exh10_1.htm


    
      

    


    EXHIBIT
10.1

     

    $30,000,000
REVOLVING CREDIT FACILITY

     

    $40,000,000
TERM LOAN

     

    CREDIT
AGREEMENT

     

    by
and among

     

    SUNRISE
COAL, LLC

     

    and

     

    THE
LENDERS PARTY HERETO

     

    and

     

    PNC
BANK, NATIONAL ASSOCIATION, as Administrative Agent

     

    Dated
as of December 12, 2008

     

    
      
        
          4434281

        

      

       

      
         


      

      
         


        
          

        

      

      
         


      

    

     

    
 

    
      


      LIST
OF SCHEDULES AND EXHIBITS

       

    

    
      
        	
                 
      

              	
                SCHEDULES

              


      

       

    

    
      	
               
      

            	
              SCHEDULE
      1.1(A)

            	
              -

            	
              PRICING
      GRID

            
	 	      
              SCHEDULE
      1.1(B)

            	      
              -

            	      
              COMMITMENTS
      OF LENDERS AND ADDRESSES FOR
NOTICES

            


    

    
    

    
      	
               
      

            	
              SCHEDULE
      1.1(P)

            	
              -

            	
              PERMITTED
      LIENS

            


    

    
      	
               
      

            	
              SCHEDULE
      1.1(R)

            	
              -

            	
              REAL
      PROPERTY

            


    

    
      	
               
      

            	
              SCHEDULE
      2.9

            	
              -

            	
              EXISTING
      LETTERS OF CREDIT

            


    

    
      	
               
      

            	
              SCHEDULE
      6.1.1

            	
              -

            	
              QUALIFICATIONS
      TO DO BUSINESS

            


    

    
      	
               
      

            	
              SCHEDULE
      6.1.2

            	
              -

            	
              SUBSIDIARIES

            


    

    
      	
               
      

            	
              SCHEDULE
      6.1.4

            	
              -

            	
              No Conflict;
      Material Agreements; Consents

            


    

    
      	
               
      

            	
              SCHEDULE
      6.1.14

            	
              -

            	
              ENVIRONMENTAL
      DISCLOSURES

            


    

    
      	
               
      

            	
              SCHEDULE
      7.1.1

            	
              -

            	
              OPINION OF
      COUNSEL

            


    

    
      	
               
      

            	
              SCHEDULE
      8.1.3

            	
              -

            	
              INSURANCE
      REQUIREMENTS RELATING TO COLLATERAL

            


    

    
      	
               
      

            	
              SCHEDULE
      8.2.1

            	
              -

            	
              EXISTING
      INDEBTEDNESS

            


    

    


    


    
      	
               
      

            	
              EXHIBITS

            


    

     

    
      	
               
      

            	
              EXHIBIT
      1.1(A)

            	
              -

            	
              ASSIGNMENT
      AND ASSUMPTION AGREEMENT

            


    

    
      	
               
      

            	
              EXHIBIT
      1.1(C)

            	
              -

            	
              COLLATERAL
      ASSIGNMENT

            


    

    
      	
               
      

            	
              EXHIBIT
      1.1(G)(1)

            	
              -

            	
              GUARANTOR
      JOINDER

            


    

    
      	
               
      

            	
              EXHIBIT
      1.1(G)(2)

            	
              -

            	
              GUARANTY
      AGREEMENT

            


    

    
      	
               
      

            	
              EXHIBIT
      1.1(H)

            	
              -

            	
              HALLADOR
      SUBORDINATION AGREEMENT

            


    

    
      	
               
      

            	
              EXHIBIT
      1.1(I)(1)

            	
              -

            	
              INDEMNITY

            


    

    
      	
               
      

            	
              EXHIBIT
      1.1(I)(2)

            	
              -

            	
              INTERCOMPANY
      SUBORDINATION AGREEMENT

            


    

    
      	
               
      

            	
              EXHIBIT
      1.1(M)

            	
              -

            	
              MORTGAGE

            


    

    
      	
               
      

            	
              EXHIBIT
      1.1(N)(1)

            	
              -

            	
              REVOLVING
      CREDIT NOTE

            
	 	EXHIBIT
      1.1(N)(2)	-	      
              SWING LOAN
      NOTE

            


    

    
    

    
      	
               
      

            	
              EXHIBIT
      1.1(N)(3)

            	
              -

            	
              TERM
      NOTE

            


    

    
      	
               
      

            	
              EXHIBIT
      1.1(P)

            	
              -

            	
              PLEDGE
      AGREEMENT

            


    

    
      	
               
      

            	
              EXHIBIT
      1.1(S)

            	
              -

            	
              SECURITY
      AGREEMENT

            


    

    
      	
               
      

            	
              EXHIBIT
      2.5.1

            	
              -

            	
              LOAN
      REQUEST

            


    

    
      	
               
      

            	
              EXHIBIT
      2.5.2

            	
              -

            	
              SWING LOAN
      REQUEST

            


    

    
      	
               
      

            	
              EXHIBIT
      8.3.3

            	
              -

            	
              QUARTERLY
      COMPLIANCE CERTIFICATE

            


    

     

    



    
      
        
          4434281

        

         


      

      
         


        
          

        

      

      
         


      

    


    


     

    CREDIT
AGREEMENT

     

    THIS CREDIT
AGREEMENT (as hereafter amended, the "Agreement") is dated as of
December 12, 2008 and is made by and among SUNRISE COAL, LLC, an Indiana
limited liability corporation (the "Borrower"), EACH OF THE GUARANTORS (as
hereinafter defined), the LENDERS (as hereinafter
defined), and PNC BANK,
NATIONAL ASSOCIATION, in its capacity as administrative agent for the
Lenders under this Agreement (hereinafter referred to in such capacity as the
"Administrative
Agent").

     

    The Borrower has
requested the Lenders to provide (i) a revolving credit facility to the
Borrower in an aggregate principal amount not to exceed $30,000,000 and
(ii) a $40,000,000 term loan facility.  In consideration of their
mutual covenants and agreements hereinafter set forth and intending to be
legally bound hereby, the parties hereto covenant and agree as
follows:

     

    1.           CERTAIN
DEFINITIONS

     

    1.1 Certain
Definitions.

     

      In
addition to words and terms defined elsewhere in this Agreement, the following
words and terms shall have the following meanings, respectively, unless the
context hereof clearly requires otherwise:

     

    Administrative Agent
shall mean PNC Bank, National Association, and its successors and
assigns.

     

    Administrative Agent's
Fee shall have the meaning specified in Section 10.9 [Administrative Agent's Fee].

     

    Administrative Agent's
Letter shall have the meaning specified in Section10.9 [Administrative Agent's Fee].

     

    Affiliate as to any
Person any other Person (i) which directly or indirectly controls, is
controlled by, or is under common control with such Person, (ii) which
beneficially owns or holds 5% or more of any class of the voting or other equity
interests of such Person, or (iii) 5% or more of any class of voting
interests or other equity interests of which is beneficially owned or held,
directly or indirectly, by such Person.

     

    Ancillary Security
Documents shall mean all documents, instruments, environmental reports,
agreements, endorsements, policies and certificates requested by the
Administrative Agent and customarily delivered by any property owner in
connection with a mortgage financing.  Without limiting the generality
of the foregoing, examples of Ancillary Security Documents would include
insurance policies (other than title insurance) or certificates regarding any
collateral, lien searches, estoppel letters, flood insurance certifications,
environmental audits which shall meet the Administrative Agent's minimum
requirements for phase I environmental assessments or phase II environmental
assessments, as applicable, opinions of counsel and the like.

     

    Anti-Terrorism Laws
shall mean any Laws relating to terrorism or money laundering, including
Executive Order No. 13224, the USA Patriot Act, the Laws comprising or
implementing the Bank Secrecy Act, and the Laws administered by the United
States Treasury Department's Office of Foreign Asset Control (as any of the
foregoing Laws
may from time to time be amended, renewed, extended, or replaced).

     

    Applicable Commitment Fee
Rate shall mean a percentage rate per annum equal to 0.5%.

     

    Applicable Letter of Credit
Fee Rate shall mean the percentage rate per annum based on the Leverage
Ratio then in effect according to
the pricing grid on Schedule 1.1(A) below
the heading "Letter of Credit Fee."

     

    Applicable Margin
shall mean, as
applicable:

     

    (A)           the
percentage spread to be added to the Base Rate applicable to Revolving Credit
Loans under the Base Rate Option based on the Leverage Ratio then in effect
according to the pricing grid on Schedule 1.1(A) below
the heading "Revolving Credit Base Rate Spread",

     

    (B)           the
percentage spread to be added to the Base Rate applicable to Term Loans under
the Base Rate Option based on the Leverage Ratio then in effect according to the
pricing grid on Schedule 1.1(A) below
the heading "Term Loan Base Rate Spread",

     

    (C)           the
percentage spread to be added to the LIBOR Rate applicable to Revolving Credit
Loans under the LIBOR Rate Option based on the Leverage Ratio then in effect
according to the pricing grid on Schedule 1.1(A) below
the heading "Revolving Credit LIBOR Rate Spread", or

     

    (D)           the
percentage spread to be added to the LIBOR Rate applicable to Term Loans under
the LIBOR Rate Option based on the Leverage Ratio then in effect according to
the pricing grid on Schedule 1.1(A) below
the heading "Term Loan LIBOR Rate Spread".

     

    Approved Fund shall
mean any Person (other than a natural person) that is engaged in making,
purchasing, holding or investing in bank loans and similar extensions of credit
in the ordinary course of business and that is administered or managed by
(a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an
Affiliate of an entity that administers or manages a Lender.

     

    Assignment and
Assumption means an assignment and assumption entered into by a Lender
and an assignee permitted under Section 11.8
[Successors and Assigns], in substantially the form of Exhibit 1.1(A).

     

    Authorized Officer
shall mean, with respect to any Loan Party, the Chief Executive Officer,
President, Chief Financial Officer, Treasurer or Assistant Treasurer of such
Loan Party or such other individuals, designated by written notice to the
Administrative Agent from the Borrower, authorized to execute notices, reports
and other documents on behalf of the Loan Parties required
hereunder.  The Borrower may amend such list of individuals from time
to time by giving written notice of such amendment to the Administrative
Agent.

     

    Availability shall
mean the difference between the Revolving Credit Commitments minus the sum of the
Revolving Facility Usage and the outstanding Swing Loans.

     

    Base Rate shall mean,
for any day, a fluctuating per annum rate of interest equal to the highest of
(i) the interest rate per annum announced from time to time by the
Administrative Agent at its Principal Office as its then prime rate, which rate
may not be the lowest rate then being charged commercial borrowers by the
Administrative Agent, (ii) the Federal Funds Open Rate plus 1⁄2 of 1%, or (iii)
the Daily LIBOR Rate plus 100 basis points (1%).

     

    For purposes of
this definition, “Daily LIBOR
Rate” shall mean, for any day, the rate per annum determined by the
Administrative Agent by dividing (x) the Published Rate by (y) a
number equal to 1.00 minus the percentage
prescribed by the Federal Reserve for determining the maximum reserve
requirements with respect to any eurocurrency funding by banks on such
day.  “Published
Rate” shall mean the rate of interest published each Business Day in The
Wall Street Journal “Money Rates” listing under the caption “London Interbank
Offered Rates” for a one month period (or, if no such rate is published therein
for any reason, then the Published Rate shall be the eurodollar rate for a one
month period as published in another publication determined by the
Administrative Agent).

     

    Base Rate Option
shall mean the option of the Borrower to have Loans bear interest at the rate
and under the terms set forth in either Section 4.1.1(i) [Revolving Credit
Base Rate Option]or Section 4.1.2(i) [Term Loan Base Rate Option], as
applicable.

     

    Black Lung Act shall
mean, collectively, the Black Lung Benefits Revenue Act of 1977, as amended and
the Black Lung Benefits Reform Act of 1977, as amended.

     

    Borrower shall mean
Sunrise Coal, LLC, a limited liability corporation organized and existing under
the laws of the State of Indiana.

     

    Borrowing Date shall
mean, with respect to any Loan, the date for the making thereof or the renewal
or conversion thereof at or to the same or a different Interest Rate Option,
which shall be a Business Day.

     

    Borrowing Tranche
shall mean specified portions of Loans outstanding as
follows:  (i) any Loans to which a LIBOR Rate Option applies
which become subject to the same Interest Rate Option under the same Loan
Request by the Borrower and which have the same Interest Period shall constitute
one Borrowing Tranche, and (ii) all Loans to which a Base Rate Option
applies shall constitute one Borrowing Tranche.

     

    Business Day shall
mean any day other than a Saturday or Sunday or a legal holiday on which
commercial banks are authorized or required to be closed for business in
Pittsburgh, Pennsylvania and if the applicable Business Day relates to the
request for, or the continuation or conversion of, any Loan to which the LIBOR
Rate Option applies, such day must also be a day on which dealings are carried
on in the London interbank market.

     

    Change in Law shall
mean the occurrence, after the date of this Agreement, of any of the following:
(a) the adoption or taking effect of any Law, (b) any change in any
Law or in the administration, interpretation or application thereof by any
Official Body or (c) the making or issuance of any request, guideline or
directive (whether or not having the force of Law) by any Official
Body.

     

    Closing Date shall
mean the Business Day on which the first Loan shall be made, which shall be
December 12, 2008.

     

    Coal Act shall mean
the Coal Industry Retiree Health Benefits Act of 1992, as amended.

     

    Code shall mean the
Internal Revenue Code of 1986, as the same may be amended or supplemented from
time to time, and any successor statute of similar import, and the rules and
regulations thereunder, as from time to time in effect.

     

    Collateral shall mean
the collateral under the (i) Security Agreement (ii) Pledge Agreement, (iii)
Collateral Assignment or (iv) Mortgage, other than the Excluded
Collateral.

     

    Collateral Assignment
shall mean the Collateral Assignment in the form of Exhibit 1.1(C).

     

    Collateral Documents
shall have the meaning assigned to that term in Section 6.1.11 [Liens in Collateral].

     

    Commitment shall mean
as to any Lender the aggregate of its Revolving Credit Commitment and Term Loan
Commitment and, in
the case of the Agent, its Swing Loan Commitment, and Commitments shall
mean the aggregate of the Revolving Credit Commitments, Term Loan Commitments
and Swing Loan Commitment of all of the Lenders.

     

    Commitment Fee shall
have the meaning specified in Section 2.3 [Commitment Fees].

     

    Compliance
Certificate shall have the meaning specified in Section 8.3.3 [Certificate of the Borrower].

     

    Complying Lender
shall mean any Lender which is not a Non-Complying Lender.

     

    Consolidated Cash Flow from
Operations for any period of determination shall mean for the four fiscal
quarters then ended (i) the sum of net income, depreciation, depletion,
amortization, other non-cash charges to net income, interest expense and income
tax expense minus (ii) non-cash credits to net income, in each case of the
Borrower and its Subsidiaries for such period determined and consolidated in
accordance with GAAP.

     

    Consolidated EBITDA
for any period of determination shall mean (i) the sum of net income,
depreciation, depletion, amortization, other non-cash charges to net income,
interest expense and income tax expense minus
(ii) non-cash credits to net income, in each case of the Borrower and its
Subsidiaries for such period determined and consolidated in accordance with
GAAP.

     

    Consolidated Funded
Debt shall mean, without duplication, total Indebtedness for Borrowed
Money of the Loan Parties (other than Hallador) and their Subsidiaries,
determined and consolidated in accordance with GAAP.

     

    Consolidated Tangible Net
Worth shall mean as of any date of determination total stockholders'
equity less intangible assets of the Borrower and its Subsidiaries as of such
date determined and consolidated in accordance with GAAP.

     

    Contamination shall
mean the presence or release or threat of release of Regulated Substances in,
on, under or emanating to or from the Real Property, which pursuant to
Environmental Laws requires notification or reporting to an Official Body, or
which pursuant to Environmental Laws requires the investigation, cleanup,
removal, remediation, containment, abatement of or other response action or
which otherwise constitutes a violation of Environmental Laws.

     

    Dollar, Dollars, U.S.
Dollars and the symbol $ shall mean lawful
money of the United States of America.

     

    Drawing Date shall
have the meaning specified in Section 2.9.3
[Disbursements, Reimbursement].

     

    Environmental
Complaint shall mean any written complaint by any Person or Official Body
setting forth a cause of action for personal injury or property damage, natural
resource damage, contribution or indemnity for response costs, civil or
administrative penalties, criminal fines or penalties, or declaratory or
equitable relief arising under any Environmental Laws or any order, notice of
violation, citation, subpoena, request for information or other written notice
or demand of any type issued by an Official Body pursuant to any Environmental
Laws.

     

    Environmental Laws
shall mean all federal, state, local and foreign Laws and any consent decrees,
settlement agreements, judgments, orders, directives or policies or programs
having the force and effect of law issued by or entered into with an Official
Body pertaining or relating to: (i) pollution or pollution control;
(ii) protection of human health or the environment; (iii) employee
safety in the workplace; (iv) the presence, use, management, generation,
manufacture, processing, extraction, treatment, recycling, refining,
reclamation, labeling, transport, storage, collection, distribution, disposal or
release or threat of release of Regulated Substances; (v) the presence of
Contamination; (vi) the protection of endangered or threatened species and
(vii) the protection of Environmentally Sensitive Areas.

     

    Environmentally Sensitive
Area shall mean (i) any wetland as defined by applicable Environmental
Laws; (ii) any area designated as a coastal zone pursuant to applicable Laws,
including Environmental Laws; (iii) any area of historic or archeological
significance or scenic area as defined or designated by applicable Laws,
including Environmental Laws; (iv) habitats of endangered species or
threatened species as designated by applicable Laws, including Environmental
Laws or (v) a floodplain or other flood hazard area as defined pursuant to any
applicable Laws.

     

    ERISA shall mean the
Employee Retirement Income Security Act of 1974, as the same may be amended or
supplemented from time to time, and any successor statute of similar import, and
the rules and regulations thereunder, as from time to time in
effect.

     

    ERISA Affiliate shall
mean, at any time, any trade or business (whether or not incorporated) under
common control with the Borrower and are treated as a single employer under
Section 414 of the Code.

     

    ERISA Event means (a)
a reportable event (under Section 4043 of ERISA and regulations thereunder)
with respect to a Pension Plan; (b) a withdrawal by Borrower or any ERISA
Affiliate from a Pension Plan subject to Section 4063 of ERISA during a plan
year in which it was a substantial employer (as defined in Section 4001(a)(2) of
ERISA) or a cessation of operations that is treated as such a withdrawal under
Section 4062(e) of ERISA; (c) a complete or partial withdrawal by Borrower or
any ERISA Affiliate from a Multiemployer Plan or notification that a
Multiemployer Plan is in reorganization; (d) the filing of a notice of intent to
terminate, the treatment of a Plan amendment as a termination under Sections
4041 or 4041A of ERISA, or the commencement of proceedings by the PBGC to
terminate a Pension Plan or Multiemployer Plan; (e) an event or condition which
constitutes grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Pension Plan or Multiemployer Plan;
or (f) the imposition of any liability under Title IV of ERISA, other than for
PBGC premiums due but not delinquent under Section 4007 of ERISA, upon Borrower
or any ERISA Affiliate.

     

    ERISA Group shall
mean, at any time, the Borrower and all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control and all other entities which, together with the Borrower, are
treated as a single employer under Section 414 of the Internal Revenue
Code.

     

    Event of Default
shall mean any of the events described in Section 9.1 [Events of Default]
and referred to therein as an "Event of Default."

     

    Excess Cash Flow
shall be computed as of the close of each fiscal year by taking the difference
between Consolidated Cash Flow from Operations for such fiscal year and Fixed
Charges for such fiscal year.  All determinations of Excess Cash Flow
shall be based on the immediately preceding fiscal year and shall be made
following the delivery by the Borrower to the Administrative Agent of the
Borrower's audited financial statements for such preceding year.

     

    Excluded Collateral
shall mean the following:

     

    (1) any lease,
license, contract, property rights, equipment, joint venture interests, or
agreement to which a Loan Party is a party or any of its rights or interests
thereunder if and for so long as the grant of a security interest therein shall
constitute or result in (A) the abandonment, invalidation or unenforceability of
any right, title or interest of such Loan Party therein or (B) a breach or
termination pursuant to the terms of, or a default under, any such lease,
license, contract, property rights or agreement (other than to the extent that
any such term would be rendered ineffective pursuant to Sections 9-406, 9-407,
9-408 or 9-409 of the UCC (or any successor provision or provisions) of any
relevant jurisdiction or any other applicable law (including the Bankruptcy
Code) or principles of equity), provided however that, in the case of either (A)
or (B) above, such security interest shall attach immediately at such time as
the condition causing such abandonment, invalidation or unenforceability shall
be remedied and to the extent severable, shall attach immediately to any portion
of such lease, license, contract, property rights or agreement that does not
result in any of the consequences specified in (A) or (B) above, or

     

    (2) any of the
outstanding capital stock of any Subsidiary not organized under the laws of the
United States or any State or a political subdivision thereof in excess of 65%
of the voting power of all classes of capital stock of such Subsidiary entitled
to vote.

     

    Excluded Taxes shall
mean, with respect to the Administrative Agent, any Lender, the Issuing Lender
or any other recipient of any payment to be made by or on account of any
obligation of the Borrower hereunder, (a) taxes imposed on or measured by
its overall net income (however denominated), and franchise taxes imposed on it,
(b) any branch profits taxes imposed by the United States of America or any
similar tax imposed by any other jurisdiction in which the Borrower is located
and (c) in the case of a Foreign Lender, any withholding tax that is
imposed on amounts payable to such Foreign Lender at the time such Foreign
Lender becomes a party hereto (or designates a new lending office) or is
attributable to such Foreign Lender's failure or inability (other than as a
result of a Change in Law) to comply with Section 5.9.5 [Status of Lenders], except to the extent that
such Foreign Lender (or its assignor, if any) was entitled, at the time of
designation of a new lending office (or assignment), to receive additional
amounts from the Borrower with respect to such withholding tax pursuant to
Section 5.9.1 [Payment Free of Taxes].

     

    Executive Order No.
13224 shall mean the Executive Order No. 13224 on Terrorist Financing,
effective September 24, 2001, as the same has been, or shall hereafter be,
renewed, extended, amended or replaced.

     

    Expiration Date shall
mean December 12, 2012.

     

    Existing Credit
Agreement shall mean that certain Credit Agreement by and between the
Borrower and Old National Bank dated as of April 19, 2006, as
amended.

     

    Existing Letters of
Credit shall have the meaning assigned to that term in Section 2.9 [Letter of Credit Subfacility].

     

    Federal Funds Effective
Rate for any day shall mean the rate per annum (based on a year of 360
days and actual days elapsed and rounded upward to the nearest 1/100 of 1%)
announced by the Federal Reserve Bank of New York (or any successor) on such day
as being the weighted average of the rates on overnight federal funds
transactions arranged by federal funds brokers on the previous trading day, as
computed and announced by such Federal Reserve Bank (or any successor) in
substantially the same manner as such Federal Reserve Bank computes and
announces the weighted average it refers to as the "Federal Funds Effective
Rate" as of the date of this Agreement; provided, if such
Federal Reserve Bank (or its successor) does not announce such rate on any day,
the "Federal Funds Effective Rate" for such day shall be the Federal Funds
Effective Rate for the last day on which such rate was announced.

     

    Federal Funds Open
Rate for any day shall mean the rate per annum (based on a year of 360
days and actual days elapsed) which is the daily federal funds open rate as
quoted by ICAP North America, Inc. (or any successor) as set forth on the
Bloomberg Screen BTMM for that day opposite the caption "OPEN" (or on such other
substitute Bloomberg Screen that displays such rate), or as set forth on such
other recognized electronic source used for the purpose of displaying such rate
as selected by the Administrative Agent (an "Alternate Source") (or if such
rate for such day does not appear on the Bloomberg Screen BTMM (or any
substitute screen) or on any Alternate Source, or if there shall at any time,
for any reason, no longer exist a Bloomberg Screen BTMM (or any substitute
screen) or any Alternate Source, a comparable replacement rate determined by the
Administrative Agent at such time (which determination shall be conclusive
absent manifest error); provided however, that if such day is not a Business
Day, the Federal Funds Rate for such day shall be the "open" rate on the
immediately preceding Business Day.  If and when the Federal Funds
Rate changes, the rate of interest with respect to any advance to which the
Federal Funds Rate applies will change automatically without notice to the
Borrower, effective on the date of any such change.

     

    Fixed Charge Coverage
Ratio shall mean the ratio of (i) Consolidated EBITDA minus Maintenance Capital
Expenditure Cap to (ii) the sum of Fixed Charges.

     

    Fixed Charges shall
mean for any period of determination the sum of interest expense, income taxes
due and payable and scheduled principal installments on Indebtedness (as
adjusted for prepayments), in each case of the Borrower and its Subsidiaries for
such period determined and consolidated in accordance with GAAP.

     

    Foreign Lender shall
mean any Lender that is organized under the Laws of a jurisdiction other than
that in which the Borrower is resident for tax purposes.  For purposes
of this definition, the United States of America, each State thereof and the
District of Columbia shall be deemed to constitute a single
jurisdiction.

     

    Foreign Subsidiaries
shall mean, for any Person, each Subsidiary of such Person that is incorporated
or organized under the laws of any jurisdiction other than the United States of
America or any state or territory thereof.

     

    GAAP shall mean
generally accepted accounting principles as are in effect from time to time,
subject to the provisions of Section 1.3 [Accounting Principles], and
applied on a consistent basis both as to classification of items and
amounts.

     

    Guarantor shall mean
each of the parties to this Agreement which is designated as a "Guarantor" on
the signature page hereof and each other Person which joins this Agreement as a
Guarantor after the date hereof.

     

    Guarantor Joinder
shall mean a joinder by a Person as a Guarantor under the Loan Documents in the
form of Exhibit 1.1(G)(1).

     

    Guaranty of any
Person shall mean any obligation of such Person guaranteeing or in effect
guaranteeing any liability or obligation of any other Person in any manner,
whether directly or indirectly, including any agreement to indemnify or hold
harmless any other Person, any performance bond or other suretyship arrangement
and any other form of assurance against loss, except endorsement of negotiable
or other instruments for deposit or collection in the ordinary course of
business.

     

    Guaranty Agreement
shall mean the Continuing Agreement of Guaranty and Suretyship in substantially
the form of Exhibit
1.1(G)(2) executed and
delivered by each of the Guarantors.

     

    Hallador shall mean
Hallador Petroleum Company, a corporation organized and existing under the laws
of the State of Colorado.

     

    Hallador Subordination
Agreement shall mean the Hallador Subordination Agreement and Assignment
of Note in substantially the form of Exhibit 1.1(H) executed by each
of Hallador and the Administrative Agent.

     

    Indebtedness shall
mean, as to any Person at any time, any and all indebtedness, obligations or
liabilities (whether matured or unmatured, liquidated or unliquidated, direct or
indirect, absolute or contingent, or joint or several) of such Person for or in
respect of:  (i) borrowed money, (ii) amounts raised under
or liabilities in respect of any note purchase or acceptance credit facility,
(iii) reimbursement obligations (contingent or otherwise) under any letter
of credit, currency swap agreement, interest rate swap, cap, collar or floor
agreement or other interest rate management device, (iv) any other
transaction (including forward sale or purchase agreements, capitalized leases
and conditional sales agreements) having the commercial effect of a borrowing of
money entered into by such Person to finance its operations or capital
requirements (but not including trade payables and accrued expenses incurred in
the ordinary course of business which are not represented by a promissory note
or other evidence of indebtedness and which are not more than thirty (30) days
past due), or (v) any Guaranty of Indebtedness for borrowed
money.

     

    Indebtedness for Borrowed
Money shall mean, as to any Person at any time, any and all indebtedness,
obligations or liabilities (whether matured or unmatured, liquidated or
unliquidated, direct or indirect, absolute or contingent, or joint or several)
of such Person for or in respect of: (i) borrowed money, (ii) amounts
raised under or liabilities in respect of any note purchase or acceptance credit
facility, (iii) the unreimbursed amount of all drafts drawn under letters
of credit issued for the account of such Person and the undrawn stated amount of
all letters of credit issued for the account of such Person, or (iv) obligations
with respect to capitalized leases.

     

    Indemnified Taxes
shall mean Taxes other than Excluded Taxes.

     

    Indemnitee shall have
the meaning specified in Section 11.3.2
[Indemnification by the Borrower].

     

    Indemnity shall mean
the Indemnity Agreement in the form of Exhibit 1.1(I)(1) relating to
possible environmental liabilities associated with any of the owned or leased
real property of the Loan Parties (other than Hallador) or their
Subsidiaries.

     

    Information shall
mean all information received from the Loan Parties or any of their Subsidiaries
relating to the Loan Parties or any of such Subsidiaries or any of their
respective businesses, other than any such information that is available to the
Administrative Agent, any Lender or the Issuing Lender on a non-confidential
basis prior to disclosure by the Loan Parties or any of their
Subsidiaries.

     

    Insolvency Proceeding
shall mean, with respect to any Person, (a) a case, action or proceeding
with respect to such Person (i) before any court or any other Official Body
under any bankruptcy, insolvency, reorganization or other similar Law now or
hereafter in effect, or (ii) for the appointment of a receiver, liquidator,
assignee, custodian, trustee, sequestrator, conservator (or similar official) of
any Loan Party or otherwise relating to the liquidation, dissolution, winding-up
or relief of such Person, or (b) any general assignment for the benefit of
creditors, composition, marshaling of assets for creditors, or other, similar
arrangement in respect of such Person's creditors generally or any substantial
portion of its creditors; undertaken under any Law.

     

    Intercompany Subordination
Agreement shall mean a Subordination Agreement among the Loan Parties in
the form attached hereto as Exhibit 1.1(I)(2).

     

    Interest Period shall
mean the period of time selected by the Borrower in connection with (and to
apply to) any election permitted hereunder by the Borrower to have Revolving
Credit Loans or Term Loans bear interest under the LIBOR Rate
Option.  Subject to the last sentence of this definition, such period
shall be one, two, three or six Months.  Such Interest Period shall
commence on the effective date of such Interest Rate Option, which shall be (i)
the Borrowing Date if the Borrower is requesting new Loans, or (ii) the date of
renewal of or conversion to the LIBOR Rate Option if the Borrower is renewing or
converting to the LIBOR Rate Option applicable to outstanding
Loans.  Notwithstanding the second sentence hereof: (A) any
Interest Period which would otherwise end on a date which is not a Business Day
shall be extended to the next succeeding Business Day unless such Business Day
falls in the next calendar month, in which case such Interest Period shall end
on the next preceding Business Day, and (B) the Borrower shall not select,
convert to or renew an Interest Period for any portion of the Loans that would
end after the Expiration Date.

     

    Interest Rate Hedge
shall mean an interest rate exchange, collar, cap, swap, adjustable strike cap,
adjustable strike corridor or similar agreements entered into by the Loan
Parties (other than Hallador) or their Subsidiaries in order to provide
protection to, or minimize the impact upon, the Borrower, the Guarantor and/or
their Subsidiaries of increasing floating rates of interest applicable to
Indebtedness

     

    Interest Rate Option
shall mean any LIBOR Rate Option or Base Rate Option.

