September 30, 2007 Form 10-QSB

-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PEF+xmtWbvdXljgcJraBBw6EunWY7StrQlqKocnBc7myMGRNdTYpOVR1J3HVkh6g PDbQjHBeuJROR6fuRNadqg== 0000788965-07-000040.txt : 20071114 0000788965-07-000040.hdr.sgml : 20071114 20071114163147 ACCESSION NUMBER: 0000788965-07-000040 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 20070930 FILED AS OF DATE: 20071114 DATE AS OF CHANGE: 20071114 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: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-14731 FILM NUMBER: 071245383 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 10QSB 1 sep2007q.htm SEPTEMBER 30, 2007 FORM 10-QSB September 30, 2007 Form 10-QSB

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-QSB

þ	QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2007

o	TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 0-14731

Hallador Petroleum Company

(Name of Small Business Issuer as Specified in Its Charter)

Colorado		84-1014610
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

1660 Lincoln St., #2700, Denver, Colorado		80264-2701
(Address of Principal Executive Offices)		(Zip Code)

(303) 839-5504 fax: (303) 832-3013

(Issuer’s Telephone Number, Including Area Code)

Check whether the issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

Shares outstanding as of November 14, 2007: 16,362,528

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Transitional Small Business Disclosure Format: Yes o No þ

PART 1 - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Consolidated Balance Sheet

September 30, 2007

(in thousands)

ASSETS
Current assets:
Cash and cash equivalents	$	4,480
Accounts receivable		3,655
Coal inventory		357
Prepaid expenses and other		304
Total current assets		8,796

Coal properties, at cost		58,853
Less - accumulated depreciation, depletion, and amortization		(1,993	)
		56,860

Investment in Savoy		6,041

Other assets		1,163
	$	72,860
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt	$	850
Accounts payable and accrued liabilities		5,132
Fair value of interest rate swaps		536
Other		454
Total current liabilities		6,972

Long-term liabilities:
Bank debt		31,507
Asset retirement obligations		725
Contract termination obligation		4,256
Total long-term liabilities		36,488

Total liabilities		43,460

Minority interest		480

Commitments and Contingencies (Note 3)

Stockholders' equity:
Preferred stock, $.10 par value, 10,000,000 shares authorized;
none issued
Common stock, $.01 par value, 100,000,000 shares authorized;
12,798,011 shares issued		128
Additional paid-in capital		33,893
Accumulated deficit		(5,101	)
Total stockholders' equity		28,920
	$	72,860

See accompanying notes.

Consolidated Statement of Operations

(in thousands)

	Nine months ended					Three months ended
	September 30,					September 30,
	2007			2006		2007			2006

Revenue:
Coal sales	$	18,070		$		$	8,672		$
Gain on sale of oil and gas properties		1,824			362		1,824
Equity income - Savoy		203			415		132			28
Interest income		113			663		25			226
Other		275			372					114
		20,485			1,812		10,653			368

Costs and expenses:
Cost of coal sales		14,326					6,340
DD&A-coal operations		1,670					712
G&A		3,624			1,458		2,583			539
Interest		2,721			233		1,484			233
		22,341			1,691		11,119			772

Income (loss) before minority interest and income taxes		(1,856	)		121		(466	)		(404	)

Minority interest		320					30

Income (loss) before income taxes		(1,536	)		121		(436	)		(404	)

Income tax benefit					125					320

Net income (loss)	$	(1,536	)	$	246	$	(436	)	$	(84	)


Net income (loss) per share, basic	$	(.12	)	$	.02	$	(.03	)	$	(.01	)


Weighted average shares outstanding-basic		12,320			11,562		12,619			12,168

See accompanying notes.

Condensed Consolidated Statement of Cash Flows

Nine months ended September 30,

(in thousands)


	2007			2006

Net cash used for operating activities	$	(1,483	)	$	(882	)

Cash flows from investing activities:
Acquisition of Sunrise coal, net of acquired cash of $1,892					(5,828	)
Capital expenditures for properties		(12,094	)		(4,312	)
Sales of oil and gas properties		2,456			3,394
Distribution from Savoy					518
Other		131			(26	)
Net cash used for investing activities		(9,507	)		(6,254	)

Cash flows from financing activities:
Proceeds from bank debt		7,140
Stock sale to related parties					7,000
Capital contributions from Sunrise minority owners		800
Proceeds from exercise of stock options		460
Other		(136	)
Net cash provided by financing activities		8,264			7,000
Net decrease in cash and cash equivalents		(2,726	)		(136	)
Cash and cash equivalents, beginning of period		7,206			12,261
Cash and cash equivalents, end of period	$	4,480		$	12,125

Supplemental disclosures of cash flow information:
Cash paid for interest (net of amount capitalized-$230 and $290)	$	1,710		$	190
Income tax	$			$	432

Non-cash investing and financing activities:
Change in accrual for coal properties	$	1,371		$	170

See accompanying notes.

Notes to Financial Statements

1.	General Business

The interim financial data is unaudited; however, in our opinion, it includes all adjustments, consisting only of normal recurring adjustments necessary for a fair statement of the results for the interim periods. The financial statements included herein have been prepared pursuant to the SEC’s rules and regulations; accordingly, certain information and footnote disclosures normally included in GAAP financial statements have been condensed or omitted.

Our organization and business, the accounting policies we follow and other information, are contained in the notes to our financial statements filed as part of our 2006 Form 10-KSB. This quarterly report should be read in conjunction with that annual report.

The accompanying consolidated financial statements include the accounts of Hallador Petroleum Company and its subsidiaries. All significant intercompany accounts and transactions have been eliminated. We are engaged in the production of coal from an underground mine located in western Indiana. We also own a 45% equity interest (32% as of September 30, 2007) in Savoy Energy, LLC, a private oil and gas company operating primarily in Michigan.

As discussed in prior filings, we have entered into significant related party capital transactions with the Yorktown group of companies. Yorktown owns about 55% of our common stock and represents one of the five seats on our board.

Since the July 2007 sale of the San Juan properties, we have deemphasized our oil and gas operations and are concentrating our efforts in the coal business. Oil and gas operations for 2006 are combined with the "other" caption in the statement of operations. Oil and gas sales for the nine months ended September 30, 2006 were $738,000 and the related expenses were $216,000; oil and gas sales for the three months ended September 30, 2006 were $229,000 and the related expenses were $61,000.

2. Stock Options

Effective January 1, 2006, we adopted the fair value recognition provisions of SFAS 123R, using the modified prospective transition method, and therefore, have not restated prior periods' results.

In April 2005, we granted 750,000 options at an exercise price of $2.30. These options vest at 1/3 per year from the date of grant and expire in April 2015. On July 9, 2007 Mr. Stabio, our CEO, exercised 200,000 options, which are now available for re-issuance.

We estimated the fair value of the option grant using the Black-Scholes option-pricing model, with the following assumptions: (i) risk free interest rate of 4.24%; (ii) expected life of 10 years; (iii) expected volatility of 120%; and (iv) expected default rate of 5%, and (v) no dividend yield. The average fair value of options granted during 2005 was $2.19. At September 30, 2007, our 550,000 outstanding stock options had a remaining contractual maturity of eight years and an aggregate intrinsic value of about $412,000.

