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Exhibit 10.13
 
AMENDMENT NO. 3 AND WAIVER
 
AMENDMENT No. 3 AND WAIVER (this “Amendment and Waiver”) dated as of November 7,
2006, to the CREDIT AGREEMENT dated as of May 3l, 2005, as amended by that
certain Amendment No. 1 and Waiver dated February 22, 2006, as further amended
by that certain Amendment No. 2 and Waiver dated May 30, 2006 (as may be further
amended, restated, modified or replaced, the “Credit Agreement”), among JAMES
RIVER COAL COMPANY (the “Borrower”), the LENDERS from time to time party
thereto, PNC BANK, NATIONAL ASSOCIATION, as Administrative Agent.
 
A. Pursuant to the Credit Agreement, the Lenders have extended credit to the
Borrower, and have agreed to extend credit to the Borrower, in each case
pursuant to the terms and subject to the conditions set forth therein.
 
B. The Borrower has requested that the Lenders agree to waive and amend certain
provisions of the Credit Agreement, in each case pursuant to the terms and
subject to the applicable conditions set forth herein.
 
C. The undersigned Lenders are willing, pursuant to the terms and subject to the
applicable conditions set forth herein, to grant such waivers and approve such
amendments.
 
D. Capitalized terms used but not defined herein shall have the respective
meanings assigned to them in the Credit Agreement (as amended hereby).
 
Accordingly, in consideration of the mutual agreements herein contained and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, and subject to the applicable conditions set forth herein,
the parties hereto hereby agree as follows:
 
SECTION 1. Waivers. Subject to the applicable conditions set forth herein, the
undersigned Lenders hereby waive compliance with Sections 6.12 [Fixed Charge
Covenant Ratio], Section 6.13 [Leverage Ratio] and Section 6.14 [Senior Secured
Leverage Ratio] for the period from September 30, 2006, to and including
December 30, 2006.
 
SECTION 2. Amendment of the Definition of Applicable Rate. The defined term
“Applicable Rate” contained in Section 1.01 [Defined Terms] of the Credit
Agreement is amended by adding the following sentence at the end of the
definition thereto:
 
“Notwithstanding anything herein to the contrary, from October 1, 2006 and
thereafter, the Applicable Rate with respect to the Loan ABR Spread shall be
2.50% and the Applicable Rate with respect to the Loan Eurodollar Spread shall
be 3.50%.”
 
SECTION 3. Amendment of the Definition of Pro Forma Basis. The defined term “Pro
Forma Basis” contained in Section 1.01 [Defined Terms] of the Credit Agreement
is amended by replacing the phrase “Sections 6.12, 6.13, 6.14 and 6.15” with the
phrase “Sections 6.12, 6.13, 6.14, 6.15, 6.18 and 6.19.”
 

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SECTION 4. Amendment of Section 1.01[Defined Terms]. Section 1.01 [Defined
Terms] of the Credit Agreement is amended by inserting the following new
definition into Section 1.01 in alphabetical order thereto:
 
““Liquidity” means the sum of the Borrower’s liquid assets at any time in the
form of (a) cash on hand, (b) cash equivalents, (c) marketable securities traded
on a national exchange or on NASDAQ and (d) the difference between the Revolving
Commitment and the Revolving Exposure.”
 
SECTION 5. Amendment of Section 2.12(c). Section 2.12(c) is amended by adding
the following sentence at the end of the paragraph:
 
“Notwithstanding anything contrary contained in the Credit Agreement, the
interest rate referenced in Section 2.12(c)(i)(a) shall increase to 3.50% for
the period commencing on October 1, 2006 and thereafter.”
 
SECTION 6. Amendment of Article VI [Negative Covenants]. Article VI [Negative
Covenants]of the Credit Agreement is hereby amended by adding the following
Section 6.18 thereto:
 
“SECTION 6.18. Minimum Consolidated EBITDA. The Borrower shall generate
Consolidated EBITDA in an amount greater than or equal to $8,000,000 for the
fiscal quarter ending September 30, 2006.”

SECTION 7. Amendment of Article VI [Negative Covenants]. Article VI [Negative
Covenants] of the Credit Agreement is hereby amended by adding the following
Section 6.19 thereto:
 
“SECTION 6.19. Minimum Liquidity. The Borrower shall not permit Liquidity to be
less than $7,500,000.00 at any time, including on a Pro Forma Basis prior to the
Borrower making the December 1, 2006 interest payment on the Senior Notes.”
 