     

    IRS shall mean the
Internal Revenue Service.

     

    Issuing Lender means
PNC Bank, in its individual capacity as issuer of Letters of Credit hereunder,
Old National Bank and any other Lender that Borrower, Administrative Agent and
such other Lender may agree may from time to time issue Letters of Credit
hereunder.

     

    Joint Venture shall
mean a corporation, partnership, limited liability company or other entities in
which any Person other than the Loan Parties (other than Hallador) and their
Subsidiaries holds, directly or indirectly, an equity interest.

     

    Law shall mean any
law (including common law), constitution, statute, treaty, regulation, rule,
ordinance, opinion, release, ruling, order, injunction, writ, decree, bond,
judgment, authorization or approval, lien or award by or settlement agreement
with any Official Body.

     

    Lender Provided Interest
Rate Hedge shall mean an Interest Rate Hedge which is provided by any
Lender or its Affiliate and with respect to which the Administrative Agent
confirms: (i) is documented in a standard International Swap Dealer
Association Agreement, (ii) provides for the method of calculating the
reimbursable amount of the provider's credit exposure in a reasonable and
customary manner, and (iii) is entered into for hedging (rather than
speculative) purposes.

     

    Lenders shall mean
the financial institutions named on Schedule 1.1(B) and their
respective successors and assigns as permitted hereunder, each of which is
referred to herein as a Lender.  For the purpose of any Loan Document
which provides for the granting of a security interest or other Lien to the
Lenders or to the Administrative Agent for the benefit of the Lenders as
security for the Obligations, "Lenders" shall include any Affiliate of a Lender
to which such Obligation is owed.

     

    Lessor Consents shall
have the meaning specified in Section 7.1.1(viii).

     

    Letter of Credit
shall have the meaning specified in Section 2.9.1 [Issuance of Letters of
Credit].

     

    Letter of Credit
Borrowing shall have the meaning specified in Section 2.9.3 [Disbursements, Reimbursement].

     

    Letter of Credit Fee
shall have the meaning specified in Section 2.9.2 [Letter of Credit
Fees].

     

    Letter of Credit
Obligation means, as of any date of determination, the aggregate amount
available to be drawn under all outstanding Letters of Credit on such date (if
any Letter of Credit shall increase in amount automatically in the future, such
aggregate amount available to be drawn shall currently give effect to any such
future increase) plus the aggregate
Reimbursement Obligations and Letter of Credit Borrowings on such
date.

     

    Letter of Credit
Sublimit shall have the meaning specified in Section 2.9.1 [Issuance of Letters of Credit].

     

    Leverage Ratio shall
mean, as of the end of any date of determination, the ratio of
(A) Consolidated Funded Debt of Borrower and its Subsidiaries on such date
to (B) Consolidated EBITDA (i) for the four fiscal quarters then
ending if such date is a fiscal quarter end or (ii) for the four fiscal
quarters most recently ended if such date is not a fiscal quarter
end.

     

    LIBOR Rate shall
mean, with respect to the Loans comprising any Borrowing Tranche to which the
LIBOR Rate Option applies for any Interest Period, the interest rate per annum
determined by the Administrative Agent by dividing (the resulting quotient
rounded upwards, if necessary, to the nearest 1/100th of 1% per annum) (i) the
rate which appears on the Bloomberg Page BBAM1 (or on such other substitute
Bloomberg page that displays rates at which US dollar deposits are offered by
leading banks in the London interbank deposit market), or the rate which is
quoted by another source selected by the Administrative Agent which has been
approved by the British Bankers' Association as an authorized information vendor
for the purpose of displaying rates at which US dollar deposits are offered by
leading banks in the London interbank deposit market (a "LIBOR Alternate
Source"), at approximately 11:00 a.m., London time, two (2) Business Days prior
to the commencement of such Interest Period as the London interbank offered rate
for U.S. Dollars for an amount comparable to such Borrowing Tranche and having a
borrowing date and a maturity comparable to such Interest Period (or if there
shall at any time, for any reason, no longer exist a Bloomberg Page BBAM1 (or
any substitute page) or any LIBOR Alternate Source, a comparable replacement
rate determined by the Administrative Agent at such time (which determination
shall be conclusive absent manifest error)), by (ii) a number equal to 1.00
minus the LIBOR Reserve Percentage.  LIBOR may also be expressed by
the following formula:

     

    Average of London
interbank offered rates quoted

     

    by Bloomberg or
appropriate successor as shown on

     

    
      	
               
      

            	
              LIBOR
      =

            	
              Bloomberg Page
      BBAM1

            


    

     

    
      	
               
      

            	
              1.00 - LIBOR
      Reserve Percentage

            


    

     

    The LIBOR Rate
shall be adjusted with respect to any Loan to which the LIBOR Rate Option
applies that is outstanding on the effective date of any change in the LIBOR
Rate Reserve Percentage as of such effective date.  The Administrative
Agent shall give prompt notice to the Borrower of the LIBOR Rate as determined
or adjusted in accordance herewith, which determination shall be conclusive
absent manifest error.

     

    LIBOR Rate Option
shall mean the option of the Borrower to have Loans bear interest at the rate
and under the terms set forth in Section 4.1.1(ii) [Revolving Credit LIBOR Rate Option] or
Section 4.1.2(ii) [Term Loan LIBOR Rate Option], as
applicable.

     

    LIBOR Rate Reserve
Percentage shall mean as of any day the maximum percentage in effect on
such day, as prescribed by the Board of Governors of the Federal Reserve System
(or any successor) for determining the reserve requirements (including
supplemental, marginal and emergency reserve requirements) with respect to
eurocurrency funding (currently referred to as "Eurocurrency
Liabilities").

     

    Lien shall mean any
mortgage, deed of trust, pledge, lien, security interest, charge or other
encumbrance or security arrangement of any nature whatsoever, whether
voluntarily or involuntarily given, including any conditional sale or title
retention arrangement, and any assignment, deposit arrangement or lease intended
as, or having the effect of, security and any filed financing statement or other
notice of any of the foregoing (whether or not a lien or other encumbrance is
created or exists at the time of the filing).

     

    Loan Documents shall
mean this Agreement, the Administrative Agent's Letter, the Collateral
Assignment, the Guaranty Agreement, the Hallador Subordination Agreement, the
Indemnity, the Intercompany Subordination Agreement, the Mortgage, the Notes,
the Pledge Agreement, the Security Agreement, and any other instruments,
certificates or documents delivered in connection herewith or
therewith.

     

    Loan Parties shall
mean the Borrower and the Guarantors.

     

    Loan Request shall
have the meaning specified in Section 2.5 [Revolving Credit Loan Requests;
Swing Loan Requests].

     

    Loans shall mean
collectively and Loan shall mean
separately all Revolving Credit Loans, Swing Loans and the Term Loans or any
Revolving Credit Loan, Swing Loan or the Term Loan.

     

    Maintenance Capital
Expenditure Cap shall equal the lesser of actual capital expenditures or
$9,000,000 in any consecutive four fiscal quarters.

     

    Mandatory Prepayment
Date shall have the meaning assigned to that term in Section 5.7.4 [Excess Cash Flow].

     

    Mandatory Prepayment of
Excess Cash Flow shall have the meaning assigned to that term in Section
5.7.4 [Excess Cash Flow].

     

    Material Adverse
Change shall mean any set of circumstances or events which (a) has
or could reasonably be expected to have any material adverse effect whatsoever
upon the validity or enforceability of this Agreement or any other Loan
Document, (b) is or could reasonably be expected to be material and adverse
to the business, properties, assets, financial condition, results of operations
of the Loan Parties taken as a whole, (c) impairs materially or could
reasonably be expected to impair materially the ability of the Loan Parties
taken as a whole to duly and punctually pay or perform its Indebtedness, or
(d) impairs materially or could reasonably be expected to impair materially
the ability of the Administrative Agent or any of the Lenders, to the extent
permitted, to enforce their legal remedies pursuant to this Agreement or any
other Loan Document.

     

    Month, with respect
to an Interest Period under the LIBOR Rate Option, shall mean the interval
between the days in consecutive calendar months numerically corresponding to the
first day of such Interest Period.  If any LIBOR Rate Interest Period
begins on a day of a calendar month for which there is no numerically
corresponding day in the month in which such Interest Period is to end, the
final month of such Interest Period shall be deemed to end on the last Business
Day of such final month.

     

    Mortgage shall mean
the Mortgage in substantially the form of Exhibit 1.1(M) executed and
delivered by the Loan Parties (other than Hallador) to the Administrative Agent
for the benefit of the Lenders with respect to the Real Property that is owned
by any of the Loan Parties (other than Hallador), or with respect to the Real
Property that is leased by any of the Loan Parties (other than Hallador) and
that includes surface rights and significant facilities of any of the Loan
Parties (other than Hallador), but not including any leased office
space.

     

    Multiemployer Plan
shall mean any employee benefit plan which is a "multiemployer plan" within the
meaning of Section 4001(a)(3) of ERISA and to which the Borrower or any
member of the ERISA Group is then making or accruing an obligation to make
contributions or, within the preceding five Plan years, has made or had an
obligation to make such contributions.

     

    Non-Complying Lender
shall mean any Lender which has failed to fund any Loan which it is required to
fund, or pay any other amount which it is required to pay to the Administrative
Agent or any other Lender, within one day of the due date therefor.

     

    Non-Consenting Lender
shall have the meaning specified in Section 11.1 [Modifications, Amendments or
Waivers].

     

    Notes shall mean,
collectively, the promissory notes in the form of Exhibit 1.1(N)(1)
evidencing the Revolving Credit Loans, in the form of Exhibit 1.1(N)(2)
evidencing the Swing Loan, and in the form of Exhibit 1.1(N)(3)
evidencing the Term Loans.

     

    Notices shall have
the meaning specified in Section 11.5 [Notices; Effectiveness; Electronic
Communication].

     

    Obligation shall mean
any obligation or liability of any of the Loan Parties, howsoever created,
arising or evidenced, whether direct or indirect, absolute or contingent, now or
hereafter existing, or due or to become due, under or in connection with
(i) this Agreement, the Notes, the Letters of Credit,
the Administrative Agent's Letter or any other Loan Document whether to the
Administrative Agent, any of the Lenders or their Affiliates or other persons
provided for under such Loan Documents, (ii) any Lender Provided Interest
Rate Hedge and (iii) any Other Lender Provided Financial Service
Product.

     

    Official Body shall
mean the government of the United States of America or any other nation, or of
any political subdivision thereof, whether state or local, and any agency,
authority, instrumentality, regulatory body, court, central bank or other entity
exercising executive, legislative, judicial, taxing, regulatory or
administrative powers or functions of or pertaining to government (including any
supra-national bodies such as the European Union or the European Central
Bank).

     

    Other Lender Provided
Financial Service Products shall mean agreements or other arrangements
under which any Lender or Affiliate of a Lender provides any of the following
products or services to any of the Loan Parties: (a) credit cards, (b) credit
card processing services, (c) debit cards, (d) purchase cards, (e) ACH
Transactions, (f) cash management, including controlled disbursement, accounts
or services, or (g) foreign currency exchange.

     

    Other Taxes shall
mean all present or future stamp or documentary taxes or any other excise or
property taxes, charges or similar levies arising from any payment made
hereunder or under any other Loan Document or from the execution, delivery or
enforcement of, or otherwise with respect to, this Agreement or any other Loan
Document.

     

    Participant has the
meaning specified in Section 11.8.4
[Participations].

     

    Participation Advance
shall have the meaning specified in Section 2.9.3 [Disbursements, Reimbursement].

     

    Payment Date shall
mean the first day of each calendar quarter after the date hereof and on the
Expiration Date or upon acceleration of the Notes.

     

    Payment In Full shall
mean payment in full in cash of the Loans and other Obligations hereunder (other
than Unasserted Obligations), termination of the Commitments and expiration or
termination of all Letters of Credit.

     

    PBGC shall mean the
Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title
IV of ERISA or any successor.

     

    Pension Plan means
any "employee pension benefit plan" (as such term is defined in Section 3(2) of
ERISA), other than a Multiemployer Plan, that is subject to Title IV of ERISA
and is sponsored or maintained by Borrower or any ERISA Affiliate or to which
Borrower or any ERISA Affiliate contributes or has an obligation to contribute,
or in the case of a multiple employer or other plan described in Section 4064(a)
of ERISA, has made contributions at any times during the immediately preceding
five plan years.

     

    Permitted Investments
shall mean:

     

    (i)           direct
obligations of the United States of America or any agency or instrumentality
thereof or obligations backed by the full faith and credit of the United States
of America maturing in twelve (12) months or less from the date of
acquisition;

     

    (ii)           commercial
paper maturing in 180 days or less rated not lower than A-1, by Standard &
Poor's or P-1 by Moody's Investors Service, Inc. on the date of
acquisition;

     

    (iii)           demand
deposits, time deposits or certificates of deposit maturing within one year in
commercial banks whose obligations are rated A-1, A or the equivalent or better
by Standard & Poor's on the date of acquisition; and

     

    (iv)           money
market or mutual funds whose investments are limited to those types of
investments described in clauses (i)-(iii) above.

     

    Permitted Liens shall
mean:

     

    (i)           Liens
for taxes, assessments, or similar charges, incurred in the ordinary course of
business and which are not yet due and payable;

     

    (ii)           Pledges
or deposits made in the ordinary course of business to secure payment of
workmen's compensation, or to participate in any fund in connection with
workmen's compensation, unemployment insurance, old-age pensions or other social
security programs;

     

    (iii)           Liens
of mechanics, materialmen, warehousemen, carriers, or other like Liens, securing
obligations incurred in the ordinary course of business that are not yet due and
payable and Liens of landlords securing obligations to pay lease payments that
are not yet due and payable or in default;

     

    (iv)           Good-faith
pledges or deposits made in the ordinary course of business to secure
performance of bids, tenders, contracts (other than for the repayment of
borrowed money) or leases, not in excess of the aggregate amount due thereunder,
or to secure statutory obligations, or surety, appeal, indemnity, performance or
other similar bonds required in the ordinary course of business;

     

    (v)           Encumbrances
consisting of zoning restrictions, easements or other restrictions on the use of
real property, none of which materially impairs the intended use of such
property or the value thereof, and none of which is violated in any material
respect by existing or proposed structures or land use;

     

    (vi)           Liens,
security interests and mortgages in favor of the Administrative Agent for the
benefit of the Lenders and their Affiliates securing the Obligations (including
obligations in connection with Lender Provided Interest Rate Hedges and Other
Lender Provided Financial Service Products);

     

    (vii)           Liens
on property leased by any Loan Party (other than Hallador) or Subsidiary of such
Loan Party under capital and operating leases permitted in Section 8.2.14
[Capital Expenditures and Leases] securing obligations of such Loan Party or
Subsidiary to the lessor under such leases;

     

    (viii)                      Any
Lien existing on the date of this Agreement and described on Schedule 1.1(P), provided that the
principal amount secured thereby is not hereafter increased, and no additional
assets become subject to such Lien;

     

    (ix)           Purchase
Money Security Interests; provided that the
aggregate amount of loans and deferred payments secured by such Purchase Money
Security Interests shall not exceed $1,000,000 (excluding for the purpose of
this computation any loans or deferred payments secured by Liens described on
Schedule 1.1(P));
and

     

    (x)           The
following, (A) if the validity or amount thereof is being contested in good
faith by appropriate and lawful proceedings diligently conducted so long as levy
and execution thereon either has not commenced or have been stayed and continue
to be stayed or (B) if a final judgment is entered and such judgment is
discharged within thirty (30) days of entry, and in either case they do not in
the aggregate, materially impair the ability of any Loan Party to perform its
Obligations hereunder or under the other Loan Documents:

     

    (1)           Claims
or Liens for taxes, assessments or charges due and payable and subject to
interest or penalty; provided that the
applicable Loan Party maintains such reserves or other appropriate provisions as
shall be required by GAAP and pays all such taxes, assessments or charges
forthwith upon the commencement of proceedings to foreclose any such
Lien;

     

    (2)           Defects
of title to, real or personal property;

     

    (3)           Claims
or Liens of mechanics, materialmen, warehousemen, carriers, or other statutory
nonconsensual Liens incurred in the ordinary course of business or the ordinary
course of construction, and in either case such claims or liens do not result in
a Material Adverse Change; or

     

    (4)           Liens
resulting from final judgments or orders described in Section 9.1.6 [Final
Judgments or Orders].

     

    (xi)           Judgment
Liens not constituting an Event of Default.

     

    (xii)           Liens
securing Indebtedness that will be repaid with the first advances under this
Agreement.

     

    Permitted Tax
Distributions shall mean any cash distributions made to any equity owners
of Borrower, pursuant to section 7.1 of the Sunrise Coal, LLC Amended and
Restated Operating Agreement dated July 31, 2006.

     

    Person shall mean any
individual, corporation, partnership, limited liability company, association,
joint-stock company, trust, unincorporated organization, joint venture,
government or political subdivision or agency thereof, or any other
entity.

     

    Plan shall mean at
any time an employee pension benefit plan (including a Multiple Employer Plan,
but not a Multiemployer Plan) which is covered by Title IV of ERISA or is
subject to the minimum funding standards under Section 412 of the Code and
either (i) is maintained by any member of the ERISA Group for employees of
any member of the ERISA Group or (ii) has at any time within the preceding
five years been maintained by any entity which was at such time a member of the
ERISA Group for employees of any entity which was at such time a member of the
ERISA Group.

     

    Pledge Agreement
shall mean the Pledge Agreement in substantially the form of Exhibit 1.1(P) executed and
delivered by Hallador to the Administrative Agent for the benefit of the
Lenders.

     

    PNC Bank shall mean
PNC Bank, National Association, its successors and assigns.

     

    Potential Default
shall mean any event or condition which with notice or passage of time, or both,
would constitute an Event of Default.

     

    Principal Office
shall mean the main banking office of the Administrative Agent in Pittsburgh,
Pennsylvania.

     

    Prior Security
Interest shall mean a valid and enforceable perfected first-priority
security interest under the Uniform Commercial Code in the Collateral which is
subject only to statutory Liens for taxes not yet due and payable or Purchase
Money Security Interests.

     

    Purchase Money Security
Interest shall mean Liens upon tangible personal property securing loans
to any Loan Party (other than Hallador) or Subsidiary of such Loan Party or
deferred payments by such Loan Party or Subsidiary for the purchase of such
tangible personal property.

     

    Ratable Share shall
mean the proportion that a Lender's Commitment (excluding the Swing Loan
Commitment) bears to the Commitments (excluding the Swing Loan Commitment) of
all of the Lenders.  If the Commitments have terminated or expired,
the Ratable Shares shall be determined based upon the Commitments (excluding the
Swing Loan Commitment) most recently in effect, giving effect to any
assignments.

     

    Real Property shall
mean the real property, both owned and leased, and the surface, coal, and
mineral rights, interests and coal leases of each Loan Party (other than
Hallador) associated with the properties described on Schedule 1.1(R),
which shall be encumbered by a Mortgage, as described on Schedule
1.1(R).

     

    Regulated Substances
shall mean, without limitation, any substance, material or waste, regardless of
its form or nature, defined under Environmental Laws as a "hazardous substance",
"pollutant", "pollution", "contaminant", "hazardous or toxic substance",
"extremely hazardous substance", "toxic chemical", "toxic substance", "toxic
waste", "hazardous waste", "special handling waste", "industrial waste",
"residual waste", "solid waste", "municipal waste", "mixed waste", "infectious
waste", "chemotherapeutic waste", "medical waste", "regulated substance" or any
other material, substance or waste, regardless of its form or nature, which
otherwise is regulated by Environmental Laws.

     

    Reimbursement
Obligation shall have the meaning specified in Section 2.9.3 [Disbursements, Reimbursement].

     

    Related Parties shall
mean, with respect to any Person, such Person's Affiliates and the partners,
directors, officers, employees, agents and advisors of such Person and of such
Person's Affiliates.

     

    Relief Proceeding
shall mean any proceeding seeking a decree or order for relief in respect
of any Loan Party or Subsidiary of a Loan Party in a voluntary or involuntary
case under any applicable bankruptcy, insolvency, reorganization or other
similar law now or hereafter in effect, or for the appointment of a receiver,
liquidator, assignee, custodian, trustee, sequestrator, conservator (or similar
official) of any Loan Party or Subsidiary of a Loan Party for any substantial
part of its property, or for the winding-up or liquidation of its affairs, or an
assignment for the benefit of its creditors.

     

    Required Environmental
Notices shall mean all notices, reports, plans, forms or other filings
which are required pursuant to Environmental Laws or Required Environmental
Permits to be submitted to an Official Body or which otherwise must be
maintained.

     

    Required Environmental
Permits shall mean all permits, licenses, bonds, consents, approvals or
authorizations required under Environmental Laws to own, occupy or maintain the
Real Property.

     

    Required Lenders
shall mean

     

    (A)           If
there exists fewer than three (3) Lenders, all Lenders, and

     

    (B)           If
there exist three (3) or more Lenders:

     

    (i)           if
there are no Loans, Reimbursement Obligations or Letter of Credit Borrowings
outstanding, Complying Lenders whose Commitments (excluding the Swing Loan
Commitments) aggregate at least 67% of the Commitments (excluding the Swing Loan
Commitments) of all of the Complying Lenders, or

     

    (ii)           if
there are Loans, Reimbursement Obligations, or Letter of Credit Borrowings
outstanding, any group of Complying Lenders if the sum of the Loans (excluding
the Swing Loans), Reimbursement Obligations and Letter of Credit Borrowings of
such Lenders then outstanding aggregates at least 67% of the total principal
amount of all of the Loans (excluding the Swing Loans), Reimbursement
Obligations and Letter of Credit Borrowings of all of the Complying Lenders then
outstanding.

     

    Required Mining
Permits shall mean all permits, licenses, authorizations, plans,
approvals and bonds necessary under the Environmental Laws for the Loan Parties
or any Subsidiary to continue to conduct coal mining and related operations on,
in or under the Real Property, and any and all other mining properties owned or
leased by any such Loan Party or Subsidiary (collectively "Mining Property")
substantially in the manner as such operations had been authorized immediately
prior to Borrower's or such Subsidiary's acquisition of its interests in the
Real Property and as may be necessary for Borrower or such Subsidiary to conduct
coal mining and related operations on, in or under the Mining Property as
described in any plan of operation.

     

    Required Share shall
have the meaning assigned to such term in Section 5.11 [Settlement Date
Procedures].

     

    Revolving Credit
Commitment shall mean, as to any Lender at any time, the amount initially
set forth opposite its name on Schedule 1.1(B) in the column
labeled "Amount of Commitment for Revolving Credit Loans," as such Commitment is
thereafter assigned or modified and Revolving Credit
Commitments shall mean the aggregate Revolving Credit Commitments of all
of the Lenders.

     

    Revolving Credit
Loans shall mean collectively and Revolving Credit Loan
shall mean separately all Revolving Credit Loans or any Revolving Credit Loan
made by the Lenders or one of the Lenders to the Borrower pursuant to
Section 2.1 [Revolving Credit Commitments] or 2.9.3 [Disbursements,
Reimbursement].

     

    Revolving Facility
Usage shall mean at any time the sum of the outstanding Revolving Credit
Loans, Swing Loans and the Letter of Credit Obligations.

     

    Security Agreement
shall mean the Security Agreement in substantially the form of Exhibit 1.1(S) executed and
delivered by each of the Loan Parties (other than Hallador) to the
Administrative Agent for the benefit of the Lenders.

     

    Security Documents
shall mean the Security Agreement, the Pledge Agreement, the Collateral
Assignment, the Mortgage, deeds of trust, and all other documents, instruments,
and agreements sufficient to provide the Administrative Agent for the benefit of
the Lenders with a first priority perfected Lien, subject only to Permitted
Liens, on the Collateral.

     

    Settlement Date shall
mean any Business Day on which the Administrative Agent elects to effect
settlement pursuant to Section 5.11 [Settlement Date Procedures].

     

    Solvent shall mean,
with respect to any Person on a particular date, that on such date (i) the
fair value of the property of such Person is greater than the total amount of
liabilities, including, without limitation, contingent liabilities, of such
Person, (ii) the present fair saleable value of the assets of such Person
is not less than the amount that will be required to pay the probable liability
of such Person on its debts as they become absolute and matured, (iii) such
Person is able to realize upon its assets and pay its debts and other
liabilities, contingent obligations and other commitments as they mature in the
normal course of business, (iv) such Person does not intend to, and does
not believe that it will, incur debts or liabilities beyond such Person's
ability to pay as such debts and liabilities mature, and (v) such Person is
not engaged in business or a transaction, and is not about to engage in business
or a transaction, for which such Person's property would constitute unreasonably
small capital after giving due consideration to the prevailing practice in the
industry in which such Person is engaged.  In computing the amount of
contingent liabilities at any time, it is intended that such liabilities will be
computed at the amount which, in light of all the facts and circumstances
existing at such time, represents the amount that can reasonably be expected to
become an actual or matured liability.

     

    Standard & Poor's
shall mean Standard & Poor's Ratings Services, a division of The McGraw-Hill
Companies, Inc.

     

    Statements shall have
the meaning specified in Section 6.1.6(i) [Historical
Statements].

     

    Subsidiary of any
Person at any time shall mean any corporation, trust, partnership, any limited
liability company or other business entity (i) of which 50% or more of the
outstanding voting securities or other interests normally entitled to vote for
the election of one or more directors or trustees (regardless of any contingency
which does or may suspend or dilute the voting rights) is at such time owned
directly or indirectly by such Person or one or more of such Person's
Subsidiaries, or (ii) which is controlled or capable of being controlled by
such Person or one or more of such Person's Subsidiaries.

     

    Subsidiary Equity
Interests shall have the meaning specified in Section 6.1.2
[Subsidiaries and Owners; Investment Companies].

     

    Swing Loan Commitment
shall mean PNC Bank's commitment to make Swing Loans to the Borrower pursuant to
Section 2.1.2 [Swing Loan Commitment] hereof in an aggregate principal amount up
to $5,000,000.

     

    Swing Loan Note shall
mean the Swing Loan Note of the Borrower in the form of [Exhibit 1.1(N)(2)]
evidencing the Swing Loans, together with all amendments, extensions, renewals,
replacements, refinancings or refundings thereof in whole or in
part.

     

    Swing Loan Request
shall mean a request for Swing Loans made in accordance with Section 2.5.2
[Swing Loan Request] hereof.

     

    Swing Loans shall
mean collectively and Swing Loan shall mean
separately all Swing Loans or any Swing Loan made by PNC Bank to the Borrower
pursuant to Section 2.1.2 [Swing Loan Commitment] hereof.

     

    Taxes shall mean all
present or future taxes, levies, imposts, duties, deductions, withholdings,
assessments, fees or other charges imposed by any Official Body, including any
interest, additions to tax or penalties applicable thereto.

     

    Term Loan shall have
the meaning specified in Section 3.1 [Term Loan Commitments]; Term Loans shall mean
collectively all of the Term Loans.

     

    Term Loan Commitment
shall mean, as to any Lender at any time, the amount initially set forth
opposite its name on Schedule 1.1(B) in the column
labeled "Amount of Commitment for Term Loans," as such Commitment is thereafter
assigned or modified and Term Loan Commitments
shall mean the aggregate Term Loan Commitments of all of the
Lenders.

     

    Unasserted
Obligations shall mean contingent indemnification obligations (other than
Letter of Credit Obligations) under the Loan Documents to the extent no claim
giving rise thereto has been asserted.

     

    USA Patriot Act shall
mean the Uniting and Strengthening America by Providing Appropriate Tools
Required to Intercept and Obstruct Terrorism Act of 2001, Public Law 107-56, as
the same has been, or shall hereafter be, renewed, extended, amended or
replaced.

     

    1.2 Construction.

     

      Unless
the context of this Agreement otherwise clearly requires, the following rules of
construction shall apply to this Agreement and each of the other Loan Documents:
(i) references to the plural include the singular, the plural, the part and the
whole and the words "include," "includes" and "including" shall be deemed to be
followed by the phrase "without limitation"; (ii) the words "hereof," "herein,"
"hereunder," "hereto" and similar terms in this Agreement or any other Loan
Document refer to this Agreement or such other Loan Document as a whole; (iii)
article, section, subsection, clause, schedule and exhibit references are to
this Agreement or other Loan Document, as the case may be, unless otherwise
specified; (iv) reference to any Person includes such Person's successors and
assigns; (v) reference to any agreement, including this Agreement and any other
Loan Document together with the schedules and exhibits hereto or thereto,
document or instrument means such agreement, document or instrument as amended,
modified, replaced, substituted for, superseded or restated; (vi) relative to
the determination of any period of time, "from" means "from and including," "to"
means "to but excluding," and "through" means "through and including"; (vii) the
words "asset" and "property" shall be construed to have the same meaning and
effect and to refer to any and all tangible and intangible assets and
properties, including cash, securities, accounts and contract rights, (viii)
section headings herein and in each other Loan Document are included for
convenience and shall not affect the interpretation of this Agreement or such
Loan Document, and (ix) unless otherwise specified, all references herein to
times of day shall be references to Eastern Standard Time or Eastern Daylight
Time, as applicable.

     

    1.3 Accounting
Principles.

     

      Except
as otherwise provided in this Agreement, all computations and determinations as
to accounting or financial matters and all financial statements to be delivered
pursuant to this Agreement shall be made and prepared in accordance with GAAP
(including principles of consolidation where appropriate), and all accounting or
financial terms shall have the meanings ascribed to such terms by GAAP; provided, however, that all
accounting terms used in Section 8.2 [Negative
Covenants] (and all defined terms used in the definition of any accounting term
used in Section 8.2 [Negative Covenants] shall
have the meaning given to such terms (and defined terms) under GAAP as in effect
on the date hereof applied on a basis consistent with those used in preparing
Statements referred to in Section 6.1.6(i) [Historical
Statements].  In the event of any change after the date hereof in
GAAP, and if such change would affect the computation of any of the financial
covenants set forth in Section 8.2 [Negative
Covenants], then the parties hereto agree to endeavor, in good faith, to agree
upon an amendment to this Agreement that would adjust such financial covenants
in a manner that would preserve the original intent thereof, but would allow
compliance therewith to be determined in accordance with the Borrower's
financial statements at that time, provided that, until so
amended such financial covenants shall continue to be computed in accordance
with GAAP prior to such change therein.

     

    2.           REVOLVING CREDIT AND SWING
LOAN FACILITIES

     

    2.1 Revolving Credit
Commitments.

     

    2.1.1 Revolving Credit
Loans.

     

     Subject to
the terms and conditions hereof and relying upon the representations and
warranties herein set forth, each Lender severally agrees to make Revolving
Credit Loans to the Borrower at any time or from time to time on or after the
date hereof to the Expiration Date; provided that after
giving effect to such Loan (i) the aggregate amount of Loans from such
Lender shall not exceed such Lender's Revolving Credit Commitment minus such
Lender's Ratable Share of the Letter of Credit Obligations and (ii) the
Revolving Facility Usage plus the amount of the outstanding Swing Loans shall
not exceed the Revolving Credit Commitments.  Within such limits of
time and amount and subject to the other provisions of this Agreement, the
Borrower may borrow, repay and reborrow pursuant to this
Section 2.1.