The total compensation expense related to this plan was about $350,000 for both the nine month periods ended September 30. The impact on earnings per share was about $.03 for both periods. Assuming no more grants, we estimate that for each of the next two quarters, we will expense about $108,000 for stock options or $216,000 in total.

3. Sunrise Coal Acquisition

As discussed in the 2006 Form 10-KSB on July 31, 2006 we entered into a joint venture (JV) with Sunrise. The original Sunrise members retained a 40% interest in the venture, and we agreed to contribute capital of $20.5 million for a 60% interest.

During the second quarter 2007, we completed our $20.5 million funding commitment. Through approximately 87% of the JVs cash flow, we will receive $20.5 million plus interest at 10%. Thereafter, cash flow will be distributed 60% to us, and 40% to the original Sunrise members. All of our contributions were used for mine development and no funds were distributed to any of the original JV partners.

On July 31, 2006 (date of acquisition), we began consolidating the Sunrise JV; because, at the date of acquisition, the original Sunrise members had not contributed capital in excess of accumulated losses, we have reflected Sunrise’s entire losses for the period since acquisition. When Sunrise’s accumulated earnings exceed its prior losses or if the original Sunrise members make additional capital contributions, we will reflect the original members’ minority interest in the results of operations. In the first quarter of 2007, the original Sunrise members made a capital contribution of about $800,000. Consequently, we have recorded a minority interest amount of $174,000 based on 13% of Sunrise's year to date loss of about $1.3 million; in addition, we have recorded a minority interest of $146,000 as a recoupment of Sunrise's 2006 loss based on 13% of about $1.1 million.

Included in liabilities assumed for the Sunrise acquisition is the estimated present value of the possible contract termination obligation (about $4 million; $4.3 million considering accretion charges) with the utility that was to purchase the coal from the Howesville mine; such mine was closed for safety reasons in June 2006. This possible $4 million obligation was based on an offer made to the utility. The utility to date has not accepted our offer and no final settlement agreement has been consummated.

4. Investment in Savoy

On October 5, 2007 we acquired for $6 million an additional 13% interest in Savoy Energy, LLP, a private oil and gas company operating primarily in Michigan. We now have a total interest in Savoy of about 45%. We account for our interest in Savoy using the equity method of accounting.

Below (in thousands) are: (i) a condensed balance sheet at September 30, 2007, and (ii) a condensed statement of operations for the nine months ended September 30, 2007.

Condensed Balance Sheet


Current assets	$	8,124
PP&E, net		10,442
	$	18,566

Total liabilities	$	3,239
Partners' capital		15,327
	$	18,566

Condensed Statement of Operations

Revenue	$	4,099
Expenses		(3,207)
Net income	$	892

The difference between the purchase price and our pro rata share of the equity of Savoy is being amortized based on Savoy's units of production rate using proved reserves. Such amount was about $82,000 for the first nine months of 2007.

To the extent that distributions from Savoy represent a return on capital, they are reflected as cash flows from operating activities. Otherwise, they are reflected as cash flows from investing activities.

5. Bank Debt and Interest Rates Swaps

In late June 2007, our Indiana banks agreed to increase the Sunrise line of credit (LOC) from $30 million to $40 million. The additional funds will be used to purchase certain mining equipment, build a rail loop, and working capital. As of November 13, 2007, we have drawn down about $35.4 million; plus we have outstanding letters of credit for another $2.5 million that leaves us with about $2 million left on the $40 million LOC. The current interest rate is LIBOR (4.71%) plus 3.55% or 8.26%. As discussed below, Sunrise entered into two interest rate swaps. As LIBOR rates increase the fair value of the swaps will increase, and conversely, as LIBOR rates decrease so will the fair value of the swaps.

Under the new LOC with the banks no principal payments are due until the end of July 2008; assuming the full $40 million LOC is drawn, we will begin making monthly payments (principal and interest) of about $600,000 through June 2015.

Accounting rules require us to recognize all derivatives on the balance sheet at fair value. Derivatives that are not hedges must be adjusted to fair value through earnings. We have no derivatives designated as a hedge.

We have entered into two interest rate swap agreements swapping variable rates for fixed rates. The first swap agreement is relative to the $30 million LOC and is effective commencing July 15, 2007 and matures on July 15, 2012. The second swap agreement relates to the additional $10 million that increased Sunrises' LOC to $40 million. This second swap agreement is effective commencing December 28, 2007 and matures on December 28, 2011. The two swap agreements fix our interest rate at about 8.8%. At September 30, 2007, we recorded the fair value of the two swaps as a $536,000 liability with a corresponding charge to interest expense.

6. Sale of San Juan Oil and Gas Properties

In early July 2007 we sold our interest in the San Juan properties for $2.3 million. We recognized a gain of about $1.8 million. We continue to be the operator for these properties.

Other than our equity investment in Savoy, our remaining oil and gas properties are not significant and we will be making minimal disclosures, if any, regarding them.

7. Restricted Stock Grants

On June 20, 2007, the Board authorized and granted the issuance of 600,000 shares of restricted stock. Victor Stabio, our CEO, received 390,000 shares, Brent Bilsland, Sunrise’s President, received 165,000 shares and two consultants received 45,000 shares. The Board allowed Mr. Stabio's shares to vest on July 9, 2007. Mr. Stabio's shares for GAAP accounting purposes were valued at $3.25 on the date of grant based on the closing price on that date. The Board allowed Mr. Bilsland’s shares to vest on August 9, 2007. Mr. Bilsland's shares for GAAP accounting purposes were valued at $3.25 on the date of grant based on the closing price on that date. The other shares vest at the end of three years.

We took a charge of about $1.8 million for these vested shares. We will amortize $146,000 to expense over 36 months for the other shares.

Of the 390,000 shares granted to Mr. Stabio, 125,000 shares were relinquished back to the company as consideration for the income taxes due.

8. Subsequent Events

On October 5, 2007, we sold 3,564,517 shares of common stock for an aggregate cash purchase price of about $11 million ($3.10 per share). The shares were sold to investors in a private placement transaction. The proceeds from the sale were used to purchase an additional 13% interest in Savoy for $6 million which brings our total ownership to about 45%. The remaining $5 million will be used for general corporate purposes.

ITEM 2. MD&A

THE FOLLOWING DISCUSSION UPDATES THE MD&A SECTION OF OUR 2006 FORM 10-KSB WHICH WAS FILED ON APRIL 16, 2007 AND SHOULD BE READ IN CONJUNCTION THERETO.

Liquidity and Capital Resources

In late June 2007, our Indiana banks agreed to increase the Sunrise line of credit (LOC) from $30 million to $40 million. The additional funds will be used to purchase certain mining equipment, build a rail loop, and working capital. With the purchase of additional equipment we expect our annual coal production capabilities to increase from about 800,000 tons to about 1,600,000 tons. Currently, we have drawn down about $35.4 million on the Sunrise $40 million LOC. The current interest rate is LIBOR (4.71%) plus 3.55% or 8.26%. As discussed below, Sunrise entered into two interest rate swaps. As LIBOR rates increase the fair value of the swaps will increase, and conversely, as LIBOR rates decrease so will the fair value of the swaps.

