MEMBERSHIP INTEREST PURCHASE AGREEMENT
 
by and among
 
HALLADOR PETROLEUM COMPANY,
 
a Colorado corporation,
 
and
 
SUNRISE COAL, LLC,
 
an Indiana limited liability company
 

 
Dated as of July 31, 2006
 

1-LA/887883.7 

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TABLE OF CONTENTS

ARTICLE I
 
DEFINITIONS
 
2
 
1.1
Certain Defined Terms
2
1.2
Other Defined Terms
7
     
ARTICLE II
REORGANIZATION
 
7
 
2.1
Purchase and Sale of the Sunrise Interests
7
2.2
Closing
8
2.3
Transactions to be Effected at the Closing
8
     
ARTICLE III
 
REPRESENTATIONS AND WARRANTIES OF SUNRISE
 
8
 
3.1
Organization and Good Standing
8
3.2
Capitalization
9
3.3
Sunrise Subsidiaries.
10
3.4
Authority and Enforceability
10
3.5
No Conflicts; Authorizations
11
3.6
Financial Statements.
11
3.7
No Undisclosed Liabilities
12
3.8
Coal Reserves
12
3.9
Accounts Receivable
12
3.10
Taxes.
13
3.11
Compliance with Law
13
3.12
Authorizations
14
3.13
Title to Personal Properties.
14
3.14
Condition of Tangible Assets
15
3.15
Real Property
15
3.16
Intellectual Property
16
3.17
Absence of Certain Changes or Events
17
3.18
Contracts
19
3.19
Litigation.
21
3.20
Employee Benefits
21
3.21
Labor and Employment Matters
24
3.22
Environmental.
25
3.23
Related Party Transactions
28
3.24
Insurance.
29
3.25
Books and Records
29
3.26
Brokers or Finders
30
3.27
No Illegal Payments
30
3.28
Suppliers and Customers
30
3.29
Bank Accounts
30
3.30
Powers of Attorney
30
3.31
Completeness of Disclosure
31
     
ARTICLE IV
 
REPRESENTATIONS AND WARRANTIES OF HALLADOR
 
31
 
4.1
Organization and Good Standing
31
4.2
Authority and Enforceability
31
4.3
No Conflicts; Authorizations
31
4.4
Purchase for Investment
32
4.5
Availability of Funds
32
4.6
Brokers or Finders
32
     
ARTICLE V
 
CERTAIN COVENANTS
 
32
 
5.1
Access to Information
32
5.2
Conduct of Businesses Pending Closing
32
5.3
No Solicitation of Transactions
34
5.4
Authorizations
34
5.5
Public Announcements
34
5.6
Non-Disclosure of Proprietary Data
35
5.7
Disclosure Schedule Update
35
     
ARTICLE VI
 
CONDITIONS TO THE OBLIGATIONS OF HALLADOR
 
35
 
6.1
Accuracy of Representations and Warranties
35
6.2
Performance
36
6.3
Absence of Governmental Orders
36
6.4
Certificates
36
6.5
Sunrise Members
36
6.6
Sunrise Required Consents
36
6.7
Articles of Organization
36
6.8
Sunrise Coal, Inc
36
     
ARTICLE VII
 
CONDITIONS TO THE OBLIGATIONS OF SUNRISE
 
36
 
7.1
Accuracy of Representations and Warranties
36
7.2
Performance
37
7.3
Absence of Governmental Orders
37
7.4
Officers’ Certificates
37
7.5
Operating Agreement
37
     
ARTICLE VIII
 
TERMINATION
 
37
 
8.1
Termination
37
8.2
Written Notice
38
8.3
Effect of Termination
38
8.4
Waiver
38
8.5
Nonsurvival of Representations and Warranties
38
     
ARTICLE IX
 
GENERAL PROVISIONS
 
38
 
9.1
Expenses, Taxes, Etc
38
9.2
Notices
38
9.3
Interpretation
39
9.4
Severability
40
9.5
Assignment
40
9.6
No Third-Party Beneficiaries
40
9.7
Amendment
40
9.8
No Other Remedies
40
9.9
Further Assurances
40
9.10
Mutual Drafting
40
9.11
Governing Law
40
9.12
Dispute Resolution
40
9.13
Counterparts
41
9.14
Entire Agreement
42

 
1-LA/887883.7 
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EXHIBITS:
 
EXHIBIT A CARLISLE MINE DEVELOPMENT BUDGET

EXHIBIT B FORM OF OPINION

EXHIBIT C FORM OF CONTRIBUTION AGREEMENT

SCHEDULES:
 
1.1 SUNRISE KNOWLEDGE PERSONS AND HALLADOR KNOWLEDGE PERSONS

SUNRISE DISCLOSURE SCHEDULE

 

1-LA/887883.7 

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MEMBERSHIP INTEREST PURCHASE AGREEMENT
 
MEMBERSHIP INTEREST PURCHASE AGREEMENT, dated as of July 31, 2006, by and
between Hallador Petroleum Company, a Colorado corporation (“Hallador”) and
Sunrise Coal, LLC, an Indiana limited liability company (“Sunrise”).
 
RECITALS
 
A. The Sunrise Members hold all of the currently issued membership interests in
Sunrise.
 
B. The Sunrise Members have approved, and deem it advisable and in the best
interest of Sunrise, for Sunrise to issue the Sunrise Interests (defined below).
 
C. Sunrise desires to sell the Sunrise Interests to Hallador and Hallador
desires to purchase the Sunrise Interests from Sunrise, upon the terms and
subject to the conditions set forth in this Agreement and the Operating
Agreement.
 
D. In furtherance of this Agreement, the Sunrise Members and Hallador have
entered into that certain Amended and Restated Operating Agreement of Sunrise
Coal, LLC, dated as of the date hereof (the “Operating Agreement”).
 
E. Sunrise and Hallador desire to make certain representations, warranties,
covenants and agreements in connection with the Operating Agreement and the
transactions contemplated hereby and thereby.
 
NOW, THEREFORE, in consideration of the foregoing, and of the representations,
warranties, covenants and agreements contained herein, the parties hereto hereby
agree as follows:
 
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ARTICLE I  
DEFINITIONS
 
1.1  Certain Defined Terms. As used in this Agreement, the following terms shall
have the following meanings (such definitions to be equally applicable to both
the singular and plural forms of the terms defined):
 
“Acquisition” has the meaning specified in Section 2.1.
 
“Action” means any claim, action, suit or arbitration, or any other proceeding,
in each instance by or before any Governmental Authority or any nongovernmental
arbitration, mediation or other nonjudicial dispute resolution body.
 
“Affiliate” has the meaning set forth in Rule 12b-2 of the regulations under the
Exchange Act.
 
“Agreement” means this Membership Interest Purchase Agreement, including all
schedules and exhibits hereto, as it may be further amended from time to time as
herein provided.
 
“Agreement Date” means July 31, 2006.
 
“Antitrust Authorities” has the meaning specified in Section 5.4(b).
 
“Audited Financial Statements” has the meaning specified in Section 3.6(a).
 
“Authorization” means any authorization, approval, consent, certificate,
license, permit or franchise of or from any Governmental Authority or pursuant
to any Law.
 
“Balance Sheet” has the meaning specified in Section 3.6(b).
 
“Balance Sheet Date” has the meaning specified in Section 3.6(b).
 
“Benefit Plan” has the meaning specified in Section 3.20(a).
 
“Books and Records” means all of the following which pertain to the conduct of
the Sunrise Business: books, records, manuals and other materials, accounting
books and records, continuing property records for property, plant and
equipment, files, computer tapes, disks, other storage media and records,
advertising matter, catalogues, price lists, correspondence, mailing lists,
lists of customers and suppliers, distribution lists, photographs, production
data, sales and promotional materials and records, purchasing materials and
records, personnel records, credit records, manufacturing and quality control
records and procedures, blueprints, research and development files, data and
laboratory books, patent and trademark files and disclosures, media materials
and plates, sales order files, litigation files, deeds, easements and other
instruments relating to the Real Property, any Tax Returns filed by Sunrise,
including all work papers and calculations in support of such Tax Returns, and
any comparable information with respect to predecessors of Sunrise to the extent
available.
 
“CERCLA” has the meaning specified in Section 3.22(a)(iv).
 
“Charter Documents” means a company’s certificate of formation, articles of
organization, articles of incorporation, certificate of incorporation, bylaws,
limited liability company operating agreement, partnership agreement, formation
agreement, joint venture agreement or other similar organizational documents of
such entity (in each case, as amended).
 
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“Closing” means the closing of the transactions contemplated by this Agreement
as specified in Section 2.2.
 
“Closing Date” has the meaning specified in Section 2.2.
 
“Coal Reserves” has the meaning specified in Section 3.8(a).
 
“Code” means the United States Internal Revenue Code of 1986, as amended, and
any successor statute thereto, and the rules and regulations of the IRS
thereunder.
 
“Consents” means all consents, waivers, assignments and other approvals and
actions.
 
“Contract” means any agreement, contract, license, lease, commitment,
arrangement or understanding, written or oral, including any sales order and
purchase order.
 
“Encumbrance” means any interest (including any security interest), pledge,
mortgage, lien, charge, adverse claim or other right of third Persons.
 
“Environment” has the meaning specified in Section 3.22(a)(i).
 
“Environmental Action” has the meaning specified in Section 3.22(a)(ii).
 
“Environmental Clean-Up Site” has the meaning specified in Section 3.22(a)(iii).
 
“Environmental Laws” has the meaning specified in Section 3.22(a)(iv).
 
“Environmental Liabilities” has the meaning specified in Section 3.22(a)(v).
 
“Environmental Permit” has the meaning specified in Section 3.22(a)(vi).
 
“ERISA” has the meaning specified in Section 3.20(a).
 
“ERISA Affiliate” has the meaning specified in Section 3.20(a).
 
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and any
successor statute thereto, and the rules and regulations of the SEC thereunder.
 
“Financial Statements” has the meaning specified in Section 3.6(a).
 
“GAAP” means U.S. generally accepted accounting principles, unless expressly
described otherwise.
 
“Governmental Authority” means any international, national, Federal, state,
municipal or local government, governmental authority, regulatory or
administrative agency, governmental commission, department, board, bureau,
agency or instrumentality, court, tribunal, arbitrator or arbitral body.
 
“Governmental Order” means any order, writ, rule, judgment, injunction, decree,
stipulation, determination or award entered by or with any Governmental
Authority.
 
“Hallador” has the meaning specified in the preamble.
 
“Hallador Note” means that certain Promissory Note dated June 1, 2006 issued by
Sunrise in favor of Hallador in the original principal amount of up to
$5,000,000.
 
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“Hazardous Substances” has the meaning specified in Section 3.22(a)(vii).
 
“Indebtedness” means any of the following: (a) any indebtedness for borrowed
money, (b) any obligations evidenced by bonds, debentures, notes or other
similar instruments, (c) any obligations to pay the deferred purchase price of
property or services, except trade accounts payable and other current
Liabilities arising in the ordinary course of business, (d) any obligations as
lessee under capitalized leases, (e) any indebtedness created or arising under
any conditional sale or other title retention agreement with respect to acquired
property, (f) any obligations, contingent or otherwise, under acceptance credit,
letters of credit or similar facilities, and (g) any guaranty of any of the
foregoing.
 
“Initial Cash Payment” means the initial payment of the Purchase Price in an
amount equal to Seven Million Five Hundred Thousand Dollars ($7,500,000), to be
made by Hallador to Sunrise on the Closing Date.
 
“Intellectual Property” has the meaning specified in Section 3.16.
 
“Interim Balance Sheet” has the meaning specified in Section 3.6(b).
 
“Interim Balance Sheet Date” has the meaning specified in Section 3.6(b).
 
“Interim Financial Statements” has the meaning specified in Section 3.6(a).
 
“IRS” means the Internal Revenue Service.
 
“Knowledge” means the actual knowledge after due inquiry of only the Persons
listed on Schedule 1.1. Anything herein to the contrary notwithstanding, no
Person listed on any of such schedules shall have any personal Liability with
respect to any of the matters set forth in this Agreement or any representation
or warranty herein being or becoming untrue, inaccurate or incomplete, except to
the extent such Person may be liable hereunder as a Sunrise Member.
 
“Law” means any statute, law (including common law), constitution, treaty,
ordinance, code, order, decree, judgment, rule, regulation and any other binding
requirement or determination of any Governmental Entity.
 
“Leased Real Property” has the meaning specified in Section 3.15(a).
 
“Liabilities” means any and all debts, liabilities and obligations of any nature
whatsoever, whether accrued or fixed, absolute or contingent or mature or
unmatured.
 
“Material Adverse Effect” means any event(s) with respect to, change(s) in, or
effect(s) on, a Person which, individually or in the aggregate, is reasonably
likely to be adverse to the business, results of operations or financial
condition of such Person in a manner that is material to such Person, excluding
any such events, changes or effects resulting from or arising in connection with
(i) changes or conditions generally affecting the coal industry or (ii) changes
or conditions generally affecting the U.S. economy or financial markets.
 
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“Material Contracts” has the meaning specified in Section 3.18(b).
 
“Other Antitrust Laws” has the meaning specified in Section 3.5(b).
 
“Operating Agreement” has the meaning specified in the recitals to this
Agreement.
 
“Outstanding Interests” has the meaning specified in Section 3.2(b).
 
“Owned Real Property” has the meaning specified in Section 3.15(a).
 
“PCBs” has the meaning specified in Section 3.22(i).
 
“Pension Plan” has the meaning specified in Section 3.20(b).
 