     

    2.1.2 Swing Loan
Commitment.

     

     Subject to
the terms and conditions hereof and relying upon the representations and
warranties herein set forth, and in order to facilitate loans and repayments
between Settlement Dates, PNC Bank may, at its option, cancelable at any time
for any reason whatsoever, make swing loans (the "Swing Loans") to the Borrower
at any time or from time to time after the date hereof to, but not including,
the Expiration Date, in an aggregate principal amount up to but not in excess of
$5,000,000 (the "Swing Loan
Commitment"), provided that the aggregate principal amount of PNC Bank's
Swing Loans and the Revolving Credit Loans of all the Lenders at any one time
outstanding shall not exceed the Revolving Credit Commitments of all the
Lenders.  Within such limits of time and amount and subject to the
other provisions of this Agreement, the Borrower may borrow, repay and reborrow
pursuant to this Section 2.1.2.

     

    2.2 Nature of Lenders'
Obligations with Respect to Revolving Credit Loans.

     

      Each
Lender shall be obligated to participate in each request for Revolving Credit
Loans pursuant to Section 2.5 [Revolving Credit Loan Requests; Swing Loan
Requests] in accordance with its Ratable Share.  The aggregate of each
Lender's Revolving Credit Loans outstanding hereunder to the Borrower at any
time shall never exceed its Revolving Credit Commitment minus its Ratable Share
of the Letter of Credit Obligations.  The obligations of each Lender
hereunder are several.  The failure of any Lender to perform its
obligations hereunder shall not affect the Obligations of the Borrower to any
other party nor shall any other party be liable for the failure of such Lender
to perform its obligations hereunder.  The Lenders shall have no
obligation to make Revolving Credit Loans hereunder on or after the Expiration
Date.

     

    2.3 Commitment
Fees.

     

      Accruing
from the date hereof until the Expiration Date, the Borrower agrees to pay to
the Administrative Agent for the account of each Lender according to its Ratable
Share, a nonrefundable commitment fee (the "Commitment Fee") equal to the
Applicable Commitment Fee Rate (computed on the basis of a year of 365 or 366
days, as the case may be, and actual days elapsed) times the average daily
difference between the amount of (i) the Revolving Credit Commitments (for
purposes of this computation, PNC Bank's Swing Loans shall be deemed to be
borrowed amounts under its Revolving Credit Commitment) and the (ii) the
Revolving Facility Usage.  All Commitment Fees shall be payable in
arrears on each Payment Date.

     

    2.4 Intentionally
Omitted.

     

    2.5 Revolving Credit Loan
Requests; Swing Loan Requests.

     

    2.5.1 Revolving Credit Loan
Requests.

     

     Except as
otherwise provided herein (and subject to Section 4.5 [Selection of Interest Rate Options], the Borrower
may from time to time prior to the Expiration Date request the Lenders to make
Revolving Credit Loans, or renew or convert the Interest Rate Option applicable
to existing Revolving Credit Loans or Term Loans pursuant to Section 4.2
[Interest Periods], by delivering to the Administrative Agent, not later than
10:00 a.m., (i) three (3) Business Days prior to the proposed Borrowing
Date with respect to the making of Revolving Credit Loans to which the LIBOR
Rate Option applies or the conversion to or the renewal of the LIBOR Rate Option
for any Loans; and (ii) one (1) Business Day prior to either the proposed
Borrowing Date with respect to the making of a Revolving Credit Loan to which
the Base Rate Option applies or the last day of the preceding Interest Period
with respect to the conversion to the Base Rate Option for any Loan, of a duly
completed request therefor substantially in the form of Exhibit 2.5.1 or
a request by telephone immediately confirmed in writing by letter, facsimile or
telex in such form (each, a "Loan Request"), it being
understood that the Administrative Agent may rely on the authority of any
individual making such a telephonic request without the necessity of receipt of
such written confirmation.  Each Loan Request shall be irrevocable and
shall specify the aggregate amount of the proposed Loans comprising each
Borrowing Tranche, and, if applicable, the Interest Period, which amounts shall
be in integral multiples of $500,000 and not less than $1,000,000 for each
Borrowing Tranche under the LIBOR Rate Option and in integral multiples of
$100,000 and not less than the lesser of $500,000 or the maximum amount
available for Borrowing Tranches under the Base Rate Option.

     

    2.5.2 Swing Loan
Requests.

     

     Except as
otherwise provided herein, the Borrower may from time to time prior to the
Expiration Date request PNC Bank to make Swing Loans by delivery to PNC Bank not
later than 12:00 pm Pittsburgh time on the proposed Borrowing Date of a duly
completed request therefor substantially in the form of Exhibit 2.5.2 hereto or a
request by telephone immediately confirmed in writing by letter, facsimile or
telex (each, a "Swing Loan
Request"), it being understood that the Administrative Agent may rely on
the authority of any individual making such a telephonic request without the
necessity of receipt of such written confirmation.  Each Swing Loan
Request shall be irrevocable and shall specify the proposed Borrowing Date and
the principal amount of such Swing Loan, which shall be not less than
$100,000.

     

    2.6 Making Revolving Credit
Loans and Swing Loans; Presumptions by the Administrative Agent; Repayment of
Revolving Credit Loans; Borrowings to Repay Swing Loans.

     

    2.6.1 Making Revolving Credit
Loans.

     

      The
Administrative Agent shall, promptly after receipt by it of a Loan Request
pursuant to Section 2.5 [Revolving Credit Loan Requests; Swing Loan
Requests], notify the Lenders of its receipt of such Loan Request specifying the
information provided by the Borrower and the apportionment among the Lenders of
the requested Revolving Credit Loans as determined by the Administrative Agent
in accordance with Section 2.2 [Nature of Lenders' Obligations with Respect
to Revolving Credit Loans].  Each Lender shall remit the principal
amount of each Revolving Credit Loan to the Administrative Agent such that the
Administrative Agent is able to, and the Administrative Agent shall, to the
extent the Lenders have made funds available to it for such purpose and subject
to Section 7.2 [Each Loan or Letter of Credit], fund such Revolving Credit
Loans to the Borrower in U.S. Dollars and immediately available funds at the
Principal Office prior to 2:00 p.m., on the applicable Borrowing Date; provided that if any
Lender fails to remit such funds to the Administrative Agent in a timely manner,
the Administrative Agent may elect in its sole discretion to fund with its own
funds the Revolving Credit Loans of such Lender on such Borrowing Date, and such
Lender shall be subject to the repayment obligation in Section 2.6.2 [Presumptions by the Administrative
Agent].

     

    2.6.2 Presumptions by the
Administrative Agent.

     

      Unless
the Administrative Agent shall have received notice from a Lender prior to the
proposed date of any Loan that such Lender will not make available to the
Administrative Agent such Lender's share of such Loan, the Administrative Agent
may assume that such Lender has made such share available on such date in
accordance with Section 2.6.1 [Making Revolving
Credit Loans] and may, in reliance upon such assumption, make available to the
Borrower a corresponding amount.  In such event, if a Lender has not
in fact made its share of the applicable Loan available to the Administrative
Agent, then the applicable Lender and the Borrower severally agree to pay to the
Administrative Agent forthwith on demand such corresponding amount with interest
thereon, for each day from and including the date such amount is made available
to the Borrower to but excluding the date of payment to the Administrative
Agent, at (i) in the case of a payment to be made by such Lender, the
greater of the Federal Funds Effective Rate and a rate determined by the
Administrative Agent in accordance with banking industry rules on interbank
compensation and (ii) in the case of a payment to be made by the Borrower,
the interest rate applicable to Loans under the Base Rate Option.  If
such Lender pays its share of the applicable Loan to the Administrative Agent,
then the amount so paid shall constitute such Lender's Loan.  Any
payment by the Borrower shall be without prejudice to any claim the Borrower may
have against a Lender that shall have failed to make such payment to the
Administrative Agent.

     

    2.6.3 Making Swing
Loans.

     

     So long as
PNC Bank elects to make Swing Loans, PNC Bank shall, after receipt by it of a
Swing Loan Request pursuant to Section 2.5.2, [Swing Loan Requests] fund such
Swing Loan to the Borrower in U.S. Dollars and immediately available funds at
the Principal Office prior to 2:00 p.m. Pittsburgh time on the Borrowing
Date.

     

    2.6.4 Repayment of Revolving
Credit Loans.

     

      The
Borrower shall repay the Revolving Credit Loans together with all outstanding
interest thereon on the Expiration Date. 

     

    2.6.5 Borrowings to Repay Swing
Loans.

     

     PNC Bank may,
at its option, exercisable at any time for any reason whatsoever, demand
repayment of the Swing Loans, and each Lender shall make a Revolving Credit Loan
in an amount equal to such Lenders' Ratable Share of the aggregate principal
amount of the outstanding Swing Loans, plus, if PNC Bank so requests, accrued
interest thereon, provided that no
Lender shall be obligated in any event to make Revolving Credit Loans in excess
of its Revolving Credit Commitment.  Revolving Credit Loans made
pursuant to the preceding sentence shall bear interest at the Base Rate Option
and shall be deemed to have been properly requested in accordance with Section
2.5.1 [Revolving Credit Loan Requests] without regard to any of the requirements
of that provision.  PNC Bank shall provide notice to the Lenders
(which may be telephonic or written notice by letter, facsimile or telex) that
such Revolving Credit Loans are to be made under this Section 2.6.5 and of the
apportionment among the Lenders, and the Lenders shall be unconditionally
obligated to fund such Revolving Credit Loans (whether or not the conditions
specified in Section 2.5.1 [Revolving Credit Loan Requests] are then
satisfied) by the time PNC Bank so requests, which shall not be earlier than
3:00 p.m. Pittsburgh time on the Business Day next after the date the Lenders
receive such notice from PNC Bank.

     

    2.7 Notes.

     

      The
Obligation of the Borrower to repay the aggregate unpaid principal amount of the
Revolving Credit Loans, Swing Loans and Term Loans made to it by each Lender,
together with interest thereon, shall be evidenced by a revolving credit Note, a
swing Note and a term Note, dated the Closing Date payable to the order of such
Lender in a face amount equal to the Revolving Credit Commitment, Swing Loan
Commitment or Term Loan Commitment, as applicable, of such Lender.

     

    2.8 Use of
Proceeds.

     

      The
proceeds of the Loans shall be used to refinance existing Indebtedness and for
general corporate purposes including fees and expenses related to the
closing.

     

    2.9 Letter of Credit
Subfacility.

     

    2.9.1 Issuance of Letters of
Credit.

     

      On the
Closing Date, the outstanding letters of credit previously issued by any Lender
under the Existing Credit Agreement that are set forth on Schedule 2.9 (the
"Existing Letters of Credit") will automatically, without any action on the part
of any Person, be deemed to be Letters of Credit issued hereunder for the
account of the Borrower for all purposes of this Agreement and the other Loan
Documents.  Borrower may at any time prior to the Expiration Date
request the issuance of a standby or trade letter of credit (each a "Letter of Credit") on behalf
of itself or another Loan Party (other than Hallador), or the amendment or
extension of an existing Letter of Credit, by delivering or having such other
Loan Party deliver to the Issuing Lender (with a copy to the Administrative
Agent) a completed application and agreement for letters of credit, or request
for such amendment or extension, as applicable, in such form as the Issuing
Lender may specify from time to time by no later than 10:00 a.m. at least five
(5) Business Days, or such shorter period as may be agreed to by the Issuing
Lender, in advance of the proposed date of issuance.  Promptly after
receipt of any letter of credit application, the Issuing Lender shall confirm
with the Administrative Agent (by telephone or in writing) that the
Administrative Agent has received a copy of such Letter of Credit application
and if not, such Issuing Lender will provide Administrative Agent with a copy
thereof.  Unless the Issuing Lender has received notice from any
Lender, Administrative Agent or any Loan Party (other than Hallador), at least
one day prior to the requested date of issuance, amendment or extension of the
applicable Letter of Credit, that one or more applicable conditions in Section
7 [Conditions of Lending and Issuance of Letters of
Credit] is not satisfied, then, subject to the terms and conditions hereof and
in reliance on the agreements of the other Lenders set forth in this
Section 2.9, the Issuing Lender or any of the Issuing Lender's Affiliates
will issue a Letter of Credit or agree to such amendment or extension, provided
that each Letter of Credit shall (A) have a maximum maturity of twelve (12)
months from the date of issuance, and (B) in no event expire later than the
Expiration Date and provided further that in no event shall (i) the Letter
of Credit Obligations exceed, at any one time, $10,000,000 (the "Letter of Credit Sublimit") or
(ii) the Revolving Facility Usage exceed, at any one time, the Revolving
Credit Commitments.  Each request by the Borrower for the issuance,
amendment or extension of a Letter of Credit shall be deemed to be a
representation by the Borrower that it shall be in compliance with the preceding
sentence and with Section 7 [Conditions of Lending
and Issuance of Letters of Credit] after giving effect to the requested
issuance, amendment or extension of such Letter of Credit.  Promptly
after its delivery of any Letter of Credit or any amendment to a Letter of
Credit to the beneficiary thereof, the applicable Issuing Lender will also
deliver to Borrower and Administrative Agent a true and complete copy of such
Letter of Credit or amendment.

     

    2.9.2 Letter of Credit
Fees.

     

      The
Borrower shall pay (i) to the Administrative Agent for the ratable account
of the Lenders a fee (the "Letter of Credit Fee") equal
to the Applicable Letter of Credit Fee Rate, and (ii) to the Issuing Lender
for its own account a fronting fee equal to 0.25% per annum (in each case
computed on the basis of a year of 360 days and actual days elapsed), which fees
shall be computed on the daily average Letter of Credit Obligations and shall be
payable quarterly in arrears on each Payment Date following issuance of each
Letter of Credit.  The Borrower shall also pay to the Issuing Lender
for the Issuing Lender's sole account the Issuing Lender's then in effect
customary fees and administrative expenses payable with respect to the Letters
of Credit as the Issuing Lender may generally charge or incur from time to time
in connection with the issuance, maintenance, amendment (if any), assignment or
transfer (if any), negotiation, and
administration of Letters of Credit.

     

    2.9.3 Disbursements,
Reimbursement.

     

      Immediately
upon the Issuance of each Letter of Credit, each Lender shall be deemed to, and
hereby irrevocably and unconditionally agrees to, purchase from the Issuing
Lender a participation in such Letter of Credit (including the Existing Letters
of Credit) and each drawing thereunder in an amount equal to such Lender's
Ratable Share of the maximum amount available to be drawn under such Letter of
Credit and the amount of such drawing, respectively.

     

    2.9.3.1 In the event of any
request for a drawing under a Letter of Credit by the beneficiary or transferee
thereof, the Issuing Lender will promptly notify the Borrower and the
Administrative Agent thereof.  Provided that it shall have received
such notice, the Borrower shall reimburse (such obligation to reimburse the
Issuing Lender shall sometimes be referred to as a "Reimbursement Obligation") the
Issuing Lender prior to 12:00 noon, Pittsburgh time on each date that an amount
is paid by the Issuing Lender under any Letter of Credit (each such date, a
"Drawing Date") by
paying to the Administrative Agent for the account of the Issuing Lender an
amount equal to the amount so paid by the Issuing Lender.  In the
event the Borrower fails to reimburse the Issuing Lender (through the
Administrative Agent) for the full amount of any drawing under any Letter of
Credit by 12:00 noon, Pittsburgh time, on the Drawing Date, the Administrative
Agent will promptly notify each Lender thereof, and the Borrower shall be deemed
to have requested that Revolving Credit Loans be made by the Lenders under the
Base Rate Option to be disbursed on the Drawing Date under such Letter of
Credit, subject to the amount of the unutilized portion of the Revolving Credit
Commitment and subject to the conditions set forth in Section 7.2 [Each
Loan or Letter of Credit] other than any notice requirements.  Any
notice given by the Administrative Agent or Issuing Lender pursuant to this
Section 2.9.3.1 may be oral if immediately
confirmed in writing; provided that the lack of such an immediate confirmation
shall not affect the conclusiveness or binding effect of such
notice.

     

    2.9.3.2 Each Lender shall
upon any notice pursuant to Section 2.9.3.1
make available to the Administrative Agent for the account of the Issuing Lender
an amount in immediately available funds equal to its Ratable Share of the
amount of the drawing, whereupon the participating Lenders shall (subject to
Section 2.9.3 [Disbursement; Reimbursement])
each be deemed to have made a Revolving Credit Loan under the Base Rate Option
to the Borrower in that amount.  If any Lender so notified fails to
make available to the Administrative Agent for the account of the Issuing Lender
the amount of such Lender's Ratable Share of such amount by no later than 2:00
p.m., Pittsburgh time on the Drawing Date, then interest shall accrue on such
Lender's obligation to make such payment, from the Drawing Date to the date on
which such Lender makes such payment (i) at a rate per annum equal to the
Federal Funds Effective Rate during the first three (3) days following the
Drawing Date and (ii) at a rate per annum equal to the rate applicable to Loans
under the Revolving Credit Base Rate Option on and after the fourth day
following the Drawing Date.  The Administrative Agent and the Issuing
Lender will promptly give notice (as described in Section 2.9.3.1 above) of the occurrence of the Drawing Date,
but failure of the Administrative Agent or the Issuing Lender to give any such
notice on the Drawing Date or in sufficient time to enable any Lender to effect
such payment on such date shall not relieve such Lender from its obligation
under this Section 2.9.3.2.

     

    2.9.3.3 With respect to any
unreimbursed drawing that is not converted into Revolving Credit Loans under the
Base Rate Option to the Borrower in whole or in part as contemplated by
Section 2.9.3.1, because of the Borrower's
failure to satisfy the conditions set forth in Section 7.2 [Each Loan or
Letter of Credit] other than any notice requirements, or for any other reason,
the Borrower shall be deemed to have incurred from the Issuing Lender a
borrowing (each a "Letter of
Credit Borrowing") in the amount of such drawing.  Such Letter
of Credit Borrowing shall be due and payable on demand (together with interest)
and shall bear interest at the rate per annum applicable to the Revolving Credit
Loans under the Base Rate Option.  Each Lender's payment to the
Administrative Agent for the account of the Issuing Lender pursuant to Section
2.9.3 [Disbursements, Reimbursement] shall be
deemed to be a payment in respect of its participation in such Letter of Credit
Borrowing (each a "Participation Advance") from
such Lender in satisfaction of its participation obligation under this
Section 2.9.3.

     

    2.9.4 Repayment of Participation
Advances.

     

    2.9.4.1 Upon (and only
upon) receipt by the Administrative Agent for the account of the Issuing Lender
of immediately available funds from the Borrower (i) in reimbursement of
any payment made by the Issuing Lender under the Letter of Credit with respect
to which any Lender has made a Participation Advance to the Administrative
Agent, or (ii) in payment of interest on such a payment made by the Issuing
Lender under such a Letter of Credit, the Administrative Agent on behalf of the
Issuing Lender will pay to each Lender, in the same funds as those received by
the Administrative Agent, the amount of such Lender's Ratable Share of such
funds, except the Administrative Agent shall retain for the account of the
Issuing Lender the amount of the Ratable Share of such funds of any Lender that
did not make a Participation Advance in respect of such payment by the Issuing
Lender.

     

    2.9.4.2 If the
Administrative Agent is required at any time to return to any Loan Party, or to
a trustee, receiver, liquidator, custodian, or any official in any Insolvency
Proceeding, any portion of any payment made by any Loan Party to the
Administrative Agent for the account of the Issuing Lender pursuant to this
Section in reimbursement of a payment made under the Letter of Credit or
interest or fee thereon, each Lender shall, on demand of the Administrative
Agent, forthwith return to the Administrative Agent for the account of the
Issuing Lender the amount of its Ratable Share of any amounts so returned by the
Administrative Agent plus interest thereon from the date such demand is made to
the date such amounts are returned by such Lender to the Administrative Agent,
at a rate per annum equal to the Federal Funds Effective Rate in effect from
time to time.

     

    2.9.5 Documentation.

     

      Each
Loan Party agrees to be bound by the terms of the Issuing Lender's application
and agreement for letters of credit and the Issuing Lender's written regulations
and customary practices relating to letters of credit, though such
interpretation may be different from such Loan Party's own.  In the
event of a conflict between such application or agreement and this Agreement,
this Agreement shall govern.  It is understood and agreed that, except
in the case of gross negligence or willful misconduct, the Issuing Lender shall
not be liable for any error, negligence and/or mistakes, whether of omission or
commission, in following any Loan Party's instructions or those contained in the
Letters of Credit or any modifications, amendments or supplements
thereto.

     

    2.9.6 Determinations to Honor
Drawing Requests.

     

      In
determining whether to honor any request for drawing under any Letter of Credit
by the beneficiary thereof, the Issuing Lender shall be responsible only to
determine that the documents and certificates required to be delivered under
such Letter of Credit have been delivered and that they comply on their face
with the requirements of such Letter of Credit.

     

    2.9.7 Nature of Participation and
Reimbursement Obligations.

     

      Each
Lender's obligation in accordance with this Agreement to make the Revolving
Credit Loans or Participation Advances, as contemplated by Section 2.9.3
[Disbursements, Reimbursement], as a result of a drawing under a Letter of
Credit, and the Obligations of the Borrower to reimburse the Issuing Lender upon
a draw under a Letter of Credit, shall be absolute, unconditional and
irrevocable, and shall be performed strictly in accordance with the terms of
this Section 2.9 under all circumstances, including the following
circumstances:

     

    (i) any set-off,
counterclaim, recoupment, defense or other right which such Lender may have
against the Issuing Lender or any of its Affiliates, the Borrower or any other
Person for any reason whatsoever, or which any Loan Party may have against the
Issuing Lender or any of its Affiliates, any Lender or any other Person for any
reason whatsoever;

     

    (ii) the failure of any
Loan Party or any other Person to comply, in connection with a Letter of Credit
Borrowing, with the conditions set forth in Section 2.1 [Revolving Credit
Commitments], 2.5 [Revolving Credit Loan Requests; Swing Loan Requests], 2.6
[Making Revolving Credit Loans and Swing Loans; Etc.] or 7.2 [Each Loan or
Letter of Credit] or as otherwise set forth in this Agreement for the making of
a Revolving Credit Loan, it being acknowledged that such conditions are not
required for the making of a Letter of Credit Borrowing and the obligation of
the Lenders to make Participation Advances under Section 2.9.3
[Disbursements, Reimbursement];

     

    (iii) any lack of
validity or enforceability of any Letter of Credit;

     

    (iv) any claim of breach
of warranty that might be made by any Loan Party or any Lender against any
beneficiary of a Letter of Credit, or the existence of any claim, set-off,
recoupment, counterclaim, crossclaim, defense or other right which any Loan
Party or any Lender may have at any time against a beneficiary, successor
beneficiary any transferee or assignee of any Letter of Credit or the proceeds
thereof (or any Persons for whom any such transferee may be acting), the Issuing
Lender or its Affiliates or any Lender or any other Person, whether in
connection with this Agreement, the transactions contemplated herein or any
unrelated transaction (including any underlying transaction between any Loan
Party or Subsidiaries of a Loan Party and the beneficiary for which any Letter
of Credit was procured);

     

    (v) the lack of power
or authority of any signer of (or any defect in or forgery of any signature or
endorsement on) or the form of or lack of validity, sufficiency, accuracy,
enforceability or genuineness of any draft, demand, instrument, certificate or
other document presented under or in connection with any Letter of Credit, or
any fraud or alleged fraud in connection with any Letter of Credit, or the
transport of any property or provision of services relating to a Letter of
Credit, in each case even if the Issuing Lender or any of its Affiliates has
been notified thereof;

     

    (vi) payment by the
Issuing Lender or any of its Affiliates under any Letter of Credit against
presentation of a demand, draft or certificate or other document which does not
comply with the terms of such Letter of Credit;

     

    (vii) the solvency of, or
any acts or omissions by, any beneficiary of any Letter of Credit, or any other
Person having a role in any transaction or obligation relating to a Letter of
Credit, or the existence, nature, quality, quantity, condition, value or other
characteristic of any property or services relating to a Letter of
Credit;

     

    (viii) any failure by the
Issuing Lender or any of its Affiliates to issue any Letter of Credit in the
form requested by any Loan Party, unless the Issuing Lender has received written
notice from such Loan Party of such failure within three Business Days after the
Issuing Lender shall have furnished such Loan Party and the Administrative Agent
a copy of such Letter of Credit and such error is material and no drawing has
been made thereon prior to receipt of such notice;

     

    (ix) any adverse change
in the business, operations, properties, assets, condition (financial or
otherwise) or prospects of any Loan Party or Subsidiaries of a Loan
Party;

     

    (x) any breach of this
Agreement or any other Loan Document by any party thereto;

     

    (xi) the occurrence or
continuance of an Insolvency Proceeding with respect to any Loan
Party;

     

    (xii) the fact that an
Event of Default or a Potential Default shall have occurred and be
continuing;

     

    (xiii) the fact that the
Expiration Date shall have passed or this Agreement or the Commitments hereunder
shall have been terminated; and

     

    (xiv) any other
circumstance or happening whatsoever, whether or not similar to any of the
foregoing.

     

    2.9.8 Indemnity.

     

      The
Borrower hereby agrees to protect, indemnify, pay and save harmless the Issuing
Lender and any of its Affiliates that has issued a Letter of Credit from and
against any and all claims, demands, liabilities, damages, taxes, penalties,
interest, judgments, losses, costs, charges and expenses (including reasonable
fees, expenses and disbursements of counsel and allocated costs of internal
counsel) which the Issuing Lender or any of its Affiliates may incur or be
subject to as a consequence, direct or indirect, of the issuance of any Letter
of Credit, other than as a result of (A) the gross negligence or willful
misconduct of the Issuing Lender as determined by a final non-appealable
judgment of a court of competent jurisdiction or (B) the wrongful dishonor
by the Issuing Lender or any of Issuing Lender's Affiliates of a proper demand
for payment made under any Letter of Credit, except if such dishonor resulted
from any act or omission, whether rightful or wrongful, of any present or future
de jure or de facto government or governmental authority.

     

    2.9.9 Liability for Acts and
Omissions.

     

      As
between any Loan Party and the Issuing Lender, or the Issuing Lender's
Affiliates, such Loan Party assumes all risks of the acts and omissions of, or
misuse of the Letters of Credit by, the respective beneficiaries of such Letters
of Credit.  In furtherance and not in limitation of the foregoing, the
Issuing Lender shall not be responsible for any of the following, including any
losses or damages to any Loan Party or other Person or property relating
therefrom:  (i) the form, validity, sufficiency, accuracy,
genuineness or legal effect of any document submitted by any party in connection
with the application for an issuance of any such Letter of Credit, even if it
should in fact prove to be in any or all respects invalid, insufficient,
inaccurate, fraudulent or forged (even if the Issuing Lender or its Affiliates
shall have been notified thereof); (ii) the validity or sufficiency of any
instrument transferring or assigning or purporting to transfer or assign any
such Letter of Credit or the rights or benefits thereunder or proceeds thereof,
in whole or in part, which may prove to be invalid or ineffective for any
reason; (iii) the failure of the beneficiary of any such Letter of Credit,
or any other party to which such Letter of Credit may be transferred, to comply
fully with any conditions required in order to draw upon such Letter of Credit
or any other claim of any Loan Party against any beneficiary of such Letter of
Credit, or any such transferee, or any dispute between or among any Loan Party
and any beneficiary of any Letter of Credit or any such transferee;
(iv) errors, omissions, interruptions or delays in transmission or delivery
of any messages, by mail, cable, telegraph, telex or otherwise, whether or not
they be in cipher; (v) errors in interpretation of technical terms;
(vi) any loss or delay in the transmission or otherwise of any document
required in order to make a drawing under any such Letter of Credit or of the
proceeds thereof; (vii) the misapplication by the beneficiary of any such
Letter of Credit of the proceeds of any drawing under such Letter of Credit; or
(viii) any consequences arising from causes beyond the control of the
Issuing Lender or the its Affiliates, as applicable, including any act or
omission of any governmental authority, and none of the above shall affect or
impair, or prevent the vesting of, any of the Issuing Lender's or its Affiliates
rights or powers hereunder.  Nothing in the preceding sentence shall
relieve the Issuing Lender from liability for the Issuing Lender's gross
negligence or willful misconduct in connection with actions or omissions
described in such clauses (i) through (viii) of such sentence.  In no
event shall the Issuing Lender or its Affiliates be liable to any Loan Party for
any indirect, consequential, incidental, punitive, exemplary or special damages
or expenses (including without limitation attorneys' fees), or for any damages
resulting from any change in the value of any property relating to a Letter of
Credit.

     

    Without limiting
the generality of the foregoing, the Issuing Lender and each of its Affiliates
(i) may rely on any oral or other communication believed in good faith by
the Issuing Lender or such Affiliate to have been authorized or given by or on
behalf of the applicant for a Letter of Credit, (ii) may honor any
presentation if the documents presented appear on their face substantially to
comply with the terms and conditions of the relevant Letter of Credit;
(iii) may honor a previously dishonored presentation under a Letter of
Credit, whether such dishonor was pursuant to a court order, to settle or
compromise any claim of wrongful dishonor, or otherwise, and shall be entitled
to reimbursement to the same extent as if such presentation had initially been
honored, together with any interest paid by the Issuing Lender or its Affiliate;
(iv) may honor any drawing that is payable upon presentation of a statement
advising negotiation or payment, upon receipt of such statement (even if such
statement indicates that a draft or other document is being delivered
separately), and shall not be liable for any failure of any such draft or other
document to arrive, or to conform in any way with the relevant Letter of Credit;
(v) may pay any paying or negotiating bank claiming that it rightfully
honored under the laws or practices of the place where such bank is located; and
(vi) may settle or adjust any claim or demand made on the Issuing Lender or
its Affiliate in any way related to any order issued at the applicant's request
to an air carrier, a letter of guarantee or of indemnity issued to a carrier or
any similar document (each an "Order") and honor any drawing
in connection with any Letter of Credit that is the subject of such Order,
notwithstanding that any drafts or other documents presented in connection with
such Letter of Credit fail to conform in any way with such Letter of
Credit.

     

    In
furtherance and extension and not in limitation of the specific provisions set
forth above, any action taken or omitted by the Issuing Lender or its Affiliates
under or in connection with the Letters of Credit issued by it or any documents
and certificates delivered thereunder, if taken or omitted in good faith, shall
not put the Issuing Lender or its Affiliates under any resulting liability to
the Borrower or any Lender.

     

    2.9.10 Issuing Lender Reporting
Requirements.

     

      Each
Issuing Lender shall, on the first business day of each month, provide to
Administrative Agent and Borrower a schedule of the Letters of Credit issued by
it, in form and substance satisfactory to Administrative Agent, showing the date
of issuance of each Letter of Credit, the account party, the original face
amount (if any), and the expiration date of any Letter of Credit outstanding at
any time during the preceding month, and any other information relating to such
Letter of Credit that the Administrative Agent may request.