We may be required to raise additional capital to fund mine development and expansion. There can be no assurances that we will be able to raise additional capital on terms which would be acceptable to us.

October Sale of Stock to Yorktown and Others

On October 5, 2007, we sold 3,564,517 shares of our common stock for about $11 million cash ($3.10 per share). The shares were sold to investors in a private placement transaction. The proceeds from the sale were used to purchase an additional 13% interest in Savoy for $6 million which brings our total ownership to about 45%. The remaining $5 million will be used for general corporate purposes.

Results of Operations

In 2007, we have shipped coal to three utilities. We expect total coal shipments for 2007 to reach 980,000 tons. Starting in 2008 - 2013, we have contracts with multiple utilities; total annual sales range from 1.4 million tons per year to 1.9 million tons per year.

We expect to make a small profit for the fourth quarter.

We had no coal operations for the comparable periods in 2006; therefore, there is no need to discuss changes in the accounts.

The increase in property sales was due to the sale of San Juan as discussed below.

Interest income was less due to a significant lower amount of investable funds during the periods.

G&A increased due to the restricted stock grants to Mr. Stabio and Mr. Bilsland which were about $1.8 million. In addition, G&A related to the coal operations were about $700,000 during 2007; we had no such expenses in 2006.

The interest expense relates solely to the debt connected with the Sunrise acquisition.

Sale of Oil and Gas Properties

In early July 2007 we sold our interest in the San Juan properties for $2.3 million. We recognized a gain of about $1.8 million.

Other than our equity investment in Savoy, our remaining oil and gas properties are not significant and we will be making minimal disclosures, if any, regarding them.

Savoy

The decrease in the equity income was due to lower oil and gas sales of about $800,000 due to lower production and prices offset by lower exploration costs of about $370,000.

Restricted Stock Grants

On June 20, 2007, the Board authorized and granted the issuance of 600,000 shares of restricted stock. Victor Stabio, our CEO, received 390,000 shares, Brent Bilsland, Sunrise’s President, received 165,000 shares and two consultants received 45,000 shares. The Board allowed Mr. Stabio's shares to vest on July 9, 2007. Mr. Stabio's shares for GAAP accounting purposes were valued at $3.25 on the date of grant based on the closing price on that date. The Board allowed Mr. Bilsland's shares to vest on August 9, 2007. Mr. Bilsland's shares for GAAP accounting purposes were valued at $3.25 on the date of grant based on the closing price on that date. The other shares vest at the end of three years.

We took a charge of about $1.8 million for these vested shares. We will amortize $146,000 to expense over 36 months for the other shares.

Of the 390,000 shares granted to Mr. Stabio, 125,000 shares were relinquished back to the company as consideration for the income taxes due. Mr. Stabio also exercised 200,000 of his 400,000 options at an exercise price of $2.30 per share.

ITEM 3. CONTROLS AND PROCEDURES

We maintain a system of disclosure controls and procedures that are designed for the purposes of ensuring that information required to be disclosed in our SEC reports is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to our CEO as appropriate to allow timely decisions regarding required disclosure.

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our CEO of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon that evaluation, our CEO, who is also our CFO, concluded that our disclosure controls and procedures are effective for the purposes discussed above. There has been no change in our internal control over financial reporting during the quarter ended September 30, 2007 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II—OTHER INFORMATION
ITEM 6.	EXHIBITS
(a)	10.1 - Subscription Agreement - Cortlandt S. Dietler 10.2 - Subscription Agreement - Murchison Capital Partners 10.3 - Subscription Agreement - Yorktown Energy Partners VII, L.P. 10.4 - Subscription Agreement - Lubar Equity Fund, LLC 10.5 - Subscription Agreement - Tecovas Partners V, L.P. 10.6 -- Purchase and Sale Agreement dated effective as of October 5, 2007 between Hallador Petroleum Company, as Purchaser and Savoy Energy Limited Partnership, as Seller 31 -- SOX 302 Certification 32 -- SOX 906 Certification

SIGNATURE
In accordance with the requirements of the Exchange Act, the Registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
		HALLADOR PETROLEUM COMPANY

Dated: November 14, 2007	By:	/S/ VICTOR P. STABIO CEO and CFO Signing on behalf of registrant and as principal financial officer.

EXHIBIT 31

CERTIFICATION

I, Victor P. Stabio, certify that:

1.	I have reviewed this quarterly report on Form 10-QSB for the quarter ended September 30, 2007 of Hallador Petroleum Company;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.	I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and I have:

designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this report is being prepared;

evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report my conclusion about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant's fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.	I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors;

all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: November 14, 2007

/S/VICTOR P. STABIO

VICTOR P STABIO

CEO and CFO

EXHIBIT 32

CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Hallador Petroleum Company (the "Company"), on Form 10-QSB for the period ended September 30, 2007, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned, in the capacities and dates indicated below, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: November 14, 2007

By:

/S/VICTOR P. STABIO

VICTOR P. STABIO

CEO and CFO

EX-10.1 2 dietler10_1.htm DIETLER SUBSCRIPTION AGREEMENT Unassociated Document

EXHIBIT 10.1

SUBSCRIPTION AGREEMENT

This Subscription Agreement (this “Agreement”) is made as of September 26, 2007 by and between HALLADOR PETROLEUM COMPANY, a Colorado corporation (the “Corporation”) and CORTLANDT S. DIETLER, an individual (“Subscriber”).

1. Subscription.

(a) Subscriber hereby subscribes for 16,129 shares (the “Shares”) of the Corporation’s common stock, par value $0.01 per share (the “Common Stock”), at a subscription price of $3.10 per share (the “Per Share Subscription Price”), for a total subscription price of $49,999.90 (the “Total Subscription Price”).

(b) The closing of the sale and purchase of the Shares (the “Closing”) will take place in the offices of Morgan, Lewis & Bockius LLP, 300 S. Grand Avenue, Suite 2200, Los Angeles, California 90071 at 9:00 a.m. local time on October 5, 2007, or such later date and time as the Corporation and Subscriber agree (the “Closing Date”). At the Closing, (i) the Corporation will deliver to Subscriber a copy of this Agreement countersigned by the Corporation, and (ii) Subscriber will pay the Total Subscription Price to the Corporation by wire transfer of immediately available funds to an account designated by the Corporation to Subscriber in writing. Subject to the Closing, the Corporation shall cause its transfer agent to issue a certificate representing the Shares in the name of Subscriber and to deliver such certificate to Subscriber at the address set forth on the signature page hereto, within five (5) business days after the date on which the Closing occurs.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

5. General Provisions.

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

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

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

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

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

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

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

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

[SIGNATURES ON FOLLOWING PAGE]

1-LA/953496.3

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

SUBSCRIBER:

By: /s/ Cortlandt S. Dietler

Name: Cortlandt S. Dietler

CORPORATION:

HALLADOR PETROLEUM COMPANY

By: /s/ Victor P. Stabio

Name: Victor P. Stabio

Title: Chief Executive Officer and President

EX-10.2 3 murchison10_2.htm MURCHISON CAPITAL PARTNERS Murchison Capital Partners

EXHIBIT 10.2

SUBSCRIPTION AGREEMENT

This Subscription Agreement (this “Agreement”) is made as of September 26, 2007 by and between HALLADOR PETROLEUM COMPANY, a Colorado corporation (the “Corporation”) and MURCHISON CAPITAL PARTNERS, L.P. (“Subscriber”).

