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Exhibit 10.1
 
THIRD AMENDMENT TO TERM CREDIT AGREEMENT
 
THIS THIRD AMENDMENT TO TERM CREDIT AGREEMENT (this “Agreement”), is made and
entered into as of May 5, 2008 (the “Effective Date”), by and among James River
Coal Company, a corporation organized under the laws of Virginia (“JRCC”), and
certain of JRCC’s Subsidiaries identified on the signature pages hereof, as
borrowers (such Subsidiaries, together with JRCC, are referred to hereinafter
each individually as a “Borrower”, and collectively, jointly and severally, as
the “Borrowers”), and the other credit parties hereto, identified on the
signature pages hereof as Guarantors (together, the Borrowers and Guarantors,
the “Credit Parties”), the lenders party hereto from time to time (the
“Lenders”), Morgan Stanley Senior Funding, Inc. (“MS”), a corporation formed
under the laws of Delaware, as administrative agent for the Lenders (in such
capacity, together with its successors and assigns, if any, the “Administrative
Agent”) and as sole-bookrunner and lead arranger (in such capacity, the “Lead
Arranger”), and Morgan Stanley & Co. Incorporated, as collateral agent for the
Lenders (in such capacity, together with its successors and assigns, if any, the
“Collateral Agent”).

W I T N E S S E T H:
 
WHEREAS, the Borrowers, the other Credit Parties signatory thereto, the Lenders
and L/C Issuers party thereto, and the Administrative Agent are parties to that
certain Term Credit Agreement, dated as of February 26, 2007 (as amended,
restated, supplemented and revised from time to time, the “Credit Agreement”),
pursuant to which the Lenders have committed to make certain loans and other
extensions of credit to the Borrowers upon the terms and conditions set forth
therein; and
 
WHEREAS, the Borrowers have requested that the Lenders make certain changes to
the Credit Agreement and that the Lenders consent to certain actions of the
Borrowers; and
 
WHEREAS, the Lenders are willing, upon and subject to certain conditions, to
amend the Credit Agreement in certain respects, all in accordance with and
subject to the terms and conditions set forth herein.
 
NOW, THEREFORE, in consideration of the premises, the covenants and agreements
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto do hereby agree
that capitalized terms used herein and not otherwise defined herein shall have
the meanings given to such terms in the Credit Agreement and as follows:
 

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1.            Waiver. The Administrative Agent and the undersigned Lenders,
subject to the terms and conditions of this Agreement, including without
limitation the conditions to effectiveness specified in Section 7 below, hereby
waive any Default or Event of Default solely occurring by reason of the
Borrower’s failure to comply with (a) the Minimum Consolidated EBITDA covenant
set forth in Section 10.01 solely for the period ending March 31, 2008, and (b)
the Leverage Ratio covenant set forth in Section 10.02, solely for the period
ending March 31, 2008.
 
2.            Amendments to the Credit Agreement.
 
(a)           Section 1.01 of the Credit Agreement, Definitions, is hereby
amended by adding the following definitions in the appropriate alphabetical
order:
 

                “Equity Issuance” means the issuance of any Equity Interest by a
Credit Party.

            “Equity Repayment” shall have the meaning ascribed to such term in
Section 3.02(b)(ii).
 
        “Senior Notes” means the 9.375 Senior Notes Due 2012 issued pursuant to
the Indenture.
 
        “Third Amendment Date” means the effective date of the Third Amendment
to Term Credit Agreement dated as of May 5, 2008.
 
    “Third Amendment Fee” means, with respect to any Lender, three percentage
points (3%) times an amount equal to the sum of (a) such Lender's Pro Rata Share
of the Term Loan Obligations plus (b) such Lender's Pro Rata Share of the Term
Letter of Credit Commitment.
 
(b)           Section 1.01 of the Credit Agreement, Definitions, is hereby
amended by deleting the definitions of “Commitment Fee”, “Consolidated EBITDA”
and “Leverage Ratio” in their entirety and substituting in lieu thereof the
following:
 
"Applicable Margin” means, four and a half percentage points (4.50%) in the case
of Base Rate Loans and five and a half percentage points (5.50%) in the case of
LIBOR Rate Loans.
 
