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EXHIBIT 10.2

CONTINUING AGREEMENT OF GUARANTY AND SURETYSHIP

THIS CONTINUING AGREEMENT OF GUARANTY AND SURETYSHIP (this "Guaranty"), dated as
of this 12th day of December, 2008, is given by HALLADOR PETROLEUM COMPANY
("HALLADOR"), AND JOINTLY AND SEVERALLY BY EACH OF THE OTHER PERSONS WHICH
BECOME GUARANTORS HEREUNDER FROM TIME TO TIME (each a "Guarantor" and
collectively with Hallador (except as otherwise noted) the "Guarantors") in
favor of PNC BANK, NATIONAL ASSOCIATION, as administrative agent for the Lenders
(the "Administrative Agent") in connection with that Credit Agreement, dated as
of even date herewith, by and among Sunrise Coal, LLC, an Indiana limited
liability company (the "Borrower"), the Administrative Agent, the Lenders now or
hereafter party thereto (the "Lenders") and the Guarantors (as amended,
restated, modified, or supplemented from time to time hereafter, the "Credit
Agreement").  Capitalized terms not otherwise defined herein shall have the
respective meanings ascribed to them by the Credit Agreement and the rules of
construction set forth in Section 1.2 [Construction] of the Credit Agreement
shall apply to this Guaranty.
 
1. Guarantied Obligations.  To induce the Administrative Agent and the Lenders
to make loans and grant other financial accommodations to the Borrower under the
Credit Agreement, each Guarantor hereby jointly and severally unconditionally,
and irrevocably, guaranties to the Administrative Agent, each Lender and any
provider of a Lender Provided Interest Rate Hedge or any provider of Other
Lender Provided Financial Service Products; and becomes surety, as though it was
a primary obligor for, the full and punctual payment and performance when due
(whether on demand, at stated maturity, by acceleration, or otherwise and
including any amounts which would become due but for the operation of an
automatic stay under the federal bankruptcy code of the United States or any
similar laws of any country or jurisdiction) of all Obligations, including,
without limiting the generality of the foregoing, all obligations, liabilities,
and indebtedness from time to time of the Borrower or any other Guarantor to the
Administrative Agent or any of the Lenders or any Affiliate of any Lender under
or in connection with the Credit Agreement or any other Loan Document, whether
for principal, interest, fees, indemnities, expenses, or otherwise, and all
refinancings or refundings thereof, whether such obligations, liabilities, or
indebtedness are direct or indirect, secured or unsecured, joint or several,
absolute or contingent, due or to become due, whether for payment or
performance, now existing or hereafter arising (and including obligations,
liabilities, and indebtedness arising or accruing after the commencement of any
bankruptcy, insolvency, reorganization, or similar proceeding with respect to
the Borrower or any Guarantor or which would have arisen or accrued but for the
commencement of such proceeding, even if the claim for such obligation,
liability, or indebtedness is not enforceable or allowable in such proceeding,
and including all Obligations, liabilities, and Indebtedness arising from any
extensions of credit under or in connection with any Loan Document from time to
time, regardless of whether any such extensions of credit are in excess of the
amount committed under or contemplated by the Loan Documents or are made in
circumstances in which any condition to extension of credit is not satisfied)
(all of the foregoing obligations, liabilities and indebtedness are referred to
herein collectively as the "Guarantied Obligations" and each as a "Guarantied
Obligation").  Without limitation of the foregoing, any of the Guarantied
Obligations shall be and remain Guarantied Obligations entitled to the benefit
of this Guaranty if the Administrative Agent or any of the Lenders (or any one
or more assignees or transferees thereof) from time to time assign or otherwise
transfer all or any portion of their respective rights and obligations under the
Loan Documents, or any other Guarantied Obligations, to any other Person.  In
furtherance of the foregoing, Hallador individually, and each other Guarantor
jointly and severally agrees as follows.
 
2. Guaranty.  Each Guarantor hereby promises to pay and perform all such
Guarantied Obligations immediately upon demand of the Administrative Agent and
the Lenders or any one or more of them (if such Guarantied Obligations are then
due and payable).  All payments made hereunder shall be made by each Guarantor
in immediately available funds in U.S. Dollars and shall be made without setoff,
counterclaim, withholding, or other deduction of any nature.
 