1. Subscription.

(a) Subscriber hereby subscribes for 107,527 shares (the “Shares”) of the Corporation’s common stock, par value $0.01 per share (the “Common Stock”), at a subscription price of $3.10 per share (the “Per Share Subscription Price”), for a total subscription price of $333,333.70 (the “Total Subscription Price”).

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

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

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

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

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

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

5. General Provisions.

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

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

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

[SIGNATURES ON FOLLOWING PAGE]

1-LA/947090.3

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

SUBSCRIBER:

MURCHISON CAPITAL PARTNERS, L.P.

By: Murchison Management Corp.,

its general partner

By: /s/ Robert F. Murchison

Name: Robert F. Murchison

Title: President

CORPORATION:

HALLADOR PETROLEUM COMPANY

By: /s/ Victor P. Stabio

Name: Victor P. Stabio

Title: Chief Executive Officer and President

EX-10.3 4 yorktown10_3.htm YORKTOWN ENERGY PARTNERS VII L.P. SUBSCRIPTION AGREEMENT Yorktown Energy Partners VII L.P. Subscription Agreement

EXHIBIT 10.3

SUBSCRIPTION AGREEMENT

This Subscription Agreement (this “Agreement”) is made as of September 26, 2007 by and between HALLADOR PETROLEUM COMPANY, a Colorado corporation (the “Corporation”) and YORKTOWN ENERGY PARTNERS VII, L.P., a Delaware limited liability company (“Subscriber”).

1. Subscription.

(a) Subscriber hereby subscribes for 2,419,355 shares (the “Shares”) of the Corporation’s common stock, par value $0.01 per share (the “Common Stock”), at a subscription price of $3.10 per share (the “Per Share Subscription Price”), for a total subscription price of $7,500,000.50 (the “Total Subscription Price”).

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

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

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

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

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

5. General Provisions.

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

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

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

[SIGNATURES ON FOLLOWING PAGE]

1-LA/947087.5

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

SUBSCRIBER:

YORKTOWN ENERGY PARTNERS VII, L.P.

By: Yorktown VII Company LP,

its general partner

By: Yorktown VII Associates LLC,

its general partner

By: /s/ W. Howard Keenan Jr.

Name: W. Howard Keenan Jr.

Title: Member

CORPORATION:

HALLADOR PETROLEUM COMPANY

By: /s/ Victor P. Stabio

Name: Victor P. Stabio

EX-10.4 5 lubar10_4.htm LUBAR EQUITY FUND LLC SUBSCRIPTION AGREEMENT Lubar Equity Fund LLC Subscription Agreement

EXHIBIT 10.4

SUBSCRIPTION AGREEMENT

This Subscription Agreement (this “Agreement”) is made as of September 26, 2007 by and between HALLADOR PETROLEUM COMPANY, a Colorado corporation (the “Corporation”) and LUBAR EQUITY FUND, LLC (“Subscriber”).

1. Subscription.

(a) Subscriber hereby subscribes for 806,452 shares (the “Shares”) of the Corporation’s common stock, par value $0.01 per share (the “Common Stock”), at a subscription price of $3.10 per share (the “Per Share Subscription Price”), for a total subscription price of $2,500,001.20 (the “Total Subscription Price”).

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

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

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

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

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

5. General Provisions.

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

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

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

[SIGNATURES ON FOLLOWING PAGE]

1-LA/947089.4

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

SUBSCRIBER:

LUBAR EQUITY FUND, LLC

By: /s/ David Lubar

Name: David Lubar

Title: President

By: /s/ David Bauer

Name: David Bauer

Title: Chief Financial Officer

CORPORATION:

HALLADOR PETROLEUM COMPANY

By: /s/ Victor P. Stabio

Name: Victor P. Stabio

Title: Chief Executive Officer and President

EX-10.5 6 tecovas10_5.htm TECOVAS PARTNERS V L.P. Tecovas Partners V L.P.

EXHIBIT 10.5

SUBSCRIPTION AGREEMENT

This Subscription Agreement (this “Agreement”) is made as of September 26, 2007 by and between HALLADOR PETROLEUM COMPANY, a Colorado corporation (the “Corporation”) and TECOVAS PARTNERS V, L.P., a Texas limited partnership (“Subscriber”).

1. Subscription.

(a) Subscriber hereby subscribes for 215,054 shares (the “Shares”) of the Corporation’s common stock, par value $0.01 per share (the “Common Stock”), at a subscription price of $3.10 per share (the “Per Share Subscription Price”), for a total subscription price of $666,667.40 (the “Total Subscription Price”).

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

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

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

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

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

5. General Provisions.

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

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

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

[SIGNATURES ON FOLLOWING PAGE]

1-LA/947088.4

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

SUBSCRIBER:

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

By: Marsh Operating Company,

its general partner

By: /s/ James C. Crain

Name: James C. Crain

Title: President

CORPORATION:

HALLADOR PETROLEUM COMPANY

By: /s/ Victor P. Stabio

Name: Victor P. Stabio

Title: Chief Executive Officer and President

EX-31 7 exh31.htm SOX 302 CERTIFICATION sox 302 certification

EXHIBIT 31

CERTIFICATION

I, Victor P. Stabio, certify that:

1.	I have reviewed this quarterly report on Form 10-QSB for the quarter ended September 30, 2007 of Hallador Petroleum Company;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.	I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and I have:

5.	I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors;

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: November 14, 2007

/S/VICTOR P. STABIO

VICTOR P STABIO

CEO and CFO

EX-32 8 exh32.htm SOX 906 CERTIFICATION Unassociated Document

EXHIBIT 32

CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Dated: November 14, 2007

By:

/S/VICTOR P. STABIO

VICTOR P. STABIO

CEO and CFO

EX-10.6 9 savoypsa.htm SAVOY PURCHASE AND SALE AGREEMENT 100507 Savoy Purchase and Sale Agreement 100507