“Applicable Payment Fee” means (a) on or prior to the 2nd anniversary of the
Third Amendment Date, three percentage points, (b) on or prior to the 3rd
anniversary of the Third Amendment Date, two percentage points, and (c) after
the 3rd anniversary of the Third Amendment Date zero percentage points, in each,
case, times the amount of the Term Loan B Loans being paid for any reason other
than (i) payments from Excess Cash Flow under Section 3.02(d) and (ii) payments
from Net Casualty/Condemnation Proceeds under Section 3.02(a).
 
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“Applicable Reduction Fee” means (a) on or prior to the 2nd anniversary of the
Third Amendment Date, three percentage points, (b) on or prior to the 3rd
anniversary of the Third Amendment Date, two percentage points, and (c) after
the 3rd anniversary of the Third Amendment Date zero percentage points, in each
case times the amount of the Term Letter of Credit Commitment being reduced for
any reason other than (i) reductions due to mandatory payments from Excess Cash
Flow under Section 3.02(d) or (ii) reductions due to mandatory payments from Net
Casualty/Condemnation Proceeds under Section 3.02(a).
 
“Commitment Fee” shall mean a fee on the amount of the Term Letter of Credit
Obligations payable on each Interest Payment Date in cash in an amount equal to
the Term Letter of Credit Obligations times (a) four percentage points (4.00%)
per annum from the Closing Date through the effective date of the Second
Amendment; (b) four and three fourths percentage points per annum from the
effective date of the Second Amendment through the effective date of the Third
Amendment; and (c) five and a half percentage points (5.50%)  per annum from and
after the effective date of the Third Amendment.”
 
“Consolidated EBITDA” means, with respect to any Person for any period, the
consolidated Net Income of such Person for such period plus, without
duplication, the sum of the following amounts of such Person for such period to
the extent deducted in the determination of consolidated Net Income of such
Person for such period:  (a) Net Interest Expense and all fees and charges in
connection with the Agreement, the Revolving Credit Agreement and the Prior
Credit Agreement, (b) provisions for federal, state, local and foreign income,
value added and similar Taxes, (c) depreciation expense, (d) amortization
expense, (e) non-cash extraordinary, unusual or non-recurring losses (determined
on an after tax basis), (f) fees due and payable to Wachovia Bank, N.A. in
connection with cash management services for deposit accounts maintained at
Wachovia Bank, N.A. in an aggregate amount not to exceed $300,000 in any fiscal
year, and (g) non-cash expenses from the granting of stock options and
restricted stock grants minus, the amount of non-cash extraordinary, unusual or
non-recurring gains (determined on an after tax basis) of such Person for such
period to the extent added in the determination of consolidated Net Income of
such Person for such period.  For the avoidance of doubt, the calculation of
Consolidated EBITDA shall exclude, (i) any non-cash prepaid asset write-off
related to KRP in the amount of $1,800,000 (one million eight hundred thousand
dollars) for the Fiscal Year ending December 31, 2008.
 
    “Leverage Ratio” means, as of any date of determination (a) the amount of
Senior Funded Indebtedness as of such date, divided by (b) the amount of
Consolidated EBITDA of the Borrowers and their Subsidiaries for the twelve (12)
month period most recently ended prior to that date; provided that,
notwithstanding anything contained herein to the contrary, for purposes of
calculating the Leverage Ratio for the fiscal quarter ending as of (i) June 30,
2008, the amount of Consolidated EBITDA required in clause (b) of this
definition shall be determined by taking the amount of Consolidated EBITDA for
the six months ended as of June 30, 2008 and multiplying that amount by two
(i.e. 6 months Consolidated EBITDA times 2), and (ii) September 30, 2008, the
amount of Consolidated EBITDA required in clause (b) of this definition shall be
determined by taking the amount of Consolidated EBITDA for the nine months ended
as of September 30, 2008 and multiplying that amount by four and dividing the
result by three (i.e. 9 months Consolidated EBITDA times 4/3).
 