SECTION 8. Representations and Warranties. The Borrower represents and warrants
to the Administrative Agent and the Lenders that:
 
(a) This Amendment and Waiver has been duly authorized, executed and delivered
by the Borrower and constitutes a legal, valid and binding obligation of the
Borrower, enforceable in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium or other laws affecting
creditors’ fights generally and subject to general principles of equity,
regardless of whether considered in a proceeding in equity or at law.
 
(b) None of the execution, delivery or performance by the Borrower of this
Amendment and Waiver or the compliance by the Borrower with the terms and
provisions hereof (i) will contravene any material provision of any applicable
law, statute, rule or regulation, or any order, writ, injunction or decree of
any Governmental Authority, (ii) will conflict or be inconsistent with, or
result in any breach of, any of the terms, covenants, conditions or provisions
of, or constitute a default under, or result in the creation or imposition of
(or the obligation to create or impose) any Lien upon any of the property or
assets of Borrower or any of its respective Subsidiaries pursuant to the terms
of any indenture, mortgage, deed of trust, loan agreement, credit agreement or
any other material agreement or instrument to which Borrower or any of its
respective Subsidiaries is a party or by which Borrower or any of its respective
Subsidiaries or any of the property or assets of Borrower or any of its
respective Subsidiaries are bound or to which Borrower or any of its respective
Subsidiaries may be subject or (iii) will violate any provision of the
certificate or articles of incorporation, by-laws, certificate of partnership,
partnership agreement, certificate of limited liability company, limited
liability company agreement or equivalent organizational document, as the case
may be, of Borrower or any of its respective Subsidiaries.
 

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(c) The representations and warranties of Borrower set forth in the Loan
Documents are true and correct on and as of the date hereof, except to the
extent such representations and warranties expressly relate to an earlier date,
in which case such representations and warranties are true and correct as of
such earlier date.
 
(d) After giving effect to this Amendment and Waiver, no Default or Event of
Default shall have occurred and be continuing.
 
SECTION 9. Amendment Fee. In consideration of the agreements of the Lenders
contained in this Amendment and Waiver, the Borrower agrees to pay to the
Administrative Agent, for the account of each consenting Lender that delivers an
executed counterpart of this Amendment and Waiver to the Administrative Agent
prior to 5:00 p.m., New York City time, on November 10, 2006, an amendment fee
in an amount equal to 0.15% of such Lender’s Revolving Exposures, Synthetic LC
Exposure, unused Revolving Commitments and Excess Credit-Linked Deposits as of
such date.
 
SECTION 10. Conditions to Effectiveness. This Amendment and Waiver shall become
effective as of the date (the “Effective Date”) on which each of the following
conditions has been satisfied:
 
(a) the Administrative Agent shall have received counterparts of this Amendment
and Waiver that, when taken together, bear the signatures of the Borrower and
the Required Lenders;
 
(b) the Administrative Agent shall have received a certificate of a Financial
Officer of the Borrower, dated the Effective Date, to the effect that the
representations and warranties set forth in Section 8 hereof are true and
correct;
 
(c) the Borrower shall have paid to the Administrative Agent, in immediately
available funds, for the account of each of the Lenders entitled thereto, the
Amendment Fee referred to in Section 9 hereof; and
 
(d) to the extent invoiced, the Administrative Agent shall have received payment
or reimbursement of its reasonable out-of-pocket expenses in connection with
this Amendment and Waiver and any other out-of-pocket expenses of the
Administrative Agent required to be paid or reimbursed pursuant to the Credit
Agreement, including the reasonable fees, charges and disbursements of counsel
for the Administrative Agent.
 

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SECTION 11. Effect of Amendment and Waiver. Except as specifically set forth
herein, this Amendment and Waiver shall not by implication or otherwise limit,
impair, constitute a waiver of, or otherwise affect the rights and remedies of
the Lenders, any Agent, the Collateral Agent, the Borrower under the Credit
Agreement or any other Loan Document, and shall not alter, modify, amend or in
any way affect any of the terms, conditions, obligations, covenants or
agreements contained in the Credit Agreement or any other Loan Document, all of
which are ratified and affirmed in all respects and shall continue in full force
and effect. Nothing herein shall be deemed to entitle the Borrower to a consent
to, or a waiver, amendment, modification or other change of, any of the terms,
conditions, obligations, covenants or agreements contained in the Credit
Agreement or any other Loan Document in similar or different circumstances.
After the date hereof, any reference to the Credit Agreement shall mean the
Credit Agreement as amended and waived hereby. This Amendment and Waiver shall
be a Loan Document for all purposes.
 
