
      to
      or demand on the Assignor will entitle the Assignor to any other or further
      notice or demand in the same, similar or other circumstance.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25"><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>Successors
      and Assigns</u></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>.
      </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">This
      Assignment will be binding upon and inure to the benefit of the Assignor and
      the
      Bank and their respective successors and assigns; provided, however, that the
      Assignor may not assign this Assignment in whole or in part without the Bank&#8217;s
      prior written consent and the Bank at any time may assign this Assignment in
      whole or in part.</font></div>
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    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25"><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>Interpretation</u></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>.
      </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      this
      Assignment, unless the Bank and the Assignor otherwise agree in writing, the
      singular includes the plural and the plural the singular; words importing any
      gender include the other genders; references to statutes are to be construed
      as
      including all statutory provisions consolidating, amending or replacing the
      statute referred to; the word &#8220;or&#8221; shall be deemed to include &#8220;and/or&#8221;, the
      words &#8220;including&#8221;, &#8220;includes&#8221; and &#8220;include&#8221; shall be deemed to be followed by
      the words &#8220;without limitation&#8221;; references to articles, sections (or
      subdivisions of sections) or exhibits are to those of this Assignment; and
      references to agreements and other contractual instruments shall be deemed
      to
      include all subsequent amendments and other modifications to such instruments,
      but only to the extent such amendments and other modifications are not
      prohibited by the terms of this Assignment. Section headings in this Assignment
      are included for convenience of reference only and shall not constitute a part
      of this Assignment for any other purpose. Defined terms not otherwise defined
      herein shall have the meaning ascribed to such term in the Credit
      Agreement.</font></div>
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      Upon
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      and of no force and effect.</font></div>
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      and shall be governed, construed and enforced in all respects in accordance
      with
      the laws of the State of Indiana, without regard to principles of conflicts
      of
      law. ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS ASSIGNMENT
      SHALL
      BE TRIED AND LITIGATED ONLY IN THE STATE COURTS LOCATED IN THE COUNTY OF MARION,
      STATE OF INDIANA, OR THE FEDERAL COURTS WHOSE VENUE INCLUDES THE COUNTY OF
      MARION, STATE OF INDIANA, OR, AT THE SOLE OPTION OF BANK, IN ANY OTHER COURT
      IN
      WHICH BANK SHALL INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT
      MATTER JURISDICTION OVER THE MATTER IN CONTROVERSY. THE ASSIGNOR AND BANK HEREBY
      VOLUNTARILY, KNOWINGLY, IRREVOCABLY, AND UNCONDITIONALLY WAIVE ANY RIGHT TO
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      A JURY PARTICIPATE IN RESOLVING ANY DISPUTE (WHETHER BASED UPON CONTRACT, TORT,
      OR OTHERWISE) BETWEEN OR AMONG ASSIGNOR AND BANK ARISING OUT OF OR IN ANY WAY
      RELATED TO THIS ASSIGNMENT, OR ANY RELATIONSHIP BETWEEN BANK AND ASSIGNOR.
      THIS
      PROVISION IS A MATERIAL INDUCEMENT TO BANK TO PROVIDE THE LOANS OR IN THE LOAN
      DOCUMENTS. Whenever possible, each provision of this Assignment or any related
      agreement or instrument shall be interpreted in such manner as to be effective
      and valid under applicable law, but if any such provision shall be prohibited
      by
      or invalid under applicable law, such provision shall be ineffective to the
      extent of such prohibition or invalidity, without invalidating the remainder
      of
      such provision or the remaining provisions of this or any related agreement
      or
      instrument.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
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      Assignor acknowledges that it has read and understood all the provisions of
      this
      Agreement, including the waiver of jury trial, and has been advised by counsel
      as necessary or appropriate.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div><br>
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        <div id="GLFTR" style="WIDTH: 100%" align="left">
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      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
        </div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
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      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
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      WITNESS WHEREOF, Assignor, by its duly authorized representative, has executed
      this Collateral Assignment of Hallador Master Purchase/Sale Agreement as of
      the
      date and year first written above.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">

          <tr>
            <td align="justify" valign="top" width="36%">&#160;</td>
            <td align="justify" valign="top" width="37%">
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              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>HALLADOR
                PETROLEUM COMPANY</strong></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
            </td>
          </tr>
          <tr>
            <td align="justify" valign="top" width="36%">&#160;</td>
            <td align="justify" valign="top" width="37%">
              <div style="DISPLAY: block; MARGIN-LEFT: 180pt; TEXT-INDENT: -189pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;&#160;&#160;&#160;&#160;By:&#160;
                /S/VICTOR P. STABIO</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 180pt; TEXT-INDENT: -153pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;Victor
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              <div style="DISPLAY: block; MARGIN-LEFT: 180pt; TEXT-INDENT: -153pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;President,
                Chief Executive Officer</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 180pt; TEXT-INDENT: -153pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;and
                Chief Financial Officer</font></div>
            </td>
          </tr>
          <tr>
            <td align="justify" valign="top" width="36%">&#160;</td>
            <td align="justify" valign="top" width="37%">&#160;</td>
          </tr>
          <tr>
            <td align="justify" valign="top" width="36%">&#160;</td>
            <td align="justify" valign="top" width="37%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>HALLADOR
                PRODUCTION COMPANY</strong></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
            </td>
          </tr>
          <tr>
            <td align="justify" valign="top" width="36%">&#160;</td>
            <td align="justify" valign="top" width="37%">
              <div style="DISPLAY: block; MARGIN-LEFT: 180pt; TEXT-INDENT: -189pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;&#160;&#160;&#160;&#160;B</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">y:
                /S/VICTOR P. STABIO</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 180pt; TEXT-INDENT: -153pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;Victor
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              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
            </td>
          </tr>
          <tr>
            <td align="justify" valign="top" width="36%">&#160;</td>
            <td align="justify" valign="top" width="37%">&#160;</td>
          </tr>
          <tr>
