PURCHASE AND SALE AGREEMENT

Exhibit 10.1

PURCHASE AND SALE AGREEMENT

BY AND BETWEEN

HALLADOR PETROLEUM COMPANY

(a Colorado corporation)

and

[                                                ]

(a [                                ])

with respect to

SUNRISE COAL, LLC

(an Indiana limited liability company)

dated

as of September        , 2009

PURCHASE AND SALE AGREEMENT

This Purchase and Sale Agreement (this “ Agreement ”) is made and entered into as of September __, 2009, by and between [                                               ], a [                              ] (“ Seller ”) and Hallador Petroleum Company, a Colorado corporation (“ Purchaser ”).

RECITALS

WHEREAS, Seller and Purchaser are each members of Sunrise Coal, LLC, an Indiana limited liability company (“ Sunrise ”).

WHEREAS, Seller and Purchaser and the other members of Sunrise are each a party to the Amended and Restated Operating Agreement of Sunrise dated as of July 31, 2006, as amended to date (the “ Operating Agreement ”).  Capitalized terms used and not otherwise defined herein shall have the meaning provided in the Operating Agreement. 

WHEREAS, subject to payment of the Purchase Price by Purchaser to Seller and the other terms and conditions set forth herein, Seller desires to sell to Purchaser and Purchaser desires to purchase from Seller (i) all of the Common Units in Sunrise held by Seller, which represent the percentage membership interest of Sunrise set forth in the column corresponding to the name of Seller on Exhibit A (the “ Membership Interest ”), and (ii) all Unreturned Capital Balance (the “ Unreturned Capital Balance ”), all Unsatisfied Preferred Return (the “ Unsatisfied Preferred Return ”) and the future rights to receive any Preferred Returns, in each case accompanying such Membership Interest of Seller, and (iii) all rights of Seller as a member of the Sunrise pursuant to the Operating Agreement. 

WHEREAS, the accrued cash value of Seller’s Unreturned Capital Balance and Unsatisfied Preferred Return are also set forth in the column corresponding to the name of Seller on Exhibit A.

NOW, THEREFORE, in consideration of the premises and for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Seller and Purchaser agree as follows:

ARTICLE 1

PURCHASE AND SALE

1.1               Agreement to Purchase and Sell .  Upon the terms and subject to the satisfaction of the conditions contained herein, Seller hereby (a) agrees to assign, transfer, convey and deliver to Purchaser, and Purchaser agrees to accept the assignment, transfer and conveyance to it of the Membership Interest, and (b) agrees to sell, assign, transfer and convey or cause the sale, assignment, transfer or conveyance to Purchaser of the Unreturned Capital Balance, the Unsatisfied Preferred Return and any future rights to receive Preferred Returns in accordance with the Operating Agreement. Upon the terms and subject to the satisfaction of the conditions contained herein, Purchaser hereby agrees to assume all of the obligations of Seller with respect to the Membership Interest as of the Closing Date and to purchase and accept the sale, assignment, transfer and conveyance to Purchaser of the Unreturned Capital Balance, the Unsatisfied Preferred Return and any future rights to receive Preferred Returns pursuant to the Operating Agreement.

1.2               Purchase Price .  At the Closing, Purchaser shall pay to Seller, for the transfer and sale to Purchaser of the Membership Interest, the Unreturned Capital Balance, the Unsatisfied Preferred Return and any future rights to receive Preferred Returns, an aggregate amount equal to [                                  ] Dollars ($[                               ]) (the “ Purchase Price ”).  The portion of the Purchase Price to be paid for the Membership Interest (which shall include the right to receive any furture Preferred Return) shall be composed of One Million Five Hundred Thousand Dollars ($1,500,000.00) of value for each percent of Membership Interest sold and transferred to Purchaser hereunder, pro-rated as applicable, and shall be paid in the form of cash and shares of common stock, par value $0.01, of Purchaser (“ HPCo common stock ”) as follows: [                                     ] Dollars ($[       ]) of immediately available cash and [                 ] shares of HPCo common stock (which are valued at $6.00 per share for purposes of this Agreement), free and clear of all liens, pledges, charges, security interests, adverse claims or other encumbrances other than restrictions on future sale, assignment, disposition or transfer of such shares of HPCo common stock imposed by applicable federal and state securities laws (the “ Stock Consideration ”). The portion of the Purchase Price to be paid for the Unreturned Capital Balance and the Unsatisfied Preferred Return shall be paid in immediately available cash (such cash, along with the cash paid in respect of the Membership Interest, being the “ Cash Consideration ”). 

1.3               Closing .  Subject to the satisfaction of each of the conditions precedent to the Closing set forth in Article 4 , or the waiver of such condition by the relevant party, the closing of the transactions contemplated hereunder (the “ Closing ”) shall take place at 8:00 a.m. Pacific time on September 16, 2009 or such later date as Purchaser notifies Seller that the Closing will occur (the “ Closing Date ”), at the offices of Morgan, Lewis & Bockius LLP, 300 South Grand Avenue, 22nd Floor, Los Angeles, California 90071, or at such other place as mutually agreed upon between Purchaser and Seller. 