3. Obligations Absolute.  The obligations of the Guarantors hereunder shall not
be discharged or impaired or otherwise diminished by the failure, default,
omission, or delay, willful or otherwise, by any Lender, the Administrative
Agent, or any Borrower or any other obligor on any of the Guarantied
Obligations, or by any other act or thing or omission or delay to do any other
act or thing which may or might in any manner or to any extent vary the risk of
any Guarantor or would otherwise operate as a discharge of any Guarantor as a
matter of law or equity.  Each of the Guarantors agrees that the Guarantied
Obligations will be paid and performed strictly in accordance with the terms of
the Loan Documents.  Without limiting the generality of the foregoing, each
Guarantor hereby consents to, at any time and from time to time, and the joint
and several obligations of each Guarantor hereunder shall not be diminished,
terminated, or otherwise similarly affected by any of the following:
 
(a) Any lack of genuineness, legality, validity, enforceability or allowability
(in a bankruptcy, insolvency, reorganization or similar proceeding, or
otherwise), or any avoidance or subordination, in whole or in part, of any Loan
Document or any of the Guarantied Obligations and regardless of any law,
regulation or order now or hereafter in effect in any jurisdiction affecting any
of the Guarantied Obligations, any of the terms of the Loan Documents, or any
rights of the Administrative Agent or the Lenders or any other Person with
respect thereto;
 
(b) Any increase, decrease, or change in the amount, nature, type or purpose of
any of, or any release, surrender, exchange, compromise or settlement of any of
the Guarantied Obligations (whether or not contemplated by the Loan Documents as
presently constituted); any change in the time, manner, method, or place of
payment or performance of, or in any other term of, any of the Guarantied
Obligations; any execution or delivery of any additional Loan Documents; or any
amendment, modification or supplement to, or refinancing or refunding of, any
Loan Document or any of the Guarantied Obligations;
 
(c) Any failure to assert any breach of or default under any Loan Document or
any of the Guarantied Obligations; any extensions of credit in excess of the
amount committed under or contemplated by the Loan Documents, or in
circumstances in which any condition to such extensions of credit has not been
satisfied; any other exercise or non-exercise, or any other failure, omission,
breach, default, delay, or wrongful action in connection with any exercise or
non-exercise, of any right or remedy against the Borrower or any other Person
under or in connection with any Loan Document or any of the Guarantied
Obligations; any refusal of payment or performance of any of the Guarantied
Obligations, whether or not with any reservation of rights against any
Guarantor; or any application of collections (including but not limited to
collections resulting from realization upon any direct or indirect security for
the Guarantied Obligations) to other obligations, if any, not entitled to the
benefits of this Guaranty, in preference to Guarantied Obligations entitled to
the benefits of this Guaranty, or if any collections are applied to Guarantied
Obligations, any application to particular Guarantied Obligations;
 
(d) Any taking, exchange, amendment, modification, waiver, supplement,
termination, subordination, compromise, release, surrender, loss, or impairment
of, or any failure to protect, perfect, or preserve the value of, or any
enforcement of, realization upon, or exercise of rights, or remedies under or in
connection with, or any failure, omission, breach, default, delay, or wrongful
action by the Administrative Agent or the Lenders, or any of them, or any other
Person in connection with the enforcement of, realization upon, or exercise of
rights or remedies under or in connection with, or, any other action or inaction
by the Administrative Agent or the Lenders, or any of them, or any other Person
in respect of, any direct or indirect security for any of the Guarantied
Obligations.  As used in this Guaranty, "direct or indirect security" for the
Guarantied Obligations, and similar phrases, includes any collateral security,
guaranty, suretyship, letter of credit, capital maintenance agreement, put
option, subordination agreement, or other right or arrangement of any nature
providing direct or indirect assurance of payment or performance of any of the
Guarantied Obligations, made by or on behalf of any Person;
 
(e) Any merger, consolidation, liquidation, dissolution, winding-up, charter
revocation, or forfeiture, or other change in, restructuring or termination of
the corporate structure or existence of, the Borrower or any other Person; any
bankruptcy, insolvency, reorganization or similar proceeding with respect to the
Borrower or any other Person; or any action taken or election made by the
Administrative Agent or the Lenders, or any of them (including but not limited
to any election under Section 1111(b)(2) of the United States Bankruptcy Code),
the Borrower, or any other Person in connection with any such proceeding;
 
(f) Any defense, setoff, or counterclaim which may at any time be available to
or be asserted by the Borrower or any other person with respect to any Loan
Document or any of the Guarantied Obligations; or any discharge by operation of
law or release of the Borrower or any other Person from the performance or
observance of any Loan Document or any of the Guarantied Obligations; or
 
(g) Any other event or circumstance, whether similar or dissimilar to the
foregoing, and whether known or unknown, which might otherwise constitute a
defense available to, or limit the liability of, any Guarantor, a guarantor or a
surety, excepting only full, strict, and indefeasible payment and performance of
the Guarantied Obligations.
 
Each Guarantor acknowledges, consents, and agrees that new Guarantors may join
in this Guaranty pursuant to Section 8.2.9 [Subsidiaries, Partnerships and Joint
Ventures] of the Credit Agreement and each Guarantor affirms that its
obligations shall continue hereunder undiminished.
 