“Permitted Liens” means any (a) mechanics’, carriers’, workers’ and other
similar liens arising in the ordinary course of business which are not
delinquent and which in the aggregate are not material in amount, and do not
interfere with the present use of the assets of the Sunrise Entities to which
they apply; (b) liens for current Taxes and assessments not yet due and payable;
and (c) the title and other interests of lessors under capital or operating
leases or of licensors under licenses or royalty agreements; and (d) liens that
are immaterial in character, amount, and extent and which do not detract from
the value or interfere with the present or proposed use of the properties they
affect.
 
“Person” shall include any individual, trustee, firm, corporation, partnership,
limited liability company, Governmental Authority or other entity, whether
acting in an individual, fiduciary or any other capacity.
 
“Policies” has the meaning specified in Section 3.24(a).
 
“Purchase Price” has the meaning specified in Section 2.1.
 
“RCRA” has the meaning specified in Section 3.22(a)(iv).
 
“Real Property” has the meaning specified in Section 3.15(a).
 
“Release” has the meaning specified in Section 3.22(a)(viii).
 
“SEC” means the United States Securities and Exchange Commission.
 
“Securities Act” means the Securities Act of 1933, as amended, and any successor
statute thereto, and the rules and regulations of the SEC thereunder.
 
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“Sunrise” has the meaning specified in the preamble.
 
“Sunrise Business” means the Sunrise Entities’ business of owning, operating and
developing coal mines.
 
“Sunrise Disclosure Schedule” means the Disclosure Schedule dated as of the
Agreement Date, as amended in accordance with this Agreement, as delivered to
Hallador by Sunrise and forming a part of this Agreement.
 
“Sunrise Entities” means, collectively, Sunrise and the Sunrise Subsidiaries.
 
“Sunrise Interests” means the additional membership interests to be issued by
Sunrise and purchased by Hallador, which shall be made up of 60 Common Units and
the right to receive the Preferred Return, as those terms are defined in the
Operating Agreement.
 
“Sunrise Members” means the parties listed on Schedule 3.2 hereof.
 
“Sunrise Required Consents” means those consents, waivers, approvals, orders and
authorizations of, notices to, and registrations, declarations, designations,
qualifications and filings with, Governmental Authorities and third Persons,
domestic or foreign, (a) set forth in Sunrise Disclosure Schedule
Section 3.5(b), (b) required in order to eliminate the items set forth in
Sunrise Disclosure Schedule Section 3.5(a) from such section, (c) that otherwise
are necessary in order to make the representations and warranties set forth in
Section 3.5 true and correct as of the Closing Date and (d) with respect to
financings of the Sunrise Entities, set forth on Sunrise Disclosure Schedule
Section 1.1.
 
“Sunrise Subsidiaries” means, collectively, the Persons in which Sunrise has a
direct or indirect equity or ownership interest in excess of 10%.
 
“Tax” or “Taxes” means any and all federal, state, local, or foreign net or
gross income, gross receipts, net proceeds, sales, use, ad valorem, value added,
franchise, bank shares, withholding, payroll, employment, excise, property,
deed, stamp, alternative or add-on minimum, environmental, profits, windfall
profits, transaction, license, lease, service, service use, occupation,
severance, energy, unemployment, social security, workers’ compensation,
capital, premium, and other taxes, assessments, customs, duties, fees, levies,
or other governmental charges of any nature whatever, whether disputed or not,
together with any interest, penalties, additions to tax, or additional amounts
with respect thereto.
 
“Tax Returns” means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
 
“Taxing Authority” means any Governmental Authority having jurisdiction with
respect to any Tax.
 
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1.2  Other Defined Terms. In addition to the terms defined in Section 1.1,
certain other terms are defined elsewhere in this Agreement and, whenever such
terms are used in this Agreement, they shall have their respective defined
meanings.
 
ARTICLE II  
REORGANIZATION
 
2.1  Purchase and Sale of the Sunrise Interests. Upon the terms and subject to
the conditions of this Agreement, at the Closing, Sunrise shall sell to
Hallador, and Hallador shall purchase from Sunrise, the Sunrise Interests free
and clear of all Encumbrances. The aggregate purchase price for the Sunrise
Interests consists of the Initial Cash Payment and the additional capital
contributions to be made to Sunrise by Hallador pursuant to the Hallador Capital
Commitment as set forth in the Operating Agreement (the “Purchase Price”). The
purchase and sale of the Sunrise Interests is referred to in this Agreement as
the “Acquisition.” 
 
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2.2  Closing. Subject to the fulfillment or waiver of the conditions precedent
set forth in Article VI and Article VII, the consummation of the transactions
contemplated by this Agreement (the “Closing”) shall take place at the offices
of Morgan, Lewis & Bockius LLP, Los Angeles, California, at 9:00 a.m., local
time (a) on July 31, 2006, or (b) at such other date, time or place as the
parties hereto may agree upon in writing. The date on which the transactions
contemplated by Section 2.1 hereof are consummated is referred to herein as the
“Closing Date.”
 
2.3  Transactions to be Effected at the Closing. 
 
2.3.1  At the Closing Hallador shall deliver to Sunrise (i) the Initial Cash
Payment in immediately available funds by deposit to an account of Sunrise at
Old National Bank, (ii) a certificate of Hallador, dated the Closing Date,
certifying as to the matters requested by Sunrise pursuant to Section 7.4, (iii)
the cancelled Hallador Note and (iv) all other documents, instruments or
certificates required to be delivered by Hallador at or prior to the Closing
pursuant to Article VII. 
 
2.3.2  At the Closing Sunrise shall deliver to Hallador (i) payment in cash in
full of the outstanding principal amount of the Hallador Note plus all accrued
interest thereon in an amount equal to Five Million Forty Three Thousand Five
Hundred Twenty Eight Dollars and Seventy Seven Cents ($5,043,528.77) by deposit
of immediately available funds into an account of Hallador at Old National Bank,
(ii) certificates for the Sunrise Interests, (iii) certificates of Sunrise dated
the Closing Date, certifying as to the matters requested by Hallador pursuant to
Sections 6.4 and 6.5, (iv) an opinion or opinions of Krieg DeVault LLP
substantially in the form attached hereto as Exhibit B, (v) all other documents
and instruments necessary to vest in Hallador all of Sunrise’s right, title and
interest in and to the Sunrise Interests, free and clear of all Encumbrances,
and (iv) all other documents, instruments or certificates required to be
delivered by Sunrise at or prior to the Closing pursuant to Article VI.
 
ARTICLE III  
REPRESENTATIONS AND WARRANTIES OF SUNRISE
 
Sunrise represents and warrants to Hallador as of the date hereof and as of the
Closing Date that the statements contained in this Article III are true and
correct, except as set forth in the Sunrise Disclosure Schedule. The Sunrise
Disclosure Schedule shall be arranged in paragraphs corresponding to each
representation and warranty set forth in this Article III, but the disclosures
in any Section of the Sunrise Disclosure Schedule shall qualify any other
Section in Article III to the extent each disclosure specifically references
such other Section; provided, however, that the mere inclusion of an item in the
Sunrise Disclosure Schedule as an exception to a representation or warranty
shall not be deemed an admission by Sunrise that such item represents a material
exception or fact, event or circumstance or that such item is reasonably likely
to result in a Material Adverse Effect with respect to Sunrise.
 
3.1  Organization and Good Standing.
 
(a)  Each of the Sunrise Entities is a limited liability company, validly
existing and in good standing under the Laws of the jurisdiction of its
formation, has all requisite power to own, lease and operate its properties and
to carry on its business as now being conducted and as proposed to be conducted,
and is duly qualified to do business and is in good standing as a foreign Person
in each jurisdiction in which it owns or leases property or conducts any
business so as to require such qualification. The Sunrise Disclosure Schedule
lists each jurisdiction in which the Sunrise Entities are qualified to do
business.
 
(b)  Each of the Sunrise Entities has complied with and is not in default under
its Charter Documents. The Charter Documents of the Sunrise Entities in the
forms attached to the Sunrise Disclosure Schedule are the Charter Documents of
each Sunrise Entity as in effect on the date of this Agreement and as of the
Closing Date.
 
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3.2  Capitalization.
 
(a)  The outstanding membership interests in Sunrise will, upon issuance of the
Sunrise Interests to Hallador, consist of one hundred (100) Common Units (as
defined in the Operating Agreement) and the rights to receive the Preferred
Return as provided in the Operating Agreement. All of the Outstanding Interests
were and the Sunrise Interests will be issued in compliance with all applicable
federal and state securities Laws. The Sunrise Interests will be issued to
Hallador free and clear of all Encumbrances, other than pursuant to the
Operating Agreement.
 
(b)  Schedule 3.2 contains a true and complete list of the record holders of the
membership interests in Sunrise outstanding as of the date hereof (the
“Outstanding Interests”) and sets forth the full name, current address and
number of Outstanding Interests owned by each. 
 
(c)  Except for the Outstanding Interests, Sunrise does not have outstanding
equity securities of any kind. Except for this Agreement and the Operating
Agreement, Sunrise is not party to any Contract obligating Sunrise, directly or
indirectly, to issue additional securities and there is no circumstance or
condition that may give rise to a claim by any Person that such Person is
entitled to acquire any securities of Sunrise.
 
(d)  None of the Outstanding Interests were issued or have been transferred in
violation of, or are subject to, any preemptive rights, rights of first offer or
subscription agreements. Sunrise is not party to any stockholder agreements,
voting agreements, voting trusts or any such other similar arrangements with
respect to the transfer, voting or other rights associated with its securities,
and there are no such agreements to which Sunrise is not a party. Sunrise does
not have outstanding or authorized any stock appreciation, phantom stock, profit
participation, or similar rights.
 
(e)  Sunrise has not repurchased or otherwise reacquired any of its securities.
There are no obligations, contingent or otherwise, of Sunrise to repurchase,
redeem or otherwise acquire any of its securities. There are no declared or
accrued unpaid dividends with respect to any of Sunrise’s securities.
 
(f)  Sunrise does not have outstanding any bonds, debentures, notes or other
obligations or debt securities the holders of which have the right to vote (or
convertible into, or exercisable or exchangeable for, securities having the
right to vote) on any matter.
 
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3.3  Sunrise Subsidiaries.
 
(a)  The Sunrise Disclosure Schedule contains a true and complete list of the
Sunrise Subsidiaries and sets forth with respect to each such Sunrise Subsidiary
the jurisdiction of formation, the authorized and outstanding ownership
interests of such Sunrise Subsidiary, the owner(s) of record of such outstanding
ownership interests, and the federal, state and local tax classification of such
Sunrise Subsidiary. All of the outstanding ownership interests of each Sunrise
Subsidiary are owned by Sunrise free and clear of all Encumbrances.
 
(b)  Each Sunrise Subsidiary is validly existing and in good standing under the
Laws of the jurisdiction of its formation, has all requisite power to own, lease
and operate its properties and to carry on its business as now being conducted
and as proposed to be conducted, and is duly qualified to do business and is in
good standing in each jurisdiction in which it owns or leases property or
conducts any business so as to require such qualification.
 
(c)  Other than the ownership interests set forth in the Sunrise Disclosure
Schedule, no Sunrise Subsidiary has outstanding securities of any kind. No
Sunrise Subsidiary is party to any Contract obligating such Subsidiary, directly
or indirectly, to issue any additional securities and there is no circumstance
or condition that may give rise to a claim by any Person that such Person is
entitled to acquire the securities of any such Subsidiary. No Sunrise Subsidiary
has outstanding or authorized any stock appreciation, phantom stock, profit
participation, or similar rights.
 
(d)  No Sunrise Subsidiary has outstanding any bonds, debentures, notes or other
obligations or debt securities the holders of which have the right to vote (or
convertible into, or exercisable or exchangeable for, securities having the
right to vote) on any matter.
 
(e)  Other than the Subsidiaries set forth in the Sunrise Disclosure Schedule,
none of the Sunrise Entities, directly or indirectly, owns any securities or
other interest in any corporation, partnership, joint venture or other business
association or entity, or to provide funds to or make any investment.
 
(f)  There are no obligations, contingent or otherwise, of any Sunrise Entity to
provide funds to or make an investment (in the form of a loan, capital
contribution or otherwise) in any entity.
 
3.4  Authority and Enforceability. Sunrise has all necessary power and authority
to enter into this Agreement, to perform its obligations hereunder and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by Sunrise and the consummation by Sunrise of the transactions
contemplated hereby have been duly authorized by all necessary limited liability
company action. This Agreement has been duly executed and delivered by Sunrise
and, assuming due authorization, execution and delivery by Hallador, constitutes
the valid and binding obligation of Sunrise, enforceable against it in
accordance with its terms, except as such enforceability may be limited by
(i) bankruptcy, insolvency, reorganization, moratorium or other similar Laws
affecting or relating to creditors’ rights generally, and (ii) the availability
of injunctive relief and other equitable remedies. The Operating Agreement has
been duly authorized by the Sunrise Members.
 
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3.5  No Conflicts; Authorizations.
 
(a)  Except as set forth in the Sunrise Disclosure Schedule, the execution and
delivery of this Agreement by Sunrise does not, and the performance by Sunrise
of its obligations hereunder and the consummation by Sunrise of the transactions
contemplated hereby (in each case, with or without the giving of notice or lapse
of time, or both) will not, directly or indirectly, (i) violate the provisions
of any of the Charter Documents of any Sunrise Entity, (ii) violate or conflict
with, or constitute a default, an event of default or an event creating rights
of acceleration, termination, cancellation, imposition of additional obligations
or loss of rights, or require a consent to assignment, under any Contract (A) to
which any of the Sunrise Entities is a party, (B) of which any of the Sunrise
Entities is a beneficiary or (C) by which any of the Sunrise Entities or any of
their respective assets is bound, or (iii) assuming compliance by the Sunrise
Entities with the matters referred to in Section 3.5(b), violate or conflict
with any Law, Authorization or Governmental Order applicable to any of the
Sunrise Entities, or give any Governmental Authority or other Person the right
to challenge any of the transactions contemplated hereby or to exercise any
remedy, obtain any relief under or revoke or otherwise modify any rights held
under, any such Law, Authorization or Governmental Order.
 
