8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

________________

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of report (Date of earliest event reported): July 2, 2007 (June 28, 2007)

HALLADOR PETROLEUM COMPANY

(Exact Name of Registrant as specified in Charter)

0-14731

(Commission file number)

Colorado	84-1014610
(State or other jurisdiction of incorporation)	(IRS Employer Identification No.)
1660 Lincoln Street, Suite 2700, Denver, Colorado	80264-2701
(Address of principal executive offices)	(Zip code)

Registrant’s telephone number, including area code: 303-839-5504

________________

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):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230-425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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Item 1.01 Entry into a Material Definitive Agreement.

On June 28, 2007, the registrant entered into an Amended and Restated Continuing Guaranty (the “Amended Guaranty”) to guaranty the full and complete payment of any indebtedness incurred by Sunrise Coal, LLC, an Indiana limited liability company (“Sunrise”), to Old National Bank (“Lender”), pursuant to that certain Credit Agreement dated April 19, 2006 (the “Credit Agreement”), as amended by that certain First Amendment to Credit Agreement, Waiver and Ratification of Loan Documents dated June 28, 2007 (the “First Amendment”), whereby Lender agreed to increase Sunrise’s existing line of credit and term loan to $40,000,000.00. The registrant owns 60% of the membership interests in Sunrise. Under the terms of the Amended Guaranty, the obligations of the registrant were secured by the registrant’s indirect interest in the Master Purchase/Sale Agreement effective as of September 1, 2001 (the “Gas Contract”), between Hallador Petroleum LLP, a subsidiary of the registrant, and Coral Energy Resources, L.P., pursuant to that certain Collateral Assignment of Gas Well Rights in favor of the Lender, dated as of April 19, 2006. The registrant disposed of its indirect interest in the Gas Contract on July 2, 2007, and pursuant to the terms of the Amended Guaranty will deposit certain proceeds it received upon disposition of its indirect interest in the Gas Contract into an account with the Lender to secure the registrant’s obligations under the Amended Guaranty.

The Amended Guaranty is filed as Exhibit 10.1 to this Current Report and is incorporated herein by reference.

Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

See Item 1.01 above.

Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

On June 28, 2007, the registrant entered into a Restricted Stock Unit Issuance Agreement (the “RSU Agreement”) with Victor P. Stabio, the Chief Executive Officer, President and Chief Financial Officer of the registrant. Under the terms of the RSU Agreement, Mr. Stabio was granted 390,000 restricted stock units, all of which vest on June 28, 2010, subject to Mr. Stabio’s continuing employment with the registrant and subject to acceleration in accordance with the terms of the RSU Agreement. Upon vesting, each unit entitles Mr. Stabio to receive one share of common stock. If Mr. Stabio’s employment with the registrant ceases for any reason prior to vesting, the units will be cancelled and Mr. Stabio will no longer have any right to receive any shares of common stock.

The RSU Agreement is filed as Exhibit 10.2 to this Current Report and is incorporated herein by reference.

Item 9.01 Financial Statements and Exhibits.

(a)Not applicable.

(b)Not applicable.

(c)Not applicable

(d)Exhibits. The following exhibit is filed herewith:

10.1 Amended and Restated Continuing Guaranty, dated as of June 28, 2007, between Hallador Petroleum Company, Sunrise Coal, LLC, and Old National Bank.

10.2 Hallador Petroleum Company Restricted Stock Unit Issuance Agreement dated as of June 28, 2007, between Hallador Petroleum Company and Victor P. Stabio.

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SIGNATURES

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.

HALLADOR PETROLEUM COMPANY

Date: July 2, 2007By:   /S/VICTOR P. STABIO

 Victor P. Stabio

 Chief Executive Officer and President

3 

EX-10.1

exhibit 10.1

AMENDED AND RESTATED CONTINUING GUARANTY

FOR VALUE RECEIVED and in consideration of credit given or to be given, and of other financial accommodations afforded or to be afforded to SUNRISE COAL, LLC, an Indiana limited liability company(hereinafter referred to as “Borrower”), pursuant to that certain Credit Agreement, dated April 19, 2006 (the “Credit Agreement”), as amended by that certain First Amendment to Credit Agreement and Ratification of Loan Documents, by and among the Bank (as defined herein), the Borrower and the Guarantor (as defined herein), dated as of June 28, 2007 (the “Amendment”), and the Loan Documents (as defined in the Amendment) executed or to be executed by and between the Borrower and OLD NATIONAL BANK, (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, HALLADOR PETROLEUM COMPANY, 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, as amended, that certain Amended and Restated Line of Credit Note, dated of even date herewith, payable to the order of the Bank in the original aggregate principal amount of Forty Million and No/100 Dollars ($40,000,000.00) 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”).