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(c)           Section 3.01(d), of the Credit Agreement, Voluntary
Prepayments/Reductions of Commitments, is hereby amended by deleting the final
sentence of such Section in its entirety and inserting the following in lieu
thereof:
 

“Notwithstanding anything contained hereunder, including but not limited to the
provisions of Sections 3.01(a), 3.01(b) and 3.01(c), the Borrower shall not be
permitted to make any voluntary prepayment of the Obligations or reduction in
the Term Letter of Credit Commitments prior to the 1st anniversary of the Third
Amendment Date.”
 
 
(d)           Section 3.02(b) of the Credit Agreement, Prepayments from the
Incurrence of Indebtedness, is hereby amended by adding “or Issuance of Equity”
to the end the subsection title and inserting “(i)” prior to the beginning of
the first sentence of such Section 3.02(b). Following the final sentence of such
new subsection (i) of Section 3.02(b), the word “and” shall be added and a new
subsection (ii) shall be added to such Section 3.02(b) as follows:
 
“(ii) The Borrower agrees that at least fifty percent (50%) of the Net Offering
Proceeds of any Equity Issuance shall be, upon receipt, segregated into a Cash
Management Account and offered as a mandatory prepayment to the Term Lenders,
together with the payment of the Applicable Payment Fee and the Applicable
Reduction Fee on the amount being offered as a prepayment (the “Equity
Repayment”).  Any Term Lender may, in its discretion, notify the Borrower, in
writing within ten (10) Business Days, that such Term Lender does not want to
accept such Term Lender’s pro rata share of the Equity Repayment.  In the event
any Term Lender sends such a notice, such Term Lender’s pro rata share of the
Equity Repayment may be retained by JRCC, or used by Borrowers for any corporate
purpose (including, without limitation, to prepay, purchase or otherwise redeem
the Senior Notes); provided however, that no prepayment of Indebtedness, other
than the Obligations under the Credit Agreement and the obligations under the
Revolving Credit Agreement, shall be permitted if, after giving effect to such
prepayment on a pro forma basis, any Default or Event of Default shall have
occurred.”
 
(e)           Section 4.04, of the Credit Agreement, Fees, is hereby amended by
deleting the “and” immediately prior to subsection (b) and adding a final clause
“(c)” as follows:
 
“, and (c) substantially contemporaneously with the effectiveness of the Third
Amendment, the Borrowers hereby agree to pay the Third Amendment Fee to each
Lender that, on or before May 12, 2008, executes and delivers its consent to the
Third Amendment.”
 
(f)           Section 9.05 of the Credit Agreement, Limitation on Issuance of
Equity Interests, is hereby amended by deleting clause (e) in its entirety and
inserting the following in lieu thereof:
 
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“(e) issuances of Equity Interests (other than Disqualified Equity Interests)
consisting solely of common stock of JRCC, to the holders of Senior Notes in
exchange for, or as a redemption or repayment of, any or all such Senior Notes.
Notwithstanding the above, and in addition to Equity Interests otherwise
permitted to be issued pursuant to Section 9.05(e), the Borrower shall be
permitted to issue, sell and enter into any agreement or arrangement for the
issuance and sale of Equity Interests consisting of shares of JRCC’s common
stock and issued under the Registration Statement on Form S-3 filed by JRCC with
the Securities & Exchange Commission June 7, 2007; provided however, that such
Equity Interest is not a Disqualified Equity Interest, and further provided,
that any and all Net Offering Proceeds are subject to Section 3.02(b)(ii).”
 
(g)           Section 10.01, Minimum Consolidated EBITDA, of the Credit
Agreement is hereby amended by deleting such Section in its entirety and
inserting the following in lieu thereof:
 
                      “SECTION 10.01      Minimum Consolidated EBITDA.  The
Credit Parties shall not permit Consolidated EBITDA for the indicated period
ending on any date set forth in the table below to be less than the amount set
forth opposite such date:
 