     

    3.           TERM
LOANS

     

    3.1 Term Loan
Commitments.

     

      Subject
to the terms and conditions hereof, and relying upon the representations and
warranties herein set forth, each Lender severally agrees to make a term loan
(the "Term Loan") to the
Borrower on the Closing Date in such principal amount as the Borrower shall
request up to, but not exceeding such Lender's Term Loan
Commitment.

     

    3.2 Nature of Lenders'
Obligations with Respect to Term Loans; Repayment Terms.

     

      The
obligations of each Lender to make Term Loans to the Borrower shall be in the
proportion that such Lender's Term Loan Commitment bears to the Term Loan
Commitments of all Lenders to the Borrower, but each Lender's Term Loan to the
Borrower shall never exceed its Term Loan Commitment.  The failure of
any Lender to make a Term Loan shall not relieve any other Lender of its
obligations to make a Term Loan nor shall it impose any additional liability on
any other Lender hereunder.  The Lenders shall have no obligation to
make Term Loans hereunder after the Closing Date.  The Term Loan
Commitments are not revolving credit commitments, and the Borrower shall not
have the right to borrow, repay and reborrow under Section 3.1 [Term Loan
Commitments].  The Term Loans shall be payable as
follows:  Commencing on December 31, 2009, and on each fiscal quarter
thereafter through the fiscal quarter ending September 30, 2012, quarterly
payments of principal equal to $2,500,000 each, and a lump sum payment of
principal equal to $10,000,000 due on the Expiration Date.

     

    4.           INTEREST
RATES

     

    4.1 Interest Rate
Options.

     

      The
Borrower shall pay interest in respect of the outstanding unpaid principal
amount of the Loans as selected by it from the Base Rate Option or LIBOR Rate
Option set forth below applicable to the Loans, it being understood that,
subject to the provisions of this Agreement, the Borrower may select different
Interest Rate Options and different Interest Periods to apply simultaneously to
the Loans comprising different Borrowing Tranches and may convert to or renew
one or more Interest Rate Options with respect to all or any portion of the
Loans comprising any Borrowing Tranche; provided that there
shall not be at any one time outstanding more than five (5) Borrowing Tranches
in the aggregate among all of the Loans and provided further that
if an Event of Default or Potential Default exists and is continuing, the
Borrower may not request, convert to, or renew the LIBOR Rate Option for any
Loans and the Required Lenders may demand that all existing Borrowing Tranches
bearing interest under the LIBOR Rate Option shall be converted immediately to
the Base Rate Option, subject to the obligation of the Borrower to pay any
indemnity under Section 5.10 [Indemnity] in
connection with such conversion.  If at any time the designated rate
applicable to any Loan made by any Lender exceeds such Lender's highest lawful
rate, the rate of interest on such Lender's Loan shall be limited to such
Lender's highest lawful rate.

     

    4.1.1 Revolving Credit Interest
Rate Options; Swing Line Interest Rate.

     

      The
Borrower shall have the right to select from the following Interest Rate Options
applicable to the Revolving Credit Loans:

     

    (i) Revolving Credit Base Rate
Option:  A fluctuating rate per annum (computed on the basis of
a year of 365 or 366 days, as the case may be, and actual days elapsed) equal to
the Base Rate plus the Applicable Margin, such interest rate to change
automatically from time to time effective as of the effective date of each
change in the Base Rate; or

     

    (ii) Revolving Credit LIBOR Rate
Option:  A rate per annum (computed on the basis of a year of
360 days and actual days elapsed) equal to the LIBOR Rate plus the Applicable
Margin.

     

    Subject to Section
4.3 [Interest After Default], only the Base Rate
Option applicable to Revolving Credit Loans shall apply to the Swing
Loans.

     

    4.1.2 Term Loan Interest Rate
Options.

     

      The
Borrower shall have the right to select from the following Interest Rate Options
applicable to the Term Loans:

     

    (i) Term Loan Base Rate
Option:  A fluctuating rate per annum (computed on the basis of
a year of 365 or 366 days, as the case may be, and actual days elapsed) equal to
the Base Rate plus the Applicable Margin, such interest rate to change
automatically from time to time effective as of the effective date of each
change in the Base Rate; or

     

    (ii) Term Loan LIBOR Rate
Option:  A rate per annum (computed on the basis of a year of
360 days and actual days elapsed) equal to the LIBOR Rate plus the Applicable
Margin.

     

    4.1.3 Rate
Quotations.

     

      The
Borrower may call the Administrative Agent on or before the date on which a Loan
Request is to be delivered to receive an indication of the rates then in effect,
but it is acknowledged that such projection shall not be binding on the
Administrative Agent or the Lenders nor affect the rate of interest which
thereafter is actually in effect when the election is made.

     

    4.2 Interest
Periods.

     

      At any
time when the Borrower shall select, convert to or renew a LIBOR Rate Option,
the Borrower shall notify the Administrative Agent thereof at least three (3)
Business Days prior to the effective date of such LIBOR Rate Option by
delivering a Loan Request.  The notice shall specify an Interest
Period during which such Interest Rate Option shall
apply.  Notwithstanding the preceding sentence, the following
provisions shall apply to any selection of, renewal of, or conversion to a LIBOR
Rate Option:

     

    4.2.1 Amount of Borrowing
Tranche.

     

      Each
Borrowing Tranche of Loans under the LIBOR Rate Option shall be in integral
multiples of $500,000 and not less than $1,000,000; and

     

    4.2.2 Renewals.

     

      In the
case of the renewal of a LIBOR Rate Option at the end of an Interest Period, the
first day of the new Interest Period shall be the last day of the preceding
Interest Period, without duplication in payment of interest for such
day.

     

    4.3 Interest After
Default.

     

      To the
extent permitted by Law, upon the occurrence of an Event of Default and until
such time such Event of Default shall have been cured or waived:

     

    4.3.1 Letter of Credit Fees,
Interest Rate.

     

      The
Letter of Credit Fees and the rate of interest for each Loan otherwise
applicable pursuant to Section 2.9.2 [Letter of Credit Fees] or
Section 4.1 [Interest Rate Options], respectively, shall be increased by
2.0% per annum;

     

    4.3.2 Other
Obligations.

     

      Each
other Obligation hereunder if not paid when due shall bear interest at a rate
per annum equal to the sum of the rate of interest applicable under the
Revolving Credit Base Rate Option plus an additional 2.0% per annum from the
time such Obligation becomes due and payable and until it is paid in full;
and

     

    4.3.3 Acknowledgment.

     

      The
Borrower acknowledges that the increase in rates referred to in this
Section 4.3 reflects, among other things, the fact that such Loans or other
amounts have become a substantially greater risk given their default status and
that the Lenders are entitled to additional compensation for such risk; and all
such interest shall be payable by Borrower upon demand by Administrative
Agent.

     

    4.4 LIBOR Rate
Unascertainable; Illegality; Increased
Costs; Deposits Not Available.

     

    4.4.1 Unascertainable.

     

      If on
any date on which a LIBOR Rate would otherwise be determined, the Administrative
Agent shall have determined that:

     

    (i) adequate and
reasonable means do not exist for ascertaining such LIBOR Rate, or

     

    (ii) a contingency has
occurred which materially and adversely affects the London interbank eurodollar
market relating to the LIBOR Rate, the Administrative Agent shall have the
rights specified in Section 4.4.3 [Administrative Agent's and Lender's
Rights].

     

    4.4.2 Illegality; Increased Costs;
Deposits Not Available.

     

      If at
any time any Lender shall have determined that:

     

    (i) the making,
maintenance or funding of any Loan to which a LIBOR Rate Option applies has been
made impracticable or unlawful by compliance by such Lender in good faith with
any Law or any interpretation or application thereof by any Official Body or
with any request or directive of any such Official Body (whether or not having
the force of Law), or

     

    (ii) such LIBOR Rate
Option will not adequately and fairly reflect the cost to such Lender of the
establishment or maintenance of any such Loan, or

     

    (iii) after making all
reasonable efforts, deposits of the relevant amount in Dollars for the relevant
Interest Period for a Loan, or to banks generally, to which a LIBOR Rate Option
applies, respectively, are not available to such Lender with respect to such
Loan, or to banks generally, in the interbank eurodollar market,

     

    then the
Administrative Agent shall have the rights specified in Section 4.4.3
[Administrative Agent's and Lender's Rights].

     

    4.4.3 Administrative Agent's and
Lender's Rights.

     

      In the
case of any event specified in Section 4.4.1 [Unascertainable] above, the
Administrative Agent shall promptly so notify the Lenders and the Borrower
thereof, and in the case of an event specified in Section 4.4.2
[Illegality; Increased Costs; Deposits Not Available] above, such Lender shall
promptly so notify the Administrative Agent and endorse a certificate to such
notice as to the specific circumstances of such notice, and the Administrative
Agent shall promptly send copies of such notice and certificate to the other
Lenders and the Borrower.  Upon such date as shall be specified in
such notice (which shall not be earlier than the date such notice is given), the
obligation of (A) the Lenders, in the case of such notice given by the
Administrative Agent, or (B) such Lender, in the case of such notice given
by such Lender, to allow the Borrower to select, convert to or renew a LIBOR
Rate Option shall be suspended until the Administrative Agent shall have later
notified the Borrower, or such Lender shall have later notified the
Administrative Agent, of the Administrative Agent's or such Lender's, as the
case may be, determination that the circumstances giving rise to such previous
determination no longer exist.  If at any time the Administrative
Agent makes a determination under Section 4.4.1 [Unascertainable] and the
Borrower has previously notified the Administrative Agent of its selection of,
conversion to or renewal of a LIBOR Rate Option and such Interest Rate Option
has not yet gone into effect, such notification shall be deemed to provide for
selection of, conversion to or renewal of the Base Rate Option otherwise
available with respect to such Loans.  If any Lender notifies the
Administrative Agent of a determination under Section 4.4.2 [Illegality;
Increased Costs; Deposits Not Available], the Borrower shall, subject to the
Borrower's indemnification Obligations under Section 5.10 [Indemnity], as
to any Loan of the Lender to which a LIBOR Rate Option applies, on the date
specified in such notice either convert such Loan to the Base Rate Option
otherwise available with respect to such Loan or prepay such Loan in accordance
with Section 5.6 [Voluntary Prepayments].  Absent due notice from
the Borrower of conversion or prepayment, such Loan shall automatically be
converted to the Base Rate Option otherwise available with respect to such Loan
upon such specified date.

     

    4.5 Selection of Interest Rate
Options.

     

      If the
Borrower fails to select a new Interest Period to apply to any Borrowing Tranche
of Loans under the LIBOR Rate Option at the expiration of an existing Interest
Period applicable to such Borrowing Tranche in accordance with the provisions of
Section 4.2 [Interest Periods], the Borrower shall be deemed to have
converted such Borrowing Tranche to the Revolving Credit Base Rate Option or
Term Loan Base Rate Option, as applicable, commencing upon the last day of the
existing Interest Period.

     

    5.           PAYMENTS

     

    5.1 Payments.

     

      All
payments and prepayments to be made in respect of principal, interest,
Commitment Fees, Letter of Credit Fees, Administrative Agent's Fee or other fees
or amounts due from the Borrower hereunder shall be payable prior to 1:00 p.m.
on the date when due without presentment, demand, protest or notice of any kind,
all of which are hereby expressly waived by the Borrower, and without set-off,
counterclaim or other deduction of any nature, and an action therefor shall
immediately accrue.  Such payments shall be made to the Administrative
Agent at the Principal Office for the account of PNC Bank with respect to the
Swing Loans and for the ratable accounts of the Lenders with respect to the
Revolving Credit Loans or Term Loans in U.S. Dollars and in immediately
available funds, and the Administrative Agent shall promptly distribute such
amounts to the Lenders in immediately available funds; provided that in the
event payments are received by 1:00 p.m. by the Administrative Agent with
respect to the Loans and such payments are not distributed to the Lenders on the
same day received by the Administrative Agent, the Administrative Agent shall
pay the Lenders the Federal Funds Effective Rate with respect to the amount of
such payments for each day held by the Administrative Agent and not distributed
to the Lenders.  The Administrative Agent's and each Lender's
statement of account, ledger or other relevant record shall, in the absence of
manifest error, be conclusive as the statement of the amount of principal of and
interest on the Loans and other amounts owing under this Agreement and shall be
deemed an "account stated".

     

    5.2 Pro Rata Treatment of
Lenders.

     

      Each
borrowing shall be allocated to each Lender according to its Ratable Share, and
each selection of, conversion to or renewal of any Interest Rate Option and each
payment or prepayment by the Borrower with respect to principal, interest,
Commitment Fees, Letter of Credit Fees, or other fees (except for the
Administrative Agent's Fee) or amounts due from the Borrower hereunder to the
Lenders with respect to the Loans, shall (except as provided in
Section 4.4.3 [Administrative Agent's and Lender's Rights] in the case of
an event specified in Section 4.4 [LIBOR Rate Unascertainable; Etc.], 5.6.2
[Replacement of a Lender] or 5.8 [Increased Costs]) be made in proportion to the
applicable Loans outstanding from each Lender and, if no such Loans are then
outstanding, in proportion to the Ratable Share of each
Lender.  Notwithstanding any of the foregoing, each borrowing or
payment or prepayment by the Borrower of principal, interest, fees or other
amounts from the Borrower with respect to Swing Loans shall be made by or to PNC
Bank according to Section 2.6.5 [Borrowings to
Repay Swing Loans].

     

    5.3 Sharing of Payments by
Lenders.

     

      If any
Lender shall, by exercising any right of setoff, counterclaim or banker's lien,
by receipt of voluntary payment, by realization upon security, or by any other
non-pro rata source, obtain payment in respect of any principal of or interest
on any of its Loans or other obligations hereunder resulting in such Lender's
receiving payment of a proportion of the aggregate amount of its Loans and
accrued interest thereon or other such obligations greater than its Ratable
Share thereof as provided herein, then the Lender receiving such greater
proportion shall (a) notify the Administrative Agent of such fact, and
(b) purchase (for cash at face value) participations in the Loans and such
other obligations of the other Lenders, or make such other adjustments as shall
be equitable, so that the benefit of all such payments shall be shared by the
Lenders ratably in accordance with the aggregate amount of principal of and
accrued interest on their respective Loans and other amounts owing them, provided
that:

     

    (i) if any such
participations are purchased and all or any portion of the payment giving rise
thereto is recovered, such participations shall be rescinded and the purchase
price restored to the extent of such recovery, together with interest or other
amounts, if any, required by Law (including court order) to be paid by the
Lender or the holder making such purchase; and

     

    (ii) the provisions of
this Section 5.3 shall not be construed to apply to
(x) any payment made by the Loan Parties pursuant to and in accordance with
the express terms of the Loan Documents or (y) any payment obtained by a
Lender as consideration for the assignment of or sale of a participation in any
of its Loans or Participation Advances to any assignee or participant, other
than to the Borrower or any Subsidiary thereof (as to which the provisions of
this Section 5.3 shall apply).

     

    Each Loan Party
consents to the foregoing and agrees, to the extent it may effectively do so
under applicable Law, that any Lender acquiring a participation pursuant to the
foregoing arrangements may exercise against each Loan Party rights of setoff and
counterclaim with respect to such participation as fully as if such Lender were
a direct creditor of each Loan Party in the amount of such
participation.

     

    5.4 Presumptions by
Administrative Agent.

     

      Unless
the Administrative Agent shall have received notice from the Borrower prior to
the date on which any payment is due to the Administrative Agent for the account
of the Lenders or the Issuing Lender hereunder that the Borrower will not make
such payment, the Administrative Agent may assume that the Borrower has made
such payment on such date in accordance herewith and may, in reliance upon such
assumption, distribute to the Lenders or the Issuing Lender, as the case may be,
the amount due.  In such event, if the Borrower has not in fact made
such payment, then each of the Lenders or the Issuing Lender, as the case may
be, severally agrees to repay to the Administrative Agent forthwith on demand
the amount so distributed to such Lender or the Issuing Lender, with interest
thereon, for each day from and including the date such amount is distributed to
it to but excluding the date of payment to the Administrative Agent, at the
greater of the Federal Funds Effective Rate and a rate determined by the
Administrative Agent in accordance with banking industry rules on interbank
compensation.

     

    5.5 Interest Payment
Dates.

     

      Interest
on Loans to which the Base Rate Option applies shall be due and payable in
arrears on each Payment Date.  Interest on Loans to which the LIBOR
Rate Option applies shall be due and payable on the last day of each Interest
Period for those Loans and, if such Interest Period is longer than three (3)
Months, also on the 90th and 180th day, as applicable, of such Interest
Period.  Interest on mandatory prepayments of principal under
Section 5.7 [Mandatory Prepayments] shall be due on the date such mandatory
prepayment is due.  Interest on the principal amount of each Loan or
other monetary Obligation shall be due and payable on demand after such
principal amount or other monetary Obligation becomes due and payable (whether
on the stated Expiration Date, upon acceleration or otherwise).

     

    5.6 Voluntary
Prepayments.

     

    5.6.1 Right to
Prepay.

     

      The
Borrower shall have the right at its option from time to time to prepay the
Loans in whole or part without premium or penalty (except as provided in
Section 5.6.2 [Replacement of a Lender] below, in Section 5.8
[Increased Costs] and Section 5.10
[Indemnity]).  Whenever the Borrower desires to prepay any part of the
Loans, it shall provide a prepayment notice to the Administrative Agent by 1:00
p.m. at least one (1) Business Day prior to the date of prepayment of the
Revolving Credit Loans or Term Loans or no later than 1:00 p.m., Pittsburgh
time, on the date of prepayment of Swing Loans, setting forth the following
information:

     

    (x)           the
date, which shall be a Business Day, on which the proposed prepayment is to be
made;

     

    (y)           a
statement indicating the application of the prepayment between the Revolving
Credit Loans and Term Loans and Swing Loans;

     

    (z)           with
respect to any prepayment of any Loans subject to the LIBOR Rate Option, a
statement indicating the application of the prepayment between the LIBOR Rate
Option tranches; and

     

    (z)           the
total principal amount of such prepayment, which shall not be less than: (i)
$100,000 for any Swing Loan, (ii) $100,000 for any Revolving Credit Loan, or
(iii) $500,000 for any Term Loan.

     

    All prepayment
notices shall be irrevocable.  The principal amount of the Loans for
which a prepayment notice is given, together with interest on such principal
amount except with respect to Loans to which the Base Rate Option applies, shall
be due and payable on the date specified in such prepayment notice as the date
on which the proposed prepayment is to be made.  All Term Loan
prepayments permitted pursuant to this Section 5.6.1 [Right to Prepay]
shall be applied to the unpaid installments of principal of the Term Loans in
the inverse order of scheduled maturities.  Except as provided in
Section 4.4.3 [Administrative Agent's and Lender's Rights], if the Borrower
prepays a Loan but fails to specify the applicable Borrowing Tranche which the
Borrower is prepaying, the prepayment shall be applied (i) first to
Revolving Credit Loans and then to Term Loans; and (ii) after giving effect
to the allocations in clause (i) above and in the preceding sentence, first to
Loans to which the Base Rate Option applies, then to Loans to which the LIBOR
Rate Option applies.  Any prepayment hereunder shall be subject to the
Borrower's Obligation to indemnify the Lenders under Section 5.10
[Indemnity].

     

    5.6.2 Replacement of a
Lender.

     

      In the
event any Lender (i) gives notice under Section 4.4 [LIBOR Rate
Unascertainable, Etc.], (ii) requests compensation under Section 5.8 [Increased Costs], or requires the Borrower to pay
any additional amount to any Lender or any Official Body for the account of any
Lender pursuant to Section 5.9 [Taxes],
(iii) is a Non-Complying Lender or otherwise, (iv) becomes subject to
the control of an Official Body (other than normal and customary supervision),
or (v) is a Non-Consenting Lender referred to in Section 11.1 [Modifications, Amendments or Waivers] then in
any such event the Borrower may, at its sole expense, upon notice to such Lender
and the Administrative Agent, require such Lender to assign and delegate,
without recourse (in accordance with and subject to the restrictions contained
in, and consents required by, Section 11.8
[Successors and Assigns]), all of its interests, rights and obligations under
this Agreement and the related Loan Documents to an assignee that shall assume
such obligations (which assignee may be another Lender, if a Lender accepts such
assignment), provided
that:

     

    (i) the Borrower shall
have paid to the Administrative Agent the assignment fee specified in Section 11.8 [Successors and Assigns];

     

    (ii) such Lender shall
have received payment of an amount equal to the outstanding principal of its
Loans and Participation Advances, accrued interest thereon, accrued fees and all
other amounts payable to it hereunder and under the other Loan Documents
(including any amounts under Section 5.10
[Indemnity]) from the assignee (to the extent of such outstanding principal and
accrued interest and fees) or the Borrower (in the case of all other
amounts);

     

    (iii) in the case of any
such assignment resulting from a claim for compensation under Section 5.8.1
[Increased Costs Generally] or payments required to be made pursuant to
Section 5.9 [Taxes], such assignment will
result in a reduction in such compensation or payments thereafter;
and

     

    (iv) such assignment
does not conflict with applicable Law.

     

    A
Lender shall not be required to make any such assignment or delegation if, prior
thereto, as a result of a waiver by such Lender or otherwise, the circumstances
entitling the Borrower to require such assignment and delegation cease to
apply.

     

    5.7 Mandatory
Prepayments.

     

    5.7.1 Sale of
Assets.

     

      The
Borrower shall make a mandatory prepayment of principal equal to the after-tax
net proceeds (as estimated in good faith by the Borrower), without exceeding the
principal of any sale of assets authorized by Section 8.2.7(v) [Disposition of Assets or Subsidiaries] that
are in excess of $500,000 individually or exceed $1,000,000 in the aggregate in
any fiscal year, together with accrued interest on such principal amount to the
extent that such proceeds have not been reinvested by the Loan Parties (other
than Hallador) within 180 days of such sale.

     

    5.7.2 Debt or Equity
Offering.

     

      Within
five (5) Business Days of (i) any receipt of any funds resulting from
additional stock, member interests, partnership or other equity interests being
issued in any Loan Party (other than Hallador) or (ii) any proceeds of
Indebtedness incurred by any of the Loan Parties (other than Indebtedness
permitted under Section 8.2.1 [Indebtedness] or
Indebtedness incurred by or issued from Hallador), the Borrower shall promptly
make a mandatory prepayment of principal on the Loans, equal to the net
after-tax proceeds of such equity or debt offering (as estimated in good faith
by the Borrower), together with accrued interest on such principal
amount.

     

    5.7.3 Insurance or Condemnation
Proceeds.

     

      Within
one hundred eighty (180) days of any receipt of insurance or condemnation
proceeds, which individually or in the aggregate, involve more than $5,000,000
in any fiscal year (the "Insurance Proceeds"), the Borrower shall have
reinvested the after-tax proceeds of such Insurance Proceeds in replacement or
substitute assets or the Borrower shall make a mandatory prepayment of principal
on the Loans equal to the net after-tax proceeds of such Insurance Proceeds (as
estimated in good faith by the Borrower), together with accrued interest on such
principal amount.

     

    5.7.4 Excess Cash
Flow.

     

      Commencing
with the fiscal year ending as of December 31, 2009 and within five (5) Business
Days of delivery of the Borrower's annual financial statements, but in any event
no later than April 7th of each year during the term hereof (each, a "Mandatory Prepayment Date"),
the Borrower shall make a mandatory prepayment of principal equal to fifty
percent (50%) of Excess Cash Flow for the immediately preceding fiscal year,
subject to a credit for voluntary prepayments made during the immediately
preceding fiscal year, together with accrued interest on such principal amount
(each, a "Mandatory Prepayment
of Excess Cash Flow"); provided, however, if the ratio
of Consolidated Funded Debt of the Borrower and its Subsidiaries to Consolidated
EBITDA as determined as of the end of the preceding fiscal year is less than
2.00 to 1.00 then the Borrower shall not be required to make the Mandatory
Prepayment of Excess Cash Flow.

     

    5.7.5 Application of Mandatory
Prepayment.

     

      All
prepayments required pursuant to this Section 5.7 shall first be applied
among the Interest Rate Options to the principal amount of the Term Loans
subject to the Base Rate Option, in the inverse order of scheduled maturities;
then to Term Loans subject to a LIBOR Rate Option, in the inverse order of
scheduled maturities; then to Revolving Credit Loans subject to a Base Rate
Option; and then to Revolving Credit Loans subject to a LIBOR Rate
Option.  Additionally, with respect to any prepayment of any Loans
subject to the LIBOR Rate Option, the Borrower shall provide the Administrative
Agent with a statement indicating the application of the prepayment between the
LIBOR Rate Option tranches.  In accordance with Section 5.10
[Indemnity], the Borrower shall indemnify the Lenders for any loss or expense,
including loss of margin, incurred with respect to any such prepayments applied
against Loans subject to a LIBOR Rate Option on any day other than the last day
of the applicable Interest Period.

     

    5.8 Increased
Costs.

     

    5.8.1 Increased Costs
Generally.

     

      If any
Change in Law shall:

     

    (i) impose, modify or
deem applicable any reserve, special deposit, compulsory loan, insurance charge
or similar requirement against assets of, deposits with or for the account of,
or credit extended or participated in by, any Lender (except any reserve
requirement reflected in the LIBOR Rate) or the Issuing Lender;

     

    (ii) subject any Lender
or the Issuing Lender to any tax of any kind whatsoever with respect to this
Agreement, any Letter of Credit, any participation in a Letter of Credit or any
Loan under the LIBOR Rate Option made by it, or change the basis of taxation of
payments to such Lender or the Issuing Lender in respect thereof (except for
Indemnified Taxes or Other Taxes covered by Section 5.9 [Taxes] and the imposition of, or any change in
the rate of, any Excluded Tax payable by such Lender or the Issuing Lender);
or

     

    (iii) impose on any
Lender, the Issuing Lender or the London interbank market any other condition,
cost or expense affecting this Agreement or Loan under the LIBOR Rate Option
made by such Lender or any Letter of Credit or participation
therein;

     

    and the result of
any of the foregoing shall be to increase the cost to such Lender of making or
maintaining any Loan under the LIBOR Rate Option (or of maintaining its
obligation to make any such Loan), or to increase the cost to such Lender or the
Issuing Lender of participating in, issuing or maintaining any Letter of Credit
(or of maintaining its obligation to participate in or to issue any Letter of
Credit), or to reduce the amount of any sum received or receivable by such
Lender or the Issuing Lender hereunder (whether of principal, interest or any
other amount) then, upon request of such Lender or the Issuing Lender, the
Borrower will pay to such Lender or the Issuing Lender, as the case may be, such
additional amount or amounts as will compensate such Lender or the Issuing
Lender, as the case may be, for such additional costs incurred or reduction
suffered.

     

    5.8.2 Capital
Requirements.

     

      If any
Lender or the Issuing Lender determines that any Change in Law affecting such
Lender or the Issuing Lender or any lending office of such Lender or such
Lender's or the Issuing Lender's holding company, if any, regarding capital
requirements has or would have the effect of reducing the rate of return on such
Lender's or the Issuing Lender's capital or on the capital of such Lender's or
the Issuing Lender's holding company, if any, as a consequence of this
Agreement, the Commitments of such Lender or the Loans made by, or
participations in Letters of Credit held by, such Lender, or the Letters of
Credit issued by the Issuing Lender, to a level below that which such Lender or
the Issuing Lender or such Lender's or the Issuing Lender's holding company
could have achieved but for such Change in Law (taking into consideration such
Lender's or the Issuing Lender's policies and the policies of such Lender's or
the Issuing Lender's holding company with respect to capital adequacy), then
from time to time the Borrower will pay to such Lender or the Issuing Lender, as
the case may be, such additional amount or amounts as will compensate such
Lender or the Issuing Lender or such Lender's or the Issuing Lender's holding
company for any such reduction suffered.

     

    5.8.3 Certificates for
Reimbursement; Repayment of Outstanding Loans; Borrowing of New
Loans.

     

      A
certificate of a Lender or the Issuing Lender setting forth the amount or
amounts necessary to compensate such Lender or the Issuing Lender or its holding
company, as the case may be, as specified in Sections 5.8.1 [Increased Costs Generally] or 5.8.2 [Capital Requirements] and delivered to the
Borrower shall be conclusive absent manifest error.  The Borrower
shall pay such Lender or the Issuing Lender, as the case may be, the amount
shown as due on any such certificate within ten (10) days after receipt
thereof.

     

    5.8.4 Delay in
Requests.

     

      Failure
or delay on the part of any Lender or the Issuing Lender to demand compensation
pursuant to this Section shall not constitute a waiver of such Lender's or the
Issuing Lender's right to demand such compensation, provided that the
Borrower shall not be required to compensate a Lender or the Issuing Lender
pursuant to this Section for any increased costs incurred or reductions suffered
more than nine months prior to the date that such Lender or the Issuing Lender,
as the case may be, notifies the Borrower of the Change in Law giving rise to
such increased costs or reductions and of such Lender's or the Issuing Lender's
intention to claim compensation therefor (except that, if the Change in Law
giving rise to such increased costs or reductions is retroactive, then the nine
(9) month period referred to above shall be extended to include the period of
retroactive effect thereof).

     

    5.9 Taxes.

     

    5.9.1 Payments Free of
Taxes.

     

      Any and
all payments by or on account of any obligation of the Borrower hereunder or
under any other Loan Document shall be made free and clear of and without
reduction or withholding for any Indemnified Taxes or Other Taxes; provided that if the
Borrower shall be required by applicable Law to deduct any Indemnified Taxes
(including any Other Taxes) from such payments, then (i) the sum payable
shall be increased as necessary so that after making all required deductions
(including deductions applicable to additional sums payable under this Section)
the Administrative Agent, Lender or Issuing Lender, as the case may be, receives
an amount equal to the sum it would have received had no such deductions been
made, (ii) the Borrower shall make such deductions and (iii) the
Borrower shall timely pay the full amount deducted to the relevant Official Body
in accordance with applicable Law.

     

    5.9.2 Payment of Other Taxes by
the Borrower.

     

      Without
limiting the provisions of Section 5.9.1 [Payments
Free of Taxes] above, the Borrower shall timely pay any Other Taxes to the
relevant Official Body in accordance with applicable Law.

     

    5.9.3 Indemnification by the
Borrower.

     

      The
Borrower shall indemnify the Administrative Agent, each Lender and the Issuing
Lender, within ten (10) days after demand therefor, for the full amount of any
Indemnified Taxes or Other Taxes (including Indemnified Taxes or Other Taxes
imposed or asserted on or attributable to amounts payable under this Section)
paid by the Administrative Agent, such Lender or the Issuing Lender, as the case
may be, and any penalties, interest and reasonable expenses arising therefrom or
with respect thereto, whether or not such Indemnified Taxes or Other Taxes were
correctly or legally imposed or asserted by the relevant Official
Body.  A certificate as to the amount of such payment or liability
delivered to the Borrower by a Lender or the Issuing Lender (with a copy to the
Administrative Agent), or by the Administrative Agent on its own behalf or on
behalf of a Lender or the Issuing Lender, shall be conclusive absent manifest
error.