4. Waivers, etc.  Each of the Guarantors hereby waives any defense to or
limitation on its obligations under this Guaranty arising out of or based on any
event or circumstance referred to in Section 3 hereof.  Without limitation and
to the fullest extent permitted by applicable law, each Guarantor waives each of
the following:
 
(a) All notices, disclosures and demand of any nature which otherwise might be
required from time to time to preserve intact any rights against any Guarantor,
including the following:  any notice of any event or circumstance described in
Section 3 hereof; any notice required by any law, regulation or order now or
hereafter in effect in any jurisdiction; any notice of nonpayment,
nonperformance, dishonor, or protest under any Loan Document or any of the
Guarantied Obligations; any notice of the incurrence of any Guarantied
Obligation; any notice of any default or any failure on the part of the Borrower
or any other Person to comply with any Loan Document or any of the Guarantied
Obligations or any direct or indirect security for any of the Guarantied
Obligations; and any notice of any information pertaining to the business,
operations, condition (financial or otherwise) or prospects of the Borrower or
any other Person;
 
(b) Any right to any marshalling of assets, to the filing of any claim against
the Borrower or any other Person in the event of any bankruptcy, insolvency,
reorganization or similar proceeding, or to the exercise against the Borrower or
any other Person of any other right or remedy under or in connection with any
Loan Document or any of the Guarantied Obligations or any direct or indirect
security for any of the Guarantied Obligations; any requirement of promptness or
diligence on the part of the Administrative Agent or the Lenders, or any of
them, or any other Person; any requirement to exhaust any remedies under or in
connection with, or to mitigate the damages resulting from default under, any
Loan Document or any of the Guarantied Obligations or any direct or indirect
security for any of the Guarantied Obligations; any benefit of any statute of
limitations; and any requirement of acceptance of this Guaranty or any other
Loan Document, and any requirement that any Guarantor receive notice of any such
acceptance;
 
(c) Any defense or other right arising by reason of any law now or hereafter in
effect in any jurisdiction pertaining to election of remedies (including but not
limited to anti-deficiency laws, "one action" laws or the like), or by reason of
any election of remedies or other action or inaction by the Administrative Agent
or the Lenders, or any of them (including but not limited to commencement or
completion of any judicial proceeding or nonjudicial sale or other action in
respect of collateral security for any of the Guarantied Obligations), which
results in denial or impairment of the right of the Administrative Agent or the
Lenders, or any of them, to seek a deficiency against the Borrower or any other
Person or which otherwise discharges or impairs any of the Guarantied
Obligations; and
 
(d) Any and all defenses it may now or hereafter have based on principles of
suretyship, impairment of collateral, or the like.
 
5. Reinstatement.  This Guaranty is a continuing obligation of the Guarantors
and shall remain in full force and effect notwithstanding that no Guarantied
Obligations may be outstanding from time to time and notwithstanding any other
event or circumstance.  Upon termination of all Commitments, the expiration of
all Letters of Credit and indefeasible payment in full of all Guarantied
Obligations, this Guaranty shall terminate; provided, however, that this
Guaranty shall continue to be effective or be reinstated, as the case may be,
any time any payment of any of the Guarantied Obligations is rescinded,
recouped, avoided, or must otherwise be returned or released by any Lender or
Administrative Agent upon or during the insolvency, bankruptcy, or
reorganization of, or any similar proceeding affecting, the Borrower or for any
other reason whatsoever, all as though such payment had not been made and was
due and owing.
 
6. Subrogation.  Each Guarantor waives and agrees it will not exercise any
rights against Borrower or any other Guarantor arising in connection with, or
any Collateral securing, the Guarantied Obligations (including rights of
subrogation, contribution, and the like) until the Guarantied Obligations have
been indefeasibly paid in full, and all Commitments have been terminated and all
Letters of Credit have expired.  If any amount shall be paid to any Guarantor by
or on behalf of the Borrower or any other Guarantor by virtue of any right of
subrogation, contribution, or the like, such amount shall be deemed to have been
paid to such Guarantor for the benefit of, and shall be held in trust for the
benefit of, the Administrative Agent and the Lenders and shall forthwith be paid
to the Administrative Agent to be credited and applied upon the Guarantied
Obligations, whether matured or unmatured, in accordance with the terms of the
Credit Agreement.
 
7. No Stay.  Without limitation of any other provision of this Guaranty, if any
declaration of default or acceleration or other exercise or condition to
exercise of rights or remedies under or with respect to any Guarantied
Obligation shall at any time be stayed, enjoined, or prevented for any reason
(including but not limited to stay or injunction resulting from the pendency
against the Borrower or any other Person of a bankruptcy, insolvency,
reorganization or similar proceeding), the Guarantors agree that, for the
purposes of this Guaranty and their obligations hereunder, the Guarantied
Obligations shall be deemed to have been declared in default or accelerated, and
such other exercise or conditions to exercise shall be deemed to have been taken
or met.
 