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. 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.

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.

This Guaranty shall be secured by Guarantor’s assignment of its indirect interest in the Gas Contract (as such term is defined in the Credit Agreement), as evidenced by that certain Collateral Assignment of Gas Well Rights in favor of the Bank, dated as of April 19, 2006, and upon the disposition of Guarantor’s indirect interest in the Gas Contract, $1,800,000 of the proceeds from the disposition of such interest, or all of such proceeds if less than such amount, to be deposited into an account with the Bank.

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.

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, 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 negligenceor 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.

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.

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.

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.

If to the Bank:              Old National Bank

2 West Main Street

Danville, Illinois 61832

Attn: Dan Laughner, Vice President

Telephone: (217) 477-5344

Facsimile: (217) 477-5896

With a copy                 Bingham McHale LLP

(which shall                  2700 Market Tower

not constitute               10 West Market Street

notice here-                 Indianapolis, Indiana 46204-4900

under) to:                    Attn: Brett J. Miller, Esq.

                                   Facsimile: (317) 236-9907

If to the Guarantor:      Hallador Petroleum Company

                                  1660 Lincoln Street, Suite 2700

                                  Denver, CO 80264

                                  Attn: Victor Stabio

                                  Facsimile: (303) 832-3013

With copies                Morgan, Lewis & Bockius LLP

(which shall                300 South Grand Avenue, Suite 2200

not constitute              Los Angeles, CA 90071

notice here-               Attn: Ingrid A. Myers, Esq.

under) to:                  Facsimile: (213) 612-2501

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.

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.

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 “Purchase Price”), 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:

(a)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;

(b)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’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

(c)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.

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.

While the Liabilities are outstanding, the Guarantor agrees: (a) 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 within twenty four (24) hours of filing; (b) to maintain a Maximum Unsubordinated Debt to Tangible Net Worth Ratio (as such ratio is defined in the Amendment) to 2.00 to 1.00, which may be measured at any time; and (c) except to the extent required by law, to not create, incur or suffer to exist any lien on the limited partnership interests in Savoy Energy Limited Partnership owned by Guarantor. Guarantor’s failure to do any of the foregoing shall be a Default under the terms of the Credit Agreement.

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.

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.

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.

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.

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.

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.

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.

This Guaranty shall terminate and be of no further force and effect upon payment in full of the amounts due under the Note.

This Guaranty amends and restates in its entirety that certain Continuing Guaranty, dated April 19, 2006, issued by Guarantor in favor of the Bank (the “Original Guaranty”). All rights, benefits, indebtedness, interest, liabilities and obligations of the Guarantor are hereby amended, restated and superseded in their entirety according to the terms and provisions set forth herein. All Guarantor’s obligations under the Original Guaranty are hereby renewed and supplemented by this Guaranty and shall, from and after the date hereof, be governed by this Guaranty. Effective as of the date hereof, all references to the Guaranty in any other Loan Documents shall refer to this Guaranty.

[Remainder of page intentionally left blank]

1-LA/944069.4

IN WITNESS WHEREOF, the undersigned has executed this Amended and Restated Continuing Guaranty effective as of this 28th day of June, 2007.

HALLADOR PETROLEUM COMPANY

By: /s/ Victor P. Stabio

Victor P. Stabio, President, Chief Executive

Officer and Chief Financial Officer

U.S. Employer Identification Number: 84-1014610

EX-10.2

exhibit 10.2

HALLADOR PETROLEUM COMPANY

RESTRICTED STOCK UNIT ISSUANCE AGREEMENT

This RESTRICTED STOCK UNIT ISSUANCE AGREEMENT (this “Agreement”) is made and entered into as of June 28, 2007 by and between Hallador Petroleum Company, a Colorado corporation (the “Corporation”), and Victor P. Stabio, an individual (“Participant”).

RECITALS

A.Participant is to render valuable services to the Corporation, and this Agreement evidences the special equity incentive award the Board has authorized for Participant as an inducement to continue in the Corporation’s service.

