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Exhibit 10.12
JAMES RIVER COAL COMPANY
SEVERANCE AND RETENTION PLAN
 
ARTICLE ONE 
INTRODUCTION
 
1.1  Purpose. The Board of Directors of James River Coal Company (the “Company”)
has determined that it is in the best interests of the Company and its
shareholders to assure that the Company will have the continued dedication of
its employees, notwithstanding the possibility or occurrence of a significant
restructuring or change in control of the Company. The Board of Directors (the
“Board”) believes it is imperative to diminish the inevitable distraction of
such employees by virtue of the personal uncertainties and risks created by such
possibilities and to encourage the employees’ full attention and dedication to
the Company and its affiliates. Therefore, in order to accomplish these
objectives, the Board has approved and adopted this James River Coal Company
Severance and Retention Plan (the “Plan”) to induce certain employees of the
Company and its affiliates to remain in their current employment and to devote
their time and energies to the successful performance of their employment duties
by providing such persons a measure of security.
 
1.2  Effective Date. The Plan was approved by the Board at meetings held on
March 3 and 13, 2006 and shall be effective as of March 13, 2006 (the “Effective
Date”).
 
 
ARTICLE TWO 
DEFINITIONS
 
2.1  Definitions. The following capitalized terms used in the Plan shall have
the meanings assigned to them below:
 
“Board” means the Board of Directors of the Company.
 
“Cause” means the involuntary termination of a Participant by the Company for
any of the following reasons: (a) as a result of an act or acts by the
Participant which have been found in an applicable court of law to constitute a
felony (other than traffic-related offenses); (b) as a result of one or more
acts by a Participant which in the good faith judgment of the Board are believed
to be in violation of law or of policies of the Company and which result in
demonstrably material injury to the Company; (c) as result of an act or acts of
proven dishonesty by the Participant resulting or intended to result directly or
indirectly in significant gain or personal enrichment to the Participant at the
expense of the Company or public shareholders of the Company; or (d) upon the
willful and continued failure by the Participant to perform his duties with the
Company (other than any such failure resulting from incapacity due to mental or
physical illness not constituting a Disability), after a demand in writing for
substantial performance is delivered by the Board, which demand specifically
identifies the manner in which the Board believes that the Participant has not
substantially performed his duties. For purposes of this Plan, no act or failure
to act by the Participant shall be deemed to be “willful” unless done or omitted
to be done by the Participant not in good faith and without reasonable belief
that the Participant’s action or omission was in the best interests of the
Company. “Cause” shall be determined by the Committee. Notwithstanding the
foregoing, if the Participant has entered into an employment agreement with the
Company or one of its affiliates that is binding as of the Date of Termination,
and if such employment agreement defines “Cause,” then the definition of “Cause”
in such agreement, in lieu of the definition provided above, shall apply to the
Participant for purposes of the Plan.
 

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    “CEO” means the Chief Executive Officer of the Company.
 
A “Change in Control” means any of the following events:
 
(a) The acquisition (other than from the Company) by any “Person” (as the term
is used for purposes of sections 13(d) or 14(d) of the Exchange Act) of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of forty percent (40%) or more of the combined voting power of the
Company’s then outstanding voting securities; or
 
(b) The individuals who, as of the Effective Date are members of the Board (the
“Incumbent Board”), cease for any reason to constitute at least two-thirds of
the Board, provided, however, that if the election, or nomination for election
by the Company’s shareholders, of any new director was approved by a vote of at
least two-thirds of the Incumbent Board, such new director shall, for purposes
of this Plan, be considered as a member of the Incumbent Board; or
 
(c) Consummation of a merger or consolidation involving the Company, if the
shareholders of the Company, immediately before such merger or consolidation do
not, as a result of such merger or consolidation, own, directly or indirectly,
more than fifty percent (50%) of the combined voting power of the then
outstanding voting securities of the corporation resulting from such merger or
consolidation in substantially the same proportion as their ownership of the
combined voting power of the voting securities of the Company outstanding
immediately before such merger or consolidation; or
 
(d) A complete liquidation or dissolution of the Company or consummation of the
sale or other disposition of all or substantially all of the assets of the
Company;
 
provided that, in the case of (c) or (d) above, only if such event arises from
the investigation of strategic alternatives by the Company announced on March 1,
2006.
 