     

    5.9.4 Evidence of
Payments.

     

      As soon
as practicable after any payment of Indemnified Taxes or Other Taxes by the
Borrower to a Official Body, the Borrower shall deliver to the Administrative
Agent the original or a certified copy of a receipt issued by such Official Body
evidencing such payment, a copy of the return reporting such payment or other
evidence of such payment reasonably satisfactory to the Administrative
Agent.

     

    5.9.5 Status of
Lenders.

     

      Any
Foreign Lender that is entitled to an exemption from or reduction of withholding
tax under the Law of the jurisdiction in which the Borrower is resident for tax
purposes, or any treaty to which such jurisdiction is a party, with respect to
payments hereunder or under any other Loan Document shall deliver to the
Borrower (with a copy to the Administrative Agent), at the time or times
prescribed by applicable Law or reasonably requested by the Borrower or the
Administrative Agent, such properly completed and executed documentation
prescribed by applicable Law as will permit such payments to be made without
withholding or at a reduced rate of withholding.  Notwithstanding the
submission of a such documentation claiming a reduced rate of or exemption from
U.S. withholding tax, the Administrative Agent shall be entitled to withhold
United States federal income taxes at the full 30% withholding rate if in its
reasonable judgment it is required to do so under the due diligence requirements
imposed upon a withholding agent under § 1.1441-7(b) of the United States Income
Tax Regulations.  Further, the Administrative Agent is indemnified
under § 1.1461-1(e) of the United States Income Tax Regulations against any
claims and demands of any Lender or assignee or participant of a Lender for the
amount of any tax it deducts and withholds in accordance with regulations under
§ 1441 of the Internal Revenue Code.  In addition, any Lender, if
requested by the Borrower or the Administrative Agent, shall deliver such other
documentation prescribed by applicable Law or reasonably requested by the
Borrower or the Administrative Agent as will enable the Borrower or the
Administrative Agent to determine whether or not such Lender is subject to
backup withholding or information reporting requirements.

     

    Without limiting
the generality of the foregoing, in the event that the Borrower is resident for
tax purposes in the United States of America, any Foreign Lender shall deliver
to the Borrower and the Administrative Agent (in such number of copies as shall
be requested by the recipient) on or prior to the date on which such Foreign
Lender becomes a Lender under this Agreement (and from time to time thereafter
upon the request of the Borrower or the Administrative Agent, but only if such
Foreign Lender is legally entitled to do so), whichever of the following is
applicable:

     

    (i) duly completed
copies of IRS Form W-8BEN claiming eligibility for benefits of an income tax
treaty to which the United States of America is a party,

     

    (ii) duly completed
copies of IRS Form W-8ECI,

     

    (iii) in the case of a
Foreign Lender claiming the benefits of the exemption for portfolio interest
under section 881(c) of the Code, (x) a certificate to the effect that such
Foreign Lender is not (A) a "bank" within the meaning of section
881(c)(3)(A) of the Code, (B) a "10 percent shareholder" of the Borrower
within the meaning of section 881(c)(3)(B) of the Code, or (C) a
"controlled foreign corporation" described in section 881(c)(3)(C) of the Code
and (y) duly completed copies of IRS Form W-8BEN, or

     

    (iv) any other form
prescribed by applicable Law as a basis for claiming exemption from or a
reduction in United States Federal withholding tax duly completed together with
such supplementary documentation as may be prescribed by applicable Law to
permit the Borrower to determine the withholding or deduction required to be
made.

     

    5.10 Indemnity.

     

      In
addition to the compensation or payments required by Section 5.8 [Increased Costs]or Section 5.9 [Taxes], the Borrower shall indemnify each Lender
against all liabilities, losses or expenses (including loss of margin, any loss
or expense incurred in liquidating or employing deposits from third parties and
any loss or expense incurred in connection with funds acquired by a Lender to
fund or maintain Loans subject to a LIBOR Rate Option) which such Lender
sustains or incurs as a consequence of any

     

    (i) payment,
prepayment, conversion or renewal of any Loan to which a LIBOR Rate Option
applies on a day other than the last day of the corresponding Interest Period
(whether or not such payment or prepayment is mandatory, voluntary or automatic
and whether or not such payment or prepayment is then due),

     

    (ii) attempt by the
Borrower to revoke (expressly, by later inconsistent notices or otherwise) in
whole or part any Loan Requests under Section 2.5 [Revolving Credit Loan
Requests; Swing Loan Requests] or Section 4.2 [Interest Periods] or notice
relating to prepayments under Section 5.6 [Voluntary Prepayments],
or

     

    (iii) default by the
Borrower in the performance or observance of any covenant or condition contained
in this Agreement or any other Loan Document, including any failure of the
Borrower to pay when due (by acceleration or otherwise) any principal, interest,
Commitment Fee or any other amount due hereunder.

     

    If
any Lender sustains or incurs any such loss or expense, it shall from time to
time notify the Borrower of the amount determined in good faith by such Lender
(which determination may include such assumptions, allocations of costs and
expenses and averaging or attribution methods as such Lender shall deem
reasonable) to be necessary to indemnify such Lender for such loss or
expense.  Such notice shall set forth in reasonable detail the basis
for such determination.  Such amount shall be due and payable by the
Borrower to such Lender ten (10) Business Days after such notice is
given.

     

    5.11 Settlement Date
Procedures.

     

     In order to
minimize the transfer of funds between the Lenders and the Administrative Agent,
the Borrower may borrow, repay and reborrow Swing Loans and PNC Bank may make
Swing Loans as provided in Section 2.1.2 [Swing Loan Commitments] hereof during
the period between Settlement Dates.  The Administrative Agent shall
notify each Lender of its Ratable Share of the total of the Revolving Credit
Loans and the Swing Loans (each a "Required
Share").  On such Settlement Date, each Lender shall pay to the
Administrative Agent the amount equal to the difference between its Required
Share and its Revolving Credit Loans, and the Administrative Agent shall pay to
each Lender its Ratable Share of all payments made by the Borrower to the
Administrative Agent with respect to the Revolving Credit Loans.  The
Administrative Agent shall also effect settlement in accordance with the
foregoing sentence on the proposed Borrowing Dates for Revolving Credit Loans
and on Mandatory Prepayment Dates and may at its option effect settlement on any
other Business Day.  These settlement procedures are established
solely as a matter of administrative convenience, and nothing contained in this
Section 5.11 shall relieve the Lenders of their obligations to fund Revolving
Credit Loans on dates other than a Settlement Date pursuant to Section 2.1.2
[Swing Loan Commitment].  The Administrative Agent may at any time at
its option for any reason whatsoever require each Lender to pay immediately to
the Administrative Agent such Lender's Ratable Share of the outstanding
Revolving Credit Loans and each Lender may at any time require the
Administrative Agent to pay immediately to such Lender its Ratable Share of all
payments made by the borrower to the Administrative Agent with respect to the
Revolving Credit Loans.

     

    6.           REPRESENTATIONS AND
WARRANTIES

     

    6.1 Representations and
Warranties.

     

      The
Loan Parties (other than Hallador), jointly and severally, represent and warrant
to the Administrative Agent and each of the Lenders as follows:

     

    6.1.1 Organization and
Qualification; Power and Authority; Compliance With Laws; Title to Properties;
Event of Default.

     

      Each
Loan Party (other than Hallador) and each Subsidiary of such Loan Party (i) is a
corporation, partnership or limited liability company duly organized, validly
existing and in good standing under the laws of its jurisdiction of
organization, (ii) has the lawful power to own or lease its properties and to
engage in the business it presently conducts or proposes to conduct, (iii) is
duly licensed or qualified and in good standing in each jurisdiction listed on
Schedule 6.1.1 and in all
other jurisdictions where the property owned or leased by it or the nature of
the business transacted by it or both makes such licensing or qualification
necessary, except where such failure would not constitute a Material Adverse
Change (iv) has full power to enter into, execute, deliver and carry out this
Agreement and the other Loan Documents to which it is a party, to incur the
Indebtedness contemplated by the Loan Documents and to perform its Obligations
under the Loan Documents to which it is a party, and all such actions have been
duly authorized by all necessary proceedings on its part, (v) is in
compliance in all material respects with all applicable Laws (other than
Environmental Laws which are specifically addressed in Section 6.1.14
[Environmental Matters]) in all jurisdictions in which such Loan Party or
Subsidiary of any such Loan Party is presently or will be doing business except
where the failure to do so would not constitute a Material Adverse Change, and
(vi) has good and marketable title to or valid leasehold interest in all
material properties, assets and other rights which it purports to own or lease
or which are reflected as owned or leased on its books and records, free and
clear of all Liens and encumbrances except Permitted Liens.  No Event
of Default or Potential Default exists or is continuing.

     

    6.1.2 Subsidiaries and Owners;
Investment Companies.

     

      Schedule 6.1.2 states (i) the
name of each of the Borrower's Subsidiaries, its jurisdiction of organization
and the amount, percentage and type of equity interests in such Subsidiary (the
"Subsidiary Equity
Interests"), (ii) the name of each holder of an equity interest in
the Borrower, the amount, percentage and type of such equity interest (the
"Borrower Equity
Interests"), and (iii) any options, warrants or other rights
outstanding to purchase any such equity interests referred to in clause (i) or
(ii) (collectively the "Equity
Interests").  The Borrower and each Subsidiary of the Borrower
has good and marketable title to all of the Subsidiary Equity Interests it
purports to own, free and clear in each case of any Lien and all such Subsidiary
Equity Interests been validly issued, fully paid and
nonassessable.  None of the Loan Parties (other than Hallador) or
Subsidiaries of such Loan Party is an "investment company" registered or
required to be registered under the Investment Company Act of 1940 or under the
"control" of an "investment company" as such terms are defined in
the Investment Company Act of 1940 and shall not become such an "investment
company" or under such "control."  None of the Loan Parties (other
than Hallador) is a "holding company" or any "affiliate" of a "holding company"
or of a "subsidiary company" of a "holding company" within the meaning of the
Public Utility Holding Company Act of 2005, as amended.  None of the
Loan Parties (other than Hallador) is subject to any other federal or state
statute or regulation limiting its ability to incur Indebtedness for borrowed
money.

     

    6.1.3 Validity and Binding
Effect.

     

      This
Agreement and each of the other Loan Documents (i) has been duly and validly
executed and delivered by each Loan Party (other than Hallador), and (ii)
constitutes, or will constitute, legal, valid and binding obligations of each
such Loan Party which is or will be a party thereto, enforceable against such
Loan Party in accordance with its terms, except as the same may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws in
effect from time to time relating to or affecting the enforcement of creditors’
rights generally and by general principles of equity.

     

    6.1.4 No Conflict; Material
Agreements; Consents.

     

      Neither
the execution and delivery of this Agreement or the other Loan Documents by any
Loan Party (other than Hallador) nor the consummation of the transactions herein
or therein contemplated or compliance with the terms and provisions hereof or
thereof by any of them will conflict with, constitute a default under or result
in any breach of (i) the terms and conditions of the certificate of
incorporation, bylaws, certificate of limited partnership, partnership
agreement, certificate of formation, limited liability company agreement or
other organizational documents of such Loan Party or (ii) any Law or any
material agreement or instrument or order, writ, judgment, injunction or decree
to which such Loan Party or any of its Subsidiaries is a party or by which it or
any of its Subsidiaries is bound or to which it is subject, or result in the
creation or enforcement of any Lien, charge or encumbrance whatsoever upon any
property (now or hereafter acquired) of such Loan Party or any of its
Subsidiaries (other than Liens granted under the Loan
Documents).  There is no default under such material agreement
(referred to above) and none of the Loan Parties (other than Hallador) or their
Subsidiaries is bound by any contractual obligation, or subject to any
restriction in any organization document, or any requirement of Law which could
result in a Material Adverse Change.  Except as set forth on Schedule 6.1.4, no
consent, approval, exemption, order or authorization of, or a registration or
filing with, any Official Body or any other Person is required by any Law or any
agreement in connection with the execution, delivery and carrying out of this
Agreement and the other Loan Documents.

     

    6.1.5 Litigation.

     

      There
are no actions, suits, proceedings or investigations pending or, to the
knowledge of any Loan Party (other than Hallador), threatened against such Loan
Party or any Subsidiary of such Loan Party at law or in equity before any
Official Body which individually or in the aggregate may result in any Material
Adverse Change.  None of the Loan Parties (other than Hallador) or any
Subsidiaries of any such Loan Party is in violation of any order, writ,
injunction or any decree of any Official Body which may result in any Material
Adverse Change.

     

    6.1.6 Financial
Statements.

     

    (i) Historical
Statements.  The Borrower has delivered to the Administrative
Agent copies of its production reports, income statement and cash flow statement
for and as of the end of the fiscal year ended December 31, 2007.  In
addition, the Borrower has delivered to the Administrative Agent copies of its
interim production reports, income statement, balance sheet and cash flow
statement for the fiscal year to date and as of the end of the fiscal quarter
ended September 30, 2008 (all such annual and interim statements being
collectively referred to as the "Statements").  The
Statements were compiled from the books and records maintained by the Borrower's
management, are correct and complete and fairly represent the financial
condition of the Borrower and its Subsidiaries as of the respective dates
thereof and the results of operations for the fiscal periods then ended and have
been prepared in accordance with GAAP consistently applied, subject (in the case
of the interim statements) to normal year-end audit adjustments.

     

    (ii) Accuracy of Financial
Statements.  Neither the Borrower nor any Subsidiary of the
Borrower has any liabilities, contingent or otherwise, or forward or long-term
commitments that are not disclosed in the Statements or in the notes thereto,
and except as disclosed therein there are no unrealized or anticipated losses
from any commitments of the Borrower or any Subsidiary of the Borrower which may
cause a Material Adverse Change.  Since January 1, 2008, no Material Adverse
Change has occurred.

     

    6.1.7 Margin
Stock.

     

      None of
the Loan Parties (other than Hallador) or any Subsidiaries of any such Loan
Party engages or intends to engage principally, or as one of its important
activities, in the business of extending credit for the purpose, immediately,
incidentally or ultimately, of purchasing or carrying margin stock (within the
meaning of Regulation U, T or X as promulgated by the Board of Governors of the
Federal Reserve System).  No part of the proceeds of any Loan has been
or will be used, immediately, incidentally or ultimately, to purchase or carry
any margin stock or to extend credit to others for the purpose of purchasing or
carrying any margin stock or which is inconsistent with the provisions of the
regulations of the Board of Governors of the Federal Reserve
System.  None of the Loan Parties (other than Hallador) or any
Subsidiary of any such Loan Party holds or intends to hold margin stock in such
amounts that more than 25% of the reasonable value of the assets of any such
Loan Party or Subsidiary of any such Loan Party are or will be represented by
margin stock.

     

    6.1.8 Full
Disclosure.

     

      Neither
this Agreement nor any other Loan Document, nor any certificate, statement,
agreement or other documents furnished to the Administrative Agent or any Lender
in connection herewith or therewith, contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make the statements
contained herein and therein, in light of the circumstances under which they
were made, not misleading.  There is no fact known to any Loan Party
(other than Hallador) which materially adversely affects the business, property,
assets, financial condition, or results of operations of any such Loan Party or
Subsidiary of any such Loan Party which has not been set forth in this Agreement
or in the certificates, statements, agreements or other documents furnished in
writing to the Administrative Agent and the Lenders prior to or at the date
hereof in connection with the transactions contemplated hereby.

     

    6.1.9 Taxes.

     

      All
material federal, state, local and other tax returns required to have been filed
with respect to each Loan Party (other than Hallador) and each Subsidiary of
each such Loan Party have been filed, and payment or adequate provision has been
made for the payment of all taxes, fees, assessments and other governmental
charges which have or may become due pursuant to said returns or to assessments
received, except to the extent that such taxes, fees, assessments and other
charges are being contested in good faith by appropriate proceedings diligently
conducted and for which such reserves or other appropriate provisions, if any,
as shall be required by GAAP shall have been made.

     

    6.1.10 Patents, Trademarks,
Copyrights, Licenses, Etc.

     

      No Loan
Party (other than Hallador) and no Subsidiary of each such Loan Party owns or
possesses any material patents, trademarks, service marks, trade names, or
copyrights.  Each Loan Party (other than Hallador) owns or possesses
all the material licenses, registrations, franchises, permits and rights
necessary to own and operate its properties and to carry on its business as
presently conducted and planned to be conducted by such Loan Party or
Subsidiary, without known possible, alleged or actual conflict with the rights
of others.

     

    6.1.11 Liens in the
Collateral.

     

      The
Liens in all material Collateral granted to the Administrative Agent for the
benefit of the Lenders pursuant to the Collateral Assignment, the Pledge
Agreement, the Security Agreement and the Mortgage (collectively, the "Collateral Documents")
constitute and will continue to constitute first priority perfected Liens
subject to Permitted Liens.  All filing fees and other expenses in
connection with the perfection of such Liens have been or will be paid by the
Borrower.

     

    6.1.12 Insurance.

     

      The
properties of each Loan Party (other than Hallador) and each of its Subsidiaries
are insured pursuant to policies and other bonds which are valid and in full
force and effect and which provide adequate coverage from reputable and
financially sound insurers in amounts sufficient to insure the assets and risks
of each such Loan Party and Subsidiary in accordance with prudent business
practice in the industry of such Loan Parties and Subsidiaries.

     

    6.1.13 ERISA
Compliance.

     

     (i)  Each
Plan is in compliance in all material respects with the applicable provisions of
ERISA, the Code and other federal or state Laws.  To the best
knowledge of Borrower, each Plan that is intended to qualify under
Section 401(a) of the Code has received a favorable determination or
opinion letter from the IRS or an application for such a letter will be
submitted or is currently being processed by the IRS with respect thereto, and
nothing has occurred which would prevent, or cause the loss of, such
qualification.  Borrower and each ERISA Affiliate have made all
required contributions to each Plan subject to Section 412 of the Code, and no
application for a funding waiver or an extension of any amortization period
pursuant to Section 412 of the Code has been made with respect to any
Plan.

     

    (ii)           No
ERISA Event has occurred or is reasonably expected to occur; (a) no Pension Plan
has any unfunded pension liability (i.e. excess of benefit liabilities over the
current value of that Pension Plan's assets, determined in accordance with the
assumptions used for funding the Pension Plan for the applicable plan year); (b)
neither Borrower nor any ERISA Affiliate has incurred, or reasonably expects to
incur, any liability under Title IV of ERISA with respect to any Pension
Plan (other than premiums due and not delinquent under Section 4007 of ERISA);
(c) neither Borrower nor any ERISA Affiliate has incurred, or reasonably expects
to incur, any liability (and no event has occurred which, with the giving of
notice under Section 4219 of ERISA, would result in such liability) under
Sections 4201 or 4243 of ERISA with respect to a Multiemployer Plan; and
(d) neither Borrower nor any ERISA Affiliate has engaged in a transaction that
could be subject to Sections 4069 or 4212(c) of ERISA.

     

    6.1.14 Environmental
Matters.

     

      Except
for those items described on Schedule 6.1.14, none
of which items, individually or collectively, could be reasonably expected to
result in a Material Adverse Change:

     

    (i) None of the Loan
Parties (other than Hallador) has received any Environmental Complaint, whether
directed or issued to any such Loan Party or relating or pertaining to
activities undertaken by any prior owner, operator or occupant of the Real
Property, which would result in a Material Adverse Change, and has no reason to
believe that it might receive an Environmental Complaint that would result in a
Material Adverse Change.

     

    (ii) No activity of any
Loan Party (other than Hallador) at the Real Property is being conducted in
violation of any Environmental Law or Required Environmental Permit, which such
activity would result in a Material Adverse Change, and to the knowledge of any
such Loan Party, no activity of any prior owner, operator or occupant of the
Real Property has caused an on-going violation of any Environmental Law, which
such activity would result in a Material Adverse Change.

     

    (iii) There are no
Regulated Substances present on, in, under, or emanating from, or, to any such
Loan Party’s knowledge, emanating to, the Real Property or any portion thereof
which result in Contamination, which such Contamination would result in a
Material Adverse Change.

     

    (iv) Each Loan Party
(other than Hallador) has all Required Environmental Permits, the absence of
which would result in a Material Adverse Change, and all such Required
Environmental Permits are in full force and effect.

     

    (v) Each Loan Party
(other than Hallador) has submitted to an Official Body and/or maintains, as
appropriate, all Required Environmental Notices where the failure to submit
and/or maintain such Required Environmental Notices would result in a Material
Adverse Change.

     

    (vi) No structures,
improvements, equipment, fixtures, impoundments, pits, lagoons or aboveground or
underground storage tanks located on the Real Property contain or use, except in
compliance with Environmental Laws and Required Environmental Permits, Regulated
Substances or otherwise are operated or maintained except in compliance with
Environmental Laws and Required Environmental Permits where such failure to
contain, or the use of, Regulated Substances or the noncompliance with
Environmental Laws or Required Environmental Permits, would result in a Material
Adverse Change.  To the knowledge of each Loan Party (other than
Hallador), no structures, improvements, equipment, fixtures, impoundments, pits,
lagoons or aboveground or underground storage tanks of prior owners, operators
or occupants of the Real Property contained or used, except in compliance with
Environmental Laws, Regulated Substances or otherwise were operated or
maintained by any such prior owner, operator or occupant except in compliance
with Environmental Laws where such failure to contain, or the use of, Regulated
Substances or the noncompliance with Environmental Laws or Required
Environmental Permits, would result in a Material Adverse Change.

     

    (vii) To the knowledge of
each Loan Party (other than Hallador), no facility or site to which any such
Loan Party, either directly or indirectly by a third party, has sent Regulated
Substances for storage, treatment, disposal or other management is identified in
writing or proposed in writing to be identified on any list of contaminated
properties or other properties which pursuant to Environmental Laws are the
subject of an investigation, cleanup, removal, remediation or other response
action by an Official Body where such investigation, cleanup, removal,
remediation or other response by an Official Body would result in a Material
Adverse Change.

     

    (viii) No portion of the
Real Property is identified in writing or, to the knowledge of any Loan Party
(other than Hallador), proposed to be identified in writing on any list of
contaminated properties or other properties which pursuant to Environmental Laws
are the subject of an investigation or remediation action by an Official Body
where such investigation or remediation action by an Official Body would result
in a Material Adverse Change, nor to the knowledge of any such Loan Party, is
any property adjoining or in the proximity of the Real Property so identified or
proposed to be identified on any such list where such identification or proposed
identification would result in an investigation or remediation action by an
Official Body that would result in a Material Adverse Change.

     

    (ix) No portion of the
Real Property constitutes an Environmentally Sensitive Area where the inclusion
of such portion of the Real Property constituting an Environmentally Sensitive
Area would result in a Material Adverse Change.

     

    (x) No lien or other
encumbrance authorized by Environmental Laws exists against the Real Property
and none of the Loan Parties (other than Hallador) has any reason to believe
that such a lien or encumbrance may be imposed where such lien or encumbrance
would result in a Material Adverse Change.

     

    6.1.15 Solvency.

     

      Each
Loan Party (other than Hallador) is Solvent.  After giving effect to
the transactions contemplated by the Loan Documents on the Closing Date,
including all Indebtedness incurred thereby, the Liens granted each such Loan
Party in connection therewith and the payment of all fees related thereto, each
such Loan Party will be Solvent, determined as of the Closing Date.

     

    6.1.16 Employment
Matters.

     

      Each of
the Loan Parties (other than Hallador) is in compliance with all employment
agreements, employment contracts, collective bargaining agreements and other
agreements among any such Loan Party and its employees (collectively, "Labor Contracts") and all
applicable federal, state and local labor and employment Laws including those
related to equal employment opportunity and affirmative action, labor relations,
minimum wage, overtime, child labor, medical insurance continuation, worker
adjustment and relocation notices, immigration controls and worker and
unemployment compensation, where the failure to comply would constitute a
Material Adverse Change.  There are no outstanding grievances,
arbitration awards or appeals therefrom arising out of the Labor Contracts or
current or threatened strikes, picketing, handbilling or other work stoppages or
slowdowns at facilities of any of such Loan Parties which in any case would
constitute a Material Adverse Change.

     

    6.1.17 Title to
Properties.

     

      A Lien
on all Real Property owned by each Loan Party (other than Hallador) has been
granted to the Administrative Agent for the benefit of the Lenders pursuant to a
Mortgage and other appropriate Security Documents, except for Real Property
acquired by a Loan Party (other than Hallador) in which a Mortgage and other
appropriate Security Documents will be executed and delivered by such Loan Party
in favor of the Administrative Agent for the benefit of the Secured Parties
within the time frames provided in Section 8.1.10
[Collateral and Additional Collateral; Execution and Delivery of Additional
Security Documents] or Section 8.2.9 [Subsidiaries,
Partnerships and Joint Ventures], as applicable.  Each Loan Party
(other than Hallador) and each Subsidiary of such Loan Party has good and
sufficient title to or valid leasehold interest in all material properties,
assets and other rights that are reflected as owned or leased on its most recent
audited balance sheet, free and clear of all Liens except Permitted Liens, and
subject to the terms and conditions of the applicable leases.  All
leases of property are in full force and effect, except for those leases of
property where such failure would not result in a Material Adverse
Change.

     

    6.1.18 Coal Act; Black Lung
Act.

     

      To the
extent applicable, the Borrower, its Subsidiaries and its "related persons" (as
defined in the Coal Act) are in compliance in all material respects with the
Coal Act and none of the Borrower, its Subsidiaries or its related persons has
any liability under the Coal Act except with respect to premiums or other
payments required thereunder which have been paid when due and except to the
extent that the liability thereunder would not reasonably be expected to result
in a Material Adverse Change.  The Loan Parties (other than Hallador)
are in compliance in all material respects with the Black Lung Act, and none of
the Loan Parties (other than Hallador) has any liability under the Black Lung
Act except with respect to premiums, contributions or other payments required
thereunder which have been paid when due and except to the extent that the
liability thereunder would not reasonably be expected to result in a Material
Adverse Change.

     

    6.1.19 Bonding
Capacity.

     

      After
giving effect to the transactions contemplated by the Loan Documents, the
Borrower has a sufficient mine bonding capacity to conduct its operations as
projected in accordance with the financial projections of the Borrower and its
Subsidiaries provided to the Administrative Agent.

     

    6.1.20 Permit
Blockage.

     

      No Loan
Party (other than Hallador) has been barred for a period in excess of fourteen
(14) consecutive days from receiving surface mining or underground mining
permits pursuant to the permit block provisions of the Surface Mining Control
and Reclamation Act, 30 U.S.C. §§ 1201 et seq., and the
regulations promulgated thereto, or any corresponding state laws or
regulations.

     

    6.2 Updates to
Schedules.

     

      Should
any of the information or disclosures provided on any of the Schedules attached
hereto become outdated or incorrect in any material respect, the Borrower shall
promptly provide the Administrative Agent in writing with such revisions or
updates to such Schedule as may be necessary or appropriate to update or correct
same; provided,
however, that
(i) Schedules 1.1(R), 6.1.1, and 6.1.2 shall not be deemed to have been amended,
modified or superseded by any such correction or update, nor shall any breach of
warranty or representation resulting from the inaccuracy or incompleteness of
any such Schedule be deemed to have been cured thereby, unless and until the
Administrative Agent, in its sole and absolute discretion, shall have accepted
in writing such revisions or updates to such Schedules and (ii) all remaining
Schedules shall not be deemed to have been amended, modified or superseded by
any such correction or update, nor shall any breach of warranty or
representation resulting from the inaccuracy or incompleteness of any such
Schedule be deemed to have been cured thereby, unless and until the Required
Lenders, in their sole and absolute discretion, shall have accepted in writing
such revisions or updates to such Schedule.

     

    7.           CONDITIONS OF
LENDING AND
ISSUANCE OF LETTERS OF CREDIT

     

    The obligation of
each Lender to make Loans and of the Issuing Lender to issue Letters of Credit
hereunder is subject to the performance by each of the Loan Parties of its
Obligations to be performed hereunder at or prior to the making of any such
Loans or issuance of such Letters of Credit and to the satisfaction of the
following further conditions:

     

    7.1 First Loans and Letters of
Credit.

     

    7.1.1 Deliveries.

     

      On the
Closing Date, the Administrative Agent shall have received each of the following
in form and substance satisfactory to the Administrative Agent:

     

    (i) A certificate of
each of the Loan Parties signed by an Authorized Officer, dated the Closing Date
stating that such Loan Party is in compliance with each of its respective
representations, warranties, covenants and conditions hereunder, or in the case
of Hallador, under this Agreement and the Guaranty, and no Event of Default or
Potential Default exists and no Material Adverse Change has occurred and no
material litigation exists since the date of the last reviewed financial
statements of Hallador for the fiscal quarter ending September 30, 2008,
delivered to the Administrative Agent.

     

    (ii) A certificate dated
the Closing Date and signed by the Secretary or an Assistant Secretary of each
of the Loan Parties, certifying as appropriate as to: (a) all action taken
by each Loan Party in connection with this Agreement and the other Loan
Documents; (b) the names of the Authorized Officers authorized to sign the
Loan Documents and their true signatures; and (c) copies of its organizational
documents as in effect on the Closing Date certified by the appropriate state
official where such documents are filed in a state office together with
certificates from the appropriate state officials as to the continued existence
and good standing of each Loan Party in each state where organized or qualified
to do business.

     

    (iii) This Agreement and
each of the other Loan Documents signed by an Authorized Officer and all
appropriate financing statements and appropriate stock powers and certificates
evidencing the pledged Collateral.

     

    (iv) A written opinion
of counsel for the Loan Parties, dated the Closing Date and as to the matters
set forth in Schedule
7.1.1.

     

    (v) Evidence that
adequate insurance, including flood insurance, if applicable, required to be
maintained under this Agreement is in full force and effect, with additional
insured, mortgagee and lender loss payable special endorsements attached thereto
in form and substance satisfactory to the Administrative Agent and its counsel
naming the Administrative Agent as additional insured, mortgagee and lender loss
payee.

     

    (vi) A duly completed
closing date compliance certificate dated as of the Closing Date, signed by an
Authorized Officer of Borrower which includes satisfactory evidence that the
Borrower's trailing twelve month Consolidated EBITDA for the period ended
September 30, 2008, as determined in accordance with GAAP, shall be at least
equal to $14,000,000 and the ratio of Consolidated Funded Debt of the Borrower
to trailing twelve month Consolidated EBITDA does not exceed 3.25 to
1.00;

     

    (vii) All material
consents, approvals and licenses required to effectuate the transactions
contemplated hereby.

     

    (viii) All lessor consents
allowing for, among other things, a Lien to be obtained upon any lease of the
Borrower of the Real Property, from the lessors of such lease, as required by
the Administrative Agent, in its sole discretion, to have such consents, which
such consents shall be in form and substance acceptable to the Administrative
Agent (the "Lessor
Consents").

     

    (ix) Evidence that the
Existing Credit Agreement has been terminated or will be terminated concurrently
with the execution of the Credit Agreement, and all outstanding obligations and
commitments thereunder have been paid and all Liens securing such obligations
have been released; and

     

    (x) A Lien search in
acceptable scope and with acceptable results.