B. All capitalized terms in this Agreement shall have the meaning assigned to them in the attached Appendix A.

NOW, THEREFORE, it is hereby agreed as follows:

1.Grant of Restricted Stock Units. The Corporation hereby awards to Participant, as of the Award Date, Restricted Stock Units for the number of shares of Common Stock indicated below. Each Restricted Stock Unit which vests during Participant’s period of Service shall entitle Participant to receive one share of Common Stock on the specified issue date. The number of shares of Common Stock subject to the awarded Restricted Stock Units, the applicable vesting schedule for those shares, the applicable date or dates on which those vested shares shall become issuable to Participant and the remaining terms and conditions governing the award (the “Award”) shall be as set forth in this Agreement.

Award Date:	June 28, 2007
Number of Shares Subject to Award:	390,000 shares of Common Stock (the “Shares”)
Vesting Schedule:	The Shares shall vest upon Participant’s completion of the three (3)-year period of Service measured from the Award Date. However, the Shares may be subject to accelerated vesting in accordance with the provisions of Paragraph 5 below. The Shares which vest hereunder shall be issued in accordance with the provisions of Paragraph 7 of this Agreement, subject to the Corporation’s collection of the applicable Withholding Taxes.

2.Limited Transferability. Prior to actual receipt of the Shares which vest and become issuable hereunder, Participant may not transfer any interest in the Award or the underlying Shares. Any Shares which vest hereunder but which otherwise remain unissued at the time of Participant’s death may be transferred pursuant to the provisions of Participant’s will or the laws of inheritance or to Participant’s designated beneficiary or beneficiaries of this Award. Participant may make such a beneficiary designation at any time by filing the appropriate form with the Board or its designee.

3.Cessation of Service. Should Participant cease Service for any reason prior to vesting in the Shares subject to this Award, then the Restricted Stock Units awarded hereunder shall be immediately cancelled, and Participant shall thereupon cease to have any right or entitlement to receive any Shares under those cancelled units.

4.Stockholder Rights. The holder of this Award shall not have any stockholder rights, including voting, dividend or liquidation rights, with respect to the Shares subject to the Award until the Participant becomes the record holder of those Shares upon their actual issuance following the Corporation’s collection of the applicable Withholding Taxes.

5.Reorganization/Change in Control.

A.Any Restricted Stock Units subject to this Award at the time of a Reorganization may be assumed by the successor entity or otherwise continued in full force and effect. In the event of such assumption or continuation of the Award, no accelerated vesting of the Restricted Stock Units shall occur at the time of the Reorganization; provided, however, that if the Reorganization event also constitutes a Change in Control, then the special vesting acceleration provisions of Paragraph 5.C of this Agreement shall be applicable.

B.In the event the Award is assumed or otherwise continued in effect, the Restricted Stock Units subject to the Award will be adjusted immediately after the consummation of the Reorganization so as to apply to the number and class of securities into which the Shares subject to those units immediately prior to the Reorganization would have been converted in consummation of that Reorganization had the Shares actually been issued and outstanding at that time.

C.If the Restricted Stock Units subject to this Award at the time of the Reorganization are not assumed or otherwise continued in effect in accordance with Paragraph 5.A above or in event such Reorganization also constitutes a Change in Control, then those units shall vest immediately upon the effective date of such Reorganization or Change in Control. The Shares subject to those vested units shall be issued on the closing date of the Change in Control or Reorganization transaction triggering such accelerated vesting (or shall otherwise be converted into the right to receive the same consideration per share of Common Stock payable to the other stockholders of the Corporation in consummation of that Reorganization or Change in Control and distributed at the same time as such stockholder payments), subject to the Corporation’s collection of applicable Withholding Taxes pursuant to the provisions of Paragraph 7. In no event, however, shall the issuance of the vested Shares or the distribution of any other consideration for those Shares be made to Participant later than the later of (i) the close of the calendar year in which the Change in Control or Reorganization transaction is effected, or (ii) the fifteenth (15th) day of the third (3rd) calendar month following the effective date of such transaction.

D.This Agreement shall not in any way affect the right of the Corporation to adjust, reorganize or otherwise change its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets.