            <td align="justify" valign="top" width="36%">&#160;</td>
            <td align="justify" valign="top" width="37%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>HALLADOR
                PETROLEUM LLLP</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">By:
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              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
            </td>
          </tr>
          <tr>
            <td align="justify" valign="top" width="36%">&#160;</td>
            <td align="justify" valign="top" width="37%">
              <div style="DISPLAY: block; MARGIN-LEFT: 180pt; TEXT-INDENT: -189pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;&#160;&#160;&#160;
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              <div style="DISPLAY: block; MARGIN-LEFT: 180pt; TEXT-INDENT: -153pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Victor
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              <div style="DISPLAY: block; MARGIN-LEFT: 180pt; TEXT-INDENT: -153pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">President,
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                Chief Financial Officer</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
            </td>
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    <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
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        </div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
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        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
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    <div>&#160;</div>
    <div>
      <div align="left">
        <table border="0" cellpadding="0" cellspacing="0" width="100%">

            <tr>
              <td align="justify" valign="top" width="8%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">STATE
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              </td>
              <td align="right" valign="top" width="11%" style="border-bottom: black thin solid;">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</font></div>
              </td>
              <td align="justify" valign="top" width="6%">&#160;</td>
              <td align="justify" valign="top" width="75%">&#160;</td>
            </tr>
            <tr>
              <td align="justify" valign="top" width="8%">&#160;</td>
              <td align="right" valign="top" width="11%">
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              <td align="justify" valign="top" width="6%">
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              <td align="justify" valign="top" width="75%">&#160;</td>
            </tr>
            <tr>
              <td align="justify" valign="top" width="8%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">COUNTY
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                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</font></div>
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              <td align="justify" valign="top" width="6%">&#160;</td>
              <td align="justify" valign="top" width="75%">&#160;</td>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Subscribed
      and sworn to before me, a Notary Public, in and for said county and state,
      this
      19th day of April, 2006, at which time Victor P. Stabio, the
      authorized&#160;______________&#160; of Hallador Petroleum Company, a Colorado
      corporation, personally appeared and acknowledged the execution of the above
      and
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      Notary
      Public</font></div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
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      <div align="left">
        <table border="0" cellpadding="0" cellspacing="0" width="100%">

            <tr>
              <td align="justify" valign="top" width="8%">
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              </td>
              <td align="right" valign="top" width="11%" style="border-bottom: black thin solid;">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</font></div>
              </td>
              <td align="justify" valign="top" width="6%">&#160;</td>
              <td align="justify" valign="top" width="75%">&#160;</td>
            </tr>
            <tr>
              <td align="justify" valign="top" width="8%">&#160;</td>
              <td align="right" valign="top" width="11%">
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              </td>
              <td align="justify" valign="top" width="75%">&#160;</td>
            </tr>
            <tr>
              <td align="justify" valign="top" width="8%">
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              <td align="justify" valign="top" width="6%">&#160;</td>
              <td align="justify" valign="top" width="75%">&#160;</td>
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        and sworn to before me, a Notary Public, in and for said county and state,
        this
        19th day of April, 2006, at which time Victor P. Stabio, the authorized
</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">of
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        and
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      Notary
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      and sworn to before me, a Notary Public, in and for said county and state,
      this
      19th day of April, 2006, at which time, Victor P. Stabio, the authorized of
      Hallador Petroleum LLLP, a Colorado limited liability limited partnership,
      personally appeared and acknowledged the execution of the above and foregoing
      to
      be his voluntary act and deed on behalf of such limited liability limited
      partnership.</font></div>
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<DOCUMENT>
<TYPE>EX-10.3
<SEQUENCE>4
<FILENAME>reimbursement.htm
<DESCRIPTION>REIMBURSEMENT AGREEMENT
<TEXT>
<html>
  <head>
    <title>
      Reimbursement Agreement
</title>
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      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>REIMBURSEMENT
        AGREEMENT</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">THIS
        REIMBURSEMENT AGREEMENT dated as of April 19, 2006 (the &#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Agreement</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;),
        is
        entered by and between SUNRISE COAL, LLC, a Indiana limited liability company
        (&#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Sunrise
        Coal</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;),
        and
        HALLADOR PETROLEUM COMPANY, a Colorado corporation (&#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Hallador
        Petroleum</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;).</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>RECITALS</u></strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">A.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Sunrise
        Coal, as borrower, and OLD NATIONAL BANK, as lender (&#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Bank</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;),
        have
        entered into a Credit Agreement, dated as of the date hereof (the &#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Credit
        Agreement</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;),
        which
        provides for, among other things, certain loans (&#8220;Loans&#8221;) to be made by Bank to
        Sunrise Coal. To induce Bank to enter into the Credit Agreement and provide
        the
        Loans to Sunrise Coal, Hallador Petroleum has agreed to provide a Continuing
        Guaranty in favor of Bank in the form of Exhibit&#160;&#8220;A&#8221; attached hereto (the
&#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Guaranty</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;).</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">B.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">To
        induce
        Hallador Petroleum to execute and deliver the Guaranty to Bank, Sunrise Coal