Notwithstanding the foregoing, a Change in Control shall not be deemed to occur
pursuant to subsection (a) above solely because forty percent (40%) or more of
the combined voting power of the Company’s then outstanding securities is
acquired by (i) a trustee or other fiduciary holding securities, under one or
more employee benefit plans maintained by the Company or any of its
subsidiaries, or (ii) any corporation which, immediately prior to such
acquisition, is owned directly or indirectly by the shareholders of the Company
in the same proportion as their ownership of stock in the Company immediately
prior to such acquisition.
 
“Code” means the Internal Revenue Code of 1986, as amended.
 
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“Committee” means the committee responsible for the administration of the Plan,
which shall be the Compensation Committee of the Board, or such other committee
as may be designated by the Board.
 
“Company” means James River Coal Company, a Virginia corporation.
 
“Date of Termination” shall mean, for any Participant, the date specified in the
notice of termination as the date upon which Participant’s employment with the
Company is to cease. In the case of termination by Participant for Good Reason,
the Date of Termination shall not be less than 30 days nor more than 60 days
from the date the notice of termination is given.
 
“Disability” shall have the meaning ascribed to the term “Disabled” in Code
Section 409A and the regulations promulgated thereunder. The existence of a
Disability shall be determined by the Board in good faith.
 
“Exchange Act” means the Securities Exchange Act of 1934, as now in effect or as
hereafter amended. All citations to sections of the Exchange Act or rules
thereunder are to such sections or rules as they may from time to time be
amended or renumbered.
 
“Good Reason” shall mean the occurrence (without Participant’s express written
consent) of any one of the following acts by the Company, or failures by the
Company to act, unless, in the case of any Company act or failure to act
described below, such act or failure to act is corrected by the Company prior to
the Date of Termination specified in the notice of termination given in respect
thereof:
 
(a) a material reduction in Participant’s duties or responsibilities; provided,
however, that the fact that Participant’s employment after a Change in Control
shall be with a non-publicly traded subsidiary of an entity resulting from or
surviving the Change in Control, if that is the case, shall not of itself be
deemed a material diminution in Participant’s duties or responsibilities for
purposes of this paragraph;
 
(b) a reduction in Participant’s base salary or target bonus;
 
(c) the failure by the Company to maintain a benefit program (or to provide a
substitute benefit program) that is materially comparable to Participant’s
overall compensation prior to the Change in Control;
 
(d) the relocation of Participant’s office or the Company’s headquarters from
its location on the Effective Date to a location more than 35 miles away; or
 
(e) the Company’s material breach of any other provision of this Plan.
 
Participant’s right to terminate Participant’s employment for Good Reason shall
not be affected by Participant’s incapacity due to physical or mental illness,
except for a Disability. Participant’s continued employment shall not constitute
consent to, or a waiver of rights with respect to, any circumstance constituting
Good Reason hereunder.
 
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Any claim of Good Reason shall be communicated by Participant to the Company in
writing and shall specifically identify the factual details concerning the
event(s) giving rise to Participant’s claim of Good Reason. The Company shall
have an opportunity to cure any claimed event of Good Reason prior to the
specified Date of Termination.
 
“Participant” means any Retention Participant or Severance Participant. A
Participant may be a Retention Participant or Severance Participant, or both.
 
“Plan” means this James River Coal Company Severance and Retention Plan, as it
may be amended.
 
“Restrictive Covenants” means the restrictive covenants contained in Article Six
of the Plan, including without limitation, the covenant not to disclose
confidential information.
 
“Retention Participant” means an employee of the Company or its affiliates who
has been designated by the Committee to participate in the retention portion of
the Plan.
 
“Severance Participant” means an employee of the Company or its affiliates who
has been selected by the Committee to participate in the severance portion of
the Plan and is so designated in a writing, in the form of the “Acknowledgment
Form” attached hereto as Exhibit A and identifying the Severance Period,
executed by a duly authorized member of the Committee or the CEO, on behalf of
the Company, and by such Participant for the purpose of affirming his agreement
to be bound by the terms of the Plan.
 
ARTICLE THREE 
EQUITY AWARDS
 
3.1 Equity Awards Upon a Change in Control. Upon the occurrence of a Change in
Control, all unvested equity awards (including, without limitation, all
restricted shares of common stock of the Company and all options to acquire
common stock of the Company) held by employees of the Company shall immediately
vest and become exercisable, as applicable.
 