EXHBIT 10.6

PURCHASE AND SALE AGREEMENT

dated effective as of October 5, 2007

between

Hallador Petroleum Company,

as Purchaser

and

Savoy Energy Limited Partnership,

as Seller

1-LA/947404.9

ARTICLE IDEFINITIONS1

1.1Definitions1

1.2Other Defined Terms2

ARTICLE IIPURCHASE AND SALE2

2.1Purchase and Sale of the Additional Partnership Interest2

2.2Consideration3

2.3Transactions to be Effected at the Closing3

2.4Closing Date3

ARTICLE IIIREPRESENTATIONS AND WARRANTIES OF SELLER3

3.1Organization3

3.2Authorization and Enforceability3

3.3No Conflicts; Authorization4

3.4No Brokers or Finders4

ARTICLE IVREPRESENTATIONS AND WARRANTIES OF PURCHASER4

4.1Organization4

4.2Authority and Enforceability4

4.3No Conflicts; Authorizations5

4.4Investment Representations5

4.5Brokers or Finders5

ARTICLE VCONDITIONS TO CLOSING5

5.1Conditions to Obligations of Purchaser5

5.2Conditions to Obligations of Seller6

ARTICLE VIPOST-CLOSING COVENANTS7

6.1Post-Closing Notifications7

6.2Certain Tax Matters7

6.3Further Assurances7

ARTICLE VIITERMINATION7

7.1Termination7

7.2Effect of Termination8

7.3Remedies8

ARTICLE VIIIINDEMNIFICATION9

8.1Survival9

8.2Indemnification9

8.3Notice and Opportunity to Defend9

8.4Contingent Claims10

8.5Tax Treatment of Indemnification Payments10

8.6Exclusive Remedy10

ARTICLE IXMISCELLANEOUS10

9.1Notices10

9.2Amendments and Waivers11

9.3Expenses12

9.4Successors and Assigns12

9.5Governing Law12

9.6Consent to Jurisdiction12

9.7Counterparts12

9.8Third Party Beneficiaries12

9.9Entire Agreement13

9.10Captions13

9.11Severability13

9.12Interpretation13

1-LA/947404.9

TABLE OF CONTENTS

(continued)

Page

PURCHASE AND SALE AGREEMENT

This PURCHASE AND SALE AGREEMENT (this “Agreement”), dated as of October 5, 2007, is entered into by and between Hallador Petroleum Company, a Colorado corporation (“Purchaser”), and Savoy Energy Limited Partnership, a Michigan limited partnership (“Seller”).

RECITALS:

A. Purchaser is a limited partner of Seller, and its chief executive officer serves as one of three members of the Executive Committee of Seller.

B. As of the date of this Agreement, Purchaser owns a 32.303328% limited partnership interest in Seller.

C. Upon the terms and subject to the conditions set forth in this Agreement, Purchaser wishes to purchase from Seller, and Seller wishes to sell to Purchaser, a 13.102581% limited partnership interest in Seller (the “Additional Partnership Interest”). Following such purchase and sale, Purchaser will hold a 45.405909% limited partnership interest in Seller.

NOW, THEREFORE, in consideration of the foregoing premises and the respective representations and warranties, covenants and agreements contained herein, the parties hereto agree as follows:

ARTICLE I

DEFINITIONS

1.1 Definitions. When used in this Agreement, the following terms shall have the meanings assigned to them in this Section 1.1, or in the applicable Section of this Agreement to which reference is made in this Section 1.1.

“Affiliate” means, with respect to any specified Person, any other Person directly or indirectly controlling, controlled by or under common control with such specified Person.

“Business Day” means a day other than a Saturday, Sunday or other day on which banks located in Detroit, Michigan are authorized or required by Law to close.

“Certificate” means the Certificate of Limited Partnership of Seller filed with the Michigan Department of Labor and Economic Growth, as the same may be amended from time to time.

“Governmental Entity” means any entity or body exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to United States federal, state, local, or municipal government, foreign, international, multinational or other government, including any department, commission, board, agency, bureau, subdivision, instrumentality, official or other regulatory, administrative or judicial authority thereof.

“Law” means any statute, law (including common law), treaty, ordinance, code, order, decree, judgment, rule, regulation and any other binding requirement or determination of any Governmental Entity.

“Lien” means, with respect to any property or asset, any mortgage, lien, pledge, charge, security interest, adverse claim or other encumbrance in respect of such property or asset.

“Losses” means any and all losses, liabilities, claims, demands, fines, judgments, orders, settlements, damages and any related expenses (including, without limitation, reasonable legal, accounting, consulting and investigation expenses and litigation costs), but excluding consequential damages or any damages based upon a multiple of damages or similar theory.

“Order” means any award, injunction, judgment, decree, order, ruling, subpoena or verdict or other decision issued, promulgated or entered by or with any Governmental Entity of competent jurisdiction.

“Person” means an individual, a corporation, a partnership, a limited liability company, a trust, an unincorporated association, a Governmental Entity or any agency, instrumentality or political subdivision of a Governmental Entity, or any other entity or body.

1.2 Other Defined Terms. The following terms have the meanings assigned to such terms in the Sections of the Agreement set forth below:

Acquisition	2.1
Additional Partnership Interest	Recitals
Agreement	Preamble
Asserted Liability	8.3(a)
Closing	2.4
Closing Date	2.4
Indemnitee	8.3(a)
Indemnifying Party	8.3(a)
Partnership Agreement	3.1
Permitted Restrictions	2.1
Purchase Price	2.2
Purchaser	Preamble
Seller	Preamble

ARTICLE II

PURCHASE AND SALE

2.1 Purchase and Sale of the Additional Partnership Interest. Upon the terms and subject to the conditions of this Agreement, at the Closing, Seller shall sell to Purchaser, and Purchaser shall purchase from Seller, the Additional Partnership Interest free and clear of all Liens other than restrictions on transfer imposed under the Certificate and the Partnership Agreement (the “Permitted Restrictions”). The purchase and sale of the Additional Partnership Interest is referred to in this Agreement as the “Acquisition.”

2.2 Consideration. At the Closing, Purchaser shall pay to Seller an amount equal to U.S. $6,000,000.00 (the “Purchase Price”) by wire transfer of immediately available funds to the bank account set forth on Schedule 2.2.

2.3 Transactions to be Effected at the Closing.

(a) At the Closing Purchaser shall deliver to Seller all documents, instruments or certificates required to be delivered by Purchaser to Seller at the Closing pursuant to this Agreement.

(b) At the Closing Seller shall deliver to Purchaser (i) all certificates representing or evidencing the Additional Partnership Interest, if any, (ii) all other documents and instruments necessary to vest in Purchaser all of Seller’s right, title and interest in and to the Additional Partnership Interest, free and clear of all Liens (other than the Permitted Restrictions), and (iii) all other documents, instruments or certificates required to be delivered by Seller to Purchaser at the Closing pursuant to this Agreement.

2.4 Closing Date. The closing of the Acquisition (the “Closing”) shall be coordinated by Morgan, Lewis & Bockius LLP and Barnes & Thornburg LLP and shall take place on October 5, 2007, unless another time, date or place is agreed to in writing by the parties. The date upon which the Closing occurs is herein referred to as the “Closing Date.”

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF SELLER

Seller represents, warrants and covenants to Purchaser as of the date hereof and as of the Closing Date that:

3.1 Organization. Seller is a limited partnership existing in good standing under the Laws of Michigan and has all requisite power and authority to own, lease, and operate its assets and to carry on its business as presently conducted. Seller is duly qualified or licensed to do business as a foreign limited partnership and is in good standing in each jurisdiction in which the activity of Seller in such jurisdiction thereby makes such qualification necessary. Except for the Third Amended and Restated Agreement of Limited Partnership of Seller dated October 5, 2007 (the “Partnership Agreement”), there is no voting trust, proxy, or other agreement or understanding between or among any Persons that affects or relates to the voting or giving of written consent with respect to Seller.

3.2 Authorization and Enforceability. Seller has all requisite power and authority to execute and deliver this Agreement, to perform Seller’s obligations hereunder and to consummate the transactions contemplated hereby. Seller has the full power to issue the Additional Partnership Interest to Purchaser in accordance with the terms of this Agreement, free and clear of all Liens (other than the Permitted Restrictions). The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized by Seller and no other proceedings by Seller or the partners of Seller are necessary to authorize this Agreement or to consummate the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by Seller, and constitutes the valid and binding obligation of Seller enforceable against Seller in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar Laws affecting or relating to creditors’ rights generally, or general principles of equity.