(b)  No Authorization or Governmental Order of, registration, declaration or
filing with, or notice to any Governmental Authority or other Person, is
required to be made, obtained, performed or given to or with respect to any of
the Sunrise Entities in connection with the execution and delivery of this
Agreement.
 
3.6  Financial Statements.
 
(a)  True and complete copies of the Sunrise Entities’ unaudited consolidated
financial statements consisting of the consolidated balance sheet of the Sunrise
Entities as at December 31, 2005 and the related statements of income and
retained earnings, members’ equity and cash flow for the year then ended (the
“Annual Financial Statements”), and unaudited consolidated financial statements
consisting of the balance sheet of the Sunrise Entities as at June 30, 2006 and
the related statements of income and retained earnings, stockholders’ equity and
cash flow for the six month period then ended (the “Interim Financial
Statements” and together with the Annual Financial Statements, the “Financial
Statements”), are included in the Sunrise Disclosure Schedule. 
 
(b)  The Financial Statements are true, complete and correct and have been
prepared in accordance GAAP applied on a consistent basis throughout the periods
involved, subject, in the case of the Interim Financial Statements, to normal
year-end adjustments (the effect of which will not be materially adverse) and
the absence of notes (that, if presented, would not differ materially from those
presented in the Annual Financial Statements). The Financial Statements are
based on the books and records of the Sunrise Entities, and fairly present the
financial condition of the Sunrise Entities as of the respective dates they were
prepared and the results of the operations of the Sunrise Entities for the
periods indicated. The consolidated balance sheet of the Sunrise Entities as of
December 31, 2005 is referred to herein as the “Balance Sheet” and the date
thereof as the “Balance Sheet Date” and the consolidated balance sheet of the
Sunrise Entities as of June 30, 2006 is referred to herein as the “Interim
Balance Sheet” and the date thereof as the “Interim Balance Sheet Date.” Each of
the Sunrise Entities maintains a standard system of accounting established and
administered in accordance with GAAP.
 
(c)  There is and has been no fraud, whether or not material, that involves
management or other employees who have a significant role in the Sunrise
Entities’ internal controls.
 
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3.7  No Undisclosed Liabilities. The Sunrise Entities have no Liabilities except
(a)those which are adequately reflected or reserved against in the Balance Sheet
as of the Balance Sheet Date, and (b) those which have been incurred in the
ordinary course of business and consistent with past practice since the Balance
Sheet Date and which do not, individually or in the aggregate, equal to or more
than $10,000.
 
3.8  Coal Reserves. 
 
(a)  The Sunrise Entities reserve estimates of measured, indicated and inferred
reserves (as defined in United States Geological Survey Circular 891) (the “Coal
Reserves”) are set forth on Section 3.8 of the Sunrise Disclosure Schedule.
 
(b)  The Sunrise Entities possess the legal rights to access and extract coal
from the Coal Reserves.
 
(c)  None of the Coal Reserves are within an area designated as unsuitable for
mining activities or under study for designation as unsuitable for mining
activities under the Federal Surface Mining Control and Reclamation Act, 30
U.S.C. Section 1201, et seq. or analogous state laws.
 
(d)  The Coal Reserves can be mined utilizing approved methods and procedures
commonly used by competent mine operators in the region.
 
3.9  Accounts Receivable. The accounts receivable of the Sunrise Entities as set
forth on the Interim Balance Sheet or arising since the date thereof are, to the
extent not paid in full by the account debtor prior to the date hereof,
(a) valid and genuine, have arisen solely out of bona fide sales and deliveries
of goods, performance of services and other business transactions in the
ordinary course of business consistent with past practice, (b) not subject to
valid defenses, set offs or counterclaims, and (c) collectible within 90 days
after billing at the full recorded amount thereof less, in the case of accounts
receivable appearing on the Sunrise Interim Balance Sheet, the recorded
allowance for collection losses on the Interim Balance Sheet or, in the case of
accounts receivable arising since the Interim Balance Sheet Date, the recorded
allowance for collection losses shown on the accounting records of the Sunrise
Entities. The allowance for collection losses on the Interim Balance Sheet and,
with respect to accounts receivable arising since the Interim Balance Sheet
Date, the allowance for collection losses shown on the accounting records of the
Sunrise Entities, have been determined in accordance with GAAP consistent with
past practice. The accounts receivable existing as of the Closing Date will be
collectible within 90 days after billing at the full recorded amount thereof net
of the reserves shown on the accounting records of the Sunrise Entities as of
the Closing Date (which reserve shall be adequate and shall not represent a
greater percentage of the accounts receivable as of the Closing Date than the
reserve reflected in the Interim Balance Sheet represented of the accounts
receivable reflected therein).
 
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3.10  Taxes.
 
(a)  Each of the Sunrise Entities has duly and timely filed all Tax Returns
required to have been filed by or with respect to the Sunrise Entities and will
duly and timely file all Tax Returns due between the date hereof and the Closing
Date. Each such Tax Return correctly and completely reflects all liability for
Taxes and all other information required to be reported thereon. All Taxes owed
by the Sunrise Entities (whether or not shown on any Tax Return) have been
timely paid (or, if due between the date hereof and the Closing Date, will be
duly and timely paid). Each of the Sunrise Entities has adequately provided for,
in its books of account and related records, all liability for all unpaid Taxes,
being current Taxes not yet due and payable.
 
(b)  None of the Sunrise Entities is the beneficiary of any extension of time
within which to file any Tax Return, nor has any of the Sunrise Entities made
(or had made on its behalf) any requests for such extensions. None of the
Sunrise Entities has waived (or, to the Knowledge of Sunrise, is subject to a
waiver of) any statute of limitations in respect of Taxes or has agreed to (or,
to the Knowledge of Sunrise, is subject to) any extension of time with respect
to a Tax assessment or deficiency.
 
(c)  The Sunrise Disclosure Schedule indicates those Tax Returns that have been
audited and those Tax Returns that currently are the subject of audit. Except as
set forth in the Sunrise Disclosure Schedule there is no Action now pending or,
to the Knowledge of Sunrise, threatened against or with respect to the Sunrise
Entities in respect of any Tax or any assessment or deficiency. There are no
liens for Taxes (other than current Taxes not yet due and payable) upon the
assets of the Sunrise Entities. Sunrise has delivered to Hallador correct and
complete copies of all federal income Tax Returns, examination reports, and
statements of deficiencies assessed against or agreed to by the Sunrise
Entities.
 
(d)  The Sunrise Disclosure Schedule lists, as of the date of this Agreement,
all jurisdictions in which any of the Sunrise Entities currently files Tax
Returns. No claim has been made by an authority in a jurisdiction where any of
the Sunrise Entities does not file Tax Returns that any of them is or may be
subject to taxation by that jurisdiction or that any of them must file Tax
Returns.
 
(e)  None of the Sunrise Entities (i) has ever been a party to any Tax
allocation or sharing agreement or Tax indemnification agreement, (ii) has ever
been a member of an affiliated, consolidated, condensed or unitary group, or
(iii) has any liability for or obligation to pay Taxes of any other Person under
Treas. Reg. 1.1502-6 (or any similar provision of Tax Law), or as transferee or
successor, by contract or otherwise.
 
3.11  Compliance with Law.
 
(a)  Each of the Sunrise Entities has complied with each, and is not in material
violation of, any applicable Law to which any of the Sunrise Entities or its
business, operations, assets or properties is or has been subject.
 
(b)  No event has occurred and no circumstances exist that (with or without the
passage of time or the giving of notice) may result in a violation of, conflict
with or failure on the part of any of the Sunrise Entities to comply with, any
Law. Except as set forth in the Sunrise Disclosure Schedule, none of the Sunrise
Entities has received notice regarding any such violation of, conflict with, or
failure to comply with, any Law, except such violations, conflicts or failures
to comply that (i) have been resolved, or (ii) cannot reasonably be expected to
result in a Material Adverse Effect on Sunrise or its assets or properties.
 
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3.12  Authorizations.
 
(a)  Except as set forth in the Sunrise Disclosure Schedule, each of the Sunrise
Entities owns, holds or lawfully uses in the operation of its business all
Authorizations which are necessary for it to conduct its business as currently
conducted or as proposed to be conducted or for the ownership and use of the
assets owned or used by such Sunrise Entity in the conduct of its business free
and clear of all Encumbrances. The Authorizations held by the Sunrise Entities
are valid and in full force and effect and none of such Authorizations will be
terminated or impaired or become terminable as a result of the transactions
contemplated by this Agreement.
 
(b)  No event has occurred and no circumstances exist that (with or without the
passage of time or the giving of notice) may result in a violation of, conflict
with, failure on the part of any of the Sunrise Entities to comply with the
terms of, or the revocation, withdrawal, termination, cancellation, suspension
or modification of any Authorization. None of the Sunrise Entities has received
notice regarding any violation of, conflict with, failure to comply with the
terms of, or any revocation, withdrawal, termination, cancellation, suspension
or modification of, any Authorization. None of the Sunrise Entities is in
default, nor has any of the Sunrise Entities received notice of any claim of
default, with respect to any Authorization.
 
(c)  No Person other than one of the Sunrise Entities owns or has any
proprietary, financial or other interest (direct or indirect) in any
Authorization which any of the Sunrise Entities owns, possesses or uses in the
operation of its business as now or proposed to be conducted.
 
3.13  Title to Personal Properties.
 
(a)  The Sunrise Disclosure Schedule sets forth a complete and accurate list of
all the personal properties and assets owned, leased or used by any of the
Sunrise Entities or otherwise used in the businesses of the Sunrise Entities as
of the date of this Agreement, with a current fair market value in excess of
$100,000, specifying whether and by whom each such asset is owned or leased and,
in the case of leased assets, indicating the parties to and annual payments
under, the lease.
 
(b)  With respect to personal properties and assets that they purport to own,
including all properties and assets reflected as owned on the Interim Balance
Sheet (other than inventory sold in the ordinary course of business since the
date thereof), the Sunrise Entities named on the Sunrise Disclosure Schedule
have good and valid title to all of such properties and assets, free and clear
of all Encumbrances other than Permitted Liens.
 
(c)  With respect to personal properties and assets that are leased, the Sunrise
Entities named on the Sunrise Disclosure Schedule have a valid leasehold
interest in such properties and assets and all such leases are in full force and
effect and constitute valid and binding obligations of the other party(ies)
thereto. None of the Sunrise Entities nor any other party thereto is in
violation of any of the terms of any such lease.
 
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3.14  Condition of Tangible Assets. All buildings, plants, leasehold
improvements, structures, facilities, equipment and other items of tangible
property and assets which are owned, leased or used by any of the Sunrise
Entities are structurally sound, are in good operating condition and repair
(subject to normal wear and tear given the use and age of such assets), are
usable in the regular and ordinary course of business and conform, to the
Knowledge of Sunrise, to all Laws and Authorizations relating to their
construction, use and operation.
 
3.15  Real Property.
 
(a)  The Sunrise Disclosure Schedule contains (i) a list of all real property
and interests in real property owned in fee by any of the Sunrise Entities (the
“Owned Real Property”), and (ii) a list of all real property and interests in
real property leased by any of the Sunrise Entities (the “Leased Real Property”
and together with the Owned Real Property, the “Real Property”). The Real
Property listed on the Sunrise Disclosure Schedule includes all interests in
real property used in or necessary for the conduct of the businesses and
operations of the Sunrise Entities as currently conducted and as proposed to be
conducted. 
 
(b)  With respect to each parcel of Owned Real Property:
 
(i)  One of the Sunrise Entities has good and marketable title to each such
parcel of Owned Real Property free and clear of all Encumbrances, except
(A) Permitted Liens and (B) zoning and building restrictions, easements,
covenants, rights of way and other similar restrictions of record, none of which
impairs the current or proposed use of such Owned Real Property.
 
(ii)  The legal description for such parcel of Owned Real Property contained in
the deed thereof describes the property fully and accurately. All buildings,
structures and facilities located on, and improvements to, such parcel of Owned
Real Property are located within the boundary lines of such Owned Real Property
and do not encroach on any easement, right of way or other encumbrance which
burdens any portion of the Owned Real Property. No structures, facilities or
other improvements on any parcel adjacent to the Owned Real Property encroach
onto any portion of the Owned Real Property.
 
(iii)  The Sunrise Entities have provided (or made available) to Hallador copies
of the deeds and other instruments (as recorded) by which the Sunrise Entities
acquired such parcel of Owned Real Property, and copies of all title insurance
policies, opinions, abstracts and surveys in the possession of any of the
Sunrise Entities relating thereto.
 
(iv)  There are no outstanding options or rights of first refusal to purchase
such parcel of Owned Real Property, or any portion thereof or interest therein.
 
(c)  With respect to Leased Real Property, the Sunrise Entities have delivered
(or made available) to Hallador a true and complete copy of every lease and
sublease pursuant to which any of the Sunrise Entities is a party or by which
any of them is bound. The applicable Sunrise Entity has peaceful, undisturbed
and exclusive possession of the Leased Real Property.
 
(d)  The uses for which the buildings, facilities and other improvements located
on the Real Property are zoned do not restrict, or impair, the use of the Real
Property for purposes of the business. None of the Sunrise Entities has received
any notice from any Governmental Authority or other Person that the Real
Property does not comply with all applicable building and zoning codes, deed
restrictions, ordinances and rules.
 