ARTICLE FOUR 
RETENTION BONUSES
 
4.1 Retention Bonus Upon a Change in Control. Upon the occurrence of a Change in
Control, each Retention Participant shall be eligible to receive a Retention
Bonus in the amount designated by the Committee. To be eligible to receive the
Retention Bonus, the Participant must be employed by the Company or one of its
affiliates on the date of the Change in Control. If the Participant satisfies
the above requirements, the Participant’s Retention Bonus shall become 100%
vested as of the date of the Change in Control and shall be payable in a lump
sum within 15 days of the Change in Control.
 
4.2 Termination of Employment Prior to a Change in Control. If, prior to a
Change in Control, a Participant’s employment is terminated by the Company or
any of its affiliates for any reason or the Participant terminates employment
for any reason, then no Retention Bonus shall be payable to such Participant.
 
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ARTICLE FIVE 
SEVERANCE BENEFITS
 
5.1 Termination by the Company Without Cause; Termination by Participant For
Good Reason. If, within 12 months after a Change in Control, the Company or any
of its affiliates terminates the employment of a Severance Participant other
than for Cause, death or Disability or if, within 12 months after a Change in
Control, a Severance Participant resigns for Good Reason, the Company shall (in
lieu of any severance benefits under any Company severance program) pay or
provide to such Severance Participant compensation and benefits as follows:
 
(a)  Severance Participant will continue to receive his base salary as then in
effect through his Date of Termination.
 
(b)  Severance Participant shall receive, no later than 30 days after Severance
Participant’s Date of Termination, a lump sum payment equal to (i) Severance
Participant’s monthly base salary at the time that Severance Participant’s Date
of Termination occurs, multiplied by (ii) the number of months in the Severance
Period. The “Severance Period” shall be the period identified in the
Acknowledgment Form signed by the Severance Participant. The lump sum payment
under this paragraph (b) shall not alter the amounts Severance Participant is
entitled to receive under the benefit plans described in paragraph (c) below.
Benefits under such plans shall be determined as if Severance Participant had
continued to receive his base salary over the applicable Severance Period rather
than in a lump sum.
 
(c)  The group health and dental care (including any medical plan) and group
term life insurance benefits coverages provided to Severance Participant at his
Date of Termination shall be continued at the same level as for active employees
and in the same manner as if his employment had not terminated, beginning on the
Date of Termination and continuing for the Severance Period. Any additional
coverages Severance Participant had at termination, including dependent
coverage, will also be continued for such period on the same terms, to the
extent permitted by the applicable policies or contracts. Any costs Severance
Participant was paying for such additional coverages at the time of termination
shall be paid by Severance Participant by separate check payable to the Company
each month in advance. If the terms of the group term life insurance plan, or
the laws applicable to such plan, do not permit continued participation by
Severance Participant, then the Company will pay Severance Participant a lump
sum amount equal to the costs of such coverage(s) for the applicable Severance
Period. If the terms of the group health and dental plans referred to in this
subsection do not permit continued participation by Severance Participant as
required by this subsection, or if the health and dental benefits to be provided
to Severance Participant and his dependents pursuant to this subsection cannot
be provided in a manner such that the benefit payments will be tax-free to
Severance Participant and his dependents, then the Company shall (A) pay to
Severance Participant monthly during the Severance Period an amount equal to the
monthly rate for COBRA coverage under the health and dental plans that is then
being paid by former active employees for the level of coverage that applies to
Severance Participant and his dependents, minus the amount active employees are
then paying for such coverage, and (B) permit Severance Participant and his
dependents to elect to participate in the health and dental plans for the
Severance Period upon payment of the applicable rate for COBRA coverage during
the Severance Period. The coverages provided for in this Section shall be
applied against and reduce the period for which COBRA coverage will be provided.
 
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(d) Except as expressly provided herein, all other fringe benefits provided to
Severance Participant as an active employee of the Company (e.g., long-term
disability, AD&D, etc.), shall cease on his Date of Termination (except to the
extent Severance Participant has already qualified for benefits under any such
program), provided that any conversion or extension rights applicable to such
benefits shall be made available to Severance Participant at his Date of
Termination or when such coverages otherwise cease.
 