SECTION 12. Applicable Law. THIS AMENDMENT AND WAIVER SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
 
SECTION 13. Counterparts. This Amendment and Waiver may be executed in two or
more counterparts, each of which shall constitute an original but all of which
when taken together shall constitute but one agreement. Delivery of an executed
signature page to this Amendment and Waiver by facsimile or other electronic
transmission shall be effective as delivery of a manually signed counterpart of
this Amendment and Waiver.
 
SECTION 14. Expenses. The Borrower agrees to reimburse the Administrative Agent
for its out-of-pocket expenses in connection with this Amendment and Waiver,
including the reasonable fees, charges and disbursements of Buchanan Ingersoll &
Rooney PC, counsel for the Administrative Agent.
 
SECTION 15. Headings. The Section headings used herein are for convenience of
reference only, are not part of this Amendment and Waiver and are not to affect
the construction of, or to be taken into consideration in interpreting, this
Amendment and Waiver.
 
[REMAINDER OF THIS PAGE LEFT BLANK INTENTIONALLY]
 

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[SIGNATURE PAGE TO AMENDMENT NO. 3 TO CREDIT AGREEMENT]
 
IN WITNESS WHEREOF, the parties hereto have caused this Amendment and Waiver to
be duly executed by their respective authorized officers as of the day and year
first written above.

     
JAMES RIVER COAL COMPANY, as Borrower
       
By: 
 
/s/ Samuel M. Hopkins, II
       
Name: 
Samuel M. Hopkins, II
       
Title: 
Vice President

 

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[SIGNATURE PAGE TO AMENDMENT NO. 3 TO CREDIT AGREEMENT]

     
PNC BANK, NATIONAL ASSOCIATION,
 as Lender and as Administrative Agent
       
By: 
 
/s/ Holly Kay
       
Name: 
Holly Kay
       
Title: 
 

 

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[SIGNATURE PAGE TO AMENDMENT NO. 3 TO CREDIT AGREEMENT]
 
To Approve the Amendment and Waiver:
 

     
Name of Institution:
             
BEAR STEARNS CORPORATE LENDING INC.
       
By: 
 
/s/ Richard Bram Smith
       
Name: 
Richard Bram Smith
       
Title: 
Vice President

 

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[SIGNATURE PAGE TO AMENDMENT NO. 3 TO CREDIT AGREEMENT]
 
To Approve the Amendment and Waiver:
 

     
Name of Institution:
             
Gleneagles CLO, Ltd.
             
By:
Highland Capital Management, L.P. as
Collateral Manager
         
By: 
 
Strand Advisors, Inc. Its General Partner
         
By: 
 
/s/ David W. Lancelot
         
Name: 
David W. Lancelot
         
Title: 
Treasurer, Strand Advisors, Inc.,
General Partner of Highland Capital Management, L.P.

 

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[SIGNATURE PAGE TO AMENDMENT NO. 3 TO CREDIT AGREEMENT]
 
To Approve the Amendment and Waiver:
 

     
Name of Institution:
             
Highland Credit Strategies Fund
       
By: 
 
 
       
Name: 
         
Title: 
 

 

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[SIGNATURE PAGE TO AMENDMENT NO. 3 TO CREDIT AGREEMENT]
 
To Approve the Amendment and Waiver:
 

     
Name of Institution:
             
Highland Floating Rate Advantage Fund
       
By: 
 
/s/ M. Jason Blackburn
       
Name: 
M. Jason Blackburn
       
Title: 
Treasurer

 

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[SIGNATURE PAGE TO AMENDMENT NO. 3 TO CREDIT AGREEMENT]
 
To Approve the Amendment and Waiver:

     
Name of Institution:
             
Highland Floating Rate LLC
       
By: 
 
 
       
Name: 
         
Title: 
 

 

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[SIGNATURE PAGE TO AMENDMENT NO. 3 TO CREDIT AGREEMENT]
 
To Approve the Amendment and Waiver:

     
Name of Institution:
             
Highland Offshore Partners, L.P.
             