(e)  No Governmental Authority having the power of eminent domain over the Real
Property has commenced or, to the Knowledge of Sunrise, intends to exercise the
power of eminent domain or a similar power with respect to all or any part of
the Real Property. There are no pending or, to the Knowledge of Sunrise,
threatened condemnation, fire, health, safety, building, zoning or other land
use regulatory proceedings, lawsuits or administrative actions relating to any
portion of the Real Property or any other matters which do or may adversely
effect the current use, occupancy or value thereof. None of the Sunrise Entities
has received notice of any pending or threatened special assessment proceedings
affecting any portion of the Real Property.
 
(f)  The Real Property and all present uses and operations of the Real Property
comply with all Laws, Authorizations, covenants, conditions, restrictions,
easements, disposition agreements and similar matters affecting the Real
Property. The continued use, occupancy and operation of the Real Property as
currently used, occupied and operated do not constitute a nonconforming use and
are not the subject of a special use permit under any Law.
 
(g)  The Real Property is in suitable condition for the businesses of the
Sunrise Entities as currently conducted and as proposed to be conducted. Each of
the Sunrise Entities has good and valid rights of ingress and egress to and from
all Real Property from and to the public street systems for all usual street,
road and utility purposes.
 
(h)  No Person other than a Sunrise Entity is in possession of any of the Real
Property or any portion thereof, and there are no leases, subleases, licenses,
concessions or other agreements, written or oral, granting to any Person other
than a Sunrise Entity the right of use or occupancy of the Real Property or any
portion thereof. To the Knowledge of Sunrise, no easement, utility transmission
line or water main located on the Real Property adversely affects the use of the
Real Property or any improvement on the Real Property.
 
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3.16  Intellectual Property. 
 
(a)  The Sunrise Disclosure Schedule contains an accurate and complete list of
(b) all patents throughout the world, (c) all trademarks, trade names and
service marks and applications therefore throughout the world, (d) all
copyrights and applications therefor throughout the world, (e) all software and
computer programs, and (f) all licenses relating to patents, patent rights, know
how, trade secrets, trademarks, trade names, service marks, software and
computer programs or other intellectual property, in each case issued to or used
or held for use by the Sunrise Entities in the operation of the Sunrise Business
(collectively, the “Intellectual Property”; provided, however, that the Sunrise
Disclosure Schedule need not contain any Intellectual Property consisting of
“off-the shelf” software or computer programs). Except as set forth in the
Sunrise Disclosure Schedule, the Sunrise Entities are the sole and exclusive
owner or licensee of, with all right, title and interest in and to (free and
clear of any Encumbrances, other than Permitted Liens), the Intellectual
Property. To the Knowledge of Sunrise, the use of any such Intellectual Property
in the conduct of the Sunrise Business as presently conducted does not violate
any rights of any third Person. The Sunrise Entities have not received written
notice that the use of any such Intellectual Property in the conduct of the
Sunrise Business as presently conducted violates any rights of any third Person.
 
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3.17  Absence of Certain Changes or Events. Since the Balance Sheet Date to the
date of this Agreement (with respect to the representation and warranty made as
of the date of this Agreement) and to the Closing Date (with respect to the
representation and warranty made as of the Closing Date):
 
(a)  there has not been any material adverse change in the business, financial
condition, operations, prospects or results of operations of the Sunrise
Entities taken as a whole;
 
(b)  None of the Sunrise Entities has amended or otherwise modified its Charter
Documents;
 
(c)  None of the Sunrise Entities has declared, set aside or paid any dividend
or other distribution (whether in cash, stock or property) with respect to any
of its securities other than customary distributions intended to enable the
Sunrise Members to satisfy Tax liabilities associated with their respective
allocable shares of Sunrise taxable income as determined pursuant to Section 702
and 704 of the Code and any similar provisions of state or local law and in all
events agreed to by Hallador;
 
(d)  None of the Sunrise Entities has split, combined or reclassified any of its
securities, or issued, or authorized for issuance, any securities;
 
(e)  None of the Sunrise Entities has altered any term of any outstanding
securities;
 
(f)  None of the Sunrise Entities has (i) increased or modified the compensation
or benefits payable or to become payable to any of their respective current or
former directors, employees, contractors or consultants, (ii) increased or
modified any bonus, severance, termination, pension, insurance or other employee
benefit plan, payment or arrangement made to, for or with any of its current or
former directors, employees, contractors or consultants or (iii) entered into
any employment, severance or termination agreement;
 
(g)  None of the Sunrise Entities has sold, leased, transferred or assigned any
property or assets of the Sunrise Entities, except for the sale of inventory, in
each case in the ordinary course of business consistent with past practice;
 
(h)  None of the Sunrise Entities has incurred, assumed or guaranteed any
Indebtedness, or modified the terms of any Indebtedness outstanding as of the
Balance Sheet Date;
 
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(i)  None of the Sunrise Entities has incurred any material Liability or created
or assumed any Encumbrance on any asset, except for Permitted Liens,
Encumbrances arising under lease financing arrangements existing as of the
Balance Sheet Date and Encumbrances for taxes not yet due and payable with
respect to which the Sunrise Entities maintain adequate reserves;
 
(j)  None of the Sunrise Entities has made any loan, advance or capital
contribution to, or investment in, any Person other than travel loans or
advances in the ordinary course of business consistent with past practice;
 
(k)  None of the Sunrise Entities has entered into any Material Contract;
 
(l)  (i) no Material Contract has been modified, (ii) no rights under any
Material Contract have been waived or accelerated and (iii) no Contract that
would be required to be listed as a Material Contract pursuant to Section 3.18
hereof if such Contract were in effect on the date hereof has been terminated or
cancelled;
 
(m)  None of the Sunrise Entities has sold, transferred, pledged or assigned,
and there has been no material reduction in the value of, any Intellectual
Property;
 
(n)  there has not been any labor dispute, other than individual grievances, or
any activity or proceeding by a labor union or representative thereof to
organize any employees of any of the Sunrise Entities;
 
(o)  there has not been any violation of or conflict with any Law to which the
business, operations, assets or properties of any of the Sunrise Entities are
subject;
 
(p)  None of the Sunrise Entities has agreed or entered into any arrangement to
take any action which, if taken prior to the date hereof, would have made any
representation or warranty set forth in this Article III untrue or incorrect as
of the date when made;
 
(q)  there has not been any material damage, destruction or loss with respect to
the property and assets of any of the Sunrise Entities, whether or not covered
by insurance;
 
(r)  None of the Sunrise Entities has made any change in accounting practices;
or
 
(s)  None of the Sunrise Entities has agreed, whether in writing or otherwise,
to do any of the foregoing.
 
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3.18  Contracts.
 
(a)  The Sunrise Disclosure Schedule contains a complete and accurate list of
each Contract or series of related Contracts to which any of the Sunrise
Entities is a party or is subject, or by which any of their respective assets
are bound:
 
(i)  for the purchase of materials, supplies, goods, services, equipment or
other assets and that involves or would reasonably be expected to involve
(A) annual payments by any of the Sunrise Entities of $50,000 or more, or
(B) aggregate payments by any of the Sunrise Entities of $250,000 or more;
 
(ii)  (A) for the sale by any of the Sunrise Entities of materials, supplies,
goods, services, equipment or other assets, and that involves (1) a specified
annual minimum dollar sales amount by any of the Sunrise Entities of $50,000 or
more, or (2) aggregate payments to any of the Sunrise Entities of $50,000 or
more, or (B) pursuant to which any of the Sunrise Entities received payments of
more than $100,000 in the year ended 2006 or expects to receive payments of more
than $100,000 in the year ending 2006;
 
(iii)  that requires any of the Sunrise Entities to purchase its total
requirements of any product or service from a third party or that contains “take
or pay” provisions;
 
(iv)  pursuant to which (A) any of the Sunrise Entities purchases components for
inclusion into its products other than components purchased solely on a purchase
order basis or (B) pursuant to which a third party manufactures or assembles
products on behalf of any of the Sunrise Entities;
 
(v)  that continues over a period of more than six months from the date hereof,
other than arrangements disclosed pursuant to the preceding subparagraphs (i)
and (ii);
 
(vi)  that is an employment, consulting, termination or severance Contract,
other than any such Contract that is terminable at-will by any of the Sunrise
Entities without liability to such Sunrise Entity;
 
(vii)  that is a partnership, joint venture or similar Contract;
 
(viii)  that is a distribution, dealer, representative or sales agency Contract;
 
(ix)  that is a (A) lease or sublease pursuant to which any of the Sunrise
Entities is a party or by which any of them is bound or (B) Contract for the
lease of personal property, in either case which provides for payments to or by
any of the Sunrise Entities in any one case of $5,000 or more annually or
$10,000 or more over the term of the lease;
 
(x)  which provides for the indemnification by any of the Sunrise Entities of
any Person, the undertaking by any of the Sunrise Entities to be responsible for
consequential damages, or the assumption by any of the Sunrise Entities of any
Tax, environmental or other Liability;
 
(xi)  with any Governmental Authority;
 
(xii)  that is a note, debenture, bond, equipment trust, letter of credit, loan
or other Contract for Indebtedness or lending of money (other than to employees
for travel expenses in the ordinary course of business) or Contract for a line
of credit or guarantee, pledge or undertaking of the Indebtedness of any other
Person;
 
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(xiii)  for a charitable or political contribution in any one case in excess of
$1,000 or any such Contracts in the aggregate greater than $5,000;
 
(xiv)  for any capital expenditure or leasehold improvement in any one case in
excess of $100,000 or any such Contracts in the aggregate greater than $500,000;
 
(xv)  that restricts or purports to restrict the right of any of the Sunrise
Entities to engage in any line of business, acquire any property, develop or
distribute any product or provide any service (including geographic
restrictions) or to compete with any Person or granting any exclusive
distribution rights, in any market, field or territory;
 
(xvi)  that relates to the acquisition or disposition of any material business
(whether by merger, sale of stock, sale of assets or otherwise);
 
(xvii)  that is a collective bargaining Contract or other Contract with any
labor organization, union or association; and
 
(xviii)  that is otherwise material to the Sunrise Entities as a whole and not
previously disclosed pursuant to this Section 3.18.
 
(b)  Each Contract required to be listed in Section 3.18(a) of the Sunrise
Disclosure Schedule (collectively, the “Material Contracts”) is in full force
and effect and valid and enforceable in accordance with its terms. 
 
(c)  None of the Sunrise Entities is, and to the Knowledge of Sunrise, no other
party thereto is, in default in the performance, observance or fulfillment of
any obligation, covenant, condition or other term contained in any Material
Contract, and none of the Sunrise Entities has given or received notice to or
from any Person relating to any such alleged or potential default that has not
been cured. To the Knowledge of Sunrise, no event has occurred which with or
without the giving of notice or lapse of time, or both, may conflict with or
result in a violation or breach of, or give any Person the right to exercise any
remedy under or accelerate the maturity or performance of, or cancel, terminate
or modify, any Sunrise Material Contract.
 
(d)  The Sunrise Entities have provided (or made available) accurate and
complete copies of each Material Contract to Hallador.
 
(e)  All Contracts other than Material Contracts to which any of the Sunrise
Entities is a party or is subject, or by which any of their respective assets
are bound are in all material respects valid and enforceable in accordance with
their terms. None of the Sunrise Entities is in default in the performance,
observance or fulfillment of any obligation, covenant or condition contained
therein, and no event has occurred which with or without the giving of notice or
lapse of time, or both, would constitute a default thereunder by any of the
Sunrise Entities, except in either case where any such default or defaults could
not reasonably be expected have, individually or in the aggregate, a material
adverse effect on any of the Sunrise Entities taken as a whole.
 
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3.19  Litigation.
 
(a)  There is no Action pending or, to the Knowledge of Sunrise, threatened
(i) against or affecting any of the Sunrise Entities or (ii) that challenges or
seeks to prevent, enjoin or otherwise delay the Acquisition. No event has
occurred or circumstances exist that may give rise or serve as a basis for any
such Action. To the Knowledge of Sunrise, there is no Action against any current
or former director or employee of any of the Sunrise Entities with respect to
which any of the Sunrise Entities has or is reasonably likely to have an
indemnification obligation.
 
(b)  There is no unsatisfied judgment, penalty or award against or affecting any
of the Sunrise Entities or any of their respective properties or assets. There
is no Governmental Order to which any of the Sunrise Entities or any of their
respective properties or assets are subject.
 
3.20  Employee Benefits.
 
(a)  The Sunrise Disclosure Schedule sets forth a complete and accurate list of
all Benefit Plans. A current, accurate and complete copy of each Benefit Plan
has been provided to Hallador. None of the Sunrise Entities has any intent or
commitment to create any additional Benefit Plan or amend any Benefit Plan.
“Benefit Plan” means any “employee benefit plan” as defined in Section 3(3) of
the Employee Retirement Income Security Act of 1974 (“ERISA”), including any
(i) nonqualified deferred compensation or retirement plan or arrangement which
is an Employee Pension Benefit Plan (as defined in ERISA Section 3(2)),
(ii) qualified defined contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan, (iii) qualified defined benefit retirement plan
or arrangement which is an Employee Pension Benefit Plan (including any
Multiemployer Plan (as defined in ERISA Section 3(37)), (iv) Employee Welfare
Benefit Plan (as defined in ERISA Section 3(1)) or material fringe benefit plan
or program, or (v) stock purchase, stock option, severance pay, employment,
change-in-control, vacation pay, Sunrise Members awards, salary continuation,
sick leave, excess benefit, bonus or other incentive compensation, life
insurance, or other employee benefit plan, contract, program, policy or other
arrangement, whether or not subject to ERISA, in each case which is sponsored,
maintained or contributed to by any of the Sunrise Entities or any ERISA
Affiliate, or with respect to which the Sunrise Entities or any ERISA Affiliate
otherwise has any present or future Liability. “ERISA Affiliate” means any
entity which is a member of a “controlled group of corporations” with, under
“common control” with or a member of an “affiliated services group” with, the
any of the Sunrise Entities, as defined in Section 414(b), (c), (m) or (o) of
the Code.
 