1.4               Closing Deliveries . 

(a)                 At the Closing, Seller will deliver, or cause to be delivered to Purchaser:

(i)                   The certificate representing the Membership Interest or an Affidavit of Lost Certificate (the “ Affidavit ”) in the form attached hereto as Exhibit B;

(ii)                 An assignment of the Membership Interest, the Unreturned Capital Balance, the Unsatisfied Preferred Return and any future rights to receive Preferred Returns, in favor of Purchaser, in a form reasonably satisfactory to Purchaser;

(iii)                If applicable, the Spousal Consent (the “ Spousal Consent ”), substantially in the form attached hereto as Exhibit C , executed by Seller’s spouse; and

(iv)               The Accredited Investor Questionnaire substantially in the form attached hereto as Exhibit D .

(b)                At the Closing, Purchaser will deliver, or cause to be delivered:

(i)                   to Seller, the Cash Consideration; and

(ii)                 either (A) a certificate representing the Stock Consideration to Seller, or (B) an instruction letter to Purchaser’s transfer agent instructing the transfer agent to record the issuance of the Stock Consideration to Seller in the transfer agents direct registration system. 

ARTICLE 2

REPRESENTATIONS AND WARRANTIES OF SELLER

Seller hereby represents and warrants to Purchaser as follows:

2.1               Authority; Binding Obligations .  Seller has the full legal capacity and authority to enter into this Agreement and has entered into this Agreement as its own free act.  This Agreement (a) has been duly executed and delivered by Seller, and (b) assuming the due execution and delivery thereof by the other parties hereto, constitutes legal, valid and binding obligations of Seller, enforceable in accordance with its terms, except as the same may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws in effect from time to time relating to or affecting the enforcement of creditors’ rights generally and by general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law).

2.2               Title; Liens .  Except as set forth on Schedule 2.2 hereto, Seller is the owner of the Membership Interest, the Unreturned Capital Balance, the Unsatisfied Preferred Return and any future rights to receive Preferred Returns, free and clear of all liens, pledges and encumbrances, other than those restrictions imposed by applicable federal and state securities laws.  At the Closing, Seller will deliver, or cause to be delivered to Purchaser good and valid title to the Membership Interest, the Unreturned Capital Balance, the Unsatisfied Preferred Return and any future rights to receive Preferred Returns, free and clear of all liens, pledges or encumbrances, other than those restrictions imposed by applicable federal and state securities laws.

2.3               No Bankruptcy .  No voluntary proceeding or petition has been instituted by Seller and no proceeding has been instituted or, to Seller’s knowledge, been threatened to be instituted against Seller under the bankruptcy laws of the United States or any other country or any political subdivision thereof.  Seller has not made any assignment of any assets or properties for the benefit of creditors, consented to the appointment of a receiver or trustee for any assets or properties, been adjudicated bankrupt or made a bulk sale or taken any action which contemplates the making of a bulk sale.  No court has entered any order appointing a receiver or trustee for any assets or properties of Seller or has assumed the custody of or sequestered any assets or properties of Seller and no attachment has been made on any assets or properties of Seller.

2.4               Independent Decision to Sell; Certain Grants of Restricted Stock Units .  Seller acknowledges that he or she has independently and without reliance upon Purchaser made its own analysis and decision to sell the Membership Interest, the Unreturned Capital Balance, the Unsatisfied Preferred Return and any future rights to receive Preferred Returns to Purchaser.  Seller further acknowledges that Purchaser may possess material non-public information not known to Seller regarding or relating to Sunrise, and Seller acknowledges that it has not requested such information and agrees that the Purchaser shall have no liability whatsoever (and Seller hereby waives and releases all claims which it would otherwise have) with respect to the non-disclosure of such information either prior to the date hereof or subsequent hereto.  Seller also acknowledges that in connection with the transactions contemplated by this Agreement, Brent K. Bilsland will become an officer and a member of the Board of Directors of Hallador, and that Hallador may in the future grant cash or equity awards to Brent K. Bilsland in connection with his service to Hallador.

2.5               Purchase for Investment .  The Stock Consideration that Seller will receive hereunder as part of the Purchase Price is being acquired for investment only and not with a view to any public distribution thereof.  Seller shall not offer to sell or otherwise dispose of, or sell or otherwise dispose of, such Stock Consideration in violation of any of the registration requirements of the Securities Act of 1933, as amended, or any applicable state securities laws. 

2.6               No Registration .  Seller acknowledges that the Stock Consideration that Seller will receive hereunder has not been registered under the Securities Act of 1933, as amended, and are being issued to Seller in reliance upon the exemption from such registration provided by Section 4(2) of the Securities Act of 1933, as amended, and exemptions available under applicable state securities laws.  Seller has been informed that the Stock Consideration that Seller will receive hereunder consists of “restricted securities” under the Securities Act of 1933, as amended, and may not be resold or transferred unless it is first registered under the federal securities laws or unless an exemption from such registration is available.  Accordingly, Seller hereby acknowledges that Seller is prepared to hold the Stock Consideration to be acquired by it hereunder for an indefinite period.

2.7               Restricted Legend .  Seller acknowledges that the certificates or entries in the transfer agent’s direct registration system evidencing the Stock Consideration hereunder will bear the following legend, which shall be in addition to any other legends required by law or contract:

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

2.9               Seller’s Investigation .  Seller, either alone or together with Seller’s advisors (if any), has made such independent investigation of Purchaser, its management and related matters as Seller deems to be, or such advisors (if any) have advised to be, necessary or advisable in connection with an investment in the Stock Consideration.  Seller