        has
        agreed to reimburse Hallador Petroleum for any amounts paid, or damages or
        losses incurred, by Hallador Petroleum under or in connection with the Guaranty,
        pursuant to the terms and conditions set forth in this Agreement.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">NOW,
        THEREFORE, to induce Hallador Petroleum to execute and deliver the Guaranty
        to
        Bank and in consideration of the foregoing recitals which by this reference
        are
        incorporated herein and the mutual covenants contained herein, the parties
        hereto, each intending to be legally bound hereby, covenant and agree as
        follows:</font></div>
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          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 45pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Section
              1.&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">CERTAIN
                DEFINITIONS.</font></div>
            </td>
          </tr>

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      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">As
        used
        herein, the following respective terms shall have the following respective
        meanings (terms defined in the plural to include the singular and </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>vice</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>versa</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">):</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Applicable
        Law</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;
means
        any law, provision of statute, rule, regulation, or order of a Governmental
        Authority applicable to a Person, and all orders and decrees of all courts
        and
        arbitrators in proceedings or actions in which the Person in question is
        a
        party.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Authorized
        Officer</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;
means,
        with respect to any Person, its chief executive officer, chief financial
        officer, chief accounting officer, any vice president, or
        treasurer.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Base
        Rate</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;
means,
        as determined by Hallador Petroleum on a daily basis, the variable rate of
        interest per annum most recently announced by Wells Fargo Bank, as its &#8220;Prime
        Rate&#8221; or &#8220;Reference Rate,&#8221; as the case may be, whether or not such announced
        rate is the best rate available from such financial institution.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Business
        Day</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;
means
        any day on which commercial banks are not authorized or required to close
        in
        Denver, Colorado.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Default</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;
means
        an Event of Default or any other event which with the giving of notice or
        lapse
        of time, or both, would become an Event of Default.</font></div>
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      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Event
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shall
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        hereof.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>GAAP</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;
means
        United States generally accepted accounting principles consistently applied
        (except for accounting changes in response to FASB releases, or other
        authoritative pronouncements).</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Governmental
        Authority</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;
means
        any federal, state, municipal or other governmental department, commission,
        board, bureau, agency or instrumentality, or any court, or any arbitrator
        or
        arbitration board whose rulings are judicially recognized as lawful and binding,
        in each case whether of the United States or foreign.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>hereunder</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;,
        &#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>herein</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;,
        &#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>hereof</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;
and
        the
        like mean and refer to this Agreement as a whole and not merely to the specific
        section, paragraph or clause in which the respective word appears.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Loan
        Documents</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;
means
        the Credit Agreement and all promissory notes, security agreements, mortgages,
        pledge agreements, indemnities, and other agreements, instruments, and documents
        executed and/or delivered by Sunrise Coal or any other Person with respect
        to,
        or in connection with, the Loans.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Lien</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;
means
        any mortgage, pledge, security interest, encumbrance, lien or charge of any
        kind
        whatsoever (including any conditional sale or other title retention agreement,
        any lease in the nature thereof, and the filing of or the agreement to give
        any
        financing statement under the Uniform Commercial Code of any
        jurisdiction).</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Obligations</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;
means
        the reimbursement obligations of Sunrise Coal under </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Section&#160;3.A</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
        hereof
        and all other monetary obligations of Sunrise Coal to Hallador Petroleum
        hereunder, including, without limitation, Sunrise Coal&#8217;s obligations set forth
        in </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Section&#160;8.D</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
        hereof.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>person</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;
or
        &#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Person</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;
means
        any natural person, corporation, division of a corporation, partnership,
        trust,
        joint venture, association, company, limited liability company, estate,
        unincorporated organization or government or any agency or political subdivision
        thereof.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Principal
        Office</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;
means
        the principal office of Hallador Petroleum presently located at 1660 Lincoln
        Street, Suite 2700, Denver, Colorado 80264.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 45pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Section
              2.&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">GUARANTY.</font></div>
            </td>
          </tr>

      </table>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Hallador
        Petroleum agrees, on the terms and subject to the conditions set forth in
        this
        Agreement, to execute and deliver to Bank the Guaranty.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 45pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Section
              3.&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">REIMBURSEMENT;
                FEES; ETC.</font></div>
            </td>
          </tr>

      </table>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">A.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Obligation</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
        Sunrise
        Coal is obligated, and hereby unconditionally agrees, to reimburse Hallador