     

    (xi) Evidence that after
giving effect to the transactions contemplated by the Loan Documents, the
Borrower has a sufficient mine bonding capacity to conduct its operations as
projected in accordance with the financial projections of the Borrower and its
Subsidiaries provided to the Administrative Agent.

     

    (xii) Evidence that all
of Required Mining Permits are in full force and effect in accordance with their
terms.

     

    (xiii) A title insurance
policy or policies or binder or binders in favor of the Administrative Agent for
the benefit of the Lenders, in customary ALTA current mortgagee's form, insuring
the Mortgage with respect to the Real Property owned by any of the Loan Parties
(other than Hallador) and on certain leased Real Property as indicated on Schedule 1.1(R) as a
valid first priority Lien.

     

    (xiv) The projected
financial projections (including balance sheets and statements of operations and
cash flows) of the Borrower for the four year period following the Closing
Date.

     

    (xv) An engineering
report certified by an independent engineer acceptable to the Administrative
Agent setting forth a satisfactory review (as determined by the Administrative
Agent) of (i) the coal mines, coal reserves and business operations of the
Borrower as related to the financial projections of the Borrower and (ii) an
assessment of the Borrower's coal reserves.

     

    (xvi) The capital
structure of the Borrower, including the terms and conditions of the
subordinated intercompany notes from Borrower in favor of Hallador evidencing
that the Borrower has received $13,000,000 from Hallador on or before the
Closing Date, and copies of such subordinated note dated as of the Closing Date
and all related loan documents.

     

    (xvii) The Chief Executive
Officer President or Chief Financial Officer of each Loan Party, acting in their
capacities as such officers, shall have delivered a certificate in form and
substance satisfactory to the Administrative Agent as to the capital adequacy
and solvency of each Loan Party after giving effect to the transactions
contemplated hereby.

     

    (xviii) A review of the
amount and nature of all tax, ERISA, employee retirement benefit, environmental
and all other contingent liabilities to which the Loan Parties may be
subject.

     

    (xix) Such other
documents in connection with such transactions as the Administrative Agent or
said counsel may reasonably request.

     

    7.1.2 Payment of
Fees.

     

      The
Borrower shall have paid all fees payable on or before the Closing Date or
arranged for funding of such fees out of the proceeds of the initial
Loans.

     

    7.2 Each Loan or Letter of
Credit.

     

      At the
time of making any Loans or issuing any Letters of Credit and after giving
effect to the proposed extensions of credit:  the representations,
warranties and covenants of the Loan Parties shall then be true and no Event of
Default or Potential Default shall have occurred and be continuing; the making
of the Loans or issuance of such Letter of Credit shall not contravene any Law
applicable to any Loan Party or Subsidiary of any Loan Party or any of the
Lenders; and the Borrower shall have delivered to the Administrative Agent a
duly executed and completed Loan Request or to the Issuing Lender an application
for a Letter of Credit, as the case may be.

     

    8.           COVENANTS

     

    The Loan Parties,
jointly and severally, covenant and agree that until Payment in Full, the Loan
Parties shall comply at all times with the following covenants:

     

    8.1 Affirmative
Covenants.

     

    8.1.1 Preservation of Existence,
Etc.

     

      Each
Loan Party shall, and each Loan Party (other than Hallador) shall cause each of
its Subsidiaries to, maintain its legal existence as a corporation, limited
partnership or limited liability company and its license or qualification and
good standing in each jurisdiction in which its ownership or lease of property
or the nature of its business makes such license or qualification necessary,
except as otherwise expressly permitted in Section 8.2.6 [Liquidations,
Mergers, Consolidations, Acquisitions] or where failure to do so would not
result in a Material Adverse Effect.

     

    8.1.2 Payment of Liabilities,
Including Taxes, Etc.

     

      Each
Loan Party shall, and each Loan Party (other than Hallador) shall cause each of
its Subsidiaries to, duly pay and discharge all liabilities to which it is
subject or which are asserted against it, promptly as and when the same shall
become due and payable, including all taxes, assessments and
governmental charges upon it or any of its properties, assets, income or
profits, prior to the date on which penalties attach thereto, except to the
extent that such liabilities, including taxes, assessments or charges, are being
contested in good faith and by appropriate and lawful proceedings diligently
conducted and for which such reserve or other appropriate provisions, if any, as
shall be required by GAAP shall have been made.

     

    8.1.3 Maintenance of
Insurance.

     

      Each
Loan Party shall, and each Loan Party (other than Hallador) shall cause each of
its Subsidiaries to, insure its properties and assets against loss or damage by
fire and such other insurable hazards as such assets are commonly insured
(including fire, extended coverage, property damage, workers' compensation and
public liability) and against other risks (including errors and omissions) in
such amounts as similar properties and assets are insured by prudent companies
in similar circumstances carrying on similar businesses, and with reputable and
financially sound insurers, including self-insurance to the extent customary,
all as reasonably determined by the Administrative Agent.  The Loan
Parties shall comply with the covenants and provide the endorsement set forth on
Schedule 8.1.3 relating to
property and related insurance policies covering the Collateral.

     

    8.1.4 Maintenance of Properties
and Leases.

     

      Each
Loan Party shall, and each Loan Party (other than Hallador) shall cause each of
its Subsidiaries to, maintain in good repair, working order and condition
(ordinary wear and tear excepted) in accordance with the general practice of
other businesses of similar character and size, all of those properties useful
or necessary to its business, and from time to time, such Loan Party will make
or cause to be made all appropriate repairs, renewals or replacements
thereof.

     

    8.1.5 Visitation
Rights.

     

      Each
Loan Party shall, and each Loan Party (other than Hallador) shall cause each of
its Subsidiaries to, permit any of the officers or authorized employees or
representatives of the Administrative Agent or any of the Lenders to visit and
inspect any of its properties and to examine and make excerpts from its books
and records and discuss its business affairs, finances and accounts with its
officers, all in such detail and at such times and as often as any of the
Lenders may reasonably request, provided that each
Lender shall provide the Borrower and the Administrative Agent with reasonable
notice prior to any visit or inspection.  In the event any Lender
desires to conduct such visit or inspection of any Loan Party, such Lender shall
make a reasonable effort to conduct such visit or inspection contemporaneously
with any audit to be performed by the Administrative Agent and such visits or
inspections shall be subject to customary safety procedures.

     

    8.1.6 Keeping of Records and Books
of Account.

     

      The
Borrower shall, and shall cause each Subsidiary of the Borrower to, maintain and
keep proper books of record and account which enable the Borrower and its
Subsidiaries to issue financial statements in accordance with GAAP and as
otherwise required by applicable Laws of any Official Body having jurisdiction
over the Borrower or any Subsidiary of the Borrower, and in which full, true and
correct entries shall be made in all material respects of all its dealings and
business and financial affairs.

     

    8.1.7 Compliance with Laws; Use of
Proceeds.

     

      Each
Loan Party shall, and each Loan Party (other than Hallador) shall cause each of
its Subsidiaries to, comply with all applicable Laws, including all
Environmental Laws, in all material respects; provided that it
shall not be deemed to be a violation of this Section 8.1.7 if any failure
to comply with any Law would not result in fines, penalties, remediation costs,
other similar liabilities or injunctive relief which in the aggregate would
constitute a Material Adverse Change.  The Loan Parties will use the
Letters of Credit and the proceeds of the Loans only in accordance with Section
2.8 [Use of Proceeds] and as permitted by
applicable Law.  Without limiting the generality of the foregoing, the
Loan Parties shall maintain adequate allowances on its books in accordance with
GAAP for (i) future costs associated with any lung disease claim alleging
pneumoconiosis or silicosis or arising out of exposure or alleged exposure to
coal dust or the coal mining environment, (ii) future costs associated with
retiree and health care benefits, (iii) future costs associated with reclamation
of disturbed acreage, removal of facilities and other closing costs in
connection with its mining activities and (iv) future costs associated with
other potential environmental liabilities.

     

    8.1.8 Further
Assurances.

     

      Each
Loan Party shall, from time to time, at its expense, faithfully preserve and
protect the Administrative Agent's Lien on and Prior Security Interest in the
Collateral and all other real and personal property of the Loan Parties whether
now owned or hereafter acquired as a continuing first priority perfected Lien,
subject only to Permitted Liens, and shall do such other acts and things as the
Administrative Agent in its sole discretion may deem necessary or advisable from
time to time in order to preserve, perfect and protect the Liens granted under
the Loan Documents and to exercise and enforce its rights and remedies
thereunder with respect to the Collateral.

     

    8.1.9 Anti-Terrorism
Laws.

     

      None of
the Loan Parties is or shall be (i) a Person with whom any Lender is restricted
from doing business under Executive Order No. 13224 or any other Anti-Terrorism
Law, (ii) engaged in any business involved in making or receiving any
contribution of funds, goods or services to or for the benefit of such a Person
or in any transaction that evades or avoids, or has the purpose of evading or
avoiding, the prohibitions set forth in any Anti-Terrorism Law, or (iii)
otherwise in violation of any Anti-Terrorism Law.  The Loan Parties
shall provide to the Lenders any certifications or information that a Lender
requests to confirm compliance by the Loan Parties with Anti-Terrorism Laws.

     

    8.1.10 Collateral and Additional
Collateral; Execution and Delivery of Additional and Ancillary Security
Documents.

     

    (i) Pursuant to the
Loan Documents, the Loan Parties (other than Hallador) shall grant, or cause to
be granted, to the Administrative Agent, for the benefit of the Lenders, a first
priority security interest in and lien on, subject only to Permitted Liens
(A) all Collateral, including (i) all capital stock and equity
interests owned by the Loan Parties (other than Hallador), but only up to 65% of
the capital stock or equity interests of any Foreign Subsidiaries,
(ii) Hallador's equity interest in the Borrower, and (iii) all of the
assets of the Loan Parties (other than Hallador) including all accounts,
inventory, as-extracted collateral, fixtures, equipment, investment property,
instruments, chattel paper, general intangibles, coal reserves, methane gas
reserves, coal bed methane reserves, mineral rights, owned and leased Real
Property, leasehold interests, patents and trademarks of each such Loan Parties
and (B) all other assets of the Loan Parties (other than Hallador), whether
owned on the Closing Date or subsequently acquired;

     

    (ii) Without limiting
the generality of the foregoing, each applicable Loan Party (other than
Hallador) which owns or leases any real property shall promptly execute and
deliver any and all Mortgages substantially in the form of Exhibit 1.1(M)
hereof, other Security Documents and Ancillary Security Documents reasonably
requested by the Agent to grant a first priority Lien (subject only to Permitted
Liens), and with respect to any leased Real Property, any Lessor Consents that
the Administrative Agent reasonably requests, in such Loan Party's interest in
such real property (other than Excluded Collateral) in favor of the
Administrative Agent, for the ratable benefit of the Lenders, as security for
the Obligations.  In furtherance of the foregoing, the Loan Parties
shall diligently cooperate with and assist, at their own expense, the
Administrative Agent in procuring any and all Mortgages, Security Documents,
Ancillary Security Documents and Lessor Consents.  Each Loan Party
(other than Hallador) hereby appoints any officer or agent of the Administrative
Agent as its true and lawful attorney, for it and in its name, place and stead,
to make, execute, deliver, and cause to be recorded or filed any or all such
Mortgages, deeds of trust, assignments, pledges, security interests, financing
statements and additional documents and agreements relating thereto, granting
unto said attorney full power to do any and all things said attorney may
consider reasonably necessary or appropriate to be done with respect to the
Mortgages as fully and effectively as such Loan Party might or could do, and
hereby ratifying and confirming all its said attorney shall lawfully do or cause
to be done by virtue hereof.  This power of attorney is coupled with
an interest and shall be irrevocable for the terms of this Agreement and all
transactions hereunder.  All reasonable out-of-pocket costs and
expenses incurred by the Administrative Agent in connection with the exercise of
the rights under this Section shall be paid by the Loan Parties on demand of the
Administrative Agent.  The Loan Parties, the Lenders and the
Administrative Agent agree that without any further action on the part of any of
them, upon execution and/or delivery, the Mortgages, other Security Documents,
the Ancillary Security Documents and Lessor Consents shall become Loan Documents
and the assets that are subject to the Mortgages and the other Security
Documents shall become collateral for the Obligations.

     

    8.1.11 Maintenance of Coal Supply
Agreements and Material Contracts.

     

      Each Loan
Party shall maintain and materially comply with the terms and conditions of all
coal supply agreements and material agreement or contract, the nonperformance of
which would reasonably be expected to result in a Material Adverse Change.

     

    8.1.12 Maintenance of Licenses,
Etc.

     

      Each Loan
Party shall maintain in full force and effect all licenses, franchises, permits
and other authorizations necessary for the ownership and operation of its
properties and business if the failure so to maintain the same would constitute
a Material Adverse Change.

     

    8.1.13 Maintenance of
Permits.

     

      Each Loan
Party shall maintain all Required Mining Permits in full force and effect in
accordance with their terms.

    


    8.2 Negative
Covenants.

     

    8.2.1 Indebtedness.

     

      Each of
the Loan Parties (other than Hallador) shall not, and shall not permit any of
its Subsidiaries to, at any time create, incur, assume or suffer to exist any
Indebtedness, except:

     

    (i) Indebtedness under
the Loan Documents;

     

    (ii) Existing
Indebtedness as set forth on Schedule 8.2.1 (including any
extensions or renewals thereof; provided there is no
increase in the amount thereof or other significant change in the terms thereof
unless otherwise specified on Schedule 8.2.1;

     

    (iii) Capitalized and
operating leases as and to the extent permitted under Section 8.2.14
[Capital Expenditures and Leases];

     

    (iv) Indebtedness
secured by Purchase Money Security Interests not exceeding $1,000,000
outstanding (in the aggregate) at any time;

     

    (v) Indebtedness of a
Loan Party (other than Hallador) to another Loan Party which is subordinated
pursuant to the Intercompany Subordination Agreement, and Indebtedness as of the
Closing Date of the Borrower to Hallador which is subordinated pursuant to the
Hallador Subordination Agreement; and

     

    (vi) Any (i) Lender
Provided Interest Rate Hedge, (ii) other Interest Rate Hedge approved by
the Administrative Agent or (iii) Indebtedness under any Other Lender
Provided Financial Services Product;

     

    (vii) Guaranties
permitted under Section 8.2.3
[Guaranties];

     

    (viii) Indebtedness
representing deferred compensation to employees incurred in the ordinary course
of business;

     

    (ix) Indebtedness to
current or former officers, directors, employees, their respective estates,
spouses, or former spouses to finance the purchase or redemption of equity
interests in Hallador in aggregate amount not to exceed $500,000 outstanding in
the aggregate at any time;

     

    (x) Indebtedness in
respect of netting services, automated clearinghouse arrangements, overdraft
protections, and similar arrangements, in each case in connection with deposit
accounts incurred in the ordinary course;

     

    (xi) Indebtedness
consisting of the financing of insurance premiums arising in the ordinary course
of business;

     

    (xii) Indebtedness
incurred in respect of warehouse receipts or similar instruments issued or
created in the ordinary course of business;

     

    (xiii) Obligations in
respect of performance, bid, appeal, and surety bonds and performance and
completion guarantees and similar obligations provided by the Loan Parties;
and

     

    (xiv) Other unsecured
Indebtedness or subordinated debt of the Loan Parties in an aggregate amount
outstanding not to exceed $1,000,000.

     

    8.2.2 Liens.

     

      Each of
the Loan Parties (other than Hallador) shall not, and shall not permit any of
its Subsidiaries to, at any time create, incur, assume or suffer to exist any
Lien on any of its property or assets, tangible or intangible, now owned or
hereafter acquired, or agree or become liable to do so, except Permitted
Liens.

     

    8.2.3 Guaranties.

     

      Each of
the Loan Parties (other than Hallador) shall not, and shall not permit any of
its Subsidiaries to, at any time, directly or indirectly, become or be liable in
respect of any Guaranty, or assume, guarantee, become surety for, endorse or
otherwise agree, become or remain directly or contingently liable upon or with
respect to any obligation or liability of any other Person, except for
Guaranties of Indebtedness of the Loan Parties permitted hereunder.

     

    8.2.4 Loans and
Investments.

     

      Each of
the Loan Parties (other than Hallador) shall not, and shall not permit any of
its Subsidiaries to, at any time make or suffer to remain outstanding any loan
or advance to, or purchase, acquire or own any stock, bonds, notes or securities
of, or any partnership interest (whether general or limited) or limited
liability company interest in, or any other investment or interest in, or make any capital
contribution to, any other Person, or agree, become or remain liable to do any
of the foregoing, except:

     

    (i) trade credit
extended on usual and customary terms in the ordinary course of
business;

     

    (ii) advances to
employees to meet expenses incurred by such employees in the ordinary course of
business;

     

    (iii) Permitted
Investments; and

     

    (iv) loans, advances and
investments in other Loan Parties (other than Hallador).

     

    (v) investments
consisting of extensions of credit in the nature of accounts receivable or notes
receivable arising from the grant of trade credit in the ordinary course of
business, and investments received in satisfaction or partial satisfaction
thereof from financially troubled account debtors and other credits to suppliers
in the ordinary course of business;

     

    (vi) Subject to the
requirements of Section 5.7 [Mandatory
Prepayments], investments not to exceed $5,000,000 at any time outstanding,
consisting of promissory notes and other noncash consideration received in
connection with the disposition of property otherwise permitted under this
Agreement;

     

    (vii) advances of payroll
payments to employees in the ordinary course of business;

     

    (viii) investments in
Subsidiaries that become Loan Parties; and

     

    (ix) other investments
made after the date of this Agreement in an aggregate amount not to exceed
$1,000,000.

     

    8.2.5 Dividends and Related
Distributions.

     

      Each of
the Loan Parties (other than Hallador) shall not, and shall not permit any of
its Subsidiaries to, make or pay, or agree to become or remain liable to make or
pay, any dividend or other distribution of any nature (whether in cash,
property, securities or otherwise) on account of or in respect of its shares of
capital stock, partnership interests or limited liability company interests on
account of the purchase, redemption, retirement or acquisition of its shares of
capital stock (or warrants, options or rights therefor), partnership interests
or limited liability company interests, except (i) dividends or other
distributions payable to another Loan Party (other than Hallador),
(ii) Permitted Tax Distributions; provided that the Loan Parties provide
the Administrative Agent with reasonable information setting forth the amount of
each such Permitted Tax Distribution, and (iii) dividends or distributions
to the owners of the Borrower in the amount of up to $6,200,000 in 2010, and up
to $3,100,000 each fiscal year thereafter, provided, that prior
to and immediately after making such dividend or distribution set forth in
subsection (iii) above, the Borrower shall certify: (a) that the ratio of
consolidated total liabilities of the Borrower and its Subsidiaries to
Consolidated Tangible Net Worth is less than 2.00 to 1.00, (b) that the amount
of Availability shall not be less than $7,500,000 and (c) there shall exist no
Event of Default.

     

    8.2.6 Liquidations, Mergers,
Consolidations, Acquisitions.

     

      Each of
the Loan Parties shall not, and each Loan Party (other than Hallador) shall not
permit any of its Subsidiaries to, dissolve, liquidate or wind-up its affairs,
or become a party to any merger or consolidation, or acquire by purchase, lease
or otherwise all or substantially all of the assets or capital stock of any
other Person; provided that any
Loan Party other than the Borrower may consolidate or merge into another Loan
Party which is wholly-owned by one or more of the other Loan
Parties.

     

    8.2.7 Dispositions of Assets or
Subsidiaries.

     

      Each of
the Loan Parties shall not, and shall not permit any of its Subsidiaries to,
sell, convey, assign, lease, abandon or otherwise transfer or dispose of,
voluntarily or involuntarily, any of its properties or assets, tangible or
intangible (including sale, assignment, discount or other disposition of
accounts, contract rights, chattel paper, equipment or general intangibles with
or without recourse or of capital stock, shares of beneficial interest,
partnership interests or limited liability company interests of a Subsidiary of
such Loan Party) which are, or would become, Collateral under any of the Loan
Documents, except:

     

    (i) transactions
involving the sale of inventory in the ordinary course of business;

     

    (ii) any sale, transfer
or lease of assets in the ordinary course of business which are obsolete or no
longer necessary or required in the conduct of such Loan Party's or such
Subsidiary's business;

     

    (iii) any sale, transfer
or lease of assets by any wholly owned Subsidiary of such Loan Party to another
Loan Party;

     

    (iv) any sale, transfer
or lease of assets in the ordinary course of business which are replaced by
substitute assets acquired or leased within the parameters of
Section 8.2.14 [Capital Expenditures and Leases]; provided such
substitute assets are subject to the Lenders' Prior Security Interest (subject
to Permitted Liens); or

     

    (v) any sale, transfer
or lease of assets (other than Hallador's member or equity interest in the
Borrower), the aggregate principal amount of which does not exceed $5,000,000,
other than those specifically excepted pursuant to clauses (i) through (iv)
above, so long as the after-tax net proceeds (as reasonably estimated by the
Borrower) are applied as a mandatory prepayment of the Term Loans in accordance
with the provisions of Section 5.7.1 [Sale of Assets] above.

     

    8.2.8 Affiliate
Transactions.

     

      Each of
the Loan Parties shall not, and shall not permit any of its Subsidiaries to,
enter into or carry out any transaction with any Affiliate of any Loan Party
(including purchasing property or services from or selling property or services
to, any Affiliate of any Loan Party) unless such transaction is not otherwise
prohibited by this Agreement, is entered into in the ordinary course of business
upon fair and reasonable arm's-length terms and conditions which are fully
disclosed to the Administrative Agent and is in accordance with all applicable
Law.

     

    8.2.9 Subsidiaries, Partnerships
and Joint Ventures.

     

      Each of
the Loan Parties (other than Hallador) shall not, and shall not permit any of
its Subsidiaries to own or create directly or indirectly any Subsidiaries other
than (i) any Subsidiary which has joined this Agreement as Guarantor on the
Closing Date; and (ii) any Subsidiary formed after the Closing Date which joins
this Agreement as a Guarantor by delivering to the Administrative Agent
(A) a signed Guarantor Joinder; (B) documents in the forms described
in Section 7.1 [First Loans] modified as appropriate; and
(C) documents necessary to grant and perfect Prior Security Interests
(subject to Permitted Liens) to the Administrative Agent for the benefit of the
Lenders in the equity interests of, and Collateral held by, such
Subsidiary.  None of the Loan Parties (other than Hallador) shall
become or agree to become a party to a Joint Venture.

     

    8.2.10 Continuation of or Change in
Business.

     

      Each of
the Loan Parties (other than Hallador) shall not, and shall not permit any of
its Subsidiaries to, engage in any business other than the business that such
Loan Party is currently engaged in and reasonable extensions thereof, and such Loan Party or
Subsidiary shall not permit any material change in such business.

     

    8.2.11 Fiscal
Year.

     

      The
Borrower shall not, and shall not permit any Subsidiary of the Borrower to,
change its fiscal year from the twelve-month period beginning January 1 and
ending December 31, except with the written consent of the Administrative Agent,
such consent not to be unreasonably withheld.

     

    8.2.12 Issuance of
Stock.

     

      Each of
the Loan Parties (other than Hallador) shall not, and shall not permit any of
its Subsidiaries to, issue any additional shares of its capital stock or any
options, warrants or other rights in respect thereof.

     

    8.2.13 Changes in Organizational
Documents.

     

      Each of
the Loan Parties shall not, and each Loan Party (other than Hallador) shall not
permit any of its Subsidiaries to, amend in any respect its certificate of
incorporation (including any provisions or resolutions relating to capital
stock), by-laws, certificate of limited partnership, partnership agreement,
certificate of formation, limited liability company agreement or other
organizational documents without providing at least ten (10) calendar days'
prior written notice to the Administrative Agent and the Lenders and, in the
event such change would be adverse to the Lenders as determined by the
Administrative Agent in its reasonable discretion, obtaining the prior written
consent of the Required Lenders.

     

    8.2.14 Capital Expenditures and
Leases.

     

      Each of
the Loan Parties (other than Hallador) shall not, and shall not permit any
of its Subsidiaries to make any payments on account of the purchase or lease of
any assets which if purchased would constitute fixed assets or which if leased
would constitute a capitalized lease to exceed the amounts set forth below for
the fiscal years specified below:

     

    
      	
              Fiscal
      Year

            	
              Amount

            
	
              2008

            	
              $30,000,000

            
	
              2009

            	
              $40,000,000

            
	
              each fiscal
      year thereafter

            	
              $11,000,000

            


    

    


    If
such payments made by the Loan Parties (other than Hallador) in any fiscal year
are less than the amounts permitted for such fiscal year under the table set
forth above, then such unpaid amounts may be added by the Loan Parties (other
than Hallador) to the amounts permitted to be used for payments in future
years.

     

    8.2.15 Minimum Fixed Charge
Coverage Ratio.

     

      The
Loan Parties (other than Hallador) shall not permit the Fixed Charge Coverage
Ratio, calculated as of the end of each fiscal quarter for the four fiscal
quarters then ended, to be less than 1.25 to 1.0.

     

    8.2.16 Maximum Leverage
Ratio.

     

      The
Loan Parties (other than Hallador) shall not at any time permit the ratio of
Consolidated Funded Debt of the Borrower and its Subsidiaries to Consolidated
EBITDA to exceed the ratio set forth below for the fiscal period then ending as
specified below:

     

    
      	
              Fiscal
      Quarter

            	
              Ratio

            
	
              December 31,
      2008 through June 30, 2009

            	
              3.25 to
      1.00

            
	
              September 30,
      2009 through December 31, 2009

            	
              3.00 to
      1.00

            
	
              March 31,
      2010 and each fiscal quarter thereafter

            	
              2.75 to
      1.00

            


    

     

    
 

    8.3 Reporting
Requirements.

     

      The
Loan Parties will furnish or cause to be furnished to the Administrative Agent
and each of the Lenders.

     

    8.3.1 Monthly and Quarterly
Financial Statements.

     

      As soon
as available and in any event within thirty (30) calendar days after the end of
each month or forty-five (45) calendar days after the end of each fiscal
quarter, as applicable, in each fiscal year, financial statements of Borrower,
consisting of a consolidated balance sheet as of the end of such month or fiscal
quarter, as applicable and related consolidated statements of income, retained
earnings and cash flows for the month or quarter, as applicable, then ended and
the fiscal year through that date, all in reasonable detail and certified
(subject to normal year-end audit adjustments and without footnotes) by the
Chief Executive Officer, President or Chief Financial Officer of Borrower as
having been prepared in accordance with GAAP, consistently applied, and, with
respect to the quarterly financial statements, including comments on any
positive or negative variations from the Borrower's annual budget.

     

    8.3.2 Annual Financial
Statements.

     

      Commencing
with the fiscal year ending as of December 31, 2008, as soon as available and in
any event within one hundred twenty (120) calendar days after the end of each
such fiscal year of Hallador, audited financial statements of Hallador
consisting of a consolidated balance sheet as of the end of such fiscal year,
and related consolidated statements of income, retained earnings and cash flows
for the fiscal year then ended, including audited consolidating schedules for
the balance sheet, statement of income, retained earnings and cash flow of
Borrower, all in reasonable detail and setting forth in comparative form the
financial statements as of the end of and for the preceding fiscal year, and
certified by independent certified public accountants satisfactory to the
Administrative Agent.  The certificate or report of accountants shall
be free of qualifications (other than any consistency qualification that may
result from a change in the method used to prepare the financial statements as
to which such accountants concur) and shall not indicate the occurrence or
existence of any event, condition or contingency which would materially impair
the prospect of payment or performance of any covenant, agreement or duty of any
Loan Party under any of the Loan Documents.  The Loan Parties shall
deliver with such financial statements and certification by their accountants a
letter of such accountants to the Administrative Agent and the Lenders
substantially to the effect that, based upon their ordinary and customary
examination of the affairs of the Loan Parties, performed in connection with the
preparation of such consolidated financial statements, and in accordance with
GAAP, they are not aware of the existence of any condition or event which
constitutes an Event of Default or Potential Default or, if they are aware of
such condition or event, stating the nature thereof.

     

    8.3.3 Certificates of the Borrower
and Hallador.

     

      Concurrently
with the quarterly and annual financial statements of Borrower and Hallador, as
applicable furnished to the Administrative Agent and to the Lenders pursuant to
Sections 8.3.1 [Monthly and Quarterly Financial Statements] and 8.3.2
[Annual Financial Statements], a certificate (each a "Compliance Certificate") of
Hallador signed by the Chief Executive Officer, President or Chief Financial
Officer of Hallador and of Borrower signed by the President or Chief Financial
Officer of Borrower, each in the form of Exhibit 8.3.3.

     

    8.3.4 Notices.

     

    8.3.4.1 Default.  Promptly
after any officer of any Loan Party has learned of the occurrence of an Event of
Default or Potential Default, a certificate signed by an Authorized Officer
setting forth the details of such Event of Default or Potential Default and the
action which such Loan Party proposes to take with respect thereto.

     

    8.3.4.2 Litigation.  Promptly
after the commencement thereof, notice of all actions, suits, proceedings or
investigations before or by any Official Body or any other Person against any
Loan Party or Subsidiary of any Loan Party which relate to the Collateral,
involve a claim or series of claims in excess of $2,500,000 or which if
adversely determined would constitute a Material Adverse Change.

     

    8.3.4.3 Organizational
Documents.  Within the time limits set forth in
Section 8.2.13 [Changes in Organizational Documents], any amendment to the
organizational documents of any Loan Party.

     

    8.3.4.4 Erroneous Financial
Information.  Immediately in the event that the Borrower or its
accountants conclude or advise that any previously issued financial statement,
audit report or interim review should no longer be relied upon or that
disclosure should be made or action should be taken to prevent future
reliance.

     

    8.3.4.5 ERISA
Event.  Immediately upon the occurrence of any ERISA
Event.

     

    8.3.4.6 Other Reports.
Promptly upon their becoming available to the Borrower:

     

    (i) Annual
Budget.  The annual budget and any forecasts or projections of
the Borrower, to be supplied not later than the commencement of the current
fiscal year to which any of the foregoing may be applicable,

     

    (ii) Management
Letters.  Any reports including management letters submitted to
the Borrower by independent accountants in connection with any annual, interim
or special audit,

     

    (iii) Other
Information.  Such other reports and information as any of the
Lenders may from time to time reasonably request.