8. Taxes.
 
(a) No Deductions.  All payments made by any Guarantor under any of the Loan
Documents shall be made free and clear of and without deduction for any present
or future taxes, levies, imposts, deductions, charges, or withholdings, and all
liabilities with respect thereto, excluding taxes imposed on the net income of
any Lender and all income and franchise taxes of the United States or any State
applicable to any Lender (all such non-excluded taxes, levies, imposts,
deductions, charges, withholdings, and liabilities being hereinafter referred to
as "Taxes").  If any Guarantor shall be required by law to deduct any Taxes from
or in respect of any sum payable under any of the Loan Documents, (i) the sum
payable shall be increased as may be necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this Subsection (a) such Lender receives an amount equal to the sum it would
have received had no such deductions been made, (ii) such Guarantor shall make
such deductions, and (iii) such Guarantor shall timely pay the full amount
deducted to the relevant tax authority or other authority in accordance with
applicable law.
 
(b) Stamp Taxes.  In addition, each Guarantor agrees to pay any present or
future stamp or documentary taxes or any other excise or property taxes,
charges, or similar levies which arise from any payment made hereunder or from
the execution, delivery, or registration of, or otherwise with respect to, any
of the Loan Documents (hereinafter referred to as "Other Taxes").
 
(c) Indemnification for Taxes Paid by any Lender.  Each Guarantor shall
indemnify each Lender for the full amount of Taxes or Other Taxes (including,
without limitation, any Taxes or Other Taxes imposed by any jurisdiction on
amounts payable under this Subsection) paid by any Lender and any liability
(including penalties, interest, and expenses) arising therefrom or with respect
thereto, whether or not such Taxes or Other Taxes were correctly or legally
asserted.  This indemnification shall be made within thirty (30) days from the
date a Lender makes written demand therefor.
 
(d) Certificate.  Within thirty (30) days after the date of any payment of any
Taxes by any Guarantor, such Guarantor shall furnish to each Lender, the
original or a certified copy of a receipt evidencing payment thereof.  If no
Taxes are payable in respect of any payment by such Guarantor, such Guarantor
shall, if so requested by a Lender, provide a certificate of an officer of such
Guarantor to that effect.
 
9. Notices.  Each Guarantor agrees that all notices, statements, requests,
demands and other communications under this Guaranty shall be given to such
Guarantor at the address set forth on a Schedule to, or in a Guarantor Joinder
and Assumption Agreement given under, the Credit Agreement and in the manner
provided in Section 11.5 [Notices; Effectiveness; Electronic Communication] of
the Credit Agreement.  The Administrative Agent and the Lenders may rely on any
notice (whether or not made in a manner contemplated by this Guaranty)
purportedly made by or on behalf of a Guarantor, and the Administrative Agent
and the Lenders shall have no duty to verify the identity or authority of the
Person giving such notice.
 
10. Counterparts; Telecopy Signatures.  This Guaranty may be executed in any
number of counterparts, each of which, when so executed, shall be deemed an
original, but all such counterparts shall constitute but one and the same
instrument.  Each Guarantor acknowledges and agrees that a telecopy transmission
to Administrative Agent or any Lender of signature pages hereof purporting to be
signed on behalf of any Guarantor shall constitute effective and binding
execution and delivery hereof by such Guarantor.
 
11. Setoff, Default Payments by Borrower.
 
(a) In the event that at any time any obligation of the Guarantors now or
hereafter existing under this Guaranty shall have become due and payable, the
Administrative Agent and the Lenders, or any of them, shall have the right from
time to time, without notice to any Guarantor, to set off against and apply to
such due and payable amount any obligation of any nature of any Lender or the
Administrative Agent, or any subsidiary or affiliate of any Lender or
Administrative Agent, to any Guarantor, including but not limited to all
deposits (whether time or demand, general or special, provisionally credited or
finally credited, however evidenced) now or hereafter maintained by any
Guarantor with the Administrative Agent or any Lender.  Such right shall be
absolute and unconditional in all circumstances and, without limitation, shall
exist whether or not the Administrative Agent or the Lenders, or any of them,
shall have given any notice or made any demand under this Guaranty or under such
obligation to the Guarantor, whether such obligation to the Guarantor is
absolute or contingent, matured or unmatured (it being agreed that the
Administrative Agent and the Lenders, or any of them, may deem such obligation
to be then due and payable at the time of such setoff), and regardless of the
existence or adequacy of any collateral, guaranty, or other direct or indirect
security or right or remedy available to the Administrative Agent or any of the
Lenders.  The rights of the Administrative Agent and the Lenders under this
Section are in addition to such other rights and remedies (including, without
limitation, other rights of setoff and banker's lien) which the Administrative
Agent and the Lenders, or any of them, may have, and nothing in this Guaranty or
in any other Loan Document shall be deemed a waiver of or restriction on the
right of setoff or banker's lien of the Administrative Agent and the Lenders, or
any of them.  Each of the Guarantors hereby agrees that, to the fullest extent
permitted by law, any affiliate or subsidiary of the Administrative Agent or any
of the Lenders and any holder of a participation in any obligation of any
Guarantor under this Guaranty, shall have the same rights of setoff as the
Administrative Agent and the Lenders as provided in this Section (regardless
whether such affiliate or participant otherwise would be deemed a creditor of
the Guarantor).
 