        Petroleum on demand for any amounts paid, and all damages, expenses, and
        losses
        incurred, by Hallador Petroleum (or its successors and assigns) under or
        in
        connection with the Guaranty. The payment obligations of Sunrise Coal hereunder
        shall be unconditional and irrevocable, and shall be paid strictly in accordance
        with the terms hereof under all circumstances, including, without limitation,
        the following circumstances:</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="left">&#160;</div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center">&#160;</div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="2">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="right">&#160;</div>
        </div>
      </div>
      <div style="MARGIN-LEFT: 36pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25">&#160;</div>
      <div style="MARGIN-LEFT: 36pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(i)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">any
        lack
        of validity or enforceability of the Loan Documents or the Guaranty or any
        other
        agreement or instrument relating to the Guaranty (collectively, the
&#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Related
        Documents</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;);</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="MARGIN-LEFT: 36pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(ii)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">any
        amendment or waiver of, or any consent to departure from, all or any of the
        Related Documents;</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="MARGIN-LEFT: 36pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(iii)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">the
        existence of any claim, set-off, defense or other right which Sunrise Coal
        may
        have at any time against Bank or any transferee or assignee of the Loans
        or the
        Loan Documents (or any persons or entities for whom Bank or any such transferee
        or assignee may be acting), Hallador Petroleum, or any other person or entity,
        whether in connection herewith, the transactions contemplated herein or in
        the
        Related Documents, or any unrelated transaction; or</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="MARGIN-LEFT: 36pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(iv)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">any
        other
        circumstance or happening whatsoever whether or not similar to any of the
        foregoing, except as a result of Hallador Petroleum&#8217;s own gross negligence or
        willful misconduct.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">B.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Interest</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
        Sunrise
        Coal hereby agrees to pay interest (computed on the basis of a year of 360
        days
        and actual days elapsed) on the amount of any Obligation arising as the result
        of any payment under or in connection with the Guaranty, in respect of each
        day
        during the period from the date of such payment by Hallador Petroleum until
        the
        date the same shall be reimbursed in full to Hallador Petroleum, at a rate
        per
        annum for each day during such period equal to the Base Rate plus 2% for
        such
        day, such interest to be payable on demand. None of the terms and provisions
        contained in this Agreement, or in other documents or instruments related
        hereto, shall ever be construed to create a contract for the use, forbearance
        or
        detention of money requiring payment of interest at a rate in excess of the
        maximum interest permitted to be charged by applicable laws or regulation
        governing the Obligations (&#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Usury
        Laws</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;).
        Borrower shall never be required to pay interest under this Agreement in
        excess
        of the maximum interest that may be lawfully charged under such Usury Laws,
        as
        made applicable by the final judgment of a court of competent jurisdiction,
        and
        the provisions of this Section shall control over all other provisions hereof
        and of any other instrument executed in connection herewith or executed to
        secure the indebtedness evidenced hereby, which may be in apparent conflict
        with
        this Section. If Hallador Petroleum collects monies which are deemed to
        constitute interest which would otherwise increase the effective interest
        rate
        on this Agreement to a rate in excess of that permitted to be charged by
        such
        Usury Laws, all such sums deemed to constitute interest in excess of the
        maximum
        rate shall, at the option of Hallador Petroleum, either be credited to the
        payment of principal or returned to Sunrise Coal.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">C.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Payments</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
        All
        payments by Sunrise Coal to Hallador Petroleum under this Agreement shall
        be
        made to Hallador Petroleum at the Principal Office in immediately available
        funds on or prior to 12:00&#160;noon Mountain time on the due date thereof (any
        payment made after such time being deemed made on the next succeeding Business
        Day).</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="left">&#160;</div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center">&#160;</div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="2">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="right">&#160;</div>
        </div>
      </div>
      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">D.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Commercial
        Practices</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
        Sunrise
        Coal agrees that neither Hallador Petroleum nor any of its officers, directors,
        employees, agents, or attorneys shall be liable or responsible for, and the
        obligations of Sunrise Coal to Hallador Petroleum hereunder shall not in
        any
        manner be affected by: (i)&#160;the use which may be made of the Guaranty or the
        respective proceeds thereof by Bank or any other Person; or (ii)&#160;any other
        circumstances whatsoever in making or failing to make payment under the
        Guaranty. In furtherance and not in limitation of the foregoing, Hallador
        Petroleum may accept documents or notices in connection with requested payments
        under the Guaranty that appear on their face to be in order without
        responsibility for further investigation.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 45pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Section
              4.&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">REPRESENTATIONS
                AND WARRANTIES.</font></div>
            </td>
          </tr>

      </table>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Sunrise
        Coal represents and warrants to Hallador Petroleum that:</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">A.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Existence
        and Power</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
        Sunrise
        Coal has been duly organized and is validly existing under the laws of Indiana
        and is in good standing as a foreign corporation in all jurisdictions where
        the
        nature of its properties or business so requires it. Sunrise Coal has the
        limited liability company power to own its properties and carry on its business
        as now being conducted, to execute, deliver and perform its obligations under
        this Agreement and other documents contemplated hereby to which it is a
