HALLADOR PETROLEUM COMPANY RESTRICTED STOCK UNIT ISSUANCE AGREEMENT

A.   The Corporation has adopted the 2008 Restricted Stock Unit Plan (the “Plan”), attached hereto as Exhibit A , pursuant to which the Corporation is authorized to grant to certain employees of the Company Restricted Stock Units, giving such recipient the right to receive shares of Common Stock of the Company upon vesting.

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

C.   All capitalized terms in this Agreement and not otherwise defined herein shall have the meaning assigned to them in the attached Appendix A .

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.

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 Plan Administrator 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 Plan Administrator deems appropriate in order to reflect such change and thereby preclude a dilution or enlargement of benefits hereunder.  The determination of the Plan Administrator 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 eve