(b) Upon the occurrence and during the continuation of any default under any
Guarantied Obligation, if any amount shall be paid to any Guarantor by or for
the account of Borrower, such amount shall be held in trust for the benefit of
each Lender and Administrative Agent and shall forthwith be paid to the
Administrative Agent to be credited and applied to the Guarantied Obligations
when due and payable.
 
12. Construction.  The section and other headings contained in this Guaranty are
for reference purposes only and shall not affect interpretation of this Guaranty
in any respect.  This Guaranty has been fully negotiated between the applicable
parties, each party having the benefit of legal counsel, and accordingly neither
any doctrine of construction of guaranties or suretyships in favor of the
guarantor or surety, nor any doctrine of construction of ambiguities in
agreement or instruments against the party controlling the drafting thereof,
shall apply to this Guaranty.
 
13. Successors and Assigns.  This Guaranty shall be binding upon each Guarantor,
its successors and assigns, and shall inure to the benefit of and be enforceable
by the Administrative Agent and the Lenders, or any of them, and their
successors and permitted assigns; provided, however, that no Guarantor may
assign or transfer any of its rights or obligations hereunder or any interest
herein and any such purported assignment or transfer shall be null and
void.  Without limitation of the foregoing, the Administrative Agent and the
Lenders, or any of them (and any successive assignee or transferee), from time
to time may assign or otherwise transfer all or any portion of its rights or
obligations under the Loan Documents (including all or any portion of any
commitment to extend credit), or any other Guarantied Obligations, to any other
person and such Guarantied Obligations (including any Guarantied Obligations
resulting from extension of credit by such other Person under or in connection
with the Loan Documents) shall be and remain Guarantied Obligations entitled to
the benefit of this Guaranty, and to the extent of its interest in such
Guarantied Obligations such other Person shall be vested with all the benefits
in respect thereof granted to the Administrative Agent and the Lenders in this
Guaranty or otherwise.
 
14. Governing Law; Submission to Jurisdiction; Waiver of Jury Trial.
 
(a) Governing Law.  This Guaranty shall be governed by, construed, and enforced
in accordance with, the internal laws of the Commonwealth of Pennsylvania,
without regard to conflict of laws principles.
 
(b) Certain Waivers.  Each Guarantor hereby irrevocably:
 
(i) Submits to the nonexclusive jurisdiction of the courts of the Commonwealth
of Pennsylvania sitting in Allegheny County and the United States District Court
for the Western District of Pennsylvania, and any appellate court from any
thereof.
 
(ii) Waives any objection to jurisdiction and venue of any action instituted
against it as provided herein and agrees not to assert any defense based on lack
of jurisdiction or venue; and
 
(iii) WAIVES TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING, OR COUNTERCLAIM OF
ANY KIND ARISING OUT OF OR RELATED TO THIS GUARANTY, THE CREDIT AGREEMENT, OR
ANY OTHER LOAN DOCUMENT TO THE FULLEST EXTENT PERMITTED BY LAW.
 
15. Severability; Modification to Conform to Law.
 
(a) It is the intention of the parties that this Guaranty be enforceable to the
fullest extent permissible under applicable law, but that the unenforceability
(or modification to conform to such law) of any provision or provisions hereof
shall not render unenforceable, or impair, the remainder hereof.  If any
provision in this Guaranty shall be held invalid or unenforceable in whole or in
part in any jurisdiction, this Guaranty shall, as to such jurisdiction, be
deemed amended to modify or delete, as necessary, the offending provision or
provisions and to alter the bounds thereof in order to render it or them valid
and enforceable to the maximum extent permitted by applicable law, without in
any manner affecting the validity or enforceability of such provision or
provisions in any other jurisdiction or the remaining provisions hereof in any
jurisdiction.
 
(b) Without limitation of the preceding subsection (a), to the extent that
applicable law (including applicable laws pertaining to fraudulent conveyance or
fraudulent or preferential transfer) otherwise would render the full amount of
the Guarantor's obligations hereunder invalid, voidable, or unenforceable on
account of the amount of a Guarantor's aggregate liability under this Guaranty,
then, notwithstanding any other provision of this Guaranty to the contrary, the
aggregate amount of such liability shall, without any further action by the
Administrative Agent or any of the Lenders or such Guarantor or any other
Person, be automatically limited and reduced to the highest amount which is
valid and enforceable as determined in such action or proceeding, which (without
limiting the generality of the foregoing) may be an amount which is equal to the
greater of:
 
(i) the fair consideration actually received by such Guarantor under the terms
and as a result of the Loan Documents and the value of the benefits described in
this Section 15 (b) hereof, including (and to the extent not inconsistent with
applicable federal and state laws affecting the enforceability of guaranties)
distributions, commitments, and advances made to or for the benefit of such
Guarantor with the proceeds of any credit extended under the Loan Documents, or
 
(ii) the excess of (A) the amount of the fair value of the assets of such
Guarantor as of the date of this Guaranty as determined in accordance with
applicable federal and state laws governing determinations of the insolvency of
debtors as in effect on the date hereof, over (B) the amount of all liabilities
of such Guarantor as of the date of this Guaranty, also as determined on the
basis of applicable federal and state laws governing the insolvency of debtors
as in effect on the date hereof.
 