6.Adjustment in Shares. Should any change be made to the Common Stock by reason of any stock split, stock dividend, recapitalization, combination of shares, exchange of shares, spin-off transaction, extraordinary dividend or distribution or other similar change affecting the outstanding Common Stock as a class without the Corporation’s receipt of consideration, or should the value of outstanding shares of Common Stock be substantially reduced as a result of a spin-off transaction or an extraordinary dividend or distribution, or should there occur any merger, consolidation or other reorganization, then equitable adjustments shall be made to the total number and/or class of securities issuable pursuant to this Award. Such adjustments shall be made in such manner as the Board deems appropriate in order to reflect such change and thereby preclude a dilution or enlargement of benefits hereunder. The determination of the Board shall be final, binding and conclusive. In the event of a Change in Control or Reorganization, the adjustments (if any) shall be made in accordance with the provisions of Paragraph 5.

7.Issuance of Shares of Common Stock/Collection of Withholding Taxes.

A.On the date on which the Shares vest in accordance with the provisions of this Agreement or as soon as administratively practicable following such vesting date, the Corporation shall issue to or on behalf of Participant a certificate for those vested Shares, subject to the Corporation’s collection of the applicable Withholding Taxes and Participant’s delivery of any representations required of him or her pursuant to Paragraph 8.B. Such issuance shall be effected no later than the later of (i) the end of the calendar year in which the applicable vesting date occurs, or (ii) the fifteenth (15th) day of the third (3rd) calendar month following such vesting date, with the applicable Withholding Taxes to be collected on or before such issuance.

B.Unless Participant (i) otherwise makes satisfactory arrangements with the Corporation on or before the date on which the Shares vest under this Award to pay the applicable Withholding Taxes through the delivery of a check payable to the Corporation in a dollar amount equal to the Withholding Taxes which the Corporation must collect from Participant in connection with the vesting and concurrent issuance of such Shares, and (ii) in fact delivers such check to the Corporation not later than that vesting date, the Corporation shall collect the applicable Withholding Taxes by withholding from the vested Shares otherwise issuable to Participant at that time, a portion of those Shares with a Fair Market Value (measured as of the vesting date) equal to the applicable Withholding Taxes; provided, however, that the number of Shares so withheld shall not exceed in Fair Market Value the amount necessary to satisfy the Corporation’s required tax withholding obligations using the minimum statutory withholding rates for federal and state tax purposes, including payroll taxes, that are applicable to supplemental taxable income.

C.Except as otherwise provided in Paragraph 5 and Paragraph 7.B, the settlement of all Restricted Stock Units which vest under the Award shall be made solely in shares of Common Stock. In no event, however, shall any fractional shares be issued. Accordingly, the total number of shares of Common Stock to be issued pursuant to that Award shall, to the extent necessary, be rounded down to the next whole share in order to avoid the issuance of a fractional share.

8.Securities Law Compliance

A.The Shares issued under this Agreement will not be registered under the 1933 Act and will be issued to Participant in reliance upon the private placement exemption from such registration provided under Section 4(2) of the 1933 Act. Participant hereby confirms that Participant has been informed that the issued Shares will be restricted securities under the 1933 Act and may not be resold or transferred unless those shares are first registered under the Federal securities laws or unless an exemption from such registration is available. Accordingly, Participant hereby acknowledges that Participant will acquire the Shares for investment purposes only and not with a view to resale and will hold the Shares for an indefinite period and that Participant is aware that SEC Rule 144 issued under the 1933 Act which exempts certain resales of restricted securities will require such shares to be held for a period of at least one year after their issuance pursuant to this Agreement.

B.Upon demand by the Corporation, Participant shall deliver to the Corporation a representation in writing that Participant will acquire the Shares issued under this Agreement for investment only and not for resale or with a view to distribution, and containing such other representations and provisions with respect thereto as the Corporation may require. Should the Corporation make such demand, then delivery of such representation shall be a condition precedent to Participant’s right to the issuance of the Shares.

C.Participant shall make no disposition of the issued Shares unless and until there is compliance with all of the following requirements:

(i)Participant shall have provided the Corporation with a written summary of the terms and conditions of the proposed disposition.

(ii)Participant shall have provided the Corporation with an opinion of counsel, in form and substance satisfactory to the Corporation, that (i) the proposed disposition does not require registration of the Shares under the 1933 Act, or (ii) all appropriate action necessary for compliance with the registration requirements of the 1933 Act or any exemption from registration available under the 1933 Act (including Rule 144) has been taken.