     

    9.           DEFAULT

     

    9.1 Events of
Default.

     

      An
Event of Default shall mean the occurrence or existence of any one or more of
the following events or conditions (whatever the reason therefor and whether
voluntary, involuntary or effected by operation of Law):

     

    9.1.1 Payments Under Loan
Documents.

     

      The
Borrower shall fail to pay:  (i) any principal of any Loan
(including scheduled installments, mandatory prepayments or the payment due at
maturity), Reimbursement Obligation or Letter of Credit Obligation on the date
on which such payment becomes due in accordance with the terms hereof or
thereof, or (ii) any interest on any Loan, Reimbursement Obligation or
Letter of Credit Obligation or any other amount owing hereunder or under the
other Loan Documents within three (3) Business Days of the date on which such
interest or other amount becomes due in accordance with the terms hereof or
thereof;

     

    9.1.2 Breach of
Warranty.

     

      Any
representation or warranty made at any time by any of the Loan Parties herein or
by any of the Loan Parties in any other Loan Document, or in any certificate,
other instrument or statement furnished pursuant to the provisions hereof or
thereof, shall prove to have been false or misleading in any material respect as
of the time it was made or furnished;

     

    9.1.3 Breach of Negative Covenants
or Visitation Rights.

     

      Any of
the Loan Parties shall default in the observance or performance of any covenant
contained in Section 8.1.5 [Visitation Rights] or Section 8.2 [Negative Covenants];

     

    9.1.4 Breach of Other
Covenants.

     

      Any of
the Loan Parties shall default in the observance or performance of any other
covenant, condition or provision hereof or of any other Loan Document and such
default shall continue unremedied for a period of thirty (30) days;

     

    9.1.5 Defaults in Other Agreements
or Indebtedness.

     

      A
default or event of default shall occur at any time under the terms of any other
agreement involving borrowed money or the extension of credit or any other
Indebtedness under which any Loan Party or Subsidiary of any Loan Party may be
obligated as a borrower or guarantor in excess of $1,000,000 in the aggregate,
and such breach, default or event of default consists of the failure to pay
(beyond any period of grace permitted with respect thereto) any Indebtedness
when due (whether at stated maturity, by acceleration or otherwise) or if such
breach or default permits or causes the acceleration of any Indebtedness or the
termination of any commitment to lend;

     

    9.1.6 Final Judgments or
Orders.

     

      Any
final judgments or orders for the payment of money in excess of $2,000,000 in
the aggregate shall be entered against any Loan Party by a court having
jurisdiction in the premises, which judgment is not discharged, vacated, bonded
or stayed pending appeal within a period of thirty (30) days from the date of
entry;

     

    9.1.7 Loan Document
Unenforceable.

     

      Any of
the Loan Documents shall cease to be legal, valid and binding agreements
enforceable against the party executing the same or such party's successors and
assigns (as permitted under the Loan Documents) in accordance with the
respective terms thereof or shall in any way be terminated (except in accordance
with its terms) or become or be declared ineffective or inoperative or shall in
any way be challenged or contested or cease to give or provide the respective
Liens, security interests, rights, titles, interests, remedies, powers or
privileges intended to be created thereby;

     

    9.1.8 Uninsured Losses;
Proceedings Against Assets.

     

      There
shall occur any material uninsured damage to or loss, theft or destruction of
any of the Collateral in excess of $2,500,000 or the Collateral or any other of
the Loan Parties' or any of their Subsidiaries' assets are attached, seized,
levied upon or subjected to a writ or distress warrant; or such come within the
possession of any receiver, trustee, custodian or assignee for the benefit of
creditors and the same is not cured within thirty (30) days
thereafter;

     

    9.1.9 Events Relating to Plans and
Benefit Arrangements.

     

      (i) An
ERISA Event occurs with respect to a Pension Plan or Multiemployer Plan which
has resulted or could reasonably be expected to result in liability of Borrower
under Title IV of ERISA to the Pension Plan, Multiemployer Plan or the PBGC in
an aggregate amount in excess of $2,500,000, or (ii) Borrower or any ERISA
Affiliate fails to pay when due, after the expiration of any applicable grace
period, any installment payment with respect to its withdrawal liability under
Section 4201 of ERISA under a Multiemployer Plan in an aggregate amount in
excess of $2,500,000;

     

    9.1.10 Change of
Control.

     

      (i)
 Any person or group of persons (within the meaning of Sections 13(d)
or 14(a) of the Securities Exchange Act of 1934, as amended), other than
Hallador, shall have acquired beneficial ownership of (within the meaning of
Rule 13d-3 promulgated by the Securities and Exchange Commission under said Act)
25 % or more of the voting capital stock or equity interests of the Borrower; or
(ii) within a period of twelve (12) consecutive calendar months,
individuals who were managers of the Borrower on the first day of such period
shall cease to constitute a majority of the managers of the
Borrower.

     

    9.1.11 Relief
Proceedings.

     

      (i) A
Relief Proceeding shall have been instituted against any Loan Party or
Subsidiary of a Loan Party and such Relief Proceeding shall remain undismissed
or unstayed and in effect for a period of sixty (60) consecutive days or such
court shall enter a decree or order granting any of the relief sought in such
Relief Proceeding, (ii) any Loan Party or Subsidiary of a Loan Party
institutes, or takes any action in furtherance of, a Relief Proceeding, or (iii)
any Loan Party or any Subsidiary of a Loan Party ceases to be Solvent or admits
in writing its inability to pay its debts as they mature.

     

    9.2 Consequences of Event of
Default.

     

    9.2.1 Events of Default Other Than
Bankruptcy, Insolvency or Reorganization Proceedings.

     

      If an
Event of Default specified under Sections 9.1.1 through 9.1.10 shall occur
and be continuing, the Lenders and the Administrative Agent shall be under no
further obligation to make Loans and the Issuing Lender shall be under no
obligation to issue Letters of Credit and the Administrative Agent may, and upon
the request of the Required Lenders, shall (i) by written notice to the
Borrower, declare the unpaid principal amount of the Notes then outstanding and
all interest accrued thereon, any unpaid fees and all other Indebtedness of the
Borrower to the Lenders hereunder and thereunder to be forthwith due and
payable, and the same shall thereupon become and be immediately due and payable
to the Administrative Agent for the benefit of each Lender without presentment,
demand, protest or any other notice of any kind, all of which are hereby
expressly waived, and (ii) require the Borrower to, and the Borrower shall
thereupon, deposit in a non-interest-bearing account with the Administrative
Agent, as cash collateral for its Obligations under the Loan Documents, an
amount equal to the maximum amount currently or at any time thereafter available
to be drawn on all outstanding Letters of Credit, and the Borrower hereby
pledges to the Administrative Agent and the Lenders, and grants to the
Administrative Agent and the Lenders a security interest in, all such cash as
security for such Obligations; and

     

    9.2.2 Bankruptcy, Insolvency or
Reorganization Proceedings.

     

      If an
Event of Default specified under Section 9.1.11 [Relief Proceedings] shall
occur and be continuing, the Lenders shall be under no further obligations to
make Loans hereunder and the Issuing Lender shall be under no obligation to
issue Letters of Credit and the unpaid principal amount of the Loans then
outstanding and all interest accrued thereon, any unpaid fees and all other
Indebtedness of the Borrower to the Lenders hereunder and thereunder shall be
immediately due and payable, without presentment, demand, protest or notice of
any kind, all of which are hereby expressly waived; and

     

    9.2.3 Set-off.

     

      If an
Event of Default shall have occurred and be continuing, each Lender, the Issuing
Lender, and each of their respective Affiliates and any participant of such
Lender or Affiliate which has agreed in writing to be bound by the provisions of
Section 5.3 [Sharing of Payments] is hereby
authorized at any time and from time to time, to the fullest extent permitted by
applicable Law, to set off and apply any and all deposits (general or special,
time or demand, provisional or final, in whatever currency) at any time held and
other obligations (in whatever currency) at any time owing by such Lender, the
Issuing Lender or any such Affiliate or participant to or for the credit or the
account of any Loan Party against any and all of the Obligations of such Loan
Party now or hereafter existing under this Agreement or any other Loan Document
to such Lender, the Issuing Lender, Affiliate or participant, irrespective of
whether or not such Lender, Issuing Lender, Affiliate or participant shall have
made any demand under this Agreement or any other Loan Document and although
such Obligations of the Borrower or such Loan Party may be contingent or
unmatured or are owed to a branch or office of such Lender or the Issuing Lender
different from the branch or office holding such deposit or obligated on such
Indebtedness.  The rights of each Lender, the Issuing Lender and their
respective Affiliates and participants under this Section are in addition to
other rights and remedies (including other rights of setoff) that such Lender,
the Issuing Lender or their respective Affiliates and participants may
have.  Each Lender and the Issuing Lender agrees to notify the
Borrower and the Administrative Agent promptly after any such setoff and
application; provided that the failure to give such notice shall not affect the
validity of such setoff and application; and

     

    9.2.4 Application of
Proceeds.

     

      From
and after the date on which the Administrative Agent has taken any action
pursuant to this Section 9.2 and until all Obligations of the Loan Parties
have been paid in full, any and all proceeds received by the Administrative
Agent from any sale or other disposition of the Collateral, or any part thereof,
or the exercise of any other remedy by the Administrative Agent, shall be
applied as follows:

     

    (i) first, to reimburse
the Administrative Agent and the Lenders for reasonable out-of-pocket costs,
expenses and disbursements, including reasonable attorneys' and paralegals' fees
and legal expenses, incurred by the Administrative Agent or the Lenders in
connection with realizing on the Collateral or collection of any Obligations of
any of the Loan Parties under any of the Loan Documents, including advances made
by the Lenders or any one of them or the Administrative Agent for the reasonable
maintenance, preservation, protection or enforcement of, or realization upon,
the Collateral, including advances for taxes, insurance, repairs and the like
and reasonable expenses incurred to sell or otherwise realize on, or prepare for
sale or other realization on, any of the Collateral;

     

    (ii) second, to the
repayment of all Obligations then due and unpaid of the Loan Parties to the
Lenders or their Affiliates incurred under this Agreement or any of the other
Loan Documents or agreements evidencing Lender Provided Interest Rate Hedges or
Other Lender Provided Financial Service Products, whether of principal,
interest, fees, expenses or otherwise and to cash collateralize the Letter of
Credit Obligations, in such manner as the Administrative Agent may determine in
its discretion; and

     

    (iii) the balance, if
any, as required by Law.

     

    10.           THE ADMINISTRATIVE
AGENT

     

    10.1 Appointment and
Authority.

     

      Each of
the Lenders and the Issuing Lender hereby irrevocably appoints PNC Bank to act
on its behalf as the Administrative Agent hereunder and under the other Loan
Documents and authorizes the Administrative Agent to take such actions on its
behalf and to exercise such powers as are delegated to the Administrative Agent
by the terms hereof or thereof, together with such actions and powers as are
reasonably incidental thereto.  The provisions of this Section 10 are solely for the benefit of the Administrative
Agent, the Lenders and the Issuing Lender, and neither the Borrower nor any
other Loan Party shall have rights as a third party beneficiary of any of such
provisions.

     

    10.2 Rights as a
Lender.

     

      The
Person serving as the Administrative Agent hereunder shall have the same rights
and powers in its capacity as a Lender as any other Lender and may exercise the
same as though it were not the Administrative Agent and the term "Lender" or
"Lenders" shall, unless otherwise expressly indicated or unless the context
otherwise requires, include the Person serving as the Administrative Agent
hereunder in its individual capacity.  Such Person and its Affiliates
may accept deposits from, lend money to, act as the financial advisor or in any
other advisory capacity for and generally engage in any kind of business with
the Borrower or any Subsidiary or other Affiliate thereof as if such Person were
not the Administrative Agent hereunder and without any duty to account therefor
to the Lenders.

     

    10.3 Exculpatory
Provisions.

     

      The
Administrative Agent shall not have any duties or obligations except those
expressly set forth herein and in the other Loan Documents.  Without
limiting the generality of the foregoing, the Administrative Agent:

     

    (a)           shall
not be subject to any fiduciary or other implied duties, regardless of whether a
Potential Default or Event of Default has occurred and is
continuing;

     

    (b)           shall
not have any duty to take any discretionary action or exercise any discretionary
powers, except discretionary rights and powers expressly contemplated hereby or
by the other Loan Documents that the Administrative Agent is required to
exercise as directed in writing by the Required Lenders (or such other number or
percentage of the Lenders as shall be expressly provided for herein or in the
other Loan Documents); provided that the
Administrative Agent shall not be required to take any action that, in its
opinion or the opinion of its counsel, may expose the Administrative Agent to
liability or that is contrary to any Loan Document or applicable Law;
and

     

    (c)           shall
not, except as expressly set forth herein and in the other Loan Documents, have
any duty to disclose, and shall not be liable for the failure to disclose, any
information relating to the Borrower or any of its Affiliates that is
communicated to or obtained by the Person serving as the Administrative Agent or
any of its Affiliates in any capacity.

     

    The Administrative
Agent shall not be liable for any action taken or not taken by it (i) with
the consent or at the request of the Required Lenders (or such other number or
percentage of the Lenders as shall be necessary, or as the Administrative Agent
shall believe in good faith shall be necessary, under the circumstances as
provided in Sections 11.1 [Modifications,
Amendments or Waivers] and 9.2 [Consequences of
Event of Default]) or (ii) in the absence of its own gross negligence or
willful misconduct.  The Administrative Agent shall be deemed not to
have knowledge of any Potential Default or Event of Default unless and until
notice describing such Potential Default or Event of Default is given to the
Administrative Agent by the Borrower, a Lender or the Issuing
Lender.

     

    The Administrative
Agent shall not be responsible for or have any duty to ascertain or inquire into
(i) any statement, warranty or representation made in or in connection with
this Agreement or any other Loan Document, (ii) the contents of any
certificate, report or other document delivered hereunder or thereunder or in
connection herewith or therewith, (iii) the performance or observance of
any of the covenants, agreements or other terms or conditions set forth herein
or therein or the occurrence of any Potential Default or Event of Default,
(iv) the validity, enforceability, effectiveness or genuineness of this
Agreement, any other Loan Document or any other agreement, instrument or
document or (v) the satisfaction of any condition set forth in Section 7 [Conditions of Lending and Issuance of Letters of
Credit] or elsewhere herein, other than to confirm receipt of items expressly
required to be delivered to the Administrative Agent.

     

    10.4 Reliance by Administrative
Agent.

     

      The
Administrative Agent shall be entitled to rely upon, and shall not incur any
liability for relying upon, any notice, request, certificate, consent,
statement, instrument, document or other writing (including any electronic
message, Internet or intranet website posting or other distribution) believed by
it to be genuine and to have been signed, sent or otherwise authenticated by the
proper Person.  The Administrative Agent also may rely upon any
statement made to it orally or by telephone and believed by it to have been made
by the proper Person, and shall not incur any liability for relying
thereon.  In determining compliance with any condition hereunder to
the making of a Loan, or the issuance of a Letter of Credit, that by its terms
must be fulfilled to the satisfaction of a Lender or the Issuing Lender, the
Administrative Agent may presume that such condition is satisfactory to such
Lender or the Issuing Lender unless the Administrative Agent shall have received
notice to the contrary from such Lender or the Issuing Lender prior to the
making of such Loan or the issuance of such Letter of Credit.  The
Administrative Agent may consult with legal counsel (who may be counsel for the
Borrower), independent accountants and other experts selected by it, and shall
not be liable for any action taken or not taken by it in accordance with the
advice of any such counsel, accountants or experts.

     

    10.5 Delegation of
Duties.

     

      The
Administrative Agent may perform any and all of its duties and exercise its
rights and powers hereunder or under any other Loan Document by or through any
one or more sub-agents appointed by the Administrative Agent.  The
Administrative Agent and any such sub-agent may perform any and all of its
duties and exercise its rights and powers by or through their respective Related
Parties.  The exculpatory provisions of this Section 10 shall apply to any such sub-agent and to the
Related Parties of the Administrative Agent and any such sub-agent, and shall
apply to their respective activities in connection with the syndication of the
credit facilities provided for herein as well as activities as Administrative
Agent.

     

    10.6 Resignation of
Administrative Agent.

     

      The
Administrative Agent may at any time give notice of its resignation to the
Lenders, the Issuing Lender and the Borrower.  Upon receipt of any
such notice of resignation, the Required Lenders shall have the right, with
approval from the Borrower (so long as no Event of Default has occurred and is
continuing), to appoint a successor, such approval not to be unreasonably
withheld or delayed.  If no such successor shall have been so
appointed by the Required Lenders and shall have accepted such appointment
within thirty (30) days after the retiring Administrative Agent gives
notice of its resignation, then the retiring Administrative Agent may on behalf
of the Lenders and the Issuing Lender, appoint a successor Administrative Agent
meeting the qualifications set forth above; provided that if the
Administrative Agent shall notify the Borrower and the Lenders that no
qualifying Person has accepted such appointment, then such resignation shall
nonetheless become effective in accordance with such notice and (i) the
retiring Administrative Agent shall be discharged from its duties and
obligations hereunder and under the other Loan Documents (except that in the
case of any collateral security held by the Administrative Agent on behalf of
the Lenders or the Issuing Lender under any of the Loan Documents, the retiring
Administrative Agent shall continue to hold such collateral security until such
time as a successor Administrative Agent is appointed) and (ii) all
payments, communications and determinations provided to be made by, to or
through the Administrative Agent shall instead be made by or to each Lender and
the Issuing Lender directly, until such time as the Required Lenders appoint a
successor Administrative Agent as provided for above in this Section 10.6.  Upon the acceptance of a successor's
appointment as Administrative Agent hereunder, such successor shall succeed to
and become vested with all of the rights, powers, privileges and duties of the
retiring (or retired) Administrative Agent, and the retiring Administrative
Agent shall be discharged from all of its duties and obligations hereunder or
under the other Loan Documents (if not already discharged therefrom as provided
above in this Section).  The fees payable by the Borrower to a
successor Administrative Agent shall be the same as those payable to its
predecessor unless otherwise agreed between the Borrower and such
successor.  After the retiring Administrative Agent's resignation
hereunder and under the other Loan Documents, the provisions of this Section 10 and Section 11.3
[Expenses; Indemnity; Damage Waiver] shall continue in effect for the benefit of
such retiring Administrative Agent, its sub-agents and their respective Related
Parties in respect of any actions taken or omitted to be taken by any of them
while the retiring Administrative Agent was acting as Administrative
Agent.

     

    If
PNC Bank resigns as Administrative Agent under this Section 10.6, PNC Bank shall also resign as an Issuing
Lender.  Upon the appointment of a successor Administrative Agent
hereunder, such successor shall (i) succeed to all of the rights, powers,
privileges and duties of PNC Bank as the retiring Issuing Lender and
Administrative Agent and PNC Bank shall be discharged from all of its respective
duties and obligations as Issuing Lender and Administrative Agent under the Loan
Documents, and (ii) issue letters of credit in substitution for the Letters of
Credit issued by PNC Bank, if any, outstanding at the time of such succession or
make other arrangement satisfactory to PNC Bank to effectively assume the
obligations of PNC Bank with respect to such Letters of Credit.

     

    10.7 Non-Reliance on
Administrative Agent and Other Lenders.

     

      Each
Lender and the Issuing Lender acknowledges that it has, independently and
without reliance upon the Administrative Agent or any other Lender or any of
their Related Parties and based on such documents and information as it has
deemed appropriate, made its own credit analysis and decision to enter into this
Agreement.  Each Lender and the Issuing Lender also acknowledges that
it will, independently and without reliance upon the Administrative Agent or any
other Lender or any of their Related Parties and based on such documents and
information as it shall from time to time deem appropriate, continue to make its
own decisions in taking or not taking action under or based upon this Agreement,
any other Loan Document or any related agreement or any document furnished
hereunder or thereunder.

     

    10.8 No Other Duties,
etc.

     

      Anything
herein to the contrary notwithstanding, none of the other Lenders listed on the
cover page hereof shall have any powers, duties or responsibilities under this
Agreement or any of the other Loan Documents, except in its capacity, as
applicable, as the Administrative Agent, a Lender or the Issuing Lender
hereunder.

     

    10.9 Administrative Agent's
Fee.

     

      The
Borrower shall pay to the Administrative Agent a nonrefundable fee (the "Administrative Agent's Fee")
under the terms of a letter (the "Administrative Agent's
Letter") between the Borrower and Administrative Agent, as amended from
time to time.

     

    10.10 Authorization to Release
Collateral and Guarantors.

     

      The
Lenders and Issuing Lenders authorize the Administrative Agent to release (i)
any Collateral consisting of assets or equity interests sold or otherwise
disposed of in a sale or other disposition or transfer permitted under this
Agreement, and (ii) any Guarantor from its obligations under the Guaranty
Agreement if the ownership interests of such Guarantor in the Borrower are sold
or otherwise disposed of or transferred to persons other than Loan Parties or
Subsidiaries of the Loan Parties in a transaction permitted under this
Agreement.

     

    10.11 No Reliance on
Administrative Agent's Customer Identification Program.

     

      Each
Lender acknowledges and agrees that neither such Lender, nor any of its
Affiliates, participants or assignees, may rely on the Administrative Agent to
carry out such Lender's, Affiliate's, participant's or assignee's customer
identification program, or other obligations required or imposed under or
pursuant to the USA Patriot Act or the regulations thereunder, including the
regulations contained in 31 CFR 103.121 (as hereafter amended or replaced, the
"CIP Regulations"), or
any other Anti-Terrorism Law, including any programs involving any of the
following items relating to or in connection with any of the Loan Parties, their
Affiliates or their agents, the Loan Documents or the transactions hereunder or
contemplated hereby: (i) any identity verification procedures,
(ii) any recordkeeping, (iii) comparisons with government lists,
(iv) customer notices or (v) other procedures required under the CIP
Regulations or such other Laws.

     

    11.           MISCELLANEOUS

     

    11.1 Modifications, Amendments or
Waivers.

     

      With
the written consent of the Required Lenders, the Administrative Agent, acting on
behalf of all the Lenders, and the Borrower, on behalf of the Loan Parties, may
from time to time enter into written agreements amending or changing any
provision of this Agreement or any other Loan Document or the rights of the
Lenders or the Loan Parties hereunder or thereunder, or may grant written
waivers or consents hereunder or thereunder.  Any such agreement,
waiver or consent made with such written consent shall be effective to bind all
the Lenders and the Loan Parties; provided, that no
such agreement, waiver or consent may be made which will:

     

    11.1.1 Increase of
Commitment.

     

      Increase
the amount of the Revolving Credit Commitment, Term Loan Commitment or Swing
Loan Commitment of any Lender hereunder without the consent of such
Lender;

     

    11.1.2 Extension of Payment;
Reduction of Principal Interest or Fees; Modification of Terms of
Payment.

     

      Whether
or not any Loans are outstanding, extend the Expiration Date or the time for
payment of principal or interest of any Loan (excluding the due date of any
mandatory prepayment of a Loan), the Commitment Fee or any other fee payable to
any Lender, or reduce the principal amount of or the rate of interest borne by
any Loan or reduce the Commitment Fee or any other fee payable to any Lender,
the Commitment Fee or any other fee payable to any Lender, without the consent
of each Lender directly affected thereby;

     

    11.1.3 Release of Collateral or
Guarantor.

     

      Except
for sales or other dispositions of assets permitted by this Agreement, release
all or substantially all of the Collateral or any Guarantor from its Obligations
under the Guaranty Agreement without the consent of all Complying Lenders;
or

     

    11.1.4 Miscellaneous.

     

      Amend
Section 5.2 [Pro Rata Treatment of Lenders],
10.3 [Exculpatory Provisions, Etc.] or 5.3 [Sharing of Payments by Lenders] or this
Section 11.1, alter any provision regarding the pro rata treatment of the
Lenders or requiring all Lenders to authorize the taking of any action or reduce
any percentage specified in the definition of Required Lenders, in each case
without the consent of all of the Complying Lenders;

     

    provided that no
agreement, waiver or consent which would modify the interests, rights or
obligations of the Administrative Agent or the Issuing Lender without the
written consent of such Administrative Agent or Issuing Lender, as applicable,
and provided,
further that, if in connection with any proposed waiver, amendment or
modification referred to in Sections 11.1.1 through
11.1.4 above, the consent of the Required Lenders
is obtained but the consent of one or more of such other Lenders whose consent
is required is not obtained (each a "Non-Consenting Lender"), then
the Borrower shall have the right to replace any such Non-Consenting Lender with
one or more replacement Lenders pursuant to Section 5.6.2 [Replacement of a Lender].

     

    11.2 No Implied Waivers;
Cumulative Remedies.

     

      No
course of dealing and no delay or failure of the Administrative Agent or any
Lender in exercising any right, power, remedy or privilege under this Agreement
or any other Loan Document shall affect any other or future exercise thereof or
operate as a waiver thereof, nor shall any single or partial exercise thereof
preclude any further exercise thereof or of any other right, power, remedy or
privilege.  The rights and remedies of the Administrative Agent and
the Lenders under this Agreement and any other Loan Documents are cumulative and
not exclusive of any rights or remedies which they would otherwise
have.

     

    11.3 Expenses; Indemnity; Damage
Waiver.

     

    11.3.1 Costs and
Expenses.

     

      The
Borrower shall pay (i) all reasonable out-of-pocket expenses incurred by
the Administrative Agent and its Affiliates (including the reasonable fees,
charges and disbursements of counsel for the Administrative Agent), and shall
pay all fees and time charges and disbursements for attorneys who may be
employees of the Administrative Agent, in connection with the syndication of the
credit facilities that have occurred on or prior to the Closing Date as provided
for herein, the preparation, negotiation, execution, delivery and administration
of this Agreement and the other Loan Documents or any amendments, modifications
or waivers of the provisions hereof or thereof (whether or not the transactions
contemplated hereby or thereby shall be consummated), (ii) all reasonable
out-of-pocket expenses incurred by the Issuing Lender in connection with the
issuance, amendment, renewal or extension of any Letter of Credit or any demand
for payment thereunder, (iii) all reasonable out-of-pocket expenses
incurred by the Administrative Agent, any Lender or the Issuing Lender
(including the fees, charges and disbursements of any counsel for the
Administrative Agent, any Lender or the Issuing Lender), and shall pay all fees
and time charges for attorneys who may be employees of the Administrative Agent,
any Lender or the Issuing Lender, in connection with the enforcement or
protection of its rights (A) in connection with this Agreement and the
other Loan Documents, including its rights under this Section, or (B) in
connection with the Loans made or Letters of Credit issued hereunder, including
all such reasonable out-of-pocket expenses incurred during any workout,
restructuring or negotiations in respect of such Loans or Letters of Credit, and
(iv) all reasonable out-of-pocket expenses of the Administrative Agent's regular
employees and agents engaged periodically to perform audits of the Loan Parties'
books, records and business properties.

     

    11.3.2 Indemnification by the
Borrower.

     

      The
Borrower shall indemnify the Administrative Agent (and any sub-agent thereof),
each Lender and the Issuing Lender, and each Related Party of any of the
foregoing Persons (each such Person being called an "Indemnitee") against, and hold
each Indemnitee harmless from, any and all losses, claims, damages, liabilities
and related expenses (including the fees, charges and disbursements of any
counsel for any Indemnitee), and shall indemnify and hold harmless each
Indemnitee from all fees and time charges and disbursements for attorneys who
may be employees of any Indemnitee, incurred by any Indemnitee or asserted
against any Indemnitee by any third party or by the Borrower or any other Loan
Party arising out of, in connection with, or as a result of (i) the
execution or delivery of this Agreement, any other Loan Document or any
agreement or instrument contemplated hereby or thereby, the performance by the
parties hereto of their respective obligations hereunder or thereunder or the
consummation of the transactions contemplated hereby or thereby, (ii) any
Loan or Letter of Credit or the use or proposed use of the proceeds therefrom
(including any refusal by the Issuing Lender to honor a demand for payment under
a Letter of Credit if the documents presented in connection with such demand do
not strictly comply with the terms of such Letter of Credit), (iii) breach
of representations, warranties or covenants of the Borrower under the Loan
Documents, or (iv) any actual or prospective claim, litigation,
investigation or proceeding relating to any of the foregoing, including any such
items or losses relating to or arising under Environmental Laws or pertaining to
environmental matters, whether based on contract, tort or any other theory,
whether brought by a third party or by the Borrower or any other Loan Party, and
regardless of whether any Indemnitee is a party thereto; provided that such
indemnity shall not, as to any Indemnitee, be available to the extent that such
losses, claims, damages, liabilities or related expenses (x) are determined
by a court of competent jurisdiction by final and nonappealable judgment to have
resulted from the gross negligence or willful misconduct of such Indemnitee or
(y) result from a claim brought by the Borrower or any other Loan Party
against an Indemnitee for breach in bad faith of such Indemnitee's obligations
hereunder or under any other Loan Document, if the Borrower or such Loan Party
has obtained a final and nonappealable judgment in its favor on such claim as
determined by a court of competent jurisdiction.

     

    11.3.3 Reimbursement by
Lenders.

     

      To the
extent that the Borrower for any reason fails to indefeasibly pay any amount
required under Sections 11.3.1 [Costs and Expenses]
or 11.3.2 [Indemnification by the Borrower] to be
paid by it to the Administrative Agent (or any sub-agent thereof), the Issuing
Lender or any Related Party of any of the foregoing, each Lender severally
agrees to pay to the Administrative Agent (or any such sub-agent), the Issuing
Lender or such Related Party, as the case may be, such Lender's Ratable Share
(determined as of the time that the applicable unreimbursed expense or indemnity
payment is sought) of such unpaid amount, provided that the
unreimbursed expense or indemnified loss, claim, damage, liability or related
expense, as the case may be, was incurred by or asserted against the
Administrative Agent (or any such sub-agent) or the Issuing Lender in its
capacity as such, or against any Related Party of any of the foregoing acting
for the Administrative Agent (or any such sub-agent) or Issuing Lender in
connection with such capacity.

     

    11.3.4 Waiver of Consequential
Damages, Etc.

     

      To the
fullest extent permitted by applicable Law, the Borrower shall not assert, and
hereby waives, any claim against any Indemnitee, on any theory of liability, for
special, indirect, consequential or punitive damages (as opposed to direct or
actual damages) arising out of, in connection with, or as a result of, this
Agreement, any other Loan Document or any agreement or instrument contemplated
hereby, the transactions contemplated hereby or thereby, any Loan or Letter of
Credit or the use of the proceeds thereof.  No Indemnitee referred to
in Section 11.3.2 [Indemnification by Borrower]
shall be liable for any damages arising from the use by unintended recipients of
any information or other materials distributed by it through telecommunications,
electronic or other information transmission systems in connection with this
Agreement or the other Loan Documents or the transactions contemplated hereby or
thereby.

     

    11.3.5 Payments.

     

      All
amounts due under this Section shall be payable not later than ten (10) days
after demand therefor.

     

    11.4 Holidays.

     

      Whenever
payment of a Loan to be made or taken hereunder shall be due on a day which is
not a Business Day such payment shall be due on the next Business Day (except as
provided in Section 4.2 [Interest Periods]) and such extension of time
shall be included in computing interest and fees, except that the Loans shall be
due on the Business Day preceding the Expiration Date if the Expiration Date is
not a Business Day.  Whenever any payment or action to be made or
taken hereunder (other than payment of the Loans) shall be stated to be due on a
day which is not a Business Day, such payment or action shall be made or taken
on the next following Business Day, and such extension of time shall not be
included in computing interest or fees, if any, in connection with such payment
or action.