3.3 No Conflicts; Authorization. The execution and delivery by Seller of this Agreement do not, and the consummation of the Acquisition by Seller will not:

(a) conflict with or result in a violation or breach of any of the terms, conditions or provisions of the Certificate, Partnership Agreement or similar organization documents of Seller;

(b) conflict with or result in a material violation or breach of any Law or Order applicable to Seller or any of Seller’s assets and properties or require any consent or approval of or any notice or filing with any Governmental Entity or other third party; or

(c) conflict with or result in a breach or violation of, or default under, or give rise to any right of acceleration or termination of, any of the terms, conditions or provisions of, any note, bond, lease, license, agreement or other instrument or obligation to which Seller is a party or by which Seller’s assets or properties are bound.

3.4 No Brokers or Finders. Seller has not incurred and will not incur, directly or indirectly, as a result of any action taken or permitted to be taken by or on behalf of Seller, any liability for brokerage or finders’ fees or agents’ commissions or similar charges in connection with the execution and performance of the transactions contemplated by this Agreement.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF PURCHASER

Purchaser represents and warrants as of the date hereof and as of the Closing Date:

4.1 Organization. Purchaser is a corporation existing in good standing under the Laws of Colorado and has all requisite power and authority to own, lease, and operate its assets and to carry on its business as presently conducted. Purchaser is duly qualified or licensed to do business as a foreign corporation and is in good standing in each jurisdiction in which the activity of Seller in such jurisdiction thereby makes such qualification necessary.

4.2 Authority and Enforceability. Purchaser has all requisite power and authority to execute and deliver this Agreement, to perform Purchaser’s obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized by all necessary action on the part of Purchaser and no other proceedings by Purchaser are necessary to authorize this Agreement or to consummate the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by Purchaser and constitutes the valid and binding obligation of Purchaser, enforceable against Purchaser in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar Laws affecting or relating to creditors’ rights generally, or general principles of equity.

4.3 No Conflicts; Authorizations. The execution and delivery of this Agreement by Purchaser does not, and the consummation of the Acquisition by Purchaser will not:

(a) conflict with or result in a violation or breach of any of the terms, conditions or provisions of the charter, bylaws or similar organization documents of Purchaser;

(b) conflict with or result in a material violation or breach of any Law or Order applicable to Purchaser or any of Purchaser’s assets and properties or require any consent or approval of or any notice or filing with any Governmental Entity or other third party; or

(c) conflict with or result in a breach or violation of, or default under, or give rise to any right of acceleration or termination of, any of the terms, conditions or provisions of, any note, bond, lease, license, agreement or other instrument or obligation to which Purchaser is a party or by which Purchaser’s assets or properties are bound.

4.4 Investment Representations. The Additional Partnership Interest is being acquired for Purchaser’s own account for investment only and not with a view to any sale or other distribution thereof. Purchaser understands that the Partnership Agreement and applicable Law prohibits Purchaser from offering to sell or otherwise dispose of, or selling or otherwise disposing of, the Additional Partnership Interest so acquired by it in violation of any Law, including, but not limited to, the Securities Act of 1933, as amended (the “Act”), and applicable state securities laws. Purchaser acknowledges that its designee is a member of Seller’s Executive Committee, that it is familiar with Seller’s business operations and prospects, and that it has had the opportunity to review all information and to make all investigations that it desired regarding Seller prior to making the Acquisition. Purchaser is an “accredited investor” within the meaning of Rule 501(a) of Regulation D promulgated pursuant to the Act. The Additional Partnership Interest has not been offered or sold by means of any general advertising or general solicitation.

4.5 Brokers or Finders. Purchaser has not incurred and will not incur, directly or indirectly, any liability for any brokerage, finder’s or other fee or commission in connection with the transactions contemplated by this Agreement.

ARTICLE V

CONDITIONS TO CLOSING

The obligations of Purchaser and Seller to effect the transactions contemplated hereby are subject to the satisfaction at or prior to the Closing of the following conditions:

5.1 Conditions to Obligations of Purchaser.

(a) Representations and Warranties of Seller. The representations and warranties of Seller shall be true and correct as of the Closing Date.

(b) Agreements and Covenants. Seller shall have performed and complied in all material respects with each agreement, covenant and obligation required by it pursuant to this Agreement to be so performed or complied with by Seller at or before the Closing.

(c) Partnership Agreement. Seller shall deliver to Purchaser a copy of the Partnership Agreement, signed by each of the partners except Purchaser, the form of which is attached hereto as Exhibit A.

(d) Officer’s Certificate. An authorized officer of Seller shall have delivered to Purchaser at the Closing a certificate stating that all approvals necessary to consummate the transactions contemplated by this Agreement have been obtained and attaching thereto: (i) a copy of the Certificate, certified by the Michigan Department of Labor and Economic Growth and certified by the general partner of Seller as the true and correct copy of the Certificate as of the Closing; (ii) a copy of the Second Amended and Restated Agreement of Limited Partnership (the “Second Partnership Agreement”), dated as of February 1, 2003, certified by the general partner of Seller as the true and correct copy of the Second Partnership Agreement as of the Closing; (iii) a copy of the consent of the Executive Committee of Seller, evidencing the approval of this Agreement and the transactions contemplated hereby; and (iv) a copy of the waiver by each of the Partners of Seller, waiving their respective preemptive rights to acquire the Additional Partnership Interest under the Partnership Agreement.

(e) Legal opinion of Seller’s Counsel. Seller shall deliver, or shall cause to be delivered, a legal opinion from Barnes and Thornburg LLP, counsel to Seller, with respect to Section 3.1 of the Agreement, in form and substance acceptable to Purchaser in its reasonable discretion.

(f) Third-Party Consents. Any and all consents or waivers required from third parties relating to the performance by Seller of its obligations hereunder shall have been obtained.

(g) No Actions or Proceedings. No claim, action, suit, investigation or proceeding shall be pending or threatened before any court or governmental agency which presents a substantial risk of the restraint or prohibition of the transactions contemplated by this Agreement.

(h) Management Incentive Plan. Seller shall have adopted a management equity incentive plan containing terms reasonably acceptable to Purchaser, substantially in the form of Exhibit B attached hereto.

5.2 Conditions to Obligations of Seller.

(a) Representations, Warranties of Purchaser. The representations and warranties of Purchaser contained in this Agreement shall be true and correct as of the date hereof.

(b) Agreements and Covenants. Purchaser shall have performed and complied in all material respects with each agreement, covenant and obligation required by this Agreement to be so performed or complied with by Purchaser at or before the Closing, including payment of the Purchase Price as specified in Section 2.2.

(c) Partnership Agreement. Seller shall have received Purchaser’s signature to the Partnership Agreement, the form of which is attached hereto as Exhibit A.

(d) Third-Party Consents. Any and all consents or waivers required from third parties relating to the performance by Purchaser of its obligations hereunder shall have been obtained.