(b)  Each Benefit Plan has been and is currently administered in compliance with
its constituent documents and with all reporting, disclosure and other
requirements of ERISA and the Code applicable to such Benefit Plan. Each Benefit
Plan that is an Employee Pension Benefit Plan (as defined in Section 3(2) of
ERISA) and which is intended to be qualified under Section 401(a) of the Code (a
“Pension Plan”), has been determined by the Internal Revenue Service to be so
qualified and no condition exists that would adversely affect any such
determination. No Benefit Plan is a “defined benefit plan” as defined in
Section 3(35) of ERISA.
 
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(c)  None of any Sunrise Entity, any ERISA Affiliate or any trustee or agent of
any Benefit Plan has been or is currently engaged in any prohibited transactions
as defined by Section 406 of ERISA or Section 4975 of the Code for which an
exemption is not applicable which could subject any Sunrise Entity, any ERISA
Affiliate or any trustee or agent of any Benefit Plan to the tax or penalty
imposed by Section 4975 of the Code or Section 502 of ERISA.
 
(d)  There is no event or condition existing which could be deemed a “reportable
event” (within the meaning of Section 4043 of ERISA) with respect to which the
30 day notice requirement has not been waived. To the Knowledge of Sunrise, no
condition exists which could subject any of the Sunrise Entities to a penalty
under Section 4071 of ERISA.
 
(e)  None of any Sunrise Entity or any ERISA Affiliate is, or has been, party to
any “multi employer plan,” as that term is defined in Section 3(37) of ERISA.
 
(f)  True and correct copies of the most recent annual report on Form 5500 and
any attached schedules for each Benefit Plan (if any such report was required by
applicable Law) and a true and correct copy of the most recent determination
letter issued by the Internal Revenue Service for each Pension Plan have been
provided to Hallador.
 
(g)  With respect to each Benefit Plan, there are no actions, suits or claims
(other than routine claims for benefits in the ordinary course) pending or, to
the Knowledge of Sunrise, threatened against any Benefit Plan, any Sunrise
Entity, any ERISA Affiliate or any trustee or agent of any Benefit Plan.
 
(h)  With respect to each Benefit Plan to which any Sunrise Entity or any ERISA
Affiliate is a party which constitutes a group health plan subject to
Section 4980B of the Code, each such Benefit Plan complies, and in each case has
complied, with all applicable requirements of Section 4980B of the Code.
 
(i)  Full payment has been made of all amounts which any Sunrise Entity or any
ERISA Affiliate was required to have paid as a contribution to any Benefit Plan
as of the last day of the most recent fiscal year of each of the Benefit Plans
ended prior to the date of this Agreement, and none of Benefit Plans has
incurred any “accumulated funding deficiency” (as defined in Section 302 of
ERISA and Section 412 of the Code), whether or not waived, as of the last day of
the most recent fiscal year of each such Sunrise Benefit Plan ended prior to the
date of this Agreement.
 
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(j)  Each Benefit Plan is, and its administration is and has been during the six
year period preceding the date of this Agreement, in compliance with, and none
of any Sunrise Entity nor any ERISA Affiliate has received any claim or notice
that any such Sunrise Benefit Plan is not in compliance with, all applicable
Laws and Governmental Orders and prohibited transaction exemptions, including to
the extent applicable, the requirements of ERISA.
 
(k)  None of any Sunrise Entity nor any ERISA Affiliate is in default in
performing any of its contractual obligations under any Sunrise Benefit Plans or
any related trust agreement or insurance contract.
 
(l)  There are no material outstanding Liabilities of any Benefit Plan other
than Liabilities for benefits to be paid to participants in any Benefit Plan and
their beneficiaries in accordance with the terms of such Benefit Plan.
 
(m)  Subject to ERISA and the Code, each Benefit Plan may be amended, modified,
terminated or otherwise discontinued by a Sunrise Entity or an ERISA Affiliate
at any time without liability.
 
(n)  No Benefit Plan other than a Pension Plan, retiree medical plan or
severance plan provides benefits to any individual after termination of
employment.
 
(o)  The sale of the Sunrise Interests will not (either alone or in conjunction
with any other event) (i) entitle any current or former director, employee,
contractor or consultant of any of the Sunrise Entities to severance pay,
unemployment compensation or any other payment, (ii) accelerate the time of
payment or vesting, or increase the amount of compensation due to any such
director, employee, contractor or consultant, or result in the payment of any
other benefits to any Person or the forgiveness of any Indebtedness of any
Person, (iii) result in any prohibited transaction described in Section 406 of
ERISA or Section 4975 of the Code for which an exemption is not available, or
(iv) result in the payment or series of payments by Sunrise or any of its
Affiliates to any person of an “excess parachute payment” within the meaning of
Section 280G of the Code.
 
(p)  With respect to each Benefit Plan that is funded wholly or partially
through an insurance policy, all premiums required to have been paid to date
under the insurance policy have been paid, all premiums required to be paid
under the insurance policy through the Closing will have been paid on or before
the Closing and, as of the Closing, there will be no liability of any Sunrise
Entity or any ERISA Affiliate under any insurance policy or ancillary agreement
with respect to such insurance policy in the nature of a retroactive rate
adjustment, loss sharing arrangement or other actual or contingent liability
arising wholly or partially out of events occurring prior to the Closing.
 
(q)  Each Benefit Plan that constitutes a “welfare benefit plan,” within the
meaning of Section 3(1) of ERISA, and for which contributions are claimed by any
Sunrise Entity or any ERISA Affiliate as deductions under any provision of the
Code, is in compliance with all applicable requirements pertaining to such
deduction. With respect to any welfare benefit fund (within the meaning of
Section 419 of the Code) related to a welfare benefit plan, there is no
disqualified benefit (within the meaning of Section 4976(b) of the Code) that
would result in the imposition of a tax under Section 4976(a) of the Code. All
welfare benefit funds intended to be exempt from tax under Section 501(a) of the
Code have been determined by the Internal Revenue Service to be so exempt and no
event or condition exists which would adversely affect any such determination.
 
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3.21  Labor and Employment Matters.
 
(a)  The Sunrise Disclosure Schedule sets forth (i) (A) a list of all managers,
directors, employees, contractors and consultants of the Sunrise Entities
(including title and position) as of the date hereof, and (B) the base
compensation and benefits of each such manager, director, employee, contractor
and consultant in the years ending 2005 and as of July 1, 2006, and (ii) a list
of all former managers, directors, employees, contractors and consultants of
Sunrise and each of its Subsidiaries who are receiving benefits or scheduled to
receive benefits in the future, and the pension benefit, medical insurance
coverage and other benefits of each such manager, director, employee, contractor
and consultant. All managers, directors, employees, contractors and consultants
of the Sunrise Entities may be terminated by the relevant Sunrise Entity at any
time with or without cause and without any severance or other Liability to the
Sunrise Entities.
 
(b)  None of the Sunrise Entities is a party or subject to any labor union or
collective bargaining Contract. There have not been and there are not pending
or, to the Knowledge of Sunrise, threatened any labor disputes, work stoppages,
requests for representation, pickets, work slow-downs due to labor disagreements
or any actions or arbitrations which involve the labor or employment relations
of any of the Sunrise Entities. There is no unfair labor practice, charge or
complaint pending, unresolved or, to the Knowledge of Sunrise, threatened before
the National Labor Relations Board. To the Knowledge of Sunrise, no event has
occurred or circumstance exist that may provide the basis of any work stoppage
or other labor dispute.
 
(c)  Each of the Sunrise Entities has complied with each, and is not in
violation of any, Law relating to anti-discrimination and equal employment
opportunities and there are, and have been, no violations of any other Law
respecting the hiring, hours, wages, occupational safety and health, employment,
promotion, termination or benefits of any employee or other Person. Each of the
Sunrise Entities has filed all reports, information and notices required under
any Law respecting the hiring, hours, wages, occupational safety and health,
employment, promotion, termination or benefits of any employee or other Person,
and will timely file prior to Closing all such reports, information and notices
required by any Law to be given prior to Closing.
 
(d)  Each of the Sunrise Entities has paid or properly accrued in the ordinary
course of business all wages and compensation due to employees, including all
vacations or vacation pay, holidays or holiday pay, sick days or sick pay, and
bonuses.
 
(e)  None of the Sunrise Entities is a party to any Contract which restricts any
of the Sunrise Entities from relocating, closing or terminating any of its
operations or facilities or any portion thereof. None of the Sunrise Entities
have since December 31, 2005 effectuated (i) a “plant closing” (as defined in
the Worker Adjustment and Retraining Notification Act of 1988 (the “WARN Act”))
or (ii) a “mass lay-off” (as defined in the WARN Act), in either case affecting
any site of employment or facility of any of the Sunrise Entities, except in
accordance with the WARN Act. The consummation of the Acquisition will not
create liability for any act by any of the Sunrise Entities on or prior to the
Closing Date under the WARN Act or any other Law respecting reductions in force
or the impact on employees on plant closings or sales of businesses.
 
(f)  Each of the Sunrise Entities has complied and is in compliance with the
requirements of the Immigration Reform and Control Act of 1986. The Sunrise
Disclosure Schedule sets forth a true and complete list of all employees working
in the United States who are not U.S. citizens and a description of the legal
status under which each such employee is permitted to work in the United States.
All employees of the Sunrise Entities who are performing services for any of the
Sunrise Entities in the United States are legally able to work in the United
States and will be able to continue to work in the United States following the
Closing.
 
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3.22  Environmental.
 
(a)  As used in this Agreement, the following words and terms have the following
definitions:
 
(i)  “Environment” means all air, surface water, groundwater, land, including
land surface or subsurface, including all fish, wildlife, biota and all other
natural resources.
 
(ii)  “Environmental Action” means any claim, proceeding or other Action brought
or threatened under any Environmental Law or otherwise asserting that any of the
Sunrise Entities has incurred any Environmental Liability.
 
(iii)  “Environmental Clean up Site” means any location that is listed or
proposed for listing on the National Priorities List, the Comprehensive
Environmental Response, Compensation and Liability Information System, or on any
similar state or foreign list of sites requiring investigation or cleanup, or
which is the subject of any pending or threatened Action related to or arising
from any alleged violation of any Environmental Law, or at which there has been
a threatened or actual Release of a Hazardous Substance.
 
(iv)  “Environmental Laws” means any and all applicable Laws and Authorizations
issued, promulgated or entered into by any Governmental Authority relating to
the Environment, worker health and safety, mine safety, extraction of minerals,
preservation, or reclamation of natural resources, or to the management,
handling, use, generation, treatment, storage, transportation, disposal,
manufacture, distribution, formulation, packaging, labeling, Release or
threatened Release of or exposure to Hazardous Substances, whether now existing
or subsequently amended or enacted, including but not limited to: the
Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C.
Section 9601 et seq. (“CERCLA”); the Federal Water Pollution Control Act, 33
U.S.C. Section 1251 et seq.; the Clean Air Act, 42 U.S.C. Section 7401 et seq.;
the Toxic Substances Control Act, 15 U.S.C. Section 2601 et seq.; the Surface
Mining Control and Reclamation Act of 1977, 30 U.S.C. Section 1201 et seq.; the
Occupational Safety and Health Act, 29 U.S.C. Section 651 et seq.; the Federal
Coal Mine Health and Safety Act of 1969, P.L. 91-173 and the Federal Mine Safety
and Health Act of 1977, P.L. 95-164 (collectively, the “Mine Safety and Health
Acts”); Title XI of the Organized Crime Control Act of 1970, 18 U.S.C. Ch. 40;
the Emergency Planning and Community Right to Know Act of 1986, 42 U.S.C.
Section 11001 et seq.; the Safe Drinking Water Act, 42 U.S.C. Section 300(f) et
seq.; the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801 et
seq.; the Federal Insecticide, Fungicide and Rodenticide Act 7 U.S.C.
Section 136 et seq.; the Resource Conservation and Recovery Act of 1976
(“RCRA”), 42 U.S.C. Section 6901 et seq.; the Toxic Substances Control Act, 15
U.S.C. Section 2601 et seq.; the Oil Pollution Act of 1990, 33 U.S.C.
Section 2701 et seq.; and any similar or implementing state or local Law, and
any non U.S. Laws and regulations of similar import, and all amendments or
regulations promulgated thereunder; and any common law doctrine, including but
not limited to, negligence, nuisance, trespass, personal injury, or property
damage related to or arising out of the presence, Release, or exposure to
Hazardous Substances or the extraction of minerals. 
 
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(v)  “Environmental Liabilities” means Liabilities based upon or arising out of
(A) the ownership or operation of the business of any of the Sunrise Entities or
(B) the ownership, operation or condition of the Real Property or any other real
property currently or formerly owned, operated or leased by any of the Sunrise
Entities, in each case to the extent based upon or arising out of
(i) Environmental Law, (ii) a failure to obtain, maintain or comply with any
Environmental Permit, (iii) a Release of any Hazardous Substance or (iv) the
use, generation, storage, transportation, treatment, sale or disposal of
Hazardous Substances at any location.
 
(vi)  “Environmental Permit” means any Authorization under Environmental Law,
and includes any and all Governmental Orders issued or entered into by a
Governmental Authority under Environmental Law.
 