 
Measurement Period Ending
 
Consolidated
EBITDA
 
 
June 30, 2008
(6 Months)
8.6 million
 
September 30, 2008
(9 Months)
27.5 million
 
December 31, 2008
(12 Months)
41.0 million
 
March 31, 2009
(12 Months)
54.1 million
 
June 30, 2009
(12 Months)
61.3 million
 
September 30, 2009
(12 Months)
72.2 million
 
December 31, 2009
(12 Months)
78.9 million
 
March 31, 2010
(12 Months)
78.9 million
 
June 30, 2010
(12 Months)
78.1 million
 
September 30, 2010
(12 Months)
76.5 million
 
December 31, 2010
(12 Months)
78.8 million

 
(h)           Section 10.02, Leverage Ratio, of the Credit Agreement is hereby
amended by deleting such Section in its entirety and inserting the following in
lieu thereof:
 
     “SECTION 10.02       Leverage Ratio.  The Credit Parties shall not permit
the Leverage Ratio for the Credit Parties as of any date set forth in the table
below to be greater than the amount set forth opposite such date:

 
Measurement Period Ending
 
Leverage Ratio
 
June 30, 2008
5.0x
 
September 30, 2008
3.0x
 
December 31, 2008
2.6x
 
March 31, 2009
2.2x
 
June 30, 2009
1.7x
 
September 30, 2009
1.5x
 
December 31, 2009
1.5x
 
March 31, 2010
1.5x
 
June 30, 2010
1.5x
 
September 30, 2010
1.6x
 
December 31, 2010
1.5x

 
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3.           Affirmation and Acknowledgment of the Borrowers.  The Borrowers
hereby ratify and confirm all of their Obligations to the Lenders, including,
without limitation, the Loans, and the Borrowers hereby affirm their absolute
and unconditional promise to pay to the Lenders all indebtedness, obligations
and liabilities in respect of the Loans, the Letters of Credit, and all other
amounts due under the Credit Agreement and the other Loan Documents as amended
hereby.  The Borrowers hereby confirm that the Obligations are and remain
secured pursuant to the Loan Documents and pursuant to all other instruments and
documents executed and delivered by the Borrowers as security for the
Obligations.
 
                               4.           No Other Waivers, Amendments or
Consents.  Except for the waiver in Section 1, the consents in Section 2 hereof
and the amendments expressly set forth and referred to in Section 3 hereof, the
Credit Agreement shall remain unchanged and in full force and effect.  The
waiver and consents contained herein shall not extend beyond the terms expressly
set forth herein for such waiver and consents, nor impair any right or power
accruing to the Administrative Agent or any Lender with respect to any other
Default or Event of Default or any Default or Event of Default which occurs
after the date hereof.  Nothing in this Agreement is intended or shall be
construed to be a novation of any Obligations or any part of the Credit
Agreement or any of the other Loan Documents or to affect, modify or impair the
continuity or perfection of the Administrative Agent’s Liens under the Credit
Agreement and Loan Documents.
 
5.           Representations, Warranties and Covenants.  To induce the
undersigned Lenders to enter into this Agreement, the Credit Parties hereby
warrant, represent and covenant to and with to the Lenders and the
Administrative Agent that: (a) this Agreement has been duly authorized, executed
and delivered by the Credit Parties; (b) this Agreement and the Credit Agreement
as amended hereby constitute legal, valid and binding obligations of the Credit
Parties, enforceable in accordance with their respective terms; (c) after giving
effect to this Agreement, no Default or Event of Default has occurred and is
continuing as of this date; (d) no approval or consent of, or filing with, any
governmental agency or authority is required to make valid and legally binding
the execution, delivery or performance by the Credit Parties of this Agreement
or the Credit Agreement as amended hereby; and (e) after giving effect to this
Agreement, all of the representations and warranties made by the Credit Parties
in the Credit Agreement are true and correct in all material respects on and as
of the date of this Agreement (except to the extent that any such
representations or warranties expressly referred to a specific prior date and
except for changes therein expressly permitted or expressly contemplated by the
Credit Agreement or the other Loan Documents).  Any breach by the Credit Parties
of any of its representations, warranties and covenants contained in this
Section 6 shall be an Event of Default under the Credit Agreement.
 
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6.           Conditions to Effectiveness.  This Agreement shall not become
effective unless and until the Administrative Agent has received (a) payment by
the Borrowers of the Third Amendment Fee, (b) one or more counterparts of this
Agreement, duly executed, completed and delivered by the Borrowers, the other
Credit Parties and the Required Lenders and (c) a fully-executed amendment to
the Revolving Credit Agreement, in substantially the form attached hereto as
Exhibit A.
 