(e) No Actions or Proceedings. No claim, action, suit, investigation or proceeding shall be pending or threatened before any court or governmental agency which presents a substantial risk of the restraint or prohibition of the transactions contemplated by this Agreement.

(f) Management Incentive Plan. Purchaser shall have approved a management equity incentive plan containing terms reasonably acceptable to Seller, substantially in the form of Exhibit B attached hereto.

ARTICLE VI

POST-CLOSING COVENANTS

6.1 Post-Closing Notifications. Purchaser and Seller will, and each will cause their respective Affiliates to, comply with any post-Closing notification or other requirements, to the extent then applicable to such party, of any antitrust, trade competition, investment or control, export or other Law of any Governmental Entity having jurisdiction over Purchaser or Seller.

6.2 Certain Tax Matters. All sales, use, transfer, stamp, conveyance, value added or other similar taxes, duties, excises or governmental charges imposed by any Governmental Entity with taxing authority, domestic or foreign, and all recording or filing fees, notarial fees and other similar costs of Closing with respect to the transfer of the Additional Partnership Interest or otherwise on account of this Agreement or the transactions contemplated hereby will be borne in equal shares by Seller and Purchaser.

6.3 Further Assurances. Subject to the terms of this Agreement, each of Purchaser and Seller shall execute such documents and other instruments and take such further actions as may be reasonably required to carry out the provisions hereof and consummate the Acquisition.

ARTICLE VII

TERMINATION

7.1 Termination.

(a) This Agreement may be terminated and the Acquisition abandoned at any time prior to the Closing:

(i) by mutual written consent of Purchaser and Seller;

(ii) by Purchaser or Seller if:

(A) the Closing does not occur on or before October 5, 2007; provided that the right to terminate this Agreement under this clause (ii)(A) shall not be available to any party whose breach of a representation, warranty, covenant or agreement under this Agreement has been the cause of or resulted in the failure of the Closing to occur on or before such date; or

(B) a Governmental Entity shall have issued an Order or taken any other action, in any case having the effect of permanently restraining, enjoining or otherwise prohibiting the Acquisition, which Order or other action is final and non-appealable;

(iii) by Purchaser if any condition to the obligations of Purchaser hereunder becomes incapable of fulfillment other than as a result of a breach by Purchaser of any covenant or agreement contained in this Agreement, and such condition is not waived by Purchaser; or

(iv) by Seller if any condition to the obligations of Seller hereunder becomes incapable of fulfillment other than as a result of a breach by Seller of any covenant or agreement contained in this Agreement, and such condition is not waived by Seller.

(b) The party desiring to terminate this Agreement pursuant to Section 7.1(a)(ii), (iii), or (iv) shall give written notice of such termination to the other party hereto in the manner provided in this Agreement.

7.2 Effect of Termination. In the event of termination of this Agreement as provided in Section 7.1, this Agreement shall immediately become null and void and there shall be no liability or obligation on the part of any party hereto or their respective officers, directors, stockholders, members or Affiliates, except as set forth in Section 7.3; provided that the provisions of Section 7.3 and Article VIII of this Agreement shall remain in full force and effect and survive any termination of this Agreement.

7.3 Remedies. Any party terminating this Agreement pursuant to Section 7.1 shall have the right to recover damages sustained by such party as a result of any breach by the other party of any representation, warranty, covenant or agreement contained in this Agreement or fraud or willful misrepresentation; provided, however, that the party seeking relief is not in breach of any representation, warranty, covenant or agreement contained in this Agreement under circumstances which would have permitted the other party to terminate the Agreement under Section 7.1.

ARTICLE VIII

INDEMNIFICATION

8.1 Survival.

(a) All representations and warranties contained in this Agreement, or in any schedule, certificate or other document delivered pursuant to this Agreement, shall terminate upon the Closing.

(b) The covenants and agreements which by their terms do not contemplate performance after the Closing Date shall survive the Closing for a period of two (2) years. The covenants and agreements which by their terms contemplate performance after the Closing Date shall survive the Closing in accordance with their terms until sixty (60) days following the expiration of any applicable statute of limitations.

8.2 Indemnification.

(a) Seller shall indemnify, defend and hold harmless Purchaser from and against any and all Losses based upon, arising out of, in connection with, or relating to any inaccuracy or breach of any representation, warranty, covenant or agreement of Seller contained in this Agreement or other documents delivered by Seller pursuant to this Agreement.

(b) Purchaser shall indemnify, defend and hold harmless Seller from and against any and all Losses based upon, arising out of, in connection with, or relating to any inaccuracy or breach of any representation, warranty, covenant or agreement of Purchaser contained in this Agreement or other documents delivered by Purchaser pursuant to this Agreement.

8.3 Notice and Opportunity to Defend.

(a) Promptly after receipt by any party hereto (the “Indemnitee”) of notice of any demand, claim or circumstances which gives rise or might give rise to a claim or the commencement (or threatened commencement) of any action, proceeding or investigation (an “Asserted Liability”) that may result in Losses, the Indemnitee shall give notice thereof to the party obligated to provide indemnification pursuant to Section 8.2 (the “Indemnifying Party”). Such notice shall describe the Asserted Liability in reasonable detail, and shall indicate the amount (estimated, if necessary) of the Losses that have been or may be suffered by the Indemnitee.

(b) The Indemnifying Party may elect to compromise or defend, at its own expense and by its own counsel, any Asserted Liability. If the Indemnifying Party elects to compromise or defend such Asserted Liability, it shall within thirty (30) days (or sooner, if the nature of the Asserted Liability so requires) notify the Indemnitee of its intent to do so, and the Indemnitee shall cooperate, at the expense of the Indemnifying Party, in the compromise of, or defense against, such Asserted Liability. If the Indemnifying Party elects not to compromise or defend the Asserted Liability, fails to notify the Indemnitee of its election as herein provided, or contests its obligation to indemnify under this Agreement, the Indemnitee may pay, compromise or defend such Asserted Liability. Notwithstanding the foregoing, neither the Indemnifying Party nor the Indemnitee may settle or compromise any claim over the objection of the other; provided, however, that consent to settlement or compromise shall not be unreasonably withheld, conditioned or delayed. In any event, the Indemnitee and the Indemnifying Party may participate at their own expense in the defense of such Asserted Liability. Each party shall make available to the other party choosing to defend such Asserted Liability any books, records or other documents within its control that are necessary or appropriate for such defense.

8.4 Contingent Claims. Nothing herein shall be deemed to prevent an Indemnitee from making a claim hereunder for potential or contingent claims or demands; provided that any notice of Asserted Liability sets forth the specific basis for any such contingent claim to the extent then feasible and the Indemnitee has reasonable grounds to believe that such a claim may be made.

8.5 Tax Treatment of Indemnification Payments. Except as otherwise required by applicable Law, the parties shall treat any indemnification payment made hereunder as an adjustment to Purchase Price.

8.6 Exclusive Remedy. The indemnification rights of the parties under this Article VIII shall be the sole and exclusive remedy for any misrepresentation, breach of warranty or failure to fulfill any agreement or covenant hereunder on the part of any party hereto.