(vii)  “Hazardous Substances” means all explosive or radioactive materials or
substances, hazardous or toxic materials, wastes or chemicals, petroleum,
petroleum hydrocarbons, or petroleum products (including crude oil or any
fraction thereof), petroleum by-products, asbestos or asbestos-containing
materials, and any other materials, chemicals, substances, or wastes in any
amount or concentration, which are now or hereafter become defined as or
included in the definition of “hazardous substances,” “hazardous materials,”
hazardous wastes,” “extremely hazardous wastes,” “restricted hazardous wastes,”
“toxic substances,” “toxic pollutants,” “pollutants,” “regulated substances,”
“solid wastes,” “wastes,” “contaminants,” or words of similar import, under any
Environmental Law.
 
(viii)  “Release” means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping, or disposing of
Hazardous Substances into or in the Environment.
 
(b)  Each of the Sunrise Entities has secured, and is in material compliance
with, all Environmental Permits required in connection with its operations and
the Real Property. Each Environmental Permit, together with the name of the
Governmental Authority issuing such Environmental Permit, is set forth in the
Sunrise Disclosure Schedule. All such Environmental Permits are valid and in
full force and effect and none of such Environmental Permits will be terminated
or impaired or become terminable as a result of the consummation of the
Acquisition. Each of the Sunrise Entities has been, and are currently, in
material compliance with all Environmental Laws. Except as set forth in the
Sunrise Disclosure Schedule, none of the Sunrise Entities has received notice
alleging that it is not in such compliance with Environmental Laws.
 
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(c)  There are no past, pending or, to the Knowledge of Sunrise, threatened
Environmental Actions against or affecting any of the Sunrise Entities, and
Sunrise is not aware of any facts or circumstances which could be expected to
form the basis for any Environmental Action against any of the Sunrise Entities.
 
(d)  None of the Sunrise Entities has entered into or agreed to any Governmental
Order, and none of the Sunrise Entities is subject to any Governmental Order,
relating to compliance with any Environmental Law or to investigation or cleanup
of a Hazardous Substance under any Environmental Law.
 
(e)  No Encumbrance has been attached to, or asserted against, the assets,
property or rights of any of the Sunrise Entities pursuant to any Environmental
Law, and, to the Knowledge of Sunrise, no such Encumbrance has been threatened.
To the Knowledge of Sunrise, there are no facts, circumstances or other
conditions that could be expected to give rise to any Encumbrances on or
affecting any Real Property.
 
(f)  There has been no treatment, storage, disposal or Release of any Hazardous
Substance at, from, into, on or under any Real Property or any other property
currently or formerly owned, operated or leased by any of the Sunrise Entities.
No Hazardous Substances are present in, on, about or, to the Knowledge of
Sunrise, migrating to or from any Real Property that could be expected to give
rise to an Environmental Action against any of the Sunrise Entities.
 
(g)  None of the Sunrise Entities has received a CERCLA 104(e) information
request nor has any of the Sunrise Entities been named a potentially responsible
party for any Environmental Clean-up Site. None of the Sunrise Entities has
received an analogous notice or request from any non U.S. Governmental
Authority.
 
(h)  There are no active or abandoned aboveground storage tanks or underground
storage tanks on, under or about the Real Property. Any aboveground or
underground tanks previously situated on the Real Property or any other property
currently or formerly owned, operated or leased by any of the Sunrise Entities
have been removed in accordance with all Environmental Laws and no residual
contamination, if any, remains at such sites in excess of applicable standards.
 
(i)  To the Knowledge of Sunrise, there are no polychlorinated biphenyls
(“PCBs”) leaking from any article, container or equipment on, under or about the
Real Property and there are no such articles, containers or equipment containing
PCBs. There is no asbestos containing material or lead based paint containing
materials in at, on, under or within the Real Property.
 
(j)  None of the Sunrise Entities has transported or arranged for the treatment,
storage, handling, disposal, or transportation of any Hazardous Substance to any
off site location which is an Environmental Clean up Site.
 
(k)  None of the Real Property is an Environmental Clean up Site.
 
(l)  The Sunrise Entities have paid all reclamation fees required by §402 of the
Federal Surface Mining Control and Reclamation Act, 30 U.S.C. Section 1232, and
any analogous state law.
 
(m)  There are no claims for subsidence damage or diminution/contamination of
water supplies as a result of mining operations pending against the Sunrise
Entities.
 
(n)  None of the Sunrise Entities have had a mining bond or other analogous form
of financial assurance under Environmental Laws forfeited by a Governmental
Authority.
 
(o)  The Sunrise Entities have public liability insurance in force at their
mining operations as required by §507(f) of the Federal Surface Mining Control
and Reclamation Act, 30 U.S.C. Section 1257, and analogous state law.
 
(p)  The Sunrise Entities have in force insurance to guarantee the payment of
benefits for which they may be liable under the Mine Safety and Health Acts.
 
(q)  The Sunrise Entities have provided to Hallador true and complete copies of,
or access to, all environmental, worker health and safety, and mine safety
investigations, studies, audits, tests, reviews, reports and/or materials that
have been prepared by or on behalf of any of the Sunrise Entities with respect
to any of the Real Property or operations.
 
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3.23  Related Party Transactions. Except as set forth in the Sunrise Disclosure
Schedule, there are no Contracts of any kind, written or oral, entered into by
any of the Sunrise Entities with, or for the benefit of, any officer, director
or stockholder of any Sunrise Entity or any Affiliate of any of them, except in
each case, for (a)employment agreements, fringe benefits and other compensation
paid to directors, officers and employees consistent with previously established
policies (including normal merit increases in such compensation in the ordinary
course of business) and copies of which have been provided to Hallador and are
listed on the Sunrise Disclosure Schedule, (b) reimbursements of ordinary and
necessary expenses incurred in connection with their employment or service, and
(c) amounts paid pursuant to Benefit Plans of which copies have been provided to
Hallador. None of such Persons has any material direct or indirect ownership
interest in any firm or corporation with which any of the Sunrise Entities has a
business relationship, or with any firm or corporation that competes with any of
the Sunrise Entities (other than ownership of securities in a publicly traded
company representing less than one percent of the outstanding stock of such
company). No officer or director of any of the Sunrise Entities or member of his
or her immediate family or greater than 5% stockholder of any Sunrise Entity or
any Affiliate of any of them or any employee of any of the Sunrise Entities is
directly or indirectly interested in any Material Contract.
 
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3.24  Insurance.
 
(a)  The Sunrise Disclosure Schedule sets forth (i) an accurate and complete
list of each insurance policy, binder of insurance and fidelity bond which
covers the Sunrise Entities or their respective businesses, properties, assets,
directors or employees (the “Policies”) and (ii) a list of all pending claims
and the claims history for each Sunrise Entity during the current year and the
preceding three years (including with respect to insurance obtained but not
currently maintained). There are no pending claims under any of such Policies as
to which coverage has been questioned, denied or disputed by the insurer or in
respect of which the insurer has reserved its rights.
 
(b)  The Sunrise Disclosure Schedule describes any self-insurance arrangement by
or affecting any of the Sunrise Entities, including any reserves thereunder, and
describes the loss experience for all claims that were self-insured in the
current year and the preceding three years.
 
(c)  All Policies are issued by an insurer that is financially sound and
reputable, are in full force and effect and are enforceable in accordance with
their terms and will continue in full force and effect with respect to the
Sunrise Entities following the Closing and the consummation of the Acquisition.
Such Policies provide adequate insurance coverage for the Sunrise Entities and
their respective businesses, properties, assets and employees, and are
sufficient for compliance with all Laws and Contracts to which any of the
Sunrise Entities is a party or by which it is bound.
 
(d)  All premiums due under the Policies have been paid in full or, with respect
to premiums not yet due, accrued. None of the Sunrise Entities has received a
notice of cancellation of any Policy or of any material changes that are
required in the conduct of the business of any of the Sunrise Entities as a
condition to the continuation of coverage under, or renewal of, any such Policy.
To the Knowledge of Sunrise, there is no existing default or event which, with
the giving of notice or lapse of time or both, would constitute a default under
any Policy or entitle any insurer to terminate or cancel any Policy. Sunrise has
no knowledge of any threatened termination of, or material premium increase with
respect to, any Policy and none of such Policies provides for retroactive
premium adjustments.
 
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3.25  Books and Records. The books, records and accounts of the Sunrise Entities
accurately and fairly reflect, in reasonable detail, the transactions and the
assets and Liabilities of the Sunrise Entities. None of the Sunrise Entities has
engaged in any transaction, maintained any bank account or used any of the funds
of any of the Sunrise Entities other than transactions, bank accounts and funds
which have been and are reflected in the normally maintained books and records
of the business. The minute books (containing the records of the meetings, or
written consents in lieu of such meetings, of the stockholders, the board of
directors and any committees of the board of directors), the stock certificate
books, and the stock record books of the Sunrise Entities are correct and
complete, and have been maintained in accordance with sound business practices.
There are no resolutions or other actions of the stockholders, the board of
directors or any committee of the board of directors other than as disclosed in
the records of the meetings and written consents contained in the minute books.
At the Closing, all of those books and records will be in the possession of
Sunrise. At the Closing, Sunrise will deliver, or cause to be delivered, to
Hallador or its designee all of the minute books of the Sunrise Entities.
 
3.26  Brokers or Finders. Except as set forth in the Sunrise Disclosure
Schedule, there is no investment banker, broker, finder, financial advisor or
other intermediary which has been retained by or is authorized to act on behalf
of the Sunrise Entities who is entitled to any fee or commission in connection
with the transactions contemplated by this Agreement. No claim exists or will
exist against the Sunrise Entities, based on any action by any of the Sunrise
Entities, against Hallador for payment of any “topping,” “break up” or “bust-up”
fee or any similar compensation or payment arrangement as a result of the
transactions contemplated hereby.
 
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3.27  No Illegal Payments. None of the Sunrise Entities or any Affiliate,
officer, agent or employee thereof, directly or indirectly, has, since
inception, on behalf of or with respect to any of the Sunrise Entities, (a) made
any unlawful domestic or foreign political contributions, (b)made any payment or
provided services which were not legal to make or provide or which the Sunrise
Entities or any Affiliate thereof or any such officer, employee or other Person
should reasonably have known were not legal for the payee or the recipient of
such services to receive, (c) received any payment or any services which were
not legal for the payer or the provider of such services to make or provide,
(d) had any material transactions or payments which are not recorded in its
accounting books and records or (e) had any off-book bank or cash accounts or
“slush funds.”
 
3.28  Suppliers and Customers. The Sunrise Disclosure Schedule sets forth
(a) the names of the 10 suppliers with the greatest dollar volume of sales to
the Sunrise Entities in the year ended December 31, 2005 and the six-month
period ended June 30, 2006; (b) each supplier who constitutes a sole source of
supply, or is otherwise material, to the Sunrise Entities; and (c) the names of
the 10 customers with the greatest dollar volume of purchases from the Sunrise
Entities in the year ended December 31, 2005 and the six-month period ended
June 30, 2006. The relationship of the Sunrise Entities with each such supplier
and customer are good commercial working relationships. Except as set forth on
the Sunrise Disclosure Schedule, no such supplier or customer has canceled or
otherwise terminated, or, to the Knowledge of Sunrise, threatened to cancel or
otherwise terminate, its relationship with the Sunrise Entities. None of the
Sunrise Entities has received notice that any such supplier or customer may
cancel or otherwise materially and adversely modify its relationship with such
Sunrise Entity or limit its services, supplies or materials to the such Sunrise
entity, as a result of the consummation of the Acquisition or otherwise.
 
3.29  Bank Accounts. The Sunrise Disclosure Schedule sets forth the name of each
bank, safe deposit company or other financial institution in which any of the
Sunrise Entities has an account, lock box or safe deposit box and the names of
all persons authorized to draw thereon or have access thereto.
 
3.30  Powers of Attorney. Except as set forth in the Sunrise Disclosure
Schedule, there are no outstanding powers of attorney executed by or on behalf
of any of the Sunrise Entities in favor of any Person.
 
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3.31  Completeness of Disclosure. No representation or warranty by Sunrise in
this Agreement, and no statement made by Sunrise in the Sunrise Disclosure
Schedule, the Exhibits attached hereto or any certificate furnished or to be
furnished to Hallador pursuant hereto, or in connection with the negotiation,
execution or performance of this Agreement, contains or will at the Closing
contain any untrue statement of a material fact or omits or will omit to state
any material fact necessary to make any statement herein or therein, in light of
the circumstances under which they were made, not misleading.
 
ARTICLE IV 
REPRESENTATIONS AND WARRANTIES OF HALLADOR
 
Hallador represents and warrants to Sunrise as of the date hereof and as of the
Closing Date that the statements contained in this Article IV are true and
correct.
 
4.1  Organization and Good Standing. Hallador is a corporation duly organized,
validly existing and in good standing under the Laws of the State of Colorado,
has all requisite corporate power to own, lease and operate its properties and
to carry on its business as now being conducted and as proposed to be conducted,
and is duly qualified to do business and is in good standing as a foreign Person
in each jurisdiction in which it owns or leases property or conducts any
business so as to require such qualification.
 
4.2  Authority and Enforceability. Hallador has the requisite power and
authority to enter into this Agreement and to consummate the Acquisition. The
execution and delivery of this Agreement and the consummation of the Acquisition
have been duly authorized by all necessary corporate action on the part of
Hallador. This Agreement has been duly executed and delivered by Hallador and,
assuming due authorization, execution and delivery by Sunrise, constitutes the
valid and binding obligation of Hallador, enforceable against it in accordance
with its terms, except as such enforceability may be limited by (a) bankruptcy,
insolvency, reorganization, moratorium or other similar Laws affecting or
relating to creditors’ rights generally, and (b) the availability of injunctive
relief and other equitable remedies. 
 