The Corporation shall not be required (i) to transfer on its books any Shares issued pursuant to this Agreement which have been sold or transferred in violation of the provisions of this Agreement, or (ii) to treat as the owner of those Shares, or otherwise to accord voting, dividend or liquidation rights to, any transferee to whom the Shares have been transferred in contravention of this Agreement.

D. The stock certificates for any Shares issued under this Agreement shall be endorsed with the following restrictive legend:

“The shares represented by this certificate have not been registered under the Securities Act of 1933. The shares may not be sold or offered for sale in the absence of (a) an effective registration statement for the shares under such Act, (b) a ‘no action’ letter of the Securities and Exchange Commission with respect to such sale or offer or (c) an opinion of counsel, in form satisfactory to the Corporation, that registration under such Act is not required with respect to such sale or offer.”

9.Benefit Limit.In the event the vesting and issuance of the Shares subject to this Award would constitute a parachute payment under Code Section 280G, the vesting and issuance of those Shares shall be subject to reduction to the extent necessary to assure that the number of Shares which vest and are issued under this Award will be limited to the greater of (i) the number of Shares which can vest and be issued without triggering a parachute payment under Code Section 280G, or (ii) the maximum number of Shares which can vest and be issued under this Award so as to provide the Participant with the greatest after-tax amount of such vested and issued Shares after taking into account any excise tax the Participant may incur under Code Section 4999 with respect to those Shares and any other benefits or payments to which the Participant may be entitled in connection with any change in control or ownership of the Corporation or the subsequent termination of the Participant’s Service.

10.Compliance with Other Laws and Regulations. The issuance of shares of Common Stock pursuant to the Award shall be subject to compliance by the Corporation and Participant with all applicable requirements of law relating thereto and with all applicable regulations of any Stock Exchange on which the Common Stock may be listed for trading at the time of such issuance.

11.Notices. Any notice required to be given or delivered to the Corporation under the terms of this Agreement shall be in writing and addressed to the Corporation at its principal corporate offices. Any notice required to be given or delivered to Participant shall be in writing and addressed to Participant at the address indicated below Participant’s signature line on this Agreement. All notices shall be deemed effective upon personal delivery or upon deposit in the U.S. mail, postage prepaid and properly addressed to the party to be notified.

12.Successors and Assigns. Except to the extent otherwise provided in this Agreement, the provisions of this Agreement shall inure to the benefit of, and be binding upon, the Corporation and its successors and assigns and Participant and the legal representatives, heirs and legatees of Participant’s estate and any beneficiaries of the Award designated by Participant.

13.Construction. All interpretations and constructions of the provisions of this Agreement and all determinations on any questions arising under this Agreement shall be made by the Board, and its decisions on such matters shall be conclusive and binding on all persons having an interest in this option.

14.Governing Law. The interpretation, performance and enforcement of this Agreement shall be governed by the laws of the State of Colorado without resort to that State’s conflict-of-laws rules.

15.Employment at Will. Nothing in this Agreement shall confer upon Participant any right to continue in Service for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Corporation (or any Subsidiary employing or retaining Participant) or of Participant, which rights are hereby expressly reserved by each, to terminate Participant’s Service at any time for any reason, with or without cause.

IN WITNESS WHEREOF, the parties have executed this Agreement on the day and year first indicated above.

	HALLADOR PETROLEUM COMPANY
By:	/s/ David Hardie
Title:	Chairman of the Board
	PARTICIPANT: Victor P. Sabio
Signature:	/s/ Victor P. Stabio
Address:

1-LA/943456.2

APPENDIX A

DEFINITIONS

The following definitions shall be in effect under the Agreement:

A.Agreementshall mean this Restricted Stock Unit Issuance Agreement.

B.Award shall mean the award of Restricted Stock Units made to Participant pursuant to the terms of the Agreement.

C.Award Date shall mean the date the Restricted Stock Units are awarded to Participant pursuant to the Agreement and shall be the date indicated in Paragraph 1 of the Agreement.

D.Board shall mean the Corporation’s Board of Directors.

E.Change in Control shall mean any change in control or ownership of the Corporation which occurs by reason of one or more of the following events:

(i)the acquisition of any person or group of related persons (as determined pursuant to section 13(d)(3) of the 1934 Act) of beneficial ownership of securities of the Corporation representing fifty percent (50%) or more of the total number of votes that may be cast for the election of Board members, or

(ii)stockholder approval of (A) any agreement for a merger or consolidation in which the Corporation will not survive as an independent corporation or (B) any sale, exchange or other disposition of all or substantially all of the Corporation’s assets.