7.           Reimbursement of Expenses.  The Borrowers hereby agree to reimburse
the Administrative Agent on demand for all reasonable fees and reasonable
out-of-pocket costs and expenses (including without limitation the reasonable
and actual fees and expenses of its counsel) incurred by the Administrative
Agent in connection with the negotiation, documentation and consummation of this
Agreement and the other documents executed in connection herewith and the
transactions contemplated hereby.
 
8.           Governing Law.  THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK FOR CONTRACTS TO BE
PERFORMED ENTIRELY WITHIN SAID STATE AND ANY APPLICABLE LAWS OF THE UNITED
STATES OF AMERICA.
 
9.           Severability of Provisions.  Any provision of this Agreement which
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.  To the extent permitted by applicable law, the Borrowers hereby
waive any provision of law that renders any provision hereof prohibited or
unenforceable in any respect.
 
10.         Counterparts.  This Agreement may be executed in any number of
several counterparts, all of which shall be deemed to constitute but one
original and shall be binding upon all parties, their successors and permitted
assigns.  Delivery of an executed signature page of this Agreement by facsimile
transmission or electronic transmission shall be as effective as delivery of a
manually executed counterpart hereof.
 
11.         Entire Agreement.  The Credit Agreement as amended through this
Agreement embodies the entire agreement between the parties hereto relating to
the subject matter thereof and supersedes all prior agreements, representations
and understandings, if any, relating to the subject matter thereof.
 
12.         No Strict Construction.  The parties hereto have participated
jointly in the negotiation and drafting of this Agreement.  In the event an
ambiguity or question of intent or interpretation arises, this Agreement shall
be construed as if drafted jointly by the parties hereto and no presumption or
burden of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any provisions of this Agreement.
 
13.         No Third Party Reliance.  This Agreement is solely for the benefit
of the parties signatory hereto, their successors and permitted assigns.  No
waiver, consent or amendment pursuant to this Agreement may be relied upon by
any third parties.
 
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14.         Release. The Credit Parties hereby remise, release, acquit, satisfy
and forever discharge the Lenders, the Administrative Agent, the Collateral
Agent, and the L/C Issuer and their respective agents, employees, officers,
directors, predecessors, attorneys and all others acting or purporting to act on
behalf of or at the direction of the Lenders, the Administrative Agent, the
Collateral Agent, or the L/C Issuer of and from any and all manner of actions,
causes of action, suit, debts, accounts, covenants, contracts, controversies,
agreements, variances, damages, judgments, claims and demands whatsoever, in law
or in equity, which any of such parties ever had or now has against the Lenders,
the Administrative Agent, the Collateral Agent, and the L/C Issuer their
respective agents, employees, officers, directors, attorneys and all persons
acting or purporting to act on behalf of or at the direction of the Lenders or
the Administrative Agent (“Releasees”), for, upon or by reason of any matter,
cause or thing whatsoever arising from, in connection with or in relation to the
Credit Agreement or any of the other Loan Documents (including this Agreement)
through the date hereof.  Without limiting the generality of the foregoing, the
Credit Parties waive and affirmatively agree not to allege or otherwise pursue
any defenses, affirmative defenses, counterclaims, claims, causes of action,
setoffs or other rights they do, shall or may have as of the date hereof,
including, but not limited to, the rights to contest any conduct of the Lenders,
Administrative Agent or other Releasees on or prior to the date hereof.
 

[Remainder of page intentionally blank; next page is signature page]

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IN WITNESS WHEREOF, the parties have caused this Third Amendment to Term Credit
Agreement to be duly executed by their respective officers or representatives
thereunto duly authorized, as of the date first above written.
 

  BORROWERS:         JAMES RIVER COAL COMPANY  
 
         

By:
/s/ Peter T. Socha
   
Name: Peter T. Socha
   
Title: Chief Executive Officer
             
JAMES RIVER COAL SERVICE COMPANY
             

By:
/s/ Peter T. Socha
   
Name: Peter T. Socha
   
Title: Chief Executive Officer
              LEECO, INC.              