4.3  No Conflicts; Authorizations.
 
4.3.1  The execution and delivery of this Agreement by Hallador does not, and
the performance by Hallador of its obligations hereunder and the consummation by
Hallador of the Acquisition will not, (i) violate the provisions of any of the
Charter Documents of Hallador, (ii) violate any Contract to which Hallador is a
party, (iii) to the knowledge of Hallador, violate any Law of any Governmental
Entity applicable to Hallador on the date hereof, or (iv) to the knowledge of
Hallador, result in the creation of any Encumbrances upon any of the assets
owned or used by Hallador, except in each such case where such violation or
Encumbrances would not reasonably be expected to impair materially the ability
of Hallador to perform its obligations under this Agreement or consummate the
Acquisition.
 
4.3.2  No Authorization or Order of, registration, declaration or filing with,
or notices to any Governmental Entity is required by Hallador in connection with
the execution and delivery of this Agreement and the consummation of the
Acquisition, except for (i) such filings as may be required under the HSR Act
and the Other Antitrust Laws, or (ii) such Authorizations, Orders,
registrations, declarations, filings and notices the failure to obtain or make
which would not reasonably be expected to impair materially the ability of
Hallador to perform its obligations under this Agreement or consummate the
Acquisition.
 
4.4  Purchase for Investment. The Sunrise Interests purchased by Hallador
pursuant to this Agreement are being acquired for investment only and not with a
view to any public distribution thereof. Hallador shall not offer to sell or
otherwise dispose of, or sell or otherwise dispose of, the Sunrise Interests so
acquired by it in violation of any of the registration requirements of the
Securities Act or any state securities laws.
 
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4.5  Availability of Funds. Hallador has cash available or has existing
borrowing facilities which together are sufficient to enable it to consummate
the Acquisition.
 
4.6  Brokers or Finders. No broker, finder or investment banker is entitled to
any brokerage, finder’s or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Hallador or any Affiliate of Hallador.
 
ARTICLE V  
CERTAIN COVENANTS
 
5.1  Access to Information. (a) From the Agreement Date through the Closing
Date, but subject to any rights of third Persons, upon reasonable notice, the
Sunrise Entities shall (i) afford the officers, employees and authorized agents
and representatives of Hallador reasonable access during normal business hours
to the offices, properties and Books and Records of the Sunrise Entities and
(ii) furnish to the officers, employees and authorized agents and
representatives of Hallador such additional financial and operating data and
other information regarding the assets, properties and Liabilities of the
Sunrise Entities and the Sunrise Business (or legible copies thereof) as
Hallador may from time to time reasonably request; provided, however, that such
investigation shall not unreasonably interfere with any of the businesses or
operations of the Sunrise Entities. Without limiting the generality of the
foregoing, the Sunrise Entities shall cooperate fully with Hallador’s
investigation of such assets, properties and Liabilities and the Sunrise
Business and provide copies of such documents in its possession as Hallador may
reasonably request to confirm the title to any and all properties or assets
owned or leased by the Sunrise Entities. Sunrise shall not be responsible for
any bodily injury suffered by any of the officers, employees or authorized
agents and representatives of Hallador conducting any investigation of the
Sunrise Entities’ assets and properties. No investigation by Hallador shall
affect the representations and warranties of Sunrise.
 
5.2  Conduct of Businesses Pending Closing. From the Agreement Date through the
Closing Date, except as set forth in Sunrise Disclosure Schedule Section 5.2, or
as required by this Agreement or otherwise consented to or approved by the
parties in writing, which consent or approval shall not be unreasonably
withheld:
 
(a)  The Sunrise Entities shall operate the Sunrise Business only in its usual,
regular and ordinary manner and substantially in the same manner as heretofore
conducted. The Sunrise Entities shall use commercially reasonable efforts to
(i) preserve the Sunrise Business; (ii) maintain the services of the present
officers, employees, agents and independent contractors of the Sunrise Entities;
(iii) maintain the assets of the Sunrise Business in their current state of
repair, order and condition, usual and ordinary wear and tear excepted and
subject to requirements in the ordinary course of business; and (iv) maintain in
effect insurance upon the assets of the Sunrise Entities and with respect to the
conduct of the Sunrise Business in such amounts and of such kinds comparable in
all material respects to that in effect on the Agreement Date.
 
(b)  The Sunrise Entities shall not:
 
(i)  amend the Charter Documents of any of the Sunrise Entities, except for the
purpose of organizing entities for the purpose of acquiring land in the ordinary
course of business;
 
(ii)  incur or assume or become subject to any additional Indebtedness, except
in the ordinary course of business and consistent with past practices;
 
(iii)  declare or pay any dividend or make any other distribution to any of the
Sunrise Members, other than distributions for payment of income Taxes due to the
taxable income of the Sunrise Entities;
 
(iv)  redeem or otherwise acquire any shares or interest of capital stock or
other equity of any Sunrise Entity or issue any capital stock or other equity of
any Sunrise Entity or any option, warrant or right relating thereto or any
securities exchangeable for or convertible into any such shares or equity;
 
(v)  permit or allow any Sunrise Entities’ assets or properties to be subject to
any additional Encumbrance (other than Permitted Liens) or sell, transfer, lease
or otherwise dispose of any such assets or properties, in each case except in
the ordinary course of business and consistent with past practices;
 
(vi)  grant any increase in salaries or commissions payable or to become payable
to any employee of the Sunrise Entities, or to any sales agent or representative
of the Sunrise Entities, except normal periodic increases in salaries and
commissions in accordance with the Sunrise Entities’ existing compensation
practices;
 
(vii)  make any capital expenditure or commitment therefor for additions to
property, equipment or facilities in excess of $100,000 in the aggregate per
month, other than land acquisitions and expenditures associated with home
building in the ordinary course of business and consistent with past practices,
except as otherwise used in connection with the development of the Carlisle mine
pursuant to the budget attached hereto as Exhibit A;
 
(viii)  license, sell, transfer, pledge, modify, disclose, dispose of or permit
to lapse any right under or respecting, or enter into any settlement regarding
the breach or infringement of, any material Intellectual Property;
 
(ix)  terminate, renew, enter into or amend any Material Contract or contract or
agreement which would qualify as a Material Contract;
 
(x)  establish or adopt any severance pay plan or arrangement with respect to,
or for the benefit of, employees;
 
(xi)  make any change in any method of accounting or accounting practice or
policy, other than those required by GAAP;
 
(xii)  engage in any transactions with a Sunrise Entity, other than transactions
in the ordinary course and consistent with past practices; or
 
(xiii)  agree, whether in writing or otherwise, to do any of the foregoing.
 
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5.3  No Solicitation of Transactions. From the Agreement Date through the
Closing Date, none of the Sunrise Entities nor any of their representatives,
Affiliates, directors, officers, employees, members, managers, subsidiaries or
agents will solicit, consider, encourage or accept any inquiries, proposals or
offers to acquire, or offer or sell, or agree to sell, any of the Outstanding
Interests, the Sunrise Interests or the securities, assets or properties of any
Sunrise Entities (other than sales of properties in the ordinary course of
business consistent with past practices) or assist any third Person in preparing
or soliciting such an inquiry, proposal or offer. The Sunrise Entities shall not
have, and shall cause such representatives, Affiliates, directors, officers,
employees, members, managers, subsidiaries and agents not to have, any
discussions, conversations, negotiations or other communication with, or provide
any information or data to, any Person(s) expressing an interest in making or
effecting any such inquiry, proposal or offer.
 
5.4  Authorizations.
 
(a)  Each of Hallador and Sunrise as promptly as practicable after the Agreement
Date, shall (i) deliver, or cause to be delivered, all notices and make, or
cause to be made, all such declarations, designations, registrations, filings
and submissions under all statutes, laws, regulations and Governmental Orders
applicable to it as may be required for it to consummate the transactions
contemplated hereby and by the Ancillary Agreements in accordance with the terms
of this Agreement and the Ancillary Agreements; (ii) use commercially reasonable
efforts to obtain, or cause to be obtained, all authorizations, approvals,
orders, consents and waivers from all Persons necessary to consummate the
foregoing; and (iii) use commercially reasonable efforts to take, or cause to be
taken, all other actions necessary, proper or advisable in order for it to
fulfill its respective obligations hereunder and to carry out the intentions of
the parties expressed herein.
 
(b)  Each party shall use its commercially reasonable efforts to satisfy the
conditions to Closing applicable to it in Article VI and Article VII as soon as
commercially practicable.
 
5.5  Public Announcements. Neither Sunrise nor Hallador shall make any public
announcement with respect to this Agreement or the transactions contemplated
hereby or thereby without the prior written consent of the other party hereto.
The foregoing notwithstanding, any such public announcement may be made if
required by applicable statute, law, regulation, Governmental Order, the NASD or
NASDAQ rule or listing agreement, provided that the party required to make such
public announcement, to the extent reasonably possible, shall confer with the
other party concerning the timing and content of such public announcement before
the same is made.
 
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5.6  Non-Disclosure of Proprietary Data. Each of the parties agrees that such
party will not, at any time, make use of, divulge or otherwise disclose,
directly or indirectly, any trade secret or other proprietary data or
confidential information concerning the business or policies of any Sunrise
Entity or of Hallador obtained in connection with the negotiation, execution, or
performance of this Agreement. The parties’ obligations under this Section 5.6
with respect to any trade secret or other proprietary data or confidential
information of Hallador or the Sunrise Entities is independent of any
obligations under the Confidentiality Agreement and shall survive the
termination of this Agreement if this Agreement is terminated prior to Closing.
 
5.7  Disclosure Schedule Update. Sunrise will, from time to time prior to the
Closing, promptly supplement or amend the Sunrise Disclosure Schedules with
respect to any matter arising after the date of this Agreement, which, if
existing as of the date of this Agreement, would have been required to be set
forth or described in the Sunrise Disclosure Schedules in order to make any
representation or warranty set forth in this Agreement true and correct as of
such date. Any disclosure pursuant to this Section 5.7 will be deemed to amend
and supplement the Sunrise Disclosure Schedules and to have qualified the
representations and warranties contained in this Agreement. If the items
disclosed on such supplemented or amended Sunrise Disclosure Schedules have had
or could reasonably be expected to have a Material Adverse Effect and Sunrise
shall not have cured such existing or potential Material Adverse Effect within
10 days of such amended disclosure, then Hallador may, in accordance with
Section 8.1, terminate this Agreement, after the expiration of the 10 day cure
period, by written notice thereof to Sunrise; provided, however, that if
Hallador does not exercise such right to terminate this Agreement within 5
business days thereafter, then (i) Hallador will be deemed to have waived any
right to terminate this Agreement based upon such amendment and supplement,
(ii) Hallador will be deemed to have accepted such amendment and supplement, and
(iii) such amendment or supplement will be deemed to amend and supplement the
Sunrise Disclosure Schedules, as applicable. 
 
ARTICLE VI  
CONDITIONS TO THE OBLIGATIONS OF HALLADOR
 
The obligations of Hallador to effect the transactions contemplated herein shall
be subject to the fulfillment, satisfaction or waiver, on or before the Closing
Date, of each of the following conditions:
 
6.1  Accuracy of Representations and Warranties. The representations and
warranties of Sunrise contained in Article III and taken as a whole shall be
true and correct in all material respects at and as of the Closing Date with the
same effect as though made at and as of the Closing Date, except that
representations and warranties made as of, or in respect of, only a specified
date or period shall be true and correct in all material respects in respect of,
or as of, such date or period.
 
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6.2  Performance. The Sunrise Members and the Sunrise Entities shall have
performed and complied in all material respects with all agreements and
obligations required by this Agreement to be performed or complied with by them
on or prior to the Closing Date.
 
6.3  Absence of Governmental Orders. No temporary or permanent Governmental
Order shall be in effect which prohibits or makes unlawful consummation of the
transactions contemplated hereby.
 
6.4  Certificates. Sunrise shall have furnished Hallador with such certificates
certifying as to compliance with the conditions set forth in this Article VI as
may be reasonably requested by Hallador. 
 
6.5  Sunrise Members. Each of the Sunrise Members shall have duly authorized and
executed the Operating Agreement and the documents related thereto, including a
contribution agreement between each such Sunrise Member and Sunrise in the form
attached hereto as Exhibit C, and shall have delivered the same to Hallador. The
Sunrise Members shall have duly authorized the issuance of the Sunrise Interests
and the admittance of Hallador as a member of Sunrise. Each of the Sunrise
Members that is a trust shall have executed and delivered to Hallador a
certificate certifying as to the authority of the trustees to execute the
Operating Agreement and that such trust is duly organized and validly existing
under the Laws of the jurisdiction of its formation.
 
6.6  Sunrise Required Consents. The Sunrise Entities shall have obtained the
Sunrise Required Consents.
 
6.7  Articles of Organization. The Sunrise Members shall have approved an
amendment to the Articles of Organization of Sunrise that provides that Sunrise
may be managed by one or more managers, and such amendment shall have been filed
with and accepted by the Secretary of State of the State of Indiana.
 
6.8  Sunrise Coal, Inc. Any assets of Sunrise held in the name of Sunrise Coal,
Inc. shall be transferred to Sunrise in a manner reasonably acceptable to
Hallador and Sunrise Coal, Inc. shall be dissolved and withdrawn in accordance
with the laws of the State of Indiana and all other relevant jurisdictions.
 