(c) Notwithstanding anything to the contrary in this Section or elsewhere in
this Guaranty, this Guaranty shall be presumptively valid and enforceable to its
full extent in accordance with its terms, as if this Section (and references
elsewhere in this Guaranty to enforceability to the fullest extent permitted by
law) were not a part of this Guaranty, and in any related litigation the burden
of proof shall be on the party asserting the invalidity or unenforceability of
any provision hereof or asserting any limitation on any Guarantor's obligations
hereunder as to each element of such assertion.
 
16. Additional Guarantors.  At any time after the initial execution and delivery
of this Guaranty to the Administrative Agent and the Lenders, additional Persons
may become parties to this Guaranty and thereby acquire the duties and rights of
being Guarantors hereunder by executing and delivering to the Administrative
Agent and the Lenders a Guarantor Joinder pursuant to the Credit Agreement.  No
notice of the addition of any Guarantor shall be required to be given to any
pre-existing Guarantor and each Guarantor hereby consents thereto.
 
17. Joint and Several Obligations.  The obligations and additional liabilities
of the Guarantors under this Guaranty are joint and several obligations of the
Guarantors, and each Guarantor hereby waives to the full extent permitted by law
any defense it may otherwise have to the payment and performance of the
Obligations that its liability hereunder is limited and not joint and
several.  Each Guarantor acknowledges and agrees that the foregoing waivers and
those set forth below serve as a material inducement to the agreement of the
Administrative Agent and the Lenders to make the Loans, and that the
Administrative Agent and the Lenders are relying on each specific waiver and all
such waivers in entering into this Guaranty.  The undertakings of each Guarantor
hereunder secure the obligations of itself and the other Guarantors.  The
Administrative Agent and the Lenders, or any of them, may, in their sole
discretion, elect to enforce this Guaranty against any Guarantor without any
duty or responsibility to pursue any other Guarantor and such an election by the
Administrative Agent and the Lenders, or any of them, shall not be a defense to
any action the Administrative Agent and the Lenders, or any of them, may elect
to take against any Guarantor.  Each of the Lenders and Administrative Agent
hereby reserve all right against each Guarantor.
 
18. Receipt of Credit Agreement, Other Loan Documents, Benefits.
 
(a) Each Guarantor hereby acknowledges that it has received a copy of the Credit
Agreement and the other Loan Documents and each Guarantor (other than Hallador)
certifies that the representations and warranties made therein with respect to
such Guarantor are true and correct.  Further, each Guarantor acknowledges and
agrees to perform, comply with, and be bound by all of the provisions of the
Credit Agreement and the other Loan Documents.
 
(b) Each Guarantor hereby acknowledges, represents, and warrants that it
receives synergistic benefits by virtue of its affiliation with Borrower and the
other Guarantors and that it will receive direct and indirect benefits from the
financing arrangements contemplated by the Credit Agreement and that such
benefits, together with the rights of contribution and subrogation that may
arise in connection herewith are a reasonably equivalent exchange of value in
return for providing this Guaranty.
 
           19.           Representations and Warranties.  Each Guarantor (other
than Hallador) represents  and warrants jointly and severally, and Hallador
represents and warrants severally and not with respect to any other Guarantor,
as follows:
 
(a) Organization and Qualification; Power and Authority; Compliance With Laws;
Title to Properties.  Such Guarantor (i) is a corporation duly organized,
validly existing and in good standing, or a partnership or limited liability
company existing in good standing, under the laws of its jurisdiction of
organization, (ii) has the lawful power to own or lease its properties and to
engage in the business it presently conducts, (iii) is duly licensed or
qualified and in good standing in each jurisdiction listed on the Schedule
attached hereto and in all other jurisdictions where the property owned or
leased by it or the nature of the business transacted by it or both makes such
licensing or qualification necessary, except where such failure would not
constitute a Material Adverse Change, (iv) has full power to enter into,
execute, deliver and carry out this Agreement and the other Loan Documents to
which it is a party, to incur the Indebtedness contemplated by the Loan
Documents to which it is a party, and to perform its Obligations under the Loan
Documents to which it is a party, and all such actions have been duly authorized
by all necessary proceedings on its part, (v) is in compliance in all material
respects with all applicable Laws in all jurisdictions in which such Guarantor
is presently doing business except where the failure to do so would not
constitute a Material Adverse Change.  No Event of Default or Potential Default
with respect to such Guarantor exists or is continuing.  
 