        party.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">B.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Authority
        and No Violation</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
        The
        execution, delivery and performance of this Agreement (a)&#160;have been duly
        authorized by all necessary limited liability company action on the part
        of
        Sunrise Coal, (b)&#160;will not violate any provision of any Applicable Law, any
        order of any court or other Governmental Authority applicable to Sunrise
        Coal or
        any of its properties or assets, (c)&#160;will not violate any provision of the
        Articles of Organization or Operating Agreement of Sunrise Coal or, of any
        indenture, any agreement for borrowed money, any bond, note or other similar
        instrument or any other agreement to which Sunrise Coal is a party or by
        which
        Sunrise Coal or any of its properties or assets are bound, and (d)&#160;will not
        result in the creation or imposition of any Lien, charge or encumbrance of
        any
        nature whatsoever upon any property or assets of Sunrise Coal other than
        pursuant to this Agreement.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">C.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Governmental
        Approval</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
        </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(a)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">No
        action, consent or approval of, or registration or filing with, or any other
        action by, any Governmental Authority is required in connection with the
        execution, delivery and performance by Sunrise Coal of this Agreement except
        for
        consents, approvals, filings and registrations which have been obtained or
        made
        and remain in full force and effect, or which are not yet required to be
        obtained or made but which will be obtained or made and will be in full force
        and effect when and to the extent required.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(b)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">All
        necessary consents and approvals by Governmental Authorities and other Persons
        in connection with the transactions contemplated under this Agreement, or
        otherwise referred to herein, have been obtained and remain and will remain
        in
        effect.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="left">&#160;</div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center">&#160;</div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="2">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="right">&#160;</div>
        </div>
      </div>
      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25">&#160;</div>
      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">D.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Financial
        Statements</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
        The
        unaudited financial statements of Sunrise Coal at December 31, 2005, each
        in the
        form previously delivered to Hallador Petroleum, fairly present in all material
        respects the financial condition and the results of operations of Sunrise
        Coal
        at the date or for the period indicated. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">E.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>No
        Material Adverse Change</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
        Except
        as previously disclosed in writing to Hallador Petroleum, since December
        31,
        2005, there has been no material adverse change in the business, assets,
        property, condition (financial or otherwise), or results of operations of
        Sunrise Coal.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">F.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Litigation;
        Compliance with Laws</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(a)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Except
        as
        previously disclosed in writing to Hallador Petroleum, there are no actions,
        lawsuits or other proceedings pending (including, but not limited to, matters
        relating to environmental liability), or, to the knowledge of Sunrise Coal,
        threatened, against or affecting Sunrise Coal or any of its properties, by
        or
        before any Governmental Authority, arbitration panel, or arbitrator, which
        could
        reasonably be expected to have a material adverse effect on the business,
        assets, property, condition (financial or otherwise), prospects or results
        of
        operations of Sunrise Coal or which seeks to restrain, prevent, impose
        materially adverse conditions upon, hinder or delay any of the transactions
        contemplated hereby.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(b)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
        transactions contemplated hereby will not violate any Applicable
        Law.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">G.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Federal
        Reserve Regulations</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
        No part
        of the proceeds of any extension of credit under this Agreement will be used,
        directly or indirectly, and whether immediately, incidentally or ultimately
        for
        any purpose violative of or inconsistent with any of the provisions of any
        regulations of the Board of Governors of the Federal Reserve System, including,
        without limitation, Regulations&#160;T, U and X thereto.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">H.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Investment
        Company Act</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
        Sunrise
        Coal is not, and will not during the term of this Agreement be, (x)&#160;an
&#8220;investment company,&#8221; within the meaning of the Investment Company Act of 1940,
        as amended or (y)&#160;subject to regulation under the Public Utility Holding
        Company Act of 2005, the Federal Power Act or any foreign, federal or local
        statute or regulation limiting its ability to incur indebtedness for money
        borrowed as contemplated hereby.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">I.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Enforceability</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
        This
        Agreement constitutes the legal, valid and enforceable obligation of Sunrise
        Coal (subject, as to enforcement, to applicable bankruptcy, insolvency,
        reorganization, moratorium or other similar laws affecting the enforcement
        of
        creditors&#8217; rights generally and to general principles of equity).</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 45pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Section
              5.&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">CONDITIONS
                PRECEDENT.</font></div>
            </td>
          </tr>

      </table>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
        obligation of Hallador Petroleum to execute and deliver the Guaranty to Bank
        is
        subject to the following conditions precedent:</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">A.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Sunrise
        Coal shall have executed and delivered to Hallador Petroleum this Agreement
        and
        any other agreement, document, or instrument requested by Hallador
        Petroleum.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">B.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
        representations and warranties set forth in </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Section&#160;4</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
        hereof
        shall be true and correct in all material respects.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">C.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">No