By:
/s/ Peter T. Socha
   
Name: Peter T. Socha
   
Title: Chief Executive Officer
              TRIAD MINING, INC.              

By:
/s/ Peter T. Socha
   
Name: Peter T. Socha
   
Title: Chief Executive Officer
              TRIAD UNDERGROUND MINING, LLC              

By:
/s/ Peter T. Socha
   
Name: Peter T. Socha
   
Title: Chief Executive Officer
     

 
JAMES RIVER COAL COMPANY
THIRD AMENDMENT TO TERM CREDIT AGREEMENT
SIGNATURE PAGE

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        BLEDSOE COAL CORPORATION              

By:
/s/ Peter T. Socha
   
Name: Peter T. Socha
   
Title: Chief Executive Officer
              JOHNS CREEK ELKHORN COAL CORPORATION              

By:
/s/ Peter T. Socha
   
Name: Peter T. Socha
   
Title: Chief Executive Officer
              JAMES RIVER COAL SALES, INC.              

By:
/s/ Peter T. Socha
   
Name: Peter T. Socha
   
Title: Chief Executive Officer
              BLEDSOE COAL LEASING COMPANY              

By:
/s/ Peter T. Socha
   
Name: Peter T. Socha
   
Title: Chief Executive Officer

              BLUE DIAMOND COAL COMPANY              

By:
/s/ Peter T. Socha
   
Name: Peter T. Socha
   
Title: Chief Executive Officer
     

 
JAMES RIVER COAL COMPANY
THIRD AMENDMENT TO TERM CREDIT AGREEMENT
SIGNATURE PAGE

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        MCCOY ELKHORN COAL CORPORATION              

By:
/s/ Peter T. Socha
   
Name: Peter T. Socha
   
Title: Chief Executive Officer
              GUARANTORS:               BDCC HOLDING COMPANY, INC.              

By:
/s/ Peter T. Socha
   
Name: Peter T. Socha
   
Title: Chief Executive Officer
              EOLIA RESOURCES, INC.              

By:
/s/ Peter T. Socha
   
Name: Peter T. Socha
   
Title: Chief Executive Officer
     

 
JAMES RIVER COAL COMPANY
THIRD AMENDMENT TO TERM CREDIT AGREEMENT
SIGNATURE PAGE

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        SHAMROCK COAL COMPANY, INCORPORATED              

By:
/s/ Peter T. Socha
   
Name: Peter T. Socha
   
Title: Chief Executive Officer
              JOHNS CREEK COAL COMPANY              

By:
/s/ Peter T. Socha
   
Name: Peter T. Socha
   
Title: Chief Executive Officer
     

        JOHNS CREEK PROCESSING COMPANY              

By:
/s/ Peter T. Socha
   
Name: Peter T. Socha
   
Title: Chief Executive Officer
     

 
JAMES RIVER COAL COMPANY
THIRD AMENDMENT TO TERM CREDIT AGREEMENT
SIGNATURE PAGE

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        LENDER:         MORGAN STANLEY SENIOR FUNDING, INC.                    
   

By:
/s/ Stephen B. King
   
Name: Stephen B. King
   
Title: Vice President
     

        COLLATERAL AGENT         MORGAN STANLEY & CO. INCORPORATED              

By:
/s/ Stephen B. King
   
Name: Stephen B. King
   
Title: Executive Director

 
JAMES RIVER COAL COMPANY
THIRD AMENDMENT TO TERM CREDIT AGREEMENT
SIGNATURE PAGE

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        LENDER:         SANDELMAN FINANCE 2006-1, LTD.              

By:
/s/ Peter A. Bio
   
Name: Peter A. Bio
   
Title: Head of Capital Structure
     

 
JAMES RIVER COAL COMPANY
THIRD AMENDMENT TO TERM CREDIT AGREEMENT
SIGNATURE PAGE

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        LENDER:         TRILOGY PORTFOLIO COMPANY, LLC              

By:
/s/ Paul S. Greenberg
   
Name: Paul S. Greenberg
   
Title: Principal
     

 
JAMES RIVER COAL COMPANY
THIRD AMENDMENT TO TERM CREDIT AGREEMENT
SIGNATURE PAGE