(b) Subsidiaries and Owners; Investment Companies.  Such Guarantor and each
Subsidiary of any such Guarantor (other than Hallador) has good and marketable
title to all of the equity interests it purports to own, free and clear in each
case of any Lien and all such equity interests been validly issued, fully paid
and nonassessable.  Such Guarantor and the Subsidiaries of such Guarantor (other
than Hallador) are not an "investment company" registered or required to be
registered under the Investment Company Act of 1940 or under the "control" of an
"investment company" as such terms are defined in the Investment Company Act of
1940 and shall not become such an "investment company" or under such
"control."  Such Guarantor is not a "holding company" or an "affiliate" of a
"holding company" or of a "subsidiary company" of a "holding company" within the
meaning of the Public Utility Holding Company Act of 2005, as amended.  Such
Guarantor is not subject to any other federal or state statute or regulation
limiting its ability to incur Indebtedness for borrowed money.
 
(c) Validity and Binding Effect.  This Guaranty, the Credit Agreement and each
of the other Loan Documents to which such Guarantor is a party (i) has been duly
and validly executed and delivered by such Guarantor, and (ii) constitutes, or
will constitute, legal, valid and binding obligations of such Guarantor which is
or will be a party thereto, enforceable against such Guarantor 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.
 
(d) Conflict; Material Agreements; Consents.  Neither the execution and delivery
of this Guaranty, the Credit Agreement or the other Loan Documents by such
Guarantor nor the consummation of the transactions herein or therein
contemplated or compliance with the terms and provisions hereof or thereof by
such Guarantor will conflict with, constitute a default under or result in any
breach of (i) the terms and conditions of the certificate of incorporation,
bylaws, certificate of limited partnership, partnership agreement, certificate
of formation, limited liability company agreement or other organizational
documents of such Guarantor or (ii) any Law or any material agreement or
instrument or order, writ, judgment, injunction or decree to which such
Guarantor or any of the Subsidiaries of such Guarantor (other than Hallador) is
a party or by which it or any of the Subsidiaries of such Guarantor (other than
Hallador) is bound or to which it is subject, or result in the creation or
enforcement of any Lien upon any property (now or hereafter acquired) of such
Guarantor or any of the Subsidiaries of such Guarantor (other than Hallador)
(other than Liens granted under the Loan Documents or Permitted Liens).  There
is no default under such material agreements to which such Guarantor or any of
the Subsidiaries of such Guarantor (other than Hallador) is a party or by which
it or any of the Subsidiaries of such Guarantor (other than Hallador) is bound),
and no such Guarantor or any of the Subsidiaries of such Guarantor (other than
Hallador) is bound by any contractual obligation, or subject to any restriction
in any organization document, or any requirement of Law which could result in a
Material Adverse Change with respect to such Guarantor or any of the
Subsidiaries of such Guarantor (other than Hallador).  No consent, approval,
exemption, order or authorization of, or a registration or filing with, any
Official Body or any other Person is required by any Law or any agreement in
connection with the execution, delivery and carrying out by such Guarantor of
this Guaranty, the Credit Agreement and the other Loan Documents to which such
Guarantor is a party.
 
(e) Litigation.  There are no actions, suits, proceedings or investigations
pending or, to the knowledge of such Guarantor, threatened against such
Guarantor or any Subsidiary of such Guarantor (other than Hallador) at law or in
equity before any Official Body which individually or in the aggregate may
result in any Material Adverse Change with respect to such Guarantor or any of
the Subsidiaries of such Guarantor (other than Hallador).  Such Guarantor and
the Subsidiaries of such Guarantor (other than Hallador) are not in violation of
any order, writ, injunction or any decree of any Official Body which may result
in any Material Adverse Change with respect to such Guarantor or any of the
Subsidiaries of such Guarantor (other than Hallador).
 
(f) Financial Statements.
 
(i) Historical Statements.  Hallador has delivered to the Administrative Agent
copies of its audited consolidated year-end financial statements for and as of
the end of the three (3) fiscal years ended December 31, 2007.  In addition,
Hallador has delivered to the Administrative Agent copies of its unaudited
consolidated interim financial statements for the fiscal year to date and as of
the end of the fiscal quarter ended September 30, 2008 (all such annual and
interim statements being collectively referred to as the "Statements").  The
Statements were compiled from the books and records maintained by Hallador's
management, are correct and complete in all material respects and fairly
represent the consolidated financial condition of Hallador as of the respective
dates thereof and the results of operations for the fiscal periods then ended
and have been prepared in accordance with GAAP consistently applied, subject (in
the case of the interim statements) to normal year-end audit adjustments.
 
(ii) Accuracy of Financial Statements.  Hallador does not have any material
liabilities, contingent or otherwise, or forward or long-term commitments that
are not disclosed in the Statements or in the notes thereto, and except as
disclosed therein there are no unrealized or anticipated losses from any
commitments of Hallador which may cause a Material Adverse Change.  Since
January 1, 2008, no Material Adverse Change has occurred.
 