ARTICLE IX

MISCELLANEOUS

9.1 Notices. Any notice, request, demand, waiver, consent, approval or other communication which is required or permitted hereunder shall be in writing and shall be deemed given (a) on the date the same has been delivered personally, (b) on the date delivered by a private courier as established by the sender by evidence obtained from the courier, (c) on the date sent by facsimile, with confirmation of transmission, if sent during normal business hours of the recipient, if not, then on the next Business Day, or (d) on the fifth (5^th) day after the date mailed, by certified or registered mail, return receipt requested, postage prepaid. Such communications, to be valid, must be addressed as follows:

If to Purchaser, to:

Hallador Petroleum Company

1660 Lincoln Street, Suite 2700

Denver, Colorado 80264

Attn: Victor Stabio

Facsimile: 303.832.3013

With a copy to:

Morgan, Lewis & Bockius LLP

300 S. Grand Avenue, Suite 2200

Los Angeles, California 90071

Attn: Ingrid A. Myers, Esq.

Facsimile: 213.612.2501

If to Seller, to:

Savoy Energy Limited Partnership

c/o Savoy Exploration, Inc.

148 East Front Street, Suite 301

Traverse City, Michigan 49684

Attn: Thomas C. Pangborn

Facsimile: 231.941.9885

With a copy to:

Barnes & Thornburg LLP

300 Ottawa Avenue N.W.

Grand Rapids, Michigan 49503

Attn: Robert R. Stead, Esq.

Facsimile: 616.742.3999

or to such other address or to the attention of such Person or Persons as the recipient party has specified by prior written notice to the sending party (or in the case of counsel, to such other readily ascertainable business address as such counsel may hereafter maintain). If more than one method for sending notice as set forth above is used, the earliest notice date established as set forth above shall control.

9.2 Amendments and Waivers.

(a) Any provision of this Agreement may be amended or waived if, and only if, such amendment or waiver is in writing and is signed, in the case of an amendment, by each party to this Agreement, or in the case of a waiver, by the party against whom the waiver is to be effective.

(b) No failure or delay by any party in exercising any right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege.

(c) To the maximum extent permitted by Law, (i) no waiver that may be given by a party shall be applicable except in the specific instance for which it was given and (ii) no notice to or demand on one party shall be deemed to be a waiver of any obligation of such party or the right of the party giving such notice or demand to take further action without notice or demand.

9.3 Expenses. Each party shall bear its own costs and expenses in connection with this Agreement and the transactions contemplated by this Agreement, including all legal, accounting, financial advisory, consulting and all other fees and expenses of third parties, whether or not the Acquisition is consummated.

9.4 Successors and Assigns. This Agreement may not be assigned by either party hereto without the prior written consent of the other party. Subject to the foregoing, all of the terms and provisions of this Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors and assigns.

9.5 Governing Law. This Agreement and the Exhibits and Schedules hereto shall be governed by and interpreted and enforced in accordance with the Laws of the State of Michigan, without giving effect to any choice of Law or conflict of Laws rules or provisions (whether of the State of Michigan or any other jurisdiction) that would cause the application of the Laws of any jurisdiction other than the State of Michigan.

9.6 Consent to Jurisdiction. Each party irrevocably submits to the exclusive jurisdiction of the United States District Court for the Western District of Michigan in connection with any action, suit or proceeding arising out of or relating to this Agreement or any breach thereof, or any transaction contemplated hereby, unless such court would not have subject matter jurisdiction thereof, in which event the parties consent to the exclusive jurisdiction of the courts of the State of Michigan, located in Grand Traverse County. Each party further agrees that service of any process, summons, notice or document by U.S. registered mail to such party’s respective address set forth above shall be effective service of process for any action, suit or proceeding. Each party irrevocably and unconditionally waives any objection to the laying of venue of any action, suit or proceeding arising out of this Agreement or the Acquisition and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum. EACH PARTY HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE ACTIONS OF SUCH PARTY IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT HEREOF.

9.7 Counterparts. This Agreement may be executed in counterparts, and either party hereto may execute any such counterpart, each of which when executed and delivered shall be deemed to be an original and both of which counterparts taken together shall constitute but one and the same instrument. This Agreement shall become effective when each party hereto shall have received a counterpart hereof signed by the other party hereto. The parties agree that the delivery of this Agreement may be effected by means of an exchange of facsimile signatures with original copies to follow by mail or courier service.

9.8 Third Party Beneficiaries. No provision of this Agreement is intended to confer upon any Person other than the parties hereto any rights or remedies hereunder; except that in the case of Article VIII hereof, the Indemnitees and their respective heirs, executors, administrators, legal representatives, successors and assigns, are intended third party beneficiaries of such sections and shall have the right to enforce such sections in their own names.

9.9 Entire Agreement. This Agreement and the documents, instruments and other agreements specifically referred to herein or delivered pursuant hereto set forth the entire understanding of the parties hereto with respect to the Acquisition. All schedules, exhibits and attachments referred to herein are intended to be and hereby are specifically made a part of this Agreement. Any and all previous agreements and understandings between or among the parties regarding the subject matter hereof, whether written or oral, are superseded by this Agreement.

9.10 Captions. All captions contained in this Agreement are for convenience of reference only, do not form a part of this Agreement and shall not affect in any way the meaning or interpretation of this Agreement.

9.11 Severability. Any provision of this Agreement which is invalid or unenforceable in any jurisdiction shall be ineffective to the extent of such invalidity or unenforceability without invalidating or rendering unenforceable the remaining provisions hereof, and any such invalidity or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

9.12 Interpretation.

(a) The meaning assigned to each term defined herein shall be equally applicable to both the singular and the plural forms of such term and vice versa, and words denoting either gender shall include both genders as the context requires. Where a word or phrase is defined herein, each of its other grammatical forms shall have a corresponding meaning.

(b) The terms “hereof”, “herein” and “herewith” and words of similar import shall, unless otherwise stated, be construed to refer to this Agreement as a whole and not to any particular provision of this Agreement.

(c) When a reference is made in this Agreement to an Article, Section, paragraph, Exhibit or Schedule, such reference is to an Article, Section, paragraph, Exhibit or Schedule to this Agreement unless otherwise specified.

(d) The word “include”, “includes”, and “including” when used in this Agreement shall be deemed to be followed by the words “without limitation”, unless otherwise specified.

(e) A reference to any party to this Agreement or any other agreement or document shall include such party’s predecessors, successors and permitted assigns.

(f) Reference to any Law means such Law as amended, modified, codified, replaced or reenacted, and all rules and regulations promulgated thereunder.

(g) The parties have participated jointly in the negotiation and drafting of this Agreement. Any rule of construction or interpretation otherwise requiring this Agreement to be construed or interpreted against any party by virtue of the authorship of this Agreement shall not apply to the construction and interpretation hereof.

1-LA/947404.9

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the date first above written.

PURCHASER:

HALLADOR PETROLEUM COMPANY

By: /s/ Victor P. Stabio

Name: Victor P. Stabio

Title: Chief Executive Officer and President

SELLER:

SAVOY ENERGY LIMITED PARTNERSHIP

By: Savoy Exploration, Inc.

Its: General Partner

By: /s/ Thomas C. Pangborn

Name: Thomas C. Pangborn

Title: Chief Executive Officer

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