        Default or Event of Default shall have occurred and be continuing or will
        result
        from the execution and delivery of the Guaranty.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="left">&#160;</div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center">&#160;</div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="2">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="right">&#160;</div>
        </div>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 45pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Section
              6.&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">COVENANTS
                OF SUNRISE COAL.</font></div>
            </td>
          </tr>

      </table>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">From
        the
        date hereof and so long as the Guaranty shall be outstanding and until the
        payment in full of all of the Obligations, Sunrise Coal hereby agrees as
        follows:</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">A.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Financial
        Statements and Reports</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
        </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(a)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">As
        soon
        as is practicable, but in any event within 90 days after the end of each
        fiscal
        year, Sunrise Coal will furnish or cause to be furnished to Hallador Petroleum
        the audited balance sheet of Sunrise Coal as at the end of, and the related
        statements of income, shareholders&#8217; equity and cash flow for, such year, and the
        corresponding figures as at the end of, and for, the preceding fiscal year,
        accompanied by an opinion of Clifton Gunderson LLP or EKS &amp; H, which report
        and opinion shall be prepared in accordance with generally accepted auditing
        standards relating to reporting and which report and opinion shall (i)&#160;be
        unqualified as to going concern and scope of audit and shall state that such
        financial statements fairly present the financial condition of Sunrise Coal
        as
        at the dates indicated and the results of operations and cash flows for the
        periods indicated, and (ii)&#160;contain no material exceptions or
        qualifications except for qualifications relating to accounting changes (with
        which such independent public accountants concur) in response to FASB releases
        or other authoritative pronouncements;</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(b)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">As
        soon
        as is practicable, but in any event within 30 days after the end of each
        of the
        first three fiscal quarters of each of its fiscal years, Sunrise Coal will
        furnish or cause to be furnished to Hallador Petroleum the unaudited balance
        sheet of Sunrise Coal as at the end of, and the related unaudited statements
        of
        income, shareholders&#8217; equity and cash flow for, such quarter, and for the period
        from the beginning of the then current fiscal year to the end of such fiscal
        quarter and, the corresponding figures as at the end of, and for, the
        corresponding period in the preceding fiscal year, together with a certificate
        signed by an Authorized Officer of Sunrise Coal, on behalf of Sunrise Coal,
        to
        the effect that such financial statements, while not examined by independent
        public accountants, reflect, in his or her opinion and in the opinion of
        Sunrise
        Coal, all adjustments necessary to present fairly in all material respects
        the
        financial position of Sunrise Coal as at the end of the fiscal quarter and
        the
        results of its operations for the quarter then ended in conformity with GAAP
        consistently applied, subject only to year-end adjustments and to the absence
        of
        footnote disclosure; and</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(c)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">From
        time
        to time, Sunrise Coal will furnish or cause to be furnished to Hallador
        Petroleum such additional information regarding the financial condition or
        business of Sunrise Coal as Hallador Petroleum may reasonably
        request.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">B.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Existence,
        Properties, etc</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
        Sunrise
        Coal will do or cause to be done all things necessary to preserve, renew
        and
        keep in full force and effect its limited liability company existence, rights,
        licenses, permits and franchises, and comply with all applicable statutes,
        regulations and orders of, and all applicable restrictions imposed by, any
        Governmental Authority.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="left">&#160;</div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center">&#160;</div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="2">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="right">&#160;</div>
        </div>
      </div>
      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25">&#160;</div>
      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">C.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Books
        and Records</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
        Sunrise
        Coal will maintain or cause to be maintained at all times books and records
        of
        its financial operations which are true and correct in all material respects
        and
        provide Hallador Petroleum and its representatives reasonable access to such
        books and records during regular business hours in order that Hallador Petroleum
        may make such audits and examinations and make abstracts from such books,
        accounts, records and other papers and may discuss the affairs, finances
        and
        accounts with, and be advised as to the same by, officers and independent
        accountants, all as Hallador Petroleum may deem appropriate for the purpose
        of
        verifying the accuracy of the various reports delivered by Sunrise Coal to
        Hallador Petroleum pursuant to this Agreement or for otherwise ascertaining
        compliance with this Agreement.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 45pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Section
              7.&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">EVENTS
                OF DEFAULT.</font></div>
            </td>
          </tr>

      </table>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
        case
        of the happening and during the continuance of any of the following events
        (herein called &#8220;Events of Default&#8221;):</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">A.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Sunrise
        Coal shall fail to pay when due any Obligation or any other amount payable
        to
        Hallador Petroleum under this Agreement;</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">B.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Sunrise
        Coal shall fail to observe or perform any other covenant, condition or agreement
        to be observed or performed pursuant to the terms of this Agreement, and
        such
        default shall continue unremedied for ten (10) consecutive days after Sunrise
        Coal receives written notice of such occurrence from Hallador
        Petroleum;</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">C.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Sunrise
        Coal shall generally not pay its debts as they become due or shall admit
        in
        writing its inability to pay its debts, or shall make a general assignment
        for
        the benefit of creditors; or Sunrise Coal shall commence any case, proceeding
        or