(g) Full Disclosure.  Neither this Guaranty, nor any other Loan Document to
which such Guarantor is a party to, nor any certificate, statement, agreement or
other documents furnished to the Administrative Agent or any Lender by such
Guarantor in connection herewith or therewith, contains any untrue statement of
a material fact or omits to state a material fact necessary in order to make the
statements contained herein and therein, in light of the circumstances under
which they were made, not misleading.  There is no fact known to such Guarantor
which materially adversely affects the business, property, assets, financial
condition, or results of operations of such Guarantor, any Subsidiary of such
Guarantor (other than Hallador), Borrower or any Subsidiary of Borrower which
has not been set forth in this Guaranty, the Credit Agreement or in the
certificates, statements, agreements or other documents furnished in writing to
the Administrative Agent and the Lenders prior to or at the date hereof in
connection with the transactions contemplated hereby.
 
(h) Solvency.  Such Guarantor is Solvent.
 

20.           Miscellaneous.
 
(a) Generality of Certain Terms.  As used in this Guaranty, the terms "hereof",
"herein" and terms of similar import refer to this Guaranty as a whole and not
to any particular term or provision; the term "including", as used herein, is
not a term of limitation and means "including without limitation".
 
(b) Amendments, Waivers.  No amendment to or waiver of any provision of this
Guaranty, and no consent to any departure by any Guarantor herefrom, shall in
any event be effective unless in a writing manually signed by or on behalf of
the Administrative Agent and the Lenders.  Any such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.  No delay or failure of the Administrative Agent or the Lenders, or any
of them, in exercising any right or remedy under this Guaranty shall operate as
a waiver thereof; nor shall any single or partial exercise of any such right or
remedy preclude any other or further exercise thereof or the exercise of any
other right or remedy.  The rights and remedies of the Administrative Agent and
the Lenders under this Guaranty are cumulative and not exclusive of any other
rights or remedies available hereunder, under any other agreement or instrument,
by law, or otherwise.
 
(c) Telecommunications.  Each Lender and Administrative Agent shall be entitled
to rely on the authority of any individual making any telecopy or telephonic
notice, request, or signature without the necessity of receipt of any
verification thereof.
 
(d) Expenses.  Each Guarantor unconditionally agrees to pay all out-of-pocket
costs and expenses, including reasonable attorney's fees incurred by the
Administrative Agent or any of the Lenders in enforcing this Guaranty against
any Guarantor and each Guarantor shall pay and indemnify each Lender and
Administrative Agent for, and hold it harmless from and against, any and all
obligations, liabilities, losses, damages, costs, expenses (including
disbursements and reasonable legal fees of counsel to any Lender or
Administrative Agent), penalties, judgments, suits, actions, claims, and
disbursements imposed on, asserted against, or incurred by any Lender or
Administrative Agent:
 
(i) relating to the preparation, negotiation, execution, administration, or
enforcement of or collection under this Guaranty or any document, instrument, or
agreement relating to any of the Obligations, including in any bankruptcy,
insolvency, or similar proceeding in any jurisdiction or political subdivision
thereof;
 
(ii) relating to any amendment, modification, waiver, or consent hereunder or
relating to any telecopy or telephonic transmission purporting to be by any
Guarantor or Borrower; and
 
(iii) in any way relating to or arising out of this Guaranty, or any document,
instrument, or agreement relating to any of the Guarantied Obligations, or any
action taken or omitted to be taken by any Lender or Administrative Agent
hereunder, and including those arising directly or indirectly from the violation
or asserted violation by any Guarantor or Borrower or Administrative Agent or
any Lender of any law, rule, regulation, judgment, order, or the like of any
jurisdiction or political subdivision thereof (including those relating to
environmental protection, health, labor, importing, exporting, or safety) and
regardless whether asserted by any governmental entity or any other Person.
 
Provided that the Guarantors shall have no liability for any obligations,
liabilities, losses, damages, costs, expenses (including disbursements and
reasonable legal fees of counsel to any Lender or Administrative Agent),
penalties, judgments, suits, actions, claims, and disbursements imposed on,
asserted against, or incurred by any Lender or Administrative Agent arising from
gross negligence or willful misconduct of Administrative Agent or the Lenders.

(e) Prior Understandings.  This Guaranty and the Credit Agreement constitute the
entire agreement of the parties hereto with respect to the subject matter hereof
and supersede any and all other prior and contemporaneous understandings and
agreements.
 
(f) Survival.  All representations and warranties of a Guarantor made in
connection with this Guaranty shall survive, and shall not be waived by, the
execution and delivery of this Guaranty, any investigation by or knowledge of
the Administrative Agent and the Lenders, or any of them, any extension of
credit, or any other event or circumstance whatsoever.
 
[SIGNATURE PAGE FOLLOWS]
 

4434657
 
 

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[SIGNATURE PAGE - CONTINUING
AGREEMENT OF GUARANTY AND SURETYSHIP]

IN WITNESS WHEREOF, the undersigned party intending to be legally bound, has
executed this Guaranty as of the date first above written with the intention
that this Guaranty shall constitute a sealed instrument.
 

HALLADOR PETROLEUM COMPANY

By:/S/VICTOR P. STABIO [Seal]
Name: Victor P. Stabio
Title:    President and CEO