     

    11.5 Notices; Effectiveness;
Electronic Communication.

     

    11.5.1 Notices
Generally.

     

      Except
in the case of notices and other communications expressly permitted to be given
by telephone (and except as provided in Section 11.5.2 [Electronic Communications]), all notices and
other communications provided for herein shall be in writing and shall be
delivered by hand or overnight courier service, mailed by certified or
registered mail or sent by telecopier (i) if to a Lender, to it at its address
set forth in its administrative questionnaire, or (ii) if to any other Person,
to it at its address set forth on Schedule
1.1(B).

     

    Notices sent by
hand or overnight courier service, or mailed by certified or registered mail,
shall be deemed to have been given when received; notices sent by telecopier
shall be deemed to have been given when sent (except that, if not given during
normal business hours for the recipient, shall be deemed to have been given at
the opening of business on the next Business Day for the
recipient).  Notices delivered through electronic communications to
the extent provided in Section 11.5.2 [Electronic
Communications], shall be effective as provided in such Section.

     

    11.5.2 Electronic
Communications.

     

      Notices
and other communications to the Lenders and the Issuing Lender hereunder may be
delivered or furnished by electronic communication (including e-mail and
Internet or intranet websites) pursuant to procedures approved by the
Administrative Agent; provided that the
foregoing shall not apply to notices to any Lender or the Issuing Lender if such
Lender or the Issuing Lender, as applicable, has notified the Administrative
Agent that it is incapable of receiving notices under such Article by electronic
communication.  The Administrative Agent or the Borrower may, in its
discretion, agree to accept notices and other communications to it hereunder by
electronic communications pursuant to procedures approved by it; provided that
approval of such procedures may be limited to particular notices or
communications.  Unless the Administrative Agent otherwise prescribes,
(i) notices and other communications sent to an e-mail address shall be
deemed received upon the sender's receipt of an acknowledgement from the
intended recipient (such as by the "return receipt requested" function, as
available, return e-mail or other written acknowledgement); provided that if such
notice or other communication is not sent during the normal business hours of
the recipient, such notice or communication shall be deemed to have been sent at
the opening of business on the next Business Day for the recipient, and
(ii) notices or communications posted to an Internet or intranet website
shall be deemed received upon the deemed receipt by the intended recipient at
its e-mail address as described in the foregoing clause (i) of notification
that such notice or communication is available and identifying the website
address therefor.

     

    11.5.3 Change of Address,
Etc.

     

      Any
party hereto may change its address, e-mail address or telecopier number for
notices and other communications hereunder by notice to the other parties
hereto.

     

    11.6 Severability.

     

      The
provisions of this Agreement are intended to be severable.  If any
provision of this Agreement shall be held invalid or unenforceable in whole or
in part in any jurisdiction, such provision shall, as to such jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without in any
manner affecting the validity or enforceability thereof in any other
jurisdiction or the remaining provisions hereof in any
jurisdiction.

     

    11.7 Duration;
Survival.

     

      All
representations and warranties of the Loan Parties contained herein or made in
connection herewith shall survive the execution and delivery of this Agreement,
the completion of the transactions hereunder and Payment In Full.  All
covenants and agreements of the Borrower contained herein relating to the
payment of principal, interest, premiums, additional compensation or expenses
and indemnification, including those set forth in the Notes, Section 5
[Payments] and Section 11.3 [Expenses; Indemnity; Damage Waiver], shall survive
Payment in Full.  All other covenants and agreements of the Loan
Parties shall continue in full force and effect from and after the date hereof
and until Payment in Full.

     

    11.8 Successors and
Assigns.

     

    11.8.1 Successors and Assigns
Generally.

     

      The
provisions of this Agreement shall be binding upon, and inure to the benefit of,
the parties hereto and their respective successors and assigns permitted hereby,
except that neither the Borrower nor any other Loan Party may assign or
otherwise transfer any of its rights or obligations hereunder without the prior
written consent of the Administrative Agent and each Lender and no Lender may
assign or otherwise transfer any of its rights or obligations hereunder except:
(i) to an assignee in accordance with the provisions of Section 11.8.2 [Assignments by Lenders], (ii) by way of
participation in accordance with the provisions of Section 11.8.4 [Participations], or (iii) by way of
pledge or assignment of a security interest subject to the restrictions of
Section 11.8.6 [Certain Pledges; Successors and
Assigns Generally] (and any other attempted assignment or transfer by any party
hereto shall be null and void).  Nothing in this Agreement, expressed
or implied, shall be construed to confer upon any Person (other than the parties
hereto, their respective successors and assigns permitted hereby, Participants
to the extent provided in Section 11.8.4
[Participations] and, to the extent expressly contemplated hereby, the Related
Parties of each of the Administrative Agent and the Lenders) any legal or
equitable right, remedy or claim under or by reason of this
Agreement.

     

    11.8.2 Assignments by
Lenders.

     

      Any
Lender may at any time assign to one or more assignees all or a portion of its
rights and obligations under this Agreement (including all or a portion of its
Commitment and the Loans at the time owing to it); provided that any
such assignment shall be subject to the following conditions:

     

    (i) Minimum
Amounts.

     

    (A) in the case of an
assignment of the entire remaining amount of the assigning Lender's Commitment
and the Loans at the time owing to it or in the case of an assignment to a
Lender, an Affiliate of a Lender or an Approved Fund, no minimum amount need be
assigned; and

     

    (B) in any case not
described in clause (i)(A) of this Section 11.8.2,
the aggregate amount of the Commitment (which for this purpose includes Loans
outstanding thereunder) or, if the applicable Commitment is not then in effect,
the principal outstanding balance of the Loans of the assigning Lender subject
to each such assignment (determined as of the date the Assignment and Assumption
Agreement with respect to such assignment is delivered to the Administrative
Agent or, if "Trade Date" is specified in the Assignment and Assumption
Agreement, as of the Trade Date) shall not be less than $5,000,000, in the case
of any assignment in respect of the Revolving Credit Commitment of the assigning
Lender, or $5,000,000, in the case of the Term Loan of such assigning Lender,
unless each of the Administrative Agent and, so long as no Event of Default has
occurred and is continuing, the Borrower otherwise consents (each such consent
not to be unreasonably withheld or delayed).

     

    (ii) Proportionate
Amounts.  Each partial assignment shall be made as an
assignment of a proportionate part of all the assigning Lender's rights and
obligations under this Agreement with respect to the Loan or the Commitment
assigned.

     

    (iii) Required
Consents.  No consent shall be required for any assignment
except for the consent of the Administrative Agent (which shall not be
unreasonably withheld or delayed) and:

     

    (A) the consent of the
Borrower (such consent not to be unreasonably withheld or delayed) shall be
required unless (x) an Event of Default has occurred and is continuing at the
time of such assignment or (y) such assignment is to a Lender, an Affiliate of a
Lender or an Approved Fund;

     

    (B) the consent of the
Issuing Lender (such consent not to be unreasonably withheld or delayed) shall
be required for any assignment that increases the obligation of the assignee to
participate in exposure under one or more Letters of Credit (whether or not then
outstanding).

     

    (iv) Assignment and Assumption
Agreement.  The parties to each assignment shall execute and
deliver to the Administrative Agent an Assignment and Assumption Agreement,
together with a processing and recordation fee of $3,500, and the assignee, if
it is not a Lender, shall deliver to the Administrative Agent an administrative
questionnaire provided by the Administrative Agent.

     

    (v) No Assignment to
Borrower.  No such assignment shall be made to the Borrower or
any of the Borrower's Affiliates or Subsidiaries.

     

    (vi) No Assignment to Natural
Persons.  No such assignment shall be made to a natural
person.  Subject to acceptance and recording thereof by the
Administrative Agent pursuant to Section 11.8.3
[Register], from and after the effective date specified in each Assignment and
Assumption Agreement, the assignee thereunder shall be a party to this Agreement
and, to the extent of the interest assigned by such Assignment and Assumption
Agreement, have the rights and obligations of a Lender under this Agreement, and
the assigning Lender thereunder shall, to the extent of the interest assigned by
such Assignment and Assumption Agreement, be released from its obligations under
this Agreement (and, in the case of an Assignment and Assumption Agreement
covering all of the assigning Lender's rights and obligations under this
Agreement, such Lender shall cease to be a party hereto) but shall continue to
be entitled to the benefits of Sections 4.4
[LIBOR Rate Unascertainable; Illegality; Increased Costs; Deposits Not
Available], 5.8 [Increased Costs], and 11.3 [Expenses, Indemnity; Damage Waiver] with respect to facts
and circumstances occurring prior to the effective date of such
assignment.  Any assignment or transfer by a Lender of rights or
obligations under this Agreement that does not comply with this Section 11.8.2 shall be treated for purposes of this Agreement
as a sale by such Lender of a participation in such rights and obligations in
accordance with Section 11.8.4
[Participations].

     

    11.8.3 Register.

     

      The
Administrative Agent, acting solely for this purpose as an agent of the
Borrower, shall maintain a record of the names and addresses of the Lenders, and
the Commitments of, and principal amounts of the Loans owing to, each Lender
pursuant to the terms hereof from time to time.  Such register shall
be conclusive, and the Borrower, the Administrative Agent and the Lenders may
treat each Person whose name is in such register pursuant to the terms hereof as
a Lender hereunder for all purposes of this Agreement, notwithstanding notice to
the contrary.  Such register shall be available for inspection by the
Borrower and any Lender, at any reasonable time and from time to time upon
reasonable prior notice.

     

    11.8.4 Participations.

     

      Any
Lender may at any time, without the consent of, or notice to, the Borrower or
the Administrative Agent, sell participations to any Person (other than a
natural person or the Borrower or any of the Borrower's Affiliates or
Subsidiaries) (each, a "Participant") in all or a
portion of such Lender's rights and/or obligations under this Agreement
(including all or a portion of its Commitment and/or the Loans owing to it);
provided that
(i) such Lender's obligations under this Agreement shall remain unchanged,
(ii) such Lender shall remain solely responsible to the other parties
hereto for the performance of such obligations and (iii) the Borrower, the
Administrative Agent and the Lenders, Issuing Lender shall continue to deal
solely and directly with such Lender in connection with such Lender's rights and
obligations under this Agreement.

     

    Any agreement or
instrument pursuant to which a Lender sells such a participation shall provide
that such Lender shall retain the sole right to enforce this Agreement and to
approve any amendment, modification or waiver of any provision of this
Agreement; provided that such
agreement or instrument may provide that such Lender will not, without the
consent of the Participant, agree to any amendment, modification or waiver with
respect to Sections 11.1.1 [Increase of Commitment, Etc.], 11.1.2
[Extension of Payment, Etc.], or 11.1.3 [Release of Collateral or
Guarantor]).  Subject to Section 11.8.5
[Limitations upon Participant Rights Successors and Assigns Generally], the
Borrower agrees that each Participant shall be entitled to the benefits of
Sections 4.4 [LIBOR Rate Unascertainable;
Illegality; Increased Costs; Deposits Not Available] and 5.8 [Increased Costs] to the same extent as
if it were a Lender and had acquired its interest by assignment pursuant to
Section 11.8.2 [Assignments by
Lenders].  To the extent permitted by Law, each Participant also shall
be entitled to the benefits of Section 9.2.3
[Setoff] as though
it were a Lender; provided such
Participant agrees to be subject to Section 5.3
[Sharing of Payments by Lenders] as though it were a
Lender.

     

    11.8.5 Limitations upon Participant
Rights Successors and Assigns Generally.

     

      A
Participant shall not be entitled to receive any greater payment under Sections
5.8 [Increased Costs], 5.9 [Taxes] or 11.3 [
Expenses; Indemnity; Damage Waiver] than the applicable
Lender would have been entitled to receive with respect to the participation
sold to such Participant, unless the sale of the participation to such
Participant is made with the Borrower's prior written consent.  A
Participant that would be a Foreign Lender if it were a Lender shall not be
entitled to the benefits of Section 5.9
[Taxes] unless the
Borrower is notified of the participation sold to such Participant and such
Participant agrees, for the benefit of the Borrower, to comply with Section 5.9.5 [Status of Lenders] as though it were a
Lender.

     

    11.8.6 Certain Pledges; Successors
and Assigns Generally.

     

      Any
Lender may at any time pledge or assign a security interest in all or any
portion of its rights under this Agreement to secure obligations of such Lender,
including any pledge or assignment to secure obligations to a Federal Reserve
Bank; provided
that no such pledge or assignment shall release such Lender from any of its
obligations hereunder or substitute any such pledgee or assignee for such Lender
as a party hereto.

     

    11.9 Confidentiality.

     

    11.9.1 General.

     

      Each of
the Administrative Agent, the Lenders and the Issuing Lender agrees to maintain
the confidentiality of the Information, except that Information may be disclosed
(i) to its Affiliates and to its and its Affiliates' respective partners,
directors, officers, employees, agents, advisors and other representatives (it
being understood that the Persons to whom such disclosure is made will be
informed of the confidential nature of such Information and instructed to keep
such Information confidential), (ii) to the extent requested by any
regulatory authority purporting to have jurisdiction over it (including any
self-regulatory authority, such as the National Association of Insurance
Commissioners), (iii) to the extent required by applicable Laws or
regulations or by any subpoena or similar legal process, (iv) to any other
party hereto, (v) in connection with the exercise of any remedies hereunder
or under any other Loan Document or any action or proceeding relating to this
Agreement or any other Loan Document or the enforcement of rights hereunder or
thereunder, (vi) subject to an agreement containing provisions
substantially the same as those of this Section, to (A) any assignee of or
Participant in, or any prospective assignee of or Participant in, any of its
rights or obligations under this Agreement or (B) any actual or prospective
counterparty (or its advisors) to any swap or derivative transaction relating to
the Borrower and its obligations, (vii) with the consent of the Borrower or
(viii) to the extent such Information (Y) becomes publicly available
other than as a result of a breach of this Section or (Z) becomes available
to the Administrative Agent, any Lender, the Issuing Lender or any of their
respective Affiliates on a nonconfidential basis from a source other than the
Borrower or the other Loan Parties.  Any Person required to maintain
the confidentiality of Information as provided in this Section shall be
considered to have complied with its obligation to do so if such Person has
exercised the same degree of care to maintain the confidentiality of such
Information as such Person would accord to its own confidential
information.

     

    11.9.2 Sharing Information With
Affiliates of the Lenders.

     

      Each
Loan Party acknowledges that from time to time financial advisory, investment
banking and other services may be offered or provided to the Borrower or one or
more of its Affiliates (in connection with this Agreement or otherwise) by any
Lender or by one or more Subsidiaries or Affiliates of such Lender and each of
the Loan Parties hereby authorizes each Lender to share any information
delivered to such Lender by such Loan Party and its Subsidiaries pursuant to
this Agreement to any such Subsidiary or Affiliate subject to the provisions of
Section 11.9.1 [General].

     

    11.10 Counterparts; Integration;
Effectiveness.

     

    11.10.1 Counterparts; Integration;
Effectiveness.

     

      This
Agreement may be executed in counterparts (and by different parties hereto in
different counterparts), each of which shall constitute an original, but all of
which when taken together shall constitute a single contract.  This
Agreement and the other Loan Documents, and any separate letter agreements with
respect to fees payable to the Administrative Agent, constitute the entire
contract among the parties relating to the subject matter hereof and supersede
any and all previous agreements and understandings, oral or written, relating to
the subject matter hereof including any prior confidentiality agreements and
commitments.  Except as provided in Section 7 [Conditions Of Lending And Issuance Of Letters Of
Credit], this Agreement shall become effective when it shall have been executed
by the Administrative Agent and when the Administrative Agent shall have
received counterparts hereof that, when taken together, bear the signatures of
each of the other parties hereto.  Delivery of an executed counterpart
of a signature page of this Agreement by telecopy or e-mail shall be effective
as delivery of a manually executed counterpart of this Agreement.

     

    11.11 CHOICE OF LAW; SUBMISSION TO
JURISDICTION; WAIVER OF VENUE; SERVICE OF PROCESS; WAIVER OF JURY
TRIAL.

     

    11.11.1 Governing
Law.

     

      This
Agreement shall be deemed to be a contract under the Laws of the Commonwealth of
Pennsylvania without regard to its conflict of laws principles.  Each
standby Letter of Credit issued under this Agreement shall be subject either to
the rules of the Uniform Customs and Practice for Documentary Credits, as most
recently published by the International Chamber of Commerce (the "ICC") at the time of issuance
("UCP") or the rules of
the International Standby Practices (ICC Publication Number 590) ("ISP98"), as determined by the
Issuing Lender, and each trade Letter of Credit shall be subject to UCP, and in
each case to the extent not inconsistent therewith, the Laws of the Commonwealth
of Pennsylvania without regard to is conflict of laws principles.

     

    11.11.2 SUBMISSION TO
JURISDICTION.

     

      THE
BORROWER AND EACH OTHER LOAN PARTY IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR
ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF THE COURTS OF THE
COMMONWEALTH OF PENNSYLVANIA SITTING IN ALLEGHENY COUNTY AND OF THE UNITED
STATES DISTRICT COURT OF THE WESTERN DISTRICT OF PENNSYLVANIA, AND ANY APPELLATE
COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING
TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR FOR RECOGNITION OR ENFORCEMENT
OF ANY JUDGMENT, AND EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY
AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD
AND DETERMINED IN SUCH PENNSYLVANIA STATE COURT OR, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, IN SUCH FEDERAL COURT.  EACH OF THE
PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING
SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE
JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.  NOTHING IN THIS
AGREEMENT OR IN ANY OTHER LOAN DOCUMENT SHALL AFFECT ANY RIGHT THAT THE
ADMINISTRATIVE AGENT, ANY LENDER OR THE ISSUING LENDER MAY OTHERWISE HAVE TO
BRING ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT AGAINST THE BORROWER OR ANY OTHER LOAN PARTY OR ITS PROPERTIES IN THE
COURTS OF ANY JURISDICTION.

     

    11.11.3 WAIVER OF
VENUE.

     

      THE
BORROWER AND EACH OTHER LOAN PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY ACTION OR PROCEEDING ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT IN ANY COURT REFERRED
TO IN THIS SECTION 11.11.  EACH OF THE
PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH
ACTION OR PROCEEDING IN ANY SUCH COURT AND AGREES NOT ASSERT ANY SUCH
DEFENSE.

     

    11.11.4 WAIVER OF JURY
TRIAL.

     

      EACH
PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING
DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER
LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED
ON CONTRACT, TORT OR ANY OTHER THEORY).  EACH PARTY HERETO
(A) CERTIFIES THAT NO REPRESENTATIVE, ADMINISTRATIVE AGENT OR ATTORNEY OF
ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON
WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND
(B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO
ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS,
THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

     

    11.12 USA Patriot Act
Notice.

     

      Each
Lender that is subject to the USA Patriot Act and the Administrative Agent (for
itself and not on behalf of any Lender) hereby notifies Loan Parties that
pursuant to the requirements of the USA Patriot Act, it is required to obtain,
verify and record information that identifies the Loan Parties, which
information includes the name and address of Loan Parties and other information
that will allow such Lender or Administrative Agent, as applicable, to identify
the Loan Parties in accordance with the USA Patriot Act.

     

    


    [SIGNATURE
PAGE FOLLOWS]

     

    



    
      
        
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    [SIGNATURE
PAGE 1 OF 2 TO CREDIT AGREEMENT]

     

    


    IN
WITNESS WHEREOF, the parties hereto, by their officers thereunto duly
authorized, have executed this Agreement as of the day and year first above
written.

     

    BORROWER

     

    SUNRISE
COAL, LLC

     

    By:                                                                           

     

    Name:                                                                           

     

    Title:                                                                           

     

    


     

    GUARANTOR:

     

    HALLADOR
PETROLEUM COMPANY

     

    By:                                                                           

     

    Name:                                                                           

     

    Title:                                                                           

     


    
      
        
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    [SIGNATURE
PAGE 2 OF 2 TO CREDIT AGREEMENT]

     

    


    PNC BANK, NATIONAL
ASSOCIATION, individually and as Administrative Agent

     

    By:                                                                           

     

    Name:  Richard
C. Munsick

    Title:  Senior
Vice President

    


    


    UNION BANK OF CALIFORNIA,
N.A., individually and as Syndication Agent

     

    By:                                                                           

     

    Name:

    Title:

    


    


    OLD
NATIONAL BANK

     

    By:                                                                           

     

    Name:

    Title:

    


    


    FIRST
FINANCIAL BANK, NA

     

    By:                                                                           

     

    Name:

    Title:

    


    


    FIRST
COMMONWEALTH BANK

     

    By:                                                                           

     

    Name:

    Title:

    



    
      
        
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    SCHEDULE 1.1(A)

     

    PRICING
GRID--

    VARIABLE
PRICING AND FEES BASED ON LEVERAGE RATIO

     

    (PRICING
EXPRESSED IN BASIS POINTS)

     

    
      	
               

               

              Level

            	
               

               

              Leverage Ratio

            	
               

              Letter
      of Credit Fee

            	
              Revolving
      Credit Base Rate
    Spread

            	
              Term
      Loan Base Rate Spread

            	
              Revolving
      Credit LIBOR Rate
    Spread

            	
              Term
      Loan LIBOR Rate Spread

            
	
              I

            	
              Greater
      than or equal to 3.0 to 1.00

            	
              350

            	
              200

            	
              200

            	
              350

            	
              350

            
	
              II

            	
              Greater
      than or equal to 2.0 to 1.0 but less than 3.0 to 1.0

            	
              300

            	
              175

            	
              175

            	
              300

            	
              300

            
	
              III

            	
              Less
      than 2.0 to 1.0

            	
              250

            	
              150

            	
              150

            	
              250

            	
              250

            


    

    


    For purposes of
determining the Applicable Margin, the Applicable Commitment Fee Rate and the
Applicable Letter of Credit Fee Rate:

     

    (a)           Until
March 31, 2009, the Applicable Margin, Applicable Commitment Fee Rate and the
Applicable Letter of Credit Rate shall be that associated with Level I of the
pricing grid.

     

    (b)           The
Applicable Margin, the Applicable Commitment Fee Rate and the Applicable Letter
of Credit Fee Rate shall be recomputed as of the end of each fiscal quarter
ending on or after March 31, 2009 based on the Leverage Ratio as of such quarter
end.  Any increase or decrease in the Applicable Margin, the
Applicable Commitment Fee Rate or the Applicable Letter of Credit Fee Rate
computed as of a quarter end shall be effective on the date on which the
Compliance Certificate evidencing such computation is due to be delivered under
Section 8.3.3 [Certificate of
Borrower].

     

    (c)           If,
as a result of any restatement of or other adjustment to the financial
statements of the Borrower or for any other reason, the Borrower or the Lenders
determine that (i) the Leverage Ratio as calculated by the Borrower as of
any applicable date was inaccurate and (ii) a proper calculation of the
Leverage Ratio would have resulted in higher pricing for such period, the
Borrower shall immediately and retroactively be obligated to pay to the
Administrative Agent for the account of the applicable Lenders, promptly on
demand by the Administrative Agent (or, after the occurrence of an actual or
deemed entry of an order for relief with respect to the Borrower under the
Bankruptcy Code of the United States, automatically and without further action
by the Administrative Agent, any Lender or the Issuing Lender), an amount equal
to the excess of the amount of interest and fees that should have been paid for
such period over the amount of interest and fees actually paid for such
period.  This paragraph shall not limit the rights of the
Administrative Agent, any Lender or the Issuing Lender, as the case may be,
under Section 2.9 [Letter of Credit Subfacility] or 4.3 [Interest After Default] or 9 [Default].

     

    



    
      
        
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    SCHEDULE 1.1(B)

     

    COMMITMENTS
OF LENDERS AND ADDRESSES FOR NOTICES

     

    Part 1 - Commitments of
Lenders and Addresses for Notices to Lenders

     

    
      	
               

               

               

              Lender

            	
              Amount
      of Commitment for Revolving Credit
      Loans

            	
               

              Amount
      of Commitment for Term Loans

            	
               

               

               

              Commitment

            	
               

               

               

              Ratable Share

            
	
              Name:               PNC
      Bank,

                     
      National Association

              Address:            One
      PNC Plaza

                      
      249 Fifth Avenue

                      
      Pittsburgh, PA 15222

               

              Attention:            Richard
      C. Munsick

              Telephone:          (412)
      762-4299

              Telecopy:            (412)
      762-6484

              Email:                
      richard.munsick@pncbank.com

            	
              $8,142,857.15

            	
              $10,857,142.85

            	
              $19,000,000

            	
              27.142857143%

            
	
              Name:               
      Union Bank of

                      
      California, N.A.

              Address:             Energy
      Capital Services

                      
      15th Floor 

                      
      445 S. Figueroa Street

                      
      Los Angeles, CA 90071

               

              Attention:          
      Richard Reeves

              Telephone:        
      (213) 236-5821

              Telecopy:          
      (213) 236-4096

              Email:               
      Richard.Reeves@uboc.com

            	
              $7,285,714.29

            	
              $9,714,285.71

            	
              $17,000,000

            	
              24.285714286%

            
	
              Name:               Old
      National Bank

              Address:            2
      West Main Street

                      
      Post Office Box 417

                      
      Danville, Illinois  61832

               

              Attention:            Dan
      Laughner

              Telephone:          (217)-477-5344

              Telecopy:            (217)-477-5896

              Email:               
      dan.laughner@oldnational.com

            	
              $6,214,285.71

            	
              $8,285,714.29

            	
              $14,500,000

            	
              20.714285714%

            
	
              Name:               
      First Financial Bank, NA

              Address:          
       One First Financial

                      
      Plaza-CLD

                      
      Terre Haute, Indiana 47807

               

              Attention:          
      C. Stephen Jones

              Telephone:        
      (812)-238-6774

              Telecopy:          
      (812)-242-9741

              Email:             
       SJones@first-online.com

            	
              $6,214,285.71

            	
              $8,285,714.29

            	
              $14,500,000

            	
              20.714285714%

            
	
              Name:               First
      Commonwealth Bank

              Address:           437
      Grant Street, Suite 1600

                     
      Pittsburgh, PA  15219

               

              Attention:         C.
      Forrest Tefft

              Telephone:       (412)
      690-2202

              Telecopy:         (412)
      690-2206

              Email:           
       cftefft@fcbanking.com

            	
              $2,142,857.14

            	
              $2,857,142.86

            	
              $5,000,000

            	
              7.142857143%

            
	
              Total

            	
              $30,000,000

            	
              $40,000,000

            	
              $70,000,000

            	
              100%

            


    

    



    
      
        
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    SCHEDULE 1.1(B)

    


    COMMITMENTS
OF LENDERS AND ADDRESSES FOR NOTICES

     

    Part
2 - Addresses for Notices to Borrower and Guarantors:

     

    Name:                      PNC
Bank, National Association

    Address:                  One
PNC Plaza

        249 Fifth
Avenue

        Pittsburgh,
Pennsylvania 15222-2707

    Attention:                  Richard
C. Munsick

    Telephone:               (412)
762-4299

    Telecopy:                  (412)
762-2571

    


    Name:                      Agency
Services

    Address:                  PNC
Firstside Center, 4th Floor

        500 First
Avenue

        Pittsburgh,
Pennsylvania  15219

    Attention:                  Rini
Davis

    Telephone:               (412)
762-7638

    Telecopy:                 (412)
762-8672

    


    


    


    BORROWER:

     

    Name:                      Sunrise
Coal, LLC

    Address:                  1183
East Canvasback Drive

        Terre Haute,
Indiana  47802

    Attention:                  Brent
Bilsland

    Telephone:               (812)
299-2800

    Telecopy:                  (812)
299-2810

    


    


    


    GUARANTOR:

     

    Name:                      Hallador
Petroleum Company

    Address:                  1660
Lincoln Street - Suite 2700    

        Denver,
Colorado  80264

    Attention:                  Victor
Stabio

    Telephone:               (303)
839-5506

    Telecopy:                  (303)
832-3013

    



    
      
        
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    SCHEDULE 8.1.3

     

    INSURANCE
REQUIREMENTS RELATING TO THE COLLATERAL

     

    COVENANTS:

     

    At
the request of the Administrative Agent, the Loan Parties shall deliver to the
Administrative Agent and each of the Lenders (x) on the Closing Date and
annually thereafter an original certificate of insurance signed by the Loan
Parties' independent insurance broker describing and certifying as to the
existence of the insurance on the Collateral required to be maintained by this
Agreement and the other Loan Documents, together with a copy of the endorsement
described in the next sentence attached to such certificate and (y) from
time to time a summary schedule indicating all insurance then in force with
respect to each of the Loan Parties (other than Hallador).  Such
policies of insurance shall contain special endorsements, in form and substance
acceptable to the Administrative Agent, which shall include the provisions set
forth below.  The applicable Loan Parties shall notify the
Administrative Agent promptly of any occurrence causing a material loss or
decline in value of the Collateral and the estimated (or actual, if available)
amount of such loss or decline.  Any monies received by the
Administrative Agent constituting insurance proceeds or condemnation proceeds
(pursuant to the Mortgage) may, at the option of the Administrative Agent,
(i) be applied by the Administrative Agent to the payment of the Loans in
such manner as the Administrative Agent may reasonably determine, or
(ii) be disbursed to the applicable Loan Parties on such terms as are
deemed appropriate by the Administrative Agent for the repair, restoration
and/or replacement of property in respect of which such proceeds were
received.

     

    


    ENDORSEMENT:

     

    (i)           specify
the Administrative Agent as an additional insured, mortgagee and lender loss
payee as its interests may appear, with the understanding that any obligation
imposed upon the insured (including the liability to pay premiums) shall be the
sole obligation of the applicable Loan Parties and not that of the
insured,

     

    (ii)           provide
that the interest of the Lenders shall be insured regardless of any breach or
violation by the applicable Loan Parties of any warranties, declarations or
conditions contained in such policies or any action or inaction of the
applicable Loan Parties or others insured under such policies,

     

    (iii)          provide
a waiver of any right of the insurers to set off or counterclaim or any other
deduction, whether by attachment or otherwise,

     

    (iv)          provide
that any and all rights of subrogation which the insurers may have or acquire
shall be, at all times and in all respects, junior and subordinate to the prior
payment in full of the Indebtedness hereunder and that no insurer shall exercise
or assert any right of subrogation until such time as the Indebtedness hereunder
has been paid in full and the Commitments have terminated,

     

    (v)           provide,
except in the case of public liability insurance and workmen's compensation
insurance, that all insurance proceeds for losses of less than $5,000,000 shall
be adjusted with and payable to the applicable Loan Parties and that all
insurance proceeds for losses of $5,000,000 or more shall be adjusted with and
payable to the Administrative Agent,

     

    (vi)          include
effective waivers by the insurer of all claims for insurance premiums against
the Administrative Agent,

     

    (vii)         provide
that no cancellation of such policies for any reason (including non-payment of
premium) nor any change therein shall be effective until at least thirty (30)
days after receipt by the Administrative Agent of written notice of such
cancellation or change,

     

    (viii)        be
primary without right of contribution of any other insurance carried by or on
behalf of any additional insureds with respect to their respective interests in
the Collateral, and

     

    (ix)          provide
that inasmuch as the policy covers more than one insured, all terms, conditions,
insuring agreements and endorsements (except limits of liability) shall operate
as if there were a separate policy covering each insured.

     

    



    
      
        
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