5.2  Full Settlement; No Obligation to Mitigate. Except as provided in Section
5.3 below, the Company’s obligation to make the payments provided for in this
Plan and otherwise to perform its obligations hereunder shall not be affected by
any set-off, counterclaim, recoupment, defense or other claim, right or action
which the Company may have against Severance Participant or others. In no event
shall Severance Participant be obligated to seek other employment or take any
other action by way of mitigation of the amounts payable to Severance
Participant under any of the provisions of this Plan and, except as explicitly
provided herein, such amounts shall not be reduced whether or not Severance
Participant obtains other employment.
 
5.3  Severance Benefits to Terminate Upon Material Breach of Restrictive
Covenants. In the event that Severance Participant breaches any of the
Restrictive Covenants set forth in Article Six of the Plan in a manner which
results in demonstrably material injury to the Company, all payments and
benefits to be paid or provided to Severance Participant by the Company shall
cease, and the Company shall have no further obligation to pay or provide any
such amounts or benefits. The Company’s rights under the preceding sentence
shall be in addition to, and not in limitation of, any rights or remedies the
Company may have against such breaching Severance Participant, whether pursuant
to the provisions of Article Six below, or otherwise.
 
5.4  Six Month Delay for Specified Employees. To the extent (a) any payments to
which a Participant becomes entitled under this Plan constitute deferred
compensation subject to Section 409A of the Code and (b) the Participant is
deemed at the time of such termination of employment to be a “specified”
employee under Section 409A of the Code, then such payment or payments shall not
be made or commence until the earliest of (i) the expiration of the six-month
period measured from the date of the Participant’s “separation from service” (as
such term is at the time defined in Treasury Regulations under Section 409A of
the Code) with the Company (and all of its affiliates); (ii) the date the
Participant becomes “disabled” (as defined in Section 409A of the Code); or
(iii) the date of the Participant’s death following such “separation from
service”; provided, however, that such deferral shall only be effected to the
extent required to avoid adverse tax treatment to the Participant, including
(without limitation) the additional twenty percent tax for which the Participant
would otherwise be liable under Section 409A(a)(1)(B) of the Code in the absence
of such deferral. Upon the expiration of the applicable deferral period, any
payments which would have otherwise been made during that period (whether in a
single sum or in installments) in the absence of this paragraph shall be paid to
the Participant or the Participant’s beneficiary in one lump sum.
 
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ARTICLE SIX  
COVENANTS BY SEVERANCE PARTICIPANTS
 
6.1  General. Each Severance Participant and the Company understand and agree
that the purpose of the provisions of this Article Six is to protect legitimate
business interests of the Company, as more fully described below, and is not
intended in an unreasonable manner to impair or infringe upon Severance
Participant’s right to work or earn a living after termination or a Change in
Control. Severance Participant hereby acknowledges that Severance Participant
has received and will continue to receive good and valuable consideration for
the restrictions set forth in this Article Six in the form of the compensation
and benefits provided for herein as well as other consideration. Therefore,
Severance Participant shall be subject to the restrictions set forth in this
Article Six.
 
6.2  Definitions. The following capitalized terms used in this Article Six shall
have the meanings assigned to them below, which definitions shall apply to both
the singular and plural forms of such terms:
 
(a)  “Person” means any individual or any corporation, partnership, joint
venture, limited liability company, association or other entity or enterprise.
 
(b)  “Restricted Period” means the period of time beginning on the Effective
Date and ending on the later of the date that is (a) twelve months after
Severance Participant’s Date of Termination or (b) the last day of the Severance
Period.
 
6.3  The Company’s Property.
 
(a)  Upon the termination of Severance Participant’s employment for any reason
or, if earlier, upon the Company’s request, Severance Participant shall promptly
return all “Property” which had been entrusted or made available to Severance
Participant by the Company or any of its affiliates.
 
(b)  The term “Property” means all records, files, memoranda, reports, price
lists, customer lists, drawings, plans, sketches, keys, codes, computer hardware
and software and other property of any kind or description prepared, used or
possessed by Severance Participant during Severance Participant’s employment by
the Company and, if applicable, any of its affiliates (and any duplicates of any
such property) together with any and all information, ideas, concepts,
discoveries, and inventions and the like conceived, made, developed or acquired
at any time by Severance Participant individually or, with others during
Severance Participant’s employment which relate to the business, products or
services of the Company or any of its affiliates.
 
6.4  Trade Secrets.
 
(a)  Severance Participant agrees that Severance Participant will hold in a
fiduciary capacity for the benefit of the Company, and any of its affiliates,
and will not directly or indirectly use or disclose, any “Trade Secret” that
Severance Participant may have acquired during the term of Severance
Participant’s employment by the Company or any of its affiliates for so long as
such information remains a Trade Secret.
 