        other action seeking to have an order for relief entered on its behalf as
        debtor
        or to adjudicate it a bankrupt or insolvent, or seeking reorganization,
        arrangement, adjustment, liquidation, dissolution or composition of it or
        its
        debts under any law relating to bankruptcy, insolvency, reorganization or
        relief
        of debtors or seeking appointment of a receiver, trustee, custodian or other
        similar official for it or for all or any substantial part of its property
        or
        shall file an answer or other pleading in any such case, proceeding or other
        action admitting the material allegations of any petition, complaint or similar
        pleading filed against it or consenting to the relief sought therein; or
        Sunrise
        Coal shall take any action to authorize any of the foregoing; or</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">D.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Without
        the application or consent of Sunrise Coal, any involuntary case, proceeding
        or
        other action against Sunrise Coal shall be commenced seeking to have an order
        for relief entered against it as debtor or to adjudicate it a bankrupt or
        insolvent, or seeking reorganization, arrangement, adjustment, liquidation,
        dissolution or composition of it or its debts under any law relating to
        bankruptcy, insolvency, reorganization or relief of debtors, or seeking
        appointment of a receiver, trustee, custodian or other similar official for
        it
        or for all or any substantial part of its property, and such case, proceeding
        or
        other action (i)&#160;results in the entry of any order for relief against it or
        (ii)&#160;shall remain undismissed for a period of thirty (30)
        days;</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">then,
        in
        every such event and at any time thereafter during the continuance of such
        event, Hallador Petroleum may, by notice to Sunrise Coal, declare an Event
        of
        Default (except with respect to the occurrence of an Event of Default under
        </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Section&#160;7.C</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
        or
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Section&#160;7.D</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
        hereof,
        as to which no notice or declaration need be given) and (a)&#160;terminate the
        obligation of Hallador Petroleum to execute and deliver the Guaranty to Bank
        (if
        the same has not yet been executed and delivered) or (b)&#160;declare all
        amounts owing hereunder to be due and payable, or both, whereupon such
        obligation shall terminate, or all such amounts shall become due and payable,
        or
        both; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>provided</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
        </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>however</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
        that
        upon the occurrence of an Event of Default specified in </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Section&#160;7.C</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
        or
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Section&#160;7.D</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
        such
        obligation shall terminate and all such amounts shall become immediately
        due and
        owing in each case automatically, without any action on the part of Hallador
        Petroleum and without any notice, protest, presentment or demand, all of
        which
        are hereby expressly waived by Sunrise Coal.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 45pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Section
              8.&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">MISCELLANEOUS.</font></div>
            </td>
          </tr>

      </table>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">A.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Notices</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
        Except
        when otherwise required by law, any notice which a party is required or may
        desire to give the other under or in connection with this Agreement shall
        be in
        writing and may be sent by personal delivery or by mail (either (i) by United
        States registered or certified mail, return receipt requested, postage prepaid,
        or (ii) by Federal Express or similar generally recognized overnight carrier
        regularly providing proof of delivery), addressed as provided below in this
        </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Section
        8.A</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
        Any
        notice so given by mail shall be deemed to have been given as of the date
        of
        delivery (whether accepted or refused) established by U.S. Post Office return
        receipt or the overnight carrier&#8217;s proof of delivery, as the case may be. Any
        such notice not so given shall be deemed given upon receipt of the same by
        the
        party to whom the same is to be given.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(a)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">If
        to
        Hallador Petroleum, at:</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1660
        Lincoln Street, Suite 2700</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Denver,
        Colorado 80264</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Attn:
        Victor Stabio</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(b)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">If
        to
        Sunrise Coal, at:</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">6641
        S.
        State Road 46</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Terre
        Haute, Indiana 47802</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Attention:
        Brent Bilsland</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">B.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Survival
        of Covenants</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
        All
        covenants, agreements, representations and warranties made herein and in
        the
        certificates delivered pursuant hereto shall survive the execution and delivery
        of the Guaranty by Hallador Petroleum and shall continue in full force and
        effect so long as the Guaranty is outstanding and until the Obligations and
        all
        other obligations of Sunrise Coal hereunder shall have been paid and performed
        in full. Whenever in this Agreement any of the parties hereto is referred
        to,
        such reference shall, subject to the last sentence of this </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Section&#160;8.B</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
        be
        deemed to include the successors and assigns of such party, and all covenants,
        promises and agreements by or on behalf of Sunrise Coal which are contained
        in
        this Agreement shall inure to the benefit of the successors and assigns of
        Hallador Petroleum. Sunrise Coal may not transfer its rights or obligations
        under this Agreement without the prior written consent of Hallador
        Petroleum.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">C.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Expenses</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
        Each
        party agrees to pay its own expenses incurred in connection with the preparation
        and administration of this Agreement (whether or not the transactions hereby
        contemplated shall be consummated). Sunrise Coal agrees to pay all out-of-pocket
        expenses incurred by Hallador Petroleum in connection with enforcement of
        the
        rights of Hallador Petroleum in connection with this Agreement, including,