In determining whether a subparagraph (i) acquisition has occurred, the person acquiring beneficial ownership of the securities must be someone other than a person or an affiliate of a person that, as of January 15, 1993, is the beneficial owner of securities of the Corporation representing twenty percent (20%) or more of the total number of votes that may be cast for the election of Board members. The Board’s reasonable determination as to whether a Change in Control event has occurred shall be final and conclusive.

F.Codeshall mean the Internal Revenue Code of 1986, as amended.

G.Common Stock shall mean the shares of the Corporation’s common stock.

H.Corporation shall mean Hallador Petroleum Company and any successor corporation to all or substantially all of the assets or voting stock of Hallador Petroleum Company, which shall by appropriate action assume the Award.

I.Employee shall mean an individual who is in the employ of the Corporation (or any Parent or Subsidiary), subject to the control and direction of the employer entity as to both the work to be performed and the manner and method of performance.

J.Fair Market Value per share of Common Stock on any relevant date shall be determined in accordance with the following provisions:

(i)If the Common Stock is listed upon one or more established Stock Exchanges, then the Fair Market Value per share shall be deemed to be the averages of the quoted closing prices of the Common Stock on such Stock Exchanges on the date for which the determination is made, or if no sale shall have been made on any Stock Exchange on that day, on the next preceding day on which there was such a sale.

(ii)If the Common Stock is not listed upon an established Stock Exchange but is actively traded on the NASDAQ System, the Fair Market Value per share shall be deemed to be the last reported sale price for the date for which the determination is made or (in the absence of any sale on such date) the mean between the dealer “bid” and “ask” closing prices of the Common Stock on the NASDAQ System on such day or, if there shall have been no trading or quotes of the Common Stock on that day, on the next preceding day on which there was such trading or quotes.

(iii)If none of the foregoing apply, the Fair Market Value per share shall be deemed to be an amount as determined in good faith by the Board by applying any reasonable valuation method.

K.1933 Act shall mean the Securities Act of 1933, as amended.

L.1934 Act shall mean the Securities Exchange Act of 1934, as amended.

M.Participant shall mean the person to whom the Award is made pursuant to the Agreement.

N.Parentshall mean any corporation (other than the Corporation) in an unbroken chain of corporations ending with the Corporation, provided each corporation in the unbroken chain (other than the Corporation) owns, at the time of the determination, stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.

O.Restricted Stock Unitshall mean each unit subject to the Award which shall entitle Participant to receive one (1) share of Common Stock upon the vesting of that unit.

P.Reorganization shall mean the occurrence of any of the following transactions:

(i)the Corporation is merged or consolidated with another corporation and the Corporation is not the surviving corporation, or

(ii)all or substantially all of the assets of the Corporation are acquired by another entity, or

(iii)the Corporation is liquidated or reorganized,

Q.Service shall mean Participant’s performance of services for the Corporation (or any Parent or Subsidiary) in the capacity of an Employee, a non-employee member of the Board or a consultant or independent advisor. Participant shall be deemed to cease Service immediately upon the occurrence of either of the following events: (i) Participant no longer performs services in any of the foregoing capacities for the Corporation (or any Parent or Subsidiary), or (ii) the entity for which Participant performs such services ceases to remain a Parent or Subsidiary of the Corporation, even though Participant may subsequently continue to perform services for that entity. Service shall not be deemed to cease during a period of military leave, sick leave or other personal leave approved by the Corporation. Except to the extent otherwise required by law or expressly authorized by the Board or the Corporation’s written leave of absence policy, no Service credit shall be given for vesting purposes for any period Participant is on a leave of absence.

R.Stock Exchangeshall mean the American Stock Exchange, the Nasdaq Global or Global Select Market or the New York Stock Exchange.

S.Subsidiary shall mean any corporation (other than the Corporation) in an unbroken chain of corporations beginning with the Corporation, provided each corporation (other than the last corporation) in the unbroken chain owns, at the time of the determination, stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.

T.Withholding Taxes shall mean (i) the employee portion of the federal, state and local employment taxes required to be withheld by the Corporation in connection with the vesting and concurrent issuance of the shares of Common Stock under the Award and (ii) the federal, state and local income taxes required to be withheld by the Corporation in connection with such vesting and issuance of those shares.