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(b)  The term “Trade Secret” means information, including, but not limited to,
technical or nontechnical data, formulas, patterns, compilations, programs,
devices, methods, techniques, drawings, processes, financial data, financial
plans, product plans, or a list of actual or potential customers or suppliers
that (a) derives economic value, actual or potential, from not being generally
known to, and not being generally readily ascertainable by proper means by any
other Person who can obtain economic value from its disclosure or use and (b) is
the subject of reasonable efforts by the Company and any of its affiliates to
maintain its secrecy.
 
(c)  This Section 6.4 and Section 6.5 are intended to provide rights to the
Company which are in addition to, and not in lieu of, those rights the Company
has under the common law or applicable statutes for the protection of Trade
Secrets. Any provision under applicable trade secret law that provides the
Company with more liberal or generous protection of its Trade Secrets shall
prevail over any narrower protection afforded by this Plan.
 
6.5  Confidential Information.
 
(a)  Severance Participant, while employed by the Company or any of its
affiliates and thereafter during the Restricted Period, shall hold in a
fiduciary capacity for the benefit of the Company and any of its affiliates, and
shall not directly or indirectly use or disclose, any “Confidential Information”
that Severance Participant may have acquired (whether or not developed or
compiled by Severance Participant and whether or not Severance Participant is
authorized to have access to such information) during the term of, and in the
course of, or as a result of Severance Participant’s employment by the Company
or any of its affiliates. Notwithstanding anything to the contrary in this Plan,
the foregoing durational limitation shall not apply to any Confidential
Information that constitutes a “Trade Secret” and Severance Participant’s
obligation to hold in confidence and not use such Trade Secret Confidential
Information shall continue for as long as the information retains its status as
a Trade Secret.
 
(b)  The term “Confidential Information” means any secret, confidential or
proprietary information possessed by the Company or any of its affiliates
relating to their business, including, without limitation, Trade Secrets,
customer lists, details of client or consultant contracts, current and
anticipated customer requirements, pricing policies, price lists, market
studies, business plans, operational methods, marketing plans or strategies,
legal advice and communications with the Company’s counsel, product development
techniques or flaws, computer software programs (including object code and
source code), data and documentation data, base technologies, systems,
structures and architectures, inventions and ideas, past current and planned
research and development, compilations, devices, methods, techniques, processes,
financial information and data, business acquisition plans and new personal
acquisition plans (not otherwise included in the definition of a Trade Secret
under this Plan) that has not become generally available to the public by the
act of one who has the right to disclose such information without violating any
right of the Company or any of its affiliates. Confidential Information may
include, but not be limited to, future business plans, licensing strategies,
advertising campaigns, information regarding customers, executives and
independent contractors and the terms and conditions of this Plan.
 
6.6  Reasonable and Continuing Obligations. Severance Participant agrees that
Severance Participant’s obligations under this Article Six are obligations which
will continue beyond Severance Participant’s Date of Termination and that such
obligations are reasonable and necessary to protect the Company’s legitimate
business interests. The Company in addition shall have the right to take such
other action as the Company deems necessary or appropriate to compel compliance
with the provisions of this Article Six.
 
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6.7  Remedy for Breach. Severance Participant agrees that the remedies at law of
the Company for any actual or threatened breach by Severance Participant of the
covenants in this Article Six would be inadequate and that the Company shall be
entitled to seek specific performance of the covenants in this Article Six,
including entry of an ex-parte, temporary restraining order in state or federal
court, preliminary and permanent injunctive relief against activities in
violation of this Article Six, or both, or other appropriate judicial remedy,
writ or order, in addition to any damages and legal expenses which the Company
may be legally entitled to recover. Severance Participant acknowledges and
agrees that the covenants in this Article Six shall be construed as agreements
independent of any other provision of this Plan or any other agreement between
the Company and Severance Participant, and that the existence of any claim or
cause of action by Severance Participant against the Company, whether predicated
upon this Plan or any other agreement, shall not constitute a defense to the
enforcement by the Company of such covenants.
 