        but
        not limited to, the fees and disbursements of counsel to Hallador
        Petroleum.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">D.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Indemnification</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
        Sunrise
        Coal hereby indemnifies and holds harmless Hallador Petroleum from and against
        any and all claims and damages, losses, liabilities, costs and expenses which
        Hallador Petroleum may incur (or which may be claimed against Hallador Petroleum
        by any Person whatsoever) by reason of or in connection with the execution
        and
        delivery or transfer of, or payment or failure to pay under, the Guaranty;
        provided that Sunrise Coal shall not be required to indemnify Hallador Petroleum
        for any claims, damages, losses, liabilities, costs or expenses to the extent,
        but only to the extent, caused by the willful misconduct or gross negligence
        of
        Hallador Petroleum as determined by a final order issued by a court of competent
        jurisdiction.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">E.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>No
        Waiver</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
        Neither
        any failure nor any delay on the part of Hallador Petroleum in exercising
        any
        right, power or privilege hereunder, nor any course of dealing with respect
        to
        any of the same, shall operate as a waiver thereof, nor shall a single or
        partial exercise thereof preclude any other or further exercise or the exercise
        of any other right, power or privilege. The remedies herein provided are
        cumulative, and not exclusive of any remedies provided by Applicable
        Law.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">F.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Modification,
        Amendment, Waiver, etc</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
        No
        modification, amendment or waiver of any provision of this Agreement, and
        no
        consent to any departure by Sunrise Coal herefrom, shall be effective unless
        the
        same shall be in writing and signed by Hallador Petroleum and then such waiver
        or consent shall be effective only in the specific instance and for the purpose
        for which given. No notice to or demand on Sunrise Coal shall entitle Sunrise
        Coal to any other or further notice or demand in the same, similar or other
        circumstances.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">G.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Counterparts</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
        This
        Agreement may be executed in two or more counterparts, each of which shall
        constitute an original, but when taken together shall constitute but one
        agreement and any of the parties hereto may execute this Agreement by signing
        any such counterpart.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">H.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Accounting
        Terms and Principles</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
        Except
        as otherwise expressly stated or defined herein, all computations required
        hereunder shall be made by the application of, and each accounting term used
        herein shall have the meaning given to it under, United States generally
        accepted accounting principles applied on a basis consistent with that used
        in
        the preparation of the audited financial statements referred to in </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Section&#160;4.D</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
        hereof.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">I.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Headings</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
        The
        table of contents and the section and subsection headings used herein have
        been
        inserted for convenience of reference only and do not constitute matters
        to be
        considered in interpreting this Agreement.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">J.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Governing
        Law; Jurisdiction; Waiver of Jury Trial, Etc.</u></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(a)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">This
        Agreement shall be governed by, and construed in accordance with, the laws
        of
        the State of Colorado.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(b)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Sunrise
        Coal hereby irrevocably and unconditionally submits, for itself and its
        property, to the nonexclusive jurisdiction of any Colorado State court or
        federal court of the United States of America sitting in Denver, Colorado, and
        any appellate court from any thereof, in any action or proceeding arising
        out of
        or relating to this Agreement, or for recognition or enforcement of any
        judgment, and Sunrise Coal hereby irrevocably and unconditionally agrees
        that
        all claims in respect of any such action or proceeding may be heard and
        determined in any such Colorado State or, to the extent permitted by law,
        in
        such federal court. Sunrise Coal agrees that a final judgment in any such
        action
        or proceeding shall be conclusive and may be enforced in other jurisdictions
        by
        suit on the judgment or in any other manner provided by law. Nothing in this
        Agreement shall affect any right that any party may otherwise have to bring
        any
        action or proceeding relating to this Agreement in the courts of any
        jurisdiction.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(c)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Sunrise
        Coal irrevocably and unconditionally waives, to the fullest extent it may
        legally and effectively do so, any objection that it may now or hereafter
        have
        to the laying of venue of any suit, action or proceeding arising out of or
        relating to this Agreement in any Colorado State or federal court. Sunrise
        Coal
        hereby irrevocably waives, to the fullest extent permitted by law, the defense
        of an inconvenient forum to the maintenance of such action or proceeding
        in any
        such court.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>(d)</strong></font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>WAIVER
        OF RIGHT TO JURY TRIAL</u></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>.
        SUNRISE COAL HEREBY WAIVES TRIAL BY JURY, AND SUNRISE COAL HEREBY WAIVES
        RIGHTS
        OF SETOFF AND THE RIGHT TO IMPOSE COUNTERCLAIMS, IN ANY LITIGATION IN ANY
        COURT
        WITH RESPECT TO, IN CONNECTION WITH, OR ARISING OUT OF THIS AGREEMENT, THE
        TRANSACTIONS CONTEMPLATED THEREBY OR THE ACTIONS OF HALLADOR PETROLEUM IN
        THE
        NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT THEREOF, OR ANY OTHER
        CLAIM OR DISPUTE HOWSOEVER ARISING, BETWEEN HALLADOR PETROLEUM AND SUNRISE
        COAL,
        AND SUNRISE COAL CONFIRMS THAT THE FOREGOING WAIVERS ARE INFORMED AND IT
        HAS
        RECEIVED THE ADVICE OF COUNSEL WITH REGARD TO THE FOREGOING
        WAIVERS.</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">[Signatures
        on next page]</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div><br>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div style="WIDTH: 100%" align="left">
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        &#8220;A&#8221;</u></font></div>
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      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
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        OF
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        attached copy)</font></div>
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