By:
Highland Capital Management, L.P. as
Collateral Manager
         
By: 
 
Strand Advisors, Inc. Its General Partner
         
By: 
 
/s/ David W. Lancelot
         
Name: 
David W. Lancelot
         
Title: 
Treasurer, Strand Advisors, Inc.,
General Partner of Highland Capital Management, L.P.

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[SIGNATURE PAGE TO AMENDMENT NO. 3 TO CREDIT AGREEMENT]
 
To Approve the Amendment and Waiver:
 

     
Name of Institution:
             
Jasper CLO, Ltd.
       
By: 
 
/s/ David W. Lancelot
       
Name: 
David W. Lancelot
       
Title: 
Treasurer, Strand Advisors, Inc.,
General Partner of Highland Capital Management, L.P.

 

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[SIGNATURE PAGE TO AMENDMENT NO. 3 TO CREDIT AGREEMENT]
 
To Approve the Amendment and Waiver:
 

     
Name of Institution:
             
Liberty CLO, Ltd.
             
By:
Highland Capital Management, L.P. as
Collateral Manager
         
By: 
 
Strand Advisors, Inc. Its General Partner
         
By: 
 
/s/ David W. Lancelot
         
Name: 
David W. Lancelot
         
Title: 
Treasurer, Strand Advisors, Inc.,
General Partner of Highland Capital Management, L.P.

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[SIGNATURE PAGE TO AMENDMENT NO. 3 TO CREDIT AGREEMENT]
 
To Approve the Amendment and Waiver:
 

     
Name of Institution:
             
Liberty Mutual Fire Insurance Company
             
By:
Highland Capital Management, L.P. its
Investment Advisor
         
By: 
 
Strand Advisors, Inc. Its General Partner
         
By: 
 
/s/ David W. Lancelot
         
Name: 
David W. Lancelot
         
Title: 
Treasurer, Strand Advisors, Inc.,
General Partner of Highland Capital Management, L.P.

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[SIGNATURE PAGE TO AMENDMENT NO. 3 TO CREDIT AGREEMENT]
 
To Approve the Amendment and Waiver:
 

     
Name of Institution:
             
Liberty Mutual Insurance Company
             
By:
Highland Capital Management, L.P. its
Investment Advisor
         
By: 
 
Strand Advisors, Inc. Its General Partner
         
By: 
 
/s/ David W. Lancelot
         
Name: 
David W. Lancelot
         
Title: 
Treasurer, Strand Advisors, Inc.,
General Partner of Highland Capital Management, L.P.

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[SIGNATURE PAGE TO AMENDMENT NO. 3 TO CREDIT AGREEMENT]
 
To Approve the Amendment and Waiver:
 

     
Name of Institution:
             
Loan Funding IV LLC
             
By:
Highland Capital Management, L.P. its
Investment Advisor
         
By: 
 
Strand Advisors, Inc. Its General Partner
         
By: 
 
/s/ David W. Lancelot
         
Name: 
David W. Lancelot
         
Title: 
Treasurer, Strand Advisors, Inc.,
General Partner of Highland Capital Management, L.P.

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[SIGNATURE PAGE TO AMENDMENT NO. 3 TO CREDIT AGREEMENT]
 
To Approve the Amendment and Waiver:
 

     
Name of Institution:
             
Loan Funding VII LLC
             
By:
Highland Capital Management, L.P. its
Investment Advisor
         
By: 
 
Strand Advisors, Inc. Its General Partner
         
By: 
 
/s/ David W. Lancelot
         
Name: 
David W. Lancelot
         
Title: 
Treasurer, Strand Advisors, Inc.,
General Partner of Highland Capital Management, L.P.

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[SIGNATURE PAGE TO AMENDMENT NO. 3 TO CREDIT AGREEMENT]
 
To Approve the Amendment and Waiver:
 

     
Name of Institution:
             
Restoration Funding CLO, LTD
             
By:
Highland Capital Management, L.P., as
Collateral Manager
         
By: 
 
Strand Advisors, Inc. Its General Partner
         
By: 
 
/s/ David W. Lancelot
         
Name: 
David W. Lancelot
         
Title: 
Treasurer, Strand Advisors, Inc.,
General Partner of Highland Capital Management, L.P.