6.8  Severability of Covenants. Severance Participant acknowledges and agrees
that the Restrictive Covenants are reasonable and valid in time and scope and in
all other respects. The covenants set forth in this Plan shall be considered and
construed as separate and independent covenants. Should any part or provision of
any covenant be held invalid, void or unenforceable, such invalidity, voidness
or unenforceability shall not render invalid, void or unenforceable any other
part or provision of this Plan. If any portion of the foregoing provisions is
found to be invalid or unenforceable because its duration, the territory, the
definition of activities or the definition of information covered is considered
to be invalid or unreasonable in scope, the invalid or unreasonable term shall
be redefined, or a new enforceable term provided, such that the intent of the
Company and Severance Participant in agreeing to the provisions of this Plan
will not be impaired and the provision in question shall be enforceable to the
fullest extent of the applicable laws.
 
6.9  Reformation. The parties hereunder agree that it is their intention that
the provisions of this Article Six be enforced in accordance with their terms to
the maximum extent possible under applicable law. The parties further agree
that, in the event any tribunal of competent jurisdiction shall find that any
provision hereof is not enforceable in accordance with its terms, the tribunal
shall reform these covenants such that they shall be enforceable to the maximum
extent permissible at law.
 
ARTICLE SEVEN 
ADMINISTRATION
 
7.1  Plan Administration.
 
(a)  The Plan is administered and interpreted by the Committee. The Committee
shall have complete discretion to determine eligible Participants, to determine
and adjust from time to time the details of each Participant’s participation in
the Plan, and to interpret the Plan. Any decision by the Committee reached in
accordance with the provisions contained herein shall be final and binding on
all parties.
 
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(b)  The Committee may delegate all or any portion of the authority referenced
in subsection (a) above to one or more members of the Committee. As of the
Effective Date, the Committee delegates to its Chairman authority to approve
changes to the Participants that are eligible to participate in the Plan, and to
adjust from time to time the details of each Participant’s participation in the
Plan.
 
ARTICLE EIGHT 
NO FUNDING OBLIGATIONS
 
8.1  Funding. The obligations of the Company are not required to be funded under
the Plan. Nothing contained in the Plan shall give a Participant any right,
title or interest in any property of the Company, its subsidiaries or
affiliates. The Participant’s rights to a Retention Bonus shall be that of an
unsecured creditor of the Company.
 
ARTICLE NINE 
LIMITATION ON BENEFITS
 
9.1  Notwithstanding anything in this Plan to the contrary, any benefits payable
or to be provided to a Participant by the Company or its affiliates, whether
pursuant to this Plan or otherwise, which are treated as Parachute Payments
shall, but only to the extent necessary, be modified or reduced in the manner
provided in Section 9.2 below so that the benefits payable or to be provided to
the Participant under this Plan that are treated as Parachute Payments, as well
as any payments or benefits provided outside of this Plan that are so treated,
shall not cause the Company to have paid an Excess Parachute Payment. In
computing such amount, the parties shall take into account all provisions of
Code Section 280G, and the regulations thereunder, including making appropriate
adjustments to such calculation for amounts established to be Reasonable
Compensation.
 
9.2  If a reduction of benefits is required to avoid treatment of any payment as
an Excess Parachute Payment, the Participant’s Retention Bonus under this Plan
shall be reduced to an amount which, when combined with all other payments or
benefits to the Participant related to the Change in Control, does not result in
payment of an Excess Parachute Payment.
 
9.3  This Article Nine shall be interpreted so as to avoid the imposition of
excise taxes on the Participant under Section 4999 of the Code and to avoid the
disallowance of a deduction to the Company pursuant to Section 280G(a) of the
Code with respect to amounts payable under this Plan or otherwise.
 
9.4  For purposes of this Article Nine, the following definitions shall apply:
 
(a)  “Excess Parachute Payment” shall have the same meaning as provided in
Section 280G(b)(1) of the Code.
 
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(b)  “Parachute Payment” shall have the same meaning as provided in Section
280G(b)(2) of the Code.
 
(c)  “Reasonable Compensation” shall have the same meaning as provided in
Section 280G(b)(4) of the Code.
 
(d)  “Present Value” shall have the same meaning as provided in Section
280G(d)(4) of the Code.
 
ARTICLE TEN 
MISCELLANEOUS
 
10.1  Rights Not Exclusive. Except as expressly provided in the Plan, a
Participant's right to receive a Retention Bonus under the Plan shall be in
addition to and not exclusive of his rights under any other agreement or plan of
the Company or its affiliates, including without limitation, any short- or
long-term bonus or other remuneration payable pursuant to any Participant’s
Employment Agreement with the Company, if any.
 