ARTICLE VII  
CONDITIONS TO THE OBLIGATIONS OF SUNRISE
 
The obligations of Sunrise to effect the transactions contemplated herein shall
be subject to the fulfillment, satisfaction or waiver, on or before the Closing
Date, of each of the following conditions:
 
7.1

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7.1  Accuracy of Representations and Warranties. The representations and
warranties of Hallador contained in Article IV and taken as a whole shall be
true and correct in all material respects at and as of the Closing Date with the
same effect as though made at and as of the Closing Date, except that
representations and warranties made as of, or in respect of, only a specified
date or period shall be true and correct in all material respects in respect of,
or as of, such date, or period.
 
7.2  Performance. Hallador shall have performed and complied in all material
respects with all agreements and obligations required by this Agreement to be
performed or complied with by it on or prior to the Closing Date.
 
7.3  Absence of Governmental Orders. No temporary or permanent Governmental
Order shall be in effect which prohibits or makes unlawful consummation of the
transactions contemplated hereby.
 
7.4  Officers’ Certificates. Hallador shall have furnished Sunrise with such
certificates of its officers certifying as to compliance with the conditions set
forth in this Article VII as may be reasonably requested by Sunrise.
 
7.5  Operating Agreement. Hallador shall have duly authorized and executed the
Operating Agreement and the documents related thereto and shall have delivered
the same to Sunrise.
 
ARTICLE VIII 
TERMINATION
 
8.1  Termination. This Agreement may be terminated at any time prior to the
Closing:
 
(a)  by the mutual written consent of Hallador and Sunrise; or
 
(b)  by either Hallador, on the one hand, or Sunrise, on the other hand, if
(i) a United States federal or state court of competent jurisdiction or United
States federal or state governmental, regulatory or administrative agency or
commission shall have issued an order, decree or ruling or taken any other
action permanently restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement and such order, decree, ruling or
other action shall have become final and non-appealable; provided, however, that
the party seeking to terminate this Agreement pursuant to this clause (i) shall
have used all reasonable efforts to remove such injunction, order or decree; or
(ii) if the Closing shall not have occurred by August 31, 2006; provided,
however, that the right to terminate this Agreement pursuant to this subsection
shall not be available to any party or parties whose failure to fulfill any
obligation under this Agreement shall have been the cause of, or shall have
resulted in, the failure of the Closing to occur prior to such date; or
 
(c)  by Hallador, as a result of the breach in any material respect of any of
the representations and warranties of the Sunrise contained in Article III or
the failure by Sunrise to perform and comply in any material respect with any of
the agreements and obligations required by this Agreement to be performed or
complied with by Sunrise, provided that such breach or failure is not cured
within 30 days of Sunrise’s receipt of a written notice from Hallador that such
a breach or failure has occurred;
 
(d)  by Sunrise, as a result of the breach in any material respect of any of the
representations and warranties of Hallador contained in Article IV or the
failure by Hallador to perform and comply in any material respect with any of
the agreements and obligations required by this Agreement to be performed or
complied with by Hallador, provided that such breach or failure is not cured
within 30 days of Hallador’s receipt of a written notice from Sunrise that such
a breach or failure has occurred; or
 
(e)  in accordance with Section 5.7, by Hallador immediately upon written notice
to Sunrise within the 5 business day period after the expiration of the 10 day
cure period as provided therein.
 
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8.2  Written Notice. In order to terminate this Agreement pursuant to
Section 8.1, the party so acting shall give written notice of such termination
to the other parties, specifying the grounds thereof.
 
8.3  Effect of Termination. In the event of the termination of this Agreement in
accordance with Section 8.1, this Agreement (other than Sections 9.1 and 9.12,
which shall survive the termination hereof) shall become void and have no
effect, with no liability on the part of any party or its Affiliates, directors,
officers, employees, shareholders or agents in respect thereof; provided,
however, that nothing in this Section 8.3 shall deprive Sunrise, on the one
hand, and Hallador, on the other, from bringing any Action pursuant to
Section 9.12 for breach of the Agreement by the other.
 
8.4  Waiver. At any time prior to the Closing, Hallador, on the one hand, and
Sunrise, on the other hand, may (a) extend the time for the performance of any
of the obligations or other acts of the other party hereto, (b) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto or (c) waive compliance with any of the
agreements or conditions contained herein.
 
8.5  Nonsurvival of Representations and Warranties. The representations and
warranties of the parties contained in this Agreement shall expire at the
earlier of the termination of this Agreement and the Closing Date, and
thereafter Sunrise, Hallador, and all of their respective directors, managers,
officers, employees and agents shall have no further liability with respect
thereto.
 
ARTICLE IX  
GENERAL PROVISIONS
 
9.1  Expenses, Taxes, Etc. Except as otherwise provided herein or in the
Operating Agreement, each party shall pay all fees and expenses incurred by it
in connection with this Agreement, the Operating Agreement and the transactions
contemplated hereby and thereby; provided, however, that all sales, use,
documentary, stamp and excise Taxes and all transfer, filing, recordation and
similar Taxes and fees (including all real estate transfer Taxes and conveyance
and recording fees, if any) incurred by any party or the Sunrise Entities in
connection with this Agreement and the transactions contemplated hereby and
thereby will be borne equally by Hallador, on the one hand, and Sunrise, on the
other hand.
 
9.2  Notices. All notices and other communications given or made pursuant hereto
shall be in writing and shall be deemed to have been duly given or made as of
the date delivered or mailed if delivered personally or by recognized overnight
delivery service or mailed by registered or certified mail (postage prepaid,
return receipt requested), or sent by facsimile transmission (confirmation
received) to the parties at the following addresses and facsimile transmission
numbers (or at such other address or number for a party as shall be specified by
like notice), except that notices after the giving of which there is a
designated period within which to perform an act and notices of changes of
address or number shall be effective only upon receipt:
 
(a)  if to Sunrise:
 
Sunrise Coal, LLC
                                    6641 State Road 46
                                    Terre Haute, Indiana 47802
                                    Attn: Brent Bilsland
 
Facsimile No.: 
                                    with a copy to:
 
Kreig DeVault LLP
                                    One Indiana Square, Suite 2800
                                    Indianapolis, IN 46204-2017
                                    Attn: Michael Messaglia, Esq.
 
Facsimile No.: (317) 636-1507
 
(b)  if to Hallador:
 
Hallador Petroleum Company
                                    1660 Lincoln Street, Suite 2700
                                    Denver, CO 80264
                                    Attn: Victor Stabio
 
Facsimile No.: (303) 832-3013
                                    with a copy to:
 
Morgan, Lewis & Bockius LLP
                                    300 South Grand Avenue, Suite 2200
                                    Los Angeles, CA 90071
                                    Attn: Ingrid A. Myers, Esq.
 
Facsimile No.: (213) 612-2501
 
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9.3  Interpretation. When a reference is made in this Agreement to Sections,
subsections, Schedules or Exhibits, such reference shall be to a Section,
subsection, Schedule or Exhibit to this Agreement unless otherwise indicated.
The words “include,” “includes” and “including” when used herein shall be deemed
in each case to be followed by the words “without limitation.” The table of
contents and the headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. The words “herein” and “hereby” and similar references mean, except
where a specific Section or Article reference is expressly indicated, the entire
Agreement rather than any specific Section or Article. Except as otherwise
expressly provided herein, all monetary amounts referenced in this Agreement
shall mean U.S. dollars. All capitalized terms defined herein are equally
applicable to both the singular and plural forms of such terms.
 
9.4  Severability. If any term or other provision of this Agreement is invalid,
illegal or incapable of being enforced by any rule of law or public policy, all
other conditions and provisions of this Agreement shall nevertheless remain in
full force and effect so long as the economic or legal substance of the
transactions contemplated hereby is not affected in any manner adverse to any
party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the greatest extent possible.

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9.5  Assignment. This Agreement may not be assigned by operation of law or
otherwise.
 
9.6  No Third-Party Beneficiaries. This Agreement is for the sole benefit of the
parties hereto and their permitted assigns and nothing herein expressed or
implied shall give or be construed to give to any Person, other than the parties
hereto and such assigns, any legal or equitable rights or remedies hereunder.
 
9.7  Amendment. This Agreement may not be amended or modified except by an
instrument in writing signed by Sunrise and Hallador.
 
9.8  No Other Remedies. Except as provided in Sections 8.3 and 9.12, any and all
remedies herein expressly conferred upon a party hereby are deemed exclusive of
any other remedy conferred hereby or by law or equity on such party.
Notwithstanding any provision hereof, neither party shall be liable hereunder
for any incidental or consequential damages, damages for loss of profits or
opportunities or exemplary or punitive damages, regardless of the circumstances
from which such damages arose.
 
9.9  Further Assurances. Each party agrees to cooperate fully with the other
parties and to execute such further instruments, documents and agreements and to
give such further written assurances as may be reasonably requested by any other
party to evidence and reflect the transactions described herein and contemplated
hereby and to carry into effect the intents and purposes of this Agreement.
 
9.10  Mutual Drafting. This Agreement is the joint product of Hallador and
Sunrise and each provision hereof has been subject to the mutual consultation,
negotiation and agreement of Hallador and Sunrise and shall not be construed for
or against any party hereto.
 
9.11  Governing Law. This Agreement shall be governed by, and construed in
accordance with, the internal laws of the State of Colorado applicable to
agreements made and to be performed entirely within such State (without giving
effect to such State’s choice of law principles).
 
9.12  Dispute Resolution. Any dispute, controversy or claim between the parties
relating to, arising out of or in connection with this Agreement (or any
subsequent agreements or amendments thereto), including as to its existence,
enforceability, validity, interpretation, performance or breach or as to
damages, including claims in tort, whether arising before or after the
termination of this Agreement (any such dispute, controversy or claim being
herein referred to as a “Dispute”), shall be settled without litigation and only
by use of the following alternative dispute resolution procedure:
 
(a)  At the written request of Sunrise, on the one hand, or Hallador, on the
other hand, each party shall appoint a knowledgeable, responsible representative
to meet and negotiate in good faith to resolve any Dispute. The discussions
shall be left to the discretion of the representatives. Upon agreement, the
representatives may utilize other alternative dispute resolution procedures such
as mediation to assist in the negotiations. Discussions and correspondence among
the parties’ representatives for purposes of these negotiations shall be treated
as confidential information developed for the purposes of settlement, exempt
from discovery and production, and without the concurrence of both parties shall
not be admissible in the arbitration described below or in any lawsuit.
Documents identified in or provided with such communications, which are not
prepared for purposes of the negotiations, are not so exempted and may, if
otherwise admissible, be admitted in the arbitration.
 
(b)  If negotiations between the representatives of the parties do not resolve
the Dispute within 60 days of the initial written request, the Dispute shall be
submitted to binding arbitration by a panel of three arbitrators (each of which
shall have at least ten years of experience in the industry in which the Sunrise
Business operates or some material aspect thereof relating to the matter subject
to arbitration) pursuant to the Commercial Arbitration Rules, as then amended
and in effect, of the American Arbitration Association (the “Rules”). Any party
may demand such arbitration in accordance with the procedures set out in the
Rules. Sunrise and Hallador shall each select one arbitrator, and the two
arbitrators so selected shall select the third arbitrator. The arbitration shall
take place in Denver, Colorado. The arbitration hearing shall be commenced
within 60 days of such party’s demand for arbitration. The arbitrators shall
control the scheduling (so as to process the matter expeditiously) and any
discovery. The parties may submit written briefs. At the arbitration hearing,
each party may make written and oral presentations to the arbitrators, present
testimony and written evidence and examine witnesses. No party shall be eligible
to receive, and the arbitrators shall not have the authority to award,
incidental or consequential damages, damages for loss of profits or
opportunities or exemplary or punitive damages. The arbitrators shall rule on
the Dispute by issuing a written opinion within 30 days after the close of
hearings. The arbitrators’ decision shall be binding and final. Judgment upon
the award rendered by the arbitrators may be entered in any court having
jurisdiction.
 
(c)  Each party will bear its own costs and expenses in submitting and
presenting its position with respect to any Dispute to the arbitrators.
Hallador, on the one hand, and Sunrise, on the other hand, shall pay one-half of
the fees and expenses of the arbitrators and the American Arbitration
Association. Notwithstanding anything to the contrary in the foregoing, the
prevailing party in the Dispute shall be entitled to recover its costs and
reasonable attorneys’ fees.
 
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9.13  Counterparts. This Agreement may be executed in one or more counterparts,
and by the different parties hereto in separate counterparts, each of which when
executed shall be deemed to be an original but all of which taken together shall
constitute one and the same agreement.
 
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9.14  Entire Agreement. This Agreement, together with all Schedules and
Exhibits hereto, and the documents and instruments and other agreements among
the parties delivered pursuant hereto, including the Operating Agreement,
constitute the entire agreement and supersede all prior agreements and
undertakings, both written and oral, other than the Confidentiality Agreement,
among Sunrise, the Sunrise Members and Hallador with respect to the subject
matter hereof.
 

 

1-LA/887883.7 

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IN WITNESS WHEREOF, Hallador and Sunrise have caused this Agreement to be
executed as of the date first written above by their respective officers
thereunto duly authorized.
 
HALLADOR PETROLEUM COMPANY,
a Colorado corporation

By: /S/VICTOR P. STABIO
     
                                                                       Name: 
Victor P. Stabio
 
Title:    President and CEO
 
SUNRISE COAL, LLC,
an Indiana limited liability company

By: /S/BRENT BILSLAND     
 
Name:  Brent Bilsland
 
Title:
 

{Signature page to Membership Interest Purchase Agreement}

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SCHEDULE 1.1

SUNRISE KNOWLEDGE PERSONS:

Brent K. Bilsland
Ronald Laswell

HALLADOR KNOWLEDGE PERSONS:

Vic Stabio