10.2  No Contract for Employment. Nothing in the Plan shall be deemed to give
any Participant the right to be retained in the service of the Company or to
deny the Company any right it may have to discharge or demote any Participant at
any time.
 
10.3  Withholding. All amounts payable by the Company hereunder shall be subject
to withholding of such amounts related to taxes as the Company may be legally
obligated so to do.
 
10.4  Notices. Notices will be considered effective upon receipt and shall be
sent by hand delivery or certified mail addressed as follows:
 
If to the Company:
 
James River Coal Company
901 E. Byrd Street, Suite 1600
Richmond, Virginia 23219
Attention: Chief Executive Officer
 
or such other address provided to the Participant by the Company
 
If to a Participant, at his or her last known address.
10.5  Severability. The invalidity and unenforceability of any particular
provision of the Plan shall not affect any other provision of the Plan, and the
Plan shall be construed in all respects as if such invalid or unenforceable
provision were omitted.
 
10.6  No Assignment or Alienation of Benefits by Participants. A Participant
shall not have any power or right to transfer, assign, anticipate, hypothecate,
mortgage, commute, modify or otherwise encumber in advance any of the benefits
payable under the Plan, nor shall these benefits be subject to seizure for the
payment of debt, judgment, alimony or separate maintenance owed by the
Participant, or any person claiming through the Participant, or be transferable
by operation of law in the event of bankruptcy, insolvency or otherwise. Any
attempted assignment, anticipation, hypothecation, transfer, or other disposal
of the benefits hereunder, shall be void.
 
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10.7  Governing Law. The Plan shall be governed by and construed in accordance
with the laws of the Commonwealth of Virginia to the extent not preempted by
federal law.
 
10.8  Successors and Assigns. The Plan shall be binding upon the Company and its
successors (including any successor to the Company by reason of any dissolution,
merger, consolidation, sale of assets or other reorganization of the Company)
and assigns.
 
10.9  Amendment; Termination. Subject to the provisions of Section 10.11, the
Plan may be amended or terminated at any time by the Board or the Committee;
provided, however, that no such amendment or termination may be made after the
date of a Change in Control without the written consent of affected Participants
if such amendment or termination would negatively affect the rights of
Participants who would otherwise be entitled to a Retention Bonus or severance
benefits hereunder. The Plan shall automatically terminate following a Change in
Control once all Retention Bonuses and severance benefits have been paid.
 
10.10  Headings. The headings of the Sections herein are for convenience only
and shall have no significance in the interpretation of the Plan.
 
10.11  Compliance with Section 409A. This Plan shall be operated in accordance
with the requirements of Section 409A. Any action that may be taken (and, to the
extent possible, any action actually taken) by the Company shall not be taken
(or shall be void and without effect), if such action violates the requirements
of Section 409A and would result in an additional tax to the Participant. Any
provision in this Plan document that is determined to violate the requirements
of Section 409A shall be void and without effect. In addition, any provision
that is required to appear in this Plan document to satisfy the requirements of
Section 409A, but that is not expressly set forth, shall be deemed to be set
forth herein, and the Plan shall be administered in all respects as if such
provision were expressly set forth. In all cases, the provisions of this Section
shall apply notwithstanding any contrary provision of the Plan that is not
contained in this Section.
 

      JAMES RIVER COAL COMPANY
     By: /s/ Joseph H. Vipperman    

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      Name: Joseph H. Vipperman
Title: Chairman, Compensation Committee

 
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EXHIBIT A
 
Severance Participant Acknowledgment Form
 
James River Coal Company (the “Company”) and the undersigned Severance
Participant (“Participant”) hereby acknowledge that Participant has been
designated as a Participant in the James River Coal Company Severance and
Retention Plan (the “Plan”). The Severance Period applicable to Participant is
set forth below. Participant hereby acknowledges that he/she has read and
understands the terms of the Plan, and agrees to be bound by the terms of the
Plan.
 
In witness whereof, the Company and Participant have executed this
Acknowledgment Form as of the date indicated below.
 
COMPANY
 
By: ______________________________      
Name: ____________________________      
Title: _____________________________      
Date: _____________________________      
 
PARTICIPANT
 
_________________________________
Name: ____________________________      
Date: _____________________________      
 
Severance Period: ___________________